## Facts

- BFP, a partnership, purchased a home in Newport Beach, California, subject to a deed of trust held by Imperial Federal Savings Association.
- After BFP defaulted, Imperial conducted a nonjudicial foreclosure under California law.
- At a properly noticed foreclosure sale, Paul Osborne bought the property for $433,000.
- BFP later filed Chapter 11 and, as debtor in possession, sought to avoid the foreclosure sale as a constructively fraudulent transfer under 11 U.S.C. § 548(a)(2), alleging the home was worth more than $725,000 and thus was not transferred for “reasonably equivalent value.”

## Issues

1. Whether the sale price from a noncollusive, state-law-compliant foreclosure sale can be avoided under 11 U.S.C. § 548(a)(2) as constructively fraudulent because it is less than the property’s asserted fair market value.
2. Whether “reasonably equivalent value” in § 548(a)(2) requires a fair-market-value benchmark (or a minimum percentage of fair market value) in the foreclosure context.

## Decision

- The Supreme Court affirmed the judgment for the respondents.
- The Court held that, for real property sold at a noncollusive foreclosure sale conducted in compliance with state foreclosure law, the price actually received at the sale constitutes “reasonably equivalent value” under § 548(a)(2).
- The Court rejected equating “reasonably equivalent value” with fair market value in forced-sale conditions and rejected imposing a federal minimum percentage of fair market value.
- The Court limited its rule to noncollusive sales that comply with all state-law foreclosure requirements; procedurally defective or collusive sales remain subject to avoidance.

## Legal Principles

- In the context of a noncollusive, state-law-compliant foreclosure sale of real property, “reasonably equivalent value” under 11 U.S.C. § 548(a)(2) is the foreclosure sale price.
- “Reasonably equivalent value” under § 548(a)(2) does not import a fair-market-value requirement for forced sales and does not establish a federal minimum percentage of fair market value.
- Absent clear congressional direction, federal bankruptcy law is not read to displace state foreclosure rules that treat price inadequacy alone as insufficient to set aside a properly conducted sale.
- The § 548(a)(2) analysis may apply where the foreclosure process is collusive or fails to comply with state foreclosure procedures.

## Conclusion

A foreclosure sale of real property that is noncollusive and conducted in compliance with state law cannot be avoided as a constructive fraudulent transfer under § 548(a)(2) solely because the sale price is below the property’s asserted fair market value; the foreclosure sale price is treated as “reasonably equivalent value” in that setting.


BFP v. Resol. Tr. Corp., 511 U.S. 531 (1994)