Gupta v. Dulay (In re Dulay)

This is an action to determine the dischargeability of debts under 11 U.S.C. § 523(a)(6) (libel, conversion) and 11 U.S.C. § 523(a)(2)(A) (fraud). Plaintiffs Deepak Gupta and Vijay Gupta ("Plaintiffs") are seeking the nondischargeability of debts based on a pre-petition judgment entered in their favor and against Defendant Ruby Harpreet Dulay ("Defendant") which resulted from a ruling on a motion for summary judgment by the Placer County, California, Superior Court ("State Court"). Plaintiffs have now moved for summary judgment in this case.

Plaintiffs' request for summary judgment is based exclusively on certain requests in a Requests for Admissions, Set One ("RFAs"), which are attached as Exhibit A to the Cable Declaration. Plaintiffs assert that Defendant's failure to timely respond to those RFAs means the RFAs are now deemed admitted and, as such, are admissions for purposes of summary judgment. The RFAs upon which Plaintiffs rely for summary judgment asked Defendant to admit nondischargebility and the preclusive effect of the State Court judgment. Because those are legal conclusions, those RFAs are improper and Defendant's untimely response did not result in those RFAs being deemed admitted. Summary judgment will, therefore, be denied.

This matter was initially heard on January 6, 2015, and was continued to February 3, 2015. In reaching its decision, the court has considered the statements of counsel on the record in open court. The court has also reviewed and considered the following: (I) Plaintiffs' (i) Notice of Motion and Motion for Summary Judgment ("MSJ"), (ii) Separate Statement of Undisputed Facts in Support of Motion for Summary Judgment [LBR 7056-1], (iii) Declaration of Keith D. Cable in Support of Motion for Summary Judgment ("Cable Declaration"), (iv) Plaintiffs' Request for Judicial Notice in Support of Motion for Summary Judgment; (II) Defendant's Debtor's Opposition to Plaintiffs' Motion for Summary Judgment; and (III) Plaintiffs' Reply to Opposition to Motion for Summary Judgment [FRBP 7056; LBR 7056-1]. The court has further reviewed and, at Plaintiffs' request, has taken judicial notice of the Complaint Objecting to Discharge and for Other Relief ("Complaint") and the Answer to Complaint to Determine Dischargeability of Debt ("Answer").

The court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (I), and (O). Venue is proper under 28 U.S.C. § 1409.

Federal Rule of Civil Procedure ("FRCP") 56 - as made applicable to this adversary proceeding by Federal Rule of Bankruptcy Procedure ("FRBP") 7056 - provides that summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, admissions on file, and declarations, if any, show that there is "no genuine issue of fact and that the moving party is entitled to judgment as a matter of law." "The initial burden of showing the absence of a material factual issue is on the moving party. Once that burden is met, the opposing party must come forward with specific facts, and not allegations, to show a genuine factual issue remains for trial." DeHornev v. Bank of America N.T.&S.A.. 879 F.2d 459, 464 (9th Cir. 1989); see also, Celotex Corp. v. Catrett, 477 U.S. 317, 323-324 (1986). On summary judgment, all reasonable inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quotation omitted).

The court cannot grant summary judgment simply because no opposition has been filed. Henry v. Gill Industries, Inc., 983 F.2d 943, 950 (9th Cir. 1993) (summary judgment cannot be granted based upon the failure to file opposition under a local rule); In re Lenard, 140 B.R. 550, 555 (D. Co. 1992) (discussing the advisory notes to FRCP 56(e), which state: "Where the evidentiary matter in support of the motion does not establish the absence of a genuine issue, summary judgment must be denied even if no opposing evidentiary matter is presented."). Thus, even if no response to the motion in the manner required by local rules or otherwise is filed, the court must "independently determine from the record whether summary judgment is proper." Id. at 555. Moreover, a motion for summary judgment based on an admission established by default may be given special scrutiny from the court. Fleet Credit Card Services, L.P. v. Harden (In re Harden), 282 B.R. 543, 545 (Bankr. M.D. Ga. 2002).

Plaintiffs served the Defendant with the RFAs by U.S. Mail on October 14, 2014. Defendant's responses to the RFAs were due by November 17, 2014. Defendant served responses to the RFAs on November 28, 2014. Defendant's responses were untimely.

Plaintiffs seek to use Defendants' untimely response to the RFAs as admissions to establish both that there is no genuine dispute of material fact and that they are entitled to judgment as a matter of law on the issue of nondischargeability and the preclusive effect of the State Court judgment. In fact, the purported admissions resulting from the absence of a timely response is the sole basis upon which Plaintiffs seek summary judgment on each of the claims for relief alleged in the Complaint. See MSJ at 3, 4-5.

The RFAs upon which Plaintiffs rely as a basis for summary judgment fall into two categories: (1) those that request the Defendant to admit nondischargeability; and (2) those that request Defendant to admit the preclusive effect of the State Court judgment.

