THE VALIDITY OF POST-PETITION TRANSFERS OF … 2005 The Validity of Post-Petition Transfers of Real Property 151 1 11 U.S.C. §§ 101-1330 (2000). 2 Section 549(c) provides, in pertinent

* J.D., Emory University School of Law, 2005. Ms. Culpin will be clerking for theHonorable Douglas O. Tice in the Bankruptcy Court for the Eastern Division of Virginia.She is grateful to Professor Frank S. Alexander for his inspiration and guidance throughoutthe writing process and to the ABA Real Property, Probate and Trust Law Journaleditorial staff for their hard work. She wishes to thank her father, Boyd McKeown, for hissupport and encouragement in all her endeavors and the ABA Real Property, Probate andTrust Section for selecting this Article as the first place winner of the 2004 Jacques T.Schlenger Student Writing Contest.

THE VALIDITY OF POST-PETITION TRANSFERS OFREAL PROPERTY: WHO DOES THE

BANKRUPTCY CODE’SSECTION 549(c) PROTECT?

Kelly Culpin*

Editors’ Synopsis: This Article discusses whether a good faithpurchaser’s post-petition purchase of a debtor’s real property will beprotected under Bankruptcy Code section 549 in light of recent case lawdenying protection based on a violation of Bankruptcy Code section362’s automatic stay. To address this question, the author traces thehistory of early bankruptcy law, including the development of and thepolicy behind the automatic stay. Examining recent case law, the authorconcludes that the good faith purchaser should be protected, in certaincircumstances, despite a violation of the automatic stay. This conclusionis supported by the author’s analysis of the interplay between the rele-vant Bankruptcy Code sections, as well as a review of legislative historyof the Code sections. Finally, the author suggests that courts should usea fact-intensive approach when determining whether the good faithpurchaser exception should apply and provides a framework with whichcourts could make this determination.

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150II. EARLY BANKRUPTCY APPROACHES . . . . . . . . . . . . . . . . 154

A. The Bankruptcy Court’s Exclusive Jurisdiction and the Evolution of the Automatic Stay . . . . . . . . . . . . . 154

B. Development of the Good Faith Purchaser Exception 157III PRESENT LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

A. Description and Functions of the Automatic Stay, Section 362(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

B. The Purpose of the Good Faith Purchaser Exception, Section 549(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

150 40 REAL PROPERTY, PROBATE AND TRUST JOURNAL

III. INTERPLAY BETWEEN THE AUTOMATIC STAY AND THEGOOD FAITH PURCHASER EXCEPTION . . . . . . . . . . . . . . 167A. Actions Taken in Violation of the Stay: Void,

Voidable . . . or Does it Matter? . . . . . . . . . . . . . . . . . 1681. How a Violation Occurs . . . . . . . . . . . . . . . . . . . . 1682. Effectiveness of Actions Taken in Violation of

the Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169a. The Void Doctrine . . . . . . . . . . . . . . . . . . . . 170b. The Voidable Doctrine . . . . . . . . . . . . . . 171

3. The Void/Voidable Distinction Is One Without Substance . . . . . . . . . . . . . . . . . . . . . . . . . 171

B. The Growing Minority Trend . . . . . . . . . . . . . . . . . . . 1731. Lusardi Signals the Change in the Growing

Minority Trend . . . . . . . . . . . . . . . . . . . . . . . . . . . 1732. The Courts’ New Approach to the Relationship

Between Sections 362(a) and 549(c) . . . . . . . . . . . 1753. These Courts Have Misinterpreted the Scope of

Sections 362(a) and 549(c) . . . . . . . . . . . . . . . . . . 176a. The Statutory Text and Structure of the

Code Allow Section 362 and Section 549 to Overlap . . . . . . . . . . . . . . . . . . . . . . . . . . 178

b. Legislative History Shows Congress In-tended Section 549(c) to Protect Innocent Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . 181

IV. PROPOSAL: A RETURN TO A FACT-INTENSIVE ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

V. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187

I. INTRODUCTION

Post-petition purchasers of a debtor’s real property have long faceduncertainty with regard to what protection, if any, the bankruptcy lawsafford them. The introduction of a statutory automatic stay prohibiting anytransfer of the debtor’s property after commencement of the case hasexacerbated this uncertainty. In theory, the automatic stay halts all post-petition transfers made without permission of the bankruptcy court andallows courts to hold violators in contempt. In practice, however, creditors

SPRING 2005 The Validity of Post-Petition Transfers of Real Property 151

1 11 U.S.C. §§ 101-1330 (2000).2 Section 549(c) provides, in pertinent part:(c) The trustee may not avoid under subsection (a) of this section a transfer ofreal property to a good faith purchaser without knowledge of the commencementof the case and for present fair equivalent value unless a copy or notice of thepetition was filed, where a transfer of such real property may be recorded toperfect such transfer, before such transfer is so perfected that a bona fide pur-chaser of such property, against whom applicable law permits such transfer to beperfected, could not acquire an interest that is superior to the interest of suchgood faith purchaser.

Id. § 549(c).3 See id. § 549(c).4 See, e.g., In re Siciliano, 13 F.3d 748, 751 (3d Cir. 1994); Shaw v. County of San

Bernardino (In re Shaw), 157 B.R. 151, 153-54 (B.A.P. 9th Cir. 1993); Jones v. Wingo (Inre Wingo), 89 B.R. 54, 58-59 (B.A.P. 9th Cir. 1988); In re Shah, No. 99-34723 DWS,2001 Bankr. LEXIS 380, *15 (Bankr. E.D. Pa. 2001); Carpio v. Smith (In re Carpio), 213B.R. 744, 750-51 (Bankr. W.D. Mo. 1997); Groupe v. Hill (In re Hill), 156 B.R. 998, 1007(Bankr. N.D. Ill. 1993); Little v. Bago (In re Bago), 149 B.R. 610 (Bankr. C.D. Cal. 1993);In re King, 35 B.R. 530, 533 (Bankr. N.D. Ga. 1983).

5 See, e.g., Value T Sales, Inc. v. Mitchell (In re Mitchell), 279 B.R. 839, 843-44(B.A.P. 9th Cir. 2002); Glendenning v. Bowen (In re Glendenning), 243 B.R. 629, 633-34(Bankr. E.D. Pa. 2000); Smith v. London (In re Smith), 224 B.R. 44, 47 (Bankr. E.D.

often proceed with involuntary foreclosure sales or tax sales of the debt-or’s real property, creating the opportunity for an “innocent” party—onewithout knowledge of the pending bankruptcy case—to purchase theproperty. In all likelihood, the bankruptcy court will declare such a pur-chase void as a transaction conducted in violation of the automatic stay.Fortunately, the Bankruptcy Code (the “Code”)1 provides a mechanismthat courts have used for decades to protect the innocent purchaser fromthis eventuality.

Code section 549, which governs a debtor’s post-petition transactions,provides in subsection (c) an express exception to the trustee’s powers toavoid unauthorized post-petition transfers of property.2 This exceptionpermits a person who has purchased the debtor’s real property in goodfaith with no knowledge of a pending proceeding and who has paid fairand equivalent value, to obtain the debtor’s interest in the property.3 In thepast, some courts have interpreted this subsection to work as an exceptionto the voiding effect of the automatic stay, which protects the transactionin cases in which the purchaser meets the subsection’s requirements.4 In agrowing trend, however, bankruptcy courts are holding a transactioncannot be both in violation of the stay and controlled by section 549.These holdings make section 549(c)’s good faith purchaser protection in-applicable to a transfer made in violation of the automatic stay.5


Mich. 1998); New Orleans Airport Motel Assocs. v. Lee (In re Servico, Inc.), 144 B.R.933, 936 (Bankr. S.D. Fla. 1992).

6 329 F.3d 1076 (9th Cir. 2003), cert. denied, 540 U.S. 983 (2003).7 Since Lusardi, the Fifth Circuit is the only other appellate court to find against a

purchaser of a debtor’s real property at foreclosure based on this reasoning. SeeBustamante v. Cueva (In re Cueva), 371 F.3d 232, 238 (5th Cir. 2004). In support of itsdecision to deny the protection of section 549(c), the court cited Texas law, which “haslong held that foreclosures in violation of the automatic stay are invalid . . . unless re-troactive relief from the stay is granted by the court.” Id. at 237. The court further reasonedthat when a transfer is retroactively validated by this means, section 549(c) is unnecessary.Id. (discussing Jones v. Garcia (In re Jones), 63 F.3d 411, 412 (5th Cir. 1995)). As inLusardi, the Fifth Circuit found that Congress intended section 549(c) solely as anexception to the trustee’s avoiding powers, and section 549(c) was not an exception to theautomatic stay. Id. at 238; see infra note 202 (discussing the Lusardi court’s interpretationof Congress’s intent); infra Part III.A (discussing the voiding principle of the automaticstay and relief from the stay); infra Part III.B (analyzing the Lusardi court’s reasoning).

8 Lusardi, 329 F.3d at 1080.9 See infra notes 167-72 and accompanying text (explaining the reasoning of this

view).10 Lusardi, 329 F.3d at 1081-82. The court distinguished between the debtor’s vol-

untary transfers, which it felt section 549 would govern, and a third party’s involuntarytransfers, e.g., a foreclosure sale initiated by a mortgagee. Id. The discrepancy in theapplication of section 549 fails precisely because both types of transactions are post-petition transfers within the meaning of section 549 and violations of the automatic stay ofsection 362. See infra notes 191-96 and accompanying text (discussing a textual interpreta-tion of the statute).

11 Lusardi, 329 F.3d at 1082.

In its recent decision in 40235 Washington Street Corp. v. Lusardi,6

the Ninth Circuit became the first appellate court to deny the Code’sprotection to a post-petition good faith purchaser of real property based onthis theory.7 The Lusardi court held the exception to the trustee’s power toavoid post-petition transfers did not apply to a post-petition tax sale of thedebtor’s property because the sale violated the section 362(a) automaticstay and was therefore void.8 The court reasoned that any void act, deemednot to have taken place, never could qualify as a transfer within the mean-ing of section 549.9 The court found Congress designed subsection (c), anexception to the bankruptcy trustee’s power to avoid post-petition trans-fers, only to protect innocent parties from being defrauded in a debtor-initiated transaction, and that Congress intended the automatic stay toprotect the debtor and his creditors.10 The court reasoned that becauseCongress designed the sections to protect different parties, an exception toone would not apply to the other.11 Although the court attempted toreconcile the two Code sections by assigning independently meaningfulfunctions, the Ninth Circuit’s conclusion actually cut against an integrated


12 See, e.g., Ford v. A.C. Luftin (In re Ford), 296 B.R. 537, 545 (Bankr. N.D. Ga.2003) (following the Lusardi court’s holding for policy, textual, and conceptual reasons);In re Hull, No. 02-10216 2003, WL 22000599, at *1, *41 (Bankr. D. Del. Aug. 19, 2003)(citing Lusardi for the proposition that post-petition transfers of property of the estate arevoid if in violation of the automatic stay).

Bankruptcy Code.Because the United States Supreme Court denied certiorari to the

Ninth Circuit’s decision and bankruptcy courts have followed the Lusardiinterpretation,12 the issue of the Code’s protection of good faith purchasersis ripe for examination and resolution. This Article proposes that for rea-sons of certainty and predictability, and based on the plain meaning of theCode, courts should abandon the new trend, which seeks to retract the pro-tection afforded good faith purchasers of real property in post-petitiontransfers that violate the automatic stay.

Part I of this Article offers an overview of the early bankruptcy lawprovisions that preserved the bankruptcy estate, thus protecting both debt-ors and creditors via the automatic stay. Part I also introduces Congress’sresponse to the stay’s potential unfairness through the introduction of alimited form of statutory protection for good faith purchasers of real es-tate.

Part II considers how the enactment of the 1978 Code solidified theseprotections for parties on either side of the transaction in the form of thesection 362(a) automatic stay and the section 549(c) good faith purchaserexception.

Part III examines the inherent problems and interplay between thecurrent Code sections at issue and the recent judicial treatment of the goodfaith purchaser defense when invoked for transfers in violation of the stay.This Part also suggests two reasons the Code should provide active protec-tion for good faith purchasers vis-à-vis the automatic stay. First, thestatutory text does not prevent the good faith purchaser exception fromproviding relief from the automatic stay via court-ordered retroactiveannulment. Second, the history of the exception’s development evinces acongressional intent to protect good faith purchasers.

