David v. Summit Community Bank
Filing
8
MEMORANDUM OPINION AND ORDER - the Bankruptcy Courts judgment as to the issues raised in this appeal is AFFIRMED in part, REVERSED in part, and REMANDED to modify the judgment consistent with the instruction. Signed by District Judge Rossie D. Alston, Jr on 05/04/2021. (dvanm, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division
BYRON F. DAVID,
)
)
)
)
)
)
)
)
)
Appellant,
v.
SUMMIT COMMUNITY BANK,
Appellee.
Civil Action No. 1:20-cv-00721 (RDA/JFA)
MEMORANDUM OPINION AND ORDER
This matter comes before the Court on Appellant Byron F. David’s (“Appellant”) appeal
of the United States Bankruptcy Court for the Eastern District of Virginia’s (“Bankruptcy
Court”) “Order Denying [Appellant’s] Second Motion to Alter or Amend Judgment” (“Order
Denying Second Motion to Amend”). See Dkt. 1; see also In re David, No. 18-12396, Dkt. 234
(Bankr. E.D. Va. June 12, 2020). The Court dispenses with oral argument because it would not
aid in the decisional process. Loc. Civ. R. 7(J); Fed. R. Civ. P. 78. Accordingly, this matter is
now fully briefed and ripe for decision. Considering Appellant’s Brief (Dkt. 5), Appellee
Summit Community Bank’s Opposition (Dkt. 6), and Appellant’s Reply (Dkt. 7), it is hereby
ORDERED that the judgment of the Bankruptcy Court as to the issues presented in this appeal is
AFFIRMED in part, REVERSED in part, and REMANDED to modify the judgment consistent
with the instruction below.
I. BACKGROUND
A. Procedural Background
On July 10, 2018, Appellant filed a Chapter Seven bankruptcy petition with the
Bankruptcy Court.
Dkt. 5-13, 157.
Thereafter, Appellee filed the five Claims against
1
Appellant’s bankruptcy estate—Claim Numbers 3-3, 4-3, 5-3, 6-3, and 7-3.
Id. at 17-64.
Appellant objected to each of those Claims. Id. at 81-98. On April 10, 2019, the Bankruptcy
Court converted Appellant’s Chapter Seven bankruptcy action to one under Chapter 11. Id. at
10.
Subsequently, Appellant filed a Motion of Summary Judgment with the Bankruptcy
Court, which Appellee opposed, and the Bankruptcy Court denied. Dkt. Nos. 5-1, 87-120; 5-5,
52-78; 5-12, 110-11. After denying Appellant’s Motion for Summary Judgment, on October 9,
2019, the Bankruptcy Court held an Evidentiary Hearing on Appellant’s Objections to
Appellee’s Claims. Dkt. Nos. 5-12, 163-189; 5-13, 1-154.
B. Factual Background
At the Evidentiary Hearing, it was established that on July 6, 1991, Appellant married
Lisa David (“Ms. David”). Dkt. 5-13, 7. On August 29, 2012, Ms. David took her life following
a conversation that she and Appellant had regarding finances. Id. at 8-11.
From 2004 to 2012, Appellant partially owned Blue Ridge Technical Services,
Incorporated (“BRTS”), which provided “consulting network services.” Id. at 6-7. And from
2005 until her death in 2012, Ms. David also worked for BRTS. Id. at 8. There, she “wrote
[BRTS’s] . . . tax returns,” handled “expense checks[,]” and “help[ed] [ ] review contracts . . .
[and] benefits.” Id. In addition to those responsibilities, Ms. David was involved in three real
estate ventures (the “David Entities”), in which Appellant seemed to have had no involvement.
Id. at 15-17.
Over a period of time, Appellee issued five loans to the David Entities, which formed the
basis of the dispute before the Bankruptcy Court. The chart below sets forth the loans that
2
Appellee issued to the David Entities and to which Appellee filed Claims during the pendency of
the bankruptcy proceedings. Dkt. 5-1, 17-64.
