December 10, 2012 Articles

Collateral Attacks on Sale Orders, Due Diligence, and the Barton Doctrine

What happens when a trustee sells an asset that the estate did not own?

By James E. Bailey III and Paul S. Murphy

He who sells what isn’t his’n,
Must buy it back or go to pris’n.

— Daniel Drew (1797–1879)

Assets are sold by bankruptcy trustees and debtors-in-possession every day across the country. The overwhelming majority of these sales are concluded successfully and without incident. But what happens when a trustee sells an asset that the estate did not own? Consider the following hypothetical situation:

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