The RFAs that fall into the first category, i.e., those that ask the Defendant to admit nondischargeability, are identified as follows:

RFA 9 which asks Defendant to admit that she has no facts to support her denial in ¶ 11 of her Answer. Paragraph 11 of the Answer corresponds with ¶ 11 of the Complaint which states: "Pursuant to 11 U.S.C. § 523(a)(6), a debt incurred by a debtor who willfully and maliciously injures another entity or the property of another entity shall be nondischargeable. Libel is a 'willful and malicious injury' for purposes of applying 11 U.S.C. § 523(a)(6). Moreover, state court judgments for libel are nondischargeable. In re Sicroff, 401 F.3d 1101 (9th Cir. 2005), cert. denied, 545 U.S. 1139, 125 S. Ct. 2964 (2005)."
RFA 11 which asks Defendant to admit that she has no facts to support her denial in ¶ 13 of her Answer. Paragraph 13 of the Answer corresponds with ¶ 13 of the Complaint which states: "Based on the foregoing, Plaintiff Deepak Gupta requests that the debt arising from the judgment for libel be deemed nondischargeable by this Court."
RFA 12 which asks the Defendant to admit that she has no facts to support her denial in ¶ 16 of the Answer. Paragraph 16 of the Answer corresponds with ¶ 16 of the Complaint which states: "Pursuant to 11 U.S.C. § 523(a)(6), a debt incurred by a debtor who willfully and maliciously injures another entity or the property of another entity shall be nondischargeable. Conversion of another's property is a 'wilful and malicious injury' for purposes of applying 11 U.S.C. § 523(a)(6) and thus gives rise to a nondischargeable debt. In re Cecchini, 780 F.2d 1440, 1443 (9th Cir. 1986); In re Giangrasso, 145 B.R. 319 (B.A.P. 9thCir. [sic] 1992)."
RFA 14 which asks Defendant to admit that she has no facts to support her denial in ¶ 18 of the Answer. Paragraph 18 of the Answer corresponds with Paragraph 18 of the Complaint which states: "Based on the foregoing, Plaintiffs Deepak Gupta and Vijay Gupta request that the debts arising from the respective judgments for conversion be deemed nondischargeable by this Court."RFA 15 which asks the Defendant to admit she has no facts to support her denial in ¶ 21 of her Answer. Paragraph 21 of the Answer corresponds with ¶ 21 of the Complaint which states: "Pursuant to 11 U.S.C. § 523(a)(a)(A) [sic], a debt incurred by a debtor for money obtained by false pretenses, a false representation, or actual fraud shall be nondischargeable. A finding of debt due to fraud is all that is necessary to satisfy § 523(a) (2) (A) to render the debt nondischargeable. Cohen v de la Cruz, 523 U.S. 213, 223, 118 S. Ct. 1212, 140 L. Ed. 2d 341 (1998)."
RFA 17 which asks Defendant to admit that she has no facts to support her denial in ¶ 23 of her Answer. Paragraph 23 of the Answer corresponds with ¶ 23 of the Complaint which states: "Based on the foregoing, Plaintiffs Deepak Gupta and Vijay Gupta request that the debts arising from the respective judgments for fraud be deemed nondischargeable by this Court."
RFA 23 which asks Defendant to admit that the award in favor of Plaintiff Deepak Gupta for $24,050 oh his libel claim against Defendant Ruby Harpreet Dulay is nondischargeable.
RFA 25 which asks Defendant to admit that the that the award in favor of Plaintiff Deepak Gupta for $30,510 on his conversion claim against Defendant Ruby Harpreet Dulay is nondischargeable.
RFA 27 which asks Defendant to admit that the award in favor of Plaintiff Deepak Gupta for $20,516 on his fraud claim against Defendant Ruby Harpreet Dulay is nondischargeable.
RFA 29 which aks Defendant to admit that the award in favor of Plaintiff Vijay Gupta for $34,499.17 on his conversion claim against Defendant Ruby Harpreet Dulay is nondischargeable.
RFA 31 which asks Defendant to admit that the award in favor of Plaintiff Vijay Gupta for $34,499.17 on his fraud claim against Defendant Ruby Harpreet Duly is nondischargeable.

The RFAs that fall into the second category, i.e., those that ask the Defendant to admit the preclusive effect of the State Court judgment, are as follows:

