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FILED

FEB 24 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

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

)

CHARLENE M. MILBY, ) Bk. No. 9:11-14487-PC

 )

Debtor. ) Adv. No. 9:14-01132-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. ) OPINION

)

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

 

Appearances: Daniel Joseph McCarthy of Hill, Farrer & Burrill,

LLP 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,
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Inc., 5th St. Condo, LLC, Charlene M. Milby, and

Charlene’s Transportation, Inc.

 

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

FARIS, Bankruptcy Judge:

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’s Transportation, Inc. 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 The

bankruptcy court agreed with Appellees that certain of the

Templetons’ claims were untimely, holding that, while chapter 7

trustee Sandra K. McBeth was diligent and could not have

discovered the causes of actions earlier, she did not diligently

pursue the claims after discovery. The court thus granted

summary judgment and dismissed those claims pursuant to

§ 546(a)(1)(A). 

* 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 erred in its application

of equitable tolling to the two-year statute of limitations. We

affirm other decisions of the bankruptcy court in a separate

memorandum entered concurrently with the entry of this opinion. 

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

court’s order granting summary judgment; VACATE the court's order

denying reconsideration; and REMAND this action for further

proceedings consistent with our opinion.

FACTUAL BACKGROUND2

The Debtor is a materials hauling broker who conducts

certain business operations through a wholly-owned company,

Charlene’s Transportation, Inc. (“CTI”). The Debtor filed for

chapter 7 bankruptcy on September 22, 2011, and the Trustee was

appointed to administer her estate. The Templetons filed a proof

of claim in the amount of $2,756,077.21. 

The Debtor has an adjudicated history of concealment and

refusal to produce relevant information. The Templetons

initiated an adversary proceeding to deny discharge under § 727

and determine the dischargeability of the Debtor’s debts to the

Templetons under § 523. The Templetons argued that, under § 727,

the court should deny the Debtor’s discharge because she

knowingly made false and deceptive statements in her schedules

and testimony, failed to disclose assets, failed to produce

documents requested by the Trustee, and was unable to explain the

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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loss of assets. The Templetons further requested that the court

deny discharge of the Debtor’s debt to them under § 523(a),

because the Debtor had fraudulently induced them to co-purchase

real property by making certain false representations. The

Debtor and CTI failed to respond to discovery requests and defied

the court’s discovery orders. As a discovery sanction, the

bankruptcy court entered a default judgment against the Debtor,

denied the Debtor’s discharge pursuant to § 727(a)(4) and (5),

and awarded the Templetons $349,623.54 pursuant to § 523(a)(2). 

In the meantime, the Trustee and the Templetons both

investigated and began to assert additional claims against the

Debtor and her affiliates. The Trustee was able to negotiate an

early compromise of an insider preference claim against the

Debtor’s father, Jon A. Milby, and Mr. Milby’s business, D&J

Trucking, Co., Inc., receiving $7,500 in settlement of a claim

based on an undisclosed $10,000 payment from the Debtor’s bank

account to Mr. Milby or D&J Trucking. 

The normal deadline (absent tolling) to commence actions to

recover avoidable transfers was two years after the bankruptcy

filing, or September 22, 2013. Not surprisingly, there was

significant activity just before that deadline.

On September 5, 2013, the Templetons’ counsel provided the

Trustee with “a binder consisting of descriptions of assets and

transfers that the Templetons believed might be recoverable for

the benefit of the estate, as well as some supporting

documentation . . . .” On September 17, the Trustee requested

further documentation from the Templetons’ counsel regarding one

of the transfers. The next day, counsel provided the requested

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information.

On September 19, 2013, three days before the statute of

limitations was set to expire, the Trustee brought an adversary

proceeding (the “Trustee’s Avoidance Action”) against the

Debtor’s father and one of his companies to avoid and recover

fraudulent transfers, preferential transfers, and unauthorized

post-petition transfers. The Trustee’s Avoidance Action did not

state claims based on the transfers identified by the Templetons;

the Trustee later explained that, when she filed the Trustee’s

Avoidance Action, she did not have adequate documentation or

supporting evidence about those transfers and was concerned about

the Debtor’s track record of non-cooperation in discovery and the

potential litigation costs to the estate.3

The Trustee negotiated a settlement of the Trustee’s

Avoidance Action. The Templetons objected to the settlement

agreement, arguing that the release should cover only the

transfers alleged in the complaint and not other transfers. The

Trustee, the Templetons, and the settling defendants resolved

this dispute by stipulating to narrow the scope of the releases

to the transfers alleged in the Trustee’s Avoidance Action; thus,

the Trustee preserved all other claims. The bankruptcy court

approved the settlement agreement with the narrowed releases. 

In August 2014, while the motion to approve the settlement

of the Trustee’s Avoidance Action was pending, the Templetons

approached the Trustee and discussed the possibility of being

3 The Trustee also filed a second adversary proceeding to

compel the Debtor, the Debtor’s husband, Rex Rossoll, and 

Mr. Rossoll’s company, Double R Cutting Horse LLC, to turn over

assets that the Debtor had not disclosed in her schedules. 

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appointed to pursue the fraudulent transfer claims that they had

brought to the Trustee’s attention in September 2013. The

Trustee agreed, and the bankruptcy court approved the

appointment.

A few days later, on September 17, 2014, the Templetons

initiated the adversary proceeding from which this appeal arises. 

They asserted claims on behalf of themselves and the Debtor’s

estate, including derivative claims for CTI. The Templetons

alleged claims for (1) actual fraud under § 544(b) and California

Civil Code § 3439.04(a)(l); (2) constructive fraud under § 544(b)

and California Civil Code §§ 3439.04(a)(2) and 3439.05;

(3) aiding and abetting fraudulent transfers; and (4) unjust

enrichment. They alleged that CTI is the Debtor’s alter ego.

Among other things, the Templetons challenged transfers from

certain bank accounts allegedly owned by the various Appellees. 

They claimed that the Debtor owned three bank accounts ending in

-0242, -2368, and -0449. (As to account -0449, the Templetons

alleged that the account was opened “under the name ‘Milby,

Charlene dba Charlene’s Transportation.’”) The Templetons stated

that CTI owned a bank account ending in -0526. They claimed that

Mr. Milby and D&J Trucking had a bank account ending in -0589. 

Finally, the Templetons alleged that Sanjon, Inc. had a bank

account ending in -9226.

In November 2014, Appellees filed summary judgment motions

on the basis of the two-year statute of limitations in

§ 546(a)(1). They argued that equitable tolling did not apply,

despite the Trustee’s diligence, because there were no

extraordinary circumstances that prevented her from bringing suit

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within two years after the Debtor filed for bankruptcy, i.e., by

September 22, 2013.

In response, the Templetons argued that the Debtor’s

misconduct and evasion were “extraordinary circumstances”

hindering the Trustee; the two-year limitations period had been

tolled until September 2013; and the Templetons’ adversary

complaint was filed within one year of that date. In support of

the Templetons’ opposition, the Trustee stated that the Debtor

failed to disclose the transfers at issue in the adversary

proceeding; the Debtor failed to cooperate with the Trustee’s

investigation; the Trustee first learned of the allegedly

fraudulent transfers in September 2013 from the Templetons’

attorney; and, at that time, she did not have sufficient evidence

of the fraudulent transfers. 

On March 2, 2015, the bankruptcy court granted the

Appellees’ motions. The court began by analyzing which of the

Templetons’ claims were brought under § 544(b) and were therefore

actually subject to the limitations period of § 546(a)(1)(A). 

Because § 544(b) refers to “transfer[s] of an interest of the

debtor in property[,]” the court held that only the transfers

from the Debtor’s bank accounts (the transfers identified in

paragraph 30 of the complaint and related to account -0449) were

covered by § 544(b). The court ruled that the transfers from the

other Appellees’ bank accounts (described in paragraphs 31

through 35 of the complaint) “are not subject to avoidance under

§ 544(b) as fraudulent . . . because they do not involve a

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

of the complaint.” The court held that the Templetons’

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allegations did not state a plausible claim. However, the court

stated that it “is not convinced that a plausible claim for

avoidance of the alleged transfers cannot be pled by amendment

under a different theory” and dismissed with leave to amend the

first three counts to the extent they were based on paragraphs 31

through 35.4 

Having determined which claims were subject to

§ 546(a)(1)(A), the court next turned to the timeliness of the

claims to avoid the transfers from the Debtor’s accounts (alleged

in paragraph 30 of the complaint). The court found that the

Trustee had been diligent and “[t]here is no significantly

probative evidence in the record that [the Trustee] discovered,

or could have discovered, the Subject Transfers earlier than

September 2013, when she had only three days to evaluate the

Subject Transfers before expiration of the limitations period.” 

