F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

I N R E T R A C H T G U T , L L C, Debtor

,

T R A C H T G U T , L L C, Appellant

,

v

.

L O S A N G E L E S C O U

N T Y T R E A S U R E R & T A

X C O L L E C T O R ; D A V I D H A G H

N A Z A R Z A D E H ; Y U R Y V O L O D I

N S K Y , A ppellees. N o. 14-60007

B AP No. 13-1229

OPI NI ON

Appeal from the Ninth Circuit B ankruptcy

Appellate Panel Pappas, Dunn, and Tay

lor, B ankruptcy

J udg es, Presiding

Submitted F ebruary

11, 2016 * Pasadena, California

F iled September 8, 2016

* T h e p an el u n a n i m o u sl y co n clu d es th is case is su itab le f o r d ecisio n

w ith o u t o ral arg u

m en t. S ee Fed . R. A pp . P . 3 4 (a)(2 ).I N R E T R A C H T G U T , L L C 2

B efore: J erome F arris, Richard R. Clifton,

and Carlos T. B ea, Circuit J udg es.

Opinion by

J udg e Clifton

SUMMARY * *

Bankruptcy

The panel affirmed the B ankruptcy Appellate Panel’s affirmance of the bankruptcy court’s dismissal, without leave
to a mend, of an adversary c omplaint broug ht by a Chapter 11 debtor a g ainst the L o s Ang eles County T r e a surer a nd Tax Collector and the purchasers of two properties of the debtor.

The deb t o r a l l eg ed that the County ’s tax sales of the
pr o p e r t i es for prices that were too low were fraudulent transfers v oidable under 11 U.S.C. § 548(a). The panel h eld that due to procedural safeg uards in place for Californ i a tax sales, the price received at a California tax sale conducted in accordance w i t h s t a t e l a w c o nclusively establishes “reasonably equivalent valu e ” f or purposes o f § 548(a). According ly

, the sales of the debtor’s properties were not voidable.

** T h is su m m ary co n stitu

t es n o p ar t o f t h e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.I N R E T R A C H T G U T , L L C 3

COUNSEL

W illiam H. B rownstein

, W illiam H. B rownstein & Associates, Santa Monica, California, for Appellant.

B arry S. Glaser a

n d Susan M. Fr eedman, Steckbauer W e inhart L L P, L os Ang eles, California

, for Appellee L os Ang eles County

Treasurer.

Mi chael E. Schwimer, Schwimer Weinstein L L P, Santa M o n i c a , California, for Appellees David Hag hnaza r za d e h a n d Yury Volodinsky

.

OP INION

CL I F TON, Circuit J udg e :

The Yiddish phrase “Tracht g ut, vet z ein g ut!” translates
to “ Think g ood, a

nd it will be g o o d!” Alas, such was not the case for debtor Plaintiff-Appellant Tracht Gut, L L C. Tracht Gut a cquired two separate properties in L os Ang eles County

. Real property tax es were owing o n b oth properties

, as the
tax es had not been paid on either of the properties for y ears. The Co u n ty Treasurer and Tax Collector subsequently conducted tax sales of the properties under California law. A short time later, Tracht Gut filed for bankruptcy relief under Chapter 1 1. Tracht Gut filed an adversary complaint ag ainst the County Treasurer and the purchasers of t h e t w o p r o p e rties, alleg ing that because the County sold the properties fo r a p rice that was too low, the tax sales were fraudulent transfers voidable under 11 U.S.C. § 548(a). The bankruptcy c ourt dismissed the complaint with prejudice.I N R E T R A C H T G U T , L L C 4

The N inth Circuit B ankruptcy Appellate Panel affirmed. I n re Tracht Gut LLC , 503 B .R. 804 (9th Cir. B AP 2014).

