MEMORANDUM DECISION
I. INTRODUCTION
This matter is before the Court by way of a Motion for Summary Judgment (“Motion”) filed on behalf of the Defendant, Geza Eckert (“Defendant” or “Eckert”), relative to Berley Associates, Ltd.’s (“Debtor” or “Plaintiff’) adversary proceeding to recover avoidable transfers under 11 U.S.C. §§ 547 and 548. In response to the Motion, Debtor filed a Cross Motion for Summary Judgment (“Cross Motion,” and collectively the “Motions”) seeking summary judgment in its favor. A hearing on the Motions was held on March 20, 2013.
After careful review of the submissions of the parties, which include post-hearing submissions, the Court determines that the transfer of title to the Defendant in a pre-petition tax sale and foreclosure context, where there wаs no competitive bidding, may constitute a fraudulent conveyance under 11 U.S.C. § 548(a)(1)(B), and is not barred by the United States Supreme Court’s holding in BFP v. Resolution Trust Corp.,
The Court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and 157(a) and the Standing Order of the United States District Court dated July 10, 1984, as amended September 18, 2012, referring all bankruptcy cases to the bankruptcy court. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(F) and (H). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. The following constitutes the Court’s findings of faсt and conclusions of law as required by Fed. R. Bankr.P. 7052.
III. FACTS/PROCEDURAL HISTORY
The Debtor owned property located at 62 Speedwell Avenue in Morristown, New Jersey (the “Property”), which consists of a vacant lot. The Debtor failed to pay real estate taxes on the Property in 1999 and, as a result, the township of Morristown conducted a public tax sale on June 14, 2000. The successful bidder at the tax sale was Phoenix Funding, Inc. (“Phoenix”), which obtained a tax sale certificate and accompanying lien on the Property. Subsequently, Phoenix assigned its lien to Defendant Eckert.
The Debtor consistently failed to pay subsequent real estate taxes on the Property and, on January 19, 2010, neаrly ten years after Debtor’s initial tax delinquency, Eckert filed a New Jersey state court complaint to foreclose on the tax sale certificate pursuant to N.J.S.A. § 54:5-1, et seq. On September 16, 2011, the Superior Court of New Jersey entered an Order setting the time, place, and amount for redemption of the tax sale certificate. The redemption amount, as of January 10, 2011, was $244,195.99, plus taxed costs, and the last day to redeem was set as November 1, 2011. The Debtor failed to redeem the tax sale certificate and, on September 4, 2012, a final judgment was entered in the tax sale foreclosure action, enabling Eckert to obtain title to the Property.
On Seрtember 5, 2012, the Debtor filed a voluntary Chapter 11 bankruptcy petition and listed the Property with a fair market value of $500,000 in its Schedules of Assets and Liabilities. On December 10, 2012, the Debtor filed the within adversary proceeding seeking to have this Court void the final judgment, which conveyed title to Eckert, as (i) a fraudulent transfer pursuant to 11 U.S.C. § 548(a) and/or (ii) a preferential transfer pursuant to 11 U.S.C. § 547(b). The Debtor bottoms its complaint on the alleged sizeable difference between the Property’s fair market value and the indebtedness owed to Eckert. On February 8, 2013, Eckert filed the within Motion seeking a favorable ruling on summary judgment grounds. On March 7, 2013, the Debtor filed its Cross Motion.
A. Defendant’s Position
Eckert primarily relies upon the United States Supreme Court’s decision in BFP v. Resolution Trust Corp.,
In BFP, the debtor argued that the acquisition of title as a result of a mortgage foreclosure was a fraudulent conveyance because the debtor received “less than a reasonably equivalent value in exchange for such transfer.” BFP,
Eckert refers this Court to two prior decisions from this District which have addressed this issue in the tax sale foreclosure context. See In re McGrath,
In Plainfield, however, Judge Stripp seems to have reversed course from his reasoning in McGrath. There, a township purchased a tax sale certificate and ultimately foreclosed and took title to the underlying property. After the foreclosure, the former owner of the property filed for bankruptcy and brought an adversary proceeding against the township alleging, among other things, that the transfer should be set aside as a fraudulent conveyance. The defendant-township subsequently moved to dismiss the adversary proceeding in the Bankruptcy Court. In his Plainfield decision, In re 2435 Plainfield Ave.,
Finally, Eckert disputes the Debtor’s contention that the transfer of title is a voidable preference under 11 U.S.C. § 547(b). Eckert again asserts that the ruling in BFP serves as a bar to any recovery of alleged preferential transfers. Additionally, Eckert asserts that there is no equity in the Property and therefore even if the transfer is set aside, there would be no available funds for unsecured creditors.
