Foreclosure Sale Winner Faces Trustee Fraudulent Conveyance Action
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July 21, 2022, US Bankruptcy Court for Massachusetts – Gabhaltais Teaghlaigh LLC (“Debtor”) sues Synergy Funding, LLC and OHP LLC (“Defendants”) to avoid a foreclosure transfer of property allegedly belonging to the bankruptcy estate. The Debtor claims that the foreclosure sale was allegedly “unperfected” and “fraudulent” and seeks an order to avoid the said foreclosure.
The Debtor claims that the property of the estate on the bankruptcy petition date consisted of its properties at Boston, Newton and Weymouth in Massachusetts.
By background, GabTeag and Synergy Funding entered into a Commercial Real Estate Promissory Note and mortgage in the principal amount of $1,000,000 in 2018. Synergy Funding was the second mortgagee of the mortgage encumbering the title of Debtor’s properties in Massachusetts.
OHP, LLC was the highest bidder at the foreclosure auction. The foreclosure auction took place the same day that the bankruptcy petition was filed on June 15, 2022. According to the records of the Massachusetts Secretary of State, OHP LLC was not organized in Massachusetts until June 23, 2022, after the petition was filed. On July 7, 2022, after the petition had been filed but while the case was temporarily dismissed, OHP LLC or Synergy Funding caused to be recorded a foreclosure deed in the Suffolk County Registry of Deeds.
The Debtor alleges that no foreclosure deed had been recorded in the Registry of Deeds as of the petition date. The Debtor claims that the transfer is allegedly unperfected and avoidable pursuant to 11 USC §522(h).
The Debtor also alleges that the price received at the foreclosure sale was allegedly not “reasonably equivalent value”. While the foreclosure deed states the consideration of $1,150,000 for all four properties of the Debtor, the Debtor claims that the fair market value of the properties in aggregate is $3,851,900. The Debtor alleges that the foreclosure was allegedly a “fraudulent transfer”.
The Debtor also alleges that the Defendants failed to meet many procedural requirements related to the foreclosure and therefore, seeks to avoid the transfer as alleged “wrongful foreclosure”. The Debtor also claims damages under chapter 93A of the General Laws for the alleged losses it suffered due to the alleged “wrongful foreclosure”.
Gabhaltais Teaghlaigh LLC v. Synergy Funding, LLC; and OHP LLC (In re Gabhaltais Teaghlaigh LLC), AP No. 22-1040, US Bankruptcy Court for the District of Massachusetts.