FILED
United States Court of Appeals
Tenth Circuit
April 13, 2015
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
_________________________________
In re: TUNG THANH NGUYEN;
PAMELA S. NGUYEN,
Debtors.
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CARL B. DAVIS, Trustee,
Plaintiff - Appellant,
v. No. 14-3123
HOA THI PHAM; NOEL ESPLUND;
LISA STIRRAT, formerly Lisa Dang,
Defendants - Appellees.
_________________________________
Appeal from the Bankruptcy Appellate Panel
(BAP No. 13-002-KS)
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Kenneth H. Jack of Davis & Jack, LLC, Wichita, Kansas, for Plaintiff-Appellant.
Alec Nguyen of Nguyen Law Offices, LLC, Wichita, Kansas, for Defendants-
Appellees.
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Before BRISCOE, Chief Judge, EBEL and TYMKOVICH, Circuit Judges.
_________________________________
BRISCOE, Chief Judge.
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Chapter 7 bankruptcy trustee Carl Davis appeals from a decision by the U.S.
Bankruptcy Court for the District of Kansas (Bankruptcy Court), which was affirmed
by the U.S. Bankruptcy Appellate Panel of the Tenth Circuit (BAP). Davis sought to
avoid, as a fraudulent conveyance, debtor Tung Nguyen’s transfer to his sister of his
interest in a piece of real property. Both the Bankruptcy Court and the BAP
concluded that Nguyen possessed only bare legal title to the property and that such an
interest is not one that may be avoided under the Bankruptcy Code, 11 U.S.C.
§ 548(a)(1)(B). Exercising jurisdiction pursuant to 28 U.S.C. § 158(d)(1), we affirm
the Bankruptcy Court’s decision.
I
This case stems from several transactions related to a single piece of real
property in Reno County, Kansas. On September 26, 2007, Hoa Thi Pham purchased
the property in joint tenancy with her friend (now common-law husband) Noel
Esplund, with Pham contributing two-thirds of the approximately $170,000 purchase
price and Esplund contributing one-third. Two days after purchasing the land, Pham
and Esplund conveyed the property to Esplund and to Pham’s children, Tung Nguyen
and Lisa Dang (now Lisa Stirrat), as joint tenants with rights of survivorship.
On May 29, 2008, Nguyen transferred his interest in the land to Dang and
Esplund via a quitclaim deed for no compensation.1 Almost one year later, on May
1
A later deed dated February 26, 2009, indicated that Dang possessed a two-
thirds interest and Esplund possessed a one-third interest in the subject property.
2
27, 2009, Nguyen and his wife Pamela filed for Chapter 7 bankruptcy protection. The
trustee for Tung Nguyen’s bankruptcy estate, Carl Davis, filed a complaint against
Pham, Esplund, and Dang in Bankruptcy Court on January 26, 2011. The complaint
sought to avoid the transfer of Nguyen’s interest in the property to the defendants
Dang and Esplund under 11 U.S.C. § 548(a)(1)(B),2 alleging that Nguyen transferred
his interest in the Reno County property less than two years before filing for
bankruptcy, that he was insolvent at the time of the transfer, and that he received less
than reasonably equivalent value for the property.
2
Section 548(a)(1)(B) of the Bankruptcy Code states:
The trustee may avoid any transfer . . . of an interest of the debtor in
property, or any obligation . . . incurred by the debtor, that was made or
incurred on or within 2 years before the date of the filing of the petition,
if the debtor voluntarily or involuntarily—
...
(B)
(i) received less than a reasonably equivalent value in exchange
for such transfer or obligation; and
(ii)
(I) was insolvent on the date that such transfer was made or
such obligation was incurred, or became insolvent as a
result of such transfer or obligation;
(II) was engaged in business or a transaction, or was about
to engage in business or a transaction, for which any
property remaining with the debtor was an unreasonably
small capital;
(III) intended to incur, or believed that the debtor would
incur, debts that would be beyond the debtor’s ability to
pay as such debts matured; or
(IV) made such transfer to or for the benefit of an insider,
or incurred such obligation to or for the benefit of an
insider, under an employment contract and not in the
ordinary course of business.
