Court Opinion

ID: 9695666
Source: CourtListenerOpinion
Date Created: 2023-08-25 18:26:54.264918+00
Date Added: 2024-06-11T18:20:15.674003
License: Public Domain

JONES, Bankruptcy Judge,
concurring.
I agree with the conclusion of the lead opinion that the transfer in the instant ease does not constitute a voidable preference under § 547. However, my conclusion is based upon a different analysis. In my view, it is unnecessary to address the questions of whether the 1984 amendments to the Bankruptcy Code overruled Madrid or whether Madrid applies to § 547, because even assuming for purposes of argument that the foreclosure sale was a transfer, I would conclude that the elements of a preference are not present here.
The Debtor apparently argues that the foreclosure sale and the subsequent sale to the Millers should be treated as a single transfer. I disagree. The two transactions were separate and there is no basis for treating them as a single transfer. I therefore would analyze each sale separately-
With respect to the foreclosure sale, the first six elements of a preference are present (again assuming arguendo that the foreclosure sale was a transfer). However, the seventh element is not satisfied. This element, the “greater amount” test, “requires a comparison of the amount a creditor would receive in a hypothetical Chapter 7 distribution were the transfer disallowed with the amount the contested transfer, if allowed, would actually enable the creditor to receive.” In re Lewis W. Shurtleff, Inc., 778 F.2d 1416, 1423 (9th Cir.1985). Here, Western clearly was substantially ov-ersecured. As a result, it would have received full payment even if the sale was avoided and the property was liquidated as part of the estate. At the foreclosure, Western made a credit bid in the full amount it was owed by the Debtor. This was not a preference because a transfer to a fully secured creditor “only reduces secured debt and does not enable the secured party to receive more than in a Chapter 7 liquidation.” In re Joe Flynn Rare Coins, Inc., 81 B.R. 1009, 1019 (Bankr.D.Kan.1988); see In re Auto-Train Corp., 49 B.R. 605, 610 (D.C.1985), aff'd sub nom. Drabkin v. A.I. Credit Corp., 800 F.2d 1153 (D.C.Cir.1986); Countryman, The Concept of a Voidable Preference in Bankruptcy, 38 Vand.L.Rev. 713, 742-743 (1985). Western, therefore, did not receive more than it would have realized in a Chapter 7 liquidation and the foreclosure sale was not a preference.
Western’s subsequent sale of the property to the Millers also was not a preference. The second element of a preference is that the transfer involve an interest of the debt- or in property. After the foreclosure sale which, as discussed above, was not avoidable, the property was no longer property of the Debtor. The transfer, therefore, was not “a transfer of an interest of the debtor in property” and could not be a preference.1 Accordingly, I too would affirm the bankruptcy court’s decision, but for a reason different than that expressed in the lead opinion.
The dissent advocates the adoption of a rule allowing the estate to recover a windfall from a foreclosing creditor under § 547. I agree that such a rule might be consistent with the purpose and spirit of the Bankruptcy Code in that it furthers the goal of equality of distribution among creditors. However, the application of such a rule would require this Panel to find that a transfer occurred at the foreclosure sale, which in turn would require us to hold that Madrid is no longer good law. This I am unwilling to do until such time as Congress *903or the Ninth Circuit makes clear that Madrid should no longer be followed.

. Assuming, arguendo, that Madrid has been legislatively overruled, the foreclosure sale might be amenable to a fraudulent conveyance argument under Bankruptcy Code § 548. If such were the case, the amount received by the creditor upon the subsequent resale of the property would go to the issue of whether the debtor received “reasonably equivalent value” for the transfer within the meaning of § 548. However, that issue has not been presented in this appeal.