OCTOBER TERM, 1993
Syllabus
BFP v. RESOLUTION TRUST CORPORATION, AS RECEIVER OF IMPERIAL
FEDERAL SAVINGS ASSOCIATION, ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH
CIRCUIT
No. 92-1370. Argued December 7, 1993-Decided May 23,1994
Petitioner BFP took title to a California home subject to, inter
alia, a deed of trust in favor of Imperial Savings Association.
After Imperial entered a notice of default because its loan was not
being serviced, the home was purchased by respondent Osborne for
$433,000 at a properly noticed foreclosure sale. BFP soon
petitioned for bankruptcy and, acting as a debtor in possession,
filed a complaint to set aside the sale to Osborne as a fraudulent
transfer, claiming that the home was worth over $725,000 when sold
and thus was not exchanged for a "reasonably equivalent value"
under 11 U. S. C. § 548(a)(2). The Bankruptcy Court granted summary
judgment to Imperial. The District Court affirmed the dismissal,
and a bankruptcy appellate panel affirmed the judgment, holding
that consideration received in a noncollusive and regularly
conducted nonjudicial foreclosure sale establishes "reasonably
equivalent value" as a matter of law. The Court of Appeals
affirmed.
Held: A "reasonably equivalent value" for foreclosed real
property is the price in fact received at the foreclosure sale, so
long as all the requirements of the State's foreclosure law have
been complied with. Pp.535-549.
(a) Contrary to the positions taken by some Courts of Appeals,
fair market value is not necessarily the benchmark against which
determination of reasonably equivalent value is to be measured. It
may be presumed that Congress acted intentionally when it used the
term "fair market value" elsewhere in the Bankruptcy Code but not
in § 548, particularly when the omission entails replacing standard
legal terminology with a neologism. Moreover, fair market value
presumes market conditions that, by definition, do not obtain in
the forced-sale context, since property sold within the time and
manner strictures of state-prescribed foreclosure is simply worth
less than property sold without such restrictions. "Reasonably
equivalent value" also cannot be read to mean a "reasonable" or
"fair" forced-sale price, such as a percentage of fair market
value. To specify a federal minimum sale price beyond what state
foreclosure law requires would extend bankruptcy law well beyond
the traditional field of fraudulent transfers and upset the
coexistence that
532
fraudulent transfer law and foreclosure law have enjoyed for
over 400 years. While, under fraudulent transfer law, a "grossly
inadequate price" raises a rebuttable presumption of actual
fraudulent intent, it is black letter foreclosure law that, when a
State's procedures are followed, the mere inadequacy of a
foreclosure sale price is no basis for setting the sale aside.
Absent clearer textual guidance than the phrase "reasonably
equivalent value"-a phrase entirely compatible with preexisting
practice-the Court will not presume that Congress intended to
displace traditional state regulation with an interpretation that
would profoundly affect the important state interest in the
security and stability of title to real property. pp. 535-545.
(b) The conclusion reached here does not render § 548(a)(2)
superfluous. The "reasonably equivalent value" criterion will
continue to have independent meaning outside the foreclosure
context, and § 548(a)(2) will continue to be an exclusive means of
invalidating foreclosure sales that, while not intentionally
fraudulent, nevertheless fail to comply with all governing state
laws. Pp. 545-546.
974 F.2d
1144, affirmed.
SCALIA, J., delivered the opinion of the Court, in which
REHNQUIST, C. J., and O'CONNOR, KENNEDY, and THOMAS, JJ., joined.
SOUTER, J., filed a dissenting opinion, in which BLACKMUN, STEVENS,
and GINSBURG, JJ., joined, post, p. 549.
Roy B. Woolsey argued the cause for petitioner. With him on the
briefs was Ronald B. Coulombe.
Ronald
J. Mann argued the cause for respondent Resolution
Trust Corporation. With him on the brief were Solicitor General
Days, Assistant Attorney General Hunger, Jeffrey P. Minear, Joseph
Patchan, Jeffrey Ehrlich, and Janice Lynn Green.
Michael R. Sment argued the cause and filed a brief for
respondent Osborne et al. *
*Marian C. Nowell, Henry
J. Sommer, Gary Klein, Neil
Fogarty, and Philip Shuchman filed a brief for Frank Allen et al.
as amici curiae urging reversal.
Briefs of amici curiae urging affirmance were filed for the
American Council of Life Insurance et al. by Christopher F. Graham,
James L. Cunningham, and Richard E. Barnsback; for the California
Trustee's Association et al. by Phillip M. Adleson, Patrie
J. Kelly, and Duane W Shewaga;
533
JUSTICE SCALIA delivered the opinion of the Court.
This case presents the question whether the consideration
received from a noncollusive, real estate mortgage foreclosure sale
conducted in conformance with applicable state law conclusively
satisfies the Bankruptcy Code's requirement that transfers of
property by insolvent debtors within one year prior to the filing
of a bankruptcy petition be in exchange for "a reasonably
equivalent value." 11 U. S. C. § 548(a)(2).
I
Petitioner BFP is a partnership, formed by Wayne and Marlene
Pedersen and Russell Barton in 1987, for the purpose of buying a
home in Newport Beach, California, from Sheldon and Ann Foreman.
Petitioner took title subject to a first deed of trust in favor of
Imperial Savings Association (Imperial) 1 to secure payment of a
loan of $356,250 made to the Pedersens in connection with
petitioner's acquisition of the home. Petitioner granted a second
deed of trust to the Foremans as security for a $200,000 promissory
note. Subsequently, Imperial, whose loan was not being serviced,
entered a notice of default under the first deed of trust and
scheduled a properly noticed foreclosure sale. The foreclosure
proceedings were temporarily delayed by the filing of an
involuntary bankruptcy petition on behalf of petitioner. After the
dismissal of that petition in June 1989, Imperial's
for the Council of State Governments et al. by Richard Ruda; for
the Federal Home Loan Mortgage Corporation et al. by Dean S.
Cooper, Roger M. Whelan, David F. B. Smith, and William E.
Cumberland; and for Jim Walter Homes, Inc., by Lawrence A. G.
Johnson.
1 Respondent Resolution Trust Corporation (RTC) acts in this
case as receiver of Imperial Federal Savings Association (Imperial
Federal), which was organized pursuant to a June 22, 1990, order of
the Director of the Office of Thrift Supervision, and into which
RTC transferred certain assets and liabilities of Imperial. The
Director previously had appointed RTC as receiver of Imperial. For
convenience we refer to all respondents other than RTC and Imperial
as the private respondents.
534
foreclosure proceeding was completed at a foreclosure sale on
July 12, 1989. The home was purchased by respondent Paul Osborne
for $433,000.
In October 1989, petitioner filed for bankruptcy under Chapter
11 of the Bankruptcy Code, 11 U. s. C. §§ 1101-1174. Acting as a
debtor in possession, petitioner filed a complaint in Bankruptcy
Court seeking to set aside the conveyance of the home to respondent
Osborne on the grounds that the foreclosure sale constituted a
fraudulent transfer under § 548 of the Code, 11 U. s. C. § 548.
Petitioner alleged that the home was actually worth over $725,000
at the time of the sale to Osborne. Acting on separate motions, the
Bankruptcy Court dismissed the complaint as to the private
respondents and granted summary judgment in favor of Imperial. The
Bankruptcy Court found, inter alia, that the foreclosure sale had
been conducted in compliance with California law and was neither
collusive nor fraudulent. In an unpublished opinion, the District
Court affirmed the Bankruptcy Court's granting of the private
respondents' motion to dismiss. A divided bankruptcy appellate
panel affirmed the Bankruptcy Court's entry of summary judgment for
Imperial. 132 B. R. 748 (1991). Applying the analysis set forth in
In re Madrid, 21 B. R. 424 (Bkrtcy. App. Pan. CA9 1982), affirmed
on other grounds,
725 F.2d
1197 (CA9), cert. denied, 469 U. S. 833 (1984), the panel
majority held that a "non-collusive and regularly conducted
nonjudicial foreclosure sale ... cannot be challenged as a
fraudulent conveyance because the consideration received in such a
sale establishes 'reasonably equivalent value' as a matter of law."
132 B. R., at 750.
Petitioner sought review of both decisions in the Court of
Appeals for the Ninth Circuit, which consolidated the appeals. The
Court of Appeals affirmed. In re BFP,
974 F.2d
1144 (1992). BFP filed a petition for certiorari, which we
granted. 508 U. S. 938 (1993).
535
II
Section 548 of the Bankruptcy Code, 11 U. S. C. § 548, sets
forth the powers of a trustee in bankruptcy (or, in a Chapter 11
case, a debtor in possession) to avoid fraudulent transfers.2 It
permits to be set aside not only transfers infected by actual fraud
but certain other transfers as well-so-called constructively
fraudulent transfers. The constructive fraud provision at issue in
this case applies to transfers by insolvent debtors. It permits
avoidance if the trustee can establish (1) that the debtor had an
interest in property; (2) that a transfer of that interest occurred
within one year of the filing of the bankruptcy petition; (3) that
the debtor was insolvent at the time of the transfer or became
insolvent as a result thereof; and (4) that the debtor received
"less than a reasonably equivalent value in exchange for such
transfer." 11 U. S. C. § 548(a)(2)(A). It is the last of these four
elements that presents the issue in the case before us.
Section 548 applies to any "transfer," which includes
"foreclosure of the debtor's equity of redemption." 11 U. S. C. §
101(54) (1988 ed., Supp. IV). Of the three critical terms
"reasonably equivalent value," only the last is defined: "value"
means, for purposes of § 548, "property, or satisfaction or
securing of a ... debt of the debtor," 11 U. S. C.
