1

United States Court of Appeals,

Fifth Circuit.

No. 94-10447

Summary Calendar.

In the Matter of Homer Ronald SIMPSON and Shirley A. Simpson,

Debtors.

Homer Ronald SIMPSON, Kelley Renee Simpson and Ronald Keven

Simpson, Appellees,

v.

Deborah J. PENNER, Trustee for the Estate of Homer Ronald

Simpson, and Wife, Shirley A. Simpson, Appellant.

Oct. 27, 1994.

Appeal from the United States District Court for the Northern

District of Texas.

Before DUHÉ, WIENER and STEWART, Circuit Judges.

PER CURIAM:

Deborah Penner, as a bankruptcy trustee, appeals the judgment

of the district court holding that under Texas law, a valid

disclaimer or renunciation of an inheritance is not a fraudulent

transfer. For the following reasons, the judgment of the district

court is affirmed.

BACKGROUND

On January 13, 1992, Eddie E. Simpson died, leaving a

testamentary disposition to his son, Homer Simpson ("Simpson").

The disposition consisted of a one-half interest in a farming

partnership and a one-third interest in the residuary estate. On

February 26, 1992, Simpson executed a disclaimer of his

inheritance. Under Texas inheritance laws, the effect of the
2

disclaimer was to pass the property on to Simpson's son. One day

later, on February 26, 1992, Simpson and his wife filed a voluntary

petition for bankruptcy under Chapter 7 of the bankruptcy code.

On June 25, 1993, Deborah Penner, Simpson's bankruptcy

trustee, filed a petition in bankruptcy court to set aside the

disclaimer as a fraudulent transfer. The bankruptcy court granted

the petition and ordered the property turned over to the estate.

Simpson appealed to the district court. The district court

reversed the bankruptcy court judgment, holding that a disclaimer

of inheritance is not a fraudulent transfer. Penner appeals the

judgment of the district court.

LEGAL PRECEPTS

Under 11 U.S.C. § 548(a), a bankruptcy "trustee may avoid any

transfer of an interest of the debtor in property." Transfer is

defined by the bankruptcy code as "every mode, direct or indirect,

absolute or conditional, voluntary or involuntary, of disposing of

or parting with property or with an interest in property including

retention of title as a security interest and foreclosure of the

debtor's equity and redemption." 11 U.S.C. § 101(54). Interest in

property is not defined by the bankruptcy code. In the absence of

any controlling federal law, interests in property are a creature

of state law. Barnhill v. Johnson, --- U.S. ----, ----, 112 S.Ct.

1386, 1389, 118 L.Ed.2d 39 (1992).

Under Texas law, "[w]hen a person dies, leaving a lawful

will, all of his estate devised or bequeathed by such will, and all

powers of appointment granted in such will, shall vest immediately
3

in the devisees or legatees of such estate and the donees of such

powers...." Texas Probate Code § 37. Under the relation back

doctrine,

Any person ... who may be entitled to receive any property as

a beneficiary and who intends to effect disclaimer irrevocably

... of the whole or any part of such property shall evidence

same as herein provided. A disclaimer evidenced as provided

herein shall be effective as of the death of the decedent and

shall relate back for all purposes to the death of the

decedent....

Texas Probate Code § 37A; Dyer v. Eckols, 808 S.W.2d 531, 532

(Tex.Ct.App.1991). The effect of the relation back doctrine is

that a beneficiary never gains possession of disclaimed property.

Dyer, 808 S.W.2d at 532.

DISCUSSION

Initially, we note that this Court has jurisdiction over this

appeal. Simpson filed a notice of appeal without the permission of

the bankruptcy court. The question that presents itself is whether

this order was interlocutory and thus could not be appealed. Under

28 U.S.C. § 158(a), a party may appeal as of right any final order

of a bankruptcy court. We have held that a judgment compelling a

defendant to turn over property is appealable as of right pursuant

to 28 U.S.C. § 158(a). In re Moody, 817 F.2d 365, 366 (5th

Cir.1987). Therefore, Simpson had a right to appeal this final

order of the bankruptcy court and we have jurisdiction over this

case. We now turn to the issue on appeal.

