Date of Decision:
April 29, 2011
Whether a sale of a house the debtor held as a tenant in common with his estranged spouse should be authorized under 11 U.S.C. § 363(h), where the non-filing spouse continued to reside in the house, did not have sufficient assets or adequate credit to buy the estate's share, had medical and personal issues that made her moving from the house difficult, and was responsible for the equity in the home?
Following an evidentiary hearing, the Bankruptcy Court concluded all equity in the home was attributable to the non-filing spouse's financial input and therefore it did not authorize a sale under § 363(h) because no benefit to the estate existed. The Bankruptcy Court did not weigh the benefits and detriments of the proposed sale under § 363(h)(3) since no benefit at all had been found. The case trustee appealed. The Bankruptcy Appellate Panel for the Eighth Circuit remanded and directed the Bankruptcy Court to determine the impact, under South Dakota law, of the trustee's rights and powers as a hypothetical bona fide purchaser under 11 U.S.C. § 544(a) in completing its analysis under § 363(h), an issue first raised by the trustee on appeal. Lovald v. Tennyson (In re Wolk), 437 B.R. 850 (B.A.P. 8th Cir. 2010). Following remand, the Bankruptcy Court considered South Dakota law governing tenants in common, assumed the debtor owned one-half the equity in the home, which was the most favorable assumption possible for the trustee, and concluded the benefit to the estate arising from a sale would be outweighed by the detriments to the debtor's estranged spouse due to her particular circumstances. Lovald v. Tennyson (In re Wolk), slip op. (Bankr. D.S.D. April 29, 2011). The trustee again appealed.
Full Bankruptcy Court Decision:
The Bankruptcy Appellate Panel affirmed. Lovald v. Tennyson (In re Wolk), 451 B.R. 468 (B.A.P. 8th Cir. 2011). The trustee appealed to the Court of Appeals for the Eighth Circuit, which also affirmed. Lovald v. Tennyson (In re Wolk), 686 F.3d 938 (8th Cir. 2012).
Full Bankruptcy Appellate Panel/District Court Appeal Opinion:
Full Eighth Circuit Court of Appeals Opinion: