Murphy v. Walsh

UNITED STATES BANKRUPTCY COURT
FOR THE
DISTRICT OF MASSACHUSETTS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In re
GEORGIA JANE WALSH, 	Chapter 7
Debtor 	Case No. 08-17767-JNF
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
HAROLD B. MURPHY,
CHAPTER 7 TRUSTEE,
Plaintiff
v. 	Adv. P. No. 08-1372
GEORGE W. WALSH,
Defendant
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
MEMORANDUM
I. INTRODUCTION
Two matters are before the Court: 1) the Plaintiff’s Motion for Summary Judgment;
and 2) Defendant’s Opposition to Plaintiff’s Motion for Summary Judgment and Request
for Leave to Late File Defendant’s Responses to Admissions. The Court heard the matters
on June 2, 2010 and took them under advisement. 	The issue presented is whether the
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Trustee sustained his burden of establishing the absence of any genuine issues of material
fact with respect to allegedly fraudulent transfers he seeks to avoid arising out of a reverse
mortgage transaction. For the reasons set forth below, the Court shall grant the Plaintiff’s
Motion for Summary Judgment and deny the Defendant’s Request for Leave to Late File
Defendant’s Responses to Admissions.
II. THE TRUSTEE’S COMPLAINT
On December 5, 2008, Harold B. Murphy, the Chapter 7 Trustee of the bankruptcy
estate of Georgia Jane Walsh (the “Plaintiff”), filed a complaint (the “Complaint”) against
George W. Walsh (the “Defendant”), seeking to avoid and recover certain transfers
pursuant to 11 U.S.C. §§ 544(b), 550 and Mass. Gen. Laws ch. 109A, §§ 5(a)(2) 1 and 6(a). 2
1 Section 5(a) provides in relevant part the following:
(a) A transfer made or obligation incurred by a debtor is fraudulent as to a
creditor, whether the creditor’s claim arose before or after the transfer was
made or the obligation was incurred, if the debtor made the transfer or
incurred the obligation: . . .
(2) without receiving a reasonably equivalent value in
exchange for the transfer or obligation, and the debtor:
(i) was engaged or was about to engage in a
business or a transaction for which the
remaining assets of the debtor were
unreasonably small in relation to the business
or transaction; or
(ii) intended to incur, or believed or reasonably
should have believed that he would incur,
debts beyond his ability to pay as they became
due.
(b) In determining actual intent under paragraph (1) of subsection (a),
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consideration may be given, among other factors, to whether:
(1) the transfer or obligation was to an insider;
(2) the debtor retained possession or control of the property transferred
after the transfer;
(3) the transfer or obligation was disclosed or concealed;
(4) before the transfer was made or obligation was incurred, the debtor
had been sued or threatened with suit;
(5) the transfer was of substantially all the debtor’s assets;
(6) the debtor absconded;
(7) the debtor removed or concealed assets;
(8) the value of the consideration received by the debtor was reasonably
equivalent to the value of the asset transferred or the amount of the
obligation incurred;
(9) the debtor was insolvent or became insolvent shortly after the transfer
was made or the obligation was incurred;
(10) the transfer occurred shortly before or shortly after a substantial debt
was incurred; and
(11) the debtor transferred the essential assets of the business to a lienor
who transferred the assets to an insider of the debtor.
Mass. Gen. Laws ch. 109A, § 5. The Court observes that the Trustee has alleged that the
Debtor, through the Defendant’s use of the durable power of attorney, transferred
substantially all her assets (i.e, the equity in her home) to an insider, her son; she
continued to reside in the property; and she was insolvent or became insolvent shortly
after the transfers were made.
