PRECEDENTIAL

     UNITED STATES COURT OF APPEALS
          FOR THE THIRD CIRCUIT

                ________________

                   No. 18-1650
                ________________

   IN RE: FRANK J. HACKLER AND DAWN A.
             STELZLE-HACKLER,

                                 Debtors

FRANK J. HACKLER; DAWN A. STELZLE-HACKLER

                         v.

     ARIANNA HOLDINGS COMPANY, LLC,

                                           Appellant
                                  _

   On Appeal from the United States District Court
            for the District of New Jersey
      (D. C. Civil Action No. 3-17-cv-06589)
    District Judge: Honorable Peter G. Sheridan
                 ________________

             Argued on March 12, 2019

 Before: MCKEE, PORTER and ROTH, Circuit Judges
            (Opinion filed: September 12, 2019)


Elliott J. Almanza       (ARGUED)
Keith A. Bonchi
Goldenberg, Mackler, Sayegh, Mintz, Pfeffer, Bonchi & Gill
660 New Road
Suite 1-A
Northfield, NJ 08225

             Counsel for Appellant

Leonard C. Walczyk        (ARGUED)
Wasserman, Jurista & Stolz
110 Allen Road
Suite 304
Basking Ridge, NJ 07920

             Counsel for Appellee

Tara A. Twomey
National Association of Consumers Bankruptcy
1501 The Alameda
Suite 200
San Jose, CA 95126

             Counsel for Amicus Appellee


                    ________________

                        OPINION
                    ________________




                             2
ROTH, Circuit Judge

       This case requires us to decide, as a matter of first
impression, whether a transfer of real estate title conducted
via New Jersey’s tax foreclosure procedures may be voided as
“preferential” under § 547(b) of the United States Bankruptcy
Code. 1 Appellant Arianna Holding Company LLC purchased
a tax lien on a piece of property owned by Frank J. Hackler
and Dawn Stelzle-Hackler. Arianna eventually obtained title
to the Hacklers’ property via foreclosure proceedings.
Shortly after Arianna obtained title, the Hacklers filed for
bankruptcy and sought to void the transfer of the title as
preferential. The Bankruptcy Court and the District Court
ruled in favor of the Hacklers and voided the title transfer.
Because the title transfer undisputedly meets § 547(b)’s
requirements for avoidance and because the federalism
concerns raised by Arianna cannot overcome the plain
language of the Bankruptcy Code, we will affirm.

                                 I

       The Hacklers failed to pay property tax on a parcel in
North Brunswick, New Jersey. On June 25, 2013, the
township held a duly advertised tax sale—a public auction for
the unpaid municipal lien on the property. While mortgage
foreclosures involve bidding on the actual property, at New
Jersey tax foreclosures the public bids only on the rate of
interest on the unpaid taxes; the lowest bidder wins. 2
Accordingly, the redemption amount for a tax lien

1
    11 U.S.C. § 547(b).
2
    N.J.S.A. 54:5-32.




                             3
certificate—the amount the property owner must pay to
recover the lien and prevent foreclosure—is calculated from
the accrued taxes plus interest, not from the value of the
underlying property. 3 At the tax sale for the lien on the
Hacklers’ property, Phoenix Funding, Inc., bid the interest
rate on the tax sale certificate down to 0% and paid a
premium of $13,500 above the value of the lien. Phoenix
paid the delinquent taxes as they became due and charged the
state-allowed interest rate of 18% on the subsequent taxes. 4

        In New Jersey, tax sale foreclosures are “strict
foreclosures.” 5 If the property owner does not redeem the
certificate by paying the lienholder the redemption amount
(the original unpaid taxes and subsequent taxes plus 18%),
the certificate holder may, after two years, file for a
foreclosure judgment; that judgment vests title directly in the
tax lien certificate holder. After waiting the required two-
year period, and after sending a notice of intent to foreclose,
Phoenix filed an uncontested tax foreclosure complaint. On
May 9, 2016, Phoenix assigned the certificate to Arianna
Holding Company, LLC, a real estate holding company. The
Hacklers did not redeem the tax lien certificate, and on
October 6, 2016, final judgment in the foreclosure was
entered, vesting title to the Property in Arianna (the Transfer).