2 Title 11 U. S. C. § 548 provides in relevant part:
"(a) The trustee may avoid any transfer of an interest of the
debtor in property, or any obligation incurred by the debtor, that
was made or incurred on or within one year before the date of the
filing of the petition, if the debtor voluntarily or
involuntarily-
"(1) made such transfer or incurred such obligation with actual
intent to hinder, delay, or defraud any entity to which the debtor
was or became, on or after the date that such transfer was made or
such obligation was incurred, indebted; or
"(2)(A) received less than a reasonably equivalent value in
exchange for such transfer or obligation; and
"(B)(i) was insolvent on the date that such transfer was made or
such obligation was incurred, or became insolvent as a result of
such transfer or obligation .... "
536
§ 548(d)(2)(A). The question presented here, therefore, is
whether the amount of debt (to the first and second lienholders)
satisfied at the foreclosure sale (viz., a total of $433,000) is
"reasonably equivalent" to the worth of the real estate conveyed.
The Courts of Appeals have divided on the meaning of those
undefined terms. In Durrett v. Washington Nat. Ins. Co.,
621 F.2d
201 (1980), the Fifth Circuit, interpreting a provision of the
old Bankruptcy Act analogous to § 548(a)(2), held that a
foreclosure sale that yielded 57% of the property's fair market
value could be set aside, and indicated in dicta that any such sale
for less than 70% of fair market value should be invalidated. Id.,
at 203-204. This "Durrett rule" has continued to be applied by some
courts under § 548 of the new Bankruptcy Code. See In re Littleton,
888 F.2d
90, 92, n. 5 (CAll 1989). In In re Bundles,
856 F.2d
815, 820 (1988), the Seventh Circuit rejected the Durrett rule
in favor of a case-by-case, "all facts and circumstances" approach
to the question of reasonably equivalent value, with a rebuttable
presumption that the foreclosure sale price is sufficient to
withstand attack under § 548(a)(2). 856 F. 2d, at 824-825; see also
In re Grissom,
955 F.2d
1440, 1445-1446 (CAll 1992). In this case the Ninth Circuit,
agreeing with the Sixth Circuit, see In re Winshall Settler's
Trust,
758 F.2d
1136, 1139 (CA6 1985), adopted the position first put forward
in In re Madrid, 21 B. R. 424 (Bkrtcy. App. Pan. CA9 1982),
affirmed on other grounds,
725 F.2d
1197 (CA9), cert. denied, 469 U. S. 833 (1984), that the
consideration received at a noncollusive, regularly conducted real
estate foreclosure sale constitutes a reasonably equivalent value
under § 548(a)(2)(A). The Court of Appeals acknowledged that it
"necessarily part[ed] from the positions taken by the Fifth Circuit
in Durrett ... and the Seventh Circuit in Bundles." 974 F. 2d, at
1148.
In contrast to the approach adopted by the Ninth Circuit in the
present case, both Durrett and Bundles refer to fair market value
as the benchmark against which determination
537
of reasonably equivalent value is to be measured. In the context
of an otherwise lawful mortgage foreclosure sale of real estate,3
such reference is in our opinion not consistent with the text of
the Bankruptcy Code. The term "fair market value," though it is a
well-established concept, does not appear in § 548. In contrast, §
522, dealing with a debtor's exemptions, specifically provides
that, for purposes of that section, "'value' means fair market
value as of the date of the filing of the petition." 11 U. S. C. §
522(a)(2). "Fair market value" also appears in the Code provision
that defines the extent to which indebtedness with respect to an
equity security is not forgiven for the purpose of determining
whether the debtor's estate has realized taxable income. §
346(j)(7)(B). Section 548, on the other hand, seemingly goes out of
its way to avoid that standard term. It might readily have said
"received less than fair market value in exchange for such transfer
or obligation," or perhaps "less than a reasonable equivalent of
fair market value." Instead, it used the (as far as we are aware)
entirely novel phrase "reasonably equivalent value." "[I]t is
generally presumed that Congress acts intentionally and purposely
when it includes particular language in one section of a statute
but omits it in another," Chicago v. Environmental Defense Fund,
ante, at 338 (internal quotation marks omitted), and that
presumption is even stronger when the omission entails the
replacement of standard legal terminology with a neologism. One
must suspect the language means that fair market value cannot-or at
least cannot always-be the benchmark.
That suspicion becomes a certitude when one considers that
market value, as it is commonly understood, has no applicability in
the forced-sale context; indeed, it is the very antithesis of
forced-sale value. "The market value of ... a
3We emphasize that our opinion today covers only mortgage
foreclosures of real estate. The considerations bearing upon other
foreclosures and forced sales (to satisfy tax liens, for example)
may be different.
538
piece of property is the price which it might be expected to
bring if offered for sale in a fair market; not the price which
might be obtained on a sale at public auction or a sale forced by
the necessities of the owner, but such a price as would be fixed by
negotiation and mutual agreement, after ample time to find a
purchaser, as between a vendor who is willing (but not compelled)
to sell and a purchaser who desires to buy but is not compelled to
take the particular ... piece of property." Black's Law Dictionary
971 (6th ed. 1990). In short, "fair market value" presumes market
conditions that, by definition, simply do not obtain in the context
of a forced sale. See, e. g., East Bay Municipal Utility District
v. Kieffer, 99 Cal. App. 240, 255, 278 P. 476, 482 (1929),
overruled on other grounds by County of San Diego v. Miller, 13
Cal. 3d 684, 532 P. 2d 139 (1975) (in bank); Nevada Nat. Leasing
Co. v. Hereford, 36 Cal. 3d 146, 152, 680 P. 2d 1077, 1080 (1984)
(in bank); Guardian Loan Co. v. Early, 47 N. Y. 2d 515, 521, 392 N.
E. 2d 1240, 1244 (1979).
Neither petitioner, petitioner's amici, nor any federal court
adopting the Durrett or the Bundles analysis has come to grips with
this glaring discrepancy between the factors relevant to an
appraisal of a property's market value, on the one hand, and the
strictures of the foreclosure process on the other. Market value
cannot be the criterion of equivalence in the foreclosure-sale
context.4 The language of § 548(a)(2)(A) ("received less than a
reasonably equivalent
4 Our discussion assumes that the phrase "reasonably equivalent"
means "approximately equivalent," or "roughly equivalent." One
could, we suppose, torture it into meaning "as close to equivalent
as can reasonably be expected"-in which event even a vast
divergence from equivalent value would be permissible so long as
there is good reason for it. On such an analysis, fair market value
could be the criterion of equivalence, even in a forced-sale
context; the forced sale would be the reason why gross
inequivalence is nonetheless reasonable equivalence. Such
word-gaming would deprive the criterion of all meaning. If
"reasonably equivalent value" means only "as close to equivalent
value as is reasonable," the statute might as well have said
"reasonably infinite value."
539
value in exchange") requires judicial inquiry into whether the
foreclosed property was sold for a price that approximated its
worth at the time of sale. An appraiser's reconstruction of "fair
market value" could show what similar property would be worth if it
did not have to be sold within the time and manner strictures of
state-prescribed foreclosure. But property that must be sold within
those strictures is simply worth less. No one would pay as much to
own such property as he would pay to own real estate that could be
sold at leisure and pursuant to normal marketing techniques. And it
is no more realistic to ignore that characteristic of the property
(the fact that state foreclosure law permits the mortgagee to sell
it at forced sale) than it is to ignore other price-affecting
characteristics (such as the fact that state zoning law permits the
owner of the neighboring lot to open a gas station).5 Absent a
clear statutory requirement to the contrary, we must assume the
validity of this state-law regulatory background and take due
account of its effect. "The existence and force and function of
established
5We are baffled by the dissent's perception of a "patent"
difference between zoning and foreclosure laws insofar as impact
upon property value is concerned, post, at 557-558, n. 10. The only
distinction we perceive is that the former constitute permanent
restrictions upon use of the subject property, while the latter
apply for a brief period of time and restrict only the manner of
its sale. This difference says nothing about how significantly the
respective regimes affect the property's value when they are
operative. The dissent characterizes foreclosure rules as "merely
procedural," and asserts that this renders them, unlike
"substantive" zoning regulations, irrelevant in bankruptcy. We are
not sure we agree with the characterization. But in any event, the
cases relied on for this distinction all address creditors'
attempts to claim the benefit of state rules of law (whether
procedural or substantive) as property rights, in a bankruptcy
proceeding. See United Sav. Assn. of Tex. v. Timbers of Inwood
Forest Associates, Ltd.,
484 U. S. 365, 370-371
(1988); Owen v. Owen,
500 U. S. 305, 313
(1991); United States v. Whiting Pools, Inc.,
462 U. S. 198, 206207,
and nn. 14, 15 (1983). None of them declares or even intimates that
state laws, procedural or otherwise, are irrelevant to pre
bankruptcy valuation questions such as that presented by §
548(a)(2)(A).
540
institutions of local government are always in the consciousness
of lawmakers and, while their weight may vary, they may never be
completely overlooked in the task of interpretation." Davies
Warehouse Co. v. Bowles,
321 U. S. 144, 154
(1944). Cf. Gregory v. Ashcroft,
501 U. S. 452, 460-462
(1991).
There is another artificially constructed criterion we might
look to instead of "fair market price." One might judge there to be
such a thing as a "reasonable" or "fair" forced-sale price. Such a
conviction must lie behind the Bundles inquiry into whether the
state foreclosure proceedings "were calculated ... to return to the
debtor-mortgagor his equity in the property." 856 F. 2d, at 824.
And perhaps that is what the courts that follow the Durrett rule
have in mind when they select 70% of fair market value as the outer
limit of "reasonably equivalent value" for forecloseable property
(we have no idea where else such an arbitrary percentage could have
come from). The problem is that such judgments represent policy
determinations that the Bankruptcy Code gives us no apparent
authority to make. How closely the price received in a forced sale
is likely to approximate fair market value depends upon the terms
of the forced sale-how quickly it may be made, what sort of public
notice must be given, etc. But the terms for foreclosure sale are
not standard. They vary considerably from State to State, depending
upon, among other things, how the particular State values the
divergent interests of debtor and creditor. To specify a federal
"reasonable" foreclosure-sale price is to extend federal bankruptcy
law well beyond the traditional field of fraudulent transfers, into
realms of policy where it has not ventured before. Some sense of
history is needed to appreciate this.