2 Section 6 provides:
A transfer made or obligation incurred by a debtor is fraudulent as to a
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In Counts I through III of his Complaint, the Plaintiff alleged that he may avoid, pursuant
to 11 U.S.C. § 544(b), 3 certain transfers of the Debtor’s interest in property because those
transfers are voidable under applicable state law by a creditor holding an unsecured claim
that is allowed under 11 U.S.C. § 502. 	The Plaintiff further alleged that one or more
unsecured creditors exist who hold claims that arose before or after the date of each of the
transfers he seeks to avoid. In addition, he averred that he may recover the transfers or the
value of the avoided transfers from the Defendant, the initial transferee of the transfers,
pursuant to 11 U.S.C. §§ 550, 551. Through Count IV of his Complaint, the Plaintiff also
sought, pursuant to 11 U.S.C. § 502(d), to disallow any claim that the Defendant might
assert against the Debtor and/or her estate unless the Defendant paid to the Plaintiff the
full amount of any judgment obtained by him against the Defendant as requested in the
Complaint. Because the Defendant did not file a proof of claim, Count IV is moot.
creditor whose claim arose before the transfer was made or the obligation
was incurred if the debtor made the transfer or incurred the obligation
without receiving a reasonably equivalent value in exchange for the
transfer or obligation and the debtor was insolvent at that time or the
debtor became insolvent as a result of the transfer or obligation.
Mass. Gen. Laws ch. 109A, § 6.
3 Section 544(b) provides:
Except as provided in paragraph (2), the trustee may avoid any transfer of
an interest of the debtor in property or any obligation incurred by the
debtor that is voidable under applicable law by a creditor holding an
unsecured claim that is allowable under section 502 of this title or that is
not allowable only under section 502(e) of this title.
11 U.S.C. § 544(b)(1).
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On or about January 5, 2010, the Defendant filed his Answer to the Complaint.
Within a few days, the Court issued a pretrial order establishing a discovery deadline of
April 8, 2009.
III. FACTS
A. The Debtor’s Bankruptcy Case
On October 14, 2008, Georgia Jane Walsh (“the Debtor”) filed a voluntary Chapter
7 petition. On or about October 15, 2008, Harold B. Murphy was appointed the Chapter
7 trustee of her bankruptcy estate.
On October 30, 2008, the Debtor, who was represented by Peter R. Kaplan, Esq.,
filed her Schedules and Statement of Financial Affairs. On Schedule A-Real Property, the
Debtor represented that she was the sole owner of her residence located at 18 Cloverdale
Avenue, Salem, Massachusetts (the “Salem Property”). The Debtor also represented in
Schedule A that the Salem Property had a value, as of the petition date, of $286,407. The
Debtor did not claim a homestead exemption under either federal or state law on Schedule
C-Property Claimed as Exempt in the Salem Property. On Schedule D-Creditors Holding
Secured Claims, the Debtor listed Financial Freedom Senior Funding Corp. as the holder
of a reverse mortgage on the Salem Property with a claim in the amount of $302,447.42.
On Schedule F-Creditors Holding Unsecured Nonpriority Claims, the Debtor listed
three creditors holding the following claims:
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Creditor’s Name 	Date Claim Was Incurred and
Consideration for Claim
Amount of Claim
American Express/Credit
Card Acct. No. -4543
Opened 4/01/04 Last Active 3/03/06 	$5,102.00
Bac / Fleet Bankcard/Credit
Card Acct. No. -6274
Opened 11/01/03 Last Active 6/12/08 	$7,042.00
Chase CC/Credit Card Acct.
No. -4915
2007 	$3,631.46
Total: 	$15,775.46
On Schedule I-Current Income of Individual Debtor(s), the Debtor indicated that she
was retired and received a monthly Social Security check in the sum of $743.60. 	On
Schedule J-Current Expenditures of Individual Debtor(s), the Debtor listed monthly
expenses totaling $818.33.
The Court takes judicial notice of the Debtor’s Statement of Financial Affairs in which
the Debtor reported income from Social Security in the amount of $10,116 for calendar years
2006 and 2007. 	She did not report any transfers or payments to creditors, other than a
payment of $1,500 to her attorney.