3
  N.J.S.A. 54:5-58; see also In re Hackler, 

, 399
(D.N.J. 2018) (citing In re Berley Assocs., Ltd., 

,
439-40 (Bankr. D.N.J. 2013)).
4
  N.J.S.A. 54:4-67; see also In re Hackler, 

, 663
(Bankr. D.N.J. 2017).
5
  N.J.S.A. 54:5-86; see also Caput Mortuum, L.L.C. v. S&S
Crown Servs., 

, 438 (N.J. Super. Ct. App. Div.
2004).




                               4
       On December 14, 2016, a little over two months after
the Transfer, the Hacklers filed a Chapter 13 bankruptcy
petition. The petition and schedules listed the value of the
property at $335,000, which far exceeded the value of the
liens against the property (Arianna filed a proof of claim for
$42,561.21, and other liens totaled no more than $89,000).
The Hacklers’ Chapter 13 plan proposed to pay Arianna’s
claim in full.

        The same day that they filed for bankruptcy, the
Hacklers opened an adversary proceeding seeking to avoid
the Transfer of the Property to Arianna as a preferential
transfer under § 547(b) of the Bankruptcy Code and moved
for summary judgment. Arianna cross-moved for summary
judgment, arguing that voiding the Transfer would represent
an impermissible incursion into the state’s essential interests
in preserving the validity of real estate title and collecting real
estate taxes.

       The Bankruptcy Court ruled for the Hacklers, voiding
the Transfer and directing that title to the Property return to
them. The Bankruptcy Court found that the Transfer met all
the requirements of § 547(b) and held that Arianna’s
federalism concerns could not overcome the Code’s clear
statutory text. The District Court affirmed, and Arianna now
appeals.




                                5
                              II 6

                               A

        It is well-established that a “‘central policy’ of the
Bankruptcy Code is the ‘[e]quality of distribution among
creditors.’” 7 In accordance with that policy, creditors of
equal priority receive pro rata shares of the debtor’s property.
A critical feature of this system is the ability to avoid pre-
petition property transfers that benefit some creditors over
others. 8 The Code does so by allowing the unwinding of
property transfers that meet certain requirements, thereby
preventing some creditors from receiving windfalls at the
expense of others. As is relevant to the instant petition, a
property transfer may be voided as preferential under § 547 or
as fraudulent under § 548. While both § 548 and § 547
permit the unwinding of certain property transfers, they serve


6
  The Bankruptcy Court exercised jurisdiction over the matter
as a “core proceeding” under bankruptcy law. 28 U.S.C. §§
157(a); 157(b)(2)(F); 1334(a). The District Court exercised
jurisdiction over the appeal under 28 U.S.C. § 158(a)(1). We
have appellate jurisdiction under 28 U.S.C. § 158(d)(1) and
28 U.S.C. § 1291. In a bankruptcy appeal, we exercise
plenary review over the bankruptcy court’s grant of summary
judgment. In re AE Liquidation, Inc., 

, 522 (3d
Cir. 2017). Arianna does not argue that the Transfer fails to
meet any of the elements of § 547(b) and so this case presents
no dispute of fact.
7
  In re Net Pay Solutions, Inc., 

, 150 (3d Cir.
2016) (quoting Begier v. Comm’r, 

, 58 (1990)).
8
  

transfers).




                               6
different purposes, use different statutory language, and
require different analyses.

        This case involves a preferential transfer under §
547(b) of the Bankruptcy Code. Under that provision, which
prevents creditors from rushing to take assets before a debtor
files for bankruptcy, the trustee may avoid any transfer:

         (1) to or for the benefit of a creditor;
         (2) for or on account of an antecedent debt owed by
         the debtor before such transfer was made;
         (3) made while the debtor was insolvent;
         (4) made--
                 (A) on or within 90 days before the date of the
         filing of the petition; or
                 (B) between ninety days and one year before the
                 date of the filing of the petition, if such creditor
                 at the time of such transfer was an insider; and
         (5) that enables such creditor to receive more than such
         creditor would receive if--
                 (A) the case were a case under chapter 7 of this
                 title;
                 (B) the transfer had not been made; and
                 (C) such creditor received payment of such debt
                 to the extent provided by the provisions of this
                 title. 9

       The Bankruptcy Court and the District Court found
that the Transfer was voidable as preferential. Thus, they did




9
    11 U.S.C. § 547(b).




