505 B.R. 255 (9th Cir. BAP. 2014), CC-13-1041-KiTaD, In re Neff

Docket NºBAP CC-13-1041-KiTaD
Citation505 B.R. 255
Opinion JudgeKIRSCHER, Bankruptcy Judge:
Party NameIn re: RONALD A. NEFF, Debtor. v. RONALD A. NEFF, Appellee DOUGLAS J. DeNOCE, Appellant, Bankruptcy No. 1:11-bk-22424-VK Adversary No. 1:12-ap-01027-VK
AttorneyPatrick L. Swanstrom, on brief for appellant. Douglas J. DeNoce; Michael D. Kwasigroch on brief, for appellee Ronald Neff.
Judge PanelBefore: KIRSCHER, TAYLOR and DUNN, Bankruptcy Judges.
Case DateFebruary 04, 2014
CourtUnited States Bankruptcy Courts, Ninth Circuit

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505 B.R. 255 (9th Cir. BAP. 2014)

In re: RONALD A. NEFF, Debtor.

DOUGLAS J. DeNOCE, Appellant,

v.

RONALD A. NEFF, Appellee

BAP No. CC-13-1041-KiTaD

Bankruptcy No. 1:11-bk-22424-VK

Adversary No. 1:12-ap-01027-VK

United States Bankruptcy Appellate Panel For the Ninth Circuit

February 4, 2014

Submitted Without Oral Argument: November 21, 2013.

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[Copyrighted Material Omitted]

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Appeal from the United States Bankruptcy Court for the Central District of California. Bk. No. 1:11-bk-22424-VK, Adv. No. 1:12-ap-01027-VK. Honorable Victoria S. Kaufman, Bankruptcy Judge, Presiding.

Patrick L. Swanstrom, on brief for appellant.

Douglas J. DeNoce; Michael D. Kwasigroch on brief, for appellee Ronald Neff.

Before: KIRSCHER, TAYLOR and DUNN, Bankruptcy Judges.

OPINION

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KIRSCHER, Bankruptcy Judge:

Creditor, Douglas J. DeNoce (" DeNoce" ), appeals the orders granting partial summary judgment to chapter 71 debtor, Ronald A. Neff (" Neff" ), and denying DeNoce's cross-motion for partial summary judgment. Approximately eighteen months before Neff filed the instant chapter 7 case, he had filed the first of two successive chapter 13 cases, both of which were dismissed. During the course of his first chapter 13 case and about seventeen months before he filed the instant chapter 7 case, Neff transferred certain real property to his revocable living trust. DeNoce contended that the transfer was fraudulent and sought to deny Neff's discharge under § 727(a)(2). The bankruptcy court held that Neff's discharge would not be denied, because any alleged fraudulent transfer occurred more than one year before the chapter 7 petition was filed, and the one-year " lookback" period was not subject to

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equitable tolling based on Neff's prior bankruptcies. Accordingly, it granted partial summary judgment to Neff on that issue and denied it as to DeNoce.

The issue presented here is a matter of first impression in this circuit: Whether the one-year " lookback" period in § 727(a)(2)(A) is a " statute of limitations" subject to equitable tolling or whether it is a " statute of repose" not subject to equitable tolling. We hold that the one-year period is a statute of repose, and we AFFIRM.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. Events leading to Neff's first bankruptcy case

In 2007, Neff, a former dentist,2 treated DeNoce3 with the surgical placement of eight dental implants. It was a major full-day surgery. Within a month or so, each tooth had either fallen out or failed. Neff performed further surgery to correct the eight implants, but, within a couple of months, each fell out or failed again. DeNoce still apparently suffers from the improper implant procedures. In October 2008, DeNoce filed suit against Neff in state court for medical malpractice. Ultimately, DeNoce was awarded a judgment of $310,000.

In March 2008, a few months prior to DeNoce's filing of the medical malpractice action, Neff executed a revocable living trust (the " Retirement Trust" ). The trust res consisted solely of certain real property (the " Lake Harbor Property" ), which Neff had owned since 1978. According to Neff, after executing the Retirement Trust at his attorney's office, he was sent home to prepare a quitclaim deed transferring the Lake Harbor Property from himself to the Retirement Trust. It is undisputed, however, that the quitclaim deed was not recorded until two years later, on April 7, 2010.

B. The first bankruptcy case

Neff filed his first chapter 13 bankruptcy case on March 4, 2010 (the " First Bankruptcy Case" ). It was dismissed on April 9, 2010, for Neff's failure to appear at the scheduled § 341(a) meeting of creditors.

C. The second bankruptcy case

Neff filed his second chapter 13 bankruptcy case two months later on June 18, 2010 (the " Second Bankruptcy Case" ). In his Schedule B, Neff reported that the Retirement Trust owned the Lake Harbor Property. He did not disclose the recent transfer of it to the Retirement Trust in Question 10 of his Statement of Financial Affairs (" SOFA" ).

