Rachel Brown v. Ronald Sommers , 807 F.3d 701 ( 2015 )

Case: 15-20034 Document: 00513284834 Page: 1 Date Filed: 11/24/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 15-20034 United States Court of Appeals
Fifth Circuit
FILED
In the matter of: MICHAEL GLYN BROWN, November 24, 2015
Lyle W. Cayce
Deceased Debtor Clerk
------------------------------
RACHEL BROWN,
Appellant
v.
RONALD J. SOMMERS, Trustee,
Appellee
CONSOLIDATED WITH 15-20148
MICHAEL GLYN BROWN; LIONHEART COMPANY, INCORPORATED;
CASTLEMANE, INCORPORATED; PRORENTALS, INCORPORATED;
SUPERIOR VEHICLE LEASING COMPANY, INCORPORATED; MG
BROWN COMPANY, L.L.C.
Debtors
----------------------------------------------
JUDY LENOX, Representative of Michael Glyn Brown; RACHEL BROWN,
Appellants
v.
RONALD J. SOMMERS, Trustee,
Appellee
Case: 15-20034 Document: 00513284834 Page: 2 Date Filed: 11/24/2015
Nos. 15-20034 and 15-20148
Appeals from the United States District Court
for the Southern District of Texas
Before DAVIS, PRADO, and SOUTHWICK, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
Michael Glyn Brown (“Debtor”) died during the pendency of his
bankruptcy case. Debtor’s estranged spouse, Rachel Brown (“Rachel”), and
Debtor’s personal representative, Judy Lenox (“Lenox”), claimed various
allowances and exemptions under the Texas Estates Code in Debtor’s
bankruptcy case pursuant to Bankruptcy Code §§ 501, 502, and 522. The
bankruptcy court ruled that neither Lenox nor Rachel was entitled to relief
under the Texas Estates Code.
We dismiss the appeal to the extent Rachel seeks a probate allowance to
be paid out of Debtor’s bankruptcy estate. In all other respects, we affirm.
I.
The parties do not dispute the essential facts of these consolidated
appeals; they dispute only the legal significance of those facts.
A.
Debtor was a successful surgeon who accumulated a great deal of wealth
and property during his lifetime. For many years, Debtor resided with Rachel
and their children at 9110 Memorial Drive, Houston, Texas (the “Memorial
Property”).
Debtor and Rachel separated in August 2010. Rachel initiated divorce
proceedings in a Texas court in 2011. The divorce proceedings were
acrimonious and protracted. As explained in greater detail below, Debtor and
Rachel never obtained a final divorce.
2
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Nos. 15-20034 and 15-20148
Debtor moved to Miami, Florida in late 2011. Rachel and her minor
children continued to reside in Texas at the Memorial Property.
B.
Debtor filed a voluntary Chapter 11 bankruptcy petition in the Southern
District of Florida (the “Florida Bankruptcy Court”) on January 23, 2013. 1
Rachel did not join Debtor’s bankruptcy petition as a joint debtor.
Debtor engaged in significant misconduct during his bankruptcy case.
As a result, the Florida Bankruptcy Court conditionally dismissed Debtor’s
bankruptcy case and appointed a chief restructuring officer to reorganize and
operate Debtor’s business and personal financial affairs.
After Debtor substantially interfered with the chief restructuring
officer’s efforts, the Florida Bankruptcy Court reinstated Debtor’s bankruptcy
case, transferred the case to the United States Bankruptcy Court for the
Southern District of Texas (the “Texas Bankruptcy Court”), and directed the
appointment of a Chapter 11 trustee, Ronald J. Sommers (the “Trustee”).
C.
Debtor died in Florida shortly thereafter. Although Debtor left numerous
wills, none of the wills appear to be valid. As a result, no probate court has yet
assumed jurisdiction over Debtor’s probate estate, and it is unlikely that any
probate proceedings will be instituted in the near future. The parties therefore
agree that, for all practical purposes, Debtor “effectively . . . died intestate.”
In response to Debtor’s death, the Texas Bankruptcy Court converted
Debtor’s bankruptcy case to a liquidation under Chapter 7 of the Bankruptcy
1 Chapter 11 is the chapter of the bankruptcy code that governs the reorganization of
debtors. 11 U.S.C. §§ 1101-74.
3
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Nos. 15-20034 and 15-20148
Code. 2 The Trustee remained assigned to the case as the chapter 7 trustee. The
Texas Bankruptcy Court appointed Lenox to act as Debtor’s personal
representative in the bankruptcy case.
Because Debtor and Rachel never obtained a final divorce, Debtor and
Rachel remained legally married at the time of Debtor’s death.
D.
Lenox attempted to claim the Memorial Property as Debtor’s exempt
homestead under Texas Property Code § 41.001 and Texas Constitution art. 16
§ 50. Soon after Lenox claimed that exemption, however, she learned that the
Memorial Property was deeply encumbered by debt. Although the
commencement of a bankruptcy case ordinarily imposes an automatic stay that
bars creditors from pursuing debt collection activities, 3 the Texas Bankruptcy
Court entered an agreed order authorizing the first lienholder to “pursue its
state law remedies, . . . including foreclosure, repossession, and/or eviction”
against the Memorial Property. The first lienholder accordingly foreclosed
upon the Memorial Property, and Rachel and her children had to move out of
the house. Thus, although the parties agree that Lenox was entitled to claim a
homestead exemption under the Texas Property Code on Debtor’s behalf, that
exemption was essentially worthless.
2 See id. § 1112(b)(1) (“[O]n request of a party in interest, and after notice and a
hearing, the court shall convert a case under [Chapter 11 of the Bankruptcy Code] to a case
under chapter 7 . . . for cause.”).
