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transfer of the property , acknowledged to be “ noncollusive and conducted in conformity with Oklahoma law — satisfied § 549 ( c )’ s requirement that the sale be ‘ for present fair equivalent value .’” Id . at 472 .
The Tenth Circuit weighed in next in interpreting state fraudulent transfer law in In re Grandote Country Club Co ., Ltd ., 252 F . 3d 1146 ( 10th Cir . 2001 ). The case tells the story of a convoluted history of transfers of a golf course back and forth to parties in Japan . The transfer trail ends with a trustee in bankruptcy proceedings in Japan seeking to sue the purchaser of tax certificates who obtained a tax deed to the property under the Colorado Uniform Transfer Act ( CUPTA ) in a case brought under former Section 304 of the Bankruptcy Code ( now repealed and replaced by Chapter 15 ). Recognizing a split in the lower court decisions on whether BFP applied to tax sales , the Tenth Circuit , in applying BFP to “ conclude that the tax sale at issue constitutes transfer for ‘ reasonably equivalent value ’ under CUPTA ,” notes the critical fact that under Colorado law , the tax sale was conducted publicly and was “ subject to a competitive bidding procedure .” Id . at 1152 . The Tenth Circuit distinguished a prior case decided by the Tenth Circuit Bankruptcy Appellate Panel in Sherman v . Rose , 223 B . R . 555 ( B . A . P . 10th Cir . 1998 ), which refused to apply BFP to a Wyoming tax sale where Wyoming statutes “ do not permit a public sale with competitive bidding .” Id . at 559 .
Turning back to Section 548 , the Seventh Circuit then created the circuit split in deciding Smith v . SIPI , LLC , 811 F . 3d 228 ( 7th Cir . 2016 ). As previewed in the Tenth Circuit ’ s discussion in In re Grandote , the Seventh Circuit considered the process set up under Illinois law for a tax sale and determined , “[ b ] ased on fundamental differences between the bidding methods used ,” that “ the reasoning of BFP does not extend to Illinois tax sales of real property .” Id . at 234 . Explaining the Illinois procedures as not involving “ competitive bidding where the highest bid wins ,” but rather a procedure where the claim is sold and the “ lowest bid wins ,” the Seventh Circuit held that BFP did not apply to this tax foreclosure sale . Id . Characterizing BFP not as a textual interpretation case , but rather as a case based on “ practical concerns about how to let federal bankruptcy law work well with state mortgage foreclosure law ,” the Seventh Circuit confined BFP ’ s application only to “ mortgage foreclosures of real estate ,” citing the decision itself when it noted that “[ t ] he considerations bearing upon other foreclosures and forced sales ( to satisfy tax liens , for example ) may be different .” Id . at 236 . The Seventh Circuit noted that the states in which the application of BFP to tax foreclosure sales had been decided differently had open competitive bidding , and thus were more like the mortgage foreclosure process . Id . at 240 .
The Ninth Circuit weighed in next in In re Tracht Gut , LLC , 836 F . 3d 1146 ( 9th Cir . 2016 ), following the developing majority view in extending BFP to California tax foreclosure sales . However , the Ninth Circuit recognized that it faced the same situation as in the Fifth and Tenth Circuit because the “ California tax sales have the same procedural safeguards as the California mortgage foreclosure sale at issue in BFP . . . .” Id . at 1149 . The Ninth Circuit interpreted BFP as focused on policy issues finding that “[ t ] he Court reasoned that if debtors were able to avoid mortgage foreclosures under federal bankruptcy law simply because the property was sold for
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