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FILED

FEB 24 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-15-1180-FCTa

)

CHARLENE M. MILBY, ) Bk. No. 11-14487-PC

 )

Debtor. ) Adv. No. 14-01132-PC 

______________________________)

)

PATRICIA A. TEMPLETON and )

G. CRESSWELL TEMPLETON, III, )

individuals on behalf of )

the Bankruptcy Estate of )

Debtor Charlene M. Milby, and )

derivatively on behalf of )

Charlene’s Transportation, )

Inc., )

)

Appellants, )

)

v. ) MEMORANDUM*

)

JON A. MILBY; D&J TRUCKING )

CO.; SANDRA HOLDER MILBY; )

SANJON, INC.; 5TH ST CONDO, )

LLC; CHARLENE M. MILBY; )

CHARLENE’S TRANSPORTATION, )

INC., )

)

Appellees. )

______________________________)

Argued and Submitted on January 21, 2016

at Pasadena, California

Filed – February 24, 2016

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Peter Carroll, Bankruptcy Judge, Presiding

* This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8024-1.
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Appearances: Daniel Joseph McCarthy argued on behalf of

Appellants Patricia A. Templeton and G. Cresswell

Templeton, III; Karen L. Grant argued on behalf of

Appellees Jon A. Milby, D&J Trucking Company,

Sandy Holder Milby, Sanjon, Inc., 5th St. Condo,

LLC, Charlene M. Milby, and Charlene’s

Transportation, Inc.

 

Before: FARIS, CORBIT**, and TAYLOR, Bankruptcy Judges.

INTRODUCTION

Appellants Patricia A. Templeton and G. Cresswell Templeton,

III initiated an adversary proceeding on behalf of themselves and

Debtor Charlene M. Milby’s bankruptcy estate to avoid fraudulent

transfers. Appellees Jon A. Milby, D&J Trucking Company, Sandy

Holder Milby, Sanjon, Inc., 5th St. Condo, LLC, Charlene M.

Milby, and Charlene M. Milby’s wholy-owned company Charlene’s

Transportation, Inc. (“CTI”) moved for summary judgment on the

ground that the claims were untimely by virtue of the two-year

statute of limitations under § 546(a)(1).1 We address the

statute of limitations issue in a separate published opinion. 

This memorandum addresses the bankruptcy court’s decision to

grant summary judgment and dismiss portions of the complaint,

with leave to amend, for failure to state claims upon which

relief could be granted. 

** Honorable Frederick P. Corbit, Chief United States

Bankruptcy Judge for the Eastern District of Washington, sitting

by designation.

1 Unless specified otherwise, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all

“Rule” references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001-9037, and all “Civil Rule” references are

to the Federal Rules of Civil Procedure, Rules 1-86.

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We hold that the bankruptcy court did not err in granting

summary judgment and dismissing with leave to amend the claims

based on transfers by people or entities other than the Debtor. 

FACTUAL BACKGROUND2

The factual and procedural background of this case is set

out in our separate published decision. We will not repeat it

here.

JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334, 157(b)(1), and 157(b)(2)(F) and (H). We have

jurisdiction under 28 U.S.C. § 158.

As a general rule, “an order dismissing a complaint with

leave to amend is not a final, appealable order[.]” Indian

Oasis-Baboquivari Unified Sch. Dist. No. 40 of Pima Cty., Ariz.

v. Kirk, 109 F.3d 634, 636 (9th Cir. 1997). In the present case,

however, the appellants gave notice that they would not be

amending their complaint and obtained a final judgment of

dismissal from the bankruptcy court. Accordingly, we have

jurisdiction to consider this appeal. 

ISSUE

Whether the bankruptcy court erred in granting summary

judgment and dismissing with leave to amend the First, Second,

and Third Claims for Relief to the extent they are based on

2 The Templetons’ excerpts of record are incomplete and make

reference to certain documents on the bankruptcy court’s docket

without including the actual document. We have exercised our

discretion to review the bankruptcy court’s docket, as

appropriate. See Woods & Erickson, LLP v. Leonard (In re AVI,

Inc.), 389 B.R. 721, 725 n.2 (9th Cir. BAP 2008). 

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transfers by people and entities other than the Debtor (as

alleged in paragraphs 31 through 35 of the complaint) for failing

to state a claim upon which relief may be granted.

STANDARDS OF REVIEW

We review de novo the bankruptcy court’s decision to grant

or deny summary judgment. Boyajian v. New Falls Corp.

(In re Boyajian), 564 F.3d 1088, 1090 (9th Cir. 2009).

Similarly, a bankruptcy court’s decision to dismiss a

complaint for failure to state a claim is a question of law that

we review de novo. AlohaCare v. Haw. Dep’t of Human Servs.,

572 F.3d 740, 744 n.2 (9th Cir. 2009); Stoll v. Quintanar

(In re Stoll), 252 B.R. 492, 495 (9th Cir. BAP 2000).

