Walters Construction, Inc. et al v. Cook

THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
IN RE:
DANIEL PAUL COOK,
Debtor.
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WALTERS CONSTRUCTION, INC.,
Plaintiff,
v.
DANIEL PAUL COOK,
Defendant.
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Case No 05-3965
Adv. Proc. No. 05-231
MEMORANDUM OPINION
Walters Construction, Inc. (“Walters”), filed a motion for summary judgment on its complaint to
except a $17,000 debt from the Chapter 7 discharge of Daniel Paul Cook (“the Debtor”) pursuant to §
523(a)(2)(A) or (B) of the Bankruptcy Code on the grounds that the Debtor falsely certified the payroll
records of Cook Heating & Air Conditioning, Inc. (“Cook Heating”). The Debtor responds that
genuine issues of material fact exist that preclude entry of summary judgment.
For the reasons stated herein, the court will deny the motion.
I. STANDARD OF REVIEW
Summary judgment is appropriate when the matters presented to the court “show that there is
no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of
Dated: Tuesday, August 08, 2006 12:13:59 PM
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1 Because the Hope VI housing project is sponsored by HUD, it is subject Title 29 of the Code
of Federal Regulations. 29 C.F.R. § 1.1(b-c) (“The regulations in this part . . . are applicable . . . to
general wage determinations for contracts in specified localities . . . .”).
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law.” Fed. R. Civ. P. 56(c); Fed. R. Bankr. P. 7056; Celotex v. Catrett, 477 U.S. 317, 322 (1986).
The party moving for summary judgment has the initial burden of proving that there is no genuine issue
as to any material fact. Adickes v. S. H. Kress & Co., 398 U.S. 144, 161 (1970). Once the moving
party has met this initial burden of proof, the non-moving party must set forth specific facts sufficient to
raise a genuine issue for trial and may not rest on its pleadings or mere assertions of disputed facts to
defeat the motion. Matsushita Electric Industrial Co., Ltd., v. Zenith Radio Corp., 475 U.S. 574,
586-87 (1986) (stating that the party opposing the motion “must do more than simply show that there is
some metaphysical doubt as to the material facts”). The mere existence of a scintilla of evidence in
support of the opposing party’s position will not be sufficient to forestall summary judgment, but “the
judge’s function is not himself to weigh the evidence and determine the truth of the matter but to
determine whether there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
252 (1986). In ruling on a motion for summary judgment, "the evidence of the nonmovant is to be
believed, and all justifiable inferences are to be drawn in his favor." Id. at 255. A fact is not “genuinely
disputed” unless the factual conflict between the parties requires a trial of the case for resolution.
Finley v. Giacobbe, 79 F.3d 1285, 1291 (2d Cir. 1996) (“If there is any evidence in the record from
which a jury could draw a reasonable inference in favor of the non-moving party on a material fact, this
Court will find summary judgment is improper.”).
II. BACKGROUND
The United States Department of Housing and Urban Development (“HUD”) sponsored the
construction of the Hope VI housing development in Wheeling, West Virginia, which is being
administered by the Wheeling Housing Authority (“WHA”).1 Walters contracted with the WHA to
supply materials and services in connection with the construction of Hope VI, and it subcontracted part
of its work to Cook Heating. The Debtor is the president of Cook Heating. During the course of
Cook Heating’s work, pursuant to HUD regulations, the Debtor certified Cook Heating’s payroll to
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2 See 29 C.F.R. § 5.5(a)(2) (“In the event of a failure to pay any laborer . . . all or part of the
wages required by the contract, the (Agency) may . . . take such action as may be necessary to cause
the suspension of any further payment . . . until such violations have ceased.”).
3 29 C.F.R. § 5.5(a)(3)(ii)(B)(6) (“The prime contractor shall be responsible for the
compliance by any subcontractor or lower tier subcontractor . . . .”); Arliss D. Merrell, Inc.,
1994-DBA-41 (ALJ Oct. 26, 1995) (holding that a prime contractor is responsible for the back wages
due employees of its subcontractor); W. Va. Code § 21-5-7 (“[T]he prime contractor shall become
civilly liable to employees engaged in the performance of work under such contract for the payment of
wages and fringe benefits . . . to the extent that the employer of such employee fails to pay such wages
and fringe benefits . . . .”).