The Court established a deadline of March 9, 2009 for creditors to file proofs of claim
against the Debtor’s estate. The three creditors listed in the Debtor’s Schedule F timely filed
proofs of claim for outstanding and unpaid credit card charges for which the Debtor was
liable. Chase Bank USA, NA (“Chase”) filed proof of claim no. 1 asserting a nonpriority
unsecured claim in the exact amount as listed on the Debtor’s Schedule F. The Plaintiff
investigated the claim and determined that the Chase Claim is allowable under 11 U.S.C.
§ 502 and that the credit card charges that form the underlying basis for the Chase Claim
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arose either before or after the transfers related to the home equity conversion loan,
discussed below, were made.
Bank of America filed proof of claim no. 2 asserting a non-priority unsecured claim
in the amount of $7,042.78, an amount substantially similar to the amount listed on the
Debtor’s Schedule F (the “BofA Claim”). After the Plaintiff's investigation of the BofA
Claim, the Plaintiff determined that the BofA Claim is allowable under 11 U.S.C. § 502 and
that based upon the BofA credit card statements for the Debtor’s account, as well as the
Defendant’s bank statement issued by Beverly Cooperative Bank, the Debtor had an
outstanding credit card balance on her account with BofA in October 2005. On November
4, 2005 the Defendant paid the outstanding balance on the BofA credit card, in the amount
of $4,491.16, after receiving the initial transfer of $40,000, discussed below. The credit card
charges that form the underlying basis for the BofA Claim arose after the transfers
associated with the home equity conversion loan were made.
American Express (“Amex”) filed proof of claim no. 3 asserting a nonpriority
unsecured claim in the amount of $5,463.39 relating to credit card charges incurred on
account number ending in -1001 (the “Amex Claim”). After the Plaintiff’s investigation of
the Amex Claim, the Plaintiff determined that the Amex Claim is allowable under 11 U.S.C.
§ 502 and that the credit card charges that form the underlying basis for the Amex Claim
arose either before or after the transfers were made.
B. The Home Equity Conversion Loan
Approximately three years before she filed her bankruptcy petition, the Debtor, in
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September of 2005, appointed George A. Walsh, her son and the Defendant, her attorney in
fact under a durable power of attorney. 	On or about October 24, 2005, the Defendant,
exercising his authority under the durable power of attorney and on behalf of the Debtor,
entered into a Home Equity Conversion Loan Agreement (the “Loan Agreement”) with
Financial Freedom Senior Funding Corporation, a Subsidiary of Indymac Bank, F.S.B. (the
“Lender”). The Lender provided an initial home equity line of credit up to a maximum
principal amount of $256,886.80, which was based on a “Property Appraised Value” of
$335,000.
On the same date, in connection with the Loan Agreement, the Defendant, exercising
his authority under the durable power of attorney and on behalf of the Debtor, executed in
the Debtor’s name an Adjustable Rate Home Equity Conversion Mortgage (the “First
Mortgage”). The mortgage was recorded on October 31, 2005 in the Essex County Registry
of Deeds (South District) at Book 25016, Page 201. The Debtor was not required to make
monthly payments under the Note and Mortgage, and she was not personally liable for any
deficiency. 	The Mortgage secured, among other things, “the 	repayment of the debt
evidenced by the Note, with interest at a rate subject to adjustment, and all renewals,
extensions and modifications of the Note, up to a maximum principal amount of Four
Hundred Sixty Nine Thousand and Three Hundred Forty Two and 50/100 (U.S.
$469,342.50),” as well as any advances made in connection with the Loan Agreement and
the Note. 	The Note was due and payable on August 30, 2069. 	The Note, however,
contained grounds for acceleration including the following:
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(i) A Borrower dies and the Property is not the principal residence of at least
one surviving Borrower; or
(ii) All of a Borrower’s title in the Property (or his or her beneficial interest in
a trust owning all or part of the Property) is sold or otherwise transferred and
no other Borrower retains title to the Property in fee simple . . . .
In addition, the Lender was entitled to payment in full of all amounts due under the Note
if the Salem Property ceased to be the principal residence of the Debtor for reasons other
than death or if the Debtor ceased to occupy the Property for a period longer than 12
consecutive months because of physical or mental illness.
