BFP v. Resolution Trust Corporation, 511 U.S. 531, 6 (1994)

Page:   Index   Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

536

BFP v. RESOLUTION TRUST CORPORATION

Opinion of the Court

§ 548(d)(2)(A). The question presented here, therefore, is whether the amount of debt (to the first and second lienholders) satisfied at the foreclosure sale (viz., a total of $433,000) is "reasonably equivalent" to the worth of the real estate conveyed. The Courts of Appeals have divided on the meaning of those undefined terms. In Durrett v. Washington Nat. Ins. Co., 621 F. 2d 201 (1980), the Fifth Circuit, interpreting a provision of the old Bankruptcy Act analogous to § 548(a)(2), held that a foreclosure sale that yielded 57% of the property's fair market value could be set aside, and indicated in dicta that any such sale for less than 70% of fair market value should be invalidated. Id., at 203-204. This "Durrett rule" has continued to be applied by some courts under § 548 of the new Bankruptcy Code. See In re Littleton, 888 F. 2d 90, 92, n. 5 (CA11 1989). In In re Bundles, 856 F. 2d 815, 820 (1988), the Seventh Circuit rejected the Durrett rule in favor of a case-by-case, "all facts and circumstances" approach to the question of reasonably equivalent value, with a rebuttable presumption that the foreclosure sale price is sufficient to withstand attack under § 548(a)(2). 856 F. 2d, at 824-825; see also In re Grissom, 955 F. 2d 1440, 1445-1446 (CA11 1992). In this case the Ninth Circuit, agreeing with the Sixth Circuit, see In re Winshall Settler's Trust, 758 F. 2d 1136, 1139 (CA6 1985), adopted the position first put forward in In re Madrid, 21 B. R. 424 (Bkrtcy. App. Pan. CA9 1982), affirmed on other grounds, 725 F. 2d 1197 (CA9), cert. denied, 469 U. S. 833 (1984), that the consideration received at a noncollusive, regularly conducted real estate foreclosure sale constitutes a reasonably equivalent value under § 548(a)(2)(A). The Court of Appeals acknowledged that it "necessarily part[ed] from the positions taken by the Fifth Circuit in Durrett . . . and the Seventh Circuit in Bundles." 974 F. 2d, at 1148.

In contrast to the approach adopted by the Ninth Circuit in the present case, both Durrett and Bundles refer to fair market value as the benchmark against which determination

Page:   Index   Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

Last modified: October 4, 2007