Loan Number
359186
Date of Loan
Agreement
September 15,
2005
358003
June 27, 2005
358367
360540
July 15, 2005
January 5,
2006
362232
April 28, 2006
Entity to which
Loan was Issued
David-Cantrall
and Associates,
Inc.
David-Cantrall
and Associates,
Inc.
DCF I, LLC
David-Cantrall
and Associates,
Inc.
Luck Homes,
LLC
Principle Loan
Amount
$2,160,000.00
Related Claim
Number
Claim 3-3
$300,000.00
Claim 4-3
$660,000.00
$300,000.00
Claim 5-3
Claim 6-3
$199,750.00
Claim 7-3
According to Appellant, he did not know about the loans until after Ms. David died. Dkt.
5-13, 17-18. However, Appellee maintained that Appellant was listed as the guarantor for each
of the loans, as reflected by a series of notary-acknowledged Guarantees and Allonges.1 See e.g.,
id. at 134-35. During the Evidentiary Hearing, Appellant called Victoria Melby (“Ms. Melby”)2
and Kerry Self (“Ms. Self”), who Appellee contended were two of the notaries that
acknowledged the documents supporting its Claims. Id. at 132-34. Ms. Self and Ms. Melby
testified that they did not recall those specific documents or remember seeing Appellant sign
those documents on the particular days in question. In light of Ms. Self’s and Ms. Melby’s
testimony, Appellant maintained that he did not sign the Guarantees and Allonges that supported
1
The Allonges and Guarantees in this case appear to have been an agreement that certain
terms of the loans that are at issue would be modified.
In some instances in the record, Ms. Melby is referred to as “Victoria DeMeza,” as
“DeMeza” was her maiden name. For consistency, throughout this Opinion, this Court will refer
to her as Ms. Melby.
2
3
Appellee’s Claims and contended that Ms. David forged his signature on the Allonges and
Guarantees without his knowledge. Id. at 144.
In further support of his theory, Appellant also called Ellen G. LoCascio (“Ms.
LoCascio”), a retired Central Intelligence Agency (“CIA”) officer and long-time family friend of
Appellant and Ms. David. Dkt. 5-12, 212. Ms. LoCascio testified that she went to Appellant’s
home on August 29, 2012, after she learned that Ms. David had died.
Id. at 213-14. Ms.
LoCascio further explained that after learning that Ms. David had taken her life, she “started
going through [ ] [Ms. David’s] professional and personal things” in an effort to determine why
she had done so. Id. at 214. Upon doing so, she observed “hundreds of documents” that were
“shredded” in Ms. David’s home office. Id. at 215. Many of the documents, Ms. LoCascio
claimed, were “altered and manipulated” and in Ms. LoCascio’s opinion, it appeared that
someone had “cut and paste” certain documents. Id. Among other items, Ms. LoCascio recalled
seeing papers that concerned “six or seven property loans,” and certain BRTS “technical
documents” that had been altered. Id. Appellant argued that LoCascio’s testimony supported a
finding of fraud. Dkt. 5-13, 146.
At the conclusion of the Evidentiary Hearing, the Bankruptcy Court took the matter under
advisement, id. at 150, and on January 27, 2020, issued a Memorandum Opinion and Order
(“Opinion”) concerning Appellant’s Objections to Appellee’s Claims. Id. at 156-170. Therein,
the Bankruptcy Court overruled Appellant’s Objection to Claim Number 4-3 and sustained his
Objections to Claim Numbers 3-3, 5-3, 6-3, and 7-3. Id. at 170.
Appellant moved to alter or amend the Bankruptcy Court’s determinations twice. See id.
at 171-89. After those two motions had been briefed, and the Bankruptcy Court conducted a
hearing on the Second Motion to Amend, the Bankruptcy Court denied the motions and
4
Appellant then appealed the Bankruptcy Court’s determination as to Claim Number 4-3. Dkt. 53, 171-272.
II. STANDARD OF REVIEW
“When reviewing a decision of the Bankruptcy Court, a district court functions as an
appellate court and applies the standards of review generally applied in federal courts of appeal.”