The central issue is whether the B AP properly ex tended the rule in BFP v. Resoluti o n T r u s t Corp.
, 511 U .S. 531 (1994) to California tax sales. I n BFP
, the Supreme C o u rt held that the price received at a mortg ag e foreclosure sale “conclusively satisfies” the B ankruptcy Code’s req u i r ement that transfers of an insolvent debtor’s property be in ex chang e for a “reasonably equivalent v alue,” so long as the mortg ag ee complie d w ith the relevant f oreclosure laws of the state in
qu es t i o n, which in that case was also California. I d. at 533, 545. B e cause California tax sales have the same procedural safeg uards a s the California mortg ag e foreclosure sale at issue in BFP , we ag ree with the B AP a n d hold that the price received at a California tax sale conducted in accordance with
state law conclusively e stablishes “ re a sonably equivalent value” for purposes of 11 U.S.C. § 548(a). W e affirm.

I. Background

This appeal concerns two pro p e rties, described a s the

“ H atteras Property ” and the “San F ernando Property

. ” O n April 9, 2012, Tracht Gut purchased the Hatteras Property from E .R. F inancial Servi c e s & Development, I nc., N H Simpson Part n e r s hip, O F General Partnership, and EM Partner ship for $60,000.00, subject to three d eeds of trust. On that same day

, E.R. F inancial convey ed the San F ernando Property to Tracht Gut for “valuable consideration.”

Real property tax es had not been paid on either property since 2008. B oth properties were thus “tax defaulted” under California state law, a

nd subject to the County ’s power to sell. On Aug ust 31, 2 012, t h e County served a Notice o fI N R E T R A C H T G U T , L L C 5

Auction for a tax sale for each of the pr o p e r t i e s on all interested parties. On October 2 2
, 2012, the County Treasurer sold both properties at public auction. D efendantAp p e l lee David Hag hnaz arz adeh purchased the H atteras Property for $300,000.00, and D efe n d a nt-Appellee Yury Volodinsky purchased the San F ernando Prop erty for
approx imately

$100,000.00.

Tracht Gut filed for bankruptcy protection under Chapter 11 on Novemb e r 2 7
, 2012, just over a month after the tax sales o f the two properties. On December 11, 2 0 1 2
, Tracht Gut filed its Schedule A, in which it asserted:

A disputed tax sale occurred on or about October 2 1, 2012. T h e sales price was far less than the market value of this property

. Debtor attempted to pay the tax es i n f ull, which the [ C o u nty ] refused to take. As o f the dat e o f this petition, no T ax D eed has been recorded and Debtor disputes the validity o f the transfer as an avoidable transfer.

The n e x t d ay , Tracht G ut commenced the adversary proceeding that is the subject of this appeal. 1 Tracht Gut’s adversary complai n t a sserted five claims: (1) that the sales

were fraudulent transfers under 1 1 U.S.C. §§ 548 and 549 a nd California Civil Code § 3275; (2) for declarat o ry r elief; (3) for an injunction; ( 4) for unjust enrichment; and (5) for violation of the automatic stay of all actions p r o ceeding

1 On e d ay af

ter t h at, o n Decem

b er 1 3
, 2 0 1 2, th e Co u n ty reco rd ed th e tax d eed s tran sf

errin g titl e o f th e tw o p ro perties t o Hag h n azarzad eh an d Vo lo d in sk

y

.I N R E T R A C H T G U T , L L C 6

ag ainst Tracht Gut at the time of the bankruptcy filing pursuant to 11 U.S.C. § 362.

The County m o v ed to dismiss the complaint under F ederal Rule of Civil Procedure 12(b)(6) and F ederal Rule o f B ankruptcy Procedure 7012

. I t arg ued that Tracht Gut h ad failed to a lleg e any facts in its complaint to supp o r t t he
g ranting of relief on a

ny of its claim s

. I n d e ed, T racht Gut’s complaint contained only an alleg ation that the tax sales h ad been condu c t e d a n d a list of claims for relief, without the alleg ation of a

ny other facts t o s u p p o rt the claims. The County also a

rg ued that the properties should be conclusively presumed to have been transferred for reasonably equivalent value, insofar as they were s o l d at a reg ularly scheduled tax sale w ith competitive bidding procedures, all in compl iance with applicable state law.

