Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-91-01072/USCOURTS-ca10-91-01072-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

In re: SLACK-HORNER FOUNDRIES 

COMPANY, 

Debtor, 

JEFFREY A. WEINMAN, TRUSTEE, 

Appellant, 

FILED 

United States Courr of Appeals 

Tenth Circuit 

JUL 2 8 1992 

ROBERT L. HOECKER 

Clerk 

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No. 91-1072 

vs. 

GEORGE L. SIMONS, 

Appellee. 

Appeal from the United States District Court 

for the District of Colorado 

(D.C. No. 90-CV-1751) 

(Bankr. c. No. 90-0-0122) 

Caroline c. Fuller, of Fairfield and Woods, P.C., Denver, Colorado, 

for Appellant. 

Robert w. Caddes, Denver, Colorado, for Appellee. 

Before SEYMOUR and BARRETT, Circuit Judges, and BROWN, District 

Judge.* 

BROWN, District Judge. 

* The Honorable Wesley E. Brown, United States Senior District 

Judge for the District of Kansas, sitting by designation. 

Appellate Case: 91-1072 Document: 010110275110 Date Filed: 07/28/1992 Page: 1
This appeal arises out of a bankruptcy case. Appellant 

Jeffrey Weinman challenges the district court's ruling that 

Weinman, the trustee of the debtor's estate, could not set aside a 

certain transfer of real property as a fraudulent transfer under 11 

u.s.c. § 548. The transaction in dispute occurred after the debtor 

failed to pay property taxes on a piece of real estate it owned in 

Boulder County, Colorado. The unpaid taxes became a lien upon the 

property in favor of the state of Colorado. The lien was 

subsequently sold at a public sale to appellee George Simons, who 

paid the taxes due on the property for the next several years. 

When the debtor failed to redeem the property within three years, 

Simons obtained a treasurer's deed to the property from Boulder 

County. The deed had the effect of vesting all title and interest 

in the property in Simons. Within one year following the issuance 

of Simons' treasurer's deed, the debtor filed for bankruptcy. The 

trustee brought this action, alleging that the transfer of the 

property to Simons was voidable as a fraudulent transfer under 11 

U.S.C. § 548(a)(2(A)-(B)(i). Both the bankruptcy court and the 

district court found that the trustee could not void the 

transaction. 

The facts of the case are largely undisputed. The bankruptcy 

court found them to be as follows: 

1. Prior to December 1, 1983, the debtor was the owner of a 

certain parcel of real property, ("the property") described as: 

Lot 1 of the West 1/ 4 of Lot 2, Block 2, 

Conner Subdivision being a resubdivision of a 

2 

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part of the Factory Place Addition to the City 

of Longmont, Boulder County, Colorado, 

according to the recorded plat thereof. 

2. On December 1, 1983, the Boulder County Treasurer 

conducted a tax sale of the property for the nonpayment of real 

property taxes for the year 1982. Simons was the successful bidder 

for the property at that tax sale with a bid of $8,638.34 and 

received a Tax Sale Certificate of Purchase. 

3. Simons also paid the delinquent real property taxes for 

the years 1982 through 1987 and has paid a total of $66,134.61 in 

unpaid property taxes to obtain title to the property. 

4. Simons obtained a treasurer's deed on December 10, 1987 

which was recorded on December 11, 1987. The property was conveyed 

to Simons by virtue of the treasurer's deed issued on December 10, 

1987. 

5. The defendant thereafter sold the property to Stellar 

Industries, Inc., on May 13, 1988, for $170,000.00. He received a 

down payment of $40,000.00 and a Deed of Trust for his benefit in 

the amount of $130,000.00 to secure the repayment of the balance. 

Stellar Industries defaulted and Simons instituted foreclosure 

proceedings and obtained a Public Trustee's Deed to the property on 

March 31, 1989. 

6. On April 26, 1989, Simons and Stellar Industries entered 

into a Rental Agreement whereby Simons leased the property to 

Stellar on a month-to-month basis at a rental of $2,500.00 per 

month. 

3 

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7. Simons has collected rents in the total sum of 

$40,000.00, $10,000.00 of which is being held in escrow pursuant to 

an order of the bankruptcy court. 