The modern law of fraudulent transfers had its origin in the
Statute of 13 Elizabeth, which invalidated "covinous and
fraudulent" transfers designed "to delay, hinder or defraud
creditors and others." 13 Eliz., ch. 5 (1570). English courts
541
soon developed the doctrine of "badges of fraud": proof by a
creditor of certain objective facts (for example, a transfer to a
close relative, a secret transfer, a transfer of title without
transfer of possession, or grossly inadequate consideration) would
raise a rebuttable presumption of actual fraudulent intent. See
Twyne's Case, 3 Coke Rep. 80b, 76 Eng. Rep. 809 (K. B. 1601); O.
Bump, Fraudulent Conveyances: A Treatise upon Conveyances Made by
Debtors to Defraud Creditors 31-60 (3d ed. 1882). Every American
bankruptcy law has incorporated a fraudulent transfer provision;
the 1898 Act specifically adopted the language of the Statute of 13
Elizabeth. Bankruptcy Act of July 1, 1898, ch. 541, § 67(e), 30
Stat. 564-565.
The history of foreclosure law also begins in England, where
courts of chancery developed the "equity of redemption"-the
equitable right of a borrower to buy back, or redeem, property
conveyed as security by paying the secured debt on a later date
than "law day," the original due date. The courts' continued
expansion of the period of redemption left lenders in a quandary,
since title to forfeited property could remain clouded for years
after law day. To meet this problem, courts created the equitable
remedy of foreclosure: after a certain date the borrower would be
forever foreclosed from exercising his equity of redemption. This
remedy was called strict foreclosure because the borrower's entire
interest in the property was forfeited, regardless of any
accumulated equity. See G. Glenn, 1 Mortgages 3-18, 358-362, 395406
(1943); G. Osborne, Mortgages 144 (2d ed. 1970). The next major
change took place in 19th-century America, with the development of
foreclosure by sale (with the surplus over the debt refunded to the
debtor) as a means of avoiding the draconian consequences of strict
foreclosure. Id., at 661663; Glenn, supra, at 460-462, 622. Since
then, the States have created diverse networks of judicially and
legislatively crafted rules governing the foreclosure process, to
achieve what each of them considers the proper balance between
the
542
needs of lenders and borrowers. All States permit judicial
foreclosure, conducted under direct judicial oversight; about half
of the States also permit foreclosure by exercising a private power
of sale provided in the mortgage documents. See Zinman, Houle,
& Weiss, Fraudulent Transfers According to Alden, Gross and
Borowitz: A Tale of Two Circuits, 39 Bus. Law. 977, 1004-1005
(1984). Foreclosure laws typically require notice to the defaulting
borrower, a substantial lead time before the commencement of
foreclosure proceedings, publication of a notice of sale, and
strict adherence to prescribed bidding rules and auction
procedures. Many States require that the auction be conducted by a
government official, and some forbid the property to be sold for
less than a specified fraction of a mandatory presale
fair-market-value appraisal. See id., at 1002, 1004-1005; Osborne,
supra, at 683, 733-735; G. Osborne, G. Nelson, & D. Whitman,
Real Estate Finance Law 9, 446-447, 475-477 (1979). When these
procedures have been followed, however, it is "black letter" law
that mere inadequacy of the foreclosure sale price is no basis for
setting the sale aside, though it may be set aside (under state
foreclosure law, rather than fraudulent transfer law) if the price
is so low as to "shock the conscience or raise a presumption of
fraud or unfairness." Osborne, Nelson, & Whitman, supra, at
469; see also Gelfert v. National City Bank of N. Y.,
313 U. S. 221, 232
(1941); Ballentyne v. Smith,
205 U. S. 285, 290
(1907).
Fraudulent transfer law and foreclosure law enjoyed over 400
years of peaceful coexistence in Anglo-American jurisprudence until
the Fifth Circuit's unprecedented 1980 decision in Durrett. To our
knowledge no prior decision had ever applied the "grossly
inadequate price" badge of fraud under fraudulent transfer law to
set aside a foreclosure sale.6 To say that the "reasonably
equivalent value" language in
6 The only case cited by Durrett in support of its extension of
fraudulent transfer doctrine, Schafer v. Hammond,
456 F.2d
15 (CAlO 1972), involved a direct sale, not a foreclosure.
543
the fraudulent transfer provision of the Bankruptcy Code
requires a foreclosure sale to yield a certain minimum price beyond
what state foreclosure law requires, is to say, in essence, that
the Code has adopted Durrett or Bundles. Surely Congress has the
power pursuant to its constitutional grant of authority over
bankruptcy, U. S. Const., Art. I, § 8, cl. 4, to disrupt the
ancient harmony that foreclosure law and fraudulent conveyance law,
those two pillars of debtorcreditor jurisprudence, have heretofore
enjoyed. But absent clearer textual guidance than the phrase
"reasonably equivalent value"-a phrase entirely compatible with
preexisting practice-we will not presume such a radical departure.
See United Sav. Assn. of Tex. v. Timbers of Inwood Forest
Associates, Ltd.,
484
U. S. 365, 380 (1988); Midlantic Nat. Bank v. New Jersey Dept.
of Environmental Protection,
474 U. S. 494, 501
(1986); cf. United States v. Texas,
507 U. S. 529, 534 (1993)
(statutes that invade common law must be read with presumption
favoring retention of longestablished principles absent evident
statutory purpose to the contrary).7
7We are unpersuaded by petitioner's argument that the 1984
amendments to the Bankruptcy Code codified the Durrett rule. Those
amendments expanded the definition of "transfer" to include
"foreclosure of the debtor's equity of redemption," 11 U. S. C. §
101(54) (1988 ed., Supp. IV), and added the words "voluntarily or
involuntarily" as modifiers of the term "transfer" in § 548(a). The
first of these provisions establishes that foreclosure sales fall
within the general definition of "transfers" that may be avoided
under several statutory provisions, including (but not limited to)
§ 548. See § 522(h) (transfers of exempt property), § 544
(transfers voidable under state law), § 547 (preferential
transfers), § 549 (postpetition transfers). The second of them
establishes that a transfer may be avoided as fraudulent even if it
was against the debtor's will. See In re Madrid,
725 F.2d
1197, 1199
(CA9 1984) (pre amendment decision holding
that a foreclosure sale is not a "transfer" under § 548). Neither
of these consequences has any bearing upon the meaning of
"reasonably equivalent value" in the context of a foreclosure
sale.
Nor does our reading render these amendments "superfluous," as
the dissent contends, post, at 555. Prior to 1984, it was at least
open to ques-
544
Federal statutes impinging upon important state interests
"cannot ... be construed without regard to the implications of our
dual system of government .... [W]hen the Federal Government takes
over ... local radiations in the vast network of our national
economic enterprise and thereby radically readjusts the balance of
state and national authority, those charged with the duty of
legislating [must be] reasonably explicit." Frankfurter, Some
Reflections on the Reading of Statutes, 47 Colum. L. Rev. 527,
539-540 (1947), quoted in Kelly v. Robinson,
479 U. S. 36, 49-50, n. 11
(1986). It is beyond question that an essential state interest is
at issue here: We have said that "the general welfare of society is
involved in the security of the titles to real estate" and the
power to ensure that security "inheres in the very nature of
[state] government." American Land Co. v. Zeiss,
219 U. S. 47,60 (1911).
Nor is there any doubt that the interpretation urged by petitioner
would have a profound effect upon that interest: The title of every
piece of realty purchased at foreclosure would be under a federally
created cloud. (Already, title insurers have reacted to the Durrett
rule by including specially crafted exceptions from coverage in
many policies issued for properties purchased at foreclosure sales.
See, e.
g., L. Cherkis & L. King, Collier Real Estate
Transactions and the Bankruptcy Code, pp. 5-18 to 5-19 (1992).) To
displace traditional state regulation in such a manner, the federal
statutory purpose must be "clear and manifest," English v. General
Elec. Co.,
496 U. S.
72, 79 (1990). Cf. Gregory v. Ashcroft, 501 U. S., at 460-461.8
Otherwise, the Bankruptcy
tion whether § 548 could be used to invalidate even a collusive
foreclosure sale, see Madrid, supra, at 1204 (Farris, J.,
concurring). It is no superfluity for Congress to clarify what had
been at best unclear, which is what it did here by making the
provision apply to involuntary as well as voluntary transfers and
by including foreclosures within the definition of "transfer." See
infra, at 545-546.
8 The dissent criticizes our partial reliance on Gregory because
the States' authority to "defin[e] and adjus[t] the relations
between debtors and creditors ... [cannot] fairly be called
essential to their indepen-
545
Code will be construed to adopt, rather than to displace,
pre-existing state law. See Kelly, supra, at 49; Butner v. United
States,
440 U. S.
48, 54-55 (1979); Vanston Bondholders Protective Comm. v.
Green,
329 U. S.
156, 171 (1946) (Frankfurter, J., concurring).
For the reasons described, we decline to read the phrase
"reasonably equivalent value" in § 548(a)(2) to mean, in its
application to mortgage foreclosure sales, either "fair market
value" or "fair foreclosure price" (whether calculated as a
percentage of fair market value or otherwise). We deem, as the law
has always deemed, that a fair and proper price, or a "reasonably
equivalent value," for foreclosed property, is the price in fact
received at the foreclosure sale, so long as all the requirements
of the State's foreclosure law have been complied with.
This conclusion does not render § 548(a)(2) superfluous, since
the "reasonably equivalent value" criterion will continue to have
independent meaning (ordinarily a meaning similar to fair market
value) outside the foreclosure context. Indeed, § 548(a)(2) will
even continue to be an exclusive means of invalidating some
foreclosure sales. Although collusive foreclosure sales are likely
subject to attack under § 548(a)(1), which authorizes the trustee
to avoid transfers "made ... with actual intent to hinder, delay,
or defraud" creditors, that provision may not reach foreclosure
sales that, while not intentionally fraudulent, nevertheless fail
to comply with all governing state laws. Cf. 4 L. King, Collier on
Bankruptcy' 548.02, p. 548-35 (15th ed. 1993) (contrasting
subsections (a)(l) and (a)(2)(A) of § 548). Any irregularity in the
conduct of the sale that would permit judicial invalidation of the
sale under applicable state law deprives the sale
dence." Post, at 565, n. 17 (internal quotation marks omitted).