Paramount Home Entm’t Inc. v. Circuit City Stores, Inc., 445 B.R. 521, 526-27 (E.D. Va. 2010)
(citation omitted).
Thus, the district court reviews questions of fact under the “clearly
erroneous” standard. Id. “The clear error standard requires ‘a reviewing court [to] ask whether
on the entire evidence, it is ‘left with the definite and firm conviction that a mistake has been
committed.’” United States v. Span, 789 F.3d 320, 325 (4th Cir. 2015) (quoting Easley v.
Cromartie, 532 U.S. 234, 242 (2001) (third level quotations and citations omitted)). Legal
conclusions are reviewed de novo. In re Harford Sands Inc., 372 F.3d 637, 639 (4th Cir. 2004).
In cases where the issues present mixed questions of law and fact, the Court deploys “a hybrid
standard, applying to the factual portion of each inquiry the same standard applied to questions
of pure fact and examining de novo the legal conclusions derived from those facts.” Gilbane
Bldg. Co. v. Fed. Reserve Bank of Richmond, 80 F.3d 895, 905 (4th Cir. 1996) (citation omitted).
III. ANALYSIS
Appellant raises three issues on appeal. First, Appellant maintains that the Bankruptcy
Court “erred as a matter of law when it held that [ ] [Appellant] failed to satisfy the elements of
the [United States Court of Appeals for the] Fourth Circuit’s spoliation doctrine[.]” Dkt. 5, 9.
Second, Appellant contends that the Bankruptcy Court committed reversable error when it
admitted one of Appellee’s exhibits—specifically, the Guarantee tending to support Claim 4-3—
into evidence during the Evidentiary Hearing. Id. Appellee contends that this ruling ran afoul of
5
Federal Rules of Evidence 1002, 1003, and 901. Id. Third and finally, Appellant urges that the
Bankruptcy Court improperly relied on Appellant’s responses to requests for admissions in a
state court proceeding in violation of Federal Rule of Evidence 36(b) and Virginia Supreme
Court Rule 4:11(b). Id. at 9-10.
The Court will address each of these concerns in turn.
A. The Spoilation Doctrine
Appellant asserts that the Bankruptcy Court erred as a matter of law when it found that
Appellant had not satisfied two of the three spoilation elements set forth by the Fourth Circuit.
Dkt. 5, 10-18. From Appellant’s perspective Appellee’s “intentional and purposeful destruction
of [ ] [an] original guarant[ee] instrument underlying [ ] [one of] [Appellant’s Claims] [ ](if any
original ever existed) constituted sanctionable spoilation of evidence.” Id. at 10.
Appellee opposes this argument in two respects. See Dkt. 6, 21-33. As an initial matter,
Appellee reasons that this Court lacks jurisdiction to consider Appellant’s spoilation argument
because this specific issue was not preserved for appeal. Id. Appellee notes that this matter was
neither raised in Appellant’s Second Motion to Alter or Amend Judgment nor addressed in the
Bankruptcy Court’s June 12, 2020 Order, which is the Order that Appellant has noticed for
appeal. Id. Therefore, Appellee reasons that these deficiencies create a jurisdictional issue and
the spoilation question is not properly before this Court. Id.
Additionally, Appellee explains that even if the spoilation question were properly before
the Court, Appellant’s substantive argument fails because the Bankruptcy Court did not clearly
err in its findings of law and the application of the law to the facts presented at the Evidentiary
Hearing. Id. As such, Appellee concludes that should this Court reach the merits of the
spoilation issue, the Court should still reject Appellant’s argument. Id.
6
1. Whether the Spoliation Issue is Properly Before this Court
This Court will first address Appellee’s jurisdictional concerns. Federal Rule of Civil
Procedure 59(e) allows a party to move to alter or amend a judgment. Fed. R. Civ. 59(e). The
Supreme Court of the United States in Banister v. Davis recently explained that:
[t]he filing of a Rule 59(e) motion within the 28-day period “suspends the finality
of the original judgment” for purposes of an appeal. FCC v. League of Women
Voters of Cal., 468 U.S. 364, 373, n.10 (1984) (internal quotation marks and
alterations omitted). Without such a motion, a litigant must take an appeal no
later than 30 days from the district court’s entry of judgment. See Fed. Rule App.