8. The debtor filed its voluntary petition under Chapter 11 

on September 23, 1988. The case was converted to Chapter 7 on 

October 17, 1989, and the plaintiff was thereafter appointed as the 

Chapter 7 trustee. The case was reconverted, at plaintiff's 

request, to a Chapter 11 by order of this [the bankruptcy] court 

entered December 26, 1989. 

9. The trustee seeks to avoid the transfer of the debtor's 

interest in the property under 11 u.s. c. § 548(a) (2). 

10. The parties have stipulated that the debtor was insolvent 

on December 10 and 11, 1987, when the treasurer's deed was issued 

and recorded. The property which Simons obtained by treasurer's 

deed is one of three parcels of real property upon which the 

debtor's foundry sits. The other two parcels are owned by the 

Small Business Administration. 

11. The trustee seeks the return of the property and the 

turnover of $70,000.00 from the defendant and the $10,000.00 held 

in escrow. 

The trustee seeks to avoid the transfer of the property under 

11 U.S.C. § 548(a) (2)-(B) (i), which provides: 

§ 548. Fraudulent Transfers and Obligations. 

(a) The trustee may avoid any transfer 

of an interest of the debtor in property ••. 

that was made . . on or within one year 

before the date of the filing of the petition, 

if the debtor voluntarily or involuntarily --

4 

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2(A) Received less than a reasonably 

equivalent value in exchange for such transfer 

or obligation; and 

(B) (i) was insolvent on the date that 

such transfer was made .... 

Section 101 ( 54) of the Bankruptcy Code defines a "transfer" as 

"every mode, direct or indirect, absolute or conditional, voluntary 

or involuntary, of disposing of or parting with property or with an 

interest in property, including retention of title as a security 

interest and foreclosure of the debtor's equity of redemption." 

The appellant trustee contends that the facts of this case 

fall squarely within§ 548. Appellant argues that issuance of the 

treasurer's deed to Simons was a transfer of an interest of the 

debtor in property within the meaning of§ 548. Appellant also 

contends that the debtor received less than reasonably equivalent 

value for the property because Simons paid a total of only 

$66,134.61 to obtain the property even though it had a market value 

(according to the trustee) of $170,000. 

The bankruptcy court held that the trustee could not set aside 

the transaction. Applying § 548 (d) (1), the bankruptcy court 

determined that the transfer occurred when Simons recorded the 

treasurer's deed on December 11, 1987, because the recording of the 

deed meant that no bona fide purchaser from the debtor could obtain 

an interest in the property superior to Simons'. The court went on 

to find, however, that the debtor's interest in the property had 

been terminated the day before, on December 10, 1987, when the 

treasurer's deed was issued. Thus, the court concluded, at the 

5 

Appellate Case: 91-1072 Document: 010110275110 Date Filed: 07/28/1992 Page: 5
time of the transfer the debtor had no interest in the property and 

there could be no "transfer of an interest of the debtor in 

property" under§ 548(a). The trustee appealed the ruling to the 

u. s. District Court, which affirmed the bankruptcy court's 

decision. 

Appellant contends that the lower court's reasoning was 

faulty. Appellant points out that in any transfer of property by 

deed, the deed is executed before it is recorded. Thus, the 

granter-debtor never has an interest in the subject property at the 

time a deed is recorded. Under the lower court's reasoning, no 

transfer by deed could be considered a transfer of an interest of 

the debtor in property. According to appellant, the avoidance 

power of § 548 would be meaningless if applied in the manner 

advocated by the bankruptcy and district court. Appellant 

maintains that, regardless of when§ 548(d) (1) says the transfer 

took place, when it did occur it was a transfer of an interest of 

the debtor in property. 

Although our reasoning differs from the district court's, we 

agree with the court's conclusion that the trustee may not set 

aside Simons' title to the property. See Coleman Company v. 

California Union Ins. Co, No. 91-3006 (10th Cir. Apr. 7, 1992) 

(citing Scivally v. Time Ins. Co., 724 F.2d 101, 103 {10th Cir. 

1983) ( "trial court's decision will be affirmed if the record 

reveals another ground which supports the decision. 11 ) ) • The 

trustee has characterized the transfer that it seeks to set aside 

as a transfer of an interest in property from the debtor to Simons. 

