United States Court of Appeals

For the Eighth Circuit

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No. 20-3132

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In re: Barbara A. Wigley

lllllllllllllllllllllDebtor

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Lariat Companies, Inc.

lllllllllllllllllllllAppellee

v.

Barbara A. Wigley

lllllllllllllllllllllAppellant

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Appeal from the United States Bankruptcy

 Appellate Panel for the Eighth Circuit

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 Submitted: May 12, 2021

Filed: October 18, 2021

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Before COLLOTON, WOLLMAN, and KOBES, Circuit Judges. 

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WOLLMAN, Circuit Judge.
Debtor Barbara A. Wigley (Barbara) appeals from the judgment of the

bankruptcy appellate panel, which affirmed the bankruptcy court’s determination that

her debt to Lariat Companies, Inc. (Lariat), is excepted from discharge because it was

obtained by actual fraud. Barbara argues that the bankruptcy court committed legal

and factual errors in reaching that conclusion. We affirm.

I. Background

Baja Sol Cantina EP, LLC, entered into a lease agreement with Lariat in late

2008, with Michael Wigley (Michael), Barbara’s husband, personally guaranteeing

the company’s obligations under the lease. Baja Sol was evicted for failure to pay

rent in mid-2010. Lariat thereafter filed suit against Baja Sol and Michael in

Minnesota state court, seeking to recover past-due and future-accruing rent. While

the lease action was pending, Michael transferred some of his assets—namely, his

interest in the Wigleys’ joint checking account and his limited partnership interests

in Spell Capital Funds II and III—to Barbara. The state court entered summary

judgment in favor of Lariat in June 2011, awarding more than $2 million in damages.1

Lariat and other creditors thereafter sued Barbara in state court for fraudulent

transfer of funds under the Minnesota Uniform Fraudulent Transfer Act, Minn. Stat.

§ 513.41 et seq. Michael eventually was joined in the action. In its October 2013

order, the state court found that Michael had transferred assets to Barbara “with actual

intent to hinder, delay, or defraud Lariat; without receipt of reasonably equivalent

1Lariat had leased the Baja Sol space to another company in July 2011. 

Michael did not timely present evidence of a mitigation defense, however, and the

state court thus denied his motion to vacate the summary judgment order. The state

court found that Michael had made a strategic litigation decision to forego engaging

in discovery. Michael did not appeal from the denial of the motion to vacate. See

Lariat Cos., Inc. v. Baja Sol Cantina EP, LLC, No. A12-2202, 2013 WL 4404589, at

*6 n.3 (Minn. Ct. App. Aug. 19, 2013) (unpublished). 

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value in exchange for the transfers; and at a time when M. Wigley was insolvent or

became insolvent as a result of the transfers.” The state court entered judgment in

favor of Lariat, holding Barbara and Michael jointly and severally liable for more

than $780,000.

Michael filed for Chapter 11 bankruptcy in February 2014. The bankruptcy

court applied the landlord cap, see 11 U.S.C. § 502(b)(6), to Lariat’s claim, to the

extent the claim involved the Baja Sol lease termination.2 After Michael satisfied the

capped claim of $637,581.07, Barbara moved to vacate the fraudulent transfer

judgment. The state court denied the motion in December 2016. Days later, Barbara

filed for Chapter 11 bankruptcy. 

Lariat filed a claim in Barbara’s bankruptcy case for more than $1 million,

which represented the fraudulent transfer judgment and the interest that had accrued. 

Over Barbara’s objection, the bankruptcy court determined that Lariat’s discharged

claim in Michael’s bankruptcy case did not extinguish Barbara’s liability to Lariat. 

The bankruptcy court concluded that Lariat’s claim in Barbara’s proceeding arose

from a lease termination, however, and thus applied § 502(b)(6)’s landlord cap. See

In re Barbara Wigley, 951 F.3d 967, 972 (8th Cir. 2020) (affirming the bankruptcy

court’s judgment and remanding the matter “to the bankruptcy court to enter an order

that Lariat has a claim against Mrs. Wigley”). Barbara thereafter satisfied Lariat’s

capped claim of $330,886.67. 

While Barbara’s objection to Lariat’s claim was pending, Lariat filed a

complaint in bankruptcy court seeking to except its claim from discharge. Lariat

2The bankruptcy court disallowed Lariat’s claim against Michael’s estate to the

extent it sought relief related to the fraudulent transfer judgment, concluding that the

fraudulent transfer judgment was duplicative of the judgment awarding damages for

breach of lease. See In re Michael Wigley, 533 B.R. 267, 272 (B.A.P. 8th Cir. 2015)

(affirming, in relevant part, the bankruptcy court’s judgment).

