FILED AUG 19 2013 SUSAN M SPRAUL, CLERK 1 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 2 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-13-1015-KiPaD ) 6 ROBERT B. MANNING and ) Bk. No. 6:12-12466 JANA D. MANNING, ) 7 ) Adv. No. 6:12-1149 Debtors. ) 8 ) ) 9 LBS FINANCIAL CREDIT UNION, ) ) 10 Appellant, ) ) M E M O R A N D U M1 11 v. ) ) 12 ROBERT B. MANNING; ) JANA D. MANNING, ) 13 ) Appellees. ) 14 ______________________________) 15 Argued and Submitted on June 20, 2013, at Pasadena, California 16 Filed - August 19, 2013 17 Appeal from the United States Bankruptcy Court 18 for the Central District of California 19 Honorable Scott C. Clarkson, Bankruptcy Judge, Presiding 20 Appearances: Karel Rocha, Esq. of Prenovost, Normandin, Bergh & 21 Dawe, APC argued for appellant, LBS Financial Credit Union; Appellees Robert and Jana Manning did 22 not appear. 23 Before: KIRSCHER, PAPPAS and DUNN, Bankruptcy Judges. 24 25 26 1 This disposition is not appropriate for publication. 27 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 28 Cir. BAP Rule 8013-1.
-1- 1 Appellant, LBS Financial Credit Union ("LBS"), appeals a 2 judgment after trial determining that the debt of Robert B. 3 Manning and Jana D. Manning ("Mannings") to LBS was not excepted 4 from discharge under 11 U.S.C. § 523(a)(6).2 LBS also appeals the 5 bankruptcy court's orders vacating the entry of default against 6 the Mannings and denying its motion in limine. We VACATE the 7 bankruptcy court’s judgment. We also VACATE the order setting 8 aside the default and REMAND with instructions that LBS be given 9 an opportunity to be heard on the matter. We further VACATE the 10 order denying the motion in limine and REMAND with instructions 11 that the bankruptcy court consider the conclusive effect of the 12 Mannings’ failure to respond to LBS’s requests for admission in 13 deciding whether LBS met its burden on the issue of willfulness. 14 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 15 A. Prepetition events 16 On December 21, 2007, Mannings executed a Note, Consumer 17 Credit Disclosure Statement and Security Agreement ("Contract") in 18 favor of LBS, a California credit union, for the purchase of a 19 2007 GMC Yukon Denali, VIN #1GKFK63857J369308 ("Vehicle"), in the 20 amount of $49,502.15. Under the Contract, Mannings agreed to pay 21 for the Vehicle by making monthly payments for a period of 22 seventy-two months. Mannings were required to obtain written 23 consent from LBS if they intended to leave California with the 24 Vehicle for more than thirty days. They further agreed to not 25 sell or lease the Vehicle until the loan had been paid in full. 26 2 Unless specified otherwise, all chapter, code and rule 27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The 28 Federal Rules of Civil Procedure are referred to as “Civil Rules.”
-2- 1 If Mannings defaulted, LBS could accelerate and demand payment of 2 the unpaid balance (including collection costs and attorney's 3 fees) or repossess the Vehicle. At some point thereafter, 4 Mannings moved to Texas without informing LBS. 5 In August 2010, Mannings defaulted on the Contract by failing 6 to make the monthly payments. LBS's demands for further payment 7 or return of the Vehicle were unsuccessful. 8 On January 13, 2011, LBS filed a complaint in the California 9 state court against Mannings, alleging claims for breach of 10 contract and civil conversion. LBS sought return of the Vehicle 11 and the balance owing under the Contract of $34,223.11, plus 12 accruing late charges, interest and contractual attorney's fees 13 and costs. Mannings failed to respond to the complaint. On 14 May 26, 2011, the state court entered a default judgment against 15 Mannings in the amount of $38,008.66 (including $2,472.13 in 16 attorney's fees) plus interest and ordered that they return the 17 Vehicle to LBS. 18 B. Postpetition events 19 Mannings, having moved back to California from Texas, filed a 20 chapter 7 bankruptcy case on January 31, 2012. On April 26, 2012, 21 LBS filed a complaint against Mannings seeking to except its debt 22 from discharge under §§ 523(a)(4) and (a)(6).3 To support its 23 claim under § 523(a)(6), LBS alleged that after Mannings had 24 defaulted on the Contract, they, with willful and malicious intent 25 to injure LBS and its personal property, intentionally absconded 26 27 3 LBS ultimately dropped its claim under § 523(a)(4) after the bankruptcy court informed LBS that its claim for embezzlement 28 lacked merit. LBS does not appeal this issue.