T h e bankruptcy court entered a n order dismissing the complaint with prejudice and without leave to a m e nd on March 13, 2013, concluding that Tracht G ut had not properly alleg ed a c ause of action u nder 11 U .S.C. §§ 548, 549, or 362, and that it would not be possible t o a m e n d the complaint to state a viable cause of action. Thereafter, Tracht Gut filed a motion for reconsideration, w i th an attached proposed F irst Amended Complaint. T h e proposed F irst Amended Complaint contained further alleg a tions about the purported market v a l u e o f the two properties and the r esulting loss o f equity following the tax sales in support of its 11 U .S.C. § 548 fraudulent transfer claim. The bankruptcy court denied Tracht Gut’s motion for reconsideration on M ay 7, 2013, concluding that the proposed F irst Amended Complaint was still not viable. The bankruptcy court added that Tracht Gut’s tardiness in presenting more specific f a ctual alleg ations to support its claim “was purposeful and a delay ing tactic.”I N R E T R A C H T G U T , L L C 7

Tracht Gut appealed both the bankruptcy co urt’s dismissal or d e r and its order deny ing reconsideration to the B AP, which a ffirmed. In re Tracht Gut LLC
, 503 B

. R. 804 (9th Cir. B AP 2014). The B A P held that Tracht Gut failed to state a c laim in its orig inal complaint, a nd that the bankruptcy
court had the discretion to deny leave to amend because amendment would have b een futile. Id

. at 810–18. T h e B AP relied o n the Supreme Court’s o pinion in BFP. Id. at 815–18. Althoug h the Supreme Court ex pressly limited its holding in BFP to mortg ag e foreclosures, 511 U .S. at 537 n.3, the B AP concluded that the reasoning underp i n n i ng the Court’s holding in B

FP also applied to tax sales under California law. In re Tracht Gut , 503 B .R. at 815–18.

II. Discussion

This court reviews the decisions of the B A P d e novo a nd applies the standard of review appli e d b y the B AP to the decisions of the bankruptcy court. Re t z v

. Samson (

In re Retz)

, 606 F .3d 1189, 1 1 9 6 (9th Cir. 2010). The B AP reviews a bankruptcy court’s dismissal under F ederal Rule o f Civil Procedure 12(b)(6) de novo. A E ex rel. Hernandez v

. Cnty. of Tulare

, 666 F .3d 631, 636 (9th Cir. 2012). A dismissal g ranted w ithout leave to amend and w ith prejudice is r eviewed for a

buse o f discretion. Id. Denial of a motion for r econsideration u nder F ederal Rule of Civ il Procedure 6 0(b)(1) is also reviewed for a buse of discretion. Morris v. Peralta ( I n r e P e r alta)

, 317 B .R. 3 81, 385 (9th Cir. B AP 2004).

A. Motion to Dismiss

A motion to dismiss i n an adversary bankruptcy proceeding is g overned by F ederal Rule of B ankruptcyI N R E T R A C H T G U T , L L C 8

Procedure 7012(b), which incorporates F ederal Rule of Civil Procedure 12(b)–(i). Agarwal v. Pom o na Valley Medical Group, Inc. (

In re Pomona Valley Med. G rp., Inc. ), 476 F .3d 665, 671–72 (9th Cir. 2007). At the motion to dismiss phase,
t h e t ri al court must accept as true all facts alleg ed in t h e complaint and draw a ll reasonable inferences in favor of the pla i n t iff. Maya v. Centex Corp.
, 6 5 8 F .3d 1060, 1067–68 (9th Cir. 2011). H o w e v e r , the trial court does not have to accept as true conclusory alleg ations in a complaint or leg al claims asserted in the form o f factual alleg ations. Bell Atlantic Corp. v. Twombly