3
After an evidentiary hearing, the Bankruptcy Court concluded that Nguyen
possessed only bare legal title to the property and that his mother possessed equitable
ownership of his one-third share. The court concluded that Pham’s transfer to her
children fell under a provision of Kansas law that allows a resulting trust to form
when one party (the payor) provides the consideration for a piece of property, but
enters into an agreement with another non-paying party “without fraudulent intent”
for the non-paying party to hold the property in trust for the payor. Kan. Stat. Ann. §
58-2408. Specifically, the court determined that Pham and Nguyen had such an
agreement based on the testimony provided by Pham and Nguyen about the
circumstances of the transfer. After subsequent briefing, the Bankruptcy Court
concluded that bare legal title, when transferred for no consideration, is not an
“interest in property” that may be avoided under § 548(a)(1)(B) and denied Davis’s
requested relief. In re Nguyen, No. 09-11640, 2013 WL 153755, at *2 & n.13 (Bankr.
D. Kan. Jan. 15, 2013) (collecting bankruptcy court cases that have so held). The
trustee appealed the decision to the BAP, which affirmed the Bankruptcy Court’s
decision.
II
A. Standard of review
“Although this appeal is from a decision by the BAP, we review only the
Bankruptcy Court’s decision.” In re Miller, 666 F.3d 1255, 1260 (10th Cir. 2012)
(internal quotation marks omitted). “By this we do not mean that we ignore the
procedural posture of the case before us—an appeal from a BAP decision. Rather, we
4
mean that we treat the BAP as a subordinate appellate tribunal whose rulings are not
entitled to any deference (although they certainly may be persuasive).” In re Warren,
512 F.3d 1241, 1248 (10th Cir. 2008). “We review matters of law de novo, and we
review factual findings made by the bankruptcy court for clear error.” Miller, 666
F.3d at 1260 (internal quotation marks omitted).
B. Can a resulting trust and joint tenancy co-exist under Kansas law?
The parties do not appear to dispute that, if the Bankruptcy Court and the BAP
are correct that Nguyen merely possessed “bare legal title” to the property interest in
question, Davis may not use § 548(a)(1)(B) of the Bankruptcy Code to avoid the
transfer. Nor do the parties appear to challenge the Bankruptcy Court’s factual
finding that Pham intended to create a resulting trust with the transfer of her legal
interest in the property to Nguyen and Dang. Rather, at issue in this case is whether
such an arrangement is contrary to Kansas law.
Thus, Davis’s argument on appeal rests on the idea that a resulting trust is
incompatible with a joint tenancy under Kansas law and this circuit’s precedent.
Davis argues that if a resulting trust is indeed legally impossible, Nguyen actually
possessed legal and equitable title to a one-third interest in the property that
§ 548(a)(1)(B) may reach. Specifically, Davis contends that because a joint tenancy
requires the “four unities” of time, title, interest, and possession, and because Esplund
indisputedly possessed a one-third legal and equitable interest in the property in
question, Dang and Nguyen must also have possessed both legal and equitable title to
the property as part of the joint tenancy arrangement. Aplt. Br. at 9; see also 220 Am.
5
Jur. 2d Cotenancy and Joint Ownership § 5 (Feb. 2015) (“‘Unity of interest,’ as one of
the four unities required for the existence of a joint tenancy, means that the joint
tenants’ shares are all equal and the duration and quality, legal or equitable, of their
estates are the same.”).
Although Davis is correct that the formation of a joint tenancy generally
requires those four unities, it is nonetheless clear that Kansas courts have concluded
that holding real property as a joint tenancy does not bar the existence of an equitable
trust. See, e.g., Winsor v. Powell, 497 P.2d 292, 299 (Kan. 1972); see also Univ.
State Bank v. Blevins, 605 P.2d 91, 95 (Kan. 1980). Although Kansas caselaw does
not state precisely why a resulting trust would not destroy the unity of interest in a
joint tenancy, Kansas courts have stated that equitable trusts and joint tenancies are
compatible.
As we view them, the rules which relate to trusts are applicable when
property is titled in joint tenancy as well as when property is otherwise
held. We are not persuaded that ownership in joint tenancy is
incompatible with the legal concepts which govern the field of trusts, or
that joint tenancy ownership was ever intended as a device to cloak
injustice or to excuse overreaching.
Winsor, 497 P.2d at 299; see also Blevins, 605 P.2d at 95 (affirming Winsor and
concluding that “incidents of joint ownership of personal property . . . [a]re no bar to a
resulting trust. . . . [T]he holding of title to realty in joint tenancy or as tenants in
common does not prevent there being a resulting trust”).
Other state courts have similarly concluded that resulting trusts are compatible
with joint tenancies. Two separate, but related, rationales seem to underlie those
6
decisions. First is the idea that a resulting trust is an equitable remedy that can
override aspects of a joint tenancy without destroying it. See, e.g., Fenderson v.
Fenderson, 685 A.2d 600, 607 (Pa. Super. Ct. 1996) (concluding “that the creation of
a resulting trust does not destroy the four unities” and that a party not listed on the
deed was nonetheless a joint tenant due to the trust). A second rationale appears to be
that a resulting trust would prevail over a joint tenancy and potentially destroy the
unity of interest, resulting in a tenancy in common. See Kane v. Johnson, 73 N.E.2d
321, 324 (Ill. 1947) (“The unities of interest in the property were not the same. The
fact that the deed purported to convey the property in joint tenancy . . . would not
prevent the application of the equitable principles which control the establishment of
a resulting trust.”).
Either rationale may explain the previous Kansas Supreme Court holdings,
particularly given that joint tenancies are disfavored under state law. See Spark v.
Brown, 205 P.2d 938, 942 (Kan. 1949); see also Walnut Valley State Bank v. Stovall,
574 P.2d 1382, 1384 (Kan. 1978) (“While a joint tenancy has many laudable uses, it is
not a panacea. Many injustices have resulted through use of the device. Upon proper
showing we have imposed constructive trusts on property in the hands of a surviving
joint tenant in order to avoid unintended results.”). Regardless of the rationale,
Kansas law does not support Davis’s argument that a resulting trust could not coexist
7
with a joint tenancy because of the “unity of interest” required to create a joint
tenancy.3
Davis’s second argument on appeal is that this court’s precedent in Dexter v.
Dexter, 481 F.2d 711 (10th Cir. 1973), controls this case. In Dexter, we said that
Kansas’s resulting trust “statute does not apply when title to property is taken in joint
tenancy.” Id. at 714. The BAP disagreed with Davis and concluded that the Kansas
Supreme Court’s subsequent statements in Blevins, 605 P.2d at 94-95, controlled the
case. In re Nguyen, No. 09-11640, 2014 WL 1870653, *5-6 (B.A.P. 10th Cir. 2014).
Both Davis and the BAP attempt to factually distinguish this case from Blevins and
Dexter, respectively. In Dexter, a son was claiming to be a trust beneficiary based on
statements in his parents’ will and oral statements made during their lifetime that the
property they held in joint tenancy should ultimately benefit the son. 481 F.2d at 713.
In Blevins, a father and son ostensibly held a piece of property in joint tenancy, but
the father argued that the son held his property interest in trust for the father, who had
paid for and controlled the property. 605 P.2d at 93-94. The Blevins court addressed
3
Pham points to In re Estate of Lasater, 54 P.3d 511 (Kan. Ct. App. 2002), for
the proposition that “there is no requirement of unity of equality of interest” in a joint
tenancy and thus it is permissible for one joint tenant to hold bare legal title and
another to hold legal and equitable title. Aplee. Br. at 13 (citing Lasater, 54 P.3d at
514). However, Lasater was referring to the presumption that joint tenancies are
owned in equal shares; the case involved a mother who had explicitly stated that she
had a 99 percent interest in a joint tenancy with her son. 54 P.3d at 513. At issue was
the ownership share, not the type of ownership. The Kansas Supreme Court has
directly stated that the presumption of equal percentage ownership is rebuttable, but it
has not spoken on the issue of whether legal and equitable title may be severed in a
joint tenancy. See Lasater, 54 P.3d at 514 (citing Walnut Valley State Bank v.
Stovall, 574 P.2d 1382, 1385-86 (Kan. 1978)).
8
Dexter by noting that “the claimant [in Dexter] was not a joint tenant with one
supplying the consideration, but was challenging succession to ownership under the
survivorship provisions of the deed by claiming an equitable right to succeed to the
survivor’s interest.” Blevins, 605 P.2d at 94.
Davis argues that the Kansas Supreme Court in Blevins deliberately did not
reject Dexter’s holding, choosing instead to reserve its applicability for situations,
such as the one presented here, where a party claiming to be a beneficiary of a
resulting trust is not listed on the joint tenancy deed.4 However, that does not appear
to be the factual distinction the Kansas Supreme Court made. Rather, the court noted
that the son in Dexter did not claim to be a party to the original joint tenancy or to
have contributed the consideration for the property; his sole claim was that his mother
and father had agreed to hold their joint tenancy property in trust for him. Dexter, 481
F.2d at 713-14. By contrast, the BAP concluded that Dexter was factually distinct
from this case. The BAP stated that in Dexter, neither parent was alive to testify to
their intentions with regard to the property they once held in joint tenancy. In re
Nguyen, 2014 WL 1870653 at *5-6 (citing Dexter, 481 F.2d at 714). In this case,
however, the BAP noted that both Pham and Nguyen testified that Nguyen held the
property interest in trust for Pham, and the Bankruptcy Court made a factual finding
that Pham and Nguyen had made an agreement to form a trust. Id.