See also FED. R. BANKR. P. 1016 (“Death or incompetency of the debtor shall not abate
a liquidation case under chapter 7 of the Code. In such event the estate shall be administered
and the case concluded in the same manner, so far as possible, as though the death or
incompetency had not occurred. If a reorganization, family farmer's debt adjustment, or
individual's debt adjustment case is pending under chapter 11, chapter 12, or chapter 13, the
case may be dismissed; or if further administration is possible and in the best interest of the
parties, the case may proceed and be concluded in the same manner, so far as possible, as
though the death or incompetency had not occurred.”).
3 11 U.S.C. § 362.
4
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Nos. 15-20034 and 15-20148
Lenox therefore amended her schedule of exemptions to instead claim
$45,000 cash in lieu of exempt homestead property under the Texas Estates
Code (the “Cash Alternative Exemption”). This exemption would benefit
Rachel and her minor children.
The Trustee objected to the Cash Alternative Exemption, and the
bankruptcy court sustained the Trustee’s objection. Lenox now appeals that
order, and Rachel joins Lenox’s appeal. 4
E.
Whereas Lenox sought to claim exemptions on Debtor’s behalf, Rachel
also claimed various allowances and exemptions on behalf of herself and her
children pursuant to 11 U.S.C. §§ 501 and 502, the provisions of the
Bankruptcy Code which govern the filing and allowance of claims by creditors. 5
Rachel maintains that the Texas Estates Code entitles her to $56,250.00 cash
in lieu of homestead and exempt property, plus a $496,080.00 family
allowance. Rachel argues that this money should be paid to her as an
administrative expense or a domestic support obligation out of Debtor’s
bankruptcy estate. 6
4 Lenox and Rachel first appealed the Texas Bankruptcy Court’s order denying the
Cash Alternative Exemption to the district court. The district court certified the case for
direct appeal to the Fifth Circuit, and we allowed the direct appeal. See 28 U.S.C. § 158(d).
5 Although Rachel’s claim technically arose post-petition, the Texas Bankruptcy Court
treated Rachel’s claim as a prepetition claim pursuant to Bankruptcy Code § 348(d). See 11
U.S.C. § 348(d) (“A claim against the estate or the debtor that arises after the order for relief
but before conversion in a case that is converted under section 1112 [of the Bankruptcy Code]
. . . shall be treated for all purposes as if such claim had arisen immediately before the date
of the filing of the petition.”). Neither party challenges the Texas Bankruptcy Court’s
conclusion on that issue, so we proceed under the assumption that Rachel’s claim is
effectively a claim for a prepetition debt.
6 In addition to filing a claim pursuant to Bankruptcy Code §§ 501 and 502, Rachel
also filed a separate document in Debtor’s bankruptcy case entitled “Application for Family
Allowance and Allowance in Lieu of Homestead and Exempt Property.” The application does
not specify which section of the Bankruptcy Code it arises under, but the claim and the
5
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Nos. 15-20034 and 15-20148
The Trustee objected to Rachel’s claim as well. The Texas Bankruptcy
Court sustained the Trustee’s objection to the extent Rachel requested an
allowance under Texas law to be paid out of Debtor’s bankruptcy estate.
However, the court ruled that Rachel was entitled to an $18,000 allowance
under Florida law to be paid out of Debtor’s probate estate. That allowance was
significantly smaller than the amount Rachel requested under Texas law.
The Texas Bankruptcy Court entered a final order which states that “no
assets from the bankruptcy estate shall be used to pay” Rachel’s claim for a
probate allowance. However, because the Texas Bankruptcy Court concluded
that it lacked constitutional authority to enter an award against Debtor’s
probate estate, the court submitted proposed findings of fact and conclusions
of law to the district court respecting that issue. The district court adopted the
Texas Bankruptcy Court’s proposed findings and conclusions and entered a
final order granting Rachel “a family allowance from the assets of the Debtor’s
probate estate in the total amount of $18,000, payable in a single lump sum.”
Rachel now appeals. Rachel has also filed a motion to certify certain
questions to the Supreme Court of Texas. Lenox is not a party to Rachel’s
appeal. We have consolidated Rachel’s appeal with Lenox’s appeal.
application seek identical relief. The parties discuss the claim and the application
interchangeably in their briefs, so we will do the same.
6
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Nos. 15-20034 and 15-20148
II.
“Bankruptcy court findings of fact are subject to the clearly erroneous
standard of review and will be reversed only if, on the entire evidence, we are
left with the definite and firm conviction that a mistake has been made.” 7 We
review a bankruptcy court’s conclusions of law de novo. 8
III.
We first conclude that the Texas Bankruptcy Court correctly denied the
cash in lieu of homestead exemption that Lenox claimed on Debtor’s behalf
under Bankruptcy Code § 522. 9
A.
“Under the Bankruptcy Code, the commencement of a bankruptcy case
creates an estate comprising all legal and equitable interests in property . . . of
the debtor as of that date.” 10 However, § 522 of the Bankruptcy Code permits
the debtor to exempt certain property from the bankruptcy estate if certain
prerequisites are met. 11 Property exempted under § 522 is generally “not liable
during or after the case for any debt of the debtor that arose . . . before the
commencement of the case.” 12
7 Allison v. Roberts (In re Allison), 960 F.2d 481, 483 (5th Cir. 1992) (citing New
Orleans Pub. Serv., Inc. v. First Fed. Sav. & Loan Ass’n of Warner Robins, Ga. (In re Delta
Towers, Ltd.), 924 F.2d 74 (5th Cir. 1991)).