, 550 U.S. 544, 555–56 (2007). T o survive a motion to dismiss, a p laintiff must aver in the complaint “sufficient factual matter, accepted as true, to ‘state

a claim to relief that is plausible on its fac e .’” A shcroft v

. Iqbal

, 556 U.S. 662, 6 78 (2009) (quoting Twombly

, 550 U.S.
at 570). A dismissal under Rule 1 2(b)(6) m ay therefore be based on either the lack of a cog n iz able leg al theory o r on the absence of sufficient facts alleg ed under a cog niz ab l e l e g al theory

. Johnson v. Riverside Healthcare S y s

. , LP
, 534 F .3d 1116, 1121 (9th Cir. 2008).

The bankruptcy court correctly dismissed Tracht Gut’s complaint for failure to state a claim under F ederal Rule o f Civil Procedure 12(b)(6) and F ederal Rule of B ankruptcy Procedure 7 0 12. Tracht Gut’s a dversary complaint contained

no statement of facts. After est a b l i shing jurisdiction a nd
venue, Tracht Gut simply listed its five claims for relief. Tracht Gut’s first claim for r elief a s s er t e d t hat the tax sales

were avoidable fraudulent transfers under 11 U .S.C. §§ 548–49, as well as under California Civil Code § 3 2 7 5

. Tracht Gut failed to alleg e a ny specific f

acts tha t w ould support an inference that the t ax sales were avoidable fraudulent transfers either under the B ankruptcy Code o r under California state law. I nstead, Tracht Gut merely r ecitedI N R E T R A C H T G U T , L L C 9

the e le ments of a f

raudulent transfer as they a ppear in 11 U.S.C. § 5 48. Simply p ut, Tracht Gut’s fraudulent transfer claim contained only a “[ t] hreadbare recital[ ] of the elements of a c ause of action,” m a king d ismissal proper. Iqbal

, 556 U.S. at 678.

Tracht Gut’s second and third claims were g eneraliz ed
pray ers for declaratory a

nd injunctive relief, respectively

, a nd did not contain a cog niz able leg al th e o r y or a factual basis supporting such a theory

. Se e Jo h nson , 534 F .3d at 1121. Tracht Gut’s fourth claim, unjust enrichment, and fifth c laim, violation of 11 U.S.C. § 362, were also both d e v o i d o f any factual matter in support of their alleg ations. B ecause Tracht Gut failed to state a cog niz able claim for relief supported by facts to establish the plau s i b ility of such a claim, the bankruptcy court’s dismissal of T r acht G ut ’ s complaint was proper.

B. Leave to Amend

The primary issue is w hether the bankruptcy court abused its discretion in dismissing T racht Gut’s complaint without first g r anting Tracht G ut leave to amend. A party may amend its complaint within twenty

- one da y s o f service, or within
t w e n t y

- one d a

y s of service of a responsive pleading or a motion broug ht under F ederal Rule of Civil Procedure 12(b), (e), or (f). F ed. R. Civ. P. 15(a). Otherwise, a party may only amend its complaint with w ritten consent from the opposing party or with leave f

rom the co u rt, which the court should freely g ive when justice s o requires. I d. Tracht Gut did not seek leave to amend its complaint within twenty -one day s o f service of Defendants’ Rule 12(b)(6) motion, making l e a v e to amend discretionary

.I N R E T R A C H T G U T , L L C 10

I n Foman v. Davis
, 371 U.S. 178 ( 1 962), the S u p r e m e Court set forth the following standard reg arding motions for leave to amend:

I f the underly ing facts or circumstances relied
upon b y a plaintiff may be a p roper subject o f relief, he oug ht to be afforded an opportunity
to test his claim on the merits. I n the absence of any apparent o r d e c lared reason – such a s

u n d u e delay

, bad faith or d ilatory motive on the p art of the movant, repeated failure to cure deficie n c ies by amendments previously allowed, undue pr e

j udice to the opposing party by virtue of allowance of the amendment, futility o f amendmen t etc. – the le a ve soug ht should, as the rules require, be “freely g iven.” Of course, the g rant or denial of an opportunity to amend is wi t h i n the discretion o f the District Court, but outrig ht refusal to g rant the leave without any justify ing reason appearing f or the d e n ial is
not an ex e rcise of d i s c r etion; it is merely abuse of that discretion a

nd inconsistent with the spirit of the F ederal Rules.

