496 B.R. 278
N.D.N.Y.2013Background
- Clinton appeals a Bankruptcy Court order denying summary judgment and granting Warehouse’s cross-motion.
- Meridian Road Property was transferred to Clinton County after Warehouse’s default in an in rem tax-foreclosure proceeding.
- Warehouse, as debtor in possession, sought relief under 11 U.S.C. §548 to avoid the transfer.
- The dispute centers on whether §548 may avoid a tax-foreclosure transfer and whether Warehouse has standing.
- The court analyzes standing, §548(a)(1)(B) (constructive fraud) vs §548(a)(1)(A) (actual fraud), and aligns with decisions construing 548 to include tax foreclosures; it affirms the Bankruptcy Court’s ruling.
- The court relies on Bankruptcy Code provisions (11 U.S.C. §§541, 550, 1107) and relevant caselaw (e.g., BFP v. RTC) to determine value adequacy and the reach of §548 in this context.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Warehouse has standing to challenge the transfer | Warehouse had no estate interest at filing due to prepetition loss of property | Warehouse, as debtor in possession, retains rights of a trustee and may challenge transfers | Yes; Warehouse has standing given 548 recovery and debtor-in-possession rights |
| Whether §548(a)(1)(B) applies to in rem tax foreclosures and allows avoidance | Foreclosures for taxes should not be treated as transfers with less than reasonably equivalent value | Romantic: BFP-like value presumption does not extend to tax foreclosures; value must be determined in case-by-case | Yes; §548(a)(1)(B) applies and reasonably equivalent value must be determined; avoidance permitted |
Key Cases Cited
- BFP v. Resolution Trust Corp., 511 U.S. 531 (U.S. Supreme Court, 1994) (foreclosures generally provide reasonable value; extension to tax foreclosures reserved)
- In re Johnson, 449 B.R. 7 (W.D.N.Y. 2011) (estate timing and debtor rights under §541/§550)
- In re Colonial Realty Co., 980 F.2d 125 (2d Cir. 1992) (recovery of property by trustee not property of estate until recovered)
- In re Wentworth, 221 B.R. 316 (Bankr.D. Conn. 1998) (reasonably equivalent value considerations in tax foreclosures)