## Facts

- Craig and Christine Tippett filed a Chapter 7 petition, placing their residence in the bankruptcy estate under 11 U.S.C. § 541.
- No bankruptcy petition or notice was recorded in the county real property records.
- More than a year postpetition, the debtors, without trustee authorization and without disclosing the bankruptcy, listed and sold the residence through a broker.
- Seitu Coleman bought the property for about $225,000 and financed the purchase with two institutional lenders secured by recorded deeds of trust.
- Coleman and the lenders lacked knowledge of the bankruptcy; Coleman qualified as a bona fide purchaser and the relevant instruments were duly recorded.
- California recording law gives priority to a subsequent purchaser or mortgagee who records first over prior unrecorded interests.

## Issues

1. Whether a debtor’s unauthorized, postpetition sale of estate real property to a bona fide purchaser violates the automatic stay under 11 U.S.C. § 362(a)(3), rendering the transfer void.
2. Whether the trustee’s remedy is avoidance under 11 U.S.C. § 549(a), and whether the purchaser is protected by § 549(c) as a good-faith purchaser who gave present fair equivalent value without knowledge and recorded before any notice of bankruptcy was recorded.
3. Whether the Bankruptcy Code preempts California’s recording statute so that the estate’s unrecorded interest defeats the bona fide purchaser’s recorded title.

## Decision

- The Ninth Circuit affirmed the Bankruptcy Appellate Panel’s reversal of the bankruptcy court.
- The court held the debtor-initiated transfer did not violate § 362(a) and therefore was not void on stay grounds.
- The court held the transaction fell within § 549’s postpetition transfer regime, and § 549(c) barred avoidance because Coleman was a protected good-faith purchaser who recorded first without knowledge.
- The court rejected the trustee’s preemption argument, concluding the statutory scheme (including § 549(c)) operates in concert with state recording systems.

## Legal Principles

- The automatic stay under § 362 primarily restrains creditor-initiated acts against estate property; debtor-initiated postpetition transfers are generally addressed under § 549.
- Section 549(a) authorizes avoidance of unauthorized postpetition transfers of estate property, but § 549(c) protects a good-faith purchaser who (i) lacked knowledge of the case, (ii) gave present fair equivalent value, and (iii) perfected/recorded before any notice of the bankruptcy was recorded.
- Section 549(c) allocates the risk of loss to the estate when the trustee does not record notice of the bankruptcy in local real property records and an innocent purchaser records first.
- The Bankruptcy Code does not broadly displace state recording priority rules in this setting; § 549(c) expressly incorporates recording concepts to determine priority and avoidability.

## Conclusion

A Chapter 7 debtor’s unauthorized postpetition sale of estate real property is not automatically void under § 362 when it is debtor-initiated; the trustee must proceed, if at all, under § 549, and § 549(c) protects bona fide purchasers who pay fair value, lack notice, and record before any bankruptcy notice is recorded.


In re Tippett, 542 F.3d 684 (9th Cir. 2008)