Finally, Part IV proposes courts should return to a fact-intensiveanalysis when determining whether the good faith purchaser exceptionapplies to the party petitioning for protection. Part IV also provides anexample of the framework in which this assessment could proceed.


13 See 28 U.S.C. § 1334(e) (2000). (“The district court in which a case under title 11is commenced or pending shall have exclusive jurisdiction of all of the property, whereverlocated, of the debtor as of the commencement of such case, and of property of theestate.”). The statute vests jurisdiction in the federal district courts; the bankruptcy courtthen exercises that jurisdiction by referral from the district courts pursuant to 28 U.S.C.§ 157(a).

14 See In re Prudence-Bonds Corp., 77 F.2d 328, 330 (2d Cir. 1935) (advising that inreorganization cases, the court should maintain control over the debtor’s property toadminister it in a way that will achieve the desired rehabilitation).

15 Ralph Brubaker, Does § 549(c) Protect a Good Faith Purchaser in a Post-PetitionForeclosure Sale Conducted in Violation of the Automatic Stay?, BANKR. LAW LETTER,Aug. 2003, at 4 [hereinafter Brubaker 2003].

16 Mueller v. Nugent, 184 U.S. 1, 14 (1902). 17 Id.18 See id.19 3 COLLIER ON BANKRUPTCY ¶ 362.LH (Alan N. Resnick & Henry J. Sommer, eds.,

15th ed. 2003 rev.).20 Isaacs v. Hobbs Tie & Timber Co., 282 U.S. 734 (1931) (reversing a state court’s

judgment allowing foreclosure because of the bankruptcy court’s exclusive jurisdictionover the property of the estate); White v. Schloerb, 178 U.S. 542 (1900) (holding that the

II. EARLY BANKRUPTCY APPROACHES

A. The Bankruptcy Court’s Exclusive Jurisdiction and the Evolution ofthe Automatic Stay

To ensure a fair and equal distribution among creditors, the bank-ruptcy court, as a court of exclusive jurisdiction over the property of theestate,13 must maintain control over all the debtor’s non-exempt assetspending resolution of the case.14 A common law automatic stay, foundedon these principles of exclusive in rem jurisdiction,15 developed in earlybankruptcy jurisprudence. “[T]he filing of the petition [was] a caveat to allthe world, and in effect an attachment and injunction” against any actiontaken to exert control over the debtor’s property.16 Title to the debtor’sproperty became “vested in the trustee with actual or constructive posses-sion, and placed in the custody of the bankruptcy court.”17 Although anyinterference with the court’s exclusive possession was considered con-tempt of court, creditors easily could find themselves in a precarious po-sition, already having exercised control over the property of the estate.18

Oftentimes, creditors already had repossessed the debtor’s property or alien enforcement was pending at the time the case commenced.19 Creditorssoon found they could not ignore the role of the bankruptcy court andresort to state law collection remedies, which allowed them to seize andsell the debtor’s property involuntarily. The Supreme Court did not hes-itate to reverse state law decisions allowing these actions.20 Like


bankruptcy court had jurisdiction to compel a return of debtor’s property seized in replevinto the bankruptcy estate); see Brubaker 2003, supra note 15, at 4.

21 Bank v. Sherman, 101 U.S. 403, 406 (1879). 22 44 U.S. 292, 321 (1845).23 Bankruptcy Act of 1841, ch. 9, 5 Stat. 440 (repealed 1843). The Bankruptcy Act of

1841 and the Bankruptcy Act of 1898, ch. 541, 30 Stat. 544 (repealed 1978), are hereinaf-ter collectively referred to as the “Bankruptcy Act.”

24 Christy, 44 U.S. at 321. 25 Id. at 312.26 294 U.S. 648, 649 (1935).

wise, the bankruptcy court’s exclusive right to possess and control adebtor’s property prohibited the debtor from transferring any rights in hisproperty post-petition.21

The Supreme Court, in two early decisions, recognized a bankruptcycourt could protect its jurisdiction by enjoining actions against property ofthe estate not only when the debtor’s assets were in the court’s custody orcontrol (in custodia legis), but also when the assets were in the physicalcustody of secured creditors. The Court reached its first decision alongthese lines in Ex Parte Christy,22 a case heard under the Bankruptcy Act of1841.23 Although the Bankruptcy Act made no mention of securedcreditors, the Court held the bankruptcy court had the power to enjoin asecured creditor action even in the absence of statutory authority.24 JusticeStory rationalized this implied judicial power in his opinion, solidifyingthe assumption during this period that a bankruptcy court had power tomaintain control over all property of the estate:

From this brief review of these enactments it is manifest that thepurposes so essential to the just operation of the bankrupt[cy] sys-tem, could scarcely be accomplished except by clothing the courtsof the United States sitting in bankruptcy with the most amplepowers and jurisdiction to accomplish them; and it would be amatter of extreme surprise if, when Congress had thus required theend, they should at the same time have withheld the means bywhich alone it could be successfully reached.25

In Continental Illinois National Bank & Trust Co. v. Chicago, RockIsland & Pacific Railway Co., a case heard under the Bankruptcy Act al-most one hundred years later, the Supreme Court issued an injunctionagainst a secured creditor’s threatened sale of pledged collateral in thesecured creditor’s custody.26 The Court based its finding of authority forenjoining the action in section 2 of the Bankruptcy Act, which vested thebankruptcy court with equitable and legal jurisdiction. The Court further


27 Id. at 675. 28 See, e.g., Clarke v. Larremore, 188 U.S. 486, 490 (1903) (affirming a district

court’s injunction against a sheriff from turning over proceeds to a judgment creditor fromlevy on debtor’s property, and holding that the money goes to bankruptcy trustee undersection 67(f) of the Bankruptcy Act when a debtor files bankruptcy before completed ex-ecution).

29 52 Stat. 840-940 (1938).30 Section 148 of Chapter X provided: “Until otherwise ordered by the judge, an order

approving a petition shall operate as a stay of a prior pending bankruptcy, mortgageforeclosure, or equity receivership proceeding, and of any act or other proceeding toenforce a lien against the debtor’s property.” Id. at 888. Section 428 of Chapter XIIprovided:

Unless and until otherwise ordered by the court, upon hearing and after notice tothe debtor and all other parties in interest, the filing of a petition under thischapter shall operate as a stay of any act or proceeding to enforce any lien uponthe real property or chattel real of a debtor.

Id. at 918.31 52 Stat. 840, 888, 819 (Section 428 of Chapter XII and section 148 of Chapter X

refer to these limitations respectively.); see In re Bermec Corp., 445 F.2d 367 (2d Cir.1971) (explaining a contested confirmation of a reorganization plan under Chapter X of theAct); see also Grubbs v. Pettit, 282 F.2d 557 (2d Cir. 1960); In re Castle Beach Apart-ments, Inc., 113 F.2d 762 (2d Cir. 1940).

32 3 COLLIER, supra note 19, at ¶ 362.LH (citing Bankruptcy Act section 148).33 Id. at 3.

reasoned that, as a court of equity, it had inherent power to issue an in-junction to prevent interference with reorganization.27 Though this holdingwas certainly a progression in the effort to preserve the property of theestate, such early grants of injunctive power were not self-executing butrather required an affirmative request for relief from the trustee, receiver,or debtor.28

Congress passed the Chandler Act in 1938, which added new chaptersto the Bankruptcy Act of 1898.29 The additional restraints provided reliefsimilar to an automatic stay30 but were deficient in many respects. In par-ticular, one restraint applied only to the enforcement of liens on real pro-perty, and another required a showing of a reasonable likelihood of suc-cessful reorganization before the court could issue an injunction.31 There-fore, in the latter case, the stay was not effective until the court entered anorder approving the debtor’s petition.32 Thus, a long delay might occurbefore this happened, during which time a creditor easily could haveseized control of the estate’s property. Immediate relief against creditoraction was vital to preserve the estate, and a need arose for a stay thatwould become effective automatically upon commencement of the case.33

The former Rules of Bankruptcy Procedure attempted to correct defi-


34 Former Rules 401, 601, 10-601, 11-44, 12-43 and 13-401. The Rules of BankruptcyProcedure were promulgated by the Supreme Court pursuant to 28 U.S.C. § 2075 (1970).See 3 COLLIER, supra note 19, at ¶ 362.LH[3].

35 Id.36 See infra note 76 for the text of 11 U.S.C. § 362(a) (2000). 37 11 U.S.C. § 362(h) provides: “An individual injured by any willful violation of a

stay provided by this section shall recover actual damages, including costs and attorneys’fees, and, in appropriate circumstances, may recover punitive damages.”

38 See infra notes 120-24 and accompanying text for a discussion of courts that holdviolations of the stay are void.

39 William J. Rochelle, III & Gwen L. Feder, Unauthorized Sales of a Debtor’sProperty: The Rights of a Purchaser Under Section 549 of the Bankruptcy Code, AM.BANKR. L.J., Winter 1983, at 23-27.

40 Id. at 25.41 Id.42 Id.; see, e.g., Mueller, 184 U.S. at 14.

ciencies by providing various stays that became effective upon the filingof a petition.34 These stays operated without requiring notice to creditorsand generally lasted throughout the proceedings unless vacated or modi-fied by the court,35 but debtors did not receive the statutory automaticprotection they sought until the enactment of the Code in 1978. Throughthe enactment of section 362(a), Congress provided a stay that is auto-matic in nature—arising instantly upon the commencement of the case.36

Any willful violation is subject to sanctions,37 and courts generally inter-pret a transfer made in violation as void.38 With the enactment of the au-tomatic stay, Congress continued to expand the bankruptcy court’s juris-diction by creating a powerful mechanism for preserving the estate.

B. Development of the Good Faith Purchaser Exception

In the period of early bankruptcy law, courts became increasinglyconcerned to protect those who purchased a debtor’s real property after thecommencement of the case.39 Prior to 1938, a post-petition purchaser ofreal property had no guarantee of receiving clear title to that property.40 Asa general principle, anyone who purchased the debtor’s property post-petition would receive only “avoidable title” because of the common lawversion of the stay and its consequences.41 The court possibly could ordera purchaser to reconvey title to the purchased property to the bankruptcytrustee without guaranteeing the debtor could refund the purchase price.42

Acknowledging considerations of justice, equity, and the importance ofprotecting purchasers from losing their investments, courts began to makeexceptions for buyers who purchased property in good faith for present


43 Rochelle & Feder, supra note 39, at 26 (citing 4B COLLIER ON BANKRUPTCY¶ 70.66 [2], at 737-38 (14th ed. 1978)).

44 Id. at 25.45 James A. McLaughlin, Amendment of the Bankruptcy Act, 40 HARV. L. REV. 341,

583 (1927). The proposal was based on the English Bankruptcy Acts, “which protectedtransfers for present fair equivalent value, by or for the bankrupt, made before the qualifi-cation of a receiver or trustee, whichever qualified first, and made to transferees withoutthe knowledge of or reasonable cause to believe that a petition in bankruptcy had beenfiled.” See also Rochelle & Feder, supra note 39, at 26 (summarizing the proposal).

46 STAFF OF HOUSE COMM. ON THE JUDICIARY, 74TH CONG. ANALYSIS OF H.R. 12889,at 229 (1936). The notes to this addition stated “[t]his new subdivision in Section 70 issuggested by the uncertainty as to whether bona fide transactions for adequate presentvalue after bankruptcy can in any case be protected.” Id.

47 Section 70d provided:After bankruptcy and either before adjudication or before a receiver takes pos-session of the property of the bankrupt, whichever first occurs —(1) A transfer of any of the property of the bankrupt, other than real estate, madeto a person acting in good faith shall be valid against the trustee if made for apresent fair equivalent value or . . .

11 U.S.C. § 110 (1970); see also Rochelle & Feder, supra note 39, at 26. 48 Section 21g provided in pertinent part:A certified copy of the petition . . . may be recorded at any time in the officewhere conveyances of real property are recorded, in every county where thebankrupt owns or has an interest in real property. Such certified copy may berecorded by the bankrupt, trustee, receiver, custodian, referee, or any creditor . . .Unless a certified copy of the petition . . . has been recorded in such office, inany county wherein the bankrupt owns or has an interest in real property . . . thecommencement of a proceeding under this Act shall not be constructive notice toor affect the title of any subsequent bona-fide purchaser or lienor of real property

value after a debtor filed a bankruptcy petition.43 Consequently, buyerscould not predict whether courts, on a case by case basis, would elect toprotect an innocent purchaser or require reconveyance of the property tomaintain the integrity of the bankruptcy estate and to retain the assets forfuture distribution to creditors.44

Based in large part on a Harvard Law Review article written in 1927,45

Congress attempted in 1938 to clarify this confusing area of judge-madelaw by adding a new paragraph to the Bankruptcy Act that would protectbona fide transferees of property.46 However, this addition, codified assection 70d, dealt only with personal property and did not explain whatprotection, if any, would be given to transferees of real property.47 Thus,Congress added a separate section, section 21g, as part of the 1938Amendments to supplement section 70d, which extended a similar protec-tion to purchasers of real property.

