Expert South Tulsa, LLC, et al. v. Cornerstone Creek Partners, LLC

Expert South Tulsa, LLC, et al. v. Cornerstone Creek Partners, LLC (In re Expert South Tulsa, LLC), BAP No. KS-14-027 (BAP 10th Cir. July 20, 2015)
The BAP for the 10th Circuit affirmed the ruling of the bankruptcy court granting summary judgment in favor of defendant of fraudulent transfer avoidance action. The BAP agreed that under 11 USC 544(b) and UFTA, as applied under Oklahoma law, debtor's transfer of fully encumbered real property did not constitute "property" under state law definition. The BAP also agreed that under 11 USC 548, plaintiffs failed to meet burden of creating a genuine issue of material fact that purchase price was not reasonably equivalent value, where property was sold at short sale that also satisfied lien, without deficiency, in excess of sale price.
Procedural context:
Debtor and creditor brought suit to avoid transfer from debtor to transferee as being fraudulent under 11 USC 544 and 548. Bankruptcy court (D. Kan.) granted summary judgment in favor of defendant. Debtor and creditor appealed to BAP for 10th Circuit.
Chapter 11 debtor sold real property to affiliated third party for $3 million, who then sold the same property ten days later to another affiliated entity for $4.42 million. Creditor with lien on real property agreed to short sale on initial transfer, waiving deficiency claim of approximately an additional $3 million. Approximately a month later, a creditior commenced an involuntary chapter 7 against debtor, who then converted the case the chapter 11. Property at issue had been part of a larger parcel that was subdivided into three parcels, and cross collateralized by the three parcels. Original loan in the amount of approximately $12.3 million was also personally guaranteed by principals, and note was subsequently transferred, renewed, and modified repeatedly. Loan was in default and various parties executed various forbearance agreements, that included various payoff and modification options. Lender commenced state court note and foreclosure action following default. While the parties were attempting to negotiate various resolutions, debtor negotiated a sale for the price of $3 million, plus agreements by various lien holders to accept certain amounts in full satisfaction of their claims that were less than the full amount of their claims. Less than 20 days later, the buyer subsequently transferred the property for $4.42 million. A creditor commenced an involuntary bankruptcy and debtor converted the case to chapter 11. Debtor and creditor commenced suit to avoid transfer to initial purchaser as fraudulent under 11 USC 544 and 548. The parties did not dispute debtor's insolvency at time of the transfer.
Thurman, Michael, Romero

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