Supreme Court’s ‘BFP’ Holding Misapplied In Foreclosure Sale Conducted Under RPTL

After Ontario County sought foreclosure under New York’s Real Property Tax Law, appellants ­led Chapter 13 bankruptcy plans to pay arrears. Adversary proceedings sought to avoid their homes’ transfer as constructively fraudulent. The county sold the homes at auction. Although title is disputed, it is entitled to the surpluses on the homes, exceeding $42,000. District court reversed bankruptcy court’s dismissal of appellants’ complaint. It erred in applying the Supreme Court’s holding in BFP v. Resolution Trust Co. Unlike the foreclosure law in BFP and the “typical” state laws the Supreme Court described before reaching its holding, the RPTL is a strict foreclosure regime that does not provide for pre-seizure auction whereby the debtor may recover equity. Unlike the disputed forced sale in BFP, the sale of appellants’ property conducted under the RPTL “eliminated rather than redefi­ned the market.” The rationale underlying BFP’s presumption of reasonably equivalent value did not apply as “no market forces [were] at work.”

Hampton v. Ontario County, New York, 17-CV-6808 (July 18)

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