We review for abuse of discretion the denial of a motion for

reconsideration. See N. Alaska Envtl. Ctr. v. Lujan, 961 F.2d

886, 889 (9th Cir. 1992). Under an abuse of discretion standard,

a reviewing court cannot reverse unless it has “a definite and

firm conviction that the [court below] committed a clear error of

judgment” in the conclusion it reached upon a weighing of the

relevant factors. Marchand v. Mercy Med. Ctr., 22 F.3d 933, 936

(9th Cir. 1994).

DISCUSSION

A. The court did not err in granting summary judgment on and

dismissing the First, Second, and Third Claims for Relief to

the extent they are based on transfers by non-Debtor

parties. 

The Templetons assert that the bankruptcy court erred by

dismissing without prejudice the First, Second, and Third Claims

for Relief to the extent they are based on paragraphs 31 through

35 of the complaint. We find no reversible error. 

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 The Templetons first argue that the bankruptcy court should

not have granted summary judgment on this issue because the

motions for summary judgment were strictly based on the statute

of limitations. This argument misses three points. 

First, a court always has discretion to raise issues sua

sponte, provided that the court gives the parties an adequate

opportunity to address those issues. See Seismic Reservoir 2020,

Inc. v. Paulsson, 785 F.3d 330, 335 (9th Cir. 2015) (a court may

dismiss claims sua sponte under Civil Rule 12(b)(6), but 

“must give notice of its sua sponte intention to dismiss and

provide the plaintiff with an opportunity to at least submit a

written memorandum in opposition to such motion.” (internal

citations and quotation marks omitted)); see also Young v.

Hawaii, 911 F. Supp. 2d 972, 995 (D. Haw. 2012) (“a court may

properly dismiss an action sua sponte, without giving a plaintiff

notice of its intention to dismiss and an opportunity to respond

if a plaintiff ‘cannot possibly win relief’” (citing Sparling v.

Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir. 1988); Omar v.

Sea–Land Serv., Inc., 813 F.2d 986, 991 (9th Cir. 1987))). In

this case, the court saw evident flaws in the complaint and

decided to deal with those flaws promptly. The bankruptcy court

gave the parties ample opportunities to respond at the hearing on

the motion and in a motion for reconsideration. We cannot say

that the bankruptcy court erred when it decided to “cut to the

chase.”

Second, the bankruptcy court did not act entirely without

prompting. The Templetons first raised this issue (albeit

tangentially) in their opposition to the motions for summary

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judgment. The Templetons cannot complain that the court decided

an issue that they raised.

Third, the court addressed the issue because, in order to

decide whether the claims were timely under the limitations

period of § 546(a)(1)(A) (the primary argument of the Appellees’

motion), it had to decide what claims are subject to that

statute. The Templetons’ first two claims involve alleged

fraudulent transfers under § 544(b) and California Civil Code

§§ 3439.04(a)(1), 3439.04(a)(2) and 3439.05. Section 544(b)

provides that “the trustee may avoid any transfer of an interest

of the debtor in property . . . that is voidable under applicable

law by a creditor holding an unsecured claim . . . .” § 544(b)

(emphasis added). The court stated that § 544(b) means that “a

trustee may avoid transfers or obligations that could have been

avoided by an unsecured creditor under applicable non-bankruptcy

law had the bankruptcy case not been filed, provided such a

creditor actually exists.” 

The bankruptcy court pointed out that the transfers alleged

in paragraphs 31 through 35 of the complaint were transfers from

bank accounts in the name of the non-Debtor defendants. The

bankruptcy court ruled that those transfers “are not subject to

avoidance under § 544(b) as fraudulent, either actually or

constructively, pursuant to CUFTA [California Uniform Fraudulent

Transfers Act] as a matter of law because they do not involve a

‘transfer of an interest of the debtor in property’ by the terms

of the complaint.”

The Templetons basically agreed that some of their claims

were not viable under § 544(b). Rather, they argued that the

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complaint adequately stated avoidance claims because it cited

CUFTA, included shareholder derivative claims on behalf of CTI,

and alleged that CTI was an alter ego of the Debtor. In essence,

the bankruptcy court determined that the Templetons “[could not]

possibly win relief” under those theories, but did not exclude

the possibility that they could state such claims in an amended

complaint. 

We agree with the bankruptcy court. CUFTA does not help the

Templetons, because it only permits a creditor of a debtor to

attack a transfer of an interest of the debtor in property, see

Cal. Civ. Code § 3439.04 (“A transfer made or obligation incurred

by a debtor is voidable as to a creditor . . . if the debtor made

the transfer or incurred the obligation” in particular ways.),

and the complaint does not allege that the Templetons or the

bankruptcy estate of the Debtor are creditors of CTI or the other

non-Debtor transferors. For a similar reason, the shareholder

derivative claims are unavailing. Derivative status allows a

shareholder to assert claims belonging to a corporation, such as

CTI. See Quinn v. Anvil Corp., 620 F.3d 1005, 1012 (9th Cir.