This ignores the fact that it is not state authority over
debtor-creditor law in general that is at stake in this case, but
the essential sovereign interest in the security and stability of
title to land. See American Land Co. v. Zeiss,
219 U. S. 47, 60
(1911).
546
price of its conclusive force under § 548(a)(2)(A), and the
transfer may be avoided if the price received was not reasonably
equivalent to the property's actual value at the time of the sale
(which we think would be the price that would have been received if
the foreclosure sale had proceeded according to law).
III
A few words may be added in general response to the dissent. We
have no quarrel with the dissent's assertion that where the
"meaning of the Bankruptcy Code's text is itself clear," post, at
566, its operation is unimpeded by contrary state law or prior
practice. Nor do we contend that Congress must override historical
state practice "expressly or not at all." Post, at 565. The
Bankruptcy Code can of course override by implication when the
implication is unambiguous. But where the intent to override is
doubtful, our federal system demands deference to long-established
traditions of state regulation.
The dissent's insistence that here no doubt exists-that our
reading of the statute is "in derogation of the straightforward
language used by Congress," post, at 549 (emphasis added)-does not
withstand scrutiny. The problem is not that we disagree with the
dissent's proffered "plain meaning" of § 548(a)(2)(A) ("[T]he
bankruptcy court must compare the price received by the insolvent
debtor and the worth of the item when sold and set aside the
transfer if the former was substantially ('[un]reasonabl[yJ') 'less
than' the latter," post, at 552)-which indeed echoes our own
framing of the question presented ("whether the amount of debt ...
satisfied at the foreclosure sale ... is 'reasonably equivalent' to
the worth of the real estate conveyed," supra, at 536). There is no
doubt that this provision directs an inquiry into the relationship
of the value received by the debtor to the worth of the property
transferred. The problem, however, as any "ordinary speaker of
English would have no difficulty grasping," post, at 552, is that
this highly generalized re-
547
formulation of the "plain meaning" of "reasonably equivalent
value" continues to leave unanswered the one question central to
this case, wherein the ambiguity lies: What is a foreclosed
property worth? Obviously, until that is determined, we cannot know
whether the value received in exchange for foreclosed property is
"reasonably equivalent." We have considered three (not, as the
dissent insists, only two, see post, at 549) possible answers to
this question-fair market value, supra, at 536-540, reasonable
forced-sale price, supra, at 540, and the foreclosure-sale price
itself-and have settled on the last. We would have expected the
dissent to opt for one of the other two, or perhaps even to concoct
a fourth; but one searches JUSTICE SOUTER'S opinion in vain for any
alternative response to the question of the transferred property's
worth. Instead, the dissent simply reiterates the "single meaning"
of "reasonably equivalent value" (with which we entirely agree):
"[A] court should discern the 'value' of the property transferred
and determine whether the price paid was, under the circumstances,
'less than reasonabl[e].'" Post, at 559. Well and good. But what is
the "value"? The dissent has no response, evidently thinking that,
in order to establish that the law is clear, it suffices to show
that "the eminent sense of the natural reading," post, at 565,
provides an unanswered question.
Instead of answering the question, the dissent gives us hope
that someone else will answer it, exhorting us "to believe that
[bankruptcy courts], familiar with these cases (and with local
conditions) as we are not, will give ["reasonably equivalent
value"] sensible content in evaluating particular transfers on
foreclosure." Post, at 560. While we share the dissent's confidence
in the capabilities of the United States Bankruptcy Courts, it is
the proper function of this Court to give "sensible content" to the
provisions of the United States Code. It is surely the case that
bankruptcy "courts regularly make ... determinations about the
'reasonably equivalent value' of assets transferred through
other
548
means than foreclosure sales." Post, at 560. But in the vast
majority of those cases, they can refer to the traditional
common-law notion of fair market value as the benchmark. As we have
demonstrated, this generally useful concept simply has no
application in the foreclosure-sale context, supra, at 536-540.
Although the dissent's conception of what constitutes a
property's "value" is unclear, it does seem to take account of the
fact that the property is subject to forced sale. The dissent
refers, for example, to a reasonable price "under the
circumstances," post, at 559, and to the "worth of the item when
sold," post, at 552 (emphasis added). But just as we are never told
how the broader question of a property's "worth" is to be answered,
neither are we informed how the lesser included inquiry into the
impact of forced sale is to be conducted. Once again, we are called
upon to have faith that bankruptcy courts will be able to determine
whether a property's foreclosure-sale price falls unreasonably
short of its "optimal value," post, at 559, whatever that may be.
This, the dissent tells us, is the statute's plain meaning.
We take issue with the dissent's characterization of our
interpretation as carving out an "exception" for foreclosure sales,
post, at 549, or as giving "two different and inconsistent
meanings," post, at 557, to "reasonably equivalent value." As we
have emphasized, the inquiry under § 548(a)(2)(A)whether the debtor
has received value that is substantially comparable to the worth of
the transferred property-is the same for all transfers. But as we
have also explained, the fact that a piece of property is legally
subject to forced sale, like any other fact bearing upon the
property's use or alienability, necessarily affects its worth.
Unlike most other legal restrictions, however, foreclosure has the
effect of completely redefining the market in which the property is
offered for sale; normal free-market rules of exchange are replaced
by the far more restrictive rules governing forced sales. Given
this altered reality, and the concomitant inutil-
549
ity of the normal tool for determining what property is worth
(fair market value), the only legitimate evidence of the property's
value at the time it is sold is the foreclosure-sale price
itself.
***
For the foregoing reasons, the judgment of the Court of Appeals
for the Ninth Circuit is
Affirmed.
JUSTICE SOUTER, with whom JUSTICE BLACKMUN, JusTICE STEVENS, and
JUSTICE GINSBURG join, dissenting.
The Court today holds that by the terms of the Bankruptcy Code
Congress intended a peppercorn paid at a noncollusive and
procedurally regular foreclosure sale to be treated as the
"reasonabl[e] equivalent" of the value of a California beachfront
estate. Because the Court's reasoning fails both to overcome the
implausibility of that proposition and to justify engrafting a
foreclosure-sale exception onto 11 U. S. C. § 548(a)(2)(A), in
derogation of the straightforward language used by Congress, I
respectfully dissent.
I A
The majority presents our task of gIVIng meaning to §
548(a)(2)(A) in this case as essentially entailing a choice between
two provisions that Congress might have enacted, but did not. One
would allow a bankruptcy trustee to avoid a recent foreclosure-sale
transfer from an insolvent debtor whenever anything less than fair
market value was obtained, while the second would limit the
avoidance power to cases where the foreclosure sale was collusive
or had failed to comply with state-prescribed procedures. The Court
then argues that, given the unexceptionable proposition that forced
sales rarely yield as high a price as sales held under ideal,
"market" conditions, Congress's "omission" from
550
§ 548(a)(2)(A) of the phrase "fair market value" means that the
latter, narrowly procedural reading of § 548(a)(2)(A) is the
preferable one.
If those in fact were the interpretive alternatives, the
majority's choice might be a defensible one.1 The first, equating
"reasonably equivalent value" at a foreclosure sale with "fair
market value" has little to recommend it. Forced-sale prices may
not be (as the majority calls them) the "very
antithesis" of
market value, see ante, at 537, but they fail to bring in what
voluntary sales realize, and rejecting such a
1 I note, however, two preliminary embarrassments: first, the
gloss on § 548(a)(2)(A) the Court embraces is less than entirely
hypothetical. In the course of amending the Bankruptcy Code in
1984, see infra, at 554, Congress considered, but did not enact, an
amendment that said precisely what the majority now says the
current provision means, i. e., that the avoidance power is
confined to foreclosures involving collusion or procedural
irregularity. See S. 445, 98th Cong., 1st Sess., § 360 (1983). Even
if one is careful not to attach too much significance to such a
legislative nonoccurrence, it surely cautions against undue
reliance on a different, entirely speculative congressional
"omission." See ante, at 537 (the statute "seemingly goes out of
its way to avoid" using "fair market value"); but cf. ante, at 545
(reasonably equivalent value will "continue" to have a meaning
"similar to fair market value" outside the foreclosure-sale
context).
In this case, such caution would be rewarded. While the
assertedly "standard," ante, at 537, phrase "fair market value"
appears in more than 150 distinct provisions of the Tax Code, it
figures in only two Bankruptcy Code provisions, one of which is
entitled, suggestively, "Special tax provisions." See 11 U. S. C. §
346. The term of choice in the bankruptcy setting seems to be
"value," unadorned and undefined, which appears in more than 30
sections of the Bankruptcy Code, but which is, with respect to many
of them, read to mean "fair market value." See also § 549(c)
("present fair equivalent value"); § 506(a) ("value [is to] be
determined in light of the purpose of the valuation and of the
proposed disposition or use of such property"); S. Rep. No. 95-989,
p. 54 (1978) ("[M]atters [of valuation under § 361] are left to
case-by-case interpretation and development .... Value [does not]
mean, in every case, forced sale liquidation value or full going
concern value. There is wide latitude between those two extremes
... "). To the extent, therefore, that this negative implication
supplies ground to "suspect," see ante, at 537, that Congress could
not have meant what the statute says, such suspicion is
misplaced.
551
reading of the statute is as easy as statutory interpretation is
likely to get. On the majority's view, laying waste to this straw
man necessitates accepting as adequate value whatever results from
noncollusive adherence to state foreclosure requirements. Because
properties are "simply worth less," ante, at 539, on foreclosure
sale, the Court posits, they must have been "worth" whatever price
was paid. That, however, is neither a plausible interpretation of
the statute, nor its only remaining alternative reading.2
2 The majority's statutory argument depends similarly heavily on
the success of its effort to relegate "fair market value" to
complete pariah status. But it is no short leap from the (entirely
correct) observation that a property's fair market value will not
be dispositive of whether "less than a reasonably equivalent value"
was obtained on foreclosure to the assertion that market value has
"no applicability," ante, at 537, or is not "legitimate evidence,"
ante, at 549 (emphasis added), of whether the statutory standard
was met. As is explored more fully infra, the assessed value of a
parcel of real estate at the time of foreclosure sale is not to be
ignored. On the contrary, that figure plainly is relevant to the
Bankruptcy Code determination, both because it provides a proper
measure of the rights received by the transferee and because it is
indicative of the extent of the debtor's equity in the property, an
asset which, but for the pre bankruptcy transfer under review,
would have been available to the bankruptcy estate, see infra, at
562-565.