                                  7
not reach the question whether the Transfer was alternatively
voidable as fraudulent under § 548. 10

                               B

       Our analysis begins with the statutory text. 11 The
parties do not dispute the meaning of § 547(b). As explained
above, a transfer may be voided as preferential if it (1) was
made to or for the benefit of a creditor, (2) was made for an
antecedent debt, (3) was made while the debtor was insolvent,
(4) was made on or within 90 days before filing for
bankruptcy, and (5) enabled the creditor to receive more than
it would have received in a Chapter 7 liquidation proceeding.

        Nor do the parties dispute the applicability of § 547(b)
to the Transfer in this case. The Transfer was made to the tax
certificate holder, for a debt that arose before the Hacklers

10
   Under § 548, which prevents actual and constructive fraud,
       see BFP v. Resolution Trust Corp., 

, 535
       (1994) a transfer made within two years of filing for
       bankruptcy may be voided if the debtor (1) had “actual
       intent to hinder, delay, or defraud any entity to which
       the debtor” was indebted, or (2) “received less than a
       reasonably equivalent value in exchange for such
       transfer” and either was insolvent, expected to become
       insolvent, or was trying to benefit an “insider.” 11
       U.S.C. § 548(a)(1). The term “insider” is defined at 11
       U.S.C. § 101.
11
   In re Philadelphia Newspapers, LLC, 

, 304
(3d Cir. 2010) (“It is the cardinal canon of statutory
interpretation that a court must begin with the statutory
language . . . .”).




                               8
petitioned for bankruptcy, while the Hacklers were
insolvent, 12 and within 90 days of their petition; it bestowed a
parcel worth $335,000 on a party that would have received
$45,000 in a Chapter 7 proceeding. “[W]hen the statute’s
language is plain, the sole function of the courts—at least
where the disposition required by the text is not absurd—is to
enforce it according to its terms.” 13 Unless there is
ambiguity, we “cannot allow policy to guide our analysis.” 14
Here, the statute is unambiguous.                 Applying its
straightforward terms does not lead us to an absurd result.
Thus, our reading of it ends there. 15

        In requesting that we look beyond the plain terms of
the statute, Arianna raises two separate arguments, both
sounding in principles of federalism. First, the company
argues that a lawfully-conducted state tax foreclosure cannot
constitute a voidable preference under § 547. Arianna relies
in part on the Supreme Court’s decision in BFP v. Resolution


12
   For the purposes of § 547, “the debtor is presumed to have
been insolvent on and during the 90 days immediately
preceding the date of the filing of the petition.” 11 U.S.C. §
547(f).
13
   Hartford Underwriters Ins. Co. v. Union Planters Bank,
N.A., 

, 6 (2000) (quoting United States v. Ron Pair
Enters., Inc., 

, 241 (1989) (internal quotation
marks omitted)).
14
   Sea-Land Serv., Inc. v. Barry, 

, 910 (3d Cir.
1994).
15
   In re Philadelphia Newspapers, 

(“When the words of a statute are unambiguous . . . judicial
inquiry is complete.” (internal quotation marks omitted)).




                               9
Trust Corp., 16 which interpreted § 548 of the Bankruptcy
Code and which, it claims, should also apply so that New
Jersey tax sale foreclosures are exempted from avoidance
under § 547. Second, Arianna argues that the avoidance of
the Transfer violated the Tax Injunction Act. 17 As discussed
below, we find the statute to be clear and its required outcome
not absurd. But even giving full weight to Arianna’s points,
neither argument compels a different result. We address each
in turn.
                               i

       Arianna argues first that the tax foreclosure cannot
constitute a voidable preference under § 547(b). The
company relies chiefly on the Supreme Court’s decision in
BFP v. Resolution Trust Corp. In BFP, the question before
the Court was “whether the consideration received from a
noncollusive, real estate mortgage foreclosure sale conducted
in conformance with applicable state law” satisfied the
requirement of § 548 that a property transfer be made in
exchange for “a reasonably equivalent value,” so that the
transfer was protected from voidance. 18 The Court held that
the amount received at the mortgage foreclosure sale
constituted “reasonably equivalent value.” Thus, the sale
could not be voided under § 548.

