Bankruptcy/Requests For Admission: Auto Accident Defendant/Chapter 7 Debtor Properly Discharged From Liability For Costs-Of-Proof Sanctions Based On Post-Petition Conduct Or Post-Discharge Conduct

 

Post-Petition Was Passive, Not Active, So Discharge Principles Applied.

    In Reese v. Mingramm, Case No. B262021 (2d Dist., Div. 6 May 18, 2016) (unpublished), a defendant in a later personal injury action filed a Chapter no-asset bankruptcy but failed to list the personal injury plaintiff as a creditor given that the matter was just a claim and was insured.  Debtor assumed the accident did not materially relate to his bankruptcy, with the bankruptcy court issuing a discharge.  After the discharge, personal injury plaintiff filed suit and obtained a $ 538,000 jury verdict against defendant/debtor, with debtor informing everyone about the bankruptcy after the verdict.  Debtor’s insurer tendered a full $250,000 policy limit offer, which was rejected by personal injury plaintiff.  Plaintiff then filed a motion to declare the judgment non-dischargeable and obtain attorney’s fees and costs against discharged debtor based on bad faith denial of requests for admission justifying costs-of-proof sanctions under CCP § 2033.420.

    The trial court denied the motions, a result sustained on appeal before the 2/6 DCA.

    With respect to the costs-of-proof sanctions denial, the appellate court found that these sanctions are a matter of discretion, with the lower court impliedly determining that the RFA denials were made in good faith.  But there was more.  Personal injury plaintiff argued that the debtor/defendant could be liable for post-petition conduct where that debtor returns to the fray of litigation.  However, the appellate court found this was not the case by debtor because he filed no cross-complaint, did not seek damages, or take action to press the litigation forwarded—he simply defended.  Plaintiff tenaciously argued that the RFA discovery responses were false/fraudulent conduct under a specific non-dischargeability statute (11 U.S.C. § 727(a)(4)(A)), but the appellate court determined that this only related to false statements in debtor’s schedule, with the RFA responses occurring after the bankruptcy discharge was issued.  (However, reading between the lines, plaintiff did get the benefit of insurer’s policy term tender of $250,000, so not all was lost at all.)