Michigan GPTA Tax-Foreclosure Title Vesting Can Be Avoided as a § 547 Preference When the County’s 5% Sales Commission Makes It “More Than” a Chapter 7 Recovery

A. Precedents Cited

1) Michigan GPTA foreclosure, takings backdrop, and the “remaining proceeds” right

• Hall v. Meisner and Rafaeli, LLC v. Oakland County frame modern scrutiny of tax-foreclosure surplus retention and establish the significance of the owner’s residual right to proceeds. The panel used these cases primarily as context for GPTA litigation and for confidence that Michigan courts would enforce rights to remaining proceeds.
• Tyler v. Hennepin County reinforced the constitutional salience of surplus-value interests (contextual, not dispositive of § 547).
• Pung v. Kopke (cert. granted) was cited to note ongoing uncertainty about how to measure the owner’s proceeds (fair market value vs. auction price), underscoring that GPTA foreclosure consequences remain unsettled in adjacent doctrinal areas.

2) Transfer definition and state-law property interests

• Barnhill v. Johnson supplied the framework that “transfer” is defined by federal law, while timing can require attention to state law mechanics.
• Butner v. United States and In re Morehead anchored the principle that state law defines the debtor’s underlying property interests.
• Russello v. United States and In re Emmet Cnty. Treasurer for Foreclosure supported the court’s broad understanding of “interest” in property.
• In re Dickson, In re Jones, and In re Hulm reinforced that involuntary, operation-of-law divestitures in foreclosure contexts qualify as “transfers” under the Bankruptcy Code’s expansive definition.
• In re Hackler and In re RL Mgmt. Grp., LLC were used as persuasive support that title vesting is a transfer event in comparable tax-foreclosure settings (with RL Mgmt. Grp., LLC later distinguished/criticized on its broader preference analysis).

3) Preference mechanics: petition-date benchmark and hypothetical Chapter 7

• Palmer Clay Products Co. v. Brown supplied the origins of using the bankruptcy petition date as the practical benchmark for determining the “actual effect” of a transfer.
• In re Tenna Corp. imported that petition-date approach into modern § 547(b)(5) analysis in the Sixth Circuit, and the panel applied it while rejecting the Treasurer’s attempt to resurrect pre-1978 “greater percentage within class” language.
• In re Royal Golf Prods. Corp. was addressed and confined: it did not rewrite § 547(b)(5) into a within-class equality test, but concerned whether the petition-date frame was used.
• In re Chattanooga Wholesale Antiques, Inc. and In re C-L Cartage Co. provided the Sixth Circuit’s general preference-comparison framework and the typical (but not universal) intuition that fully secured creditors are often not preferred.
• Out-of-circuit and bankruptcy-court authorities—In re Smith's Home Furnishings, Inc., In re Affiliated Foods, Inc., In re Tenderloin Health, and In re Keenan—influenced the court’s willingness to make evidence-constrained predictions in the hypothetical liquidation comparison.

4) Oversecured claims and § 506(b)

• United States v. Ron Pair Enters. and Rake v. Wade supported the proposition that oversecured creditors are entitled to post-petition interest under § 506(b), including for nonconsensual liens, and that interest can accrue until payment in the bankruptcy process.
• In re Corrin and In re Cumberland Molded Prods., LLC reinforced that secured status and applicable interest rules are determined as of the petition date.

5) BFP and the fraudulent-transfer (non-)analogy

• BFP v. Resolution Trust Corp. was the centerpiece of the Treasurer’s policy argument. The panel held it inapplicable: BFP construed “reasonably equivalent value” under § 548 (fraudulent transfer), expressly limited its logic to mortgage foreclosures, and did not control the plain-text “more than” inquiry under § 547(b)(5).
• The opinion contrasted bankruptcy-court splits: In re Pulcini and In re Andrews, along with its own prior In re RL Mgmt. Grp., LLC, were treated as examples of divergent approaches, with the Sixth Circuit aligning with the view that tax foreclosures can be preferential depending on statutory particulars and record facts.

6) Plain meaning and statutory interpretation

• Niz-Chavez v. Garland and United States v. Ron Pair Enters. supported the court’s insistence that unambiguous statutory text controls despite policy concerns.

