In re Tracht Gut, LLC

After the County Treasurer and Tax Collector conducted tax sales of the properties debtor owned, debtor filed for Chapter 11 bankruptcy relief. Debtor filed an adversary complaint against the County Treasurer and the purchasers of the two properties, alleging that because the County sold the properties for a price that was too low, the tax sales were fraudulent transfers voidable under 11 U.S.C. 548(a). The bankruptcy court dismissed the complaint with prejudice, and the Ninth Circuit Bankruptcy Appellate Panel affirmed. In BFP v. Resolution Trust Corp., the Supreme Court held that the price received at a mortgage foreclosure sale “conclusively satisfies” the Bankruptcy Code’s requirement that transfers of an insolvent debtor’s property be in exchange for a “reasonably equivalent value,” so long as the mortgagee complied with the relevant foreclosure laws of the state in question, which in that case was also California. Because California tax sales have the same procedural safeguards as the California mortgage foreclosure sale at issue in BFP, the court agreed with the BAP and held that the price received at a California tax sale conducted in accordance with state law conclusively establishes “reasonably equivalent value” for purposes of 11 U.S.C. 548(a). Accordingly, the court affirmed the judgment. View "In re Tracht Gut, LLC" on Justia Law