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determining testimony though affidavit was insufficient to make out a prima facie case
Summary of this case from In re HartOpinion
NOT FOR PUBLICATION
Argued and Submitted at Pasadena, California: July 26, 2007
Appeal from the United States Bankruptcy Court for the Central District of California. Bk. No. LA 03-31102-TD, Adv. No. LA 04-02040-TD. Honorable Thomas B. Donovan, Bankruptcy Judge, Presiding.
Before: Dunn, McManus[ and Montali, Bankruptcy Judges.
Hon. Michael S. McManus, Chief Bankruptcy Judge for the Eastern District of California, sitting by designation.
MEMORANDUM
I. INTRODUCTION
Chapter 13 debtor Duc Doan (" Doan") appeals the bankruptcy court's judgment in favor of the appellee, Tu My Tong (" Tong"), dismissing Doan's claims against Tong in an adversary proceeding. We AFFIRM.
Because Doan has filed very limited excerpts from the record before the bankruptcy court, much of the summary of facts herein reflects the factual background recounted in the bankruptcy court's memorandum decision, setting forth its findings of fact and conclusions of law, entered in conjunction with its Judgment in Tong's favor. See Memorandum of Decision Regarding Tong Motion for Judgment (" Memorandum Decision") at 1-11.
At one time, Doan owned certain real property (the " Property") in Los Angeles, California, where he lived. Doan and Tong met, dated and apparently reached an agreement to live together as husband and wife, but to remain unmarried. Later on, Tong expressed " concern that she would not get anything from the relationship since they were not going to get married." Memorandum Decision at 3.
Doan alleged that " in reliance on [Tong's] promise of a relationship together [Doan in February 2003] signed a quitclaim deed to . . . Tong of a 1/3 interest in the Property" and loaned Tong money, but no money was paid by Tong to Doan for the Property interest. Memorandum Decision at 3. In March 2003, Doan " transferred another 1/3 interest [in the Property] to Tong. Again, no money changed hands and the [deed] reflects a transfer tax of zero, consistent . . . with no money paid." Memorandum Decision at 3.
On or about May 1, 2003, Tong ostensibly " arranged for a loan of $6,000 . . . supposedly for repairs to the [Property]. [Doan] signed a paper for that, but never saw the money. At that time [Tong] represented to [Doan] that she had good credit and they could get the [Property] refinanced through her credit. To that end [Doan] signed a quitclaim for [his remaining interest in the Property to Tong], and . . . the document reflects a transfer tax of zero, consistent . . . with no money paid." Memorandum Decision at 3.
Instead of refinancing the Property, Tong acted thereafter as if she owned the Property and apparently made a deal to sell the Property to an unrelated third party. Doan alleged that he never was paid anything for the Property and ultimately was evicted from it. Doan further alleged that " the promised relationship [between Doan and Tong] never . . . happened . . . [Tong] never lived with [Doan], never provided any sort of refinance assistance, and never made mortgage payments on the Property, nor advanced any money for repairs. . . ." Memorandum Decision at 4. Doan claimed that " Tong took possession of the [Property] and rented out units . . . and has never accounted [to Doan] for the rents received." Memorandum Decision at 4.
Deeds transferring interests in the Property from Doan to Tong were recorded. A proof of claim filed by U.S. Credit Bancorp, Inc. [a party to the adversary proceeding between Doan and Tong] indicated that no mortgage payments were made with respect to the Property during the period from August 2003 through April 2006.