Section 21g48 of the Bankruptcy Act introduced a method for provid


in such county for a present fair equivalent value and without actual notice of thependency of such proceeding: Provided, however, That where such purchaser orlienor has given less than such value, he shall nevertheless have a lien upon suchproperty, but only to the extent of the consideration actually given by him. Theexercise by any court of the United States or of any State of jurisdiction toauthorize or effect a judicial sale of real property of the bankrupt within anycounty in any State whose laws authorize the recording aforesaid shall not beimpaired by the pendency of such proceeding unless such copy be recorded insuch county, as aforesaid, prior to the consummation of such judicial sale . . . .

Bankruptcy Act of 1898, ch. 541, § 21g, 30 Stat. 544 (repealed 1978), reprinted in 2COLLIER ON BANKRUPTCY § 21, at 262-63 (James Wm. Moore ed., 14th ed. 1976) (empha-sis added).

49 In re Penfil, 40 B.R. 474, 477-78 (Bankr. D. Mich. 1984) (citing 2 COLLIER, supranote 48, ¶ 21.30).

50 Id.; see, e.g.,Vombrack v. Wavra, 163 N.E. 340, 342 (Ill. 1928) (discussing therequirement of the filing notice of bankruptcy in counties when the debtor’s property isheld outside of the county where he commenced his case to prevent fraudulent debtortransactions); Derryberry v. Matterson, 192 So. 78, 82 (La. 1939).

51 STAFF OF HOUSE COMM. ON THE JUDICIARY, 74TH CONG., ANALYSIS OF H.R.12889, at 262 (1936).

52 Id.53 See supra note 48 for the text of section 21g. By its language, this section applied

only to judicial sales conducted post-petition, as did section 549(c) when it was enacted.COLLIER, supra note 19, at ¶ 549.LH[4]. The 1984 Amendments changed the applicationof 21g to incorporate protection for good faith purchasers at judicial sales and non-judicialsales alike, provided they met the section’s requirements for invocation. Id. ¶ 549.LH[5].

ing constructive notice of the bankruptcy proceeding to potential purchas-ers of the debtor’s real property, lessening the opportunity for a debtor tomake fraudulent conveyances.49 For cases in which a debtor’s real estatewas located outside the county where the case was pending, the debtorpossibly could convey his interest to an innocent purchaser who had noknowledge, nor means of obtaining any knowledge, of the commencementof the case.50 This section permitted the trustee (or anyone who had aninterest in the estate) to record a copy of the petition in the recorder’soffice in every county where the debtor owned or had an interest in realproperty.51 Moreover, if no certified copy of the petition was filed, a“purchaser or a lienor for a present fair consideration, who ha[d] no actualknowledge of the pendency of the proceedings, [wa]s not charged withconstructive notice.”52 This section provided that in a jurisdiction thatrecognized such a recording, filing notice of the petition in the county’sreal estate records before the purchaser recorded his deed (and thus per-fected his interest) was the only means by which a judicial sale of realproperty could be disturbed and reconveyance could be demanded.53

Through this section, Congress specifically validated post-petition ju-


54 Brubaker 2003, supra note 15, at 8.55 S.J. Res. 88, 91st Cong. 84 Stat. 468 (1970).56 REPORT OF THE COMMISSION ON THE BANKRUPTCY LAWS OF THE UNITED STATES,

H.R. DOC. NO. 137, at pts. I-II (1973) [hereinafter COMMISSION REPORT].57 Pub. L. No. 95-598, 92 Stat. 2549 (1978).58 See generally id. 59 See COMMISSION REPORT, supra note 56, at 191-92.60 Donna Renee Tobar, Comment, The Need for a Uniform Void Ab Initio Standard

for Violations of the Automatic Stay, WHITTIER L. REV., Fall 2002, at 3, 5; (quoting In reMcLouth, 257 B.R. 316, 319 (Bankr. D. Mont. 2000) (quoting 11 U.S.C. § 362(a)(6)(2000)).

61 See generally CHARLES JORDAN TABB, THE LAW OF BANKRUPTCY § 3.1 (1997).62 3 COLLIER, supra note 19, at ¶ 362.03. Section 301 of the Code covers the proce-

dure for filing an involuntary case. Section 302 governs filing a joint case, and section 303governs the filing of an involuntary petition under Chapters 7 and 11. 11 U.S.C. §§ 301-

dicial sales that were consummated prior to the recordation of a notice ofthe debtor’s bankruptcy proceeding.54 By enacting section 549(c) of theBankruptcy Code, Congress provided certainty and predictability to thebankruptcy laws with regard to good faith purchasers of real property.

III. PRESENT LAW

In 1970, Congress created the Commission on the Bankruptcy Laws ofthe United States (“Bankruptcy Commission”) to evaluate the prior Bank-ruptcy Act and to recommend changes so that Congress could create a newact reflecting current societal demands.55 Three years later, the BankruptcyCommission’s report recommended a complete overhaul of the bankruptcylaws, and provided a draft of a proposed new bankruptcy statute,56 whicheventually and after much debate became the Bankruptcy Reform Act of1978 (“Reform Act”).57 The Reform Act imposed many sweeping changesto the existing bankruptcy system. Most notably, the Code expanded thebankruptcy courts’ jurisdiction and, as a tool for that expansion, provideda statutory automatic stay.58 Though many viewed the Code as substan-tially more debtor-friendly than the prior laws, protecting post-petitiongood faith purchasers of real property remained an essential element ofCongress’s overall scheme.59

A. Description and Functions of the Automatic Stay, Section 362(a)

Upon the filing of a petition, the Code prohibits all acts to “collect,assess, or recover a claim” outside of the bankruptcy forum.60 The auto-matic stay is a stay against, or a halting of, creditor collection efforts oncea bankruptcy case is commenced.61 As its name suggests, the stay automat-ically arises the moment the debtor files a bankruptcy petition.62 More


303.63 However, in cases in which the state’s interest in enforcing criminal or environ-

mental laws trumps the federal bankruptcy law, actions to enforce these interests areexcluded from the automatic stay. 11 U.S.C. § 362(b) (listing these and other exceptions).See, e.g., In re Commonwealth Oil Ref. Co., 805 F.2d 1175, 1182-85 (5th Cir. 1986)(permitting the government to compel a debtor-in-possession in a chapter 11 case to bringthe polluted site into compliance with the environmental laws); Penn Terra Ltd. v. Dept. ofEnvtl. Res., 733 F.2d 267, 278 (3d Cir. 1984) (holding that an action compelling the trusteeto expend the estate’s money to effect a cleanup was not “an action to enforce a moneyjudgment” within the meaning of section 362(a) and thus not stayed). In such instances, thedebtor has the burden of obtaining an injunction from the court to stay these activities. SeeTABB, supra note 61, § 3.11, at 175.

64 TABB, supra note 61, § 3.1, at 146.65 Id.66 H.R. REP. NO. 95-595 at 340 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6296-

97. 67 Id. Many courts have relied on this famous language in discussing the policy of the

automatic stay. See, e.g., Schwartz v. United States (In re Schwartz), 954 F.2d 569, 571(9th Cir. 1992); New Orleans Airport Motel Assocs., Ltd. v. Lee (In re Servico), 144 B.R.933, 935 (Bankr. S.D. Fla. 1992).

68 Robert R. Niccolini, Note, The Voidability of Actions Taken in Violation of theAutomatic Stay: Application of the Information-Forcing Paradigm, 45 VAND. L. REV.1663, 1667 (1992) (quoting Schwartz, 954 F.2d. at 571).

69 Id. at 1667.

over, the stay protects the property of the estate without requiring thedebtor to initiate a request for an injunction.63

The automatic stay is essential to implement the dual aims of bank-ruptcy: the debtor’s “fresh start” and creditor equality.64 The automaticstay works hand in hand with the policy of encouraging an honest debtor’sfresh start by providing a respite from creditor collection efforts.65 Con-gress confirmed the automatic stay’s importance, calling the stay “one ofthe fundamental debtor protection[s] provided by the bankruptcy law.”66 Inconsidering the Reform Act, the House of Representatives described thisdebtor protection: “[The stay] gives the debtor a breathing spell from hiscreditors. It stops all collection efforts, all harassment, and all foreclosureactions. It permits the debtor to attempt a repayment or reorganizationplan, or simply to be relieved of the financial pressures that drove him intobankruptcy.”67 A breathing spell facilitates a fresh start and gives individ-ual debtors an opportunity to “regain their financial footing.”68 The stayalso protects corporate debtors by allowing them to restructure their fi-nancial affairs and submit a plan of reorganization to the court.69

The stay ensures that no single creditor has an advantage over othercreditors because it places all similarly situated creditors on a level playing


70 Outside of bankruptcy law, creditors are able to pursue state collection remediessuch as obtaining a judgment against a creditor and then levying on his property to collectthe value of the judgment. See TABB, supra note 61, at §§ 1.1, 1.3(a), at 4, 10-12. Once thedebtor’s property is extinguished, those creditors with unfulfilled claims end up withnothing. Id. § 1.1, at 4. Creditors “race to the courthouse” to obtain such judgments,because the maxim “first come, first served” is truly applicable in this situation. See id.§§ 1.1, 1.3(a), at 4, 10-12. The automatic stay halts the collection efforts, Tobar, supranote 60, at 6-7, and because the Bankruptcy Code is federal law, it trumps state law via theSupremacy Clause. See U.S. CONST. art. VI, cl. 2. By stopping this scramble to be the firstin line to obtain a judgment against the debtor, the automatic stay provides an equitabledistribution of assets by “protecting creditors and making sure that no other parties getmore than their fair share of the bankruptcy estate.” Tobar, supra note 60, at 6.

71 H.R. REP. NO. 95-595, at § 362 (1978), reprinted in 1978 U.S.C.C.A.N. at 6296-97(stating that “[a] race of diligence by creditors for the debtor’s assets prevents [an orderlyliquidation procedure]”).

72 Id.73 Tobar, supra note 60, at 2.74 11 U.S.C. § 362(a) (2000).75 3 COLLIER, supra note 19, at ¶ 362.03. 11 U.S.C. § 101(15) defines an “entity” as

including “any person, estate, trust, governmental unit, and United States trustee.”Furthermore, once property ceases to be property of the estate, there is no longer a stayagainst that property. See infra note 78.

76 Id. 11 U.S.C. § 362(a)(1)-(8) provides:

field and obviates the incentive for a creditor race to the courthouse.70 TheHouse of Representatives squarely addressed this concern while consider-ing the Reform Act.71 The House stated that without the creditor protectionafforded by the stay,

certain creditors would be able to pursue their own remediesagainst the debtor’s property. Those who acted first would obtainpayment of the claims in preference to and to the detriment ofother creditors. Bankruptcy is designed to provide an orderly li-quidation procedure under which all creditors are treated equal-ly.72

Because the stay prohibits creditor actions without the permission of thebankruptcy court, the property of the estate stays intact for equal distribu-tion in the bankruptcy proceedings.73

Through its broad scope, the stay achieves protection for both credi-tors and debtors alike. The stay applies “to all entities”74 who take “almostany type of formal or informal action . . . against the debtor or the propertyof the estate.”75 For example, the stay forbids a creditor from creating, per-fecting, or enforcing a lien against the property of the estate or enforcing aprepetition judgment against the debtor.76 The statute’s broad language


(a) Except as provided in subsection (b) of this section, a petition filedunder section 301, 302 or 303 of this title, or an application filed under section5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay,applicable to all entities of —

(1) the commencement or continuation, including the issuance oremployments of process, of a judicial, administrative, or other action or proceed-ing against the debtor that was or could have been commenced before the co-mmencement of the case under this title, or to recover a claim against the debtorthat arose before the commencement of the case under this title;

(2) the enforcement, against the debtor or against property of the es-tate, of a judgment obtained before the commencement of the case under thistitle;

(3) any act to obtain possession of property of the estate or of propertyfrom the estate or to exercise control over property of the estate;

(4) any act to create, perfect, or enforce any lien against property ofthe estate;

(5) any act to create, perfect, or enforce against property of the debtorany lien to the extent that such lien secures a claim that arose before the com-mencement of the case under this title;

(6) any act to collect, assess, or recover a claim against the debtor thatarose before the commencement of the case under this title;

(7) the setoff of any debt owing to the debtor that arose before thecommencement of the case under this title against any claim against the debtor;and

(8) the commencement or continuation of a proceeding before theUnited States Tax Court concerning the debtor.77 See 11 U.S.C. § 362(a)(1)-(8).78 The stay terminates under section 524(a) once the court grants a discharge and a

“permanent statutory injunction against the collection of discharged claims comes intoeffect.” TABB, supra note 61, § 3.1, at 146.