8 Id.
9 The Trustee argues that, “in substance,” Lenox’s “‘claim in lieu of exemption’ is more
like a claim under 11 U.S.C. § 502” than a request for an exemption under Bankruptcy Code
§ 522. Lenox disclaims any reliance on 11 U.S.C. § 502, so we need not discuss this issue.
10 Zibman v. Tow (In re Zibman), 268 F.3d 298, 302 (5th Cir. 2001) (citations omitted).
11 Section 522 applies in bankruptcy cases under chapter 7 and 11 alike. See 11 U.S.C.
§ 103 (“[C]hapters 1, 3, and 5 of this title apply in a case under chapter 7, 11, 12, or 13 of this
title [with exceptions not applicable here].”).
12 Id. § 522(c).
7
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Nos. 15-20034 and 15-20148
Lenox, as Debtor’s personal representative, stands in Debtor’s shoes. The
Texas Bankruptcy Court has authorized her to claim any exemptions to which
Debtor would have been entitled.
With exceptions not applicable here, a debtor may “take advantage of
either the federal exemption provisions in the Bankruptcy Code or those
provided under state law.” 13 Here, Lenox claims an exemption on Debtor’s
behalf under Texas Estates Code § 353.053, which provides:
(a) If all or any of the specific articles of exempt property described
by Section 353.051(a) 14 are not among the decedent's effects, the
court shall make, in lieu of the articles not among the effects, a
reasonable allowance to be paid to the decedent's surviving spouse
and children as provided by Section 353.054.
(b) The allowance in lieu of a homestead may not exceed $45,000,
and the allowance in lieu of other exempt property may not exceed
$30,000, excluding the family allowance for the support of the
surviving spouse, minor children, and adult incapacitated children
provided by Subchapter C.
This provision permits the surviving spouse “an allowance in lieu of the
[homestead] exemption” in situations where the homestead is “so
[e]ncumbered with liens that its permanency as a home may be defeated at the
will of the lienholder.” 15
B.
The Texas Bankruptcy Court concluded that Lenox could not claim an
exemption under Texas Estates Code § 353.053 because Debtor was only
13Zibman, 268 F.3d at 302 (citing 11 U.S.C. § 522(b)).
14Texas Estates Code § 353.051(a)(1) includes, as exempt property to be set aside, “the
homestead for the use and benefit of the decedent’s surviving spouse and minor children.”
15 Ward v. Braun, 417 S.W.2d 888, 892 (Tex. Civ. App. 1967) (applying similarly-
worded predecessor to TEX. EST. CODE ANN. § 353.053 (West 2015)).
8
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Nos. 15-20034 and 15-20148
entitled to claim state law exemptions under Florida law. We turn first to that
choice of law issue.
To determine which State’s exemptions are potentially available to a
debtor under § 522, we first determine whether the debtor was domiciled in a
single State for the two years preceding his bankruptcy filing. If he was, then
that State’s exemption laws govern. If he was not, we instead inquire where
the debtor was domiciled during the period starting on the date 910 days prior
to filing and ending on the date 730 days prior to filing. We then apply the
exemptions of the State in which the debtor was domiciled for the longest
portion of that 180-day period. 16
Instead of inquiring where the Debtor was domiciled during the 910-day
period preceding his bankruptcy petition, the Texas Bankruptcy Court applied
the law of the State in which the Debtor was domiciled at the time of his death.
If the court had applied the correct choice of law rule, it would have concluded
that Texas law, not Florida law, governs the exemptions available to Debtor
under § 522. Debtor filed his bankruptcy petition on January 23, 2013. Because
Debtor was not domiciled in a single State between January 24, 2011 and
January 23, 2013, the court should have inquired where Debtor was domiciled
between July 28, 2010 and January 24, 2011. Debtor was domiciled in Texas
16 This choice of law rule comes from § 522(b)(3)(A) of the Bankruptcy Code, which
allows a debtor to exempt:
any property that is exempt under . . . State or local law that is applicable on
the date of the filing of the petition to the place in which the debtor’s domicile
has been located for the 730 days immediately preceding the date of the filing
of the petition or if the debtor’s domicile has not been located in a single State
for such 730-day period, the place in which the debtor’s domicile was located
for 180 days immediately preceding the 730-day period or for a longer portion
of such 180-day period than in any other place.
11 U.S.C. § 522(b)(3)(A); see also Camp v. Ingalls (In re Camp), 631 F.3d 757, 760 (5th Cir.
2011).
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during that entire time period. Thus, Texas law determines the state law
exemptions available to Debtor.
Nevertheless, the Texas Bankruptcy Court ultimately reached the
correct result when it sustained the Trustee’s objection to the Cash Alternative
Exemption. As we explain below, Debtor was not eligible for an exemption
under the Texas Estates Code at the time he filed for bankruptcy. Thus, Lenox
cannot claim an exemption under the Texas Estates Code on Debtor’s behalf.
C.
A debtor’s eligibility for a state law exemption under § 522 is determined
by the facts and law in existence on the date that the debtor filed his
bankruptcy petition. 17 This is known as the “Snapshot Rule,” and it “holds that
all exemptions are determined at the time the bankruptcy petition is filed, and
that they do not change due to subsequent events.” 18
Texas Estates Code § 353.053, by its plain terms, only applies if the
debtor is deceased. 19 Debtor was alive on the petition date, so he was not
eligible for an allowance under § 353.053 on the date he filed for bankruptcy.
Thus, under the Snapshot Rule, Lenox cannot claim that exemption on
Debtor’s behalf under Bankruptcy Code § 522.