Id. at 182. W e h ave held that trial courts should determine whether to allow leave to amend by a scertaining the presence of four factors: bad faith, u n d u e d elay

, prejudice to the opposing party , and futility

. Griggs v. Pace A m

. Grp., Inc.
, 170 F .3d 877, 88 0 ( 9 t h Cir. 1999). Here, the bankruptcy
court denied leave to am e n d because it determined that amendment would be futile and because it concluded thatI N R E T R A C H T G U T , L L C 11

Tracht Gut had unduly delay ed in presenting specific f actual alleg ations in support of its fraudulent transfer claim. 2

As noted above, in BFP v. Resolution Trust C o r p ., 511 U.S. 531 (1994), the Su p reme Court held that a prepetition mortg ag e foreclosure sale cond ucted in accordance with sta t e l a w conclusively established that the price obtained at that sale w a s for reasonably equivalent value. Under 11 U .S.C. § 5 48(a), a transfer of a d e b t o r’s property made within two y ears o f t he f iling o f the petition

ca n b e avoided if, among other conditions, “less than a reasonably equivalent value” was received in ex chang e. The Court’s h olding that the a mount r eceived throug h a mortg ag e foreclosure sale constituted “ reasonably equ i v alent value”
meant that the transaction was not s u b j ect to being f

ound fraudulent under that provision.

I n its opi n i o n in BFP
, however, the Court ex pressly limited that holding to mortg ag e foreclosures of real e s t a te. “The considerations bearing upon other foreclos u r es a nd forced sales (to satisfy tax liens, f or ex ample) may be different.” BFP , 511 U.S. at 537 n.3.

The B AP held that the Court’s holding in BFP should also apply to tax sales conducted in a c co rdance with California law. In re Tracht Gut
, 503 B .R. at 817. As a result, it ag reed with the bankruptcy court that amendment would have been futile because the County ’s leg ally conducted tax sales of the

2 In its o rd er d ism issin g th e co m p lain t w i th o u t leav e to am en d, th e b an k ru p tcy co u rt d iscu s sed o n ly th e f u tility o f am en d m en t. In th e b a n k r u p tcy co u rt’ s o rd er den y i n g T rach t Gu t’ s m o tio n f o r reco n sid eratio n , th e co u rt also d iscu ssed T rach t Gu t’ s u n d u e d elay in m o v in g f o r leav e to

am en d

.I N R E T R A C H T G U T , L L C 12

two subject properties c ould n o t constitute fraudulent transfers under 11 U.S.C. § 548. Id. at 818. W e ag ree a s well. The c onclusive rule reg arding mortg ag e foreclosures

es t a b l i s hed by BFP should also apply to tax sales in California, because the rationale and p o licy considerations behind the Court’s holding in BFP are just as relevant in the California tax sale contex t.

Responding to the arg ument that the sales price o f a property resulting from a foreclosure sale was too low when compared to fair market value, t he Court ex plained in BFP that “ market value

, a s it is commonly understood, has no applicability in the f

orced-sale contex t” and that “[ market value] is the very antithesis of f o rced-sale v a l u e .” BFP
, 511 U.S. at 537. The Court then ex plained that because state la w a l l o ws the forced sales of real estate, p roperty sold at such sales is “simply worth less ” than property “sold at leisure and pursuant to normal marketing techniques.” Id. at 539. Thus, the lower price obtained at a f o r eclosure sale, when c ompared to a fair market valuation, is a result of the mechanism of forced sales, rather than a “ b a d ge of fraud” under the law o f f

raudulent transfers. Id. at 542–43. “Absent

a clear statutory requirement to the contrary , we must a ssume the validity

of this state-law reg

u latory backg round and take due account o f it s e f

f e c t .” Id. at 539. The Court reasoned that if debtors were able to avoid mortg ag e foreclosures under federal b ankruptcy law simply because the property was sold for below market value at the foreclosure sale, t h e state reg ulatory reg ime in w hich creditors can conduct forced sales

on f oreclosed property would be frustrated. S ee id. at 537–39.