79 Id.; see Interstate Comm. Comm’n. v. Holmes Transp., Inc., 931 F.2d 984, 987 (1stCir. 1991).

80 TABB, supra note 61, § 6.1, at 334.

allows the automatic stay to apply to both judicial and non-judicial fore-closure sales.77 Furthermore, once the stay arises upon the filing of a case,a creditor who has not completed collection efforts pre-petition forfeitsthose rights until the bankruptcy proceedings have run their course or theproperty over which the creditor wishes to exercise control is no longerproperty of the estate.78 In this way, the automatic stay maintains the statusquo from the commencement of the case until the bankruptcy court’s de-cision.79

B. The Purpose of the Good Faith Purchaser Exception, Section 549(c)

The Code contains several provisions granting the trustee “avoiding”powers, which were designed to further the policy goals of bankruptcy.80


81 Id.82 See 11 U.S.C. §§ 544-51.83 TABB, supra note 61, §6.1, at 331.84 Id. Although the statute of limitations in section 546(a) governs most of the

avoiding powers, section 549 has its own statute of limitations. 11 U.S.C. § 549(d)provides:

An action or proceeding under this section may not be commenced after theearlier of —

(1) two years after the date of the transfer sought to be avoided; or(2) the time the case is closed or dismissed.

85 Harry M. Fletchner, Preferences, Post-Petition Transfers, and TransactionsInvolving a Debtor's Downstream Affiliate, 5 BANKR. DEV. J. 1, 18 (1987).

86 TABB, supra note 61, § 6.44, at 457.87 11 U.S.C. § 549.88 TABB, supra note 61, § 6.44, at 457.89 11 U.S.C. § 549 provides:

(a) Except as provided in subsection (b) or (c) of this section, the trusteemay avoid a transfer of property of the estate—

(1) that occurs after the commencement of the case; and(2)(A) that is authorized only under section 303(f) or 542(c) of this

title; or(B) that is not authorized under this title or by the court.

By providing the trustee with a series of tools to recapture value for thebenefit of the estate, the avoiding powers maximize the ultimate distribu-tion to creditors on an equitable basis.81 These provisions, found in sec-tions 544 through 551 of the Code,82 enable a bankruptcy trustee to setaside, or invalidate, either a transfer made or obligation owed by the es-tate.83 To harness this power, and thus avoid the transfer at issue, the trus-tee must bring a lawsuit under one of the Code provisions before the ex-piration of the statute of limitations.84

Section 549 of the Code embodies one of the many avoiding powersgranted to trustees of the bankruptcy estate. As the other avoiding powersdo, this section serves a purpose “fundamental to bankruptcy law by pre-serving the debtor's assets once a petition has been filed, thus ensuring thatthere will be an estate upon which the bankruptcy process can operate.”85

Under certain conditions, the availability of such powers enables the trust-ee, or the debtor-in-possession in Chapter 11 cases, to avoid transfers ofthe debtor’s property that may undermine this fundamental protection ofthe bankruptcy estate.86 However, what sets section 549 apart from theother avoiding powers is that it governs post-petition transfers of propertyof the estate.87 Thus, from the moment a petition is filed, all transfers aresubject to avoidance unless they fall into a statutory exception.88

Although section 549 provides the mechanism for avoidance,89 this


90 5 COLLIER, supra note 19 at ¶ 549.01. 91 Fletchner, supra note 85, at 17.92 11 U.S.C. § 549(c). The Bankruptcy Code does not define “good faith.” According

to Brown v. Third Nat'l Bank (In re Sherman), “Good faith is not susceptible of precisedefinition and is determined on a case-by-case basis.” 67 F.3d 1348, 1355 (8th Cir. 1995)(citing Consove v. Cohen (In re Roco Corp.), 701 F.2d 978, 984 (1st Cir. 1983)). “Todetermine whether a transferee acts in good faith, ‘courts look to what the transfereeobjectively “knew or should have known”’ instead of examining the transferee’s actualknowledge from a subjective standpoint.” Id. (citing Hayes v. Palm Seedlings Partners (Inre Agricultural Research & Technology Group, Inc.), 916 F.2d 528, 535-36 (9th Cir.1990)). The language of the statute calls for one who has paid “present fair equivalentvalue.” 11 U.S.C. § 549(c). The term “value” appears in over thirty sections of theBankruptcy Code. BFP v. Resolution Trust Corp., 511 U.S. 531, 550 (1993). According tothe Supreme Court in BFP, value generally means “fair market value.” Id. (determiningwhether trustee could avoid a conveyance under Section 548 of the Code). The Court heldthat “a ‘reasonably equivalent value’ for foreclosed property is the price in fact received atthe foreclosure sale, so long as all the requirements of the State’s foreclosure law havebeen complied with.” Id. at 531. The Fifth Circuit, applying the Court’s reasoning,addressed the validity of a purchase made at a tax sale held in violation of the automaticstay and affirmed the district court’s decision to apply the BFP reasoning in the context offoreclosure sales. The court held that “because the tax sale was noncollusive and compliedwith [state] law, it was ‘for present fair equivalent value’ as required by § 549(c).” T.F.Stone Co. v. Harper (In re T.F. Stone Co.), 72 F.3d 466, 467 (5th Cir. 1995).

93 11 U.S.C. § 549(c).94 See Wingo, 89 B.R. at 58 (B.A.P. 9th Cir. 1988) (stating in dicta that when notice

of bankruptcy had not been filed in county recorder’s office, purchaser’s imputed notice ofthe case did not constitute “knowledge” within the meaning of section 549(c)).

95 See 11 U.S.C. § 549(c). However, if the purchaser filed first and had no knowledgeof the commencement of the case but did not pay “present fair equivalent value,” the

power is subject to “very narrow” exceptions, which act as safe harbors inprescribed situations.90 One scholar has suggested that Congress designedthese exceptions “to deal with the problems arising in involuntary casesand to protect good faith purchasers of real property” respectively.91 Inparticular, section 549(c) prohibits the trustee from avoiding a transfer inwhich a purchaser of real property has purchased in good faith withoutknowledge of the commencement of the case and has paid fair value.92

Once a purchaser meets these qualifications, he must properly record hisinterest, subsequent to transfer, in the real estate records of the countywhere the property is located before a copy or notice of the bankruptcypetition is filed in those same records.93 Perfecting an interest in this wayprevents a purchaser from being charged with constructive notice, furtherpaving the way for a proper invocation of the good faith purchaser excep-tion.94 Conversely, failure to perfect an interest could bar a purchaser fromthe protection of section 549(c).95


purchaser is entitled to a lien against the estate for the extent of the value given. Id.; seeTABB, supra note 61, § 6.45, at 460; supra note 92 (discussing the definition of “presentfair equivalent value”).

96 S. REP. NO. 95-989, at 42 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5828; seeNORTON BANKR. L. & PRAC. 2D § 59:5 (2003).

97 Fed. R. Bankr. P. 2015(a); see Fed. R. Bank. P. 2015(a) advisory committee’s note(1987 Amendments) (“The filing of such notice or a copy of the petition is essential to theprotection of the estate from unauthorized post-petition conveyances of real property.”).

98 NORTON BANKR. L. & PRAC. 2d § 59:5 (2003).99 Id.100 Id.101 9B AM. JUR. 2D Bankruptcy § 1844 (West 2003). Moreover, this result is consis-

tent with the purpose of the 1898 Act’s section 21g which showed Congress’s broadconcern for protecting the integrity of and reliance upon the record notice system for realproperty. See Brubaker 2003, supra note 15, at 5.

102 9B AM. JUR. 2D Bankruptcy § 1844 (West 2003).

Likewise, for a trustee to prevail over a good faith purchaser, thetrustee must exercise the right to record notice of the pendency of the casein the land recording offices in all counties where the debtor holds non-exempt property before a purchaser perfects his interest.96 The Code au-thorizes the trustee to record notice in an attempt to put all potentialtransferees of the debtor’s real property on notice.97 Because a trustee maytake steps to record notice at his discretion, the trustee bears the risk ofwhat may follow from neglect.98 Although section 549(c) allows a post-petition purchaser to acquire rights that are “wholly or partially immune”99

from a trustee’s avoiding power, the trustee ultimately can prevent apurchaser from acquiring these rights simply by filing a notice of the pe-tition in the records office before a purchaser records the deed.100

The policy behind this seemingly stringent requirement for filing no-tice is that purchasers of real estate (especially those purchasing at a fore-closure sale, which is a risky proposition at the best of times) are entitledto rely on the real estate records for notice of any defects in the property’stitle.101 Notice of the commencement of a bankruptcy case would put aprospective buyer on notice that the property is untouchable. A diligentpurchaser who finds no notice in the real estate records should be able toproceed under the assumption that no defect exists. Under this system, apurchaser “is not prevented from obtaining the status of a bona fidepurchaser by the mere commencement of the case.”102 Congress designedsection 549(c) to protect innocent purchasers, and section 549(c) willnever protect a mortgagee’s purchasing the debtor’s property at his ownforeclosure sale. Because of the automatic nature of the stay, all creditorsare deemed to be on notice of the commencement of the case. Therefore,


103 Id.104 Id.105 Id.106 TABB, supra note 61, § 6.44, at 457 (citing 11 U.S.C. §§ 549(a), 550(a), 502(h)). A

general unsecured claim receives only a pro rata share of the bankruptcy estate upondistribution in equal proportion to the other creditors. See generally id. § 7.23, at 531-34(discussing payment of unsecured claims in chapter 7 cases); id. § 7.24, at 535-38(discussing payment of unsecured claims in reorganization cases).

because of this imputed knowledge, under no circumstances can a creditormeet the requirements of the good faith purchaser exception.

As originally enacted in the 1978 Code, the 549(c) exception did notapply to a transfer of real property in a county where the bankruptcy casecommenced, and a purchaser was afforded protection only if the propertywas located outside of that county.103 Because the trustee’s avoiding powerin this situation was absolute, the trustee was not required to file notice inthe records of the county of the bankruptcy’s commencement to prevail.104

The 1984 Amendments changed the Code to require a filing in the countywhere the bankruptcy case commenced if the trustee wished to prevailover a good faith purchaser.105

If the buyer fails to meet the requirements of section 549(c), the trus-tee has the power to avoid the transfer. Upon the trustee’s petition, a ju-dicial order will require the purchaser to reconvey the property or submitits equivalent value to the bankruptcy estate in exchange for a general un-secured claim.106 In a Chapter 11 filing in which a debtor needs the prop-erty to carry out a reorganization plan, the prospect of procuring only cashvalue requires the trustee (or debtor-in-possession) to be diligent. By al-lowing the trustee to avoid a transfer, the system rewards those who pro-perly record notice of the petition in all counties where the debtor holds aproperty interest.

III. INTERPLAY BETWEEN THE AUTOMATIC STAY AND THEGOOD FAITH PURCHASER EXCEPTION

Recall that the automatic stay arises instantly upon the filing of apetition and stays all action. Because section 549 governs post-petitiontransfers, the opportunity for a direct clash with the automatic stay emer-ges. Although section 549(a) requires the trustee to bring suit to avoid apost-petition transfer, affirmative avoidance is unnecessary for transfers inviolation of the stay. Such transfers are void unless and until the courtprovides relief by annulling the stay. Section 549(c) provides both anexception to the trustee’s avoiding power and cause for the court to annul


107 See infra note 112 for the text of 11 U.S.C. § 362(d) (2000). 108 See supra notes 5-7 and accompanying text; infra notes 159-64 and accompanying

text.109 See supra notes 5-7 and accompanying text; infra notes 159-64 and accompanying

text.110 See infra notes 138-40 and accompanying text. 111 See supra notes 62-63 and accompanying text; 11 U.S.C. § 362(a) 2000.112 See TABB, supra note 61, § 3.2, at 149-52. Section 362(d) provides in pertinent

part: “On request of a party in interest and after notice and a hearing, the court shall grantrelief from the stay provided under subsection (a) of this section, such as by terminating,annulling, modifying, or conditioning such stay.” 11 U.S.C. § 362(d).