Nevertheless, the court held that the Trustee “was dilatory in

seeking relief after discovering facts regarding the Subject

Transfers and ultimately made a conscious decision not to pursue

the transfers on behalf of the estate.” The court dismissed with

prejudice the First, Second, and Third Claims for Relief (to the

extent they concerned paragraph 30) as barred by the statute of

limitations.5

After the bankruptcy court denied their motion for

reconsideration, the Templetons gave notice that they would not

4 We address this portion of the bankruptcy court’s

decision in a separate memorandum. 

5 The court dismissed Count 4 for unjust enrichment without

leave to amend on the ground that it did not state an independent

cause of action. The Templetons do not challenge this ruling.

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amend the complaint and instead filed a timely notice of appeal.

The Templetons also filed their designation of excerpts of

record, but Appellees moved to strike nine items that were not

before the bankruptcy court in its consideration of the motions

for summary judgment. The bankruptcy court granted the motion.

The Templetons requested that this Panel take judicial

notice of the stricken items or permit enlargement of the record. 

The motions panel denied the motion without prejudice.

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.

ISSUES

(1) Whether the bankruptcy court erroneously applied the

doctrine of equitable tolling when it granted summary judgment

and dismissed the First, Second, and Third Claims for Relief (to

the extent they are based on fraudulent transfers alleged in

paragraph 30 of the complaint) as untimely under § 546(a)(1)(A).

(2) Whether this Panel should consider excerpts of record

stricken by the bankruptcy court. 

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). 

The bankruptcy court has latitude in granting relief from a

strict construction of a statute of limitations and reaches its

determination on a case-by-case analysis. See Scholar v. Pac.

Bell, 963 F.2d 264, 267–68 (9th Cir. 1992). Thus, we review for

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abuse of discretion the bankruptcy court’s decision that the

trustee could not invoke the doctrine of equitable tolling. See

Baldwin Cty. Welcome Ctr. v. Brown, 466 U.S. 147, 151 (1984) (per

curiam); see also Scholar, 963 F.2d at 267.

Similarly, 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 bankruptcy court incorrectly applied the doctrine of

equitable tolling to the statute of limitations under

§ 546(a)(1)(A).

The primary issue on appeal concerns the bankruptcy court’s

application of equitable tolling. We hold that the bankruptcy

court erred when it dismissed the § 544(b) claims as untimely

because of the Trustee’s alleged lack of diligence after

discovery of the fraudulent transfers.6

1. Section 546(a)(1)(A)’s two-year statute of limitations

is subject to equitable tolling.

Section 546(a)(1)(A) provides a two-year statute of

limitations for avoidance actions: 

(a) An action or proceeding under section 544, 545,

547, 548, or 553 of this title may not be commenced

6 Our discussion herein considers and disposes of arguments

raised in conjunction with both the Appellees' motions for

summary judgment and the Templetons' motion for reconsideration.

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after the earlier of -

(1) the later of -

(A) 2 years after the entry of the order for

relief; or

(B) 1 year after the appointment or election

of the first trustee under section 702, 1104,

1163, 1202, or 1302 of this title if such

appointment or such election occurs before

the expiration of the period specified in

subparagraph (A); or

(2) the time the case is closed or dismissed.

§ 546(a).

The statute of limitations period under § 546(a)(1)(A) may

be subject to equitable tolling. Gladstone v. U.S. Bancorp., 

No. 13-55773, --- F.3d ----, 2016 WL 142469 at *8 (9th Cir. Jan.

8, 2016) (citing Ernst & Young v. Matsumoto (In re United Ins.

Mgmt., Inc.), 14 F.3d 1380, 1387 (9th Cir. 1994)); see Young v.