The Defendant, exercising his authority under the durable power of attorney and on
behalf of the Debtor, also executed in the Debtor’s name an Adjustable Rate Home Equity
Conversion Second Mortgage (the “Second Mortgage,” and together with the First
Mortgage, the “Mortgages”), dated October 24, 2005 and recorded on October 31, 2005 in
the Essex County Registry of Deeds (South District) at Book 25016, Page 210, pursuant to
which a second mortgage was granted on the Salem Property to the Secretary of Housing
and Urban Development to secure, among other things, the repayment of any advances
made in connection with the Loan Agreement and the Note.
C. The Transfers
On October 28, 2005, the Defendant received an initial principal disbursement from
the Line of Credit in the amount of $40,000. According to the Trustee, he used
approximately $17,900 of that amount to satisfy certain credit card obligations owed by the
Debtor.
On November 21, 2005, the Defendant received a second principal disbursement of
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$50,000 and approximately three months later, on February 23, 2006, he received a third
principal transfer of $150,000 (collectively, the “transfers”). 	The three transfers totaled
$240,000.
D. The Adversary Proceeding: Procedural Background
Following the commencement of the adversary proceeding and the issuance of the
Court’s pretrial order, the parties negotiated a discovery plan and, on March 9, 2009, filed
a Motion to Approve Discovery Plan with the Court. By order dated March 10, 2009, the
Court allowed the motion and approved the discovery plan (the “Discovery Plan”),
pursuant to which the parties proposed modifications of the Court’s January 8, 2009 pretrial
order. Pursuant to paragraph 1 of the Discovery Plan, the parties were required to provide
initial disclosures under Fed. R. Bankr. P. 7026(a)(1), (2) on or before March 31, 2009.
Pursuant to paragraph 3 of the Discovery Plan, all fact discovery, including answers to
interrogatories and requests for production of documents, was required to be served so that
all responses were due on or before September 1, 2009.
On March 31, 2009, the Plaintiff served the Defendant with his initial disclosures
pursuant to Fed. R. Bankr. P. 7026(a)(1), (2), and filed a certificate of service respecting the
same on April 1, 2009. The Defendant has not yet served his initial disclosures.
On July 29, 2009, the Plaintiff served the Plaintiff‘s First Set of (i) Requests for
Admissions; (ii) Interrogatories; and (iii) Requests for Production of Documents on the
Defendant (collectively, the “Discovery Requests”) by overnight FedEx delivery. Pursuant
to the FedEx electronic shipment delivery confirmation notice, the Defendant’s counsel
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received the Discovery Requests on July 30, 2009 at 12:08 p.m. The Defendant’s responses
to the Discovery Requests, including his answers to the Plaintiff’s Requests for Admissions,
were due on or before August 28, 2009 pursuant to Fed. Civ. P. 36, made applicable to this
proceeding by Fed. R. Bankr. P. 7036.
In the Discovery Requests, the Requests for Admissions propounded pursuant to
Fed. R. Civ. P. 36 on the Defendant included the following:
Plaintiff requests that [Defendant] admit, within thirty (30) days from the date
of service hereof, for the purposes of this action only, and subject to all
pertinent objections to admissibility which may be imposed at trial, the truth
of the following statements:
1. The Debtor was insolvent or became insolvent at the time
each of the Transfers was made.
2. Each of the Transfers was made while the Debtor intended to
incur, or believed or reasonably should have believed that she
would incur, debts that would be beyond her ability to pay as
they became due.
3. Each of the Transfers was made while the Debtor was
engaged or was about to be engaged in a transaction for which
the remaining assets of the Debtor were unreasonably small in
relation to the transaction.
4. [Defendant] was the initial transferee of each of the Transfers
or the person for whose benefit each of the Transfers was made.
The Defendant failed to respond to the Discovery Requests, including the Plaintiff’s
Requests for Admissions, on or before the response deadline pursuant to Fed. R. Civ. 36,
Fed. Bankr. P. 7036, and the instructions contained in the Discovery Requests.