The Court’s r ationale also applies to tax sales. As stated by the B AP, “f

e d e ral courts should pay considerableI N R E T R A C H T G U T , L L C 13

deference to state l a w o n m atters relating to real estate.” I n

re Tracht G ut , 503 B .R. at 8 16. L ike mortg ag e foreclosures,
t a x foreclosure sales conducted by state and lo c al
g overnments are g overned by state law.

The same procedural safeg uards under California law that led the Supreme Court to conclude that mortg ag e foreclosures would y ield reasonably

equivalent value are also required in California for tax sales. “Fo r e c l osure laws ty pically require notice to the defaulting borrower, a substantial lead time before the commencement of foreclosure proceeding s, publication of a n o t i c e of sale, and strict adherence to prescribed b i d d i ng r

ules and auction procedures.” BFP
, 511 U.S. at 542.

Pursuant to Cal. Rev. & Tax C o d e § 3691(a)(1)(A), the
tax collector h as the power to sell tax -defaulted property that has not been redeemed after the property has been in default f o r t h r e e y ears for commercial real estate, and five y ears for residential real estate. Id. This three- or five-y ea r period provide s a “ substantial lead time,” one of the f actors identified as an important safeg uard in BFP

. 5 11 U.S. at 542.

I n addition, w hen a property becomes available for tax sale, th e tax collector must file n otice with the county clerk, and that n otice is recorded. Cal. Rev. & T ax Code §§ 3691.1, 3691.2, 3691.4. T h e tax collector is also required to send notice of the tax sale to all interested parties between 45 a nd 120 d ay s befo r e the proposed sale. Cal. Rev. & Tax Code § 3701. N otice must also be sent to the defaulting party , Cal. Rev. & T ax Code § 3691( a )(3)(A), and be published in a newspaper of g eneral circulation weekly for three weeks, Cal. Rev. & Tax Code § 3702. The notice must contain: ( a) date, time, and place of the sale; (b) location of publicly availableI N R E T R A C H T G U T , L L C 14

computer workstations if the sale allows internet b ids; (c) description of the property ; ( d ) name of the last a ssessee of the p roperty ; (e) minimum bid; (f) statement that the rig ht of redemption terminates the day before the sale; (g ) statement that parties of interest have the rig h t to file claims for any sale proceeds in e x cess of liens a nd costs; (h) statement that parties wi l l be notified of any e x cess proceeds; (i) date, time, a n d place of subsequent sale if property r emains unsold after p resent sale; (j) amount o f deposit required to submit b ids on the property , if so required; (k) statement that if property is purchased by a credit bid, the rig ht of redemption will revive if full pay ment is not made b y

a specified date. Cal. Rev. & Tax Code § 370 4

. Ta x sales conducted in acco r d ance w ith these requirements provide notice c omparable to that required under the foreclosure laws at issue in BFP

. See 511 U.S. at 542.

F inally

, Cal. Rev. & T ax Code § 3693 requires that all tax sales shall b e a t public auction to the hig hest bidder

. “ A n y person, reg ardless of a

n y prior or ex isting lien on, claim to, o r interest in, the property , may purchase at the sale.” Cal. Rev. & Tax Code § 3 6 9 1 (a ) ( 1 )(A). After a tax sale, the tax collector is r equired to e x ecute a deed to the purchaser f or the
p r o p e r t y

. Cal. Rev. & T ax Code § 3708. The tax deed i s “conclusive evidence of the reg ularity o f all proceeding s from the assessment of the assessor to the ex e cution of the deed.” Cal. Rev. & Tax Code § 3711. The conclusive nature of the
tax deed establishes that tax sales in California are conducted with “strict adherence to p rescribed b idding rules and a uction procedures.” BFP , 511 U.S. at 542.