6 

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We conclude, however, the debtor's interest in the property was 

transferred from the debtor to the state. 

"'What constitutes a transfer and when it is complete' is a 

question of federal law." Barnhill v. Johnson, 60 U.S.L.W. 4264 

(March 25, 1992) . "But that definition in turn includes references 

to parting with 'property and interests in property, 111 which are 

concepts defined by reference to state law . Id. We note that under 

Colorado law when the debtor failed to pay its taxes, a lien was 

created on the property in favor of the state. C.R.S. § 39-1-107. 

This lien was subsequently sold to Simons at the tax sale. Thus, 

as to the tax lien itself, Simons received his interest in the 

property from the state, not from the debtor. Simons had no 

dealings at all with the debtor. Similarly, when Simons presented 

the Certificate of Purchase for the lien to the county treasurer, 

he was issued a deed to the property from the state. Upon the 

signing of the treasurer's deed, the debtor's interest in property, 

if it were "transferred," was transferred by operation of law from 

the debtor to the state, which in turn transferred all interest in 

the property to Simons. C.R.S . § 39-11-136 ("The deed shall be 

signed by the treasurer in his official capacity and when so signed 

shall vest in the purchaser all the right, title, interest, and 

estate of the former owner in and to the land conveyed and also all 

right, title, interest, and claim of the state thereto. 11 ) The 

interest in the property must have passed to the state in order for 

the state to issue a deed conveying the property to Simons. See 

C.R.S. § 39-11-120 ("[T]he treasurer shall make out a deed for each 

7 

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such lot . for which a tax lien was sold and which remains 

unredeemed and deliver the same to such purchaser or lawful holder 

of such certificate .... ") 

Thus, the debtor's interest in property was transferred to the 

state. 

property. 

The state is the initial transferee of the debtor's 

Under the Bankruptcy Code, Simons is considered an 

immediate transferee of the initial transferee. Although§ 550 of 

the Code authorizes the trustee in certain circumstances to recover 

the value of the property transferred from either the initial 

transferee or a subsequent transferee (see 11 u.s.c. § 550(a) (1) 

and (a) (2)), in order to recover from a subsequent transferee the 

trustee must first have the transfer of the debtor's interest to 

the initial transferee avoided under§ 548. See§ 550(a): "[T)o 

the extent that a transfer is avoided under section 548 

the trustee may recover, for the benefit of the estate, the value 

of such property from [the initial transferee or any immediate 

transferee of the initial transferee] . " ( emphasis added) . The 

trustee has made no attempt to have the transfer from the debtor to 

the state avoided under§ 548(a) (2). Accordingly, we need not make 

a determination of whether the transfer from the debtor to the 

state could be avoided under that section. 1 In the absence of such 

1 Ironically, the only one to raise this issue was Mr. Simons 

himself, who asserted in his testimony that the trustee ought to 

bring the action against the county treasurer because the trustee 

was attacking the validity of a state deed. 

There are few reported cases concerning attempts to avoid tax 

deeds as fraudulent conveyances under§ 548. We are not aware of 

any bankruptcy case in which a trustee has successfully brought an 

action against a state to avoid the issuance of a tax deed. This 

may be attributable to the immunity of the state from suit. 

8 

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a showing, however, the trustee has not demonstrated any basis for 

recovering the property from Mr. Simons. Cf. 11 u.s.c. § 550. 

We believe this view of the tax lien foreclosure "transfer" is 

both proper and necessary. The state of Colorado, like most 

states, has adopted a system designed to promote the fundamental 

interest of the state in collecting taxes on property. 2 The state 

does this by allowing third persons to pay the taxes due on 

property in exchange for the state's lien against the property. If 

the owner of the property does not pay off the lien within the 

statutory period, the holder of the lien may obtain a deed to the 

property from the state. The failure to pay the taxes due results 

in a forfeiture of the original owner's interest in the property, 

by operation of law, to the state, which then grants title to the 

property to the holder of the lien free and clear of any other 

Regardless of any such problem, the trustee may not simply bypass 

the state's involvement in the transaction. The tax lien foreclosed 

upon in this case was transferred from the state to Simons. The 

deed to the property was issued by the state and shows that the 

property was granted by the state to Simons. The trustee may not 

set aside such a transfer of property by the state as fraudulent 

without bringing the state into the action. 