7) Appellate posture: cross-appeal not required to defend judgment

• Shropshire v. Laidlaw Transit, Inc., Greenlaw v. United States, Baatz v. Columbia Gas Transmission, LLC, and United States v. Am. Ry. Express Co. supported the holding that the Treasurer could press the § 547(b)(4) lookback argument without a cross-appeal because he sought affirmance, not enlargement of his rights.

B. Legal Reasoning

1) When the “transfer” occurred for § 547(b)(4)

The panel treated the GPTA foreclosure judgment as creating a future, conditional divestiture: the judgment said title “will vest” if taxes were not paid by March 31. Because Reinhardt retained meaningful, alienable property interests—including title and the ability to stop vesting by paying—until March 31, the court held that the operative “transfer” occurred when fee simple title “vest[ed] absolutely” on March 31 under Mich. Comp. Laws § 211.78k(5).

For “perfection,” the Bankruptcy Code ties the transfer date to when a bona fide purchaser cannot take a superior interest, § 547(e)(1)(A). Applying Michigan’s race-notice regime and the GPTA’s recording requirement, the panel treated recording of the judgment (April 5) as the perfection event. Because perfection occurred within 30 days, § 547(e)(2)(A) made the transfer “made” on March 31—inside the 90-day window.

2) The § 547(b)(5) comparison: foreclosure outcome vs. hypothetical Chapter 7

The court adhered to petition-date valuation as the reference point (Palmer Clay Products Co. v. Brown; In re Tenna Corp.) but rejected a rigid “snapshot” that ignores legally mandated, imminent statutory events. Because the GPTA obligates the Treasurer to sell and prescribes the distribution mechanics, the petition-date value of what the Treasurer “received” had to account for the GPTA’s built-in monetization path.

In the hypothetical Chapter 7, the Treasurer was drastically oversecured, entitling him to post-petition interest under § 506(b) at the GPTA rate. But the Treasurer could not bootstrap GPTA foreclosure-sale charges into Chapter 7 because, in the “transfer-never-happened” world, the GPTA sale never occurs.

On the foreclosure side, the key incremental benefit was the GPTA’s 5% sales commission retained by the county from sale proceeds. That commission is not a bankruptcy distribution right and would not be paid to the Treasurer in Chapter 7. Therefore, even if the Treasurer’s underlying secured tax claim would be paid in full in both worlds, the additional 5% commission means the foreclosure transfer enabled the Treasurer to receive “more than” in the plain-text sense of § 547(b)(5).

3) Rejecting the Treasurer’s “same-class percentage” rewrite

The Treasurer argued that “more than” should be read as “a greater percentage than other creditors of the same class,” echoing the repealed Bankruptcy Act of 1898 language. The court rejected that as an improper reintroduction of text Congress removed in 1978, holding that § 547(b)(5) asks a direct numeric counterfactual: did the creditor get more than it would under Chapter 7 if the transfer had not been made?

4) Why BFP did not insulate the GPTA foreclosure

The panel treated BFP v. Resolution Trust Corp. as inapposite: it construed § 548’s “reasonably equivalent value,” not § 547’s “more than,” and it expressly reserved that tax-lien foreclosures “may be different.” Policy concerns about clouds on title cannot override unambiguous statutory text.

C. Impact

• Expanded preference exposure for GPTA foreclosures near bankruptcy filings: If title vests within 90 days of a petition, debtors (or trustees) have a clearer path to avoidance when the county’s recovery includes amounts not available in Chapter 7—most notably the 5% commission.
• Focus on statutory add-ons, not just claim satisfaction: Even a fully paid secured creditor can be “preferred” if the transfer carries ancillary recoveries unavailable in bankruptcy distribution norms.
• Fact-driven, statute-specific analysis: The court emphasized limits: not every GPTA foreclosure is preferential (e.g., no commission if the property sells at or below the minimum bid), and different state tax collection models could yield different outcomes (cf. In re Smith (7th Cir. 2016)).
• Practical leverage in Chapter 13: Avoidance returns the property to the estate while preserving the county’s tax lien; debtors may use avoidance to reorganize and pay the lien through a plan rather than lose title.
• Administrative and legislative responses: Counties may reassess auction practices and commission structures in the “shadow” of bankruptcy preference law; Michigan could adjust statutory incentives if preference avoidance becomes common in high-equity foreclosures.