       BFP differs from the case before us in two crucial
ways. First, the Court was interpreting the fraudulent transfer
provision, § 548, not the preferential transfer provision.
Second, the decision involved a mortgage foreclosure, not a

16
   

(1994).
17
   28 U.S.C. § 1341.

(quoting § 548(a)(2)).




                              10
tax foreclosure. These are not trivial distinctions. The BFP
opinion is grounded in the text of § 548, in particular the term
“reasonably equivalent value,” which is not defined in the
Code and appears nowhere else. For the Court, the fact that
Congress “[went] out of its way to” replace the usual term
“fair market value” with this “entirely novel” term indicated
that “fair market value cannot—or at least cannot always—be
the benchmark.” 19 The Court buttressed its reading by
considering how mortgage foreclosures work, and in
particular, “that market value, as it is commonly understood,
has no applicability in the forced-sale context; indeed, it is the
very antithesis of forced-sale value.” 20 The Court recognized
that a foreclosed home, sold at auction, cannot be expected to
bring the price it would command if sold in a fair market after
negotiation and mutual agreement. Congress’s use of the
term “reasonably equivalent value,” therefore, could not have
been intended to mean market value, and whatever
consideration was received through the regularly-conducted
sale was sufficient so that the sale could not be avoided under
§ 548.

        The Court’s decision in BFP is thus closely tied to
both the language of § 548 and the mechanics of mortgage
foreclosures. The Court even emphasized, in a footnote, that
its “opinion . . . cover[ed] only mortgage foreclosures of real
estate,” because “[t]he considerations bearing upon other
foreclosures and forced sales (to satisfy tax liens, for
example) may be different.” 21 This is such a case. As
explained above, at New Jersey tax sales the public bids only

19
   

20
   

n.3 (emphasis added).




                               11
on the rate of interest on the unpaid taxes. The main
conclusion of BFP—that the price reached via a foreclosure
conducted according to state law should be considered to be
the “reasonably equivalent value” of the property—is not
pertinent here, because in New Jersey, the relationship
between the winning bid and the value of the underlying
property is not merely attenuated but nonexistent. Given that
the term “reasonably equivalent value” does not appear in §
547(b), and in light of the divergent procedures and attendant
considerations in tax foreclosure proceedings in New Jersey,
we find BFP inapplicable to this case. 22

        Arianna urges a contrary result, claiming that BFP
stands for the proposition that, absent a clear and manifest
intent of Congress to displace an area traditionally regulated
by the states, the Bankruptcy Code should not be construed to
supersede state law. To be sure, the BFP Court carefully
considered the potential infringement on the state. Given the
“essential state interest” in protecting the stability of real
estate titles, the Court found that without a clear signal from
Congress, it could not read § 548—the meaning of which was
disputed—in a way that would cause “[t]he title of every
piece of realty purchased at foreclosure,” a long-observed
state remedy, to “be under a federally created cloud.” 23 But
at its core, Arianna’s argument puts the cart before the horse:
The problem before the Court was how to interpret the term
“reasonably equivalent value,” a term that does not appear in
§ 547(b). The Court did consider the implications to the


22
   We emphasize that our opinion is limited to New Jersey tax
foreclosures conducted in accordance with state law.

.




                              12
state’s interests of voiding a mortgage foreclosure, but the
case hinged on the meaning of the statute.