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argued that Barbara should be required to pay the entire debt (i.e., the fraudulent

transfer judgment plus interest) and that the debt should remain with Barbara postbankruptcy, because it was obtained by “actual fraud.” See 11 U.S.C. § 523(a)(2)(A). 

Following a two-day trial, the bankruptcy court entered judgment in favor of Lariat. 

It found that Michael had transferred assets to hinder, delay, or defraud his creditors;

that Barbara had participated in the scheme; and that she had “possessed actual

fraudulent intent when receiving the transfers.” The bankruptcy appellate panel

affirmed. In re Barbara Wigley, 620 B.R. 87 (B.A.P. 8th Cir. 2020).

II. Discussion

On appeal from a decision of the bankruptcy appellate panel, we act as a

second reviewing court of the bankruptcy court’s decision. In re Barbara Wigley, 951

F.3d at 970. We thus review the bankruptcy court’s factual findings for clear error

and its legal conclusions de novo. Id.

Section 523(a)(2)(A) excepts from discharge any debt “for money . . . to the

extent obtained by . . . actual fraud.” The term “actual fraud” includes fraudulent

conveyances. See Husky Int’l Elecs., Inc. v. Ritz, 136 S. Ct. 1581, 1586 (2016)

(hereinafter Husky); DZ Bank AG Deutsche Zentral Genossenschaft Bank v. Meyer,

869 F.3d 839, 843–44 (9th Cir. 2017). “[W]hen a debtor transfers property to a third

party without adequate consideration, the transfer is deemed a fraud on the debtor’s

creditors.” McClellan v. Cantrell, 217 F.3d 890, 894 (7th Cir. 2000); see Husky, 136

S. Ct. at 1587 (explaining that “fraud” has long been used “to describe a debtor’s

transfer of assets that . . . impairs a creditor’s ability to collect the debt”). That fraud

“is actual if the debtor intended by the transfer to hinder his creditors.” McClellan,

217 F.3d at 894; see Husky, 136 S. Ct. at 1586 (“[A]nything that counts as ‘fraud’ and

is done with wrongful intent is ‘actual fraud.’”). 

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Barbara first argues that the bankruptcy court erred in excepting Lariat’s claim

from discharge because doing so nullified the landlord-cap relief she had been

granted under 11 U.S.C. § 502(b)(6). Barbara maintains that § 502(b)(6) protects

unsecured creditors by “prevent[ing] lessors from receiving windfalls on long-term

leases.” See In re Barbara Wigley, 951 F.3d at 972 (citing S. Rep. No. 95-989, at 63

(1978), which cites Oldden v. Tonto Realty Corp., 143 F.2d 916, 921 (2d Cir. 1944),

and states that § 502(b)(6) was “designed to compensate the landlord for his loss

while not permitting a claim so large (based on a long-term lease) as to prevent other

general unsecured creditors from recovering a dividend from the estate”). Barbara

contends that the bankruptcy court improperly excepted Lariat’s claim under

§ 523(a)(2)(A) “to reach an outcome directly in conflict with the specific mandate of

§ 502(b)(6),” thereby rendering the landlord cap superfluous. Appellant’s Br. 22.

Although Lariat’s claim was partially disallowed against Barbara’s bankruptcy

estate under § 502(b)(6), the landlord cap does not foreclose Lariat’s argument that

the claim should be excepted from discharge under § 523(a)(2)(A).3

 As previously

stated, Lariat filed a claim for the amount of the fraudulent transfer judgment plus

interest. Barbara objected, and the bankruptcy court capped Lariat’s claim under

§ 502(b)(6), which established the amount allowed to be paid from the bankruptcy

estate. The application of § 502(b)(6) did not preclude Lariat from seeking to except

its claim from discharge under § 523(a)(2)(A), however. See In re McAlpin, 254 B.R.

449, 454–56 (Bankr. D. Minn. 2000) (concluding that a creditor is not necessarily

3A claim is deemed allowed unless a party in interest objects. 11 U.S.C.

§ 502(a). As explained in In re Condor Systems, Inc., 296 B.R. 5, 12 (B.A.P. 9th Cir.

2003):

The claim is for the total available under substantive nonbankruptcy

law. In contrast, the cap merely defines how much of the substantive

claim will be “allowed” to be paid by the bankruptcy estate and

mandates “disallowance” of the excess. Taken together, the claim and

cap yield the “allowed” or “allowable” claim.

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barred from seeking to collect a disallowed claim, if the claim was disallowed based

on bankruptcy principles (e.g., § 502(b)(6)) and not on the merits). Accordingly, we

conclude that Lariat’s claim is excepted from discharge under § 523(a)(2)(A) to the

extent that it was obtained by actual fraud. See Grogan v. Garner, 498 U.S. 279, 287

(1991) (“Congress evidently concluded that the creditors’ interest in recovering full

payment of debts in [this category] outweighed the debtors’ interest in a complete

fresh start.”).