It is also somewhat misleading, similarly, to suggest that "[n]o
one would pay as much," ante, at 539, for a foreclosed property as
he would for the same real estate purchased under leisurely, market
conditions. Buyers no doubt hope for bargains at foreclosure sales,
but an investor with a million dollars cash in his pocket might be
ready to pay "as much" for a desired parcel of property on forced
sale, at least if a rival, equally determined millionaire were to
appear at the same auction. The principal reason such sales yield
low prices is not so much that the properties become momentarily
"worth less," ibid. (on the contrary, foreclosure-sale purchasers
receive a bundle of rights essentially similar to what they get
when they buy on the market) or that foreclosing mortgagees are
under the compulsion of state law to make no more than the most
desultory efforts to encourage higher bidding, but rather that such
free-spending millionaires are in short supply, and those who do
exist are unlikely to read the fine print which fills the "legal
notice" columns of their morning newspaper. Nor, similarly, is
market value justly known as the "antithesis" of
552
The question before the Court is whether the price received at a
foreclosure sale after compliance with state procedural rules in a
noncollusive sale must be treated conclusively as the "reasonably
equivalent value" of the mortaged property and in answering that
question, the words and meaning of § 548(a)(2)(A) are plain. See
Patterson v. Shumate,
504 U. S. 753, 760 (1992)
(party seeking to defeat plain meaning of Bankruptcy Code text
bears an "exceptionally heavy burden") (internal quotation marks
omitted); Perrin v. United States,
444 U. S. 37, 42 (1979)
(statutory words should be given their ordinary meaning). A trustee
is authorized to avoid certain recent pre bankruptcy transfers,
including those on foreclosure sales, that a bankruptcy court
determines were not made in exchange for "a reasonably equivalent
value." Although this formulation makes no pretense to mathematical
precision, an ordinary speaker of English would have no difficulty
grasping its basic thrust: the bankruptcy court must compare the
price received by the insolvent debtor and the worth of the item
when sold and set aside the transfer if the former was
substantially ("[un]reasonabl[y]") "less than" the latter.3 Nor
would any ordinary English speaker, concerned to determine whether
a foreclosure sale was collusive or procedurally irregular (an
enquiry going exclusively to the process by which a transaction was
consummated), direct an adjudicator, as the Court now holds
Congress did, to ascertain whether the sale had realized "less than
a reasonably equivalent value" (an enquiry described in
quintessentially substantive terms).4
foreclosure-sale price, for the important (if intuitive) reason
that properties with higher market values can be expected to sell
for more on foreclosure.
3 Indeed, it is striking that this is what the Court says the
statute (probably) does mean, with respect to almost every transfer
other than a sale of property upon foreclosure. See ante, at
545.
4 The Court protests, ante, at 546, that its formulation, see
ante, at 536, deviates only subtly from the reading advanced here
and purports not to disagree that the statute compels an enquiry
"into the relationship of the
553
Closer familiarity with the text, structure, and history of the
disputed provision (and relevant amendments) confirms the soundness
of the plain reading. Before 1984, the question whether foreclosure
sales fell within bankruptcy courts' power to set aside transfers
for "too little in return" was, potentially, a difficult one. Then,
it might plausibly have been contended that § 548 was most
concerned with "fraudulent" conduct by debtors on the brink of
bankruptcy, misbehavior unlikely to be afoot when an insolvent
debtor's property is sold, against his wishes, at foreclosure.5
Indeed, it could further have been argued, again consonantly with
the text of the earlier version of the Bankruptcy Code, that
Congress had not understood foreclosure to involve a "transfer"
within the ambit of § 548, see, e.
g., Abramson v. Lakewood
Bank & Trust Co.,
647 F.2d
547, 549 (CA5 1981) (Clark, J.,
value received and the worth of the property transferred," ante,
at 546. Reassuring as such carefully chosen words may sound, they
cannot obscure the fact that the "comparison" the majority
envisions is an empty ritual. See n. 10, infra.
5 The Court notes correctly that fraudulent conveyance laws were
directed first against insolvent debtors' passing assets to friends
or relatives, in order to keep them beyond their creditors' reach
(the proverbial "Elizabethan deadbeat who sells his sheep to his
brother for a pittance," see Baird & Jackson, Fraudulent
Conveyance Law and Its Proper Domain, 38 Vand. L. Rev. 829, 852
(1985)), and then later against conduct said to carry the "badges"
of such misconduct, but bankruptcy law had, well before 1984,
turned decisively away from the notion that the debtor's state of
mind, and not the objective effects on creditors, should determine
the scope of the avoidance power. Thus, the 1938 Chandler Act,
Bankruptcy Revision, provided that a transfer could be set aside
without proving any intent to "hinder, delay, or defraud," provided
that the insolvent debtor obtained less than "fair consideration"
in return, see 11 U. S. C. § 107(d)(2) (1976), and the 1978
Bankruptcy Code eliminated scrutiny of the transacting parties'
"good faith." Cf. 11 U. S. C. § 107(d)(1)(e) (1976). At the time
when bankruptcy law was more narrowly concerned with debtors'
turpitude, moreover, the available "remedies" were strikingly
different, as well. See, e.
g., 21 J ac. I., ch. 19, § 6
(1623), 4 Statutes of the Realm 1228 (insolvent debtor who
fraudulently conceals assets is subject to have his ear nailed to
pillory and cut off).
554
dissenting) (Bankruptcy Act case), cert. denied, 454 U. S. 1164
(1982), on the theory that the "transfer" from mortgagor to
mortgagee occurs, once and for all, when the security interest is
first created. See generally In re Madrid,
725
F.2d 1197 (CA9), cert. denied, 469 U. S. 833 (1984).
In 1984, however, Congress pulled the rug out from under these
previously serious arguments, by amending the Code in two relevant
respects. See Bankruptcy Amendments and Federal Judgeship Act of
1984, §§ 401(1), 463(a), 98 Stat. 366, 378. One amendment provided
expressly that "involuntar[yJ" transfers are no less within the
trustee's § 548 avoidance powers than "voluntar[yJ" ones, and
another provided that the "foreclosure of the debtor's equity of
redemption" itself is a "transfer" for purposes of bankruptcy law.
See 11 U. S. C. § 101(54) (1988 ed., Supp. IV).6 Thus, whether or
not one believes (as the majority seemingly does not) that
foreclosure sales rightfully belong within the historic domain of
"fraudulent conveyance" law, that is exactly where Congress has now
put them, cf. In re Ehring,
900 F.2d
184, 187 (CA9 1990), and our duty is to give effect to these
new amendments, along with every other clause of the Bankruptcy
Code. See, e. g., United States v. Nordic Village, Inc.,
503 U. S. 30, 36 (1992);
United Sav. Assn. of Tex. v. Timbers of Inwood Forest Associates,
Ltd.,
484 U. S.
365, 374-375 (1988); see also Dewsnup v. Timm,
502 U. S. 410, 426 (1992)
(SCALIA, J., dissenting). The Court's attempt to escape the
6 As noted at n. 1,
supra, an earlier version of the
Senate bill contained a provision that would have added to § 548
the conclusive presumption the Court implies here. See S. 445, 98th
Cong., 1st Sess., § 360 (1983) ("A secured party or third party
purchaser who obtains title to an interest of the debtor in
property pursuant to a good faith prepetition foreclosure, power of
sale, or other proceeding or provision of nonbankruptcy law
permitting or providing for the realization of security upon
default of the borrower under a mortgage, deed of trust, or other
security agreement takes for reasonably equivalent value within the
meaning of this section"). The provision was deleted from the
legislation enacted by Congress.
555
plain effect of § 548(a)(2)(A) opens it to some equally plain
objections.
The first and most obvious of these objections is the very
enigma of the Court's reading. If a property's "value" is
conclusively presumed to be whatever it sold for, the "less than
reasonabl[e] equivalen[ce]" question will never be worth asking,
and the bankruptcy avoidance power will apparently be a dead letter
in reviewing real estate foreclosures. Cf. 11 U. s. C. § 361(3)
("indubitable equivalent").7 The Court answers that the section is
not totally moribund: it still furnishes a way to attack collusive
or procedurally deficient real property foreclosures, and it enjoys
a vital role in authorizing challenges to other transfers than
those occurring on real estate foreclosure. The first answer,
however, just runs up against a new objection. If indeed the
statute fails to reach noncollusive, procedurally correct real
estate foreclosures, then the recent amendments discussed above
were probably superfluous. There is a persuasive case that
collusive or seriously irregular real estate sales were already
subject to avoidance in bankruptcy, see, e. g., In re Worcester,
811 F.2d
1224, 1228, 1232 (CA9 1987) (interpreting § 541(a)), and
neither the Court nor the respondents and their amici identify any
specific case in which a court pronounced itself powerless to avoid
a collusive foreclosure sale. But cf. Madrid, supra, at 1204
(Farris, J., concurring). It would seem peculiar,
7 Evidently, many States take a less Panglossian view than does
the majority about the prices paid at sales conducted in accordance
with their prescribed procedures. If foreclosure-sale prices truly
represented what properties are "worth," ante, at 539, or their
"fair and proper price," ante, at 545, it would stand to reason
that deficiency judgments would be awarded simply by calculating
the difference between the debt owed and the "value," as
established by the sale. Instead, in those jurisdictions permitting
creditors to seek deficiency judgments it is quite common to
require them to show that the foreclosure price roughly
approximated the property's (appraised) value. See, e.
g.,
Tex. Prop. Code Ann. §§ 51.00351.005 (Supp. 1992); see generally
Gelfert v. National City Bank of N. Y.,
313 U. S. 221 (1941); cf.
id., at 233 ("[T]he price which property commands at a
forced sale may be hardly even a rough measure of its value").
