Facts

A bankruptcy court granted a chapter 7 trustee's application to employ a real estate broker to sell Helayne Muennichow's home as Hermann Muennichow's (debtor) community property.

Title to the property was held in both debtor and Helayne's names as community property while they were married. In November 2013, Helayne filed for divorce. In order to refinance the property during their divorce proceedings, the Muennichows agreed that debtor would transfer his interest in the property to Helayne by way of quitclaim deed in exchange for Helayne transferring her ownership interest in debtor's accounting practice. The Muennichows signed a stipulation, which provided that each of the Muennichows would retain their respective community property interests in the property and debtor's accounting practice, notwithstanding the execution of quitclaim deeds and that the purpose of the transfer was to allow Helayne to refinance the property. Pursuant to the stipulation, debtor executed the quitclaim deed facially transferring his interest in the property to Helayne.

In March 2017, debtor filed a voluntary chapter 7 petition. In his petition, he disclosed the quitclaim deed in his initial bankruptcy schedules as a prepetition transfer of property and did not list the property as a real property asset in the chapter 7 schedules.

The trustee filed an adversary complaint in the bankruptcy court against the Muennichows to recover the property, asserting claims for actual and constructive fraudulent transfer. The bankruptcy court held in favor of the Muennichows and found that debtor did not fraudulently transfer the property to Helayne.

The trustee filed an application to employ real estate brokers to market the property, asserting that the property was held as community property and was thus property of the estate pursuant to Bankruptcy Code Section 541(a)(2).

The bankruptcy court granted the application and Helayne appealed in district court.

PLAINTIFF'S CONTENTIONS: Plaintiff contended that her rights established in the adversary proceeding would be destroyed if the trustee was allowed this second opportunity to take her home for the benefit of the estate. Plaintiff generally argued that the question of whether the property was not part of the debtor's estate could have been resolved in the adversary proceeding and, accordingly, the trustee was barred from raising it via the application to employ real estate brokers. Plaintiff alternatively argued that even if the property Plaintiff alternatively argued that even if the property were part of debtor's estate, the trustee abandoned the property. Specifically, plaintiff argued that the trustee's removal of the lis pendens placed on the property, and the trustee's non-opposition to a third party's motion to lift an automatic stay, demonstrated the trustee's abandonment.

DEFENDANT'S CONTENTIONS: Defendant denied all contentions.

Result

The bankruptcy court's order was affirmed.