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
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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
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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.
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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
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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.
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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.
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