-3- 1 with the Vehicle and/or otherwise disposed of it to the detriment 2 of LBS. LBS further alleged that Mannings knew or should have 3 known that their failure to pay LBS the amount due and owing on 4 the Contract or to return the Vehicle to LBS was substantially 5 certain to cause injury to LBS. As a result of Mannings' willful 6 and malicious conduct, LBS alleged that it suffered 7 nondischargeable damages of not less than $38,008.06. 8 Mannings were served with the summons and the adversary 9 complaint on May 1, 2012. An answer or other responsive pleading 10 was to be filed by May 29, 2012. As with the state court 11 complaint, Mannings failed to respond to the adversary complaint. 12 On June 22, 2012, LBS requested the entry of a clerk's default, 13 which was entered on July 2, 2012. 14 After the entry of Mannings' default, the bankruptcy court 15 held a status conference on July 18, 2012. LBS did not appear, 16 but Mannings did. We do not have a transcript from the hearing, 17 but the court's tentative ruling for that date states: 18 The Court noted that Default was entered on 7/02/12 [Dk. 9]. This matter is continued to October 17, 2012 19 at 1:30 p.m. Plaintiff is to file a motion for default judgment by no later than August 3, 2012. Appearances 20 excused. 21 On July 25, 2012, the bankruptcy court entered an order 22 vacating the entry of Mannings' default and giving them until 23 July 24, 2012, to file a response to the adversary complaint. A 24 continued status conference was scheduled for September 5, 2012. 25 Pursuant to the order vacating the entry of default, 26 Mr. Manning, pro se, timely filed a two-page narrative response to 27 the adversary complaint on July 23, 2012. Mrs. Manning's name 28 does not appear on the response and she did not sign it.
-4- 1 According to Mr. Manning, he and his wife had moved to Texas to 2 find employment after losing his job of 32 years with an annual 3 salary of $140,000 and their home in California. Meanwhile, 4 Mannings were unable to make the Vehicle payments, so they entered 5 into an agreement with a Texas couple named "Tina and Chris" to 6 take over the payments on the condition that the couple obtain 7 financing or qualify for a loan with LBS. LBS ultimately declined 8 a loan for Tina and Chris, and the couple allegedly made no other 9 attempts to obtain financing or did not make any further payments 10 to Mannings. When Mannings asked the couple to return the 11 Vehicle, they became hostile and told Mannings that they would 12 hide the Vehicle where Mannings would be unable to find it. Mr. 13 Manning claimed that authorities in both Texas and California were 14 contacted about the "stolen" Vehicle. He further alleged that LBS 15 knew Tina and Chris had the Vehicle somewhere in Terrell, Texas, 16 yet LBS had made no attempts to recover it. Mr. Manning asserted 17 that even though he was listed as the Vehicle's registered owner, 18 he felt no responsibility for recovering the Vehicle for LBS. 19 On September 5, 2012, LBS filed a motion for reconsideration 20 of the order vacating the Mannings' default. Specifically, LBS, 21 which did not appear on July 18 due to the court's indication in 22 the tentative ruling excusing appearances, contended that it was 23 prejudiced by the order because it was not given an opportunity to 24 brief or be heard on the issue of Mannings' request to vacate the 25 default, which they had apparently made orally at the July 18 26 status conference. LBS argued that Mannings should have been 27 required to set forth in writing the "good cause" they had shown 28 for vacating the default so that LBS could respond. LBS argued it
-5- 1 was further prejudiced because it had incurred costs in preparing 2 the request for default and the court-ordered motion for default 3 judgment, which was due August 3. Mannings did not oppose the 4 motion to reconsider. 5 At the continued status conference on September 5, 2012, LBS 6 informed the bankruptcy court that it had just filed a motion to 7 reconsider the order vacating Mannings' default, which was set for 8 oral argument on October 3, 2012. In response, the bankruptcy 9 court asked counsel for LBS to proceed with argument on the 10 motion. She complied. After the bankruptcy court grilled counsel 11 about hearing cases on the merits, warning her that LBS would 12 never receive attorney's fees on a § 523(a)(6) conversion matter, 13 and articulating its inclination to deny the motion to reconsider, 14 the court told counsel that it would hear the motion as scheduled 15 on October 3, 2012, and that it would sanction her if she failed 16 to appear. 