113 Tobar, supra note 60, at 11.114 Id.

the stay under section 362(d).107

A. Actions Taken in Violation of the Stay: Void, Voidable . . . or Does itMatter?

The growing trend to find that a transaction cannot be both in viola-tion of the stay and controlled by section 549 has its foundation in thevoidness principle of the automatic stay. Courts who follow this trendreason that any action that occurs in violation of the stay must be void.108

Courts deem such transactions, including post-petition transfers of a debt-or’s real property, as never having occurred at all; thus, no other section ofthe Code may govern a transfer that does not exist in any tangible form.109

The voidness principle is not absolute, as substantiated by the alternatejudicial interpretation that an act in violation of the stay is merely void-able,110 which in turn allows exceptions, such as the good faith purchaserexception in section 549(c).

1. How a Violation Occurs

As noted previously, the automatic stay of section 362(a) is a self-executing protection that requires no active participation on the part of adebtor, the trustee, or any third party.111 Because filing a bankruptcypetition instantly triggers the stay, a creditor has the burden of seekingrelief from the stay by making a formal request to the court.112 By termi-nating, modifying, or conditioning the stay through the use of this section,the bankruptcy court may lift the stay to permit creditors to take futureactions that otherwise would be prohibited.113 A creditor who fails to abideby this process and instead acts unilaterally to take control over a debtor’sproperty violates the stay.114 Whether a creditor knows of the debtor’s“bankruptcy filing is irrelevant in determining whether the stay was vio-


115 Smith v. London (In re Smith), 224 B.R. 44, 46 (Bankr. E.D. Mich. 1998).116 Id.117 Hon. Eugene R. Wedoff, Circuit Splits 2004: A Discussion of Bankruptcy Issues

Currently in Dispute Among the Courts of Appeals, 2004 No. 9 NORTON BANKR. LAWADVISER 1.

118 Section 362(d) gives the bankruptcy court the power to annul the automatic stay.11 U.S.C. § 362(d); see infra text accompanying notes 138-39.

119 Wedoff, supra note 117.120 See Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 976 (1st Cir.

1997); Fleet Consumer Discount Co. v. Graves (In re Graves), 33 F.3d 242, 248 (3d Cir.1994); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir. 1994); Schwartz,954 F.2d at 574 (9th Cir. 1992); Ellis v. Consol. Diesel Elec. Corp., 894 F.2d 371, 372(10th Cir. 1990); Albany Partners, Ltd. v. Westbrook (In re Albany Partners, Ltd.), 749F.2d 670, 675 (11th Cir. 1984).

121 Smith v. First Am. Bank, N.A. (In re Smith), 876 F.2d 524 (6th Cir. 1989).122 Wedoff, supra note 117 (citing Easley v. Pettibone Mich. Corp., 990 F.2d 905,

911 (6th Cir. 1993)).123 See Tsafaroff v. Taylor (In re Taylor), 884 F.2d 478 (9th Cir. 1989); Phoenix

Bond & Indemn. v. Shamblin (In re Shamblin), 890 F.2d 123 (9th Cir. 1989); Stringer v.Huet (In re Stringer), 847 F.2d 549, 551 (9th Cir. 1988); Sambo’s Rests., Inc. v. Wheeler(In re Sambo’s Rests., Inc.), 754 F.2d 811, 816 (9th Cir. 1985); Wingo, 89 B.R. 54.

124 954 F.2d at 570-71.

lated.”115 This policy applies to all creditors, regardless of notice.116

2. Effectiveness of Actions Taken in Violation of the Stay

Are violations of the stay void or merely voidable? Although there isno dispute among the circuits117 that a bankruptcy court can retroactivelyvalidate an action in violation of the stay pursuant to section 362(d),118 thecourts are split regarding the effect to be given an act in violation of thestay in the absence of a retroactive validation.119

The majority—the First, Second, Third, Ninth, Tenth, and EleventhCircuits—holds that actions taken in violation of the stay are void andwithout legal effect.120 At one time, the Sixth Circuit held that actionstaken in violation of the stay were void,121 but it has since wavered,holding acts in violation “are not void, but are ‘invalid’ and should betreated as void unless annulment would be appropriate.”122 During a periodof uncertainty in the late 1980s, the Ninth Circuit retracted from an earliersteadfast view that stay violations were void.123 Nevertheless, the courtonce again established its firm support of the void rule in 1992 with itsdecision in Schwartz v. United States (In re Schwartz), in which it wasconfronted with the sole issue of whether an action taken in violation of thstay was void or voidable.124

The Seventh Circuit has not ruled on the effectiveness of acts taken in


125 Matthews v. Rosene, 739 F.2d 249 (7th Cir. 1984).126 Tobar, supra note 60, at 41 n.6; see Bronson v. United States, 46 F.3d 1573, 1578

(Fed. Cir. 1995); Picco v. Global Marine Drilling Co., 900 F.2d 846, 850 (5th Cir. 1989);Sikes v. Global Marine, Inc., 881 F.2d 176, 178 (5th Cir. 1989).

127 Wedoff, supra note 117; see Winters v. George Mason Bank, 94 F.3d 130, 136(4th Cir. 1996).

128 Tobar, supra note 60. at 41 n.5; see Riley v. United States, 118 F.3d 1220, 1222n.1 (8th Cir. 1997).

129 308 U.S. 433 (1940); see, e.g., Schwartz, 954 F.2d at 572; Ellis, 894 F.2d at 372;Bowest Corp. v. Ward (In re Ward), 837 F.2d 124, 126 (3d Cir. 1988).

130 Niccolini, supra note 68, at 1669.131 Id. at 1669-70; see Kalb, 308 U.S. at 441-42. 132 Kalb, 308 U.S. at 438. 133 See, e.g., Servico, 144 B.R. at 935 (stating that “[t]he purpose of the automatic

stay will be implemented by declaring void all acts in violation of the automatic stay. Ifsome acts in violation of the automatic stay were not void, debtors would have to affirma-tively challenge such acts if they wished to avoid them.”); accord Schwartz, 954 F.2d at571-72; Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194, 1207 (3rd Cir. 1991).

134 See Niccolini, supra note 68, at 1670-71; Tobar, supra note 60, at 25-26.

violation of the automatic stay under the Code but has held that actions inviolation of the stay under the Bankruptcy Act of 1898 are void.125 Onlythe Fifth and Federal Circuits routinely hold that acts taken in violation ofthe stay are voidable.126 Meanwhile, the Fourth Circuit has expresslyrefused to take a position on this issue,127 and the Eighth Circuit hasdeclined to address it.128

a. The Void Doctrine

Most courts that follow the void rule cite the Supreme Court’s deci-sion in Kalb v. Fuerstein as precedent.129 In this seminal case, the Court,“relying heavily upon legislative history and congressional intent,”130

concluded the bankruptcy laws were intended to “[relieve] debtors fromthe necessity and expense of litigation.”131 As a result, the Supreme Courtheld that the Wisconsin Supreme Court’s earlier decision to confirm aforeclosure sale in violation of the stay was void because it was issuedwithout authority of law.132

As a natural progression, those who base their statutory interpretationof the present Code on policy considerations tend to portray the voiddoctrine as an absolute to further their cause.133 Proponents cite predict-ability and the importance of the automatic stay’s fundamental protectionfor debtors as the primary reasons for treating all violations of the stay asnull and void.134 As an absolute remedy, the void doctrine places a burdenon the creditor to seek relief before taking an otherwise prohibited action


135 See Schwartz, 954 F.2d 569; In re Garcia, 109 B.R.335 (Bankr. N.D. Ill. 1989).136 The Garcia court noted that “[t]his may be an acceptable risk to some creditors

when measured against a delayed prorata distribution.” 109 B.R. at 340.137 Schwartz, 954 F.2d at 571. “If violations are void . . . debtors are afforded better

protection and can focus their attention on reorganization.” Id. 138 See 11 U.S.C. § 362(d); see, e.g., Sikes, 881 F.2d at 176; In re Oliver, 38 B.R. 245

(Bankr. D. Minn. 1984).139 See 11 U.S.C. § 362(d); see, e.g., Sikes, 881 F.2d at 176, Oliver, 38 B.R. 245.140 See, e.g., Sikes, 881 F.2d at 176, Oliver, 38 B.R. 245.141 Brubaker 2003, supra note 15, at 3.

against the debtor.135 Creditors who acquire property from debtors withoutthe bankruptcy court’s permission run the risk the transaction will bedeclared void and legally ineffective.136 Therefore, a void standard givesdue deference to the policy behind the Code by protecting debtors fromunwarranted collection efforts and by restraining creditors from aggressiveactions. A void standard also preserves the property of the estate and pre-vents an inequitable distribution of the estate’s assets.137

b. The Voidable Doctrine

Some courts hold stay violations are merely voidable because aviolating party may seek relief from the stay under section 362(d) byrequesting an annulment of actions already taken in violation of the stay.138

A court-ordered annulment retroactively declares the stay to be void and,in effect, ratifies the creditor’s violating act.139 Proponents of the voidabledoctrine argue that a void rule would render section 549(c) meaningless,rather than acting as a specific statutory exception to the stay.140 This viewmakes more sense, particularly when considering the overlap betweentransactions in violation of the automatic stay and those transactions sub-ject to avoidance by the trustee. Because transfers subject to avoidingpowers are voidable rather than void (because a trustee must bring alawsuit to avoid the transfer), both section 362(a) and section 549 wouldgovern the transfer at issue. Thus, courts may use section 549(c) as anexception to section 549(a) to validate a transfer made in violation of theautomatic stay.

3. The Void/Voidable Distinction Is One Without Substance

Given the bankruptcy court’s power to annul the automatic stayretroactively, the debate over whether a violation is void or voidable isnothing more than “a matter of mere semantics.”141 Moreover, the goodfaith purchaser exception functions under both constructions, albeit indiffering capacities. When a court finds an automatic stay violation is


142 See, e.g., Siciliano, 13 F.3d at 751 (holding that the bankruptcy court erred indismissing the petitioner’s motion for relief from the automatic stay on the basis that apost-petition foreclosure sale was void, rather than voidable, and remanding the case for adecision on whether relief should be granted by annulling the stay and validating thesheriff’s sale).

143 Brubaker 2003, supra note 15, at 3. 144 Id. For example, the Taylor court found that the general rule that actions taken in

violation of the automatic stay are void and without legal effect was “limited . . . by theprotections afforded a bona fide purchaser of real estate by bankruptcy and state realproperty laws.” Taylor, 884 F.2d at 483 (citing 11 U.S.C. § 549(c) (2000) and 2 COLLIERON BANKRUPTCY ¶ 362.11 (15th ed. 1989)); see Carpio v. Smith (In re Carpio), 213 B.R.744, 750 (Bankr. W.D. Mo. 1997) (denying a request to set aside a foreclosure sale byreasoning that because this post-petition sale of real estate was void, the section 549(c)exception protected the purchaser).

145 Ford, 296 B.R. at 543 (citing Elbar Investments, Inc. v. Pierce (In re Pierce), 272B.R. 198, 208-09 (Bankr. S.D. Tex. 2001)).

146 Schwartz, 954 F.2d at 574.

voidable, and thus capable of cure, the court invites grounds for an-nulment.142 The good faith purchaser exception acts as one such basis. Thepurchaser has the burden of seeking stay relief “under § 362(d), but aqualifying sale under § 549(c) presumably would establish ‘cause’ withinthe meaning of § 362(d)(1)” for such relief to be granted.143 Moreover,some courts that hold that all stay violations are void view “§ 549(c)’sexpress protection for a good faith purchaser of real property [as] anexception to the principle that a post-petition transfer in violation of thestay is void.”144 Regardless of the construction given by courts, “theconsistent result is that transactions or occurrences in violation of the stay,whether void or voidable, are invalid and without legal effect unless anduntil the stay is annulled through retroactive relief from it.”145 Therefore,the voidness principle is not an absolute; courts have room to grant theprotection of the good faith purchaser exception. In fact, the Ninth Circuitstated that “[s]ubsection 549(c) is an exception to section 362 regardless ofwhether violations of the automatic stay are void or merely voidable.”146

Finally, the void/voidable distinction is without substance becauseneither interpretation diminishes the policy of the automatic stay. Forexample, in a case involving a foreclosure sale conducted in violation ofthe stay, the sale will be considered invalid unless and until the courtvalidates it by retroactively annulling the stay. In cases in which the courtgrants the protection of the good faith purchaser exception, the stay ap-plies against the violating party. Because the court always deems creditorsto be on notice of the commencement of case, in this example, the creditorconducting the sale may be liable for sanctions. On the other hand, if the


147 See, e.g., Commw. Mortgage Co. of Am. v. Konowitz (In re Konowitz), 905 F.2d55 (4th Cir. 1990); Ward, 837 F.2d 124; Shaw v. County of San Bernadino (In re Shaw),157 B.R. 151 (B.A.P. 9th Cir. 1993); Shah, 2001 Bankr. LEXIS 380, at *15.