2 The trustee asserts that "there is no meaningful distinction 

between [mortgage) foreclosure sales and tax sales for purposes of 

the application of§ 548." Appellant's Br. at 13. While we need not 

decide that issue, we would point out that there are fundamental 

state interests at stake in the collection of taxes that are not 

implicated in a debtor-creditor relationship between, for example, 

a mortgagor and mortgagee. And while the power of the trustee to 

avoid fraudulent transfers appears to be very broad in scope, the 

history of§ 548 raises the question of whether Congress drafted 

that section with the intention of interfering with state laws 

concerning the forfeiture of property for nonpayment of taxes or 

whether Congress could authorize the trustee to avoid a deed issued 

by the state without expressly stating so in the language of the 

statute. Cf. United States v. Nordic Village. Inc., 60 U.S.L.W. 

4159 (Feb. 25, 1992). 

9 

Appellate Case: 91-1072 Document: 010110275110 Date Filed: 07/28/1992 Page: 9
claims. The trustee may not bypass the interest of the state in 

the property by characterizing the transaction as a transfer of the 

debtor's interest to Simons. 

For the reasons set forth above, we conclude that the district 

court correctly found that the trustee could not recover from 

appellee Simons. The judgment of the district court is therefore 

AFFIRMED. 

10 

Appellate Case: 91-1072 Document: 010110275110 Date Filed: 07/28/1992 Page: 10
No. 91-1072, Jeffrey A. Weinman, Trustee v. George L. Simons 

SEYMOUR, Circuit Judge, dissenting. 

I regret that I am unable to join in the majority opinion. 

In my view, the majority's analysis is based on a faulty legal 

premise which in effect nullifies the carefully integrated 

provisions of the Bankruptcy Code governing avoidable transfers. 

The majority states that because Simons received the property from 

the state rather than directly from the debtor, the trustee must 

seek recovery only from the state and cannot proceed against 

Simons even if the transfer is avoidable under 11 U.S.C. § 548 

(1988). See maj. op. at 8. Under the majority's view, the 

trustee's ability to recover an avoidable transfer could always be 

defeated simply by a transfer from the initial transferee to 

another. The Code, however, specifically provides to the 

contrary. If the transfer is avoidable under the criteria set out 

in section 548, section 550 permits the trustee to seek recovery 

from Simons without proceeding against the state. 1 Because the 

majority's position renders section 550 meaningless, I must 

respectfully dissent. 

1 Thus, § 550(b)(2) "is intended to prevent a transferee from 

whom the trustee could recover from transferring the recoverable 

property to an innocent transferee ... that is, 'washing' the 

transaction through an innocent third party." Sen. Rep. No. 989, 

95th Cong., 2d Sess. 90 reprinted in 1978 u.s.c.c.A.N. 5787, 5876. 

Appellate Case: 91-1072 Document: 010110275110 Date Filed: 07/28/1992 Page: 11
I. 

The underlying undisputed facts are briefly as follows. 

Prior to December 1, 1983, debtor Slack-Horner Foundries owned 

real property in Boulder County, Colorado, upon which its foundry 

is situated. On December 1, 1983, the Boulder County Treasurer 

conducted a tax sale of the property for unpaid 1982 taxes, at 

which Simons made a successful bid of $8,638.34. On December 10, 

1987, after the applicable redemption periods had expired, Simons 

obtained a treasurer's deed to the property, which he recorded on 

December 11. During the period between the tax sale in 1983 and 

conveyance of the treasurer's deed in 1987, Simons paid taxes on 

the property in a total amount of $66,134.61. In 1988, Simons 

sold the property for $170,000 to a third party not involved in 

these proceedings. When the purchaser defaulted, Simons regained 

title in 1989 through foreclosure. 