By orders dated August 17, 2009, October 27, 2009, December 14, 2009, and January
14, 2010, this Court authorized amendments of the Discovery Plan to extend deadlines,
including the fact discovery deadline to and including January 21, 2010. Neither party
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sought an extension of the deadline for responding to the outstanding Requests for
Admissions. 	According to the Trustee, the Defendant has neither served his initial
disclosures nor any discovery requests or deposition notices.
The Plaintiff filed his Motion for Summary Judgment on March 10, 2010. On March
15, 2010, the Court scheduled the hearing on the Motion for Summary Judgment and set
May 4, 2010 as the deadline for the filing of an objection. 	The Court subsequently
rescheduled the hearing to June 2, 2010. 	Thus, before the May 4, 2010 deadline, the
Defendant had almost two months within which to obtain an extension of time to comply
with outstanding discovery requests, comply with those requests, and produce substantial
evidence pertinent to the Debtor’s solvency in the form of appraisals or otherwise to rebut
the affidavit and other evidence supporting the Trustee’s Motion for Summary Judgment.
III. 	THE 	DEFENDANT’S 	RESPONSE 	TO 	THE 	PLAINTIFF’S 	MOTION 	FOR
SUMMARY JUDGMENT AND REQUEST FOR LEAVE TO LATE FILE DEFENDANT’S
RESPONSES TO ADMISSIONS
The Defendant filed his Responses to the Plaintiff’s Request for Admissions on May
4, 2010, at the same time he filed his Opposition to the Plaintiff’s Motion for Summary
Judgment and a Request for Leave to Late File Defendant’s Responses to Admissions. In
his Responses to the Plaintiff’s four Requests for Admissions, he 1) denied that the Debtor
was insolvent or became insolvent; 2) denied that each of the transfers was made while the
Debtor intended to incur, or believed or reasonably should have believed that she would
incur debts that would be beyond her ability to pay as they became due, and 3) denied that
the transfers were made while the Debtor was engaged or was about to be engaged in a
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transaction for which the remaining assets of the Debtor were unreasonably small in relation
to the transaction. In response to the fourth Request for Admissions, the Defendant
admitted that he was the initial transferee of each of the transfers or the person for whose
benefit each transfer was made “to the extent that Transfers were made pursuant to Mr.
Walsh’s power of attorney.”
The Defendant stated that the reason he failed to comply with the provisions of Rule
7036 was oversight by his attorney, adding that he “intends to present testimony at any
evidentiary hearing in this matter to support such facts and/or to submit affidavits to that
effect. . . .” The Defendant also stated: “responses to the remaining discovery requests will
be submitted shortly.”
IV. DISCUSSION
A. Applicable Law
1. Summary Judgment
The summary judgment standard is well-known and needs little explication.
Pursuant to Fed. R. Civ. P. 56(c), made applicable to this proceeding by Fed. R. Bankr. P.
7056, “the judgment sought should be rendered if the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a matter of law.” The United
States Court of Appeals for the First Circuit has stated the following:
It is apodictic that summary judgment should be bestowed only when no
genuine issue of material fact exists and the movant has successfully
demonstrated an entitlement to judgment as a matter of law. See Fed.R.Civ.P.
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56(c). As to issues on which the movant, at trial, would be obliged to carry the
burden of proof, he initially must proffer materials of evidentiary or
quasi-evidentiary quality-say, affidavits or depositions-that support his
position. When the summary judgment record is complete, all reasonable
inferences from the facts must be drawn in the manner most favorable to the
nonmovant. This means, of course, that summary judgment is inappropriate
if inferences are necessary for the judgment and those inferences are not
mandated by the record. . . .
Desmond v. Varrasso (In re Varrasso), 37 F.3d 760, 763 (1st Cir.1994) (citations omitted,
footnote omitted). 	Rule 56(e) further provides:
(e) Affidavits; Further Testimony.
