FAILURE TO TRUTHFULLY ANSWER REQUESTS FOR ADMISSIONS CAN BE COSTLY

Second District Affirms $138,469.01 Fee Award For Improper Denial of Crucial Requests for Admission.

          Code of Civil Procedure section 2033.420(a) provides trial courts with authority to impose reasonable expenses, including reasonable attorney’s fees, which a requesting party incurs in proving the truth of any matter that is not admitted through the request for admission discovery process. Sanctions are mandatory, unless the responding party shows the issue was of no substantial importance or the responding party had reasonable basis to believe it would prevail. (Code Civ. Proc., § 2033.420(b).) Costs awards under these provisions are reviewed under the abuse of discretion standard. (Stull v. Sparrow, 92 Cal.App.4th 860, 864 (2001).) Sanctions from improperly denying crucial requests for admission can be steep, as a litigant learned in a recent unpublished decision from the Second District, Division Six.

          In Manhattan Banker Corp. v. Retamco Operating, Inc., Case No. B189546 (2d Dist., Div. 6 June 4, 2008) (unpublished), plaintiff brought a declaratory relief action to establish the priority of its alleged security interest over that of defendant competing creditor in property of an outside company. Defendant propounded eight requests for admissions dealing with crucial facts about the debtor-creditor relationships and actions (or lack of actions) by the various participants. The requests were straightforward, but plaintiff denied everyone without explanation. Defendant successfully proved all the issues plaintiff denied in responding to the requests for admissions. Defendant moved for recovery of “costs of proof” sanctions of $138,469.01 under section 2033.420(a).

          You have probably guessed what happened. The trial judge awarded defendant every penny of its request, finding there would have likely been no trial at all had the requests been properly admitted. He also concluded that all the fees and expenses incurred through the time of trial were necessarily “costs of proof.”

          The verdict on appeal? Affirmed. The Court of Appeal agreed that there would have been no issue to try if the requests had been answered correctly. This took on even more significance because the proof at trial showed no debt, no assets to which a security interest could attach, no security interests, and no foreclosure. Appellant paid a very high price for denying admission requests of a crucial nature.

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[Marc & Mike]

Mike Hensley and Marc Alexander thank Bruce Nye and Cal Biz Lit for welcoming California Attorney's Fees to the Blogosphere!