Federal Rule of Bankruptcy Procedure 1016 further supports our
conclusion. That rule provides that, if the debtor passes away during the
17 Zibman, 268 F.3d at 300.
18 Viegelahn v. Frost (In re Frost), 744 F.3d 384, 386 (5th Cir. 2014) (citations omitted).
Even where, as here, the case is converted from a chapter 11 reorganization to a
chapter 7 liquidation, exemptions are still measured by the facts and law in existence on the
petition date, not the date the case was converted. Stinson v. Williamson (In re Williamson),
804 F.2d 1355, 1356, 1358-62 (5th Cir. 1986).
19 See TEX. EST. CODE ANN. § 353.053(a) (West 2015) (describing the allowance as “a
reasonable allowance to be paid to the decedent's surviving spouse and children” (emphasis
added)).
10
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pendency of a bankruptcy case, “the estate shall be administered and the case
concluded in the same manner, so far as possible, as though the death . . . had
not occurred.” 20 Texas Estates Code § 353.053 would be completely inapplicable
if Debtor was alive today. Thus, denying Lenox’s claimed exemption under
Texas Estates Code § 353.053 would be most consistent with Rule 1016’s
admonition to administer the case as if Debtor had never passed away.
Cases from other Circuits support our conclusion as well. In Armstrong
v. Peterson (In re Peterson), 21 the debtor died while his bankruptcy case was
still pending. The chapter 7 trustee assigned to the debtor’s case “concede[d]
that at the time of filing, [the debtor] was entitled to and properly claimed a
homestead exemption.” 22 The trustee nevertheless argued that the “homestead
exemption was relinquished when [the debtor] died during the pendency of his
bankruptcy without leaving a spouse or a dependent child.” 23 The Eighth
Circuit, applying the Snapshot Rule, disagreed. Because the debtor qualified
for the exemption on the petition date, the debtor’s subsequent death was
“irrelevant.” 24 Other courts reach the same conclusion as Peterson. 25
Thus, when a debtor dies during the pendency of his bankruptcy case, he
does not become ineligible for exemptions that were available to him on the
petition date. A debtor’s post-petition death has no effect on the exemptions
20 FED. R. BANKR. P. 1016 (emphasis added).
21 897 F.2d 935 (8th Cir. 1990).
22 Id. at 935.
23 Id. at 936.
24 Id. at 939.
25 See Ohanian v. Irwin (In re Irwin), 338 B.R. 839, 851 (E.D. Cal. 2006) (“[I]t is well
settled that a claimed exemption (if valid under 522(b) at the time of filing) survives the death
of the debtor.” (citations omitted)); In re Combs, 166 B.R. 417, 417-21 (Bankr. N.D. Cal. 1994);
In re Friedman, 38 B.R. 275, 275-77 (Bankr. E.D. Pa. 1984).
11
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available to him. Therefore, a debtor cannot become eligible for exemptions
that were unavailable to him by dying after the filing date. 26
Lenox attempts to avoid the foregoing result in two ways. 27 She first
argues that this Court’s decisions in Zibman v. Tow (In re Zibman) 28 and
Viegelahn v. Frost (In re Frost) 29 render the Snapshot Rule inapplicable under
the facts of this case. We disagree. Zibman and Frost hold that, if a debtor is
eligible for a state law exemption at the time he files bankruptcy, but the
debtor fails to comply with the State’s requirements for remaining eligible for
that exemption throughout the entirety of the bankruptcy case, then the debtor
loses the exemption. Neither Zibman nor Frost holds that a debtor may become
eligible for an exemption that was originally unavailable to him when
circumstances change during the pendency of the bankruptcy. Here, Debtor
was not eligible for an exemption under Texas Estates Code § 353.053 at the
time he filed bankruptcy, so his subsequent death does not affect the
availability of the exemption.
Secondly, Lenox argues that Texas Estates Code § 353.053 is merely a
“different form of the homestead exemption found in the Texas Constitution
26 Courts regularly hold that post-petition changes in circumstances cannot render a
debtor eligible for exemptions for which he was ineligible on the petition date. See In re
Braxton, 350 B.R. 710, 710-12 (Bankr. W.D. La. 2005) (debtor who was temporarily
unemployed on the petition date could not claim exemption available only to employed
persons, even though debtor “had returned to gainful employment by the time of the
hearing”); In re Dawson, 266 B.R. 355, 356-59 (Bankr. N.D. Tex. 2001) (debtor who was
married on petition date could not claim a homestead different from that of his spouse, even
though divorce proceedings were pending on petition date and completed shortly thereafter);
In re Rivera, 5 B.R. 313, 314-16 (Bankr. M.D. Fla. 1980) (holding that single debtor
cohabitating with unmarried woman could not claim “head of household” exemption, even
though woman gave birth to child three days after bankruptcy petition was filed, because as
of the date debtor filed for bankruptcy, debtor had no legal or moral obligation to continue
support).
27 Lenox raises other arguments as well, but they are all either inadequately briefed
or unsupported by authority, so we will not discuss them here.
28 268 F.3d 298.
29 744 F.3d 384.
12
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and the Texas Property Code.” To reiterate, the parties do not dispute that
Debtor was entitled to claim a homestead exemption under the Texas
Constitution and the Texas Property Code on the date he filed bankruptcy; the
problem is that that exemption is worthless because the Texas Bankruptcy
Court authorized the first lienholder to foreclose on the Memorial Property.
The relevant homestead exemption provision of the Texas Property Code does
not contain a cash-in-lieu of homestead provision similar to Texas Estates Code
§ 353.053. 30 The question, then, is whether Lenox can exchange a valueless
homestead exemption under the Property Code for a valuable cash-in-lieu-of-
homestead exemption under the Estates Code.