Faced with foreclosure of the Property, Doan filed for bankruptcy protection, initially under chapter 11. Doan's bankruptcy case later was converted to chapter 13. Doan's chapter 13 plan, confirmed by the bankruptcy court, provided that he would file an adversary proceeding against Tong and other parties to recover the Property. Doan and the chapter 13 trustee agreed to a stipulated order, entered by the bankruptcy court, including the following provisions:
The debtor [Doan] shall pursue a Bankruptcy Adversary against [Tong], Michael Rone and U.S. Credit Bancorp and other necessary parties for the recovery of [the Property] not presently in the debtor's name. . . . The debtor shall have in addition to his own rights of recovery, all rights that could be asserted by the Chapter 13 Trustee, and may act in place and instead of the Trustee. The debtor will be solely responsible for fees and costs of suit. This asset secured by U.S. Credit Bancorp is not currently an asset of the debtor's Chapter 13 case.
Stipulation and Order Amending Order Confirming Plan Nunc Pro Tunc (" Stipulated Order"), entered May 4, 2006, at 1-2.
Doan subsequently filed an adversary proceeding (the " Adversary Proceeding") against Tong and various other parties. Following a status conference in the Adversary Proceeding on May 24, 2006, the bankruptcy court entered an order (" Status Conference Order"), separating out issues for trial, with the issues between Doan and Tong only to be tried during the week of October 23, 2006. The Status Conference Order further provided that " [b]oth sides will present direct evidence by written declarations." Status Conference Order, entered June 23, 2006, at 2. The bankruptcy court also entered a more detailed Trial Setting Order (the " Trial Setting Order"), describing procedures to be followed for the presentation of evidence to be offered at trial. Trial Setting Order at 1-4.
Later, at Doan's request, the bankruptcy court entered an Amended Trial Setting Order " to allow Doan one extra day, as he requested, to file his declarations and other papers in support of his case in chief." Memorandum Decision at 1. Other than changing the deadlines for the parties' submissions, the Amended Trial Setting Order did not alter the procedures for presenting evidence to be offered at trial.
There is no evidence in the record that Doan ever objected to the procedures for presenting direct evidence at trial in the Status Conference Order, the Trial Setting Order or the Amended Trial Setting Order.
On October 16, 2006, Tong filed a Motion for Judgment on Partial Findings (the " Motion") and supporting memorandum, based on Doan's alleged failure to meet his burden of proof to prevail on any of the causes of action he asserted against Tong in the Adversary Proceeding. Doan filed a memorandum opposing the Motion.
After taking the matter under submission, the bankruptcy court granted the Motion and entered a Judgment in favor of Tong, dismissing all of Doan's claims against Tong alleged in the Adversary Proceeding. The bankruptcy court supported the Judgment with findings of fact and conclusions of law, as stated in the Memorandum Decision. This timely appeal followed.
III. JURISDICTION
The bankruptcy court had jurisdiction with respect to the Adversary Proceeding pursuant to 28 U.S.C. § § 1334 and 157(b)(2)(E), (F) and (H). We have jurisdiction pursuant to 28 U.S.C. § 158.
" Core" jurisdiction pursuant to 28 U.S.C. § 157(b)(2)(F) relates to " proceedings to determine, avoid, or recover preferences." The bankruptcy court noted: " While the Doan complaint cites § 547 [the preference section], no cause of action, trial evidence, or opposition argument by Doan to Tong's [Motion] appears to be addressed to that Bankruptcy Code section. I will treat the issue as one that may have been pleaded summarily by Doan in his complaint but thereafter abandoned." Memorandum Decision at 5.
IV. ISSUES
Whether the bankruptcy court abused its discretion in requiring that direct testimony in the parties' Adversary Proceeding be submitted by declaration, where the bankruptcy court's trial setting orders allowed the parties to submit a summary of the direct testimony of an adverse witness through their counsel's declaration, incorporating a detailed summary of such witness' expected testimony.
Whether the bankruptcy court abused its discretion in declining to consider the transcript of the deposition of Tong that had been lodged by Doan, but had not been marked or offered in evidence consistent with the requirements of the bankruptcy court's trial setting orders.
Whether the bankruptcy court erred in concluding that Doan did not have standing to seek relief based on his own fraudulent conduct, despite the terms of the Stipulated Order that allowed Doan to assert all rights of the chapter 13 trustee.
