Williams v. City of Milwaukee City Clerk (In re Williams)
473 B.R. 307
Bankr. E.D. Wis.2012Background
- Kevin C. Williams filed a Chapter 13 petition in April 2011 and listed real property on Sherman Boulevard valued around $190k with a debt of about $14.5k for 2007–2008 taxes.
- Williams and two other debtors, Judson Campbell and Rita Gillespie, each faced Wisconsin tax-foreclosure actions under Wis. Stat. § 75.521 resulting in foreclosures before filing or within two years prior to their petitions.
- In each case the City of Milwaukee foreclosed for delinquent taxes, with documented assessed and fair market values substantially higher than the tax debts and the transfers effected without a conventional sale.
- The debtors filed adversary proceedings alleging that the tax-forfeiture transfers to the City were fraudulent conveyances under § 548(a)(1)(B) because the transfers may have lacked reasonably equivalent value.
- The City moved for summary judgment arguing the BFP framework and other authorities supported treating tax debts as reasonably equivalent value; the debtors cross-moved for summary judgment arguing the transfers were not for reasonably equivalent value.
- The court granted the debtors’ cross-motions and denied the City’s motions, ruling that strict foreclosure transfers lacking a competitive sale do not satisfy reasonably equivalent value under § 548(a)(1)(B) and must be avoided, with title returned to the plaintiffs for potential redemption.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether strict-foreclosure tax transfers satisfy §548(a)(1)(B)'s reasonably equivalent value | Williams, Campbell, Gillespie argue transfers lack value | City argues BFP and related authorities extend value to tax foreclosures | No; strict foreclosure lacks reasonably equivalent value |
Key Cases Cited
- In re Murphy, 331 B.R. 107 (N.D.N.Y. 2005) (taxing authority not exempt from § 548 analysis; due process concerns addressed)
- BFP v. Resolution Trust Corp., 511 U.S. 531 (U.S. 1994) (foreclosure sale value sets benchmark for reasonably equivalent value; non-market forced sales differ)
- In re Eckert, 388 B.R. 813 (Bankr.N.D. Ill. 2008) (two-step test for reasonably equivalent value; burden on trustee to show value received)
- In re Talbot, 254 B.R. 63 (Bankr.D. Conn. 2000) (state-defining value in tax sales; Talbot analyzed but later contrasted with BFP framework)
- Chorches v. Fleet Mortgage Corp. (In re Fitzgerald), 255 B.R. 807 (Bankr.D. Conn. 2000) (strict foreclosure evidentiary value in Connecticut; held inadequate for § 548 value)