B. Debtor’s Position
The Debtor posits that the elements necessary to establish a fraudulent conveyance claim under 11 U.S.C. § 548(a)(1)(B) have been satisfied in the unique circumstances of this case. First, the Debtor asserts that it was insolvent at the time the transfer occurred. The Debtor next argues that it did not receive “reasonably equivalent value” for the transfer. The Debtor contends that determining “reasonably equivalent value” is a fact-specific analysis which should be made on a case by case basis. The Debtor also asserts that a determination for “reasonably equivalent value” should be accomplished by analyzing the difference between the value received or paid for the property and the court-determined fair market value of the property.
The Debtor acknowledges that the holding in BFP is controlling in the mortgage foreclosure context; however, the Debtor seeks to distinguish the circumstances of BFP and its applicability in the ease at bar. The Debtor highlights that there is no competitive bidding in connection with a tax foreclosure in New Jersey, which implements a “strict foreclosure.” The Debt- or emphasizes that public bidding only occurs with respect to the sale of the tax certificate by the municipality and not the transfer of title to the property at the time of the foreclosure of the redemption rights. Further, the Debtor points out that the value of tax certificates are fixed, and the only true bidding is with respect to the interest rate, the lowest of which becomes the winning bid. Thus, the bidding does not in any way reflect the value of the foreclosed property and therefore the Debtor urges the Court to conclude that the rationale in BFP does not apply in the context of tax sale foreclosures. In this regard, the Debtor asks this Court to also reject the holdings in McGrath and Plain-field and deem the transfer in this case a fraudulent conveyance under 11 U.S.C. § 548(a)(1)(B).
Finally, the Debtor argues that the transfer was an avoidable preference under 11 U.S.C. § 547(b). The Debtor asserts that the circumstances of this case satisfy all elements of § 547 and the Debt- or cites to In re Rocco,
IV. DISCUSSION
A. Summary Judgment Standard
Summary judgment is appropriate where “the movant shows that there is no
The moving party bears the initial burden of demonstrating the absence of a genuine dispute of material fact. Huang v. BP Amoco Corp.,
Once the moving party establishes the absence of a genuine dispute of material fact, however, the burden shifts to the non-moving party to “do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita,
B. Fraudulent Conveyance
A transfer of property is deemed constructively fraudulent under 11 U.S.C. § 548(a)(1)(B) if, within two years prior to the filing of its bankruptcy petition, the transferor receives “less than reasonably equivalent value” in a transaction and the transferor:
(ii)(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation; (II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital; (III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s аbility to pay as such debts matured; or (IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.
11 U.S.C. § 548(a)(1)(B); see also Jurista v. Amerinox Processing, Inc.,
The Court turns first to Judge Stripp’s analysis in McGrath. Notwithstanding Judge Stripp’s conclusion that mortgage and tax sale certificate foreclosures are similar enough to apply the rationale of the Supreme Court in BFP to tax sales, the Court respectfully disagrees with Judge Stripp’s conclusion. Rather, the Court agrees with the Debtor’s position that the mechanics and procedures in mortgage and real estate tax foreclosures are distinctly different, leading to paramount substantive differences. Significantly, in a mortgage foreclosure action, competitive bidding for the underlying property is encouraged by means of advertising and public auction. As a result, a value for the property may be inferred. By contrast, with regard to tax sales, public bidding occurs at the inception of the procеss, within months after the delinquency, and is limited to the rate of interest on the unpaid taxes (which amounts have little connection to the value of the property). Similarly, the fixed redemption amount at the time of foreclosure of the tax sale certificate is calculated from the accrued taxes and interest thereon, not the value of the underlying property. See, e.g., McKeever v. McClandon (In re McKeever),
In Plainfield, Judge Stripp appears to have reconsidered whether a tax sale certificate foreclosure may be considered a fraudulent conveyance, holding that a tax sale could be set aside under either a state law fraudulent conveyance or equity theory. Although Judge Thompson disagreed and remanded the case on appeal, and although Judge Stripp’s holding did not specifically analyze 11 U.S.C. § 548(a)(1)(B), this Court finds Judge Stripp’s rationale to be instructive. Specifically, the Court agrees that equity or “fairness” of the price is of paramount consideration in determining whether to set aside a tax sale. In this regard, the Court is not persuaded by Eckert’s argument that reasonably equivalent value was received by the Debtor simply because Eckert complied with the New Jersey tax sale foreclosure statutes. Rather, this Court concurs with the approach taken in City of Milwaukee v. Gillespie, in which the court held:
The court is not persuaded that “reasonably equivalent value” was received as a matter of law simply because the City complied with the foreclosure statute, or that the reasoning of BFP should apply to non-sale foreclosure proceedings. As such, this court finds that a judgment of foreclosure, based solely upon delinquent taxes in a non-sale foreclosure proceeding, does not necessarily provide a property owner “reasonably equivalent value” for real estate without a public sale offering.