Proc. (FRAP) 4(a)(1)(A). But if he timely submits a Rule 59(e) motion, there is
no longer a final judgment to appeal from. See Osterneck v. Ernst & Whinney,
489 U.S. 169, 174 (1989). Only the disposition of that motion “restores th[e]
finality” of the original judgment, thus starting the 30-day appeal clock. League
of Women Voters, 468 U.S. at 373, n.10 (internal quotation marks omitted); see
FRAP 4(a)(4)(A)(iv) (A party’s “time to file an appeal runs” from “the entry of
the order disposing of the [Rule 59(e)] motion”). And if an appeal follows, the
ruling on the Rule 59(e) motion merges with the prior determination, so that the
reviewing court takes up only one judgment. See 11 Wright & Miller § 2818, at
246; Foman v. Davis, 371 U.S. 178, 181 (1962). The court thus addresses any
attack on the Rule 59(e) ruling as part of its review of the underlying decision.
140 S. Ct. 1698, 1703 (2020).
Here, on January 27, 2020, the Bankruptcy Court entered an Opinion that addressed the
Appellant’s Objections to Appellee’s Claims. In that Opinion, the Bankruptcy Court considered
Appellant’s spoliation argument. See Dkt. 5-13, 165-66. Two weeks later, Appellant moved to
alter or amend the judgment contained within the Bankruptcy Court’s Opinion, arguing, in part,
that the Bankruptcy Court “erred when [it applied] [ ] the Fourth Circuit’s spoliation doctrine and
[in] finding that the facts presented did not justify that doctrine.” See id. at 173. The Bankruptcy
Court rejected Appellant’s claim. See id. at 218 (“The [Bankruptcy] Court will not expand the
spoliation doctrine to include ‘inherently litigious documents’ in this case.”). After that ruling,
Appellee filed his Second Motion to Alter or Amend Order Denying Motion to Alter or Amend
Judgment (“Second Motion to Amend”), and perhaps realizing that the issue had already been
7
considered and decided, did not advance his spoliation argument an additional time. Id. at 21930. Accordingly, the Bankruptcy Court did not address for a third time the issue of spoliation in
denying Appellant’s Second Motion to Amend. Id. at 244-46.
Appellee stresses that the spoliation issue is not properly before this Court because
Appellant has noticed this appeal as to the Bankruptcy Court’s Order Denying Second Motion to
Amend. Dkt. 6, 21. However, Appellee’s argument on this point fails to appreciate that “the
ruling on [ ] [a] Rule 59(e) motion merges with the prior determination, so that the reviewing
court takes up only one judgment.” Banister, 140 S. Ct. at 1703 (citing 11 Wright & Miller §
2818, at 246; Foman, 371 U.S. at 181).
Therefore, because Appellant has appealed the
Bankruptcy Court’s Order denying his Second Motion to Amend, that ruling merges with the
prior determination under Rules 59(e), and thus this Court may address the Bankruptcy Court’s
decision on the question of spoliation. Banister, 140 S. Ct. at 1703. Accordingly, the spoliation
issue is properly before the Court.
2. Whether the Bankruptcy Court Erred in its Spoliation Determinations
Notwithstanding that this Court has the power to address the arguments regarding
spoliation, this Court finds that Appellant’s substantive spoliation argument is without merit. As
a threshold merits matter, this Court notes that Appellant describes his spoliation challenge as a
question of law. Dkt. 5, 9. And to the extent that Appellant contends that the Bankruptcy Court
applied the wrong standard as to one of the spoliation elements, see id. at 13-14, and that as a
legal matter, all loan guarantees should be preserved essentially into perpetuity, see id. at 12-13,
the spoliation issue does indeed present a legal question. The Court will review the legal issue de
novo.
8
“Spoliation is [defined as] ‘the destruction or material alteration of evidence or the failure to
preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.’”
Goodman v. Praxair Servs., Inc., 632 F. Supp. 2d 494, 505 (D. Md. 2009) (quoting Silvestri v.
