PNC Bank v. Sterba, No. 14-60061 (9th Cir. 2017)
Annotate this CaseWhen debtors filed for bankruptcy in 2013, PNC Bank filed a claim based on a 2007 note. Debtors objected, contending that the claim was barred by California's applicable four-year statute of limitations. PNC argued, however, that the claim was timely because the promissory note's choice of Ohio law incorporated Ohio's six-year limitations period. The bankruptcy judge agreed that Ohio's six-year limitations applied to this case. The Bankruptcy Appellate Panel reversed. The court concluded that where a choice-of-law provision does not expressly include the statute of limitations, the court has construed it as silent on the issue. The court explained that where no statute of limitations is provided for a federal cause of action, the law of limitations of the forum state is followed. However, in this case, the court reasoned that the application of Section 142 of the Restatement (Second) of Conflict of Laws compels the conclusion that California's shorter statute of limitations does not apply, because this case presents the sort of "exceptional circumstances" under which the 1988 version of the Second Restatement looks past the law of the forum, and applies a longer foreign limitations period. Accordingly, the court reversed and remanded to the bankruptcy court for further proceedings.
Court Description: Bankruptcy. The panel reversed the Bankruptcy Appellate Panel’s reversal of the bankruptcy court’s ruling that a creditor’s claim was timely. The creditor’s claim was based on a promissory note on real property in California. The claim would be barred by a four-year California statute of limitations but not by a six- year Ohio statute of limitations. The bankruptcy court ruled that the Ohio statute of limitations applied because the promissory note stated that it would be governed by the laws of Ohio. The panel held that under federal common law, the contractual choice-of-law provision did not expressly include the statute of limitations and therefore was silent on the issue. Under § 142 of the Restatement (Second) of Conflict of IN RE STERBA 3 Laws, the statute of limitations of the forum state, California, would generally apply. Exceptional circumstances, however, directed the application of the Ohio statute of limitations because the unique strictures of the Bankruptcy Code meant that, through no fault of the creditor, the only forum for its claim was the Northern District of California. Concurring in the judgment, Judge Tashima wrote that, under § 187 of the Restatement, the law of Ohio, the state chosen by the parties, must be applied.
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