Barbara argues that the bankruptcy court erred in concluding that she

committed “actual fraud.” A transferee who receives a fraudulent transfer with the

requisite wrongful intent commits “actual fraud,” and any debts traceable to the

fraudulent transfer are excepted from discharge. See Husky, 136 S. Ct. at 1586. The

transferee’s intent must “involv[e] moral turpitude or intentional wrong.” Id. (quoting

Neal v. Clark, 95 U.S. 704, 709 (1878)). The exception does not cover implied fraud,

which “describe[s] acts of deception that ‘may exist without the imputation of bad

faith or immorality.’” Id. (quoting Neal, 95 U.S. at 709).

The bankruptcy court did not clearly err in finding that Barbara had received

a fraudulent transfer from Michael.4 Barbara testified that the Wigleys began

experiencing financial difficulties in 2008. By the end of 2010, Lariat and other

creditors had filed suit in state court against Michael. The Wigleys had moved from

their family home in early 2011, executing short sales on their residence and an

adjoining lot. In addition, Lariat had filed its motion for summary judgment in the

4We reject Barbara’s argument that the bankruptcy court erred in considering

the badges of fraud set forth in Minn. Stat. § 513.44(b). See Ritchie Cap. Mgmt.,

LLC v. Stoebner, 779 F.3d 857, 863 (8th Cir. 2015) (affirming the bankruptcy court’s

finding of actual fraudulent intent under the badges of fraud approach); see also In

re Addison, 540 F.3d 805, 813–14 (8th Cir. 2008) (concluding that “the bankruptcy

court properly looked to the badges of fraud enumerated in Minn. Stat. Ann.

§ 513.44(b)” but clearly erred in finding that the debtor had fraudulent intent). 

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lease action, which sought more than $2 million in damages. Accordingly, the

Wigleys were in financial distress when Michael transferred his interest in the joint

checking account and his interests in the Spell Capital Funds to Barbara in March

2011. The bankruptcy court found their stated reason for the transfer—estate

planning—not credible in light of the evidence that the Wigleys had not followed

their usual practice of consulting with estate planning professionals, nor were the

transfers made in accordance with their ten-year estate planning cycle. Moreover,

Barbara later used the funds to pay Michael’s creditors, which negated any estate

planning benefit. According to the bankruptcy court’s findings, when asked whether

he had transferred his interests in the Spell Capital Funds in an attempt to avoid

collection activities, Michael “emotionally responded, ‘I was trying to protect myself,

my businesses[,] and my family. Absolutely, I was trying to protect myself, my

businesses, and my family.’”

The record also supports the bankruptcy court’s finding that Barbara

participated in the scheme with the requisite wrongful intent. The Wigleys testified

that they regularly discussed their financial situation and reviewed their accounts

together. Barbara testified that she knew that Michael had been sued, and the

bankruptcy court fairly inferred that it was “unrealistic that a possible judgment of

[more than $2 million] was not discussed, especially given the impact it would have

had on the family’s financial condition.” The bankruptcy court also relied on a letter

that the Wigleys had submitted to the Internal Revenue Services in 2012, explaining

that they were scrambling to cover business expenses and fighting to save their home. 

The bankruptcy court did not clearly err in rejecting the assertion that Barbara did not

understand why the funds were being transferred to her and in finding instead that she

decided to protect her husband by receiving the transfers, thereby “help[ing] M.

Wigley evade his creditors.” The evidence thus supports a finding that Barbara

engaged in a “fraud that ‘involv[ed] . . . intentional wrong.’” See Husky, 136 S. Ct.

at 1586 (quoting Neal, 95 U.S. at 709).

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We recognize that the facts of the Wigleys’ fraudulent transfer scheme are not

as egregious as the facts presented in other cases. See id. at 1585 (debtor transferred

large sums of money to other entities he controlled); McClellan, 217 F.3d at 892

(debtor purchased machinery from brother for $10, sold the machinery for $160,000,

“and she’s not telling anyone what has happened to that money”). The bankruptcy

court properly applied the law to the facts of this case, however, and the record

reflects that the court’s findings were not clearly erroneous. Because the evidence

supports the findings that Barbara intended to and did commit actual fraud, her

fraudulent transfer judgment is nondischargeable under § 523(a)(2)(A). See Husky,

136 S. Ct. at 1589 (“If that recipient [of a fraudulent transfer] later files for

bankruptcy, any debts traceable to the fraudulent conveyance will be

nondischargeable under § 523(a)(2)(A).” (internal quotation marks and citation

omitted)). 

The bankruptcy court’s judgment is affirmed.

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