Gen. Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001)). That doctrine is a principle of evidence
“and thus is ‘administered at the discretion of the trial court.’” Hodge v. Wal-Mart Stores, Inc.,
360 F.3d 446, 450 (4th Cir. 2004) (quoting Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 155
(4th Cir. 1995)). Accordingly, the Fourth Circuit has determined that “the refusal to apply a
spoliation inference must stand unless it was an abuse of the [ ] [trial] court’s broad discretion[.]”
Hodge, 360 F.3d at 450 (internal quotations and citations omitted). The Court observes that
Appellant, in part, takes issue with the Bankruptcy Court’s application of the spoliation doctrine
to the facts of this particular case. Accordingly, this Court assess whether the Bankruptcy Court
“abuse[d] . . . [its] broad discretion[.]” Id. (internal quotations and citations omitted).
The parties seem to agree that district courts within the Fourth Circuit require that to
prove spoliation, a party must demonstrate that:
“(1) the party having control over the evidence had an obligation to preserve it
when it was destroyed or altered; (2) the destruction or loss was accompanied by a
“culpable state of mind;” and (3) the evidence that was destroyed or altered was
“relevant” to the claims or defenses of the party that sought the discovery of the
spoliated evidence, to the extent that a reasonable factfinder could conclude that
the lost evidence would have supported the claims or defenses of the party that
sought it.”
Dkt. Nos. 6; 7 (both parties citing Goodman, 632 F. Supp. 2d at 509). Appellant challenges the
Bankruptcy Court’s finding as to the first and second elements. Dkt. 5, 12-15.
As for the first element, “[t]he duty to preserve material evidence arises not only during
litigation but also extends to that period before the litigation when a party reasonably should
know that the evidence may be relevant to anticipated litigation.” Silvestri, 271 F.3d at 591
9
(emphasis added). To be sure, “litigants are not required to preserve every shred of paper, every
e-mail or electronic document, and every back up tape.” E.I. du Pont de Nemours & Co. v.
Kolon Indus., Inc., 803 F. Supp. 2d 469, 497 (E.D. Va. July 21, 2011) (internal quotations and
citations omitted). However, when a party anticipates litigation, it is duty bound to “preserve
what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to
lead to the discovery of admissible evidence, is reasonably likely to be requested during
discovery, and/or is the subject of a pending discovery request.” Id. at 496 (internal quotations
and citation omitted).
Here, this Court finds that the Bankruptcy Court did not err in finding that Appellee “had
no duty to preserve the guarantees in perpetuity[,]” Dkt. 5-13, 165. The record reflects that
around the time that the loans in question were issued, Appellee’s policy was to retain the
original versions of notes and deeds of trust, scan and maintain electronic copies of other loan
documents, and shred the other loan documents, including guarantees, so that Appellee did not
have to “keep[ ] all [of] those papers.” Dkt. 5-12, 190. Apparently, this was Appellee’s policy
for all loan documents—not just the Guarantee in question. Id. And while Appellee could not
establish with certainty precisely when the Guarantee in question was destroyed, Appellant’s
typical policy was to scan and shred supplemental loan documents within a month of them
having been signed. Id. at 192.
Appellant suggests that by virtue of the fact that the document in question was a
guarantee, Appellee had an eternal duty to maintain that document as “the inherent nature and
purpose of a guarantee is to enforce the repayment of a debt in a court of law.” Dkt. 5, 12. But
that is not the law, see E.I. du Pont de Nemours & Co., 803 F. Supp. 2d at 497, and this Court
declines to stretch the contours of the spoliation doctrine that broadly to establish what would
10
essentially be a bright-line rule. In this case, where the Guarantee at issue was apparently signed
in 2005, and where this litigation did not even commence until 2018, this Court finds that the
Bankruptcy Court did not err with respect to its finding as to the first spoliation element.