Penner contends that the district court erred in holding that

the disclaimer was not a fraudulent transfer. The district court

relied primarily on In re Atchison, 925 F.2d 209 (7th Cir.), cert.
4

denied sub nom., Jones v. Atchison, --- U.S. ----, 112 S.Ct. 178,

116 L.Ed.2d 140 (1991) in making its decision. In Atchison, the

debtor had executed a disclaimer of her legacy before filing for

bankruptcy. Under the laws of Illinois, the property of the estate

vests in the beneficiaries immediately upon the decedent's death.

Tompkins State Bank v. Niles, 127 Ill.2d 209, 130 Ill.Dec. 207,

211, 537 N.E.2d 274, 278 (1989). As in Texas, however, upon the

execution of a valid renunciation, the property passes as if the

beneficiary had predeceased the testator and the renunciation

relates back to the decedent's death for all purposes.

Ill.Rev.Stat. ch. 1101/2, para. 2-7(d) (1985). The effect of a

disclaimer under Illinois law was to prevent a beneficiary from

ever acquiring an interest in the property of the decedent.

Tompkins, 537 N.E.2d at 279.

The bankruptcy trustee tried to void the disclaimer as a

fraudulent transfer. The Seventh Circuit Court of Appeals held

that the execution of the disclaimer was not a fraudulent transfer

under 11 U.S.C. 548(a). Atchison, 925 F.2d at 211. The court held

that after the execution of the disclaimer, the debtor did not have

a property interest to transfer. Id. It also stated that "[t]o

argue ... that at the moment of the disclaimer there had to be some

property interest which the beneficiary disclaimed ignores the

express language of the Illinois disclaimer statute which says for

all purposes there was not." Id.

The law in Texas is similar to the law in Illinois in respects

to the relation back doctrine and the property interests of the
5

beneficiaries. Both sets of laws vest the property of the deceased

in the heirs at the moment of the decedent's death. Both sets of

laws hold that a valid renunciation relates back to the death of

the decedent and the property of the decedent passes as if the

beneficiary died before the decedent. Both sets of law hold that

under the relation back doctrine, a beneficiary never possessed

renounced property. The only other circuit to consider this issue,

the Tenth Circuit, held that a disclaimer issued under Colorado law

was also not a fraudulent transfer for much the same reason as

Atchison. See Hoecker v. United Bank of Boulder, 476 F.2d 838, 841

(10th Cir.1973). We thus find the reasoning in Atchison persuasive

and hold that under Texas law a disclaimer is not a fraudulent

transfer under 11 U.S.C. § 548.

Penner urges us to accept the reasoning in In re Brajkovic,

151 B.R. 402 (Bank.W.D.Tex.1993). In this case, the debtor had

filed a disclaimer for property he had inherited before filing for

bankruptcy. The bankruptcy trustee sought to avoid the disclaimer

as a fraudulent transfer. The court held the disclaimer was a

fraudulent transfer because it transferred a property interest that

had vested with the debtor upon the death of the decedent. It

reasoned that the relation back doctrine is a legal fiction that

shifts the transfer of property from the decedent to the original

beneficiary so that the transfer runs from the decedent to the

original beneficiary to a different beneficiary as of the date of

death. Id. at 410. Thus, the court concluded that a disclaimer

transfers a property interest. Id.
6

The court in Brajkovic rejected the reasoning in In re

Atchison. It stated that the Atchison court had been presuming

that:

[I]mmediately after the execution of the disclaimer, the

property interest which existed prior to the disclaimer

disappears, by virtue of the relation back doctrine.

Therefore, the argument concludes, nothing existed before the

transaction, so nothing was transferred. Of course, the

transfer has to be executed in order for nothing to be

transferred, and that is the faulty premise in Atchison 's

logic.

Id. at 409 n. 15 (emphasis in the original).

We decline to follow the reasoning in Brajkovic. The

Brajkovic court, unlike the Atchison court, does not give state law

its full effect. Under Texas law, the beneficiary never possesses

the disclaimed property. Dyer v. Eckols, 808 S.W.2d 531, 534

(Tex.Ct.App.1991). Thus, the Brajkovic court erred in concluding

that under Texas law, the property of the decedent shifts to the

first beneficiary and then to the next beneficiaries.

CONCLUSION

Because a disclaimer under Texas law does not constitute a

fraudulent transfer, the judgment of the district court is

AFFIRMED.