This Court has ex tended BFP bey ond the contex t o f mortg ag e foreclosures before. I n Batlan v. Bledsoe ( In re Bledsoe)

, 569 F .3d 1106 (9th Cir. 2009), J ennifer B le d soeI N R E T R A C H T G U T , L L C 15

h ad recently d ivorced her ex -husband, Ry an B ledsoe. Id. at 1108. A state court awarded nearly a ll of the couple’s marital property to Ry a

n, citing J ennifer’s misconduct in the divorce proceeding s. Id. W hen J e nnifer later f iled for bankruptcy under Chapter 11, her trust e e b roug ht an adversary proceeding a gainst Ry an, seeking to avoid the property transfers required by the dissolution judg ment. Id. B ecause the judg ment was “inequitable,” the truste e a r gued, the
pr o p e r t y transfers it required w ere for less than “reasonably equivalent value,” and hence w ere constructively fraudulent under § 5 48. Id. at 1108 & n. 1. Th e b a n k ruptcy court disag reed and g ran t e d summary judg ment in favor of Ry an. The district court affirmed, and the trustee appealed. Id.

This Court affirme d

. I t held that under BFP
, “a state court’s d issol u t i o n j udg ment, following a reg ularly conducted contested proceeding

, conclusively establ i s hes ‘reasonably equivalent value’ for the purpose of § 548, in the absence of actual fraud.” Id. at 1112. T his was becau s e “ [ t ] he state’s traditional interest in the reg ulation of marriag e and d i vorce is at l e ast as powerful a s its traditional interest in reg ulating sales of real property ,” and “ [ a] voiding transfers made
pur s uant to a state-court dissolution judg ment would seriously imping e on that traditional state interest.” Id. I f the distribution of marital property following the dissolution o f

a marriag e is similar enoug h to state-law m o r t gag e foreclosure to warrant the e x tension of BFP
, then surely so is a state-law tax sale.

W e also note t h a t t he F ifth and Tenth Circuits have

ex p licitly ex tended BFP to tax sales. See T.F. S tone Co. v

. Harper ( In re T.F. Stone Co. ), 72 F

. 3d 466, 472 (5t h Cir. 1995) (holding that under BFP
, a tax sale done in accordance with state law satisfied 11 U.S.C. § 549’s “ present fairI N R E T R A C H T G U T , L L C 16

equivalent value” requirement, w hich the c ourt read a s

m i r r o r i n g § 5 4 8 ’ s “ r e a s o n a b l y e q u i v a l e n t v a l u e ” requirement); Kojima v. Grandote Int’l Ltd. Liab. Co. ( In re Gr a ndote Country Club, Ltd. )

, 252 F

. 3d 1146, 1152 (10th Cir. 2001) ( holding that BFP applies to tax sales challeng ed under

a state fraudulent transfer law, so long as state law re q u ires competitive bidding procedures). 3

Althoug h certain bankruptcy courts have declin e d to

ex tend BFP t o p r e p etition tax sales, that was because o f identified deficiencies in the tax sale procedures of the states in question. See, e.g.
, Berley Assocs. v

. Eckert ( In re Berley A ssocs. )

, 492 B .R. 433, 440–41 (B ankr. D. N.J

. 20 1 3 ) (holding tha t BFP does not apply to prepetition tax sales in New J e rsey because such sal es do not require competitive bidding or a dvertising ); H erkimer Forest Prod. Corp. v. Cnty. of Clinton (

In re Herkimer Forest Prod. C o r p

. )

, B ankr. No. 04-13978, Adv. No. 04-90148, 2 005 W L 6237559, a t * 3 –4 (B ankr. N.D.N.Y. J uly 26, 2005) (memorandum disposition) (holding that B

FP does not apply to pr e p e tition tax sales, noting the absence of public sale a nd c o m p etitive bidding safeg uards).