V. STANDARDS OF REVIEW
A trial court's evidentiary rulings are reviewed for abuse of discretion. City of Long Beach v. Standard Oil Co., 46 F.3d 929, 936 (9th Cir. 1995). A bankruptcy court necessarily abuses its discretion if it bases its decision on an erroneous view of the law or clearly erroneous factual findings. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990). We may reverse for abuse of discretion only when we have a definite and firm conviction that the bankruptcy court committed a clear error of judgment in the conclusion it reached. S.E.C. v. Coldicutt, 258 F.3d 939, 941 (9th Cir. 2001); and AT& T Universal Card Servs. v. Black (In re Black), 222 B.R. 896, 899 (9th Cir. BAP 1998). To reverse an evidentiary ruling, we must conclude both that there was an abuse of discretion and that the error was prejudicial. Latman v. Burdette, 366 F.3d 774, 786 (9th Cir. 2004). Due process issues are reviewed de novo. Molski v. Gleich, 318 F.3d 937, 951 (9th Cir. 2003).
We review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. Hughes v. Lawson (In re Lawson), 122 F.3d 1237, 1240 (9th Cir. 1997). Findings of fact shall not be set aside unless clearly erroneous. Fed.R.Bankr.P. 8013. " A finding is 'clearly erroneous' when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948).
On appeal, we may affirm a summary adjudication on any ground supported by the record. Newton v. Diamond, 388 F.3d 1189, 1192 (9th Cir. 2004).
VI. DISCUSSION
I. The bankruptcy court did not abuse its discretion by allowing parties to submit a summary of the direct testimony of adverse witnesses by summary declaration.
Doan argues that the bankruptcy court violated his due process rights in not providing a trial procedure allowing him to call Tong as an adverse witness in his case in chief. He asserts that if only he had been allowed to examine Tong orally as part of his case in chief, he would have been able to present a " further body of evidence [that] would then have supported his case and permitted a far better defense to the [M]otion." Appellant's Opening Brief at 9.
Nothing in the record before us indicates that Doan raised any due process issues before the bankruptcy court. However, we discuss the due process argument raised by Doan in order to set forth as complete an analysis of the issues presented by this appeal as possible.
The bankruptcy court's trial procedures were set forth initially in the Trial Setting Order, which was served both on Doan and his counsel. The Amended Trial Setting Order was entered by the bankruptcy court at the request of Doan and likewise was served both on Doan and his counsel. Both the Trial Setting Order and the Amended Trial Setting Order provided that,
1. DECLARATIONS
(a) Except as herein provided, each party shall present the testimony of all witnesses through declarations of said witnesses, under penalty of perjury.
(b) The only oral testimony that may be offered at trial by a party through its witnesses will be rebuttal testimony.
...
(d) If a party is unable to obtain a declaration of a witness, counsel for that party shall file a declaration stating the name of the witness, a detailed summary of the expected testimony and why counsel was unable to obtain the witness' declaration. Unless otherwise permitted by the Federal Rules of Evidence, a witness may be examined at trial only as to those matters set forth in the detailed summary.
(e) If a party intends to present a witness' testimony by a transcript of a deposition of the witness, only those portions of the transcript intended to be offered should be attached to a declaration of counsel, and the testimony of the witness to be offered shall be clearly marked. . . .
Doan never raised any objection before the bankruptcy court regarding the procedures for the presentation of direct evidence by declaration in the Trial Setting Order or the Amended Trial Setting Order. Doan apparently did not submit a declaration of Tong, and he did not avail himself of the procedure set forth in section 1(d) of the Amended Trial Setting Order, allowing him to submit a detailed summary of what he expected Tong's testimony to be through a declaration of his counsel. Doan is not in a strong position to argue that the bankruptcy court abused its discretion in denying him an opportunity to call Tong as a witness, when he could have presented what he expected (and/or hoped) would be Tong's testimony through a declaration of his counsel and failed to do so.