Lenox argues that the answer to that question is yes. According to Lenox,
Texas Estates Code § 353.053 “is simply an extension of the Texas Property
Code and represents an alternative and different form of the real property
homestead exemption” under Texas Property Code § 41.001. She relies upon
this Court’s statements in Frost and Zibman that, “[w]hen claiming an
exemption under state law, . . . ‘it is the entire state law applicable on the filing
date that is determinative.’” 31 Thus, argues Lenox, “the homestead exemption,
even the cash alternative, relates back to the homestead owned by [Debtor] at
the commencement of the case.”
As Lenox’s counsel conceded at oral argument, however, there is no
authority to support her assertion that § 353.053 is merely a different form of
the homestead exemption provided by the Texas Property Code and the Texas
Constitution. Indeed, the two exemptions are materially different; Texas
Estates Code § 353.053 applies only in probate proceedings where there is a
“decedent,” and it contains a cash-in-lieu provision that the relevant chapter
30 See TEX. PROP. CODE ANN. § 41.001 (West 2015).
31 Frost, 744 F.3d at 386 (emphasis in original) (quoting Zibman, 268 F.3d at 304).
13
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of the Texas Property Code lacks. Thus, if Debtor were still alive, a cash-in-
lieu exemption under Texas Estates Code § 353.053 would be completely
unavailable to him. Federal Rule of Bankruptcy Procedure 1016 commands us
to administer the case as if Debtor’s death had not occurred. As a result,
Debtor’s eligibility for a homestead exemption under the Texas Property Code
does not, in derogation of the Snapshot Rule, retroactively entitle him to a
exemption under Texas Estates Code § 353.053 for which he was ineligible on
the petition date.
In sum, the Snapshot Rule bars Lenox from claiming an exemption on
Debtor’s behalf pursuant to Texas Estates Code § 353.053 and Bankruptcy
Code § 522. We therefore affirm the Texas Bankruptcy Court’s order denying
the claimed exemption. 32
IV.
Having disposed of Lenox’s appeal, we turn now to Rachel’s appeal.
Whereas Lenox sought to claim exemptions on Debtor’s behalf under § 522 of
the Bankruptcy Code, Rachel seeks a family probate allowance and a cash-in-
lieu-of-homestead exemption on her own behalf as a creditor of Debtor’s estate.
Rachel claims that Texas Estates Code §§ 353.101(a), 33 353.053, 34 353.054, 35
32 We need not address Rachel’s argument that the Texas Bankruptcy Court
improperly struck documents from the record on appeal. The documents excluded from the
record would not change our conclusion that Debtor was ineligible for the Cash Alternative
Exemption at the time he declared bankruptcy.
33 “[T]he court shall fix a family allowance for the support of the decedent’s surviving
spouse, minor children, and adult incapacitated children.” TEX. EST. CODE ANN. § 353.101(a)
(West 2015).
34 “If all or any of the specific articles of exempt property described by Section
353.051(a) are not among the decedent's effects, the court shall make, in lieu of the articles
not among the effects, a reasonable allowance to be paid to the decedent's surviving spouse
and children . . .” Id. § 353.053(a).
35 “The executor or administrator of an estate shall pay an allowance in lieu of exempt
property in accordance with this section.” Id. § 353.054(a).
14
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and 353.055 36 entitle her to $56,250.00 as an allowance in lieu of homestead
and exempt property, plus a $496,080.00 family allowance.
As noted above, the Texas Bankruptcy Court sustained the Trustee’s
objection to the extent Rachel requested an allowance under Texas law to be
paid out of Debtor’s bankruptcy estate. However, the court granted Rachel an
$18,000 allowance under Florida law to be paid out of Debtor’s probate estate.
Rachel maintains that the Texas Bankruptcy Court should have
awarded her the much larger allowance she requested under Texas law. She
also claims that the court should have allowed her to recover the allowance out
of Debtor’s bankruptcy estate, instead of Debtor’s probate estate alone.
A.
We first agree with the Texas Bankruptcy Court that Rachel is not
eligible for a probate allowance under Texas law.
A decedent’s survivor is eligible for a probate allowance under Texas law
only if the decedent was domiciled in the State of Texas at the time of his or
her death. 37 A person is domiciled in a State if he or she (1) resides within the
State and (2) intends to remain in that State for the indefinite future. 38
36 “An allowance in lieu of any exempt property shall be paid in the manner selected
by the decedent's surviving spouse or children of legal age, or by the guardian of the
decedent's minor children, or by the guardian of each adult incapacitated child or other
appropriate person, as determined by the court, if there is no guardian . . .” Id. § 353.055(a).
37 Hopkins v. Wright, 17 Tex. 30, 39 (1856) (“The rule is well settled, that the
succession to the personal estate of a decedent is to be governed by the law of the country in
which he was domiciled at the time of his death.”); Moore v. Moore, 430 S.W.2d 247, 251 (Tex.
Civ. App. 1968) (applying predecessor to the Texas Estates Code) (“The family of a decedent
is not entitled to an allowance in lieu of a homestead out of property in the course of
administration within the state, unless the decedent at the time of death was domiciled in
the state.” (quoting 18 TEX. JUR. 2D, DECEDENTS’ ESTATES, § 497, p. 405)).
38 Acridge v. Evangelical Lutheran Good Samaritan Soc’y, 334 F.3d 444, 448 (5th Cir.
2003); Alston v. Ulman, 39 Tex. 157, 159 (1873).
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We emphasize for the sake of clarity that, unlike Lenox, Rachel is not
pursuing an exemption on the Debtor’s behalf pursuant to Bankruptcy Code §
522. As a result, neither the Snapshot Rule nor § 522(b)(3)(A)’s choice of law
rule govern Rachel’s claim under Texas law. Debtor’s domicile at the time of
his death, not his domicile at the time of his bankruptcy filing or during the
910-day period preceding his bankruptcy petition, determines Rachel’s
eligibility for the allowances she seeks.
