In re Adelman

• Decision Date: 13 September 1988
• Docket Number: Bankruptcy No. 185-00243,Adv. No. 87-1002.
• Citation: 90 BR 1012
• Parties: In re James Phillip ADELMAN and Elizabeth (Betty) Agnes Adelman, Debtors. Robert GOODNOW, Plaintiff, v. James ADELMAN, Defendant.
• Court: U.S. Bankruptcy Court — District of South Dakota

90 B.R. 1012 (1988)

In re James Phillip ADELMAN and Elizabeth (Betty) Agnes Adelman, Debtors Robert GOODNOW, Plaintiff, v. James ADELMAN, Defendant.

Bankruptcy No. 185-00243, Adv. No. 87-1002.

United States Bankruptcy Court, D. South Dakota.

September 13, 1988.

COPYRIGHT MATERIAL OMITTED

Gary E. Davis, Johnson, Eklund and Davis, Gregory, S.D., for plaintiff.

Max A. Gors, Gors, Braun and Zastrow, P.C., Pierre, S.D., for defendant.

MEMORANDUM DECISION

PEDER K. ECKER, Bankruptcy Judge.

INTRODUCTION AND PROCEDURAL HISTORY

This matter is before the Court on Robert Goodnow's complaint to determine the dischargeability of a debt owed to him by debtor James Adelman. The complaint states a cause of action based on 11 U.S.C. § 523(a)(2)(A). A trial in the matter was held on October 14, 1987, in Aberdeen, South Dakota. At the conclusion of Goodnow's case, this Court granted Adelman's motion to dismiss the complaint.

On October 30, 1987, this Court, on its own volition, reconsidered its oral order of October 14, 1987. By letter, the Court directed a judgment for plaintiff Goodnow. Defendant Adelman then moved to reconsider and this motion was granted. A new trial was set for April 22, 1988, but Goodnow's counsel was unable to attend the trial due to inclement weather. The Court allowed counsel to complete Adelman's case by deposition testimony and submit simultaneous written arguments by May 23, 1988.

At this time, the Court will decide this nondischargeability matter. It has received the requested argument from Adelman. Goodnow, however, has not submitted his argument, despite several requests from the Court. Therefore, the Court assumes that Goodnow and his counsel desire the Court to proceed to a final determination of the case. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).

REQUESTS FOR ADMISSION

Adelman filed and served on Goodnow thirty-one requests for admission in March. None of the requests for admission were answered or objected to by Goodnow. In order to proceed with the substantive issues in the case, the Court first must determine whether these requests for admission should be given conclusive effect in this case.

Rule 36(a) of the Federal Rules of Civil Procedure states that:

A party may serve upon any other party a written request for the admission, for purposes of the pending action only, of the truth of any matters within the scope of Rule 26(b) set forth in the request that relate to statements or opinions of fact or of the application of law to fact, including the genuineness of any documents described in the request. . . .

. . . The matter is admitted unless, within 30 days after service of the request, or within such shorter or longer time as the court may allow, the party to whom the request is directed serves upon the party requesting the admission a written answer or objection addressed to the matter,. . . .

Fed.R.Civ.P. 36(a). "Any matter admitted under this rule is conclusively established unless the court on motion permits withdrawal or amendment of the admission." Fed.R.Civ.P. 36(b). More simply, if the opposing party does not answer the requests for admission, the general rule is that the court must deem the requests for admission "admitted," or commit reversible error. See Rainbolt v. Johnson, 669 F.2d 767, 768 (D.C.Cir.1981). Nonetheless, if the nonanswering party moves to file the answers out of time, and the court determines that the opposing party will not be prejudiced thereby, the court may permit the filing of answers that would otherwise be untimely. See Gutting v. Falstaff Brewing Corp., 710 F.2d 1309, 1312-13 (8th Cir.1983).

The scope of permissible requests for admission is quite broad. The statute expressly permits requests relating to statements or opinions of fact, and the application of law to fact. The requests may encompass "ultimate facts" which establish the plaintiff's cause of action or the defendant's defense. Campbell v. Spectrum Automation Co., 601 F.2d 246, 253 (6th Cir.1979); City of Rome v. United States, 450 F.Supp. 378, 383 (D.D.C.1978); cf. Fed.R.Civ.P. 36(a) ("A party who considers that a matter of which an admission has been requested presents a genuine issue for trial may not, on that ground alone, object to the request. . . ."). Therefore, a request for admission may be deemed "admitted" even if the facts derived therefrom are dispositive of the case. See Luick v. Graybar Electric Co., Inc., 473 F.2d 1360, 1361-62 (8th Cir.1973); Williams v. Krieger, 61 F.R.D. 142, 144 (S.D.N.Y.1973).