The debtor filed a petition for bankruptcy on September 23, 

1988. The trustee sought to recover the property from Simons, 

asserting that the tax sale proceedings resulted in an avoidable 

transfer under 11 u.s.c. § 548(a)(2). That section allows the 

trustee to avoid any transfer of a debtor's interest in property 

made within one year of the bankruptcy filing if the debtor 

received less than reasonably equivalent value and was insolvent 

at the time of the transfer. The bankruptcy court determined that 

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the transfer occurred upon recordation of the treasurer's deed on 

December 11, 1987, at which time the debtor was insolvent. The 

court further ruled that because under Colorado law the debtor's 

right to redeem the property had expired upon the issuance of the 

treasurer's deed on December 10, the transfer on December 11 did 

not convey any interest of the debtor in the property as required 

by section 548. Accordingly, the bankruptcy court held that the 

transfer was not avoidable. The trustee appealed to the district 

court which substantially adopted the bankruptcy court's analysis 

and conclusions. 

II. 

The Bankruptcy Code defines "transfer" to include "foreclosure of the debtor's equity of redemption." 11 u.s.c. 

S 101(54). The extinguishment of an equity of redemption is thus 

deemed a transfer for purposes of the Code even though the right 

is cut off by foreclosure rather than actually transferred. 2 This 

foreclosure constitutes the transfer with which we are concerned 

in evaluating the trustee's claim under section 548. The majority 

confuses assessing the avoidability of a transfer under section 

548 with determining those transferees liable under section 550. 

2 Foreclosure is legally defined as "[to] shut out, to bar, to 

destroy an equity of redemption." Black's Law Dictionary 581 (6th 

ed. 1990) . 

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The bankruptcy estate under 11 u.s.c. § 541(a) is comprised 

of all the debtor's legal or equitable interests in property as of 

the commencement of the case. The estate also includes any 

interest in property that the trustee recovers under section 550, 

~id.§ 54l(a)(3), which includes property fraudulently 

transferred under section 548, see id.§ 550(a). Thus, the 

trustee can use section 548 to recover property in which the 

debtor has lost his interest if that loss occurred within one year 

of the filing of the bankruptcy action and otherwise meets the 

test of section 548. 

To establish an avoidable transfer under section 548, the 

trustee must show: (1) transfer of an interest of the debtor; (2) 

within one year of the bankruptcy filing; (3) for less than 

equivalent value; (4) when the debtor is insolvent. Here, the 

debtor's equity of redemption was foreclosed by the issuance of 

the treasurer's deed, and this foreclosure is a transfer within 

the meaning of section 548. This foreclosure-transfer occurred 

within one year of the bankruptcy filing, and the debtor was 

insolvent at the time of the transfer. Under section 548(a), 

therefore, the trustee can avoid the transfer if the debtor 

received less than equivalent value, an issue not resolved below. 

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Significantly, section 550 provides that if a transfer is 

avoidable under section 548, the trustee may recover from the 

initial transferee or from "any immediate or mediate transferee of 

such initial transferee," 11 u.s.c. S 550(a)(2). Even adopting 

the majority's view that all of the debtor's interest in the 

property passed to the state as the initial transferee3 and then 

to Simons as the immediate transferee of the initial transferee, 

section 550 nonetheless authorizes the trustee to recover the 

property from Simons if the transfer is avoidable. 

The majority believes it unnecessary to determine whether the 

transfer is avoidable, stating "the trustee has not shown that any 

interest of the debtor in property was transferred to the appellee 

Simons and has not demonstrated any basis for recovering the property from him." Maj. op. at 8. Both of these propositions are 

incorrect. First, Simons now holds property that once belonged to 

the debtor. Thus he is clearly a transferee, albeit not an 

initial transferee, of that property. The majority assumes that 

the trustee can only recover from a transferee who receives 

property directly from the debtor. However, section 548 does not 

set out such a requirement as an element of an avoidable transfer; 

that section simply does not address transferee liability. 

3 In my judgment, the foreclosure of an equity of redemption 

the issuance of a treasurer's deed simply cuts off the debtor's 

right of redemption, see n.2 supra, rather than conveying that 

right to the state. 

-5-

by 

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Indeed, as I have pointed out, section 548 includes as a 

"transfer" the foreclosure of an equity of redemption. Second, 

section 550, which is directed to those transferees from whom a 

trustee may recover, specifically authorizes a trustee to proceed 

against a transferee who does not receive the property directly 

from the debtor. 4 This specific authorization, together with the 

fact that section 548 simply does not speak to the issue of those 

transferees from whom a trustee may recover, leaves the majority's 

position not only legally unsupported but directly contrary to the 

applicable bankruptcy provisions. 