B e cause the policy of deferring to state law on matters o f real estate a

ppli e s a s much to tax sales as to mortg ag e forec l o s u res, and because tax sales in California contain the procedural safeg

u a r ds that apply

to mortg ag e foreclosures, a tax sale conducted in accordan c e w ith California state law conclusively e stablishes that the price r eceived at the tax sale

was for reasonably equivalent value. That means that the sale

3 W h ile T.F. S to ne co n cern ed a p o st- petitio n tax sale, Gra n d o te Co u ntry Clu b , lik e th i s case, d ealt w i th a p rep etitio n

tax sale.I N R E T R A C H T G U T , L L C 17

d i d n o t r e p r e s e n t a f

r a u d u l e n t t r a n s f e r u n d e r 1 1 U

. S

. C

. § 5 4 8 ( a )

.

I n this case, Tracht Gut’s p roposed F irst Amended Complaint did not alleg e any p r o c edural defects with either of t h e tax sales and instead a lleg ed only that the sales price

was too low in each instance. I n lig ht of the p resumption that
t h e price received at the tax sale was for reasonabl y equivalent value absent procedural irreg ularity

, a mendment would have been futile. The bankruptcy court’s denial o f leave to amend was not an abuse of discretion. 4

C. Motion for Reconsideration

Tracht Gut also appeals the bankruptcy court’s denial o f its motion for reconsideration under F edera l R ule of Civil Procedure 60(b), which provides: “On motion and just terms, the court may relie v e a party or its leg al representative from

a final judg ment, o rder, or proceedi n g f o r,” among other thing s, “mistake, inadvertence, surprise, or ex c u s able
neg lect.” I n its moving papers, Tracht Gut argu ed t h at

ex c u sable n eg lect should serve as a basis for reconsideration. Tr a c ht Gut failed, however, to identify any instance o f
neg lect that was ex cusable, let alone ex plain how ex c using its
neg lect would have p ro d uced any different result in lig ht o f the futility

of Tracht Gut’s proposed amended complaint.

4 A l th o u g h w e n eed n o t d ecid e w h eth er T rach t G ut ’s u n d u e d elay in seek in g am en d m en t

af f o rd ed th e b an k

ru p tcy co u rt th e discretio n

to d en y leav e t o am en d

, w e n o te t h at u n d u e d elay

alo n e can n ot serv e as th e b asis f o r th e d en ial o f leav e to am en d

. S ee, e.g

. , Lo ckh eed Ma rtin C o r p

. v. Netwo rk S

o lu tio n s, In c. , 1 9 4 F .3 d 9 8 0
, 98 6 (9 th Cir. 1 9 9 9 ) (“ [D]elay is n o t a d isp o sitiv e f

acto r in th e am en dm en t an aly sis.”).I N R E T R A C H T G U T , L L C 18

III. Conclusion

A tax sale conducted in a c cordance with Cal i f o r n ia law conclusively establishes that the pri ce obtained a t that sale

was for reasonably equivalent value, just a s the California mortg ag e f

oreclosure s a l e did in BFP

. Tracht Gut’s initial complaint was properly d ismissed b ecause it did not a lleg e facts sufficient to support a plausible claim of fraudulent transfer. L eave to amend was properly denied because Tracht Gut’s p roposed amendment would have been futile. The proposed amended complaint alleg ed only that th e t a x sales resulted in prices tha t w e re too low in comparison with fair

m a r k e t v a lue and did n ot alleg e that the tax sales were not properly conducted under California law. B ecause it was conclusively e stablis h e d that reasonably e quivalent value was obtained for the properties sold at the tax sales, those sales could not have been fraudulent tr a n s fers under 11 U .S.C. § 548(a).

AF F IRMED.