556
then, that for no sound reason, Congress would have tinkered
with these closely watched sections of the Bankruptcy Code, for the
sole purpose of endowing bankruptcy courts with authority that had
not been found wanting in the first place.8
The Court's second answer to the objection that it renders the
statute a dead letter is to remind us that the statute applies to
all sorts of transfers, not just to real estate foreclosures, and
as to all the others, the provision enjoys great vitality, calling
for true comparison between value received for the property and its
"reasonably equivalent value." (Indeed, the Court has no trouble
acknowledging that something "similar to" fair market value may
supply the benchmark of reasonable equivalence when such a sale is
not initiated by a mortgagee, ante, at 545.) This answer, however,
is less tenable than the first. A common rule of con-
8 That is not the only aspect of the majority's approach that is
hard to square with the amended text. By redefining "transfer" in §
101, Congress authorized the trustee to avoid any "foreclosure of
the equity of redemption" for "less than a reasonably equivalent
value." In light of the fact, see, e.
g., Lifton, Real
Estate in Trouble: Lender's Remedies Need an Overhaul, 31 Bus. Law
1927, 1937 (1976), that most foreclosure properties are sold (at
noncollusive and procedurally unassailable sales, we may presume)
for the precise amount of the outstanding indebtedness, when some
(but by no means all) are worth more, see generally Wechsler,
Through the Looking Glass: Foreclosure by Sale as De Facto Strict
ForeclosureAn Empirical Study of Mortgage Foreclosure and
Subsequent Resale, 70 Cornell L. Rev. 850 (1985), it seems
particularly curious that Congress would amend a statute to
recognize that a debtor "transfers" an "interest in property," when
the equity of redemption is foreclosed, fully intending that the
"reasonably equivalent value" of that interest would, in the
majority of cases, be presumed conclusively to be zero.
To the extent that the Court believes the amended § 548(a)(2)(A)
to be addressed to "collusive" sales, meanwhile, a surprisingly
indirect means was chosen. Cf. 11 U. S. C. § 363(n) (authorizing
trustee avoidance of postpetition sale, or, in the alternative,
recovery of the difference between the "value" of the property and
the "sale price," when the "sale price was controlled by an
agreement"). Cf. ante, at 537 (citing Chicago v. Environmental
Defense Fund, ante, at 338).
557
struction calls for a single definition of a common term
occurring in several places within a statute, see Bray v.
Alexandria Women's Health Clinic,
506 U. S. 263, 283
(1993); Dewsnup v. Timm, 502 U. S., at 422 (SCALIA, J., dissenting)
(" '[N]ormal rule[s] of statutory construction'" require that
"identical words [used] in the same section of the same enactment"
must be given the same effect) (emphasis in original), and the case
for different definitions within a single text is difficult to
make, cf. Bray, supra, at 292 (SouTER, J., concurring in part). But
to give a single term two different and inconsistent meanings (one
procedural, one substantive) for a single occurrence is an offense
so unlikely that no common prohibition has ever been thought
necessary to guard against it.9 Cf. Owen v. Owen,
500 U. S. 305, 313 (1991)
(declining to "create a distinction [between state and federal
exemptions] that the words of the statute do not contain"); Union
Bank v. Wolas,
502 U.
S. 151, 162 (1991) (the "statutory text ... makes no
distinction between short-term debt and long-term debt"). Unless
whimsy is attributed to Congress, the term in question cannot be
exclusively procedural in one class of cases and entirely
substantive in all others. To be sure, there are real differences
between sales on mortgage foreclosures and other transfers, as
Congress no doubt understood, but these differences may be
addressed simply and consistently with the statute's plain
meaning.10
9 Indeed, the Court candidly acknowledges that the proliferation
of meanings may not stop at two: not only does "reasonably
equivalent value" mean one thing for foreclosure sales and another
for other transfers, but tax sales and other transactions may
require still other, unspecified "benchmark[s]." See ante, at 537,
and n. 3.
10 The Court's somewhat mischievous efforts to dress its
narrowly procedural gloss in respectable, substantive garb, see
ante, at 537-538,546-547, make little sense. The majority suggests
that even if the statute must be read to require a comparison, the
one it compels dooms the trustee always to come up short. A
property's "value," the Court would have us believe, should be
determined with reference to a State's rules governing creditors'
enforcement of their rights, in the same fashion that it might
encom-
558
The "neologism," ante, at 537, "reasonably equivalent value"
(read in light of the amendments confirming that foreclosures are
to be judged under the same standard as are
pass a zoning rule governing (as a matter of state law) a
neighboring landowner's entitlement to build a gas station. But the
analogy proposed ignores the patent difference between these two
aspects of the "regulatory background," ante, at 539: while the
zoning ordinance would reduce the value of the property "to the
world," foreclosure rules affect not the price any purchaser "would
pay," ibid., but rather the means by which the mortgagee is
permitted to extract its entitlement from the entire "value" of the
property.
Such distinctions are a mainstay of bankruptcy law, where it is
commonly said that creditors' "substantive" state-law rights
"survive" in bankruptcy, while their "procedural" or "remedial"
rights under state debtor-creditor law give way, see, e. g., United
Sav. Assn. of Tex. v. Timbers of Inwood Forest Associates, Ltd.,
484 U. S. 365,
370-371 (1988) (refusing to treat "right to immediate foreclosure"
as an "interest in property" under applicable nonbankruptcy law);
Owen v. Owen,
500 U.
S. 305 (1991) (bankruptcy exemption does not incorporate state
law with respect to liens); United States v. Whiting Pools, Inc.,
462 U. S. 198,
206-207 (1983); see also Gelfert v. National City Bank of N. Y.,
313 U. S., at 234 ("[T]he advantages of a forced sale" are not "a
... property right" under the Constitution). And while state
foreclosure rules reflect, inter alia, an understandable judgment
that creditors should not be forced to wait indefinitely as their
defaulting debtors waste the value of loan collateral, bankruptcy
law affords mortgagees distinct and presumably adequate protections
for their interest, see 11 U. S. C. §§ 548(c), 550(d)(1), 362(d);
Wright v. Union Central Life Ins. Co.,
311 U. S. 273, 278-279
(1940), along with the general promise that the debtor's estate
will, effectively, be maximized in the interest of creditors.
The majority professes to be "baffled," ante, at 539, n. 5, by
this commonsense distinction between state zoning laws and state
foreclosure procedures. But a zoning rule is not merely
"price-affecting," ante, at 539: it affects the property's value
(i. e., the price for which any transferee can expect to resell).
State-mandated foreclosure procedures, by contrast, might be called
"price-affecting," in the sense that adherence solely to their
minimal requirements will no doubt keep sale prices low. But state
rules hardly forbid mortgagees to make efforts to encourage more
robust bidding at foreclosure sales; they simply fail to furnish
sellers any reason to do so, see infra.
559
other transfers) has a single meaning in the one provision in
which it figures: a court should discern the "value" of the
property transferred and determine whether the price paid was,
under the circumstances, "less than reasonabl[e]." There is thus no
reason to rebuke the Courts of Appeals for having failed to "come
to grips," ante, at 538, with the implications of the fact that
foreclosure sales cannot be expected to yield fair market value.
The statute has done so for them. As courts considering
nonforeclosure transfers often acknowledge, the qualification
"reasonably equivalent" itself embodies both an awareness that the
assets of insolvent debtors are commonly transferred under
conditions that will yield less than their optimal value and a
judgment that avoidance in bankruptcy (unsettling as it does the
expectations of parties who may have dealt with the debtor in good
faith) should only occur when it is clear that the bankruptcy
estate will be substantially augmented. See, e. g., In re Southmark
Corp., 138 B. R. 820, 829-830 (Bkrtcy. Ct. ND Tex. 1992) (court
must compare "the value of what went out with the value of what
came in," but the equivalence need not be "dollar for dollar")
(citation omitted); In re Countdown of Conn., Inc., 115 B. R. 18,
21 (Bkrtcy. Ct. Conn. 1990) ("[S]ome disparity between the value of
the collateral and the value of debt does not necessarily lead to a
finding of lack of reasonably equivalent value").l1
11 Indeed, it is not clear from its opinion that the Court has
"come to grips," ante, at 538, with the reality that "involuntary"
transfers occur outside the real property setting, that legally
voluntary transfers can be involuntary in fact, and that, where
insolvent debtors on the threshold of bankruptcy are concerned,
transfers for full, "fair market" price are more likely the
exception than the rule. On the Court's reading, for example,
nothing would prevent a debtor who deeded property to a mortgagee
"in lieu of foreclosure" prior to bankruptcy from having the
transaction set aside, under the "ordinar[y]," ante, at 545,
substantive standard.
560
B
I do not share in my colleagues' apparently extreme discomfort
at the prospect of vesting bankruptcy courts with responsibility
for determining whether "reasonably equivalent value" was received
in cases like this one, nor is the suggestion well taken that doing
so is an improper abdication. Those courts regularly make
comparably difficult (and contestable) determinations about the
"reasonably equivalent value" of assets transferred through other
means than foreclosure sales, see, e. g., Covey v. Commercial Nat.
Bank,
960 F.2d
657, 661-662 (CA7 1992) (rejecting creditor's claim that resale
price may be presumed to be "reasonably equivalent value" when that
creditor "seiz[es] an asset and sell[s] it for just enough to cover
its loan (even if it would have been worth substantially more as
part of an ongoing enterprise)"); In re Morris Communications NC,
Inc.,
914 F.2d
458 (CA4 1990) (for "reasonably equivalent value" purposes,
worth of entry in cellular phone license "lottery" should be
discounted to reflect probability of winning); cf. In re Royal
Coach Country, Inc., 125 B. R. 668, 673-674 (Bkrtcy. Ct. MD Fla.