17 The bankruptcy court then asked counsel when LBS desired 18 trial. Counsel stated that a trial in February 2013 would provide 19 sufficient time for LBS to do discovery. Concerned about the 20 usefulness of written discovery or deposition of the Mannings, the 21 court suggested that counsel could inquire as to the whereabouts 22 of the Vehicle at trial. Counsel responded that LBS was entitled 23 to conduct pretrial discovery. The court disagreed, asking 24 counsel under which rules LBS was entitled to do so. After 25 further discussion, the court agreed to allow LBS to conduct 26 discovery until November 30, 2012. Trial was scheduled for 27 December 2012. In its discussion about discovery, the bankruptcy 28 court stressed to Mannings the importance of cooperating with
-6- 1 LBS's discovery efforts, particularly the importance of complying 2 with LBS's requests for admission, interrogatories and requests 3 for production of documents. 4 After the scheduled hearing on October 3, 2012, the 5 bankruptcy court entered an order denying LBS's motion to 6 reconsider the order vacating the entry of Mannings' default on 7 October 19, 2012. 8 On October 23, 2012, LBS served Mannings with nineteen 9 requests for admission ("RFAs"),4 which contained nineteen 10 admissions. Mannings' responses to the RFAs were due on 11 November 26, 2012. They failed to respond to them or seek an 12 extension of time to do so. 13 On November 30, 2012, counsel for LBS filed a declaration 14 informing the bankruptcy court of Mannings' failure to respond to 15 the RFAs in accordance with Civil Rule 36(a)(3). Mannings did not 16 respond to the declaration. 17 On December 12, 2012, LBS filed a motion in limine to 18 preclude any evidence, argument, discussion or suggestion 19 contesting issues of fact that had been deemed admitted by 20 Mannings' failure to respond to the RFAs pursuant to Civil 21 Rule 36. Mannings did not oppose the motion in limine. 22 On December 17, 2012, without a hearing, the bankruptcy court 23 entered an order denying LBS's motion in limine because the RFAs 24 had failed to advise Mannings, who were pro se litigants, that 25 their failure to respond to them within thirty days would deem 26 those matters admitted per Civil Rule 36. 27 28 4 Proper service of the RFAs was never disputed.
-7- 1 C. Trial on the adversary complaint 2 Trial on LBS's adversary complaint proceeded on December 20, 3 2012. Mannings appeared at the wrong courthouse, but were 4 ultimately connected by video. At the start, LBS expressed its 5 disagreement with the order denying its motion in limine. In 6 response, the bankruptcy court allowed counsel the opportunity to 7 move for reconsideration. After hearing counsel's argument, the 8 court denied LBS's requested relief on the basis that pro se 9 litigants require more leeway with the rules of civil procedure: 10 In this case we have a situation with pro se debtors who are not very sophisticated and I don't think we will 11 blind side them. 12 Trial Tr. (Dec. 20, 2012) 6:17-19. The court then asked Mannings 13 to review the motion in limine. While trying to locate the 14 document in their stack of papers, the court observed that at 15 least one of the envelopes transmitted to Mannings by LBS appeared 16 to have not been opened. 17 The bankruptcy court then conducted direct examination of 18 both Mr. and Mrs. Manning simultaneously. They admitted to 19 signing the Contract for the Vehicle and that they had defaulted 20 by failing to make the payments. They denied being in possession 21 of the Vehicle, stating that it was at Chris and Tina's house in 22 Scurry, Texas. They had no address for Chris and Tina and could 23 not recall their last names. Mrs. Manning testified that they had 24 given the Vehicle to Tina, who Mrs. Manning knew from working at 25 Denny's in Texas, in March 2010 with the understanding that she 26 would take over the payments of $850.00 per month. According to 27 Mrs. Manning, the parties had drafted a written agreement stating 28 that Tina would return the Vehicle to Mannings if she were more