2010) (“A derivative action is an extraordinary process where

courts permit ‘a shareholder to step into the corporation’s shoes

and to seek in its right the restitution he could not demand in

his own.’” (quoting Lewis v. Chiles, 719 F.2d 1044, 1047 (9th

Cir. 1983))). But only a creditor of a debtor/transferor can

seek avoidance of the debtor’s fraudulent transfers. CTI could

not avoid any fraudulent transfers that CTI itself made, and

therefore a shareholder asserting derivative claims on behalf of

CTI can not avoid such transfers either. The alter ego claims

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might provide support, but the bankruptcy court did not err in

deciding that those claims were not adequately alleged. 

Therefore, we hold that the court did not err in granting

summary judgment and dismissing with leave to amend the nonDebtor transfer claims (based on paragraphs 31 through 35). 

B. The Panel will not consider the Templetons’ standing to

bring a derivative claim on behalf of CTI for the first time

on appeal. 

Appellees argue that the complaint did not provide them with

adequate notice that it included a corporate shareholder

derivative claim. They argue that the Templetons lack standing

to bring a derivative suit on behalf of CTI. As such, they state

that the Panel “should find that neither Templetons’ stipulation

with [the Trustee] nor the order entering it conveyed

jurisdiction or standing where none existed under applicable

law.”

We decline to consider this issue on appeal, as it was not

properly raised before the bankruptcy court in the first

instance. As a general rule, “federal appellate courts will not

consider issues not properly raised in the trial courts. An

issue only is ‘properly raised’ if it is raised sufficiently to

permit the trial court to rule upon it.” Ezra v. Seror

(In re Ezra), 537 B.R. 924, 932 (9th Cir. BAP 2015) (internal

citations omitted) (emphasis added).

Here, the bankruptcy court noted that Appellees’ argument

was beyond the scope of the motion for summary judgment and “not

before the court today.” It stated that the issue “may very well

be raised in another motion with – with notice and an opportunity

to respond[,]” but the court declined to consider Appellees’

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argument.

There are no circumstances that would cause us to exercise

our discretion to consider this issue for the first time on

appeal. See In re Ezra, 537 B.R. at 932-33. As such, we do not

consider whether the Templetons had standing to bring claims on

behalf of CTI.

C. The Templetons did not need to amend their complaint before

filing an appeal.

Appellees argue that the Templetons lack standing to appeal

the bankruptcy court’s ruling as to the transfers alleged in

paragraphs 31 through 35, because they elected not to amend the

complaint. Appellees urge the Panel to hold that the Templetons

waived their right to appeal when they declined to amend.

The Ninth Circuit has made clear that the operative question

is not whether the plaintiff has chosen to amend the complaint,

but whether the lower court has issued a final judgment. In WMX

Technologies, Inc. v. Miller, 104 F.3d 1133 (9th Cir. 1997), the

court considered whether it had standing to hear an appeal from

an appellant who had been granted leave to amend, but instead

filed an appeal without first amending the complaint. The court

concluded that it did not, noting the rule that, “[u]nless a

plaintiff files in writing a notice of intent not to file an

amended complaint, such dismissal order is not an appealable

final decision. In a typical case, filing of such notice gives

the district court an opportunity to reconsider, if appropriate,

but more importantly, to enter an order dismissing the action,

one that is clearly appealable.” Id. at 1135-36 (quoting Lopez

v. City of Needles, 95 F.3d 20, 22 (9th Cir. 1996)) (emphases

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added). The court then clarified that, in the face of

conflicting case law, “a plaintiff, who has been given leave to

amend, may not file a notice of appeal simply because he does not

choose to file an amended complaint. A further district court

determination must be obtained.” Id. at 1136.

In the present case, the Templetons both informed the court

of their intention not to amend and obtained a final judgment. 

Therefore, the Templetons have the right to appeal the dismissal

of the claims relating to the transfers alleged in paragraphs 31

through 35.

CONCLUSION

For the reasons set forth above, we conclude that the

bankruptcy court did not err in determining that transfers by

non-Debtor parties are not subject to § 544(b) and dismissing

those claims with leave to amend. For the reasons set forth in

our published opinion, we also hold that the court erroneously

applied the doctrine of equitable tolling when it dismissed the

Templetons’ remaining claims as untimely under § 546(a)(1)(A). 

Therefore, we AFFIRM IN PART and VACATE IN PART the bankruptcy

court’s orders and REMAND for further proceedings consistent with

this memorandum and the accompanying opinion.

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