       Our conclusion that BFP does not apply to New Jersey
tax foreclosures voided as preferential does not conflict with
binding precedent or out-of-Circuit caselaw. Some courts
within our Circuit have extended BFP to mortgage
foreclosures under § 547(b)—but mortgage foreclosures
entail different considerations from tax sale foreclosures, as
the BFP Court emphasized. For that reason, a case like In re
Pulcini 24 is distinguishable. In Pulcini, the Western District
of Pennsylvania Bankruptcy Court, finding no indication that
§ 547(b) was intended to override Pennsylvania real property
law, applied BFP to a sheriff’s sale and held that the sale was
not avoidable. 25 We find this holding unpersuasive as applied
to New Jersey tax sales. 26

      Decisions extending BFP to tax foreclosures under §
548 are likewise distinguishable. Not only does § 548 differ
from § 547 in its requirements, but the circuit courts that have
extended BFP to tax foreclosures under § 548 involved state




24
   

(Bankr. W.D. Pa. 2001).

.
26
    We note that other district and bankruptcy courts have
declined to extend BFP to mortgage foreclosures under §
547(b). E.g., In re Andrews, 

(Bankr. M.D. Pa.
2001); Hampton v. Ontario County, 

, 677
(W.D.N.Y. 2018).




                              13
laws that subjected the property at issue to auction. 27 The
Tenth Circuit even noted in In re Grandote Country Club
Company, Ltd. that “the decisive factor in determining
whether a transfer pursuant to a tax sale constitutes
‘reasonably equivalent value’ [under § 548] is a state’s
procedure for tax sales, in particular, statutes requiring that
tax sales take place publicly under a competitive bidding
procedure.” 28 Where the property was not subjected to public
auction, courts have been less willing to extend BFP to tax
foreclosures under § 548.29
       Finally, our decision today does not introduce a
conflict with state law. There is no explicit statutory

27
   In re Tracht Gut, LLC, 

, 1153 (9th Cir. 2016)
(citing Cal. Rev. & Tax Code § 3691(a)(1)(A)); In re
Grandote Country Club Co., 

, 1152 (10th Cir.
2001) (citing Colo. Rev. Stat. §§ 39-11-101, 39-11-108). In
re T.F. Stone Co., 

(5th Cir. 1995), similarly
involved Oklahoma law, which provides for competitive
bidding. See Okla. Stat. Ann. § 3129. In any event, In re
T.F. Stone Co. is also distinguishable as a § 549(c) 

.

.
29
   E.g., In re Smith, 

, 238 (7th Cir. 2016) (as
bidding at Illinois tax sales is limited to the penalty interest
rate on the lien, not the value of the property, no correlation
between the sale price and the value of the property and so
BFP not applicable); In re GGI Props., LLC, 

,
247, 254-55 (Bankr. D.N.J. 2017); In re Varquez, 

, 193 (Bankr. D.N.J. 2013); In re Berley Associates, 

. A notable exception is In re McGrath, 

, 83 (Bankr. D.N.J. 1994), which applied BFP to a tax
foreclosure sale under § 548.




                              14
conflict—the New Jersey fraudulent conveyance statute, 30
which exempts tax foreclosures, 31 does not address
preferential transfers. Arianna’s point that tax foreclosures
generally cannot constitute voidable preferences under state
law is also unavailing; the state preference statute requires an
intent to prefer a certain creditor, unlike the Bankruptcy
Code, so that comparing the two is unpersuasive. 32 More
importantly, since Congress has plenary power over
bankruptcy, New Jersey state law is not germane to this
case. 33 And while a debtor’s filing for bankruptcy may
impose a cloud on the title of her foreclosed property, we
believe such a result to be mandated by the Code. 34

30
   See N.J.S.A. § 25:2-20 et seq.
31
   See N.J.S.A. § 54:5-87.
32
   See N.J.S.A. § 2A:19-3.
33
   U.S. Const. Art. I, § 8; see also Barnhill v. Johnson, 

, 397 (1992) (“‘What constitutes a transfer’ . . . is a
matter of federal law.” (quoting McKenzie v. Irving Trust Co.,

, 369-70 (1945))).
34
    Arianna points out that so long as a debtor files for
bankruptcy within the ninety-day preference period, she has
another two years in which to file a claim voiding a transfer
under § 547(b), resulting in a two year and ninety day cloud
on title. However, as noted by the Bankruptcy Court for the
District of New Jersey in In re GGI Properties, LLC when
analyzing § 548, “it is highly unlikely that everyone whose
home is foreclosed due to tax liens will stampede the
bankruptcy court just to avoid the transfer—bankruptcy is a
long, intrusive and expensive process, and the consequences
for abusing the system when one is not eligible for relief are
serious 

(internal quotation marks
omitted).