The Texas Bankruptcy Court found, and the district court agreed, that
Debtor was domiciled in Florida, not Texas, at the time of his death. 39 We must
defer to the lower courts’ determination of domicile unless it is clearly
erroneous. 40
The record supports the Texas Bankruptcy Court’s finding. Debtor lived
in Florida for approximately two years prior to his death. There is no evidence
Debtor had intended to move away from Florida before he died. The Texas
Bankruptcy Court also found that Debtor maintained valuable assets in
Florida. Although Rachel is correct that Debtor (1) maintained some
connections with Texas while living in Florida and (2) possessed valuable
assets located within the state of Texas, the Texas Bankruptcy Court’s finding
is not clearly erroneous. The Texas Bankruptcy Court appropriately found that
Debtor was not domiciled in Texas at the time of his death, so Rachel may not
claim probate allowances under Texas law.
39 Rachel suggests that the Texas Bankruptcy Court never made a finding of fact with
respect to Debtor’s domicile, so there is no factual finding to which this Court may defer.
Rachel is incorrect; the Texas Bankruptcy Court did indeed make the requisite factual
finding. See Case No. 15-20034, ROA 8939 (stating in the Conclusions of Law section of the
opinion that Debtor’s “domicile at death was Florida”); id. at 8905 (“[T]o the extent that any
Conclusions of Law are construed as Findings of Fact, they are adopted as such.”).
40 Coury v. Prot, 85 F.3d 244, 251 (5th Cir. 1996) (citing 1 J. MOORE, MOORE'S FEDERAL
PRACTICE § 0.74[3.–3] n. 29); Dos Santos v. Belmere Ltd. P’ship, 516 F. App’x 401, 403 (5th
Cir. 2013) (per curiam).
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Rachel attempts to avoid the foregoing result by arguing that, under
Texas law, it is the domicile of the surviving spouse and children, not the
domicile of the decedent, which determines whether the survivors may claim
allowances under Texas probate law. Thus, argues Rachel, even if Debtor was
domiciled in Florida at the time of his death, Texas law still applies because
Rachel and her children live in Texas.
Rachel’s argument is contrary to Texas precedent. As the Court of Civil
Appeals of Texas, Dallas stated in Moore v. Moore: “It is well established in
Texas that it is the domicile of the decedent, not the widow, which determines
the right of the widow to an allowance.” 41
Rachel argues that this Court should disregard Moore because it “is
based upon an improper interpretation of” Texas Supreme Court precedent.
Although we are not bound by decisions of intermediate state appellate courts
if we are “convinced by other persuasive data that the highest court of the state
would decide otherwise,” 42 we are not persuaded that the Texas high court
would disagree with Moore because the Supreme Court of Texas has repeatedly
held that it is the domicile of the decedent, not the survivor, which determines
the survivor’s eligibility for allowances and exemptions under Texas’s probate
laws. 43 We must therefore follow Moore and the Texas Supreme Court cases
upon which it relies.
41 Moore, 430 S.W.2d at 251 (emphasis added) (citing 18 TEX. JUR. 2D, DECEDENTS’
ESTATES, § 497, p. 405).
42 Arete v. Gunnerman, 643 F.3d 410, 418 (5th Cir. 2011) (quoting Howe ex rel. Howe
v. Scottsdale Ins. Co., 204 F.3d 624 (5th Cir. 2000)).
43 See Alston, 39 Tex. at 157-59 (holding that the decedent’s children were not entitled
to a substituted allowance in lieu of homestead under Texas law, even though the children
had become permanent residents of Texas, because the decedent was not himself a Texas
domiciliary at the time of his death); Green v. Crow, 17 Tex. 180, 189-90 (1856) (holding that
a widow’s homestead rights under Texas’s probate laws “are not dependent on the
whereabouts of her residence after the death of her husband. If the husband had a domicile
at the time of his death, she is, under the section in case of insolvency of the estate, entitled
in full property to that domicile.”).
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Rachel correctly notes that the Texas cases cited above are decades or
even centuries old. She therefore asserts that these cases are no longer valid
after the 1971 promulgation of the Restatement (Second) of Conflict of Laws.
According to Rachel, if the Supreme Court of Texas applied the seven-factor
test set forth in § 6 of the Restatement (Second), 44 it would conclude that
Rachel’s domicile, not Debtor’s domicile at the time of his death, determines
Rachel’s eligibility for a state law probate allowance.
We need not decide whether Restatement (Second) of Conflict of Laws §
6 would require a different result under the facts of this case. The American
Law Institute cannot overrule the Supreme Court of Texas. Although the Texas
Supreme Court has adopted the Restatement (Second) in tort cases, 45 it has
never held that § 6 of the Restatement (Second) governs a survivor’s eligibility
for probate allowances. Although one intermediate appellate court in Texas
has cited the Restatement (Second) in a probate case, that court nonetheless
followed the Supreme Court of Texas’s longstanding rule that “[t]he laws of the
domicile of a person who dies intestate control in the succession of movable or
personal property of his estate.” 46 In other words, even Texas cases that
postdate the Restatement (Second) look to the domicile of the decedent rather
than the domicile of the survivors. Thus, we have no reason to believe that the
Supreme Court of Texas would jettison its longstanding rule that it is the
44 These seven factors are: (a) the needs of the interstate and international systems;
(b) the relevant policies of the forum; (c) the relevant policies of other interested states and
the relative interests of those states in the determination of the particular issue; (d) the
protection of justified expectations; (e) the basic policies underlying the particular field of
law; (f) certainty, predictability, and uniformity of result; and (g) ease in the determination
and application of the law to be applied. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6
(1971).