Indeed, I have found no case adopting the majority's analysis.5 In other cases where a debtor-in-possession or a trustee 

4 Section 550 does provide a good faith defense to such a 

transferee. See 11 u.s.c. S 550(b). When a good faith defense is 

established, the trustee may not be able to recover the property 

itself even when the property was the subject of an avoidable 

transfer under section 548. Simons makes a general assertion of 

good faith on appeal. However, the good faith issue was not 

addressed by the lower courts and obviously presents fact issues 

precluding our consideration on appeal. 

5 The majority defends its interpretation of the Bankruptcy 

Code as necessary to preserve the state's interest in collecting 

taxes. However, this interest is already accommodated in other 

ways. A trustee is barred by the Eleventh Amendment from bringing 

an action against a state to recover an avoidable transfer. See 

generally Hoffman v. Connecticut Dep't of Income Maintenance, 492 

U.S. 96, 104 (1989) (trustee actions "under §§542(b) and 547(b) of 

the Code are barred by the Eleventh Amendment"). Moreover, tax 

sales remain a viable means of recovering unpaid taxes because 

both the state and the tax sale buyer can be protected in an 

action under section 548 by factoring their interest into whether 

the transfer is avoidable, see,~, War Eagle Floats v. Travis 

(In re War Eagle Floats, Inc.), 104 B.R. 398, 401 (Bankr. E.D. 

Okla. 1989)(assessing "reasonably equivalent value" in light of 

need to avoid chilling potential bidding), and by the good faith 

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has brought an adversary proceeding to set aside a transfer after 

a tax sale, the plaintiff, as here, did not seek recovery from the 

governmental entity that had sold the property for taxes. See, 

~, Hall v. Quigley (In re Hall), 131 B.R. 213 (Bankr. N.D. Fla. 

1991); Allegheny Int'l Credit Corp. v. DeBois Inv. Group (In re 

Allegheny Int'l Credit Corp.), 128 B.R. 125 (Bankr. W.D. Pa. 

1991); War Eagle Floats, Inc. v. Travis (In re War Eagle Floats). 

104 B.R. 398 (Bankr. E.D. Okl. 1989); Louis L. Lasser & Stanley M. 

Kahn v. Robins Nest Dev. Corp. (In re Louis L. Lasser & Stanley M. 

Kahn), 68 B.R. 492 (Bankr. E.D.N.Y. 1986). Although the analysis 

employed in those cases varies, none of them holds that recovery 

against the subsequent transferee is precluded because the trustee 

did not go against the initial transferee, the state. 

The basic flaw in the majority's analysis is its failure to 

distinguish between section 548 avoidability and section 550 recoverability. "The Code specifically 'separates the identification of avoidable transfers ••. from the identification of those 

who must pay •.• '" Harrison v. Brent Towing Co., Inc. (In re 

H & S Transp. Co., Inc.), 939 F.2d 355, 358 (6th Cir. 1991)(quoting Levit v. Ingersoll Rand Fin. Corp., 874 F.2d 1186, 1196 (7th 

Cir. 1989)). Section 548 describes those transfers of the 

debtor's property interests which the trustee may avoid, while 

section 550 sets out those transferees from whom the trustee may 

recover the property or its value. "Section 550 prescribes the 

liability of a transferee of an avoided transfer, and enunciates 

provisions of section 550. 

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the separation between the concepts of avoiding a transfer and 

recovering from the transferee." Sen. Rep. No. 989, 95th Cong., 

2d Sess. 90, reprinted in 1978 u.s.c.c.A.N. 5787, 5876. If the 

transfer is avoidable under section 548, "we then look to section 

SSO(a) to determine to whom the trustee may look for recovery of 

the property." Harrison, 939 F.2d at 358 (footnote omitted). 

