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In re Milby

United States Court of Appeals, Ninth Circuit

November 21, 2017

In re Charlene M. Milby, Debtor,
v.
Patricia A. Templeton, individuals on behalf of the Bankruptcy Estate of Debtor Charlene M. Milby, and derivatively on behalf of Charlene's Transportation, Inc.; G. Cresswell Templeton, III, Bankruptcy Estate of Debtor Charlene M. Milby, and derivatively on behalf of Charlene's Transportation, Inc., Appellees/Cross-Appellants. Jon A. Milby; D&J Trucking Company, a California corporation; Sandra Holder Milby, an individual; Sanjon, Inc., a California corporation; 5th Street Condo, LLC, California Limited Liability Company; Charlene M. Milby; Charlene's Transportation, Inc., a California corporation, Appellants/Cross-Appellees,

          Argued and Submitted September 1, 2017 Pasadena, California

         Appeal from the Ninth Circuit Bankruptcy Appellate Panel No. 15-1180 Taylor, Faris, and Corbit, Bankruptcy Judges, Presiding

          Karen L. Grant (argued), Law Offices of Karen L. Grant, Santa Barbara, California; Janet K. McGinnis, Law Office of Janet K. McGinnis, Santa Barbara, California; for Appellants/Cross-Appellees.

          Daniel Joseph McCarthy (argued), Hill Farrer & Burrill LLP, Los Angeles, California, for Appellees/Cross-Appellants.

          Before: Kim McLane Wardlaw and Jay S. Bybee, Circuit Judges, and Harvey Bartle III, [*] District Judge.

         SUMMARY[**]

         Bankruptcy

         The panel affirmed the judgment of the Bankruptcy Appellate Panel, which (1) reversed the bankruptcy court's dismissal as time-barred of a bankruptcy estate's claims seeking avoidance of fraudulent transfers and (2) affirmed the bankruptcy court's dismissal of other claims based on transfers not made by the debtor.

         Regarding the time bar, the bankruptcy court held that the bankruptcy estate's delay in filing after discovering the transfers precluded equitable tolling of the statute of limitations. The BAP reversed, holding that such post-discovery delay is irrelevant to whether equitable tolling applies. The panel wrote that neither court correctly applied the law on equitable tolling. Under the correct standard, post-discovery delay does not preclude equitable tolling but is still relevant to assessing a party's overall diligence. The panel affirmed the judgment of the BAP because the estate's overall diligence, combined with extraordinary circumstances preventing earlier discovery of the transfers, warranted equitable tolling.

         The panel affirmed, for the same reasons stated in the BAP's opinion, the BAP's affirmance of the bankruptcy court's dismissal of claims based on transfers that were made by individuals and entities other than the debtor and therefore could not serve as predicates for a claim under 11 U.S.C. § 544(b). The panel remanded the case to the bankruptcy court.

          OPINION

          BYBEE, Circuit Judge.

         The bankruptcy estate of Debtor Charlene Milby discovered allegedly fraudulent transfers days before the statute of limitations on avoidance claims was set to expire. This action was not filed until almost a year later. The bankruptcy court dismissed the action as time barred and held that the estate's delay in filing after discovering the transfers precluded equitable tolling. The Bankruptcy Appellate Panel ("BAP") reversed, holding that such post-discovery delay is irrelevant to whether equitable tolling applies.

         Neither court correctly applied our law on equitable tolling. Under Gibbs v. Legrand, post-discovery delay does not preclude equitable tolling but is still relevant to assessing a party's "overall diligence." 767 F.3d 879, 891-93 (9th Cir. 2014). We affirm the judgment of the BAP because, here, the estate's overall diligence, combined with the extraordinary ...


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