City of Milwaukee v. Gillespie
487 B.R. 916
E.D. Wis.2013Background
- City of Milwaukee appeals bankruptcy court Order finalizing judgment for Chapter 13 debtors and avoiding transfers from tax foreclosures.
- Foreclosures under Wis. Stat. § 75.521 (strict foreclosure) transferred title to City for delinquent taxes without a competitive sale.
- Bankruptcy court found no reasonably equivalent value for transfers under 11 U.S.C. § 548(a)(1)(B) and avoided transfers.
- Court determined value of each debtor’s property, concluding the tax delinquency did not automatically equal reasonably equivalent value.
- Debtors sought to redeem properties through Chapter 13 plans; court remanded for further factual findings on reasonable value.
- Court emphasized that BFP v. Resolution Trust Corp. does not control non-sale foreclosures for tax liens; sale context matters.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether non-competitive foreclosure without sale can provide reasonably equivalent value. | Williams, Campbell, Gillespie contend not; value not equal to taxes owed. | City relies on BFP extending to foreclosures and tax liens without sale. | Not per se; remand for factual findings on value. |
| Whether the factors for reasonably equivalent value (arm's length, good faith, etc.) support the debtors here. | Debtors argue no clear showing of equivalent value based on record. | City argues process and value should be deemed equivalent under foreclosure. | Remand to allow bankruptcy court to make detailed factual findings on all factors. |
| Whether a public sale is required to satisfy § 548(a)(1)(B)’s reasonably equivalent value. | Debtors contend sale not strictly required if value otherwise equal. | City argues sale not necessary to confer value; but depends on value appraisal. | Law not settled; remand for case-specific valuation analysis. |
| Whether § 75.521 is impermissibly applied in bankruptcy or undermines Wisconsin interests. | Debtors argue bankruptcy analysis controls; statute not invalidated. | City claims bankruptcy improper encroachment on state interests. | Court clarifies it does not strike § 75.521; analysis subject to § 548(a)(1)(B) standards. |
Key Cases Cited
- In re Williams, 473 B.R. 307 (Bankr.E.D.Wis.2012) (used to assess value near time of transfer)
- BFP v. Resolution Trust Corp., 511 U.S. 531 (Supreme Court 1994) (reasonably equivalent value measured by sale price under foreclosure law)
- In re Talbot, 254 B.R. 63 (Bankr.D. Conn.2000) (non-sale foreclosure approach not supportive of tax lien value claim)
- In re Fitzgerald, 255 B.R. 807 (Bankr.D. Conn.2000) (disagreed with Talbot on value in non-sale foreclosures)
- In re Murphy, 331 B.R. 107 (Bankr.S.D.N.Y.2005) (absence of market forces in non-sale foreclosures undermines value assumption)
- Barber v. Golden Seed Co., 129 F.3d 382 (7th Cir.1997) (reasonableness of value assessed by case facts rather than fixed formula)
- Ojeda v. Goldberg, 599 F.3d 712 (7th Cir.2010) (clear error standard for factual findings; de novo for legal questions)