-8- 1 than thirty days late on a payment, but the agreement had been 2 lost during a move. Mrs. Manning testified that she notified LBS 3 in September 2010 of the parties' agreement and that Tina had the 4 Vehicle. Both Mr. and Mrs. Manning testified that Tina had made 5 payments for the Vehicle to them for the months of April, May, 6 June, July and August 2010, which they in turn used to pay LBS. 7 Mrs. Manning testified that once Tina stopped making payments, 8 Tina asked for LBS's contact information to see if she and Chris 9 could qualify for a loan for the Vehicle. Tina contacted LBS, but 10 its representative told Mr. Manning that Tina and Chris could not 11 qualify for a loan. Mrs. Manning testified that Tina and Chris 12 had stolen the Vehicle from them and LBS, and that she had tried 13 to file three police reports for it. 14 John Kuecks ("Kuecks"), LBS's representative familiar with 15 Mannings' account, testified next. Kuecks confirmed LBS's receipt 16 of the Vehicle payments for the months of April through August 17 2010. Kuecks testified that Mannings had not informed LBS prior 18 to September 2010 that they had taken the Vehicle to Texas, and 19 that LBS had never given Mannings permission to sell or lease the 20 Vehicle to a third party. Kuecks further testified that Tina and 21 Chris had never contacted LBS about applying for a loan for the 22 Vehicle, which LBS could not have approved anyway because it 23 cannot provide loans to residents outside of California. However, 24 after reviewing his notes regarding a September 2010 conversation 25 with a "Tina Ditman" about her ability to keep the Vehicle, Kuecks 26 refreshed his recollection that he must have spoken with Tina 27 about the Vehicle at that time. Kuecks informed Tina that he 28 could not discuss the Vehicle loan with her since she was not the
-9- 1 credit union member. Kuecks then read into the record an internal 2 company note written by LBS representative and Vice President of 3 Collections, Al Parent ("Parent"), from September 21, 2010. 4 According to Parent's note, a "Chris Niette" had contacted him 5 saying that he had a contract with Mannings regarding the Vehicle, 6 that he had been making payments for the past seven months, and 7 that Mannings had tried to take the Vehicle back, but the police 8 refused to intervene once Chris produced the parties' written 9 agreement. Finally, Kuecks testified that LBS made multiple 10 attempts to repossess the Vehicle at various locations in Texas, 11 to no avail. 12 Parent, LBS's next witness, confirmed Kuecks's testimony that 13 LBS had made multiple, unsuccessful attempts to repossess the 14 Vehicle in Texas. Parent testified that as of December 2010, the 15 Vehicle's blue book value was $34,200. 16 Kuecks was then recalled to the stand and testified that, 17 according to an internal note written by another LBS employee in 18 January 2011, Chris had told the employee that Mr. Manning had 19 come in the middle of the night and taken the Vehicle. According 20 to another internal note written by a different employee in 21 November 2010, Chris had told the employee that he no longer had 22 the Vehicle because Mr. Manning had taken it in the night about 23 two-and-a-half months prior, and that he had been scammed by the 24 Mannings. 25 On cross-examination, Mrs. Manning admitted that the Mannings 26 entered into an agreement with Tina and Chris without LBS's 27 permission, and that they were not allowed to sell the Vehicle to 28 a third party without LBS's permission. On his cross-examination,
-10- 1 Mr. Manning admitted the same. Mr. Manning further testified that 2 he had "no clue" as to the whereabouts of the Vehicle, and he 3 denied ever taking it back from Tina and Chris in the middle of 4 the night. He admitted that LBS had made attempts to recover the 5 Vehicle. 6 A witness for Mannings, Walter Gene Kinal, testified that 7 Mannings had an agreement with Tina and Chris regarding the 8 Vehicle, and that Mannings were not in possession of the Vehicle 9 when he helped them move back to California from Texas. 10 After LBS and Mrs. Manning presented their closing arguments, 11 the bankruptcy court announced its oral ruling in favor of the 12 Mannings. The court determined that LBS had proven malice, but 13 the debt could not be excepted from discharge under § 523(a)(6) 14 because Mannings had not intended the consequence of damaging LBS 15 by selling the Vehicle to a third party; their intent of that act 16 was to get LBS paid. 17 The bankruptcy court entered a judgment in favor of Mannings 18 on December 28, 2012 ("Judgment"). LBS timely appealed. 19 II. JURISDICTION 20 The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 21 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158. 22 III. ISSUES 23 1. Did the bankruptcy court err in setting aside the entry of 24 default without notice to LBS? 25 2. Did the bankruptcy court abuse its discretion in denying the 26 motion in limine and sua sponte withdrawing the admissions? 27 3. Did the bankruptcy court err when it entered the Judgment in 28 favor of Mannings on LBS's claim under § 523(a)(6)?