(1) In General. A supporting or opposing affidavit must be
made on personal knowledge, set out facts that would be
admissible in evidence, and show that the affiant is competent to
testify on the matters stated. If a paper or part of a paper is
referred to in an affidavit, a sworn or certified copy must be
attached to or served with the affidavit. The court may permit
an affidavit to be supplemented or opposed by depositions,
answers to interrogatories, or additional affidavits.
(2) Opposing Party’s Obligation to Respond. When a motion for
summary judgment is properly made and supported, an
opposing party may not rely merely on allegations or denials in
its own pleading; rather, its response must--by affidavits or as
otherwise provided in this rule--set out specific facts showing
a genuine issue for trial. If the opposing party does not so
respond, summary judgment should, if appropriate, be entered
against that party.
Fed. R. Bankr. P. 56(e).
2. Rule 36(a) and (b)
Fed. R. Civ. P. 36, made applicable to this proceeding by Fed. R. Bankr. P. 7036,
provides in relevant part: “A matter is admitted unless, within 30 days after being served,
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the party to whom the request is directed serves on the requesting party a written answer
or objection addressed to the matter and signed by the party or its attorney.” Fed. R. Civ.
P. 36(a)(3).
In In re Skyport Global Commc’ns, Inc., 408 B.R. 687 (Bankr. S.D. Tex. 2009), the court
explained the rationale of the rule and exceptions to it. It stated:
Pursuant to Rule 36(a), litigants may request admissions on a broad range of
matters, “including ultimate facts, as well as application of law to facts.”
Carney v. IRS (In re Carney), 258 F.3d 415, 419 (5th Cir. 2001). “Such breadth
allows litigants to winnow down issues prior to trial and thus focus their
energy and resources on disputed matters.” Id. (citing 8A Wright Miller &
Marcus, Federal Practice and Procedure § 2254 (2d ed.1994)); Sampayo
Climaco y Asociados Despacho Juridico Internacional (In re Cantu), No.
08-07041, 2009 WL 1257151, at * 1 (Bankr. S.D. Tex. May 4, 2009) (same). The
party responding to requests for admissions has an affirmative duty to act
within thirty (30) days from being served. Fed.R.Civ.P. 36(a)(3); In re Cantu,
2009 WL 1257151, at *1. Failure to respond to requests for admissions within
the time permitted results in the responding parties deemed admissions of the
matters contained within. Fed. R. Civ. P. 36(a)(3); In re Carney, 258 F.3d at 419;
Finlay v. Wolpoff & Abramson, No. H-08-0786, 2009 WL 936882, at *2 (S.D.
Tex. April 3, 2009); In re Cantu, 2009 WL 1257151, at *1; Powerhouse Prods.,
Inc. v. Widgery, No. 4:07-cv-071, 2008 WL 4331428, at *1 (E.D. Tex. Sept.17,
2008).
The Fifth Circuit has stressed that “a deemed admission can only be
withdrawn or amended by motion in accordance with Rule 36(b).” In re
Carney, 258 F.3d at 419; Am. Auto. Ass’n v. AAA Legal Clinic of Jefferson
Crooke, P.C., 930 F.2d 1117, 1120 (5th Cir.1991). In reviewing such a motion,
courts must determine: (1) whether withdrawal “would promote the
presentation of the merits of the action;” and (2) whether withdrawal “would
prejudice the requesting party in maintaining or defending the action on the
merits.” Fed.R.Civ.P. 36(b); In re Carney, 258 F.3d at 419. “Even when these
two factors are established, a district court still has discretion to deny a
request for leave to withdraw or amend an admission.” In re Carney, 258 F.3d
at 419; see Le v. Cheesecake Factory Rest., Inc., No. 06-20006, 2007 WL 715260,
at *2 (5th Cir. Mar.6, 2007); Powerhouse Prods., 2008 WL 4331428, at *1; see also
Donovan v. Carls Drug Co., 703 F.2d 650, 652 (2d Cir.1983) (“Because the
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language of [Rule 36(b) ] is permissive, the court is not required to make an
exception to Rule 36 even if both the merits and the prejudice issues cut in
favor of the party seeking exception to the rule.”).