United States, 535 U.S. 43, 49 (2002). “Congress must be

presumed to draft limitations periods in light of this background

principle. . . . That is doubly true when it is enacting

limitations periods to be applied by bankruptcy courts, which are

courts of equity and apply the principles and rules of equity

jurisprudence.” Young, 535 U.S. at 49-50 (internal citations,

quotation marks, and alteration omitted). “Under the equitable

tolling doctrine, where a party ‘remains in ignorance of [a

wrong] without any fault or want of diligence or care on his

part, the bar of the statute does not begin to run until the

fraud is discovered, though there be no special circumstances or

efforts on the part of the party committing the fraud to conceal

it from the knowledge of the other party.’” In re United Ins.

Mgmt., Inc., 14 F.3d at 1384 (quoting Lampf, Pleva, Lipkind,

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Prupis & Petigrow v. Gilbertson, 501 U.S. 350 (1991)).

2. The Ninth Circuit applies equitable tolling without

regard to a trustee’s diligence in pursuing claims

after discovery.

The Templetons contend that, based on equitable tolling, the

adversary complaint filed in September 2014 was timely. 

Appellees contend that the Trustee was dilatory after the

discovery of the fraudulent transfers, such that she should be

denied the benefit of equitable tolling. We agree with the

Templetons and hold that the bankruptcy court misapplied Ninth

Circuit law. 

In Socop-Gonzalez v. Immigration & Naturalization Service,

272 F.3d 1176 (9th Cir. 2001), the Ninth Circuit, sitting en

banc, considered whether a limitations period was subject to

equitable tolling. An immigrant seeking to challenge an order of

deportation (initially on the basis of asylum) asked an

Immigration and Naturalization Service (“INS”) officer how to

submit a petition to immigrate based on his recent marriage to an

American citizen. Id. at 1181. The INS officer instructed the

appellant to withdraw his asylum appeal and file an application

for adjustment of status with the INS. Unfortunately, the

information provided by the INS officer was incorrect. The

Bureau of Immigration Appeals (“BIA”) terminated his asylum

appeal and returned the case to the immigration court, which made

the deportation order immediately effective as of May 5, 1997. 

Id.

On July 7, 1997, the appellant received a letter from the

INS, instructing him to report for deportation. This was the

first time he was alerted to a problem in his attempt to adjust

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his status. Shortly thereafter, while processing the appellant’s

application for adjustment of status, the INS informed the

appellant that he was eligible to receive his employment

authorization card. Concerned by the INS’s conflicting posture,

on August 11, the appellant moved to reopen his case and to

reinstate the asylum appeal. The BIA denied the motion on the

ground, inter alia, that the motion to reopen was untimely

because it was not filed within ninety days of the BIA’s May 5

deportation order. Id. at 1182.

On appeal, the appellant argued that the BIA should have

equitably tolled the ninety-day limitations period between May 5

(the entry of the deportation order) and July 7 (the notice to

report for deportation), because he did not know that the INS

officer’s erroneous advice had caused him to follow the wrong

procedure. Id. at 1183. The Ninth Circuit agreed. It concluded

that equitable tolling was applicable to the filing deadline for

a motion to reopen. Id. at 1187-89. It then considered

“whether, despite due diligence, [the appellant] was prevented

during this period, by circumstances beyond his control . . .

from discovering that his order of deportation had become

effective . . . .” Id. at 1194. It held that “[b]etween May 5,

1997 and July 7, 1997, [the appellant] had no reason to believe

that his deportation order had become effective. In fact, he had

every reason to believe that he had followed the correct

procedure for adjusting his status.” Id. The court thus held

that the period from May 5 through July 7 should not have counted

toward the ninety-day period. Id.