As for the second spoliation element, this Court finds that the Bankruptcy Court erred
with respect to its statement of the law but despite this error. Indeed, as this Court indicated in
E.I. du Pont de Nemours & Co.:
[o]nce a court concludes that a party was obliged to preserve relevant materials
and documents, it must then consider whether the party breached this obligation,
either by failing to preserve, or by destroying or altering, relevant materials or
documents with a culpable state of mind. In the Fourth Circuit, any level of fault,
whether it is bad faith, willfulness, gross negligence, or ordinary negligence,
suffices to support a finding of spoliation.
803 F. Supp. 2d at 497 (emphasis added) (collecting cases).
Yet, the Bankruptcy Court
determined that its “inherent authority may only be exercised to sanction ‘bad-faith conduct’ . . .
.” Dkt. 5-13, 166.
Thus, it seems that the Bankruptcy Court found that bad faith is the only
basis of liability under spoliation doctrine. However, given that the Bankruptcy Court properly
found that Appellant did not satisfy the first spoliation element, the propriety of the Bankruptcy
Court’s finding regarding this second element is of no consequence because all three elements
must be satisfied to prove spoliation. Because Appellant failed to establish that Appellee had a
duty to preserve the document in question, the Bankruptcy Court’s error as to the requisite
mental state does not alter the ultimate outcome on the issue of spoliation.
B. Admission of the Claim 4-3 Guarantee
Next, Appellant contends that “the Bankruptcy Court erred in admitting into evidence the
Claim 4-3 Guarantee in violation of” Federal Rules of Evidence 1002 and 1003 and that the
Bankruptcy Court also erred when it “admitted that instrument into evidence without
authentication as required by” Federal Rule of Evidence 901. Dkt. 5, 18.
11
The Bankruptcy Court’s evidentiary rulings are reviewed under an abuse of discretion
standard. See United States v. Hassan, 742 F.3d 104, 130 (4th Cir. 2014) (citing United States v.
Hornsby, 666 F.3d 296, 307 (4th Cir. 2012)). Under that standard, this Court “‘will only
overturn [a] ruling that is arbitrary and irrational.’” Hassan, 742 F.3d at 130 (quoting United
States v. Cole, 631 F.3d 146, 153 (4th Cir. 2011)).
Article 10 of the Federal Rules of Evidence generally addresses the admission of the
contents of certain writings, recordings, and photographs. Along this vein, Rule 1002 indicates
that “[a]n original writing, recording, or photograph is required in order to prove its content
unless the[ ] rules or a federal statute provides otherwise.” Fed. R. Evid. 1002 (emphasis
added). Thus, Rule 1002, standing alone, could not bar the admissibility of the Claim 4-3
Guarantee if another Federal Rule of Evidence allows for its admission.
Indeed, other
evidentiary rules permit the document to be admitted: “A duplicate is admissible to the same
extent as the original unless a genuine question is raised about the original’s authenticity or the
circumstances make it unfair to admit the duplicate.” Fed. R. Evid. 1003. Also, “[a]n original is
not required and other evidence of the content of a writing, recording, or photograph is
admissible if [ ] all the originals are lost or destroyed, and not by the proponent acting in bad
faith . . .” Fed. R. Evid. 1004.
Here, in light of Federal Rule of Evidence 1004, this Court finds that the Bankruptcy
Court did not err in admitting the Guarantee supporting Claim 4-3. Although it was not the
original Guarantee, the evidence reflected that the original was destroyed and that Appellee did
not destroy that document in bad faith. As set forth above (supra, p. 10-11), the original version
of the Guarantee at issue was destroyed, as a matter of business course, years before litigation
commenced pursuant to Appellee’s policies. Thus, the Bankruptcy Court did not err in finding
12
that Appellee did not act in bad faith. Accordingly, the copy of the Claim 4-3 Guarantee was
admissible under Rule 1004.
Also, the Bankruptcy Court did not err in admitting the Claim 4-3 Guarantee pursuant to
Rule 1003. Indeed, when the case was before the Bankruptcy Court, Appellant objected as to the
authenticity of the Claim 4-3 Guarantee, and expresses on appeal why, from his perspective, the
authenticity of the Claim 4-3 Guarantee is dubious. Appellant maintains that his objections to
the admission of the Claim 4-3 Guarantee created a “genuine question” regarding “the original’s
authenticity” and that because the Bankruptcy Court found some of the documents supporting
Appellee’s Claims to be fabricated, “the circumstances ma[d]e it unfair to admit the duplicate.”