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Walters for payment.
Walters alleges that Cook Heating was unable to perform its subcontract satisfactorily, it
terminated the contract, and that Walters was forced to complete a portion of the remaining work.
Walters also states that in July 2004, the WHA informed it that Cook Heating had not complied with
the Davis-Bacon Act and that a full audit of the payrolls certified by the Debtor disclosed that the fringe
benefits shown as being paid in cash to various employees of Cook Heating had not been remitted to
those employees. The WHA notified the Debtor of its findings, made the determination that Cook
Heating owed its employees $17,000, and informed the Debtor and Cook Heating that an appeal from
the determination could be filed. When neither the Debtor nor Cook Heating appealed the WHA’s
determination, it became final in early 2005. Pursuant to HUD regulations, Walters is holding about
$21,000 due to Cook Heating under the parties’ contract until Cook Heating or the Debtor remedy the
violations noticed in the WHA determination.2
III. DISCUSSION
Walters asserts that it is subject to liability on the WHA’s determination that Cook Heating
failed to pay the fringe benefits that the Debtor certified as paid in Cook Heating’s weekly payroll
reports because Cook Heating is its subcontractor.3 To preserve its right to collect against the Debtor
on its potential liability, Walters seeks a determination that the Debtor’s certification of Cook Heating’s
payroll records was a fraudulent act, and that any debt arising from that act is excepted from the
Debtor’s discharge pursuant to 11 U.S.C. § 523(a)(2)(A) or (B). Walters further asserts that summary
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judgment is apropos on the basis that the Debtor failed to timely respond to its request for admissions.
Section 523(a) of the Bankruptcy Code provides:
(a) A discharge under section 727 . . . of this title does not discharge an individual
debtor from any debt–
. . .
(2) for money . . . to the extent obtained, by--
(A) false pretenses, a false representation, or actual fraud, other than a
statement respecting the debtor's or an insider's financial condition;
(B) use of a statement in writing--
(i) that is materially false;
(ii) respecting the debtor's or an insider's financial condition;
(iii) on which the creditor to whom the debtor is liable for such
money, property, services, or credit reasonably relied;
§ 523(a)(2)(A-B).
A. Failure to Timely Respond to Requests for Admission
Walters argues that no genuine issue of material fact exists in this case to preclude entry of
summary judgment in its favor on the basis that the Debtor failed to timely respond to its requests for
admission; therefore, Walters contends, all of its requests are automatically deemed admitted.
Walters served its requests for admissions on the Debtor on May 18, 2006, by facsimile and
regular mail. Pursuant to Fed. R. Civ. P. 36(a) and Fed. R. Bankr. P. 7036, the Debtor had 30 days
to respond or else the requested admission is treated as admitted. That 30-day period expired on June
19, 2006. Four days later, on June 23, 2006, the Debtor served his responses to Walters’s request for
admissions.
Fed. R. Bankr. P. 9006(f) (effective December 1, 2005) states: “When there is a . . .
requirement to act . . . within a prescribed period after service and that service is by mail or under Rule
5(b)(2)(C) or (D) F. R. Civ. P., three days are added after the prescribed period would otherwise
expire under Rule 9006(a).” Before the 2005 amendments to Rule 9006(f), the Rule did not indicate
how the three-day extension of time was to apply and four possible methods existed for applying the
Rule. See 10 Collier on Bankruptcy ¶ 9006.12 (Alan N. Resnck & Henry J. Sommer eds. 15th ed.
Rev. 2006) (“ ‘Cases and commentary have recognized four possible means of calculating the three
days added by present [Fed. R. Civ. P 6(e), on which Fed. R. Bankr. P. 9006(f) is modeled].’ ”)
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(citation omitted). The 2005 amendments to Rule 9006(f) were meant to resolve any doubt as to how
to calculate the 3-day extension – it is added after the period prescribed in Rule 9006(a) has expired.
