Opinion
12905-20
03-08-2023
CINDAT MANHATTAN HOTEL PORTFOLIO LLC, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
L. Paige Marvel Judge
Respondent filed First, Second, and Third Requests for Admissions (collectively, Requests for Admissions) on June 30, 2021, November 14, 2022, and December 2, 2022, respectively. Petitioner did not file a written answer or objection to any of the Requests for Admissions within 30 days as required by Rule 90(c), so each matter set forth in the Requests for Admissions was deemed admitted. See Rule 90(c).
All Rule references are to the Tax Court Rules of Practice and Procedure.
Additionally, respondent filed his First Amended Answer on September 21, 2022. Petitioner filed its Reply to First Amended Answer on November 4, 2022. In its Reply to First Amended Answer, petitioner agreed or disagreed with each allegation in respondent's First Amended Answer, except that it stated "[n]o response" in response to three of respondent's allegations. Each of those three allegations was therefore deemed admitted because it was not expressly admitted or denied. See Rule 37(c).
Specifically, petitioner stated "[n]o response" in response to paragraphs 8(h), 8(i), and 8(r) of respondent's First Amended Answer.
On February 6, 2023, petitioner filed a Motion to Withdraw or Modify the Deemed Admitted Admissions Pursuant to Rule 90(f) (Motion). On February 10, 2023,we ordered respondent to file a response to petitioner's Motion by February 28, 2023. On February 27, 2023, respondent filed an Objection to Motion to Withdraw or Modify the Deemed Admitted Admissions Pursuant to Rule 90(f).
In its Motion, petitioner (1) now denies certain of its deemed Rule 90(c) admissions and requests that these deemed admissions be withdrawn, and (2) also requests that its three deemed Rule 37(c) admissions be withdrawn. We address these two types of deemed admissions in turn. We deny petitioner's request pursuant to Rule 90(f) to withdraw its Rule 90(c) deemed admissions without prejudice. We also deny petitioner's request to withdraw its Rule 37(c) deemed admissions without prejudice.
Specifically, petitioner denies (1) paragraph 2 of respondent's First Request for Admissions, (2) paragraphs 9-14, 17-20, and 23-26 of respondent's Second Request for Admissions, and (3) paragraphs 1-6, 9-16, and 18 of respondent's Third Request for Admissions.
I. Petitioner's Request Under Rule 90(f) to Withdraw its Rule 90(c) Deemed Admissions
Rule 90(f) provides in relevant part that "[a]ny matter admitted under this Rule is conclusively established unless the Court on motion permits withdrawal or modification of the admission. Subject to any other orders made in the case by the Court, withdrawal or modification may be permitted when the presentation of the merits of the case will be subserved thereby, and the party who obtained the admission fails to satisfy the Court that the withdrawal or modification will prejudice such party in prosecuting such party's case or defense on the merits." The first precondition to withdrawal of a deemed admission is that presentation of the merits of the case will be subserved thereby, which we have interpreted "as requiring the moving party to indicate in his moving papers facts which tend to refute the substantive deemed admissions. . . . This can be accomplished by indicating facts or proposed evidence contrary to or inconsistent with those set forth in substantive deemed admissions." New v. Commissioner, 92 T.C. 1146, 1149 (1989) (quoting Chapoteau v. Commissioner, T.C. Memo. 1989-37, 56 T.C.M. (CCH) 1145, 1146-47). We have also stated that "the movant must show facts that tend to establish that an admission was erroneous. . . . The bare assertion that admissions will be refuted is insufficient; the movant must demonstrate that a trial would serve the presentation of competing evidence." Om Prakash, M.D., P.C. v. Commissioner, T.C. Memo. 1990-106, 1990 Tax Ct. Memo LEXIS 108, at *15. We may also deny a taxpayer's motion to withdraw deemed admissions when it claims it has insufficient information to admit or deny facts of which it has personal knowledge. Wells v. Commissioner, T.C. Memo. 1996-147, 1996 Tax Ct. Memo LEXIS 160, at *18.
In its Motion, petitioner makes three types of responses in its denials of certain of its deemed admissions under Rule 90(c). First, in response to certain deemed admissions that petitioner or other entities did not make or receive certain payments, petitioner avers that the payments were properly recorded on its books or on the books of other entities. We disagree that these averments are sufficient to refute the deemed admissions. These proceedings concern, in substantial part, whether petitioner entered into a bona fide debtor-creditor relationship. Petitioner's deemed admissions concern whether it or other entities actually made or received certain payments, not whether it or other entities merely made notations in its books of such payments. The difference between actually making or receiving a loan payment and merely notating it in one's books or records is central to whether a debt is actually bona fide. See Delta Plastics Corp v. Commissioner, 54 T.C. 1287, 1292 (1970) ("Bookkeeping and other related records . . . are not sufficient in and of themselves, without further substantiating evidence, to establish that a bona fide debtor-creditor relationship did in fact exist."). Further facts or items of proposed evidence tending to show actual payments are especially warranted in this case before we will consider withdrawing these deemed admissions because petitioner still admits that it did not maintain a bank account, or any account at any financial institution, from 2016 to 2019.