Doan did lodge a transcript of Tong's deposition with the bankruptcy court, but he did not mark and offer in evidence relevant excerpts from Tong's deposition through a declaration of his counsel, as required in section 1(e) of the Amended Trial Setting Order. Tong timely objected to consideration of the transcript of Tong's deposition as part of Doan's case in chief, based on Doan's failure to comply with the requirements of the bankruptcy court's trial setting orders and Local Bankruptcy Rule 7027-1(a)(2) with respect to the introduction of deposition testimony. The bankruptcy court sustained Tong's objections and struck all references to the transcript of Tong's deposition in considering the Motion. Appt's ER at 67, Memorandum Decision at 2. The bankruptcy court did not abuse its discretion in enforcing the requirements of its own Amended Trial Setting Order. See Lee-Benner v. Gergely (In re Gergely), 110 F.3d 1448, 1452 (9th Cir. 1997).
Local Bankruptcy Rule 7027-1(a)(2) provides:
Doan's argument perhaps might present a more difficult issue if we were writing on a clean slate. In fact, the Panel in Danning v. Burg (In re Burg), 103 B.R. 222 (9th Cir. BAP 1989), considered whether the bankruptcy court's " trial by affidavit" procedure violated due process and held that it did.
[B]asic notions of procedural due process compel this Panel to conclude that essential rights of the parties may be jeopardized by a procedure where oral presentation of evidence is not allowed, where the bankruptcy court's ability to gage the credibility of a witness or evidence is questionable and where rulings on objections to the admissibility of all direct evidence, may be unclear.
Id . at 225.
Doan's problem is that the Ninth Circuit expressly rejected the Burg due process conclusion in Adair v. Sunwest Bank (In re Adair), 965 F.2d 777, 780 (9th Cir. 1992)(" We disagree with the Burg panel that the bankruptcy court's procedure raises significant due process concerns."), a holding that subsequently has neither been reversed nor distinguished.
Rule 43(a) of the Federal Rules of Civil Procedure, applicable in bankruptcy cases pursuant to Fed.R.Bankr.P. 9017, provides that,
In every trial, the testimony of witnesses shall be taken in open court, unless a federal law, these rules, the Federal Rules of Evidence, or other rules adopted by the Supreme Court provide otherwise. . . . (emphasis added).
Rule 611(a) of the Federal Rules of Evidence provides that,
Control by court.--The court shall exercise reasonable control over the mode and order of interrogating witnesses and presenting evidence so as to (1) make the interrogation and presentation effective for the ascertainment of the truth, (2) avoid needless consumption of time, and (3) protect witnesses from harassment or undue embarrassment.
Local Rule 43-1 of the United States District Court for the Central District of California, provides:
L.R. 43-1 Non-Jury Trial--Narrative Statements. In any matter tried to the Court, the judge may order that the direct testimony of a witness be presented by written narrative statement subject to the witness' cross-examination at the trial.
There is no analogous rule in the Local Bankruptcy Rules for the United States Bankruptcy Court for the Central District of California, but Local Bankruptcy Rule 1001-1(e)(1) provides that matters not specifically covered by the Local Bankruptcy Rules may be determined, by " parallel or analogy to the F.R. Civ. P., the F.R.B.P., or the District Court Rules."
In Adair, the Ninth Circuit held that the Central District procedure for requiring the presentation of direct evidence by declaration for bench trials was consistent with the requirements of Fed.R.Evid. 611(a) and was a " permissible 'mode' of presenting direct testimony under Rule 611(a)." Adair, 965 F.2d at 779. The Ninth Circuit further determined that,
The bankruptcy court's procedure permits oral cross-examination in open court and thereby preserves an opportunity for the judge to evaluate the declarant's demeanor and credibility. The procedure is essential to the efficient functioning of the crowded bankruptcy courts. See In re Heckenkamp, 110 B.R. 1, 4 (Bankr. C.D. Cal. 1989).
