674 B.R. 39
Bankr. E.D.N.Y.2025Background
- Jo Ann Hodges Reynolds lost her primary residence after failing to pay property taxes for 2017-2018, leading to Suffolk County obtaining the property via tax deed for a debt of $18,453.95.
- The property was worth approximately $259,400 at the time of transfer.
- Reynolds was afforded multiple deadline extensions to redeem her home, but ultimately did not pay the required sum within the statutory redemption periods (totaling 30 months).
- Reynolds filed for Chapter 13 bankruptcy and brought an adversary proceeding asserting the transfer was a fraudulent conveyance under 11 U.S.C. §§ 522(h) and 548(a)(1)(B).
- The County filed for summary judgment seeking dismissal, arguing no insolvency resulted and that their process protected against unconstitutional takings and provided for reclamation of surplus.
- The court granted summary judgment in favor of Reynolds, avoiding the transfer as a fraudulent conveyance under the Bankruptcy Code.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to bring fraudulent transfer action | Reynolds has standing under §522(h) as trustee declined to act and property was claimed exempt | N/A | Reynolds has standing |
| Takings Clause violation (unconstitutional taking) | Claims transfer and loss of surplus value is unconstitutional | Suffolk County code allows former owners to claim surplus, preventing takings issue as noted in Tyler v. Hennepin County | No constitutional takings violation; existing code remedy prevents claim |
| Insolvency after transfer | Transfer of property left Reynolds insolvent under Bankruptcy Code definition | Debtor was not insolvent post-transfer; not all debts/liabilities count | Transfer rendered Debtor insolvent as a matter of law |
| Reasonably equivalent value | Transfer for $18K tax debt not equivalent to $259K market value; no market forces or judicial oversight | County asserts statute preserves surplus and transfer hasn’t yet resulted in windfall | Transfer was not for reasonably equivalent value and is avoidable |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (materiality and genuine issue standards for summary judgment)
- BFP v. Resolution Trust Corp., 511 U.S. 531 (reasonably equivalent value under foreclosure sales)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (burden-shifting framework for summary judgment)
- Brady v. Town of Colchester, 863 F.2d 205 (drawing inferences for non-moving party at summary judgment)
- Tomka v. Seiler Corp., 66 F.3d 1295 (summary judgment inference standards)
- Gunsalus v. County of Ontario, 37 F.4th 859 (elements of fraudulent transfer under Bankruptcy Code)