Dkt. 5, 18-29 (citing Fed. R. Evid. 1003). Yet, Appellant’s concerns go to the weight of the
evidence, and not its admissibility. See e.g., Tinley v. Poly-Triplex Techs., Inc., No. 07-CV01136, 2009 WL 812150, at * 7 (D. Colo. Mar. 26, 2009) (“Certainly Defendants may attack the
sufficiency of the copy of . . . [a contract] as well as [a] [p]laintiff’s credibility, but these
questions go to the weight, rather than the admissibility of the evidence.”). Moreover, simply
because the Bankruptcy Court found that the evidence tended to show that some documents were
fabricated while another document was not does not necessarily indicate that the Bankruptcy
Court’s ruling as to the non-fabricated document was “arbitrary and irrational.”
This is
particularly true where the Bankruptcy Court’s ruling was supported by the evidence adduced at
the hearing, as demonstrated below (infra, p. 14, 16-17).
Rule 901 also provides that “[t]o satisfy the requirement of authenticating or identifying
an item of evidence, the proponent must produce evidence sufficient to support a finding that the
item is what the proponent claims it is.” Fed. R. Evid. 901(a). Below, the Bankruptcy Court
explained that in reaching its decision as to the authenticity of the Claim 4-3 Guarantee, it “made
13
factual findings based on the exhibits and the testimony of the experts and the parties in this
case” and based upon that, it determined that Appellant, as a matter of fact, signed the Claim 4-3
Guarantee, despite Appellant’s argument to the contrary. Dkt. 5-13, 261. The Bankruptcy
Court’s findings are supported by the record in that Appellee presented evidence that Appellant
had, on previous occasions, admitted to signing the Claim 4-3 Guarantee. See Dkt. 5-13, 42-44.
For example, on cross examination of Appellant, he was impeached as to whether he had ever
admitted to signing the Claim 4-3 Guarantee. See id. at 41. Appellant initially testified that he
had not. Id. Then, counsel for Appellee presented several documents suggesting Appellant had
previously represented that he had signed the Claim 4-3 Guarantee.
Id. at 41-45.
Notwithstanding this impeachment testimony concerning Appellant’s responses to requests for
admissions, one of the documents that Appellant was confronted with contained his answers to
interrogatories in the Summit Community Bank v. David Cantrell & Assocs., Inc., et al., No.
80949 (Va. Cir. Nov. 1 2013) matter. Dkt. 5-12, 13-19. Appellant testified that he recognized
that case and read several statements contained in that document. Dkt. 5-13, 44. The statements
that he read included that he (1) “had nothing to do with David Cantrell and Associates, Inc. and
[ ] [he] was required to sign a [G]uarantee solely because of [ ] [his] status as spouse[;]” and (2)
“[t]o the best of [ ] [his] knowledge, [ ] [he] had only signed one loan guarantee document . . .
on June 27th, 2005 . . .,” which was the date that the Guarantee in question was signed. Id. at 4445. Accordingly, with respect to this authentication issue, where Appellant essentially claims
that the Guarantee was inauthentic because of his concerns about the legitimacy of the signature
it contained, this Court finds that the Bankruptcy Court’s decision to admit the Claim 4-3
Guarantee was not “arbitrary and irrational.” Instead, there was an adequate basis for the
Bankruptcy Court, in its discretion, to find that the Claim 4-3 Guarantee was authentic.
14
C. Reliance on Reponses to Requests for Admissions
Relatedly, Appellant contends that it was reversible error for the Bankruptcy Court to rely
on Appellant’s Answers to Requests for Admissions in a separate state court proceeding in
violation of both Federal Rule of Civil Procedure 36(b) and Virginia Supreme Court Rule
4:11(b). Dkt. 5, 29. Appellant maintains that this legal issue matters because that admission
should not have been admitted to support the Bankruptcy Court’s basis for determining that
Appellant had previously admitted to signing the Claim 4-3 Guarantee. Id. at 31.