148 See, e.g., Konowitz, 905 F.2d at 56-57 (assuming applicability of section 549(c) topost-petition foreclosure sales, but holding that purchaser did not perfect his interest asrequired by the statute); Ward, 837 F.2d at 126-27 (assuming section 549(c) was anexception to section 362(a) but finding that purchaser’s failure to record the deed made thesection 549(c) exception unavailable); see also Carpio, 213 B.R. 744; D’Alfonso v.A.R.E.I. Inv. Corp. (In re D’Alfonso), 211 B.R. 508 (Bankr. E.D. Pa. 1997); In re McDon-ald, 210 B.R. 648 (Bankr. S.D. Fla. 1997); Bago, 149 B.R. 610.

149 See, e.g., Lusardi, 329 F.3d 1076; Mitchell, 279 B.R. 839; Glendenning, 243 B.R.629; Smith, 224 B.R. 44; Servico, 144 B.R. 933.

150 See, e.g., Mitchell, 279 B.R. 839; Glendenning, 243 B.R. 629; Smith, 224 B.R. 44;Servico, 144 B.R. 933.

151 329 F.3d 1076.

debtor has enough advance notice of the proposed sale, the bankruptcycourt may enjoin the creditor from conducting it. Therefore, the argumentover whether an action taken in violation of the stay is void or voidableshould not be a determinative factor in the court’s analysis of whether togrant the protection of section 549(c) to qualifying purchasers.

B. The Growing Minority Trend

1. Lusardi Signals the Change in the Growing Minority Trend

The case law involving the good faith purchaser exception for acreditor-initiated sale of the debtor’s real property that violates theautomatic stay has shifted dramatically over the past decade. Recent caselaw departed markedly from the earlier fact-intensive approach involvingan analysis of whether the purchaser met the requirements of subsection549(c), which was the sole determination in holding whether the subsec-tion’s protection applies.147 In theory, finding that a purchaser qualified forthe exception to a trustee’s power to avoid certain post-petition transfersof the debtor’s property would enable the court to protect the purchaser.148

However, many courts now apply an ironclad rule that the exception isinapplicable to any involuntary transfer that violates the automatic stay,therefore never reaching this analysis at all.149 A series of bankruptcy courtdecisions developed this new standard for assessing the relationshipbetween the good faith purchaser exception and the automatic stay.150 TheNinth Circuit’s opinion in Lusardi adopted the rule most recently at theappellate level.151

The facts of Lusardi evince the tension between the automatic stayand the good faith purchaser exception that occurs when a purchaser


152 Id. at 1078-79; see also T.F. Stone Co., 72 F.3d at 468; Konowitz, 905 F.2d at 57;Taylor, 884 F.2d at 483; Shamblin, 890 F.2d at 126-27; In re Walker, 861 F.2d 597, 599-600 (9th Cir. 1988); Ward, 837 F.2d at 127; In re Allen, 816 F.2d 325, 327-28 (7th Cir.1987).

153 Lusardi, 329 F.3d at 1078.154 Id.155 Id.156 Id.157 Id. (citing In re 40235 Wash. St. Corp., No. 90-01612-LM11 (Bankr. S.D. Cal.

filed May 15, 1990)).158 Id. at 1079.159 Id.160 Id. In the appellant’s brief to the Ninth Circuit, Lusardi argued that a property’s

“present fair equivalent value” in a forced sale under section 549(c) is “the price paid at thesale under competitive conditions and in the absence of evidence of any collusion,” as heldby the Fifth Circuit in Stone. Brief for Appellant, at 14, n.5, 40235 Wash. St. Corp. v.Lusardi, 329 F.3d 1076 (9th Cir. 2001) (Nos. 01-56644, 01-56801), at 2001 WL 34110714(citing Stone, 72 F.3d at 470).

requests section 549(c) protection despite the fact the transfer at issueviolated the stay.152 The debtor in this case was 40235 Washington StreetCorporation (“WSC”), a corporation formed solely to acquire an apart-ment complex in Palm Desert, California.153 At the time of purchase, thereal estate taxes on the property were in default and the property wasscheduled to be sold at a county tax auction.154 WSC filed a Chapter 11bankruptcy petition the very next day, but despite informing the taxcollector of its filing, the tax sale proceeded as scheduled in direct viola-tion of the automatic stay.155 After competitive bidding, the property wassold to an individual, W.C. Lusardi, for $269,500.156 The bankruptcy courtdismissed WSC’s petition after the tax sale, finding WSC had filed in badfaith.157

WSC retained possession of the property and subsequently initiated anaction in federal district court to quiet title, contending Lusardi neveracquired title because the transaction was void as a violation of the auto-matic stay.158 Lusardi countered that section 549(c) of the Code protectedhis purchase because he was a good faith purchaser without knowledge ofthe bankruptcy petition and had paid fair equivalent value.159 The districtcourt, using the older analytical model, which assumes that section 549(c)protects qualifying purchasers, held that Lusardi did not pay “present fairequivalent value” within the meaning of section 549(c), nor did he prop-erly perfect his purchase by recording the deed, as required by the statute,to invoke the exception.160 The district court quieted title in favor of


161 Lusardi, 329 F.3d at 1079.162 Id.163 Id. at 1080-83.164 See, e.g., Smith, 224 B.R. at 46 (first determining that “[b]ecause the foreclosure

sale was conducted after [debtor] filed her . . . petition, it violated § 362(a)(3), which staysany act to obtain possession of the property of the estate”); Servico, 144 B.R. at 934(beginning its analysis with the sentence “[purchaser] concedes that the automatic stayprovided by 11 U.S.C. § 362 has been violated”).

165 Mitchell, 279 B.R. at 841 (citing 11 U.S.C. § 362(a) (2000)).166 See, e.g., Smith, 224 B.R. at 46 (finding pursuant to Easley v. Pettibone Michigan

Corp., 990 F.2d 905, 911 (6th Cir. 1993), a foreclosure sale held after debtor filed aChapter 13 petition was void). The court stated that “[a]ctions taken in violation . . . are . . .voidable and shall be voided absent limited equitable circumstances.” Id.

167 Ford, 296 B.R. at 546 (discussing Lusardi, 329 F.3d 1076).168 Id.

WSC.161

Upon Lusardi’s appeal, the Ninth Circuit affirmed the decision of thelower court on other grounds without reaching the question of whetherLusardi met the requirements of the good faith purchaser exception.Instead, the court held that “contrary to the district court . . . section 549(c)of the Bankruptcy Code does not create an exception to the automatic stayprovision.”162 The Ninth Circuit followed the growing minority view andpurported to rely on textual, structural, and policy arguments to find thegood faith purchaser exception did not apply to a transfer of real propertyin violation of the automatic stay.163

2. The Courts’ New Approach to the Relationship Between Sections362(a) and 549(c)

The threshold question in these cases is whether the transaction atissue was a violation of the stay.164 Filing a bankruptcy petition stays,among other things, “any act to enforce pre-petition claims or liens againstproperty of the estate or of the debtors, or to exercise control over theproperty of the estate.”165 Parties usually do not dispute that a post-petitionforeclosure sale, which transfers the debtor’s property, violates the auto-matic stay.166 Once this conclusion has been reached, the analysis focuseson whether the violation of the stay is subject to annulment or reaffirma-tion by the trustee.

The heart of the Lusardi court’s reasoning was that any action taken inviolation of the stay is without legal effect unless the court annuls the stayand ratifies the act.167 Accordingly, under the powers granted by section549(a), a trustee cannot “avoid” an act that has no legal effect.168 Propo-nents of this stance reason that only a valid and legally effective transfer is


169 Id.170 Id. The Ford court looked to Elbar Inv. Inc. v. Pierce (In re Pierce), 272 B.R. 198

(Bankr. S.D. Tex. 2001), to “prove” that section 549 did not encompass the actionsgoverned by section 362, reasoning that section 549(c) was not an available defense in anaction for violation of the stay. The Pierce court intimated the words “void” and “void-able” were interchangeable and stated that either meant an act was invalid unless ratifiedby judicial action. Conversely, the word “avoidable” means the act was valid but may beset aside by a judicial ruling. Therefore, the court reasoned section 549(c) is an exceptiononly to avoidable actions and is not within the ambit of a transaction already deemed voidby violating the automatic stay. Id.

171 Brubaker 2003, supra note 15, at 3.172 Id. (citing Glendenning, 243 B.R. at 634).173 954 F.2d 569, 573-74 (9th Cir. 1992).

subject to avoidance.169 Following the Ninth Circuit’s decision in Lusardi,the Bankruptcy Court for the Northern District of Georgia distinguishedacts that are void or voidable from acts that are avoidable and concludedthat “[t]he language of § 549(c) . . . precludes its application to a transferin violation of § 362(a).”170

3. These Courts Have Misinterpreted the Scope of Sections 362(a)and 549(c)

Reasoning that section 362 and section 549 cannot both govern a post-petition transfer stems only from certain “incomplete and erroneous” as-sumptions about the intended scope of the automatic stay and the trustee’savoiding powers for post-petition transactions.171 Chiefly, the courts thatsubmit the sections do not overlap consider the intended function of thegood faith purchaser exception as “protect[ing] against a fraudulent debtorselling real property to an innocent purchaser who has no knowledge ofthe pendency of the bankruptcy case.”172 The genesis of this argumentseems to come from an earlier Ninth Circuit case, In re Schwartz.173 InSchwartz the Ninth Circuit tried to reconcile sections 362 and 549 andstated:

[A] straightforward analysis of section 549 reveals that it is notintended to cover the same type of actions prohibited by the au-tomatic stay nor rendered moot by section 362’s voiding of allautomatic stay violations. Section 549 applies to unauthorizedtransfers of estate property which are not otherwise prohibited bythe Code. In most circumstances, section 549 applies to transfersin which the debtor is a willing participant. . . . .Section 362’s automatic stay does not apply to sales or transfers


174 Id. (internal citations omitted).175 Id.; see Glendenning, 243 B.R. at 633; accord Lusardi, 329 F.3d 1076; Mitchell,

279 B.R. at 842-43; Ford, 296 B.R. at 548 (finding that section 362(a) prohibits involun-tary removal of assets and section 549(a) provides a remedy for avoiding unauthorizedvoluntary transfers, with subsection (c) offering an exception in limited circumstances).

176 See, e.g., Mitchell, 279 B.R. at 842-43; Ford, 296 B.R. at 549; Glendenning, 243B.R. at 633; Smith, 224 B.R. at 48; see also Ralph Brubaker, Exploring the RelationshipBetween § 362(a) and § 549(c), BANKR. L. LETTER, May 2000, at 9-10 [hereinafterBrubaker 2000].