RFA 10 which asks Defendant to admit that she has no facts to support her denial in ¶ 12 of her Answer. Paragraph 12 of the Answer corresponds with ¶ 12 of the Complaint which states: "Defendant is precluded from relitigating the judgment. It is well established in this circuit that the preclusive effect of a state court judgment must be given the same effect by federal courts as by the courts of the rendering state. Gayden v.Nourbakhsh [sic] (In re Nourbakhsh), 67 F.3d 798, 800 (9th Cir. 1995)."
RFA 13 which asks Defendant to admit that she has no facts to support her denial in ¶ 17 of her Answer. Paragraph 17 of the Answer corresponds with ¶ 17 of the Complaint which states: "Defendant is precluded from relitigating the judgments. It is well established in this circuit that the preclusive effect of a state court judgment must be given the same effect by federal courts as by the courts of the rendering state. Gayden v.Nourbakhsh [sic] (In re Nourbakhsh), 67 F.3d 798, 800 (9th Cir. 1995)."
RFA 16 which asks Defendant to admit that she has no facts to support her denial in ¶ 22 of her Answer. Paragraph 22 of the Answer corresponds with ¶ 22 of the Complaint which states: "Defendant is likewise precluded from relitigating the judgments. It is well established in this circuit that the preclusive effect of a state court judgment must be given the same effect by federal courts as by the courts of the rendering state. Gayden v.Nourbakhsh [sic] (In re Nourbakhsh), 67 F.3d 798, 800 (9th Cir. 1995)."

Federal Rule of Civil Procedure 36(a)(1) - made applicable by FRBP 7036 - states that "[a] party may serve on any other party a written request to admit, for purposes of the pending action only, the truth of any matters within the scope of Rule 26(b)(1) relating to: . . . facts, the application of law to fact, or opinions about either ... ." FRCP 36(a)(1)(A). When a party fails to timely respond to requests for admissions, those requests are automatically deemed admitted. See FRCP 36(a)(3). Any matter admitted under the rule is conclusively established unless the court, on motion, permits withdrawal or amendment of the admission. See Conlon v. U.S., 474 F.3d 616, 621 (9th Cir. 2007). One notable exception to Rule 36 admissions is where the requests are manifestly improper, such as when they seek the admission of legal conclusions. Playboy Enters., Inc. v. Welles, 60 F. Supp. 2d 1050, 1057 (S.D. Cal.1999) ("Requests for admissions cannot be used to compel an admission of a conclusion of law."). Thus, "one party cannot demand that the other party admit the truth of a legal conclusion." Disability Rights Council v. Wash Metro. Area, 234 F.R.D. 1, 3 (D.D.C. 2006).

The MSJ relies exclusively on purported admissions that Plaintiffs claim resulted from Defendant's untimely response to RFAs which asked Defendant to admit nondischargeability and the preclusive effect of the State Court judgment. This is problematic for the Plaintiffs and fatal to the MSJ because "the ultimate issue of dischargeability is a legal question to be addressed by the bankruptcy court in the exercise of its exclusive jurisdiction to determine dischargeability." St. Laurent v. Ambrose (In re St. Laurent), 991 F.2d 672, 676 (11th Cir. 1993). In other words, "the nondischargeability of a debt is a legal conclusion that cannot be admitted as a fact." Karl v. Stalnaker (In re Stalnaker), 408 B.R. 440, 445 (Bankr. M.D. Ga. 2009). The same is true regarding the preclusive effect of a prior judgment. That too is also a legal question for the court. Mclnnes v. State of California, 943 F.2d 1088, 1092 (9th Cir. 1991); In re Advantage Communications Group, Inc., 1997 WL 414169 at *3 (N.D. Cal. 1997).

Because the RFAs upon which Plaintiffs rely for summary judgment are improper requests for the admission of legal conclusions, they are not - and will not be - deemed admitted as a result of Defendant's untimely response. Stripped of the ability to rely on those RFAs as admissions, there is no other factual and legal discussion or analysis of the claims for relief in the Complaint and no other basis upon which the court may grant Plaintiffs' request for summary judgment. Plaintiffs have failed to demonstrate there is no genuine dispute of material fact and that they are entitled to judgment as a matter of law on the ultimate issue of nondischargeability under 11 U.S.C. §§ 523(a)(6) and 523(a)(2)(A). Plaintiffs' request for summary judgment will, therefore, be denied.

If the MSJ is denied, Plaintiffs ask the court to identify facts not in dispute and that are otherwise established for purpose of this motion. "If the court does not grant all the relief requested by the motion, it may enter an order stating any material fact - including an item of damages or other relief - that is not genuinely in dispute and treating the fact as established in the case." FRCP 56(g). The court will deny Plaintiffs' request for Rule 56(g) relief. The court will not grant Rule 56(g) relief based on defective notice to the Defendant. See fn.1, supra.

Based on all of the foregoing, and good cause appearing:

IT IS HEREBY ORDERED that the MSJ and Plaintiffs' request for summary judgment therein are DENIED.

IT IS FURTHER ORDERED that Plaintiffs' request for relief under Federal Rule of Civil Procedure 56(g)/Federal Rule of Bankruptcy Procedure 7056 is DENIED.

Dated: February 2, 2015.

/s/_________

UNITED STATES BANKRUPTCY JUDGE

The Clerk of Court is instructed to send the attached document, via the BNC, to the following parties: Keith D. Cable
101 Parkshore Dr #100
Folsom CA 95630
Brandon Scott Johnston
915 Highland Pointe Drive, Ste. 250
Roseville CA 95678