-11- 1 IV. STANDARDS OF REVIEW 2 Whether a particular procedure comports with basic 3 requirements of due process is a question of law we review de 4 novo. Garner v. Shier (In re Garner), 246 B.R. 617, 619 (9th Cir. 5 BAP 2000). 6 A decision on a motion to set aside an entry of default is 7 reviewed for an abuse of discretion. Educ. Credit Mgmt. Corp. v. 8 Bernal (In re Bernal), 223 B.R. 542, 546 (9th Cir. BAP 1998) 9 (citing O'Connor v. Nev., 27 F.3d 357, 364 (9th Cir. 1994)). 10 The bankruptcy court’s evidentiary rulings are reviewed for 11 abuse of discretion. Latman v. Burdette, 366 F.3d 774, 786 (9th 12 Cir. 2004). See also United States v. Geston, 299 F.3d 1130, 1138 13 (9th Cir. 2002)(trial court’s ruling on motion in limine reviewed 14 for abuse of discretion); 999 v. C.I.T. Corp., 776 F.2d 866, 869 15 (9th Cir. 1995)(we review the district court's decision to permit 16 the withdrawal or amendment of an admission for abuse of 17 discretion). A bankruptcy court abuses its discretion if it 18 applied the wrong legal standard or its findings were illogical, 19 implausible or without support in the record. TrafficSchool.com, 20 Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011). 21 In reviewing a bankruptcy court’s discharge determination, we 22 review its findings of fact for clear error and conclusions of law 23 de novo. Oney v. Weinberg (In re Weinberg), 410 B.R. 19, 28 (9th 24 Cir. BAP 2009). A factual finding is clearly erroneous if it is 25 illogical, implausible or without support in the record. Retz v. 26 Samson (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010)(citing 27 United States v. Hinkson, 585 F.3d 1247, 1261-62 & n.21 (9th Cir. 28 2009)(en banc)).
-12- 1 V. DISCUSSION 2 A. The bankruptcy court erred by not allowing LBS a meaningful opportunity to oppose setting aside Mannings' default. 3 4 LBS appeals the order vacating Mannings' default entered on 5 July 25, 2012, contending that it was prejudiced because Mannings 6 were allowed to present an opposition they would not have been 7 allowed to present had the default remained in place.5 8 In general, the effect of an entry of default, if not set 9 aside, is to establish the liability of the defaulting party as a 10 basis for default judgment. 10 MOORE’S FEDERAL PRACTICE § 55.32[1][a] 11 (3d ed. 2007). After defaulting, the defaulted party has no right 12 to dispute the issue of liability. Id. See Geddes v. United Fin. 13 Grp., 559 F.2d 557, 560 (9th Cir. 1977)(default by defendants 14 establishes liability but not the extent of damages). Under Civil 15 Rule 55(c), incorporated by Rule 7055, an entry of default may be 16 set aside for "good cause." 17 At the status conference on July 18, 2012, Mannings either 18 made an oral motion to set aside the entry of default or the 19 bankruptcy court raised the issue sua sponte. See Kingvision 20 Pay-Per-View Ltd. v. Lake Alice Bar, 168 F.3d 347, 351 (9th Cir. 21 1999)(trial court can sua sponte set aside a default judgment 22 under Civil Rule 60(b)). LBS did not appear at that hearing 23 5 Generally, a trial court's grant of a motion to set aside a 24 default is not an appealable final order because it opens the door to a trial on the merits. Joseph v. Office of Consulate Gen. of 25 Nigeria, 830 F.2d 1018, 1028 (9th Cir. 1987). However, such orders become final and appealable once a judgment is entered. 26 United States v. 475 Martin Lane, 545 F.3d 1134, 1141 (9th Cir. 2008) (under the merger rule interlocutory orders entered prior to 27 the judgment merge into the judgment and may be challenged on appeal). Hence, the order at issue became final and appealable on 28 December 28, 2012.
