(Westlaw) A New York widow can keep her $650,000 home, after a bankruptcy judge set aside a tax lien sale as a fraudulent transfer.
In re Miranda, No. 23-73373; Miranda v. TLB 2019 LLC, Adv No. 23-8068, 2025 WL 242232 (Bankr. E.D.N.Y. Jan. 17, 2025).
U.S. Bankruptcy Judge Alan S. Trust of the Eastern District of New York on Jan. 17 granted Sonia Miranda’s motion for summary judgment, finding that she did not receive reasonably equivalent value from the sale of her home to pay $1,841 in taxes.
Property transfer
In December 2000, Miranda and her late husband bought their home in the village of Mineola, New York, Judge Trust’s opinion said.
A tax lien was placed on Miranda’s home after she failed to pay property taxes for tax years 2018 and 2019 totaling $1,841.
TLB 2019 LLC purchased the tax lien at a public auction conducted by the village.
In May 2021, TLB notified Miranda that she could lose her home if she did not redeem it within six months.
On Feb. 7, 2022, the village delivered a treasurer’s deed conveying the property, which had an assessed value of about $650,000, to TLB.
Two days later, TLB sued Miranda in New York’s Nassau County Supreme Court, seeking a declaration that it owned the property.
The state court granted the requested relief following Miranda’s default.
A subsequently obtained eviction order gave Miranda until Aug. 15, 2023, to vacate the property.
Miranda filed a Chapter 13 petition Sept. 12, 2023, before being evicted.
After the Chapter 13 trustee declined to seek avoidance of the transfer of Miranda’s property, the debtor filed an adversary complaint, followed by a summary judgment motion, seeking to avoid it under Section 548(a)(1)(B), 11 U.S.C.A. § 548(a)(1)(B).
That section allows transfers of a debtor’s property occurring on or within two years before the bankruptcy filing to be set aside if the transfer left the debtor insolvent and the debtor did not receive reasonably equivalent value in return.
Transfer avoided
TLB acquired title to Miranda’s home “based exclusively on mechanically applied administrative requirements,” Judge Trust said.
When the state court entered a default judgment in TLB’s favor, it did not rule on the fairness of the value paid to Miranda, he added.
In BFP v. Resolution Trust Corp., 511 U.S. 531 (1994), the U.S. Supreme Court held that the price paid at a properly conducted foreclosure sale is reasonably equivalent value for purposes of Section 548.
“But this tax deed transfer was an administrative act without judicial oversight,” Judge Trust said.
“Miranda did not have the protections of market forces as did the debtor in BFP,” nor the protections of judicial oversight, he noted.
The judge concluded that Miranda received less than reasonably equivalent value for her home as a matter of law.
The transfer was avoidable under Section 548 because there was no dispute that it occurred within two years before Miranda’s bankruptcy filing and left her unable to pay her debts, which is how Bankruptcy Code Section 101(32), 11 U.S.C.A. § 101(32), defines “insolvent.”
Judge Trust said Miranda’s Chapter 13 plan must provide for satisfaction of the tax lien plus interest.
The judge rejected TLB’s request that it be compensated for Miranda’s occupancy of the property after it was awarded title.
“TLB cannot be awarded use and occupancy for Miranda’s use of the property after TLB took title based on a fraudulent transfer,” Judge Trust said.
Roy Lester of Lester Korinman Kamran & Masini PC in Garden City, New York, represented Miranda.
Jeff Morgenstern in Carle Place, New York, represented TLB.
By David J. Light, Esq.