The court noted that, at the time the appellant was put on

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notice by the deportation notice, he still had twenty-seven days

in which he could have filed a motion to reopen. Id. The court

held that this was irrelevant. It overruled the Ninth Circuit

panel decision in Santa Maria v. Pacific Bell, 202 F.3d 1170 (9th

Cir. 2000), which stood for the proposition that “courts should

not apply equitable tolling in situations where a plaintiff

discovers the existence of a claim before the end of a

limitations period and the court believes that the plaintiff

could have been expected to bring a claim within the remainder of

the limitations period.” Socop-Gonzalez, 272 F.3d at 1194. The

court stated that, “[i]n tolling statutes of limitations, courts

have typically assumed that the event that ‘tolls’ the statute

simply stops the clock until the occurrence of a later event that

permits the statute to resume running.” Id. at 1195 (emphasis in

original). It held that the Santa Maria decision does away with

“the relative certainty and uniformity with which a statutory

period may be calculated and applied”; was explicitly rejected by

the Supreme Court; and “trumps what is arguably Congress’

intended policy objectives in setting forth a statute of

limitations period – to permit plaintiffs to take a specified

amount of time . . . to further investigate their claim and

consider their options before deciding whether to file suit.” 

Id. at 1195-96. It thus concluded by stating that,

we reject the approach to tolling adopted in Santa

Maria, and we need not inquire whether [the appellant]

could have filed his motion to reopen within the

twenty-seven days remaining in the limitations period

after he received [notice of deportation]. . . .

Instead, we need only ask whether [the appellant] filed

within the limitations period after tolling is taken

into account. [The appellant] had until ninety days

after July 7 to file a motion to reopen, or until

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October 5, 1997.

Id. at 1196 (emphases added). 

The holding of Socop-Gonzalez is still good law in this

circuit. See Mangum v. Action Collection Serv., Inc., 575 F.3d

935, 947 (9th Cir. 2009) (O’Scannlain, J., concurring). There is

no reason to think that the Ninth Circuit would apply equitable

tolling in a different fashion under § 546(a)(1).

Very recently, the Ninth Circuit again indicated that

equitable tolling simply extends the statute of limitations

period by the length of time the plaintiff could not discover the

injury. In Gladstone, the court held that the trustee’s

avoidance action was subject to § 546(a)(1)(A). 2016 WL 142469

at *8. It quoted United Insurance Management for the proposition

that, “where a party ‘remains in ignorance of [a wrong] without

any fault or want of diligence or care on his part, the bar of

the statute does not begin to run until the fraud is discovered

. . . .” Id. (quoting In re United Ins. Mgmt., Inc., 14 F.3d at

1384). The court did not inquire whether the trustee was

thereafter diligent, but merely held that “the statute of

limitations was tolled until the fraudulent transfers were

revealed to the Trustee’s attorney . . . .” Id. at *9. The

court’s language implies that a plaintiff would receive the

benefit of the full statutory period after the discovery of the

fraudulent transfer.

Appellees and the bankruptcy court relied heavily upon

Taylor v. Hosseinpour-Esfahani (In re Hosseinpour-Esfahani), 198

B.R. 574 (9th Cir. BAP 1996), a pre-Socop-Gonzalez BAP decision

that considered an issue identical to that posed in this appeal. 

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In that case, the “issue before the Panel [was] whether the

bankruptcy court abused its discretion in refusing to apply the

doctrine of equitable tolling when the trustee was dilatory after

discovering the existence of a claim.” In re HosseinpourEsfahani, 198 B.R. at 579 (emphasis in original). The panel held

that “[d]espite the trustee’s alleged diligence in discovering

the alleged fraud before the statute of limitations lapsed, we

cannot conclude that this obviates the need for the trustee to

act diligently and in a timely manner once he has this

knowledge.” Id. (internal citations omitted); see also Gladstone

v. Michaelis (In re QualityBuilt.com), Bkr. no. 09-12113-PB7,

2014 WL 5089040, at *3 (Bankr. S.D. Cal. Apr. 14, 2014)

(determining that “the Trustee was indeed dilatory after

discovering the facts underlying the Avoidance Claims, and that

there [were] no extreme circumstances which warrant equitable

tolling to save the Trustee from the time limitations”).

Appellees urge us to ignore the Ninth Circuit’s explicit

ruling in Socop-Gonzalez in favor of our own earlier decision in

Hossseinpour-Esfahani. We decline to do so. After SocopGonzalez, Hosseinpour-Esfahani is no longer good law. A court

should not look at the trustee’s post-discovery diligence when

considering whether equitable tolling should be applied. If the

trustee was diligent in discovering the claims, then he should

receive the benefit of the full limitations period after

discovery of the fraudulent transfers.