177 See, e.g., Mitchell, 279 B.R. at 842-43; Ford, 296 B.R. at 549; Glendenning, 243B.R. at 633; Smith, 224 B.R. at 48.

178 See, e.g., Mitchell, 279 B.R. at 842-43; Ford, 296 B.R. at 549; Glendenning, 243B.R. at 633; Smith, 224 B.R. at 48.

of property initiated by the debtor. Thus, section 549 has a pur-pose in bankruptcy beyond the potential overlap with section 362.In other words, the automatic stay can void any violation and stillleave section 549 with a valid and important role in bankruptcy.Section 549 exists as a protection for creditors against unautho-rized debtor transfers of estate property.174

Drawing from this language, this minority view posits that section 549(c)is directed only at a debtor’s voluntary transfers and section 362 “does notapply to sales or transfers of property initiated by the debtor.”175

Taken together, these assumptions have allowed the courts that followthis minority view to conclude the only purpose of section 549 is avoidingtransfers that do not violate the automatic stay.176 According to this inter-pretation, section 362(d) provides the correct mechanism for voidingtransfers that violate the automatic stay because these transfers are not thedomain of section 549.177 Meanwhile, because section 549 is not a basisfor avoiding a post-petition sale of the debtor’s real property, the sectionfunctions independently of the automatic stay by allowing the trustee toavoid miscellaneous post-petition transfers of estate property, includingunauthorized transfers made by the debtor.178 In Lusardi the Ninth Circuitseparated the functions of the relevant code sections:

The purpose of the automatic stay is to protect debtors from theircreditors while bankruptcy proceedings are underway. . . . Thepurpose of section 549, in contrast, is to provide a just resolutionwhen the debtor himself initiates an unauthorized postpetitiontransfer. The general rule in such situations is that the trustee isauthorized to avoid the transfer in order to protect the creditors.Section 549(c) creates an exception to that rule to protect innocentpurchasers whom the debtor has defrauded. As sections 362 and


179 329 F.3d at 1081-82 (internal citations omitted).180 Mitchell, 279 B.R. at 843; see Lusardi, 329 F.3d. at 1081-82. 181 Brubaker 2003, supra note 15, at 3.182 Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 756 (1975) (Powell, J.,

concurring). 183 Brubaker 2003, supra note 15, at 3.184 Id.185 Id. (citing 11 U.S.C. § 101(54) (2000)).186 11 U.S.C. § 362(a)(3).

549 are designed to protect different parties, it is not surprisingthat an exception to one would not apply to the other.179

The Lusardi court agreed with a previous Ninth Circuit BankruptcyAppellate Panel, which said that “Congress saw fit to protect [bona fidepurchasers] in § 549 but not in § 362, presumably expressing its intent toafford greater protection to [those] who purchase from debtors than tothose purchasing at sales violating the automatic stay.”180 Both the text andhistory of the statutory provisions at issue contradict the assumptions onwhich the Lusardi court’s interpretation of section 549(c) depends.181

a. The Statutory Text and Structure of the Code Allow Section362 and Section 549 to Overlap

When addressing issues of statutory construction, the starting point isthe language of the statute itself.182 Although the Lusardi court and its pre-decessors made a strong argument, the functions and scope of the auto-matic stay and the section governing post-petition transactions cannot beseparated neatly based upon the statutory language of those provisions.183

First, section 549 is not limited to voluntary transfers, nor to fraudulenttransfers made by the debtor, as the minority view suggests.184 The stayapplies to any unauthorized post-petition transfer of property of the estate,defined in section 101(54) as “every mode . . . voluntary or involuntary, ofdisposing of or parting with property or with an interest in property,including . . . foreclosure of the debtor’s equity of redemption.”185 Second,the language of section 362 refutes the presumption that section 362 doesnot apply to the debtor’s sale or transfer of property. Section 362(a)(3)stays “all entities,” including the debtor, from “any act to obtain posses-sion of property of the estate or of property from the estate or to exercisecontrol over property of the estate.”186 Third, the minority view that theintended function of section 549(c) is only to protect “against a fraudulentdebtor selling real property to an innocent purchaser who has no knowl-


187 Brubaker 2003, supra note 15, at 3 (citing Glendenning, 243 B.R. at 634).188 See 11 U.S.C. § 549.189 Brubaker 2000, supra note 176, at 9.190 Brubaker 2003, supra note 15, at 4.191 11 U.S.C. § 549(a).192 See Stone, 72 F.3d at 468 (finding a post-petition sale of property extinguished the

debtor’s equity of redemption and was an unauthorized transfer within the meaning ofsection 549(a)).

193 See supra note 89 for the text of section 549(a).194 Brubaker 2003, supra note 15, at 3 (quoting Smith, 224 B.R. at 47) (emphasis

added); see Servico, 144 B.R. at 936.

edge of the pendency of the bankruptcy case”187 has no basis in the text.188

The paramount concern of statutory construction is accurately inter-preting the statute. According to the Code’s text, the two Code provisionsat issue are not meant to be viewed as mutually exclusive. Although thelanguage of section 362 contains no express authority allowing a trustee toavoid post-petition transfers that violate the stay, this authority is implicitin the stay’s injunctive nature.189 Section 549, on the other hand, doesprovide the trustee with express authority to avoid post-petition transfers.Reading sections 549 and 362 together leads to the conclusion that section549, as an independent basis for avoiding certain post-petition transfers,also encompasses any activity in violation of the stay because all post-petition transfers of a debtor’s property (including an individual debtor’stransfer) are violations of the stay. Phrased another way, section 549 pro-vides additional authority for avoiding post-petition transfers.190 The lang-uage of section 549(a), which states the trustee’s avoiding powers underthis section apply to “any unauthorized post-petition transfer of propertyof the estate,”191 further warrants this conclusion. When confronted withthe relationship between sections 362 and 549, the Fifth Circuit hasinterpreted a post-petition sale (consequently one prohibited by the auto-matic stay) as an unauthorized transfer within the meaning of section549(a).192

Perhaps the only way to

interpret § 549(a)’s import as addressing post-petition transfersnot violating the stay is to read § 549(a)(2)(B)193 in the manner ofthe [In re] Smith court: “§ 549(a) applies only to postpetitiontransfers that are neither authorized nor expressly prohibited. Itdoes not apply to a transfer in violation of the automatic staybecause such a transfer is expressly prohibited.”194

This interpretation fails to consider the plain, ordinary, natural meaning of


195 Brubaker 2003, supra note 15, at 3.196 Id.197 See Kelly v. Robinson, 479 U.S. 36, 43 (U.S. 1986) (Powell, J., concurring)

(quoting Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 221 (1986): “In expoundinga statute, [the court] must not be guided by a single sentence or member of a sentence, butlook to the provisions of the whole law, and to its object and policy.”).

198 Brubaker 2000, supra note 176, at 9.199 Id.200 Id.201 Id.202 Section 362(a) provides that the stay applies “[e]xcept as provided in subsection

(b) of this section.” 11 U.S.C. § 362(a). The Lusardi court found the language of section362 “suggests that the 18 listed exceptions are the only exceptions to the automatic stay.”329 F.3d at 1080. The Lusardi court relied heavily on the Ninth Circuit Bankruptcy

the phrase “transfer that is not authorized,” contained in section549(a)(2)(B).195 As one scholar explained: “Surely . . . a ‘transfer that isnot authorized under’ the Code includes a transfer that is prohibited andenjoined by the Code; a prohibited transfer is manifestly not autho-rized.”196

Although a textual interpretation of the statute is certainly the startingpoint, the Supreme Court has expressed clearly the importance of takingan integrated view when interpreting the Code.197 Although the Code’sdrafters did not specify the avoidance of transfers stayed by section 362 inthe language of section 549(a), they have indicated that using authorityfound in other parts of the Code to authorize stayed actions is perfectlyacceptable and expected.198 For example, section 362(a)(3), which prohib-its “any act to obtain possession . . . from the property of the estate,”seems to prohibit the trustee or debtor-in-possession from selling estateproperty in the ordinary course of business.199 However, section 363(c)(1)expressly authorizes sales made in the ordinary course of business.200

Thus, by employing the more inclusive language, “not authorized by theCode,” rather than specifying actions that are prohibited by the stay,section 549(a) acknowledges the operative structure of the Code.201 Thedrafters intended section 549(a) to be broader than section 362(a); there-fore, section 549(c), although an exception to section 549(a), is also anexception to the voiding effect of section 362(a). Conversely, the NinthCircuit’s understanding of the relationship between sections 362 and 549prevents this harmonious interpretation of the Code.

The court’s own language in Schwartz contradicts its reasoning inLusardi that Congress could not have intended section 549(c) to work asan exception to the stay because the text of section 362(b) did not list sec-tion 549(c) as an exception to the stay.202 The Schwartz court stated that


Appellate Court’s decision in Mitchell, in which the court stated “[it] is obvious thatCongress knows how to create an exception to § 362, as it has provided eighteen of them.Transfer of estate property to a BFP is not among them” and concluded that § 549(c) “is adefense to an avoidance action by the trustee, no more, no less.” Mitchell, 279 B.R. at 844.

203 954 F.2d at 574.204 Id. (emphasis added).205 See supra notes 47-48 for the language of sections 70d and 21g respectively and

accompanying text for a discussion regarding the enactment of these pre-Code sections.206 “This new subdivision in Section 70 is suggested by the uncertainty as to whether

bona fide transactions for adequate present value after bankruptcy can in any case be pro-tected.” STAFF OF HOUSE COMM. ON THE JUDICIARY, 74TH CONG., ANALYSIS OF H.R.12889, at 220, 229 (1936).

207 COMMISSION REPORT, supra note 56, at 191.208 Id. at 162. Proposed Section 4-605 provided in pertinent part:

(a) Postpetition Transactions. Except as provided in section 4-208(c), atrustee may recover property of the estate transferred after the filing of a petitionunless (1) the transfer was prior to the filing of notice pursuant to subdivision(c), (2) the transferee did not know of the filing of the petition, and (3) thetransferee gave a reasonably equivalent value . . . he shall nevertheless bereimbursed for the present value given. . . .

“subsection 549(c)’s protection of good faith purchasers carves out anextremely specific and narrow exception to the automatic stay when sec-tion 362 overlaps subsection 549(c)”203 and “Congress drafted subsection549(c) to protect good faith purchasers where the sale would otherwise besubject to avoidance under section 549 or void under section 362.”204

b. Legislative History Shows Congress Intended Section 549(c)to Protect Innocent Purchasers

In addition to the text of the subsection itself, the subsection’s legisla-tive history clearly shows Congress intended section 549(c) to providerelief for post-petition purchasers of the debtor’s real estate in cases inwhich the automatic stay otherwise would prevent a valid property trans-fer. Beginning with this subsection’s earliest predecessors, sections 70dand 21g of the Bankruptcy Act,205 Congress sought to provide statutoryprotection for innocent post-petition purchasers of property in the face ofunpredictable judge-made law.206 Building on this foundation in its finalreport, the Bankruptcy Commission stated the general thrust of its recom-mendations regarding post-petition transactions was to protect thosedealing with the debtor in good faith.207

To this end, the Bankruptcy Commission’s draft statute contained sec-tion 4-605, a specific provision dealing with post-petition transfers, whichmodified and expanded sections 70d and 21g and acted as a precursor tosection 549(c) of the Code.208 In the notes accompanying this provision,


(c) Constructive Notice. (1) For the purposes of subdivision (a), notice of the filing of a petition

may be given by filing notice(A) in the office or offices designated by state law for the filing or

recording of a document in order to perfect a security interest in personal pro-perty, real property, or fixtures, as the case may be, or, whenever the state lawdoes not permit such filing or recordation, in the office of the clerk of the UnitedStates district court in the judicial district in which the property is situated, or

(B) in the office of the Recorder of Deeds of the District ofColumbia, if the property is situated in the District of Columbia.

