Tracht Gut, LLC v. County of Los Angeles Treasurer & Tax Collector (In Re Tracht Gut, LLC)
503 B.R. 804
9th Cir. BAP2014Background
- Chapter 11 debtor Tracht Gut, LLC appeals orders dismissing its adversary complaint against LA County Treasurer and Tax Collector, Haghnazarzadeh, and Volodinsky for fraudulently avoiding tax sales; dismissal was with prejudice and without leave to amend.
- Prepetition tax-defaulted properties: Hatteras Street Tarzana and a second San Fernando property, with tax sales conducted Oct 22, 2012 after notice and publication under California law.
- Debtor purchased the Hatteras Property in 2012 and recorded deed; San Fernando deed recorded Nov 26, 2012, one day before bankruptcy filing.
- Tax sales occurred prepetition; Debtor filed bankruptcy Nov 27, 2012; tax deeds recorded Dec 13, 2012; Debtor asserted five relief claims, including avoidance of transfers and stay violations.
- Bankruptcy court concluded the complaint was threadbare and conclusory, dismissed with prejudice, denied reconsideration, and held amendment would be futile; on appeal, the panel affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the fraud claim was properly dismissed under Rule 12(b)(6). | Gut contends factual allegations survive plausibility pleading. | County contends no viable facts to support avoidance under §548(a). | Dismissal upheld; claims lacked plausible factual basis. |
| Whether the court abused its discretion in denying leave to amend. | Gut argues right to amend as of course; amendment should be allowed. | County argues amendment would be futile; Rule 15 procedurally changed post-2009. | No abuse; amendment would be futile given law and facts. |
| Whether the stay violation claim was properly dismissed. | Gut asserts postpetition deeds violated stay. | Recording deeds postpetition was ministerial and not stay violation; estate never owned property. | Correct to dismiss stay claim; deeds ministerial and property not estate. |
Key Cases Cited
- BFP v. Resolution Trust Corp., 511 U.S. 531 (1994) (reasonably equivalent value in prepetition tax sales; state foreclosure framework governs value)
- In re Pettit, 217 F.3d 1072 (9th Cir. 2000) (ministerial acts exception to automatic stay)
- Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969 (1st Cir. 1997) (ministers that sequential official acts with clear statutory duty may be ministerial)
- BFP v. Imperial Savings & Loan (In re BFP), 132 B.R. 748 (9th Cir. BAP 1991) (Madrid Rule; regular tax sales give rise to conclusive presumption of reasonably equivalent value)
- Kajima v. Girandole Intel Ltd. Lab. Co. (In re Grandote Country Club Co., Ltd.), 252 F.3d 1146 (10th Cir. 2001) (state tax-sale procedures affecting reasonably equivalent value)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must plead plausible claims, not mere recitations)
- Twombly v. Bell Atl. Corp., 550 U.S. 544 (2007) (plausibility standard for pleading)