We note that Socop-Gonzalez’s “stop-clock” rule is

consistent with bankruptcy policy for several reasons. 

First, the rule advocated by the Appellees would create

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uncertainty about the length of the limitations period. An ad

hoc standard eliminates the certainty and sense of repose that a

statute of limitations is meant to provide. At oral argument,

the Panel asked Appellees’ counsel to state a standard of

timeliness that bankruptcy courts could apply in lieu of the

“stop clock” rule. Counsel had no answer. 

Second, an unguided case-by-case standard would require

parties to bear the expense of litigating a fact-intensive

inquiry into a trustee’s post discovery diligence. This would

tend to increase the expense of bankruptcy cases, to the

detriment of all creditors.

Third, Appellees’ rule would encourage debtors to obstruct

the trustee’s investigation or to hide assets and documents. If

debtors anticipate a reward for disobeying the trustee, they are

more likely to attempt to run out the statute of limitations

without cooperating. The fairer course is to allow the trustee

the full statutory period after discovery of the cause of action.

Finally, the rule of Hosseinpour-Esfahani has an ironic and

unjust consequence. For example, if the limitations period is

two years, the plaintiff’s suit is timely if filed within the

two-year period, even if the plaintiff easily could have filed

suit in less than two years. Under Hosseinpour-Esfahani, a

plaintiff entitled to equitable tolling has to bear the

additional burden of showing that the plaintiff filed suit as

promptly as was reasonably possible. In this respect, a

plaintiff entitled to equitable tolling is worse off than a

plaintiff who is not. This is both ironic and unjust since

equitable tolling is often available because the defendant

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concealed the claim or is guilty of some other misconduct. Thus,

the rule of Hossseinpour-Esfahani confers benefits on undeserving

defendants.

The bankruptcy court also said that the Trustee “made a

conscious decision” not to pursue the claims identified by the

Templetons. This is irrelevant. Prior to the expiration of the

limitations period (absent tolling), a plaintiff is perfectly

free to change her mind about whether to file suit. The

application of equitable tolling is not a reason to deprive a

plaintiff of that privilege. 

 The bankruptcy court found that the Trustee acted

diligently until she learned of the claims. The Templetons

(acting on behalf of the estate) asserted those claims within two

years thereafter. The bankruptcy erred in holding that the

claims were untimely.7

B. The bankruptcy court’s findings do not support the

application of equitable estoppel.

The Templetons urge the Panel to reverse on the alternate

basis of equitable estoppel. 

Ordinarily, we consider only arguments that the parties

7 The Templetons argue that the bankruptcy court erred by

failing to grant them summary adjudication on the statute of

limitations defense. However, the Templetons never noticed or

filed a cross-motion for summary judgment and only raised this

request in their opposition to the motions for summary judgment. 

Moreover, at the hearings on the motions for summary judgment,

counsel for the Templetons conceded that they did not file any

cross-motion, and the court was hesitant to grant relief without

giving “the parties reasonable opportunity to be heard.” The

court did not rule on the supposed cross-motion, and we decline

to do so for the first time on appeal.

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first presented to the bankruptcy court. The Templetons barely

mentioned the equitable estoppel theory in the bankruptcy court. 

But the Ninth Circuit, in the Socop-Gonzalez decision, held that

a party who relied on equitable estoppel in the lower court can

argue an equitable tolling theory on appeal, because “there is

‘clearly some overlap’ between equitable tolling and estoppel,

and . . . the two can be difficult to distinguish.” SocopGonzalez, 272 F.3d at 1185. This case involves the reverse

situation; the Templetons relied almost entirely on equitable

tolling in the bankruptcy court and want to argue equitable

estoppel on appeal. Nevertheless, the considerations that

motivated the Ninth Circuit in Socop-Gonzalez apply here. Thus,

although the Templetons did not explicitly raise equitable

estoppel in the bankruptcy court, we may consider that doctrine

on appeal. 