The Court views the absence of competitive bidding, together with appropriate advertising, as a significant bar to adjudicating “reasonably equivalent value” in a tax sale foreclosure scenario. Courts in other jurisdictions have taken a similar approach. See, e.g., Wentworth v. Town of Acton (In re Wentworth),
A non-municipal purchaser may, after two years from the date of sale, institute an action to bar the right of redemption by way of a strict foreclosure action filed in the Chancery Division of the Superior Court. N.J.S.A. 54:5-86. In such an action, the foreclosing tax certificate holder submits proofs and asks the court to fix the amount, time, and place for redemption. If no redemption is made by that deadline, final judgment is entered, barring the right of redemption and foreclosing all prior or subsequent alienations and descents of the lands and encumbrances thereon, except subsequent municipal liens, and the certificate holder is vested with an estate of inheritance in fee simple, free and clear of all liens. N.J.S.A. 54:5-87.
In written submissions and oral argument, counsel for Eckert admonishes this Court not to engage in “judicial activism” by legislating an outcome which cannot be reconciled with the New Jersey State Legislature’s efforts to shield tax sale redemp-tions from fraudulent transfer scrutiny. As noted herein, Nеw Jersey tax sale law expressly excludes foreclosure judgments from such scrutiny, stating that “[s]uch judgment and recording thereof shall not be deemed a sale, transfer, or conveyance of title or interest to the subject property under the provisions of the ‘Uniform Fraudulent Transfer Act.’ ” N.J.S.A
It comes as no surprise that New Jersey legislators desired to protect municipalities (often the sole purchasers of the tax sale certificates) by shielding tax foreclosures from collateral attack as fraudulent transfers. This Court, however, is charged with the responsibility to construe the language of the Bankruptcy Code in a manner to ensure equitable and fair treatment to all similarly situated creditors. See, e.g., Balaber-Strauss v. Town of Harrison (In re Murphy),
Furthermore, the Court is not persuaded by Eckert’s argument that avoidance of the transfer will chill the sale of tax sale certificates by clouding title to acquired properties. This need not be the result as the Court has ample discretion to fashion appropriate relief. As previously explained in Official Committee of Asbestos Claimants of G-I Holdings, Inc. v. Building Materials Corp. (In re G-I Holdings, Inc.), it is within a court’s discretion to determine whether the court should order payment of the value of the underlying property rather than order the return of said property.
Some courts have held that § 550(a) of the Code “gives a preference to the return of property unless it would be inequitable to do so.” Morris v. Kansas Drywall Supply Co. (In re Classic Drywall, Inc.),127 B.R. 874 , 876 (D.Kan.1991) (citing Gen. Indus., Inc. v. Shea (In re Gen. Indus., Inc.),79 B.R. 124 , 135 (Bankr.D.Mass.1987)). As articulated by the court in In re Classic Drywall, Inc., “this approach finds some support in the language of § 550(a) and the history behind it. Section 60(b) of theBankruptcy Act allowed the recovery of value only when the property had been converted. While this limitation is gone, § 550(a) lists first the recovery of property and then permits the recovery of value only upon the order of the court.” 127 B.R. at 877 . However, “other courts have simply read § 550(a) as placing in the court’s discretion the choice between return of the property and an award of its value.” Id. (citing In re First Software Corp.,107 B.R. 417 , 428 (D.Mass.1989)).
Id. at 250-251. Although the G-I Holdings court found it premature to determine which methodology to employ, the court held that “[i]n interpreting § 550(a) of the Code, this Court finds it within the discretion of the Court to dеcide at the appropriate time whether to order the return of the property or order the payment of the value of the property.” Id. at 252. “Without a complete record before the Court, it cannot be determined ... whether the relief of recovering the value of the lien would more appropriately restore the bankruptcy estate to the financial condition it would have enjoyed if the transfer had not occurred ...” Id.