408 B.R. at 697. See also Zimmerman v. Cambridge Credit Counseling Corp., 529 F.Supp.2d
254 (D. Mass. 2008).
B. Analysis
The only opposition to the Plaintiff’s Motion for Summary Judgment produced by
the Defendant is set forth in his Responses to Plaintiff’s Request for Admissions. 	The
Defendant states that “[i]f the matters contained in Plaintiff’s Requests for Admissions are
not deemed admitted, Plaintiff cannot bring the present Motion.” He adds that Plaintiff’s
Motion for Summary Judgment is, “in essence a ‘motion relating to a discovery dispute,’
within the meaning of MLBR Rule 7037-1, requiring a prior conference to resolve the dispute
and a certificate evidencing the same.” He also maintains that had such a conference been
initiated, discovery would have been submitted and there would have been no need for the
Motion for Summary Judgment.
The Court rejects the Defendant’s position, which improperly attempts to shift the
burden to the Plaintiff for the Defendant’s failure to timely respond to the Requests for
Admissions. The Defendant was obligated to respond to the Requests for Admissions and
failed to do so in a timely manner. 	To avoid the ramifications of that failure, it was
incumbent upon him to both satisfy the conditions of Rule 36(b) and file an objection to the
Plaintiff’s Motion for Summary Judgment that demonstrated the existence of a material fact
in dispute. He failed to do so. See Fed. R. Civ. P. 56(e)(2).
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In view of the applicable rule of civil procedure and case law in this district and
elsewhere, the Court finds that the Debtor’s insolvency is deemed admitted. 	The
Defendant’s reliance on Fed. R. Civ. P. 36(b) is unavailing. The Defendant’s bald denial of
insolvency does satisfy the requirements of Rule 36(b), because it fails to subserve the
presentation of the merits. See Zimmerman, 529 F.Supp.2d at 264-65. Indeed, the court in
Zimmerman observed:
At least some courts have questioned whether the Rule 36(b) test should even
apply where a party has failed outright to answer requests for admission,
given that the usual standard governing motions to permit an action under
the Federal Rules of Civil Procedure after the relevant time period has expired
is the more rigorous Rule 6(b)(2) “excusable neglect” standard. See Sea-Land
Serv. v. Citihope Int’l, 176 F.R.D. 118, 122 n. 10 (S.D.N.Y.1997) (suggesting that
the Rule 36(b) test should apply “only in circumstances in which a party has
filed a timely response to a Rule 36 request but later seeks to change or
withdraw its response”); Nat’l Coalition v. Wilkey, No. 00-1686, 2007 WL
951559, *2, 2007 U.S. Dist. LEXIS 21719, at *8 (N.D.N.Y. Mar. 27, 2007).
258 F.Supp.2d at 266 n.10.4 The Defendant’s statements that he will submit evidence at a
later date only underscores the weakness of his present position. In view of the pendency
of the Motion for Summary Judgment, the Defendant needed to do more than rely on Rule
4 The Defendant’s denial of insolvency in his Answer to the Complaint does not
change the result. See Meyers v. Town of Putney (In re Corporation of Windham
College), 34 B.R. 408, 411 (Bankr. D. Vt. 1983) (“An admission under the rule is
comparable to an admission in pleadings; but where a denial contained in the pleadings
is inconsistent with an admission under the rule, the admission under the rule
supersedes the denial contained in the pleadings. Fed.R.Civ.P. 36 advisory committee
note; see generally, Moore’s Manual, § 15.12. Summary judgment may be granted where
material facts are established as uncontroverted by reason of an admission under the
rule. Id. at page 15-110 n. 35 (1982) and cases cited therein; see, In Re Hess, 21 B.R. 465,
467 (Bkrtcy. W.D. Va.1982).”).
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36(b). 	It was incumbent upon him to produce evidence in the form of an affidavit or
otherwise pertinent to both the Debtor’s solvency and the use of the funds obtained from
the reverse mortgage on the Salem Property.