“Equitable estoppel focuses primarily on the actions taken

by the defendant in preventing a plaintiff from filing

suit . . . . Equitable estoppel may be invoked if the defendant

takes active steps to prevent the plaintiff from suing in time,

such as by misrepresenting or concealing facts necessary to the

. . . claim.” Coppinger-Martin v. Solis, 627 F.3d 745, 751 (9th

Cir. 2010) (internal citations and quotation marks omitted). 

Equitable estoppel thus “focuses on the actions of the

defendant.” Socop-Gonzalez, 272 F.3d at 1184 (citation omitted). 

There must be “affirmative misconduct,” which means a “deliberate

lie” or “a pattern of false promises.” Id. (citations omitted). 

Equitable estoppel also requires that: “(1) the party to be

estopped must know the facts; (2) the party to be estopped must

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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.” Alary Corp. v. Sims (In

re Associated Vintage Grp., Inc.), 283 B.R. 549, 567 (9th Cir.

BAP 2002) (citations omitted). 

In the present case, there are some indications that

equitable estoppel might apply. The Debtor must have known about

the fraudulent transfers that were drawn from her bank account. 

The bankruptcy court highlighted “Debtor’s egregious conduct,

including but not limited to, the failure to schedule assets,

false oaths in the schedules and in response to questions at

creditors’ meetings, the failure to turn over documents and

cooperate with the trustee . . . .” Finally, the court found

that the Trustee did not and could not have known of the

fraudulent transfers and, thus, did not bring suit on those

transfers. 

The court did not, however, make comparable findings of

misconduct against the Appellees other than the Debtor. It did

not find that the Debtor’s misconduct was attributable to the

other Appellees. In the absence of such findings, we cannot say

that the bankruptcy court erred in its failure to apply the

equitable estoppel doctrine.

C. The Panel declines to consider items not before the

bankruptcy court and will not take judicial notice of the

Templetons’ supplemental documents.

Finally, the Templetons urge us to take judicial notice of

supplemental documents that were not before the bankruptcy court

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during its consideration of the underlying summary judgment

motions. We will not do so.

In the first place, the Templetons acknowledged at oral

argument that they offered the additional documents only to show

that the Trustee acted diligently after discovering the

transfers. Because we have decided that the Trustee’s postdiscovery diligence is irrelevant, the supplemental documents are

unnecessary.

In any event, except in rare cases where “‘the interests of

justice demand it,’ an appellate court will not consider evidence

not presented to the trial court[.]” Graves v. Myrvang (In re

Myrvang), 232 F.3d 1116, 1119 n.1 (9th Cir. 2000) (quoting Dakota

Indus., Inc. v. Dakota Sportswear, Inc., 988 F.2d 61, 63 (8th

Cir. 1993); citing Kirshner v. Uniden Corp. of Am., 842 F.2d

1074, 1077 (9th Cir. 1988)). An appellate court is “concerned

only with the record before the trial judge when his decision was

made.” Kirshner, 842 F.2d at 1077 (citation omitted) (emphasis

in original).

In the present case, it is undisputed that the bankruptcy

court did not consider the supplemental documents.8 The

Templetons have not presented the Panel with any extraordinary

circumstances that would justify our consideration of the

supplemental documents. Nor do they show “error or accident”

8 Appellees also point out that the bankruptcy court struck

Item 3 in the excerpts of record. We have considered this

document to the extent necessary to understand the relevant

factual background.

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under Rule 8009.9 We thus decline to take judicial notice of the

supplemental documents.

CONCLUSION

For the reasons set forth above, we conclude that the

bankruptcy court erroneously applied the doctrine of equitable

tolling when it granted the summary judgment and dismissed the

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

because the Trustee was dilatory after discovery of the

fraudulent transfers. For the reasons stated in our separate

memorandum, we find no other error in the bankruptcy court’s

decisions. Accordingly, we AFFIRM IN PART and VACATE IN PART the

bankruptcy court's order granting summary judgment; VACATE the

order denying reconsideration; and REMAND for further proceedings

consistent with this opinion and the accompanying memorandum.

9 Rule 8009(e) states, in relevant part: “If anything

material to either party is omitted from or misstated in the

record by error or accident, the omission or misstatement may be

corrected, and a supplemental record may be certified and

transmitted . . . by the court where the appeal is pending.” 

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