DeNoce v. Neff (In re Neff)

Citation:
9th Cir. No. 14-60017 (June 9, 2016) (published)
Tag(s):
Ruling:
The Ninth Circuit held that the one-year window to revoke a discharge under Section 727(a)(2) is not a statute of limitations and is therefore not subject to equitable tolled by the filing of successive bankruptcy petitions.
Procedural context:
In the third of three bankruptcy cases, creditor filed a complaint to deny discharge under Section 727(a)(2). The bankruptcy court denied the objection to discharge and was upheld by the Ninth Circuit BAP. The Ninth Circuit affirmed.
Facts:
A patient got a $300,000 malpractice judgment against a dentist. A month before the dentist filed a chapter 13 petition, the dentist transferred a home to a trust he created for himself. He did not disclose the transfer in his first bankruptcy. The first bankruptcy was soon, dismissed, followed by another chapter 13 filing. While the second case was pending, the dentist disclosed and transferred the home back into his own name, and then later dismissed the second bankruptcy. After the dentist filed his third petition, this time under chapter 7, the patient filed a complaint to deny discharge under Section 727(a)(2) for fraudulent transfer of the home with “actual intent.” The third bankruptcy filing came more than one year after the initial fraudulent transfer. The bankruptcy court denied the objection to discharge, and Ninth Circuit BAP affirmed. On appeal to the Ninth Circuit, the patient contended that the filing of the successive bankruptcy petitions equitably tolled the running of the statute of limitations in Section 727(a)(2). The Ninth Circuit held that the statute is not subject to equitable tolling, disagreeing with a district judge in Texas who held in In re Womble in 2003 that Section 727(a)(2) is a statute of limitations. The Ninth Circuit held that Section 727(a)(2) is a penalty imposed on debtors for failing to retain assets for the benefit of the bankrupt estate. Unlike a statute of limitations, it is not designed to encourage creditors to prosecute claims. Since exceptions to discharge are construed narrowly, and since the statute contains no suggestion of an intent by Congress to make equitable tolling applicable, the court concluded that equitable tolling is not applicable, and successive filings do not toll the one-year window in Section 727(a)(2).
Judge(s):
Richard R. Clifton, Consuelo M. Callahan, and Sandra S. Ikuta, Circuit Judges.

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