Templeton, et al. v. Milby, et al. (In re Milby)

9th Circuit Bankruptcy Appellate Case No. CC-15-1180-FCTa (February 24, 2016)
The 9th Circuit Bankruptcy Appellate Panel ("BAP") entered two separate rulings related to the same facts. The BAP held that in tolling statutes of limitations, the courts have typically assumed that the event that "tolls" the status simply stops the clock until the occurrence of a later even that permits the statute to resume running. A court should not only consider the post-discovery diligence when considering whether equitable tolling applies. The bankruptcy court erred in determining the claims related to transfers by the Debtor were untimely. Equitable estoppel requires: (1) the party to be estopped must know the facts; (2) the party to be estopped must either intend that its conduct will be acted upon or act in a manner that the party asserting estoppel has a right to believe it is so intended; (3) the party asserting estoppel must be ignorant of the true facts; and (4) the party asserting estoppel must rely on the conduct to its injury. The bankruptcy court erroneously applied the equitable tolling when it granted summary judgment and dismissed Appellants' claim as untimely. However, the bankruptcy court did not err in determining that transfers by non-debtor parties were subject to 11 U.S.C. Sec. 544
Procedural context:
Patricia A. Templeton and G. Cresswell Templeton III ("Templeton or Appellants") appeal the bankruptcy court's holdings (1) dismissing Appellants' claims related to asserted fraudulent transfers were untimely therefore dismissed as untimely pursuant to 11 U.S.C. Sec. 546(a)(1)(A) and (2) granting summary judgment in favor of Jon A. Milby, D&J Trucking Company, Sandy H. Milby, Sanjon, Inc. 5th St. Condo, LLC, Charlene M. Milby, and Charlene's Transportation, Inc. ("Defendants / Appellees") on the basis that the transfers were no from an interest of the Debtor. Therefore, there is no cause of action pursuant to 11 U.S.C. Sec. 544. The Issues before the BAP are: (1) whether the bankruptcy court erroneously applied the doctrine of equitable estoppel (2) whether the BAP should consider excerpts of the record stricken by the bankruptcy court and (3) whether the bankruptcy court erred in granting summary judgment in favor of the Appellees.
Charlene Milby ("Debtor") was a materials hauling broker that operates though Charlene's Transportation, Inc. ("CTI"). Debtor files chapter 7 on September 22, 2011. Appellants commenced a non-dischargeability adversary against the Debtor. The Debtor and CTI failed to respond to discovery request and disregarded the bankruptcy court's order(s) regarding the same. The bankruptcy court entered judgment against the Debtor and in favor of appellants denying the Debtor's discharge and excepting from discharge an obligation due to Appellants in the amount of $349,623.54. Shortly before the expiration of the statute of limitations related to Chapter 5 of Title 11 of the United States Code claims, the Appellants provided the Chapter 7 Trustee ("Trustee") with documents and information related to asserted fraudulent transfers. The Trustee commenced an adversary against the Debtor's father and one of his companies; however, this adversary did not include the claims the Appellant asserted. On September 17, 2014, the Appellants commenced their own adversary against Appellees asserting actual fraud; constructive fraud, and alter ego. Appellees filed a motion for summary judgment asserting the claims were time barred. The bankruptcy court determined that a portion of the transfers alleged by Appellants were not a transfer of an interest by the Debtor; therefore, the claims were dismissed. Those transfers that were from the Debtor's accounts were subject to 11 U.S.C. Sec. 546; therefore, time barred. The bankruptcy court further stated that the Trustee was "dilatory in seeking relief after discovering facts" related to the transfers by the Debtors.
Bankruptcy Judges FARIS, CORBIT, and TAYLOR.

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