                              15
       In sum, Arianna’s first argument—that the Transfer
cannot be voided as preferential—is precluded by the plain
language of the statute and the differences between the
mortgage foreclosure at issue in BFP and the tax sale
foreclosure here.
                             ii

       Arianna next argues that voiding the Transfer as
preferential violates the Tax Injunction Act. The Tax
Injunction Act provides that “district courts shall not enjoin,
suspend or restrain the assessment, levy or collection of any
tax under State law” if a remedy exists in state court. 35 While
the state has a “compelling interest” 36 in enforcing the
collection of taxes, Arianna’s argument is misguided.

        Arianna faults the District Court for holding that
voiding the Transfer “does not affect the Township of New
Brunswick’s ability to still collect taxes.” 37 The District
Court relied in part on our 1995 decision in Simon v. Cebrick,
which held that preventing a private citizen from foreclosing
did “not affect the governmental entity’s ability to assess,
levy, or collect any tax,” because “upon the sale of the tax
certificate, the tax obligation is satisfied.” 38 As Arianna
points out, the New Jersey Supreme Court has since clarified
that “a property owner’s tax delinquency survive[s] the sale
of a tax certificate;” thus, “the certificate holder will hold a
lien that is based on that delinquency.” 39

35
   28 U.S.C. § 1341.
36
   Adams v. Commissioner, 

, 176 (3d Cir. 1999).
37
   In re 

.
38
   

, 22 (3d Cir. 1995).
39
   In re Princeton Office Park, 

, 69 (2014).




                              16
        We recognize that this guidance from the New Jersey
Supreme Court undermines our reasoning in Simon. But we
need not decide whether Simon remains good law because
“[i]t is well established . . . that the Tax Injunction Act does
not prevent a Bankruptcy Court from enforcing the provisions
of the Bankruptcy Code that affect the collection of state
taxes.” 40 Arianna concedes that the specific powers of the
Bankruptcy Code supersede the more general prohibitions of
the Tax Injunction Act, but argues that no specific provision
of the Bankruptcy Code permits courts to review and alter
final judgments of tax foreclosure; thus, the Tax Injunction
Act should govern. But we need not frame the question so
narrowly. The Bankruptcy Code permits courts to unwind
preferential transfers; that specific edict overrides the Tax
Injunction Act. 41




40
   In re Hechinger Inv. Co. of Del., 

, 247 n.1 (3d
Cir. 2003).
41
   See In re Ellett, 

, 1149 (9th Cir. 2001) (the
Tax Injunction Act does “not abridge the power specifically
granted to the bankruptcy court to make such judgments as
may be necessary for the enforcement of the provisions of the
Bankruptcy Act.” (quoting Cal. State Bd. of Equalization v.
Goggin, 

, 728 (9th Cir. 1951)); 

(county’s interest in collecting property taxes
must yield to Bankruptcy Code).




                              17
       In sum, voiding the Transfer did not violate the Tax
Injunction Act, and the District Court did not err in so
holding. 42
                               III

        The Transfer meets all the plain language requirements
of the preferential transfer statute and was properly voided.
Because the policy concerns Arianna raises cannot overcome
the Court’s duty to enforce the Bankruptcy Code, we will
affirm.




42
    In briefing and at oral argument, Arianna argued that
failing to apply BFP in this case could cause significant
issues for municipalities that purchase tax liens at auction
(often by default, when there is no other bidder). That is, the
Bankruptcy Court could, in the interest of preserving the
stability of title or at the request of a delinquent taxpayer,
simply direct the municipal lienholder to pay the value of the
underlying transferred property rather than return the property
itself. See 11 U.S.C. § 550(a). The municipality would then
be stuck with a potentially large bill for which it had not
budgeted. Arianna suggests that Congress could not have
contemplated § 547(b) to require this outcome, but in the
absence of concrete evidence in the form of cases or
legislative history, we will not speculate on such an
eventuality.




                              18