On the other hand, Rule 36(a) does not allow requests for admission of propositions of law. Williams v. Krieger, 61 F.R.D. at 144; see also 4A J. Moore, J. Lucas & D. Epstein, Moore's Federal Practice ¶ 36.044 at 36-33 (2d ed. 1984). If a request for admission is improper and not within the scope permitted by Rule 36(a), then the request should be stricken, even if the opposing party has failed to object. See Williams v. Krieger, 61 F.R.D. at 144. Therefore, a request for admission of a proposition of law should be stricken and should not be deemed "admitted."

In the present case, Goodnow has not moved the Court for permission to file untimely answers. Thus, there is no need to consider any exception to the general rule that unanswered requests are deemed admitted.

The Court concludes that all Adelman's requests for admission are "admitted," with the exception of one. Number 30 of the requests states: "Admit that a creditor is obligated to prepare and file documents securing himself if he wants to protect himself and it is not the debtor's obligation." This is a statement of law and is improper material for a request for admission. Thus, Number 30 of Adelman's requests for admission will be stricken, and will not be admitted.

FACTS

The following recitation of the facts is based on the deposition testimony of Robert Goodnow, the plaintiff, Terrence Gere, a bank employee of Norwest (Minnwest) Bank of Ortonville, Minnesota, and David McLaughlin, a Minnesota attorney representing James Adelman. No deposition of the defendant, James Adelman, was ever filed with the Court. In addition, the Court has examined the defendant's interrogatories to the plaintiff, and the plaintiff's answers to those interrogatories, and the defendant's affidavit attached to his earlier motion for summary judgment. The facts set forth in the requests for admission, except for Number 30, are treated as conclusively established. See Fed.R.Civ.P. 36(b).

Prior to 1984, plaintiff Goodnow owned a hog equipment business, Upper Midwest Agri-Products, Inc. The business was located on Goodnow's farm, near Armour, South Dakota. In March, 1984, he sold the corporate structure and stock to Larry Koch, and the inventory to Adelman. Adelman and Goodnow orally agreed that Adelman would pay Goodnow $65,000 for the inventory by May 1, 1984. Koch planned to run the business and Adelman would finance it. Koch and Adelman then moved the business to Mitchell.

In May, 1984, Adelman was unable to pay Goodnow. Adelman had purchased another business in Sioux Falls and was overextended. But he continued to pay Goodnow interest each month, while assuring Goodnow that he soon would pay him the entire amount due.

In early 1985, Goodnow's bank was pressing him to take some kind of action on the debt and he was getting nervous about not getting paid. Goodnow told Adelman that he, Goodnow, wanted to be secured on the debt. In April, 1985, Adelman told Goodnow that he had filed a "UCC" (financing statement) to secure Goodnow on the hog equipment inventory at the Mitchell store. After telling Goodnow over the telephone that he had filed the financing statement, Adelman wrote Goodnow that he was "filing a UCC form" on Goodnow's behalf so that Goodnow would be officially a secured creditor. In the same letter, Adelman told Goodnow that he wanted Goodnow in "No. 1 position."

In the meantime, Adelman had borrowed from Norwest Bank of Ortonville, Minnesota (now MinnWest), to finance the purchase of two stores. On March 30, 1984, Norwest loaned him $100,000 for the purchase and start-up of Upper Midwest Agri-Products. An additional $25,000 was loaned on April 4. The bank took a blanket security interest in all of Adelman's inventory, equipment, farm products, consumer goods, general intangibles, and accounts receivable. It perfected its security interest by filing its first financing statement on April 11, 1984.

In June, 1984, Adelman borrowed $46,500 from the bank to purchase Falls Livestock Equipment Center, and gave the bank another blanket security interest in inventory, equipment, farm products, consumer goods, accounts receivable, and general intangibles. According to Exhibit 12 from bank officer Gere's deposition, Adelman borrowed additional sums from Norwest in September, 1984. The bank also required Adelman to take blanket security interests in Upper Midwest Agri-Products, Falls Livestock Equipment, and Plains Agri-Sales (of Aberdeen), Adelman's agricultural equipment businesses. Goodnow has admitted the validity and proper perfection of the various security interests of Norwest Bank in all Adelman's personal property.

By April, 1985, the outstanding balance of Adelman's loans from Norwest was $252,000 and his personal property was fully encumbered by Norwest Bank. All Adelman's farm real estate was mortgaged to Tri-County State Bank. It appears that the only unencumbered real property was Adelman's homestead.

On December 19, 1985, Adelman filed bankruptcy. The proof of claim filed by Norwest Bank reveals that Adelman owed the bank $312,396.19 on that date. Bank officer Gere testified that the bank recovered approximately $143,444.11 from a liquidation of its security in all of Adelman's businesses. At the time of Gere's deposition in April, 1988, there were approximately $5,500-$7,000 of assets that might still be recovered and a contingent liability of $50,000 that might be...