This Court agrees with the rationale set forth in G-I Holdings and finds that it has the discretion to fashion a monetary award should the Debtor ultimately prove successful on its claims. Although the Court has not had an evidentiary hearing to determine the value of the Proрerty, a monetary remedy would facilitate “the prime bankruptcy policy of equality of distribution among creditors ...” See Field v. Insituform East, Inc. (In re Abatement Envtl. Res., Inc.),
Lastly, the Court submits that Eckert ascribes far too much weight to the impact of this or any decision on the vigor and hardiness of the tax sale certificate industry. This court has confidence that experienced investors are capable to factor in the minimal risks that all of the following may occur: (i) the property owner or a mortgagee fails to redeem the property by the date ordered by the court; (ii) the property has a value exceeding the value of the tax liens, with sufficient equity above all other liens and encumbrances; (iii) the property owner files a bankruptcy proceeding; (iv) the property owner pursues a fraudulent transfer and/or preference action to recover the transferred value; and (v) the property owner prevails on its litigation efforts. Given the volume of the tax sale certificates sold throughout New Jersey, the Court remains dubious of an investor’s decision to forego the opportunity to obtain a return on their investment of over eighteen percent, merely to avoid the aforementioned risks.
C. Avoidable Preference
Section 547(b) states that the trustee may avoid the transfer of an interest of a debtor to or for the benefit of a creditor for or on account of an antecedent debt owed by the debtor, while the debtor was insоlvent, that enables the creditor to receive more than it would have in a Chapter 7 liquidation. 11 U.S.C. § 547(b); see also Lubetkin v. Anthony Brusco Consulting (In re Astoria Graphics, Inc.),
In this case, it is clear that the transfer of title in the Property to Eckert was on account of an antecedent debt, namely the satisfaction of Eckert’s tax claim. As a result of the Debtor’s failure to pay the redemption amount, Eckert rightfully acquired title to the Property in satisfaction of his claim. However, what is unclear to this Court is whether the value of the Property is in excess of Eckert’s claim against the Debtor for the redemption amount, thereby enabling Eckert to receive a windfall, in excess of the dividend to be paid in a Chapter 7 proceeding. If it is determined that the value of the Property is in excess of Eckert’s claim, then the Court would agree with the Debtor that the transfer at issue may be avoided pursuant to § 547. In this regard, the Court is persuaded by the ruling in Norwest Bank Minn., N.A v. Andrews (In re Andrews), which analyzed § 547 in the context of foreclosure sales and explained as follows:
In bringing the property back into the estate, the creditor’s lien is not dissolved nor is its status as a secured creditor destroyed. It remains entitled to adequate protection and all of the other privileges and rights provided by the code to secured creditors. I, therefore, find that a prepetition bankruptcy foreclosure sale can be avoided under the dictates of 11 U.S.C. § 547 when the secured claim of the foreclosing party is substantially less than the fair market value of the property. In support, see In re Wheeler,34 B.R. 818 (Bankr.N.D.Ala.1983), Matter of Fountain,32 B.R. 965 (Bankr.W.D.Mo.1983), In re Park North Partners, Ltd.,80 B.R. 551 (N.D.Ga.1987), In re Winters,119 B.R. 283 (Bankr.M.D.Fla.1990). In each of the cited cases, the secured creditor foreclosed on real estate by bidding at a foreclosure sale an amount less than the fair market value of the property. Each of the courts took a practical, plain languagе approach to the reading of the statutory language of § 547 and found that the creditor in each case received more by way of the prepetition foreclosure than that creditor would have received and been entitled to in a Chapter 7 liquidation.
V. CONCLUSION
Based on the foregoing, the Motions are DENIED without prejudice. Counsel for the Debtor is directed to submit a form of order consistent with the Court’s findings.
Notes
. To the extent that any of the findings of fact might constitute conclusions of law, they are adopted as such. Conversely, to the extent that any conclusions of law constitute findings of fact, they are adopted as such.
. Federal Rule of Civil Procedure 56 was amended as of December 1, 2010. As noted by the court in Guiliano v. Coy (In re Coy):
Subdivision (a) now contains the summary judgment standard previously stated in subdivision (c). Fed.R.Civ.P. 56 Advisory Committee’s Note to 2010 Amendments ("Subdivision (a) carries forward the summary-judgment standard expressed in former subdivision (c), changing only one word' — genuine 'issue' becomes genuine 'dispute.' 'Dispute' better reflects the focus of a summary-judgment determination.”).
. Unlike 11 U.S.C. § 547, there is no presumption of insolvency under 11 U.S.C. § 548. 10
. The Court further notes that neither McGrath nor Plainfield are precedential. See Threadgill v. Armstrong World Industries, Inc.,