45 Gutierrez v. Collins, 583 S.W.2d 312, 318 (Tex. 1979).
46 In re Garcia-Chapa, 33 S.W.3d 859, 861-62 (Tex. App. 2000) (citing Van Hoose v.
Moore, 441 S.W.2d 597, 617 (Tex. Civ. App. 1969); Owen v. Younger, 242 S.W.2d 895, 898
(Tex. Civ. App. 1951); Saner Ragley Lumber Co. v. Spivey, 238 S.W. 912, 915 (Tex. Comm’n
App. 1930)).
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decedent’s domicile, not the survivor’s domicile, which governs the survivor’s
eligibility for a probate allowance under Texas law.
Rachel argues in the alternative that, even if the domicile of the decedent
would ordinarily determine the availability of probate allowances under Texas
law, the survivor’s domicile should instead control where, as here, “the
decedent moved to a foreign state shortly before his death, created his alleged
domicile in violation of court orders and his surviving wife and children have
consistently been domiciled in Texas since before the decedent moved away
from them.” Under the unusual circumstances of this case, argues Rachel, the
Court should not inquire where Debtor was domiciled at the time of his death,
but should instead inquire whether Rachel and her children were “‘forum’
shopping to get a better family allowance.” Again, however, all of the relevant
Texas cases state that it is the domicile of the debtor, not that of the surviving
spouse and children, that matters. Texas precedent contains no indication that
the Supreme Court of Texas would recognize Rachel’s proposed exception to its
well-settled domicile rules. In the absence of any such indication, we will not
read such an exception into Texas law.
Rachel also asks us to certify various questions to the Supreme Court of
Texas. Essentially, Rachel wants the Supreme Court of Texas to modify its
well-settled domicile rules. For the reasons explained above, however, “there
is no reason to think that the Texas Supreme Court would deviate from its
well-established rule and therefore no reason to certify the question to that
court.” 47 We therefore deny Rachel’s motion.
In sum, Rachel is not entitled to the allowances she claims under Texas
law because Debtor was not a Texas domiciliary at the time of his death. It is
47 Compass Bank v. King, Griffin & Adamson P.C., 388 F.3d 504, 505 n.1 (5th Cir.
2004) (per curiam).
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irrelevant that Rachel and her children are Texas domiciliaries. The lower
courts therefore properly denied Rachel’s request for relief under Texas law.
B.
Because Rachel is ineligible for a probate allowance under Texas law,
the Texas Bankruptcy Court instead awarded Rachel a probate allowance
under Florida law. The Texas Bankruptcy Court concluded that Florida law
limits a survivor’s family allowance to $18,000 and does not authorize an
allowance in lieu of homestead or exempt personal property. Therefore, the
Texas Bankruptcy Court limited Rachel’s recovery to $18,000.
Rachel does not challenge the Texas Bankruptcy Court’s interpretation
of Florida law; she merely disputes that Florida law applies at all. Nor does
the Trustee challenge the $18,000 allowance in any way. Because neither party
assigns any error to the Texas Bankruptcy Court’s application of Florida law,
we affirm the $18,000 award.
C.
The Texas Bankruptcy Court reasoned that Rachel should recover the
$18,000 allowance out of Debtor’s probate estate. The court was persuaded
that, because Debtor left “myriad wills” of “questionable validity,” and because
“no one named as executor in any of the Debtor’s numerous wills has had the
gumption to probate any of these wills,” it was unlikely that anyone would ever
institute probate proceedings in state court. The court observed that it
“remain[ed] in possession of the Debtor’s exempt assets – which comprise the
Debtor’s probate estate – because there is no executor or probate court to which
this Court could set them aside and entrust them.” Relying on the authority of
Seiden v. Southland Chenilles, 195 F.2d 899 (5th Cir. 1952), Hull v. Dicks, 235
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U.S. 584 (1915), 48 and Querner v. Querner (In re Querner), 7 F.3d 1199 (5th Cir.
1993), the court concluded that it “ha[d] an obligation to act to award a family
allowance that cannot or is not being resolved in state court.”
However, although the Texas Bankruptcy Court concluded that it
possessed jurisdiction over the assets in Debtor’s probate estate, it concluded
that it lacked constitutional authority to enter a final order on Rachel’s claim
against the probate estate. The Texas Bankruptcy Court therefore submitted
proposed findings of fact and conclusions of law on that issue to the district
court. The district court adopted the Texas Bankruptcy Court’s proposed
findings and conclusions in their entirety and ordered “that Rachel Brown
shall receive a family allowance from the assets of Debtor’s probate estate in
the total amount of $18,000.00, payable in a single lump sum.” Thus, Rachel
stands to receive $18,000 to be paid out of property that Lenox successfully
claimed as exempt on Debtor’s behalf in the bankruptcy case. 49
48 Although the Texas Bankruptcy Court relied on Seiden and Hull to support its
conclusion that Rachel could recover the family allowance out of Debtor’s probate estate, the
court also concluded that neither Seiden nor Hull remain good law to the extent those
decisions would require the family allowance to be paid out of Debtor’s bankruptcy estate. As
we explain below, however, we have no occasion to decide whether Congress has overruled
Seiden and Hull in whole or in part.
49 See In re Lucio, 251 B.R. 705, 709 (Bankr. W.D. Tex. 2000) (“If a bankruptcy is
pending when a person dies, the only assets that go into the probate estate are the property
claimed as exempt in the debtor’s bankruptcy case . . . and any property acquired by the
debtor after the commencement of the bankruptcy case. Conversely, the only debts for which
the probate estate is liable are those incurred by the decedent after the filing of the
bankruptcy petition. The result is that the deceased debtor’s pre-bankruptcy debts are
discharged in the bankruptcy, and the deceased debtor’s exempt assets are passed to the
probate estate free of that debt.” (internal citations omitted)).