-13- 1 because, according to the court's tentative ruling, appearances 2 were excused. The tentative ruling also instructed LBS to file a 3 motion for default judgment. Thus, nothing in the July 18 4 tentative ruling indicated that the hearing was to be anything 5 other than a pretrial conference. LBS had no notice that a motion 6 to set aside the default would be considered, much less granted. 7 According to its order entered on July 25, 2012, the 8 bankruptcy court stated its reasons for setting aside the default 9 “on the record.” Unfortunately, LBS did not include a copy of the 10 transcript in the record for our review. If a bankruptcy court’s 11 findings of fact and conclusions of law are made orally on the 12 record, a transcript of those findings is mandatory for the 13 Panel’s appellate review. McCarthy v. Prince (In re McCarthy), 14 230 B.R. 414, 416 (9th Cir. BAP 1999). Without the required 15 transcript, which precludes our ability to review what "good 16 cause" Mannings may (or may not) have demonstrated to support the 17 bankruptcy court’s decision, we may summarily affirm its ruling. 18 Ehrenberg v. Cal. State Univ., Fullerton Found. (In re Beachport 19 Entm't), 396 F.3d 1083, 1087-88 (9th Cir. 2005); Morrissey v. 20 Stuteville (In re Morrissey), 349 F.3d 1187, 1189 (9th Cir. 2003) 21 (failure to provide a critical transcript may result in summary 22 affirmance). 23 Nevertheless, even without the required transcript, we 24 conclude that the bankruptcy court erred. Despite the broad 25 discretion afforded a court in setting aside defaults, and the 26 strong policy favoring resolution of disputes on their merits, the 27 bankruptcy court violated LBS's procedural due process rights when 28 it considered Mannings' oral motion (or its own) to set aside the
-14- 1 default at the status conference and entered an order vacating the 2 entry of default without giving LBS adequate notice and a 3 meaningful opportunity to be heard. See Mullane v. Cent. Hanover 4 Bank & Trust Co., 339 U.S. 306, 314 (1950); see also Mathews v. 5 Eldridge, 424 U.S. 319, 333 (1976)("The fundamental requirement of 6 due process is the opportunity to be heard at a meaningful time 7 and in a meaningful manner."). Procedural due process must be 8 afforded to LBS or fundamental fairness is lacking. We likewise 9 conclude that the hearing on LBS's motion to reconsider did not 10 cure the due process deficiencies arising from the absence of 11 prior notice of the order vacating the entry of default. 12 Accordingly, we VACATE the order setting aside the default 13 and REMAND so LBS may have an appropriate opportunity to be heard 14 on this matter. 15 B. The bankruptcy court abused its discretion when it denied LBS's motion in limine and sua sponte withdrew the 16 admissions. 17 LBS appeals the order denying its motion in limine, 18 contending that the bankruptcy court abused its discretion by 19 withdrawing the admissions when Mannings failed to request such 20 relief, and that it further abused its discretion by imposing a 21 requirement in Civil Rule 36 that a party must inform pro se 22 litigants about the consequences of their failure to respond to 23 requests for admission.6 24 Civil Rule 36, made applicable in adversary proceedings by 25 Rule 7036, permits a party to serve on any other party a written 26 6 As with the order vacating the entry of default, the order 27 denying LBS's motion in limine was an interlocutory order that merged into the final Judgment. 475 Martin Lane, 545 F.3d at 28 1141.
-15- 1 request to admit the truth of any matters within the scope of 2 Rule 26(b)(1) set forth in the request relating to statements or 3 opinions of fact or the application of law to fact. Civil 4 Rule 36(a)(1); Tillamook Country Smoker, Inc. v. Tillamook Cnty. 5 Creamery Ass'n, 465 F.3d 1102, 1111 (9th Cir. 2006). In short, 6 "[t]he purpose of Rule 36(a) is to expedite trial by establishing 7 certain material facts as true and thus narrowing the range of 8 issues for trial." Asea, Inc. v. S. Pac. Transp. Co., 669 F.2d 9 1242, 1245 (9th Cir. 1982). "Unless the party securing an 10 admission can depend on its binding effect, he cannot safely avoid 11 the expense of preparing to prove the very matters on which he has 12 secured an admission, and the purpose of the rule is defeated." 13 Advisory Committee Notes, at 48 F.R.D. 487, 534 (1970). 14 Civil Rule 36(a)(3) provides that a party's failure to timely 15 respond to a request for admission within thirty days of being 16 served results in the admission being conclusively deemed 17 admitted. Conlon v. United States, 474 F.3d 616, 621 (9th Cir. 18 2007). Mannings' responses to the RFAs were due on November 26, 19 2012. They failed to respond. The bankruptcy court observed at 20 trial that Mannings brought to trial at least one unopened 21 envelope. As noted above, Mannings have shown a propensity to 22 ignore legal deadlines and judicial pleadings. As a result of 23 Mannings' failure to answer the RFAs, the facts set forth in the 24 requests became admitted facts. 25 The operation of Civil Rule 36(a)(3) is automatic and self- 26 executing. F.T.C. v. Medicor LLC, 217 F.Supp.2d 1048, 1053 (C.D. 27 Cal. 2002)("No motion to establish the admissions is needed 28 because Federal Rule of Civil Procedure 36(a) is self-executing.")