1991) (avoiding exchange of 1984 truck valued at $2,800 for 1981
car valued at $500), and there is every reason to believe that
they, familiar with these cases (and with local conditions) as we
are not, will give the term sensible content in evaluating
particular transfers on foreclosure, cf. United States v. Energy
Resources Co.,
495 U.
S. 545, 549 (1990); NLRB v. Bildisco & Bildisco,
465 U. S. 513, 527
(1984); Rosen v. Barclays Bank of N. Y., 115 B. R. 433 (EDNY
1990).12 As in other § 548(a)(2) cases, a trustee seeking
12 It is only by renewing, see ante, at 548, its extreme claim,
but see n. 2,
supra, that market value is wholly irrelevant
to the analysis of foreclosure-sale transfer (and that bankruptcy
courts are debarred from even "referring" to it) that the Court is
able to support its assertion that evaluations of such transactions
are somehow uniquely beyond their ken.
The majority, as part of its last-ditch effort to salvage some
vitality for the provision, itself would require bankruptcy judges
to speculate as to the
561
avoidance of a foreclosure-sale transfer must persuade the
bankruptcy court that the price obtained on pre bankruptcy transfer
was "unreasonabl[yJ" low, and as in other cases under the
provision, the gravamen of such a claim will be that the challenged
transfer significantly and needlessly diminished the bankruptcy
estate, i. e., that it extinguished a substantial equity interest
of the debtor and that the foreclosing mortgagee failed to take
measures which (consistently with state law, if not required by it)
would have augmented the price realized. 13
price "that would have been received if the foreclosure sale had
proceeded according to [state] law." Ante, at 546; cf. ante, at 540
(expressing skepticism about judicial competence to determine "such
a thing" as a "fair" forced-sale price).
13 In this regard and in its professions of deference to the
processes of local self-government, the Court wrongly elides any
distinction between what state law commands and what the States
permit. While foreclosure sales "under state law" may typically be
sparsely attended and yield low prices, see infra, at 564, these
are perhaps less the result of state law "strictures," ante, at
538, than of what state law fails to supply, incentives for
foreclosing lenders to seek higher prices (by availing themselves
of advertising or brokerage services, for example). Thus, in
judging the reasonableness of an apparently low price, it will
surely make sense to take into account (as the Court holds a
bankruptcy court is forbidden to) whether a mortgagee who promptly
resold the property at a large profit answers, "I did the most that
could be expected of me" or "I did the least I was allowed to."
I also do not join my colleagues in their special scorn for the
"70% rule" associated with Durrett v. Washington Nat. Ins. Co.,
621 F.2d
201 (CA5 1980), which they decry, ante, at 540, as less an
exercise in statutory interpretation than one of "policy
determinatio[n]." Such, of course, it may be, in the limited sense
that the statute's text no more mentions the 70% figure than it
singles out procedurally regular foreclosure sales for the special
treatment the Court accords them. But the Durrett "rule," as its
expositor has long made clear, claims only to be a description of
what foreclosure prices have, in practice, been found
"reasonabl[e]," and as such, it is consistent (as the majority's
"policy determination" is not), with the textual directive that one
value be compared to another, the transfer being set aside when one
is unreasonably "less than" the other. To the extent, moreover,
that Durrett is said to have announced a "rule," it is better
562
Whether that enquiry is described as a search for a benchmark"
'fair' forced-sale price," ante, at 540, or for the price that was
reasonable under the circumstances, cf. ante, at 538, n. 4, is
ultimately, as the Court itself seems to acknowledge, see ante, at
540, of no greater moment than whether the rule the Court discerns
in the provision is styled an "exception," an "irrebuttable
presumption," or a rule of per se validity. The majority seems to
invoke these largely synonymous terms in service of its thesis that
the provision's text is "ambiguous" (and therefore ripe for
application of policybased construction rules), but the question
presented here, whether the term "less than reasonably equivalent
value" may be read to forestall all enquiry beyond whether statelaw
foreclosure procedures were adhered to, admits only two answers,
and only one of these, in the negative, is within the "apparent
authority,"
ibid., conferred on courts by the text of the
Bankruptcy Code.14
C
What plain meaning requires and courts can provide, indeed, the
policies underlying a national bankruptcy law fully
understood as recognizing a "safe harbor" or affirmative defense
for bidding mortgagees or other transferees who paid 70% or more of
a property's appraised value at the time of sale.
14 The Court's criticism, ante, at 546-548, deftly conflates two
distinct questions: is the price on procedurally correct and
noncollusive sale presumed irrebuttably to be reasonably equivalent
value (the question before us) and, if not, what are the criteria
(a question not raised here but explored by courts that have
rejected the irrebuttable presumption)? What is "plain" is the
answer to the first question, thanks to the plain language, whose
meaning is confirmed by policy and statutory history. The answer to
the second may not be plain in the sense that the criteria might be
self-evident, see n. 13,
supra, but want of self-evidence
hardly justifies retreat from the obvious answer to the first
question. Courts routinely derive criteria, unexpressed in a
statute, to implement standards that are statutorily expressed, and
in a proper case this Court could (but for the majority's decision)
weigh the relative merits of the subtly different approaches taken
by courts that have rejected the irrebuttable presumption.
563
support. This case is a far cry from the rare one where the
effect of implementing the ordinary meaning of the statutory text
would be "patent absurdity," see INS v. GardozaFonseca,
480 U. S. 421, 452 (1987)
(SCALIA, J., concurring in judgment), or "demonstrably at odds with
the intentions of its drafters," United States v. Ron Pair
Enterprises, Inc.,
489 U. S. 235, 244 (1989)
(internal quotation marks omitted).15 Permitting avoidance of
procedurally regular foreclosure sales for low prices (and thereby
returning a valuable asset to the bankruptcy estate) is plainly
consistent with those policies of obtaining a maximum and equitable
distribution for creditors and ensuring a "fresh start" for
individual debtors, which the Court has often said are at the core
of federal bankruptcy law. See Stellwagen v. Glum,
245 U. S. 605, 617
(1918); Williams v. United States Fidelity & Guaranty Go.,
236 U. S. 549,
554-555 (1915). They are not, of course, any less the policies of
federal bankruptcy law simply because state courts will not, for a
mortgagor's benefit, set aside a foreclosure sale for "price
inadequacy" alone.16 The unwill-
15 Tellingly, while the Court's opinion celebrates fraudulent
conveyance law and state foreclosure law as the "twin pillars" of
creditor-debtor regulation, it evinces no special appreciation of
the fact that this case arises under the Bankruptcy Code, which, in
maintaining the national system of credit and commerce, embodies
policies distinct from those of state debtor-creditor law, see
generally Stellwagen v. Clum,
245 U. S. 605, 617
(1918), and which accordingly endows trustees with avoidance power
beyond what state law provides, see Board of Trade of Chicago v.
Johnson,
264 U. S.
1, 10 (1924); Stellwagen, supra, at 617; 11 U. S. C. §§ 541(a),
544(a).
16 Although the majority accurately states this "'black letter'"
law, it also acknowledges that courts will avoid a foreclosure sale
for a price that "shock[s] the conscience," see ante, at 542
(internal quotation marks omitted), a standard that has been
invoked to justify setting aside sales yielding as much as 87% of
appraised value. See generally Washburn, The Judicial and
Legislative Response to Price Inadequacy in Mortgage Foreclosure
Sales, 53 S. Cal. L. Rev. 843, 862-870 (1980). Moreover, while
price inadequacy "alone" may not be enough to set aside a sale,
such inadequacy will often induce a court to undertake a sort of
"strict scrutiny" of a sale's compliance with state procedures.
See, e.
g., id., at 861.
564
ingness of the state courts to upset a foreclosure sale for that
reason does not address the question of what "reasonably equivalent
value" means in bankruptcy law, any more than the refusal of those
same courts to set aside a contract for "mere inadequacy of
consideration," see Restatement (Second) of Contracts § 79 (1981),
would define the scope of the trustee's power to reject executory
contracts. See 11 U. S. C. § 365 (1988 ed. and Supp. IV). On the
contrary, a central premise of the bankruptcy avoidance powers is
that what state law plainly allows as acceptable or "fair," as
between a debtor and a particular creditor, may be set aside
because of its impact on other creditors or on the debtor's chances
for a fresh start.
When the prospect of such avoidance is absent, indeed, the
economic interests of a foreclosing mortgagee often stand in stark
opposition to those of the debtor himself and of his other
creditors. At a typical foreclosure sale, a mortgagee has no
incentive to bid any more than the amount of the indebtedness,
since any "surplus" would be turned over to the debtor (or junior
lienholder), and, in some States, it can even be advantageous for
the creditor to bid less and seek a deficiency judgment. See
generally Washburn, The Judicial and Legislative Response to Price
Inadequacy in Mortgage Foreclosure Sales, 53 S. Cal. L. Rev. 843,
847-851 (1980); Ehrlich, Avoidance of Foreclosure Sales as
Fraudulent Conveyances: Accommodating State and Federal Objectives,
71 Va. L. Rev. 933, 959-962 (1985); G. Osborne, G. Nelson, & D.
Whitman, Real Estate Finance Law § 8.3, p. 528 (1979). And where a
property is obviously worth more than the amount of the
indebtedness, the lending mortgagee's interests are served best if
the foreclosure sale is poorly attended; then, the lender is more
likely to take the property by bidding the amount of indebtedness,
retaining for itself any profits from resale. While state
foreclosure procedures may somewhat mitigate the potential for this
sort of opportunism (by requiring for publication of notice, for
example), it surely
565
is plausible that Congress, in drafting the Bankruptcy Code,
would find it intolerable that a debtor's assets be wasted and the
bankruptcy estate diminished, solely to speed a mortgagee's
recovery.