At the outset, the Court notes that this issue ultimately presents an evidentiary question:
whether the Bankruptcy Court erred during the Evidentiary Hearing when it admitted into
evidence Appellant’s admission from another case before the same court. In light of this, it bears
repeating that evidentiary rulings are reviewed for an abuse of discretion. See Hassan, 742 F.3d
at 130 (citing Hornsby, 666 F.3d at 307). Accordingly, this Court “‘will only overturn [a] ruling
that is arbitrary and irrational.’” Hassan, 742 F.3d at 130 (quoting Cole, 631 F.3d at 153).
Federal Rule of Civil Procedure 36 governs requests for admission. Section B of that
Rule provides, in relevant part, that “[a]n admission under [ ] [R]ule [36] is not an admission for
any other purpose and cannot be used against the party in any other proceeding.” Fed. R. Civ.
36(b). The Court finds that the plain language of Federal Rule of Civil Procedure 36(b) does not
suggest an exception to the general rule—even where a party seeks to use the admission for
purposes of impeachment—against admitting a response to an admission into evidence at a
proceeding in a separate case. See id. And this conclusion is consistent with other courts’
findings. See In re Russo-Chestnut, 522 B.R. 148, 162-63 (Bankr. D.S.C. 2014) (finding that
“courts considering Fed. R. Civ. P. 36 . . . have held that a judgment based solely on deemed
admissions cannot be a bar in a later proceeding under the express language of Rule 36, which
15
provides that ‘[a]n admission under this rule is not an admission for any other purpose and
cannot be used against the party in any other proceeding’”) (collecting cases).
Interestingly, Appellee does not squarely address why Rule 36 would permit Appellant’s
admission to be admitted into evidence during the Evidentiary Hearing. See Dkt. 6, 36-40.
Instead, Appellee focuses his argument on why Virginia Supreme Court Rule 4:11(b) would not
preclude Appellant’s admission from being admitted into evidence. Id.
Assuming that the Virginia Supreme Court Rules apply to the Bankruptcy Court
proceedings—and to be sure, neither party argues that those Rules are inapplicable—the Court
observes that Virginia Supreme Court Rule 4:11 provides 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 4:1(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.
Va. Sup. Ct. R. 4:11(a) (emphasis added). Yet, Virginia Supreme Court Rule 4:0(b) indicates
that “[n]o provision of any of the Rules in this Part Four affects the practice of taking evidence at
a trial in any action. . . .” Va. Sup. Ct. R. 4:0(b). Thus, it seems that circumstances such as
those this case presents are excepted from Virginia Supreme Court Rule 4:11(a). The Court
finds Appellee’s argument compelling on this point and finds that although Appellant’s
admission should have been barred under Federal Rule of Civil Procedure 36(b), Virginia
Supreme Court Rule 4:11(a) does not render his admission inadmissible.
Even so, there was an abundance of evidence suggesting that Appellant signed the
Guarantee supporting Claim 4-3. Furthermore, the Bankruptcy Court’s decision as to Claim 4-3
did not rely solely on Appellant’s admission. As set forth above (supra, p. 14), Appellant had
previously responded to multiple interrogatories suggesting that he had signed the Guarantee
16
supporting Claim 4-3. And Appellant’s own expert witness testified that the signature on the
Guarantee supporting Claim 4-3 was “probably [Appellant’s] signature.” Dkt. 5-13, 256.
So while under Federal Rule of Civil Procedure 36(b) it may have been error to admit
Appellant’s state court admission, ultimately, the record supports the Bankruptcy Court’s
“factual findings based on the exhibits and the testimony of the experts and the parties in this
case[.]”
IV. CONCLUSION
Accordingly, for the reasons provided above, the Bankruptcy Court’s judgment as to the
issues raised in this appeal is AFFIRMED in part, REVERSED in part, and REMANDED to
modify the judgment consistent with the instruction above.
It is SO ORDERED.
Alexandria, Virginia
May 4, 2021
17
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?