Accordingly, I must reject the majority's conclusion that we 

need not address whether the transfer is avoidable. The issues 

raised on appeal require that we consider it. The bankruptcy 

court's opinion, adopted in essence by the district court, 

concludes that section 548 is not satisfied. As the majority 

describes, maj. op. at 5, the bankruptcy court ruled that the 

transfer for purposes of section 548 occurred when the treasurer's 

deed was recorded. That court held that because the debtor's interest had previously passed to Simons when the treasurer's deed 

was issued, the "transfer" accomplished by recordation of the deed 

was not of an interest of the debtor. This holding is wrong in 

two respects. First, the execution of a deed and its recordation 

cannot be split into two separate transfers. There was only one 

transfer of an interest of the debtor, which occurred in stages, 

beginning when issuance of the treasurer's deed extinguished the 

debtor's right of redemption and ending when the deed was recorded. This result is required by section 548(d)(l), which provides that 

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a transfer is made when such transfer is so perfected 

that a bona fide purchaser from the debtor against whom 

applicable law permits such transfer to be perfected 

cannot acquire an interest in the property transferred 

that is superior to the interest in such property of the 

transferee. 

11 u.s.c. S 548(d)(l). Contrary to the view of the bankruptcy 

court, issuance of the treasurer's deed alone is not a completed 

transfer under this provision, because until recordation a person 

wishing to buy the equity of redemption does not have notice that 

the right to redeem has been cut off by the treasurer's deed. 

Second, even if it were a completed transfer, as I discuss above, 

section 550 nonetheless authorizes recovery from a second 

transferee. Indeed, both the bankruptcy court and the majority 

make essentially the same mistake in failing to recognize that 

under section 550, the trustee may in certain circumstances 

recover property subject to an avoidable transfer even if that 

property has been subsequently transferred again. 

Because transfer of an interest of the debtor was not completed until recordation of the treasurer's deed, and because this 

transfer occurred within one year of the bankruptcy filing and 

while the debtor was insolvent, the dispositive issue is whether 

the debtor received less than equivalent value under section 

548(a)(2)(A). Neither the bankruptcy court or the district court 

found it necessary to reach this issue. Courts in general are 

split on the legal standard to be used to ascertain equivalent 

value in a foreclosure situation. See,~, In re Hall, 131 B.R. 

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at 216 (noting differing lines of cases). The majority of 

circuits that have addressed the issue adopted a case-by-case 

consideration of the relevant facts. See Grissom v. Johnson (In 

re Grissom). 955 F.2d 1440, 1445 (11th Cir. 1992); Barrett v. 

Commonwealth Fed. Sav. & Loan Ass'n, 939 F.2d 20, 23-24 (3d Cir. 

1991); Cooper v. Ashley Communications, Inc. (In re Morris 

Communications NC, Inc.), 914 F.2d 458, 466-67 (4th Cir. 1990); 

Bundles v. Baker (In re Bundles), 856 F.2d 815, 824 (7th Cir. 

1988); but see Durrett v. Washington Nat'l Ins. Co., 621 F.2d 201, 

203-04 (5th Cir. 1980) (subsequently interpreted as setting 

reasonably equivalent value at no less than 70% of fair market 

value); 6 Lawyers Title Ins. Co. v. Madrid (In re Madrid), 21 B.R. 

424 (Bankr. 9th Cir. 1982), aff•d on other grounds, 725 F.2d 1197 

(9th Cir.), cert. denied, 469 U.S. 833 (1984) (subsequently 

interpreted as holding that winning bid at regularly conducted, 

non-collusive sale presumed to be reasonably equivalent value). 

Such factors include, as well as the fair market value, whether 

the property was fairly appraised, widely advertised, and bid upon 

competitively. See,~, Bundles, 856 F.2d at 824. In my 

judgment, the case-by-case approach is persuasive. See id. I 

would therefore adopt that position and remand for further factual 

inquiry under that standard. I thus respectfully dissent. 

6 Some language in Fifth Circuit opinions subsequent to Durrett 

could be viewed as a retreat from the 70% rule. See FDIC v. 

Blanton, 918 F.2d 524, 531 n.7 (5th Cir. 1990); Sandoz v. Bennett 

(In re Emerald Oil Co.), 807 F.2d 1234, 1238 n.6 (5th Cir. 1987). 

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Appellate Case: 91-1072 Document: 010110275110 Date Filed: 07/28/1992 Page: 20