Id . See Gergely, 110 F.3d at 1452:
The pretrial order required written declarations in lieu of direct oral evidence. It was a valid order. In re Adair, 965 F.2d 777, 779 (9th Cir. 1992). Lee-Benner did not follow that procedure. The bankruptcy court did not abuse its discretion in adhering to the requirements of its pretrial order.
See also Ankeny v. Meyer (In re Ankeny), 184 B.R. 64, 69 (9th Cir. BAP 1995) (" Declaration evidence may be used in lieu of direct testimony.").
In light of the foregoing review of relevant provisions of the Federal Rules of Civil Procedure and the Federal Rules of Evidence, and case law authority in the Ninth Circuit, and considering the factual record before us in this appeal, we conclude that the bankruptcy court did not violate Doan's due process rights and did not abuse its discretion in requiring the submission of the parties' direct witness testimony by declaration, with the exception that, in the event a party was unable to obtain the declaration of an adverse or uncooperative witness, such party could submit a detailed summary of the expected testimony of such witness attached to the declaration of counsel. No abuse of discretion can be imputed to the bankruptcy court where Doan did not avail himself of the opportunity to present such a summary of Tong's expected testimony through counsel's declaration. Finally, the bankruptcy court did not abuse its discretion in declining to consider the deposition transcript of Tong where Doan did not offer the transcript as evidence or mark it, as required by the terms of the Amended Trial Setting Order.
II. There is no basis in the record to determine whether the bankruptcy court committed a material error in concluding that Doan had no standing to seek relief based on his own fraudulent conduct in spite of the Stipulated Order.
Doan asserts that the bankruptcy court erred in concluding that he had no standing to assert claims, arguably arising from his own fraudulent conduct, in the place and stead of the chapter 13 trustee in light of the terms of the Stipulated Order.
In the Memorandum Decision, the bankruptcy court stated,
It is ironic that Doan's claims in several respects seek relief based on statutory law that requires a plaintiff to prove that a bankruptcy debtor such as Doan acted fraudulently toward his or her creditors. I conclude that Doan, who appears here as a chapter 13 bankruptcy debtor, does not have standing to seek relief based on what the statutes refer to as Doan's own fraudulent conduct even though Doan's chapter 13 trustee has stipulated that Doan " shall have in addition to his own rights of recovery, all rights that could be asserted by the Chapter 13 Trustee, and may act in place and instead of the Trustee." . . . No one should be allowed to seek relief against another based on his own allegedly fraudulent conduct.
Memorandum Decision at 7. Doan's standing is not mentioned further in the bankruptcy court's Memorandum Decision.
However, the statements regarding Doan's standing came after the bankruptcy court already had found that Doan had not submitted adequate direct evidence to support a prima facie case as to any of the causes of action he had asserted against Tong in the Adversary Proceeding.
My decision to grant Tong's Motion for Judgment is based on my conclusion that Doan's proffered, admissible evidence, together with Doan's bankruptcy schedules, amended schedules, and statement of financial affairs, of which I take judicial notice, are insufficient to establish a prima facie basis to support any of the foregoing theories of liability asserted by Doan or which might be asserted by Doan based on his admissible evidence offered for trial.
Memorandum Decision at 6. In other words, when Doan submitted his declarations for his case in chief for the trial, the admissible evidence contained therein did not make a prima facie case as to any of his claims against Tong, and the bankruptcy court stated that it was granting the Motion on that basis. In fact, the Memorandum Decision concludes with the following statements: " Tong's Motion for Judgment is granted. Doan's admissible evidence fails to establish any viable basis for relief against Tong."
