Bfp v. Resolution Trust Corporation, as Receiver of Imperial Federal Savings Association

Summary

The Supreme Court held that the price received at a noncollusive real estate mortgage foreclosure sale conducted in compliance with state law conclusively satisfies the Bankruptcy Code's requirement under 11 U.S.C. § 548(a)(2)(A) that insolvent debtors receive 'a reasonably equivalent value,' so such sales cannot be avoided as constructively fraudulent transfers no matter how far the price falls short of fair market value. Reasoning that 'fair market value' presupposes willing-buyer conditions that are the antithesis of a forced sale, that prescribing a federal minimum foreclosure price would be a policy judgment beyond the Code's text, and that displacing traditional state regulation of real estate titles requires a clear and manifest federal purpose, the Court read 'reasonably equivalent value' as the price in fact obtained at a lawful foreclosure sale. The Court affirmed the Ninth Circuit, which had followed the Madrid line and rejected the Durrett and Bundles approaches. Justice Souter, dissenting, joined by Justices Blackmun, Stevens, and Ginsburg, would have held that § 548(a)(2)(A)'s plain meaning requires a substantive comparison of the foreclosure price with the property's worth, with no irrebuttable presumption of adequacy.