BFP v. Resolution Trust Corp

In BFP v. Resolution Trust Corp., 511 U.S. 531, 533, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994), the Supreme Court addressed "whether the consideration received from a noncollusive, real estate mortgage foreclosure sale conducted in conformance with applicable state law conclusively satisfies the Bankruptcy Code's requirement ... of exchange for `a reasonably equivalent value.'" The Court answered that question in the affirmative, but expressly limited its holding to "mortgage foreclosures of real estate." Id. at 537 n. 3, 114 S.Ct. 1757. The Court first rejected, primarily for textual reasons, the conclusion of some appellate courts that the term "reasonably equivalent value" meant "fair market value." Id. at 536-40, 114 S.Ct. 1757. The Court next sought to create its own definition of a reasonable price, but rejected that approach, too: "To specify a federal `reasonable' foreclosure-sale price is to extend federal bankruptcy law well beyond the traditional field of fraudulent transfers, into realms of policy where it has not ventured before." Id. at 540, 114 S.Ct. 1757. The Court then reasoned that "it is beyond question that an essential state interest is at issue here"; that "to displace traditional state regulation in such a manner, the federal statutory purpose must be `clear and manifest'"; and that, because no such clear purpose appears evident in the Bankruptcy Code, the term "reasonably equivalent value" means "the price in fact received at the foreclosure sale, so long as all the requirements of the State's foreclosure law have been complied with." Id. at 544-45, 114 S.Ct. 1757. The Court concluded: This conclusion does not render 11 U.S.C. 548(a)(2) superfluous, since the "reasonably equivalent value" criterion will continue to have independent meaning (ordinarily a meaning similar to fair market value) outside the foreclosure context. Indeed, 548(a)(2) will even continue to be an exclusive means of invalidating some foreclosure sales. Although collusive foreclosure sales are likely subject to attack under 548(a)(1), which authorizes the trustee to avoid transfers "made ... with actual intent to hinder, delay, or defraud" creditors, that provision may not reach foreclosure sales that, while not intentionally fraudulent, nevertheless fail to comply with all governing state laws. Any irregularity in the conduct of the sale that would permit judicial invalidation of the sale under applicable state law deprives the sale price of its conclusive force under 548(a)(2)(A) ....(Id. at 545-46, 114 S.Ct. 1757.) In BFP, the Supreme Court held that "a fair and proper price, or a `reasonably equivalent value,' for foreclosed property, is the price in fact received at the foreclosure sale, so long as all the requirements of the State's foreclosure law have been complied with." 511 U.S. at 545, 114 S.Ct. 1757.