As the Texas Bankruptcy Court noted, “the only property in the Debtor’s probate
estate is property exempted from this bankruptcy estate, since property acquired by an
individual Chapter 11 debtor after commencement of the case is now included as property of
the bankruptcy estate.” See 11 U.S.C. § 1115(a)(1) (defining property of the estate for an
individual in Chapter 11 to include property “that the debtor acquires after the
commencement of the case”).
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On appeal, neither party objects to the lower courts’ authority to
authorize payment of the $18,000 allowance to Rachel out of the probate
estate. 50 Under normal circumstances, the proper procedure would have been
for the Texas Bankruptcy Court to transfer the exempt property – which is not
in the bankruptcy estate – to a state probate court. 51 Then Rachel would apply
to the probate court for the family allowance. But, as the Texas Bankruptcy
Court found, there is no likelihood that state court probate proceedings will
ever be initiated. Under these peculiar circumstances, we agree that the lower
courts did the only practical thing they could do: pay Rachel the $18,000 out of
the exempt assets. Because neither party objects to the lower courts’ authority
to do so, we will not disturb the district court’s order paying the family
allowance out of the probate estate.
D.
Although Rachel does not challenge the federal courts’ authority to pay
the $18,000 allowance out of the probate estate, she would prefer to be paid out
of Debtor’s bankruptcy estate. The Texas Bankruptcy Court ruled that Rachel’s
probate claims, “under the law upon which they are based, are only payable
out of the Debtor’s probate estate, and therefore may not be paid out of the
Debtor’s separate and distinct bankruptcy estate.” The Texas Bankruptcy
Court therefore ordered that “no assets from the bankruptcy estate shall be
used to pay” Rachel’s claim for a probate allowance.
Rachel challenges that order on appeal. As the Trustee correctly argues,
however, we lack appellate jurisdiction to decide this issue. We do not review
50 The Trustee raised such an objection below, but he has abandoned his objection on
appeal.
51 See In re Spiser, 232 B.R. 669, 674 (Bankr. N.D. Tex. 1999) (“[T]his court does not
have jurisdiction to determine exemptions in the probate estate; that is a matter for the Texas
courts.”).
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bankruptcy court orders that have not been reviewed by the district court. 52
Whereas the Texas Bankruptcy Court concluded that it lacked authority to
enter a final order on Rachel’s claim to the extent she sought payment from
the probate estate, and therefore submitted proposed findings of fact and
conclusions of law to the district court respecting that issue, the Texas
Bankruptcy Court concluded that it did possess constitutional authority to
enter a final order denying Rachel’s claim to the extent she sought payment
from the bankruptcy estate. 53 As a result, the Texas Bankruptcy Court entered
a final order which states that “no assets from the bankruptcy estate shall be
used to pay” Rachel’s claim for a probate allowance. Rachel never filed a notice
of appeal from the Texas Bankruptcy Court’s final order as required by Federal
Rule of Bankruptcy Procedure 8002. 54 Thus, we lack appellate jurisdiction over
Rachel’s claim against the bankruptcy estate. 55
52 See Smith v. Gartley (In re Berman-Smith), 737 F.3d 997, 998-1003 (5th Cir. 2013)
(holding that the Court of Appeals lacks appellate jurisdiction unless the appellant files a
timely notice of appeal with the bankruptcy clerk as required by FED. R. BANKR. P. 8002).
53 The parties do not challenge, and we have no reason to question, the Texas
Bankruptcy Court’s constitutional authority to enter this final order.
54 Rachel did argue in her objections to the Texas Bankruptcy Court’s proposed
findings of fact that the Texas Bankruptcy Court “was in error when it found that the family
allowance can only be paid out of the probate estate.” However, an objection to proposed
findings and conclusions is not a substitute for a notice of appeal. Compare FED. R. BANKR.
P. 9033(b) (“Within 14 days after being served with a copy of the proposed findings of fact
and conclusions of law a party may serve and file with the clerk written objections which
identify the specific proposed findings or conclusions objected to and state the grounds for
such objection.”), with FED. R. BANKR. P. 8002(a)(1) (“Except as provided in subdivisions (b)
and (c), a notice of appeal must be filed with the bankruptcy clerk within 14 days after entry
of the judgment, order, or decree being appealed.”). Rachel never filed a notice of appeal from
the Texas Bankruptcy Court’s final order denying her claim against Debtor’s bankruptcy
estate, so that order was not before the district court when it overruled Rachel’s objections to
the Texas Bankruptcy Court’s proposed findings and conclusions.
55 See Berman-Smith, 737 F.3d at 998-1003.
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We therefore dismiss the appeal to the limited extent that Rachel
challenges the Texas Bankruptcy Court’s final order denying her claim against
Debtor’s bankruptcy estate. 56
V.
For the foregoing reasons, we dismiss Rachel’s appeal to the extent she
challenges the Texas Bankruptcy Court’s final order providing that “no assets
from the bankruptcy estate shall be used to pay” Rachel’s claim for a probate
allowance. We affirm in all other respects.
AFFIRMED in part and APPEAL DISMISSED in part. Motion to certify
questions to the Supreme Court of Texas DENIED.
56 Rachel claims that she may recover her probate allowance directly out of the
bankruptcy estate under the authority of Seiden, 195 F.2d 899, and Hull, 235 U.S. 584. The
Trustee argues, and the Texas Bankruptcy Court agreed, that Congress partially overruled
Seiden and Hull when it enacted the Bankruptcy Code in 1978. Because we lack appellate
jurisdiction over this issue, we express no view regarding the continuing vitality of Seiden
and Hull.
24