-16- 1 (citing Schwarzer, Tashima & Wagstaffe, CAL. PRACTICE GUIDE: FED. 2 CIV. PROC. BEFORE TRIAL, at ¶¶ 811-12 (Rutter Group 2002)). Thus, 3 whether LBS even had to file a motion in limine to effectuate the 4 deemed admissions is questionable. However, even if it did, the 5 bankruptcy court abused its discretion in denying the motion 6 because Mannings never moved to withdraw or amend their 7 admissions, and the court could not withdraw the admissions for 8 them sua sponte. 9 Although treating a request for admission that is not timely 10 disputed as a conclusively deemed admission is mandatory and does 11 not require court action, in the exercise of its discretion, a 12 trial court may allow an admission to be withdrawn, but only under 13 statutorily prescribed rules. Asea, 669 F.2d at 1248. Civil 14 Rule 36(b) gives the court discretion to allow the moving party to 15 withdraw or amend its admission if two conditions are met: (1) if 16 such withdrawal or amendment would facilitate determination of the 17 action on its merits; and (2) if the court is not persuaded that 18 the adverse party would be prejudiced by the withdrawal or 19 amendment. See Conlon, 474 F.3d at 621. The moving party must 20 show that the withdrawal or amendment will facilitate a 21 determination on the merits, whereas the adverse party has the 22 burden of proof to show prejudice. Id. at 621-22. 23 Mannings never sought relief from their admissions either by 24 written motion or oral request. Even after the court admonished 25 them for not responding to the RFAs, they offered no excuse for 26 failing to respond. They also never opposed LBS's declaration of 27 no response or its motion in limine. Nonetheless, the bankruptcy 28 court essentially withdrew the admissions sua sponte when it
-17- 1 denied the motion in limine and allowed Mannings to testify at 2 trial about the admitted facts. This was an abuse of discretion. 3 See Am. Auto. Ass’n v. AAA Legal Clinic of Jefferson Crook, P.C., 4 930 F.2d 1117, 1120 (5th Cir. 1991)(holding that district court 5 abused its discretion in sua sponte withdrawing admissions without 6 proper motion by affected party); Layton, 2008 WL 1734191, at *1 7 (citing Am. Auto. Ass'n and concluding same). 8 Even if the bankruptcy court could sua sponte withdraw the 9 admissions, it abused its discretion by imposing a notice 10 requirement not found within Civil Rule 36 or required by Ninth 11 Circuit law. The court denied the motion in limine because the 12 RFAs failed to advise Mannings, who are pro se litigants, that 13 their failure to respond within thirty days would deem the matters 14 admitted, citing Medina v. Donahoe, 854 F.Supp.2d 733, 748 (N.D. 15 Cal. 2012). While Medina may be persuasive, it is not binding on 16 this Panel. It is also distinguishable because, in that case, the 17 non-responding pro se plaintiff had opposed the defendant's motion 18 for summary judgment, she had been deposed by defendant, she had 19 responded to defendant's other discovery requests, and the entire 20 record in the prior administrative proceeding regarding her claims 21 was available. Id. at 749. In other words, she actively 22 participated in the case and the defendant knew the basis of her 23 claims. 24 Furthermore, while we often afford pro se litigants certain 25 leeway, it is also true that pro se litigants "must follow the 26 same rules of procedure that govern other litigants," King v. 27 Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987)(citation omitted), 28 overruled on other grounds by Lacey v. Maricopa Cnty., 693 F.3d
-18- 1 896 (9th Cir. 2012), and they "should not be treated more 2 favorably than parties with attorneys of record." Jacobsen v. 3 Filler, 790 F.2d 1362, 1364 (9th Cir. 1986). "The hazards which 4 beset a layman when he seeks to represent himself are obvious. He 5 who proceeds pro se with full knowledge and understanding of the 6 risks does so with no greater rights than a litigant represented 7 by a lawyer, and the trial court is under no obligation to become 8 an 'advocate' for or to assist and guide the pro se layman through 9 the trial thicket." Jacobsen, 790 F.2d at 1365 n.5 (quoting 10 United States v. Pinkey, 548 F.2d 305 (10th Cir. 1977)). 