Id. In turn, Fed. R. Bankr. P 9006(a) states that when the end of a prescribed period of time falls on a
Saturday, Sunday, or legal holiday, the time for completing the act will not run until “the end of the next
day which is not one of the aforementioned days.”
In this case, Walters served its requests for admissions on the Debtor by mail and by facsimile,
both of which are encompassed within Fed. R. Civ. P. 5(b) and Fed. R. Bankr. P. 9006(f); thus, the 3-
day rule of 9006(f) is applicable. Because Walters served its requests for admissions on May 18,
2006, the 30-day prescribed period for responding expired on Saturday, June 17, 2006. Under Rule
9006(a), that deadline was automatically extended to Monday, June 19, 2006. Adding three days from
that date is June 22, 2006; therefore, the Debtor’s responses to Walters’s request for admissions,
served on June 23, 2006, was only one day late.
The 30-day deadline for responding to requests for admission is not rigid and a court, in its
discretion, may enlarge the allowed response time. E.g., Fed. R. Civ. P. 36(a) (“The matter is
admitted unless, within 30 days after service of the request, or within such . . . longer time as the court
may allow . . . .”); Nguyen v. CNA Corp., 44 F.3d 234, 242-43 (4th Cir. 1995) (holding that the
district court did not abuse its discretion in not deeming requests for admission as admitted when the
response was filed one day late); United States v. Lake Killarney Apartments, Inc., 443 F.2d 1170,
1170 (5th Cir. 1971) (holding that the trial judge did not abuse his discretion in allowing the United
States to file belated answers to requests for admission); White Consol. Indus. v. Waterhouse, 158
F.R.D. 429, 433 (D. Minn. 1994) (allowing late filed responses to requests for admission when the
requesting party was not prejudiced, a search for the truth would not otherwise be promoted, and when
the late filed responses largely mirrored the averments in the responding party’s answer).
Under the circumstances of this case, the court finds that Walters is not prejudiced by a one-
day extension of the deadline for responding to its requests for admission. The Debtor’s responses
largely mirror the denials in its answer, and the court finds it appropriate to consider this case on the
merits (as is the court’s preference) rather than on a procedural technicality. Therefore, the court will
treat the Debtor’s responses to Walters’s requests for admission as timely served.
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4 The court makes no findings on whether or not Walters has met any other elements in either a
§ 523(a)(2)(A) or (B) cause of action.
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B. 11 U.S.C. § 523(a)(2)(A) & (B)
Walters states that it is entitled to summary judgment based on the facts as admitted by the
Debtor. Because the court will allow a one-day extension of time for the Debtor to file his responses to
Walters’s requests for admission, there are only two pertinent facts that are plainly not controverted by
the Debtor. Namely, (1) that Cook Heating did not appeal the audit findings of the WHA that it owed
its employees $17,000, and that (2) Walters made a demand against Cook Heating to pay the amount
owed.
Whether Walters is proceeding under § 523(a)(2)(A) or (B), Walters must demonstrate, inter
alia, that the Debtor had scienter when he made the allegedly fraudulent representation or false writing.
E.g., Foley & Lardner v. Biondo (In re Biondo), 180 F.3d 126, 134 (4th Cir. 1999) (stating that the
debtor’s “state of mind is a question of fact to be determined in the first instance by the bankruptcy
court” in adjudicating a § 523(a)(2)(A) exception to discharge complaint); Candland v. Insurance Co.
of N. Am. (In re Candland), 90 F.3d 1466, 1469 (9th Cir. 1996) (requiring under § 523(a)(2)(B) that
the debtor know, at the time the writing is made, that the statement is false). Because Walters has
failed to show an essential element of either a 11 U.S.C. § 523(a)(2)(A) or (B) cause of action,
Walters’s motion for summary judgment will be denied.4
IV. CONCLUSION
The court will deny Walters’s motion for summary judgment. A separate order is attached.
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