II
Confronted with the eminent sense of the natural reading, the
Court seeks finally to place this case in a line of decisions, e.
g., Gregory v. Ashcroft,
501 U. S. 452 (1991), in
which we have held that something more than mere plain language is
required. 17 Because the stability of title in real property may be
said to be an "important" state interest, the Court suggests, see
ante, at 544, the statute must be presumed to contain an implicit
foreclosure-sale exception, which Congress must override expressly
or not at all. Our cases impose no such burden on Congress,
however. To be sure, they do offer support for the proposition that
when the Bankruptcy Code is truly silent or ambiguous, it should
not be
17The Court dangles the possibility that Gregory itself is
somehow pertinent to this case, but that cannot be so. There,
invoking principles of constitutional avoidance, we recognized a
"plain statement" rule, whereby Congress could supplant state
powers "reserved under the Tenth Amendment" and "at the heart of
representative government," only by making its intent to do so
unmistakably clear. Unlike the States' authority to "determine the
qualifications of their most important government officials," 501
U. S., at 463
(e. g., to enforce a retirement age for state
judges mandated by the State Constitution, at issue in Gregory),
the authority of the States in defining and adjusting the relations
between debtors and creditors has never been plenary, nor could it
fairly be called "essential to their independence." In making the
improbable contrary assertion, the Court converts a stray phrase in
American Land Co. v. Zeiss,
219 U. S. 47 (1911), which
upheld against substantive due process challenge the power of a
State to legislate with respect to land titles (California's effort
to restore order after title records had been destroyed in the
calamitous 1906 San Francisco earthquake) into a pronouncement
about the allocation of responsibility between the National
Government and the States. Cf.
Cipollone v. Liggett Group,
Inc.,
505 U. S.
504, 546 (1992) (SCALIA, J., concurring in judgment in part and
dissenting in part) (emphasizing the inapplicability of
"clear-statement" rules to ordinary pre-emption cases).
566
read as departing from previous practice, see, e. g., Dewsnup v.
Timm,
502 U. S.
410 (1992); Butner v. United States,
440 U. S. 48, 54 (1979).
But we have never required Congress to supply "clearer textual
guidance" when the apparent meaning of the Bankruptcy Code's text
is itself clear, as it is here. See Ron Pair, 489 U. S., at 240
("[I]t is not appropriate or realistic to expect Congress to have
explained with particularity each step it took. Rather, as long as
the statutory scheme is coherent and consistent, there generally is
no need for a court to inquire beyond the plain language of the
statute"); cf. Dewsnup, supra, at 434 (SCALIA, J., dissenting)
(Court should not "venerat[e] 'pre-Code law'" at the expense of
plain statutory meaning).18
We have, on many prior occasions, refused to depart from plain
Code meaning in spite of arguments that doing that would vindicate
similar, and presumably equally "important," state interests. In
Owen v. Owen,
500 U.
S. 305 (1991), for example, the Court refused to hold that the
state "opt-out" policy embodied in § 522(b)(1) required immunity
from avoidance under § 522(f) for a lien binding under Florida's
exemption rules. We emphasized that "[n]othing in the text of §
522(f) remotely justifies treating the [state and federal]
exemptions differently." 500 U. S., at 313. And in Johnson v. Home
State Bank,
501 U. S.
78 (1991), we relied on plain Code language to allow a debtor
who had "stripped" himself of personal mortgage liability under
Chapter 7 to reschedule the remaining indebtedness under Chapter
13, notwithstanding a plausible contrary argument based on Code
structure and a complete dearth of precedent for the manoeuver
under state law and prior bankruptcy practice.
18 Even if plain language is insufficiently "clear guidance" for
the Court, further guidance is at hand here. The provision at hand
was amended in the face of judicial decisions driven by the same
policy concerns that animate the Court, to make plain that
foreclosure sales and other "involuntary" transfers are within the
sweep of the avoidance power.
567
The Court has indeed given full effect to Bankruptcy Code terms
even in cases where the Code would appear to have cut closer to the
heart of state power than it does here. No "clearer textual
guidance" than a general definitional provision was required, for
example, to hold that criminal restitution could be a "debt"
dischargeable under Chapter 13, see Davenport, 495 U. S., at
563-564 (declining to "carve out a broad judicial exception" from
statutory term, even to avoid "hamper[ing] the flexibility of state
criminal judges"). Nor, in Perez v. Campbell,
402 U. S. 637 (1971), did
we require an express reference to state highway safety laws before
construing the generally worded discharge provision of the
Bankruptcy Act to bar application of a state statute suspending the
driver's licenses of uninsured tortfeasors.19
Rather than allow state practice to trump the plain meaning of
federal statutes, cf. Adams Fruit Co. v. Barrett,
494 U. S. 638, 648
(1990), our cases describe a contrary rule: whether or not Congress
has used any special "pre-emptive" language, state regulation must
yield to the extent it actually conflicts with federal law. This is
no less true of laws enacted under Congress's power to "establish
... uniform Laws on the subject of Bankruptcies," U. S. Const.,
Art. I, § 8, cl. 4, than of those passed under its Commerce Clause
power. See generally Perez v. Campbell, supra; cf. id., at
19 Only over vigorous dissent did the Court read the trustee's
generally worded abandonment power, 11 U. S. C. § 554, as not
authorizing abandonment "in contravention of a state statute or
regulation that is reasonably designed to protect the public health
or safety from identified hazards." Midlantic Nat. Bank v. New
Jersey Dept. of Environmental Protection,
474 U. S. 494, 505
(1986); cf.
id., at 513 (REHNQUIST, J., dissenting)
("Congress knew how to draft an exception covering the exercise of
'certain' police powers when it wanted to"); cf. also L. Cherkis
& L. King, Collier Real Estate Transactions and the Bankruptcy
Code, p. 6-24 (1992) (postMidlantic cases suggest that "if the
hazardous substances on the property do not pose immediate danger
to the public, and if the trustee has promptly notified local
environmental authorities of the contamination and cooperated with
them, abandonment may be permitted").
568
651-652 (rejecting the "aberrational doctrine ... that state law
may frustrate the operation of federal law as long as the state
legislature in passing its law had some purpose in mind other than
one of frustration"); Cipollone v. Liggett Group, Inc.,
505 U. S. 504, 545, 546
(1992) (SCALIA, J., concurring in judgment in part and dissenting
in part) (arguing against a "presumption against ... pre-emption"
of "historic police powers") (internal quotation marks
omitted).
Nor, finally, is it appropriate for the Court to look to "field
pre-emption" cases, see ante, at 544, to support the higher duty of
clarity it seeks to impose on Congress. As written and as applied
by the majority of Courts of Appeals to construe it, the disputed
Code provision comes nowhere near working the fundamental
displacement of the state law of foreclosure procedure that the
majority's rhetoric conjures.20
20 Talk of "'radica[l] adjust[ments to] the balance of state and
national authority,'"
ante, at 544, notwithstanding, the
Court's submission with respect to "displacement" consists solely
of the fact that some private companies in
Durrett
jurisdictions have required purchasers of title insurance to accept
policies with "specially crafted exceptions from coverage in many
policies issued for properties purchased at foreclosure sales."
Ante, at 544 (citing Cherkis & King,
supra, at
5-18 to 5-19). The source cited by the Court reports that these
exceptions have been demanded when mortgagees are the purchasers,
but have not been required in policies issued to third-party
purchasers or their transferees, Cherkis & King,
supra,
at 5-18 to 5-19, and that such clauses have neither been limited to
Durrett jurisdictions, nor confined to avoidance under
federal bankruptcy law. See Cherkis & King,
supra, at
5-10 (noting one standard exclusion from coverage for "[a]ny claim,
which arises ... by reason of the operation of federal bankruptcy,
state insolvency, or similar creditors' rights laws"). Nothing in
the Bankruptcy Code, moreover, deprives the States of their broad
powers to regulate directly the terms and conditions of title
insurance policies.
The "federally created cloud" on title seems hardly to be the
Damoclean specter that the Court makes it out to be. In the nearly
14 years since the
Durrett decision, the bankruptcy reports
have included a relative handful of decisions actually setting
aside foreclosure sales, nor do the States, either inside or
outside
Durrett jurisdictions, seem to have ven-
569
To the contrary, construing § 548(a)(2)(A) as authorizing
avoidance of an insolvent's recent foreclosure-sale transfer in
which "less than a reasonably equivalent value" was obtained is no
more pre-emptive of state foreclosure procedures than the trustee's
power to set aside transfers by marital dissolution decree, see
Britt v. Damson,
334 F.2d
896 (CA9 1964), cert. denied, 379 U. S. 966 (1965); In re
Lange, 35 B. R. 579 (Bkrtcy. Ct. ED Mo. 1983), "pre-empts" state
domestic relations law,21 or the power to reject executory
contracts, see 11 U. S. C. § 365, "displaces" the state law of
voluntary obligation. While it is surely true that if the provision
were accorded its plain meaning, some States (and many mortgagees)
would take steps to diminish the risk that particular transactions
would be set aside, such voluntary action should not be cause for
dismay: it would advance core Bankruptcy Code purposes of
augmenting the bankruptcy estate and improving the debtor's
prospects for a "fresh start," without compromising lenders'
state-law rights to move expeditiously against the property for the
money owed. To the extent, in any event, that the respondents and
their numerous amici are correct that the "important" policy
favoring security of title should count more and the "important"
bankruptcy policies should count less, Congress, and not this
Court, is the appropriate body to provide a foreclosure-sale
exception. See Wolas, 502 U. S., at 162. See also S. 1358, 100th
Cong., 1st Sess. (1987) (proposed amendment creating
foreclosure-sale exception).
III
Like the Court, I understand this case to involve a choice
between two possible statutory provisions: one authorizing
tured major changes in the "diverse networks of ... rules
governing the foreclosure process." See ante, at 541.
21 But cf. Wetmore v. Markoe,
196 U. S. 68 (1904)
(alimony is not a "debt" subject to discharge under the Bankruptcy
Act).
570
the trustee to avoid "involuntar[y] ... transfers [including
foreclosure sales] ... [for] less than a reasonably equivalent
value," see 11 U. S. C. § 548(a), and another precluding such
avoidance when "[a] secured party or third party purchaser ...
obtains title to an interest of the debtor in property pursuant to
a good faith prepetition foreclosure ... proceeding ... permitting
... the realization of security upon default of the borrower," see
S. 445, 98th Cong., 1st Sess., § 360 (1983). But that choice is not
ours to make, for Congress made it in 1984, by enacting the former
alternative into law and not the latter. Without some indication
that doing so would frustrate Congress's clear intention or yield
patent absurdity, our obligation is to apply the statute as
Congress wrote it. Doing that in this case would produce no
frustration or absurdity, but quite the opposite.
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