The Plaintiff, in his Opposition to the Defendant’s Request for Leave to Late File
Defendant’s Responses to Admissions, stated that the relief sought “would essentially
render the provisions of Rule 7036 meaningless and would unfairly prejudice the Plaintiff.”
The Court agrees. The Plaintiff’s Complaint has been pending for over a year and a half and
the Requests for Admissions were not lengthy, complex or burdensome. The Plaintiff was
justified in filing a Motion for Summary Judgment and is justified in relying upon Fed. R.
Civ. P. 36, made applicable to this proceeding by Fed. R. Bankr. P. 7036. He has established
that he will be prejudice if this Court were to permit the Defendant to respond to the
Requests for Admissions at this time. Nevertheless, even if this Court were to grant the
Defendant’s Request for Leave to Late File Defendant’s Responses to Admissions, the result
would not change. The Defendant failed to submit any evidence or persuasive argument
pertinent to the merits of his defense to Plaintiff’s Complaint, and thus failed to comply with
the provisions of Fed. R. Civ. P. 56(e)(2), as well as Rule 36(b).
Although he denied the Debtor’s insolvency, the Defendant did not set out a single
fact that would show that he is competent to testify about her solvency for purposes of
opposing the Motion for Summary Judgment. While it is undisputed that the Defendant
is the Debtor’s son and holds a power of attorney, the Court was presented with no
evidence of his personal knowledge or qualifications to testify about the Debtor’s solvency
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or the use that was made of the $240,000, less the $17,900 used to pay the Debtor’s credit
card bills, that was obtained from the reverse mortgage. In view of the Debtor’s Schedules,
the Court has been presented with compelling evidence that the Debtor was insolvent. She
had no unencumbered or exempt assets at the commencement of her Chapter 7 cases, and
she had insufficient income to meet her ordinary living expenses. In other words, she had
no ability to make payments to her unsecured creditors, and, if her assets were liquidated,
there would be no nonexempt assets available to satisfy the claims of unsecured creditors.
See 11 U.S.C. § 101(32). 5 Under those circumstances, the Defendant was required to do more
than rely on the Response to the Requests for Admissions.
Having determined that the facts set forth in Plaintiff’s Requests for Admissions are
deemed admitted, the Court finds that there are no genuine issues of material fact and that
the Plaintiff is entitled to judgment as a matter of law. 	See Fed. R. Civ. P. 56, made
applicable to this proceeding by Fed. R. Bankr. P. 7056. 	Again, even were the Court to
5 The term “insolvent” means--
(A) with reference to an entity other than a partnership and a
municipality, financial condition such that the sum of such entity’s debts
is greater than all of such entity’s property, at a fair valuation, exclusive
of--
(i) property transferred, concealed, or removed with intent
to hinder, delay, or defraud such entity's creditors; and
(ii) property that may be exempted from property of the
estate under section 522 of this title. . . .
11 U.S.C. § 101(32)(A).
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accept the Defendant’s late filed Responses to the Requests for Admissions, however, it
would not be sufficient to prevent the entry of summary judgment in favor of the Plaintiff.
Under Rule 56(e), a party opposing summary judgment may not rest upon mere conclusory
allegations or denials but must set forth supporting arguments or facts in opposition to the
motion. The Defendant’s Responses - - bald denials - - do not satisfy the test under Rule
56(e), particularly when coupled with the Defendant’s failure to comply with MLBR 7056-1,
which incorporates District Court Local Rule 56.1. That rule required the Defendant “to
include a concise statement of the material facts of record as to which it is contended that
there exists a genuine issue to be tried, with page references to affidavits, depositions and
other documentation.”
VI. CONCLUSION
In accordance with the foregoing, the Court shall grant the Plaintiff’s Motion for
Summary Judgment and enter judgment in favor of the Plaintiff and against the Defendant
in the sum of $222,100.00.
By the Court,
Joan N. Feeney
United States Bankruptcy Judge
Dated: June 24, 2010
cc: Peter R. Kaplan, Esq., Natalie B. Sawyer, Esq.
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