MEMORANDUM OPINION
I. INTRODUCTION
On December 1, 2005, James J. Joseph (“Plaintiff’), the chapter 7 trustee, commenced an adversary proceeding against Eva Madray (“Defendant”) to recover the value of Donald J. Bran’s (“Debtor”) interest in real property located at 356 “Y” Place, Laguna Beach, California (the “Property”). On November 6, 2006, Defendant moved for summary adjudication that Plaintiffs recovery is limited to the value of the “asset” as defined by §§ 3439.01 et seq. of the California Civil Code (“Civil Code”), that is the non-exempt net equity in the Property at the time of the transfer. Plaintiff opposed and filed a cross-motion for summary adjudication to recover the current value of the Property. Following a hearing on December 13, 2006, I took the matter under submission to determine if applicable California law limits Plaintiffs recovery under § 550 of the Bankruptcy Code. 1
*671 II. JURISDICTION
I have jurisdiction over this matter under 28 U.S.C. § 157(b)(1). This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A), (F), (0).
III. STATEMENT OF FACTS
On August 10,1998, Debtor acquired the Property. On April 24, 2002, Debtor executed a grant deed (the “Deed”) transferring his interest in the Property to Defendant. The Deed was recorded the next day.
On October 12, 2005, Debtor filed a voluntary chapter 7 petition. On December 1, 2005, Plaintiff filed a complaint (the “Complaint”) to avoid the transfer of Debt- or’s interest in the Property and recover the value of that interest. In the Complaint, Plaintiff alleged that the transfer of the Property to Defendant (the “Transfer”) is avoidable as a fraudulent transfer pursuant to § 544 of the Code and §§ 3439.01 et seq. of the Civil Code, and that the value of the Property is recoverable pursuant to Civil Code §§ 3439.05 and 3439.07. 2 Plaintiff prays for a judgment against Defendant for the total present-day market value of the property transferred.
On November 6, 2006, Defendant filed a motion (the “Motion”) for summary adjudication that Plaintiffs recovery is limited to the value of the “asset” as defined by Civil Code §§ 3439.01 et seq., that is the nonexempt net equity in the Property at the time of the Transfer. Plaintiff opposed and filed a cross-motion for summary adjudication that his recovery is not limited by California law. Plaintiff argues that once the Transfer is determined to be avoidable pursuant to § 544(b) and § 3439.04, he can recover the Property or the current fair market value of the equity in the Property, including any appreciation, pursuant to § 550(a), regardless of the limitations imposed by §§ 3439 et seq. Following a hearing on December 13, 2006, I took the matter under submission to determine whether Plaintiffs recovery is limited to the amount of non-exempt net equity in the Property at the time of the Transfer.
IY. DISCUSSION
“Section 544(b) of the Bankruptcy Code permits the Trustee to stand in the shoes of a creditor to assert any state law claims that a creditor may have.”
Kupetz v. Wolf,
Under California law, an unsecured creditor may avoid a fraudulent “transfer” to the extent necessary to satisfy the creditor’s claim. 3 See Cal. Civ.Code *672 §§ 3439.04, 3439.07. To the extent a transfer is voidable, the moving creditor may recover a judgment for the value of the “asset” transferred at the time of the transfer, or the amount necessary to satisfy the creditor’s claim, whichever is less. Id. § 3439.08. A “transfer”, as defined by California law, “means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance.” Id. § 3439.01 (emphasis added). An “asset” means unencumbered, non-exempt equity in property of a debt- or. 4 Id. Therefore, a creditor may avoid a debtor’s fraudulent disposition of the unencumbered, non-exempt value in property to the extent of its claim.
Once a trustee demonstrates the right to avoid a transfer, “[the] trustee must then establish the
amount
of recovery” pursuant to § 550(a).
See Acequia, Inc. v. Clinton (In re Acequia, Inc.),
[T]o the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from
(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or
(2) any immediate or mediate transferee of such initial transferee.
11 U.S.C. § 550(a)(l)-(2). Put simply, § 550 identifies the parties liable for repayment of the avoided or avoidable transfer, and empowers the trustee to recover the property transferred or its value for the benefit of the estate.
See Crafts Plus+, Inc. v. Foothill Capital Corp. (In re Crafts Plus+),
For this reason, courts have held that the amount of the trustee’s recovery should not be limited by the amount of the creditor’s claim.
See Acequia,
However, courts in the Ninth Circuit have not been entirely consistent regarding the impact of the recovery limitations imposed by §§ 3439
et seq.
on actions to avoid and recover pursuant to §§ 544(b) and 550(a). In
Decker v. Tramiel (In re JTS Corp.),
As can be seen from the above discussion, the interplay between the Code and California fraudulent conveyance law is far from settled. The parties have not cited, and I have not discovered any cases specifically deciding the issue here. Nonetheless, a plain reading of §§ 549 and 550, and Civil Code §§ 3439 et seq., relevant case law, and general principles of bankruptcy law support the conclusion that Plaintiff may recover the current fair market value of any equity in the Property.
Here, Plaintiff seeks to avoid the transfer of Debtor’s interest in the Property to
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Defendant via the Deed. Plaintiff may avoid the Transfer if a creditor holding an allowed claim could avoid the Transfer under applicable state law.
