Tracht Gut, LLC v. Los Angeles County Treasurer & Tax Collector (In Re Tracht Gut, LLC)

The Yiddish phrase “Tracht gut, vet zein gut!” translates to “Think good, and it will be good!” Alas, such was not the case for • debtor Plaintiff-Appellant Tracht Gut, LLC. Tracht Gut acquired two separate properties in Los Angeles County. Real property taxes were owing on both properties, as the taxes had not been paid on either of the properties for years. The County Treasurer and Tax Collector sub-sequently conducted tax sales of the prop-erties under California law. A short time later, Tracht Gut filed for bankruptcy re-lief under Chapter 11. Tracht Gut filed an adversary complaint against the County Treasurer and the purchasers of the two properties, alleging that because the County sold the properties for a price that was too low, the tax sales were fraudulent transfers voidable under 11 U.S.C. § 548 (a). The bankruptcy court dismissed the complaint with prejudice. The Ninth Circuit Bankruptcy Appellate Panel af-firmed. In re Tracht Gut LLC, 503 B.R. 804 (9th Cir. BAP 2014).

The central issue is whether the BAP properly extended the rule in BFP v. Resolution Trust Corp., 511 U.S. 531 , 114 S.Ct. 1757 , 128 L.Ed.2d 556 (1994) to California tax sales. In BFP , the…