As noted above, in an appeal from a summary adjudication, we may affirm on any ground supported by the record. Newton v. Diamond, 388 F.3d at 1192. The bankruptcy court found that Doan's evidence did not make a case against Tong on any of his claims. It is Doan's burden as appellant to demonstrate the existence of error in the bankruptcy court's rulings that would justify a reversal. See, e.g., Kyle v. Dye (In re Kyle), 317 B.R. 390, 393 (9th Cir. BAP 2004):
The settled rule on appellate records in general is that failure to provide a sufficient record to support informed review of trial-court determinations may, but need not, lead either to dismissal of the appeal or to affirmance for inability to demonstrate error. (citations omitted);
Gionis v. Wayne (In re Gionis), 170 B.R. 675, 680-81 (9th Cir. BAP 1994).
In his Excerpt of Record, Doan has not provided us with his schedules, his amended schedules, his statement of financial affairs, the complaint or amended complaint filed in the Adversary Proceeding, or perhaps most critical, any of the declarations or other submissions of direct evidence that Doan filed pursuant to the Amended Trial Setting Order. He has not submitted a copy of the transcript of Tong's deposition. He further has not included any transcripts from any of the hearings relating to pretrial proceedings culminating in the Memorandum Decision and judgment in favor of Tong. We are entitled to presume from Doan's decision not to include any of these documents in his Excerpts of Record that he does not believe that they would be helpful to his efforts to demonstrate error. Id . at 681.
In any event, the record before us is inadequate to demonstrate that the bankruptcy court erred as a matter of law in finding that Doan's direct evidence did not establish a prima facie case as to any of his causes of action against Tong. The limited record further does not suffice to give us the " definite and firm conviction" that the bankruptcy court erred in its fact findings supporting its decision to grant the Motion. In these circumstances, if the bankruptcy court's " conclusion" that Doan had no standing to pursue claims based on his own fraudulent conduct, even armed with the powers of the chapter 13 trustee, is anything more than dictum, we conclude that error, if any resulting therefrom, is harmless in light of the bankruptcy court's overriding determination that Doan did not present direct evidence sufficient to make his case.
Doan was entitled to rely on the terms of the Stipulated Order to exercise the powers of the chapter 13 trustee through the Adversary Proceeding so long as the Stipulated Order was not vacated or superseded by a later order of the bankruptcy court.
VII. CONCLUSION
We conclude that the bankruptcy court did not abuse its discretion either (1) in requiring the parties to submit their direct evidence in the Adversary Proceeding, including summaries of the expected testimony of adverse witnesses, by declaration or (2) in declining to consider the transcript of Tong's deposition in deciding the Motion, where Doan did not comply with the Amended Trial Setting Order in lodging the deposition transcript. We further conclude that the bankruptcy court did not err in granting the Motion and entering the Judgment in favor of Tong in the Adversary Proceeding. We AFFIRM.
" Use of Deposition Evidence in Contested Hearing or Trial. Each party intending to offer any evidence by way of deposition testimony pursuant to F.R. Civ. P. Rule 32 and F.R. Evid. Rules 803 and 804 shall: (A) Lodge the original deposition transcript and a copy pursuant to this Rule with the Clerk at least 10 days before the hearing or trial at which it is to be offered. (B) Identify on the copy of the transcript the testimony the party intends to offer by bracketing in the margins the questions and answers that the party intends to offer at trial. The opposing party shall likewise countermark any testimony that it plans to offer. The parties shall agree between themselves on a separate color to be used by each party which shall be consistently used by that party for all depositions marked in the case. (C) Mark objections to the proffered evidence by the other party in the margins of the deposition by briefly stating the ground for the objection. (D) Serve and file notice of the portions of the deposition marked or countermarked by stating the pages and lines so marked, objections made and the grounds indicated therefor. Such notice shall be provided within five days after the party has marked and countermarked or objects to the deposition evidence. In appropriate cases and when ordered by the Court, the parties shall jointly prepare a deposition summary to be used in lieu of question and answer reading of a deposition at trial."