11 The RFAs served on Mannings stated that they were served in 12 accordance with "Rule 36 Federal Rules of Civil Procedure, 13 applicable to this proceeding through Rule 7036 of the Federal 14 Rules of Bankruptcy Procedure," and were "to be answered within 15 (30) days of service." If Mannings had looked up either of these 16 rules when they received the RFAs, they would have learned of the 17 consequences of not answering or objecting to them. Civil 18 Rule 36(a)(3). They affirmatively chose not to respond to the 19 RFAs. Their lack of response is even more disturbing considering 20 the bankruptcy court's repeated warnings about the importance of 21 their complete and timely compliance with discovery requests. 22 Accordingly, the bankruptcy court abused its discretion when 23 it sua sponte withdrew the admissions, denied the motion in 24 limine, and allowed evidence at trial contrary to what Mannings 25 had admitted in the RFAs. The result of denying the motion was 26 particularly harsh when it was done on the eve of trial. 27 Therefore, we VACATE the order denying the motion in limine and 28 REMAND this matter with instructions that the bankruptcy court
-19- 1 consider the conclusive effect of the Mannings’ failure to respond 2 to LBS’s requests for admission in deciding whether LBS met its 3 burden on the issue of willfulness. 4 While the bankruptcy court certainly has discretion to 5 determine whether each of the requests for admission is proper 6 under Civil Rule 36(a)(1) and the effects of the admissions on the 7 issues to be tried, it is not free to consider evidence presented 8 at trial that contradicts those matters deemed admitted in the 9 RFAs. Once a matter has been deemed admitted under Civil Rule 36, 10 even by default, the court may not consider evidence that is 11 inconsistent with the admission. See 999, 776 F.2d at 869-70. 12 C. We express no opinion on the merits. 13 As for its claim under § 523(a)(6), the bankruptcy court 14 determined that LBS had proven malice, noting that causation and 15 damages were proven, although it did not articulate specific facts 16 to support its ruling. LBS does not appeal that ruling and, in 17 any event, we agree. Mannings admitted to selling the Vehicle to 18 a third party in violation of the Contract, they did it 19 intentionally without any just cause or excuse, and LBS was 20 injured by the loss of the payments and the Vehicle. 21 LBS appeals the bankruptcy court's ruling on the willfulness 22 prong. While we must VACATE the Judgment of the bankruptcy court, 23 because we are remanding the default and admissions matters, we 24 need not determine whether the bankruptcy court erred. 25 VI. CONCLUSION 26 For these reasons, we VACATE the bankruptcy court’s judgment. 27 We also VACATE the order setting aside the default and REMAND so 28 that LBS may have an appropriate opportunity to be heard on this
-20- 1 matter. We also VACATE the order denying the motion in limine and 2 REMAND this matter with instructions that the bankruptcy court 3 consider the conclusive effect of the Mannings’ failure to respond 4 to LBS’s requests for admission in deciding whether LBS met its 5 burden on the issue of willfulness.7 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 7 In remanding this matter, we express no opinion on the 21 underlying merits of LBS's claim or the substance of the RFAs. We note that while RFAs may properly relate to "the application of 22 law to fact" as set forth in Civil Rule 36(a)(3), "[r]equests for admissions cannot be used to compel an admission of a conclusion 23 of law." Playboy Enters., Inc. v. Welles, 60 F.Supp.2d 1050, 1057 (S.D. Cal. 1999); 8B Charles Alan Wright & Arthur R. Miller, 24 FEDERAL PRACTICE AND PROCEDURE § 2255 (3d ed. 2012). We note, however, that should LBS be successful upon remand, it may be entitled to 25 attorney's fees based upon controlling language in the Contract. See Fry v. Dinan (In re Dinan), 448 B.R. 775, 786 (9th Cir. BAP 26 2011)(noting that Cohen v. de la Cruz, 523 U.S. 213 (1998), is not limited to cases involving statutorily-based attorney's fees; it 27 applies equally to cases in which fees are provided for by contract)(citing Redwood Theaters, Inc. v. Davison 28 (In re Davison), 289 B.R. 716, 725 (9th Cir. BAP 2003)).
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