(2) For the purpose of the subdivision, real property and fixtures aresituated at their physical location, and personal property is situated at the re-sidence of the owner or, if owned by a corporation or partnership, at its principaloffice. The form of the notice to be filed shall be prescribed by the administrator.209 Id. at 191 (emphasis added). 210 Lusardi, 329 F.3d at 1081-82.211 Id.

the Bankruptcy Commission offered the following commentary:

Recognizing that there is a need to protect the assets of the estate,but in a manner that will also furnish substantial protection tothird parties dealing with the debtor, the Commission recommendsa method of giving constructive notice for the purpose of prevent-ing a transferee from acquiring an asset free and clear of any claimof the trustee. The present Act vests title in the trustee as of thedate of the petition. Limited protection is given third personsdealing with the debtor after the filing of a petition, but this pro-tection is hedged with exceptions and complexities, and does notexpressly extend to any transactions with the exception of certainreal property transactions, occurring after the filing of a volun-tary petition or after an adjudication pursuant to an involuntarypetition.209

This excerpt indicates the Bankruptcy Commission intended to protect allinnocent purchasers meeting the proper criteria. The Ninth Circuit’sposition in Lusardi, which seeks to separate debtor-initiated transactionsfrom creditor-initiated transactions, is directly contrary to that intention.210

Moreover, the Bankruptcy Commission stated that “[t]his section isnew and replaces the provisions of §§ 21g and 70d of the Act.”211 Mostnotably, the proposed section 4-065 departed from the former section 21gwith respect to the debtor’s real property in that the mere filing of apetition in the bankruptcy court would no longer act as constructive notice


212 Id. at 163.213 Rochelle and Feder, supra note 39, at 28 (citing H.R. 8200, 95th Cong. (1977) and

S. 2266, 95th Cong. (1977)). 214 Id.215 Id.216 S. REP. NO. 95-989, at 42 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5828.217 Act of Nov. 6, 1978, Pub. L. No. 95-598, 1978 U.S.C.C.A.N. (92 Stat.) 2601.218 Act of July 10, 1984, Pub. L. No. 98-353, 1984 U.S.C.C.A.N. (98 Stat.) 379.219 Act of Nov. 6, 1978, Pub. L. No. 95-598, 1978 U.S.C.C.A.N. (92 Stat.) 2601.220 Act of July 10, 1984, Pub. L. No. 98-353, 1984 U.S.C.C.A.N. (98 Stat.) 379.

under any circumstances.212 The Bankruptcy Commission incorporatedsome of these ideas concerning notice into the Code as introduced byHouse Bill 8200 and Senate Bill 2266, both of which contained a deriva-tive of the former section 21g.213 These sections specified that filing thepetition gave constructive notice of the commencement of a case to po-tential transferees of a debtor’s real property only in those counties wherethe petition had been recorded in the land recording offices.214 Both billswould have permitted a valid judicial sale of real property outside thecounty where the bankruptcy petition was filed if this recording require-ment had been met; however, the Senate Bill also would have allowed apurchaser at a non-judicial sale to obtain the status of a bona fide pur-chaser under identical circumstances.215 Furthermore, the accompanyingSenate Report stated it did not require this recording in the county wherethe bankruptcy case was commenced.216

As originally enacted, Code section 549(c) did not require the bank-ruptcy trustee to record in the same county where the case was com-menced to prevent a purchaser from obtaining bona fide status.217 How-ever, the 1984 Amendments to the Code eliminated this anomaly, andCongress created a requirement for recording notice of the petition, whichincluded filing in the same county in which the case was commenced if atrustee wanted to defeat a good faith purchaser for fair equivalent value.218

Another important change concerned the distinction between judicial andnon-judicial sales. Originally, section 549(c) provided protection to all ju-dicial sale purchasers and did not require that a purchaser be withoutknowledge of the pending case or give fair equivalent value.219 The 1984Amendments deleted the specific reference to judicial sale purchasers,making all post-petition purchasers of a debtor’s real property subject toidentical requirements.220

The evolution of this legislation shows a consistent congressionalintent to provide a statutory exception to the voiding effect of the formercommon law, and currently codified, automatic stay. To follow cong-


221 Brubaker 2003, supra note 15, at 5.222 Id.223 See Shah, 2001 Bankr. LEXIS 380, at *1.

ressional intent, courts must retract from the current trend, which finds thatsection 549(c) is not a defense to avoidance actions for transfers of realproperty conducted in violation of the automatic stay. Rather, courtsshould substitute a close scrutiny of the requirements for invocation of thegood faith purchaser exception as the sole means for deciding its applica-tion.

IV. PROPOSAL: A RETURN TO A FACT-INTENSIVE ANALYSIS

While remaining deferential to the bankruptcy goals of a debtor’sfresh start and creditor equality, which the automatic stay furthers, courtsshould treat section 549(c) as a means for annulling the stay in cases inwhich it is properly invoked. Adopting this course and allowing a post-petition purchaser to use the offered protection even when the purchaseviolates the stay would lead to a more concise, efficient analysis. Thismethod would clarify the Code’s protection offered to post-petition pur-chasers of real property and limit litigation to the sole issue of whether theexception is applicable to the facts presented based solely on the require-ments provided in the text of section 549(c). Furthermore, this construc-tion achieves harmony between the Code sections to the greatest extentpossible and allows both sections to serve meaningful functions.

The statutory text itself lends credence to this construction. Further-more, because the legislative history shows Congress intended section549(c) to replace the Bankruptcy Act’s section 21g, to conclude that thesections serve the same purpose is logical. Although Congress had enactedsection 21g as “a statutory exception to the voiding effect of the commonlaw automatic stay,”221 courts construe its modern day counterpart, section549(c), as an exception to the voiding effect of the Code’s statutoryautomatic stay. Under this interpretation, the courts only need to scrutinizethe facts in relation to the requirements for meeting the good faith pur-chaser exception to decide whether the purchaser may invoke the excep-tion.222

In the wake of the growing trend among bankruptcy courts to find thegood faith purchaser exception inapplicable to transactions conducted inviolation of the automatic stay, a memorandum opinion from the Bank-ruptcy Court for the Eastern District of Pennsylvania relied on the estab-lished law of the circuit in denying a mortgagee’s motion to void a judicialtax sale of the debtor’s real property.223 After concluding that section


224 Id. at *25 (citing In re Ward, 837 F.2d 124 (3d Cir. 1988)). The Shah court notedthe Third Circuit in Ward “specifically recognized in the context of a transaction found toviolate the stay, that § 549(c) provides an exception to the avoiding power granted under§ 549(a).” Id. at *17. Although the purchaser in Ward failed to meet the perfectionrequirement, the case established in the Third Circuit “that § 549(c) provides an exceptionto the principle that actions in violation of the automatic stay are void.” Id. at *18; seeAdmin. of Veterans Affairs v. Bernard (In re Bernard), 21 B.R. 287, 289 (Bankr. E.D. Pa.1982) (finding section 549(c) is an exception to the avoidability of post-petition transfers,including those which violate the stay); Siciliano, 13 F.3d at 751 (finding section 362(a)provides proper grounds for the bankruptcy court to annul the automatic stay and effec-tively to validate a sheriff’s sale).

225 Fed. R. Bankr. P. 6001 states that “[a]ny entity asserting the validity of a transferunder § 549 of the Code shall have the burden of proof.” See Carpio, 213 B.R. at 751(holding the burden is on the party seeking to invoke section 549(c)’s protection to showall the required elements); Bryant v. Woodland (In re Bryant), 103 B.R. 95, 101 (Bankr.E.D. Pa. 1989) (holding “[t]he burden of proof is shouldered by [the party seeking] touphold the validity” of a transfer under section 549(c)).

226 Shah ultimately was decided on the basis of petitioner mortgagor’s lack ofstanding to bring an avoidance action under section 549(a), which is reserved for trusteesor debtors-in-possession. 2001 Bankr. LEXIS 380, at *28, *40. However, the opinionaddressed the correct analytical framework for deciding matters based on the properinvocation of section 549(c) as a defense to an authorized avoidance action. Id. at *29.This Article advocates that framework.

549(c) “[wa]s applicable to insulate a foreclosure sale to a good faith pur-chaser conducted in violation of the stay,”224 the opinion addressedwhether the party requesting its protection had met its burden of proof asrequired by Rule 6001 of the Federal Rules of Bankruptcy Procedure.225

To meet this burden, the party must show the transaction meets therequirements of the good faith purchaser exception. Section 549(c) re-quires the purchaser of a debtor’s real property did not have knowledge ofthe commencement of the case at purchase and the purchaser paid presentfair equivalent value. If the purchaser complies with these two criteria, thepurchaser must meet a third requirement of properly perfecting its interestin the property to fall within the exception. The trustee loses the power toavoid the transfer in accordance with the statute unless the trustee has fileda copy or notice of the debtor’s bankruptcy petition in the real estaterecords of the county where the debtor’s property was purchased, thusproviding the purchaser with constructive knowledge of the bankruptcyproceeding.

The opinion provides the proper framework for analyzing whether apurchaser requesting the protection of section 549(c) has met the section’scriteria.226 The initial determination is whether the purchaser had knowl-edge of the debtor’s bankruptcy case at the time of transfer. The opinion


227 Id. at *31 (emphasis added).228 11 U.S.C. § 549(c) (2000).229 511 U.S. at 545 (determining whether the price paid for property constituted

“reasonably equivalent value” under section 548 of the Code).230 Shah, 2001 Bankr. LEXIS 380, at *35 (explaining the Fifth Circuit’s reasoning in

Stone, 72 F.3d 466).231 Id. at *36.232 See BFP, 511 U.S. at 545. Essentially, fair value has no substantive meaning in the

wake of the Supreme Court’s decision in BFP; thus, the requirement for present fairequivalent value is not a test that any foreclosure sale purchaser has to worry aboutmeeting.

contends the mere filing of a bankruptcy petition does not impute knowl-edge to an unaware purchaser. Nor does the court deem a purchaser to beon notice because the nature of the sale itself should offer a clue as to theowner’s insolvency, and should induce the purchaser to search the publicrecords to ascertain whether the debtor filed a petition. Imposing such arequirement would “swallow the exception under § 549(c) as to all pur-chases resulting from tax sales [or] mortgage foreclosures since they occurbecause the property owner failed to pay its [debt].”227 Therefore, a pur-chaser need only provide evidence that he had no actual notice of thedebtor’s petition until after consummating the sale and after recording thedeed to the property.

The second determination is the price paid for the property. Section549(c) requires that a purchaser pay “present fair equivalent value.”228

Although some courts require evidence of the property’s fair market value,the correct measure is based on the Supreme Court’s holding in BFP v.Resolution Trust Corporation that a “reasonably equivalent value” forforeclosed property “is the price in fact received at the foreclosure sale, solong as all the requirements of the State’s foreclosure law have beencomplied with.”229 In ruling the BFP rationale is applicable to section549(c), the Fifth Circuit determined that the terms “reasonably” and “fair”were interchangeable in the forced sale context and that market value wasan inappropriate benchmark under section 549(c).230 The court found thisreasoning persuasive and concluded a purchaser could satisfy the “fairequivalent value” requirement simply by proving that it purchased theproperty at a non-collusive, properly conducted judicial tax sale.231 There-fore, a purchase at a properly conducted judicial or non-judicial foreclo-sure sale also would satisfy the subsection’s value requirement.232

The third and final determination is whether the purchaser had con-structive notice of the bankruptcy proceeding. According to section549(c), a purchaser must have perfected its title “under applicable law so


233 Shah, 2001 Bankr. LEXIS 380, at *38 (citing Ward, 837 F.2d at 126).234 Id.; see, e.g., Carpio, 213 B.R. at 751 (holding that a purchaser meeting the

knowledge and value requirements was entitled to section 549(c)’s protection when nonotice of the petition had been filed in the county’s “Recorder’s Office” where the propertywas located prior to the date upon which purchaser perfected his title); McDonald, 210B.R. at 650 (noting a good faith purchaser for fair equivalent value, without knowledge ofthe bankruptcy case, “obtains good title to the real property unless notice of the debtor’sbankruptcy has been recorded in the appropriate real property records prior to the trans-fer”).

as to defeat a subsequent bona fide purchaser before a notice or copy ofthe bankruptcy [was] filed with the appropriate authority.”233 Therefore,the transferee must perfect its title under applicable law before the trusteefiles a notice of the debtor’s bankruptcy petition in the real propertyrecords in the county where the property is located.234 Thus, a purchaserwho wishes to invoke section 549(c)’s protection need only establish thatno copy or notice of the debtor’s bankruptcy petition was filed properlyprior to recording the deed and perfecting the interest. A purchaser whomeets these three requirements is entitled to section 549(c)’s good faithpurchaser protection as suggested by a plain reading of the statute and asintended by Congress.

V. CONCLUSION

The growing trend among the bankruptcy courts to find a transactioncannot be both in violation of the stay and controlled by section 549,thereby making the good faith purchaser protection of section 549(c) in-applicable to a transfer made in violation of the automatic stay, createsunnecessary confusion and uncertainty in the judiciary. The Ninth Cir-cuit’s decision in Lusardi denies good faith purchasers of a debtor’s realproperty the protection Congress desired without addressing the propermeans for making such a decision. By neglecting to reach the analysis ofthe requirements for invoking this protection that the statute prescribes, theNinth Circuit has effectively ignored section 549(c)’s purpose altogetherin one of its most used and most needed forms.

The Shah court’s reasoning and reliance on previous Third Circuitdecisions, which found a transfer can be both in violation of the automaticstay and under section 549’s governance, provides a much needed brightline in this confusing area of law. By solely using the statute’s prescribedanalytical framework to assess whether a purchaser who wishes to invokethe defense of section 549(c), courts ensure that a purchaser is not deniedthis needed protection due to a mere whim of judicial interpretation.

Retraction from this trend is necessary to further congressional intent


and to provide certainty and predictability for post-petition purchasers of adebtor’s real property where the transfer constitutes a violation of theautomatic stay.

Documents

THE VALIDITY OF POST-PETITION TRANSFERS OF … 2005 The Validity of Post-Petition Transfers of Real Property 151 1 11 U.S.C. §§ 101-1330 (2000). 2 Section 549(c) provides, in pertinent