See
11 U.S.C. § 544(b). Under controlling California fraudulent conveyance law, e.g. §§ 3439.01, 3439.04, and 3439.07, a creditor could not avoid the Transfer in its entirety. Rather, a creditor is permitted to avoid only a “transfer”. A “transfer” is the disposition of an “asset”, which excludes property encumbered by a valid lien or exempt under non-bankruptcy law. As such, property that is fully encumbered and/or exempt is not voidable as a fraudulent transfer.
See Consolidated Pioneer Mortg. Entities v. San Diego Sav. & Loan (In re Consolidated Pioneer Mortg. Entities),
Based on the above analysis, Defendant argues that Plaintiffs recovery is limited to Debtor’s equity interest in the Property at the time of the Transfer. Defendant emphasizes that § 550(a) does not permit Plaintiff to recover more than is avoidable under § 544(b) and California law. Defendant is correct that a trustee’s recovery may be made only “to the extent the transfer is avoided.” See 11 U.S.C. § 550(a). However, a trustee may recover, for the benefit of the estate, the property transferred or its value. Accordingly, while Plaintiff can avoid the Transfer only to the extent Debtor transferred equity in the Property, Plaintiff may recover the “value” of that equity interest pursuant to § 550(a).
The Code neither defines “value” nor indicates at what time “value” is to be determined.
See Hirsch v. Steinberg (In re Colonial Realty Co.),
At least two courts have recognized that the trustee is entitled to recover the “greater of the value of the transferred property at the transfer date or the value at the time of the recovery.” Collier on Bankruptcy, supra, ¶ 550.02[3];
see also Langhome v. Warmus (In re American Way Serv. Corp.),
In sum, while California law governs whether and to what extent a transfer of property is voidable, the value of the avoided transfer, and therefore, the recovery is governed by § 550(a), irrespective of any recovery limitations imposed by California law. Therefore, Plaintiff may avoid the transfer of Debtor’s interest in the Property to the extent it involved the transfer of unencumbered, non-exempt equity. Under § 550(a), Plaintiff may recover the property transferred, e.g. the “asset”, or the current fair market value of the asset, less the cost or value of improvements, assuming such recovery is for the benefit of the estate. This interpretation is consistent with a plain reading of the Code, the Ninth Circuit’s holding in Aceq-uia, and the separation of the concepts of avoidance and recovery. To the extent that the reasoning in Tramiel supports a holding to the contrary, it is unpersuasive and not binding on this court. Accordingly, Plaintiff is entitled to summary judgment that he may recover the current fair market value of the property transferred for the benefit of the estate.
V. CONCLUSION
While California law allows Plaintiff to avoid the Transfer only to the extent that Debtor disposed of unencumbered, nonexempt property, California law does not limit Plaintiffs recovery to the value of the “asset” at the time of the Transfer. Rather, Trustee may recover the appreciated value of the asset, provided it is for the benefit of the estate. Accordingly, partial summary judgment is granted for Plaintiff in that Plaintiffs recovery under §§ 544(b) and 550(a) is the value of the equity in the Property at the time of the Transfer, plus any appreciation, less any offset for property improvements.
This memorandum decision shall constitute my findings of fact and conclusions of law.
Notes
. Unless otherwise indicated, all chapter, section, and rule references are to the Bankruptcy Code (the "Code”), 11 U.S.C. §§ 101-1330, prior to its amendment by the Bankruptcy *671 Abuse Prevention and Consumer Protection Act of 2005 (the “Act”), Pub.L. 109-8, 119 Stat. 23, because this case was filed before the Act's effective date (October 17, 2005), and to the Federal Rules of Bankruptcy Procedure (the “Rules”), Rules 1001-9036.
. Plaintiff and Defendant correctly recognize that, as discussed in further detail below, Plaintiff's recovery is governed by Code § 550, and not Civil Code §§ 3439.05 and 3439.07. Therefore, as requested by the parties, I will determine whether applicable California law limits Plaintiff's recovery under § 550. However, Plaintiff is advised to amend the Complaint to assert his recovery claim under the proper statute.
. A transfer is fraudulent if the debtor made the transfer or incurred the obligation as follows:
(1) With actual intent to hinder, delay, or defraud any creditor of the debtor.
(2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either
*672 (A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction.
(B) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due.
Cal. Civ.Code § 3439.04(a).
. Section 3439.01 provides in relevant part that:
(a) "Asset” means property of a debtor, but the term does not include, the following:
(1) Property to the extent it is encumbered by a valid lien.
(2) Property to the extent it is generally exempt under nonbankruptcy law.
(3) An interest in property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only one tenant.
. Section 3439.07 provides that a creditor, subject to the limitations in § 3439.08, may obtain avoidance of a fraudulent transfer to the extent necessary to satisfy the creditor's claim. Section 3439.08(d) provides that “[n]otwithstanding voidability of a transfer ... a good faith transferee ... is entitled, to the extent of the value given the debtor for the transfer ... a reduction in the amount of the liability on the judgment.”
. Collier also notes that this result:
serves the equitable underpinnings of restorative justice by discouraging a “wait and see” approach by transferee defendants holding property, such as stock, that may be subject to wide, rapid swings in value on account of volatile markets. Likewise, as noted in the legislative record, "a transferee has an opportunity to benefit by delay, and there are possibilities for abuse where the transferred property is appreciating substantially in value.”
Collier on Bankruptcy, supra, ¶ 550.02[3].
. Improvements include physical additions or alterations to the property, repairs, the payment of taxes or secured debt, and preservation of the subject property. See 11 U.S.C. § 550(e).