Rosbottom, Jr. v. Schiff (In the Matter of Rosbottom, Jr.)

Case Type:
Case Status:
Reversed and Rendered
16-31108 (5th Circuit, Jul 17,2017) Not Published
Donations of "undivided" interests in Debtor's community property to two separate Qualified Personal Residential Trusts (QPRT) were ineffective and void due to their violation of article 2337 of the Louisiana Civil Code. As a result, title to the property never passed to the QPRT, and the QPRTs failed for lack of a res. Thus, the Debtor's condominium in Dallas, Texas (which he purchased over 15 years later from his share of proceeds of the sale of the Louisiana property) remained a community asset and became property of the Debtor's bankruptcy estate upon the commencement of the case.
Procedural context:
Appeal from District Court for the Western District of Louisiana, which reversed the bankruptcy court's summary judgment. Initially, the bankruptcy court had entered judgment in favor of the trustee, concluding that the condominium became property of the estate.
In 1999, the debtor and his then-wife executed four instruments establishing and governing two separate trusts to hold their undivided interests in their residence. In 2005, the couple divorced and sold the residence for $1,850,000. The debtor used his share to buy a condominium in Dallas, Texas. His former spouse used her share to purchase a house in Dallas. In 2009, the debtor filed for bankruptcy (a trustee was appointed, and the debtor was later incarcerated for bankruptcy fraud). Because the debtor took the position that his QRPT owned the condominium, he did not list it in his bankruptcy schedules. The trustee brought an adversary proceeding to determine that the condominium became property of the estate upon the filing. The bankruptcy court granted summary judgment in favor of the trustee, concluding that the 1999 conveyance to the QPRTs were null under Louisiana law, because they improperly alienated community property. On appeal to the district court, judgment was reversed and rendered in favor of the debtor.
King, Prado, Southwick (Per Curiam)

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