4
Davis also attempts to limit the holding of Winsor to cases involving
constructive trusts, which require some proof of wrongdoing, Aplt. Br. at 13, but
Blevins involved a resulting trust, and the court made no distinction between the two
types of equitable trusts. 605 P.2d at 94-95.
9
As Davis states, the BAP’s factual distinction seems to relate more to the
amount and quality of proof needed to establish a resulting trust under Kansas law
than to Dexter’s broad holding that the resulting trust statute is incompatible with
joint tenancies. But Davis’s purported factual distinction—that Dexter still applies to
cases in which the trust beneficiary is not listed as a joint tenant on the deed—is also
not satisfying. Although there are many reasons why being listed on a deed is useful
in property law, being able to receive the benefit of an equitable trust is not one of
them.5 See, e.g., Kull v. Pearl, 76 P.2d 790, 799 (Kan. 1938) (concluding a resulting
trust in real property existed in favor of a wife not listed with her husband on the
deed); Lyons v. Berlau, 73 P. 52, 54 (Kan. 1903) (concluding similarly regarding a
resulting trust between a deceased man and his caretaker). Additionally, while the
Blevins court did make particular mention of the fact that the alleged trust beneficiary
in Dexter was not a joint tenant, 605 P.2d at 94, it cited the Winsor case approvingly,
and that case notably involved trust parties who were not party to a written joint
tenancy agreement. Blevins, 605 P.2d at 95 (citing Winsor, 497 P.2d at 295-96). The
Blevins court also broadly stated that joint tenancies are compatible with resulting
trusts under Kan. Stat. Ann. § 58-2408. Blevins, 605 P.2d at 95 (stating “incidents of
5
This is not to say that the beneficiary of a resulting trust will always trump a
third party’s claim to an interest in property. As noted by the BAP in In re Kasparek,
a bona fide purchaser may take possession of an interest in property held in an
equitable trust if it had no notice of the existence of a trust. 426 B.R. 332, 342-44
(B.A.P. 10th Cir. 2010) (concluding that “a bona fide purchaser’s title is superior to
the title of the beneficiary of an implied trust” and that a bankruptcy trustee’s status as
a hypothetical bona fide purchaser would allow him to “take title free and clear of
implied trust interests”).
10
joint ownership of personal property (including right of survivorship) were no bar to a
resulting trust”).
Thus, Blevins reads more like an implied rejection of Dexter than a mere
factual distinction, particularly given its statement that “[t]he statute, K.S.A. [§] 58-
2408, speaks of ‘the land or some interest therein . . . .’; joint interests are not
excluded.” Blevins, 605 P.2d at 94-95. “When an intervening decision of a state’s
highest court has resolved an issue of state law directly contrary to this circuit’s
prediction of how the state court would resolve the same issue, we are bound by the
later state ruling, not by our prior panel’s interpretation of state law.”
Blackhawk–Cent. City Sanitation Dist. v. Am. Guarantee & Liab. Ins. Co., 214 F.3d
1183, 1194 n.4 (10th Cir. 2000). Although the Kansas Supreme Court did not say
outright that Dexter was wrongly decided, its holding in Blevins indicates that we are
no longer bound by the broad conclusion of Dexter that Kan. Stat. Ann. § 58-2408
does not apply to joint tenancy situations.
Thus, although having one’s name on a deed or having all parties to the trust
arrangement alive to testify as to their intent in a particular transaction may improve
the likelihood that a court will find that a resulting trust agreement existed under Kan.
Stat. Ann. § 58-2408, neither factual scenario appears to be required to prove the
existence of such an agreement under Kansas law. Moreover, nothing in Kansas law
forbids the creation of a resulting trust with land held in joint tenancy. Davis is not
challenging the Bankruptcy Court’s factual finding that Pham and Nguyen intended to
create a resulting trust under Kan. Stat. Ann. § 58-2408, or its legal conclusion that
11
bare legal title is not an interest that may be avoided under 11 U.S.C. § 548(a)(1)(B).
We therefore affirm the Bankruptcy Court’s ruling that Davis may not use 11 U.S.C.
§ 548(a)(1)(B) to avoid Nguyen’s transfer to Dang.
III
For the reasons set forth above, we AFFIRM the Bankruptcy Court’s denial of
relief to Davis under 11 U.S.C. § 548(a)(1)(B).
12