During the Second Bankruptcy Case, the bankruptcy court became aware of the transfer of the Lake Harbor Property and the fact that the transfer occurred during the First Bankruptcy Case. Facing resultant dismissal, Neff agreed to record a quitclaim deed transferring the Lake Harbor Property back to himself. He thereafter filed an amended SOFA, reporting both the initial and subsequent transfers.

In September 2010, DeNoce moved to dismiss Neff's Second Bankruptcy Case for bad faith, contending, among other things, that the transfer of the Lake Harbor Property to the Retirement Trust during the course of his First Bankruptcy

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Case was fraudulent.4 After four days of evidentiary hearings on the matter, Neff agreed to withdraw his opposition to the motion to dismiss as long as he was not barred from filing a chapter 7 case. The bankruptcy court accepted his withdrawal and orally granted DeNoce's motion dismissing the Second Bankruptcy Case. It entered the related order on November 14, 2011.

While the motion to dismiss the Second Bankruptcy Case was pending, DeNoce had filed a first amended nondischargeability complaint against Neff on July 22, 2011, seeking to except his debt from discharge under § 523(a)(6). However, once Neff's Second Bankruptcy Case was dismissed, DeNoce's § 523 action also was dismissed.

D. Neff's third bankruptcy case and the § 727 action

Neff filed a third bankruptcy case under chapter 7 on October 24, 2011 (the " Third Bankruptcy Case" ), before the order dismissing the Second Bankruptcy Case was entered on November 14.

DeNoce filed a complaint seeking to deny Neff's discharge under § 727(a)(2) (the " 727 Complaint" ). DeNoce contended that the transfer of the Lake Harbor Property into the Retirement Trust and Neff's acts and schemes to conceal it were fraudulent and done with the intent to avoid paying his creditors' claims. Neff's answer denied the allegations and asserted several affirmative defenses, including that the 727 Complaint failed to state a claim for which relief could be granted and that it was barred by all applicable statutes of limitations.

Neff later moved for partial summary judgment on DeNoce's claim under § 727(a)(2)(A) (the " PSJ Motion" ) on the basis that the transfer of the Lake Harbor Property into the Retirement Trust, which occurred on April 7, 2010, was more than one year prior to the filing of the Third Bankruptcy Case on October 24, 2011. Alternatively, the date upon which Neff transferred the Lake Harbor Property back into his name -- August 4, 2010 -- was still more than one year prior to the filing of the Third Bankruptcy Case. Therefore, argued Neff, DeNoce's claim could not support a denial of discharge, and he was entitled to discharge notwithstanding § 727(a)(2)(A) as a matter of law.

DeNoce opposed the PSJ Motion and filed a cross-motion for partial summary judgment (" PSJ Cross-Motion" ), contending he was entitled to judgment on his claims under § 727(a)(2)(A) and (B). DeNoce contended that the one-year limitation did not apply because Neff had filed three consecutive bankruptcy cases, and so the actual bankruptcy " process" started with his First Bankruptcy Case in March 2010. Thus, he argued that the " postpetition" transfer on April 7, 2010, supported a claim under § 727(a)(2)(B). Alternatively he argued that since the transfer occurred within one year prior to his Second Bankruptcy Case filed on June 18, 2010, it supported a claim under § 727(a)(2)(A). Finally, DeNoce contended that the one-year limitation did not apply because Neff continued to conceal the transfer, claiming it as an exempt retirement asset up until the day before he filed his PSJ Motion.

The bankruptcy court held a hearing on the PSJ Motion on July 11, 2012.5 After

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some preliminary argument by the parties, the court ruled that the one-year provision in § 727(a)(2)(A) was a statute of repose and not subject to equitable tolling. Hence, assuming that the transfer occurred when the quitclaim deed transferring the Lake Harbor Property from Neff to the Retirement Trust was recorded on April 7, 2010, that was more than one year prior to the filing of the Third Bankruptcy Case and could not be the basis for a claim under § 727(a)(2)(A). Therefore, because the initial transfer occurred outside the statutory period, Neff would not be denied a discharge.

An order granting the PSJ Motion was entered on August 10, 2012 (the " PSJ Order" ).

DeNoce timely filed a motion to reconsider the PSJ Order, which the bankruptcy court denied. The only issue before it was whether the one-year " lookback" period in § 727(a)(2)(A) is a statute of repose or a statute of limitations subject to equitable tolling. Noting the lack of any controlling authority on the matter, the bankruptcy court reviewed Womble v. Pher Partners (In re Womble), 299 B.R. 810 (N.D. Tex. 2003), aff'd on other grounds, 108 F.Appx. 993 (5th Cir. 2004) (" Womble" ), which, relying upon Young v. United States, 535 U.S. 43, 122 S.Ct. 1036, 152 L.Ed.2d 79 (2002), held that the one-year period in § 727(a)(2)(A) is a limitation period that can be equitably tolled...

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