In re: MOMENTUM DEVELOPMENT, LLC,

Case Type:
Business
Case Status:
Affirmed
Citation:
BAP No. CC221084 (9th Circuit, Mar 02,2023) Published
Tag(s):
Ruling:
A bankruptcy trustee's action to avoid a transfer under 11 U.S.C. § 544(b) and Cal. Civ. Code § 3439.09 nearly seven years after the transfer occurred was timely because California law provides that, when the obligation is a judgment, the statute of limitations for bringing an avoidance action under § 3439.09 begins on the later of the date of the transfer or the date on which the judgment was entered. The trustee brought the action before the expiration of California's statute of repose and within the two-year statute of limitations extension of 11 U.S.C. § 546.
Procedural context:
The recipient of a fraudulent transfer appealed the bankruptcy court's determination that the transfer was voidable under 11 U.S.C. § 544(b) and the California Uniform Voidable Transfer Act (Cal. Civ. Code § 3439.09).
Facts:
Josef Delaz was the managing member and an executive officer of two closely held companies: Momentum Development, LLC, and Pyramid Center, Inc. In 2010, Momentum hired DCA Drilling & Construction (DCA) to drill a well on Momentum's California property. The agreement between Momentum and DCA included a prevailing party attorney's fee provision. On October 31, 2012, Momentum transferred the property to Pyramid for fifty-one cents. On September 19, 2014, Momentum (not Pyramid) sued DCA for breach of contract. Momentum lost the trial, and the state court entered a judgment awarding DCA attorney's fees on May 15, 2018. About a month later, on June 19, 2018, Momentum filed a chapter 7 petition. The trustee commenced an action on October 25, 2019, seeking to avoid the transfer of the property from Momentum to Pyramid. The trustee's suit was based on 11 U.S.C. § 544(b) and the California Uniform Voidable Transfer Act (Cal. Civ. Code § 3439.09). The bankruptcy court found that the trustee introduced sufficient evidence to establish that the transfer of the property was avoidable under Cal. Civ. Code § 3439.09 and ruled against Pyramid's statute of limitations and statute of repose defenses.
Judge(s):
CORBIT, FARIS, and LAFFERTY, Bankruptcy Judges

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