Specifically, we refer to (1) paragraph 2 of respondent's First Request for Admissions, (2) paragraphs 9-14, 17-20, and 26 of respondent's Second Request for Admissions, and (3) paragraph 15 of respondent's Third Request for Admissions.
Second, in response to other deemed admissions concerning the actions of petitioner or related persons, petitioner avers in relevant part that its "newly retained counsel is diligently investigating and analyzing the facts" and that it currently "cannot make a statement as to the truth" of these deemed admissions. This type of averment is insufficient to provide a basis for withdrawing the deemed admissions because it does not show that a trial would serve the presentation of competing evidence. It is also insufficient because petitioner should have personal knowledge of its own actions or those of related persons. See Wells, 1996 Tax Ct. Memo LEXIS 160, at *18. This is especially true at this stage of these proceedings, which petitioner commenced by filing its Petition on November 5, 2020.
Specifically, we refer to (1) paragraphs 23-25 of respondent's Second Request for Admissions and (2) paragraphs 1-6, 10, and 13 of respondent's Third Request for Admissions.
Finally, in response to the remaining deemed admissions, petitioner states that it "will show at trial" that the opposite of the deemed admission is true without offering virtually any facts or proposed evidence to substantiate its statements. This type of averment does not demonstrate the existence of "facts or proposed evidence contrary to or inconsistent with those set forth in substantive deemed admissions." New, 92 T.C. at 149 (quoting Chapoteau, 56 T.C.M. (CCH) at 1147) (emphasis added). In other words, it does not demonstrate that a trial would serve the presentation of competing evidence because it is nothing more than a bare assertion that certain admissions will be refuted at trial. See Om Prakash, M.D., P.C., 1990 Tax Ct. Memo LEXIS 108, at *15. Because we conclude that petitioner has not demonstrated that presentation of the merits would be subserved by withdrawing its deemed admissions under Rule 90(c), we do not address the issue of whether respondent would be prejudiced by withdrawal of the deemed admissions.
Specifically, we refer to paragraphs 9, 11-12, 14, 16, and 18 of respondent's Third Request for Admissions.
Nonetheless, we recognize that petitioner has recently retained new counsel and that facts or proposed evidence to support petitioner's denials of its deemed admissions may emerge at a later date, despite the amount of time that has already passed since petitioner filed its Petition on November 5, 2020. We also recognize that this case is no longer scheduled on a trial calendar and that the prejudice to respondent from permitting withdrawal of petitioner's Rule 90(c) deemed admissions may be lessened under such circumstances. We therefore think that it is appropriate to deny petitioner's Motion with respect to its Rule 90(c) deemed admissions without prejudice so that petitioner may make another showing of whether it is proper to withdraw those deemed admissions at a later date if new facts or items of proposed evidence emerge. We caution petitioner that if it again moves to withdraw its deemed admissions under Rule 90(c), its timeliness in making such a motion before its trial date would likely be a factor in deciding whether respondent is prejudiced by the withdrawal of those deemed admissions.
II. Petitioner's Request to Withdraw its Rule 37(c) Deemed Admissions
Rule 37(c) provides in relevant part that "[w]here a reply is filed, every affirmative allegation set out in the answer and not expressly admitted or denied in the reply shall be deemed to be admitted." There is no Rule expressly providing for the withdrawal of Rule 37(c) deemed admissions. Nonetheless, we have stated that "deemed admissions under Rules 37(c) and 90(c) are similar. . . . [D]eemed admissions under the two Rules serve similar purposes and are obtained by similar procedures. Given those parallels, we believe the standard for withdrawing Rule 37(c) deemed admissions (by allowing an extension of time to file a reply pursuant to Rule 25(c)) should be the same as the standard under Rule 90(f) for withdrawing Rule 90(c) deemed admissions." New, 92 T.C. at 1148-49; see also Marshall v. Commissioner, 85 T.C. 267, 273 (1985).
Here, petitioner filed its Reply to First Amended Answer, but it stated "[n]o response" to three of respondent's allegations instead of expressly admitting or denying the allegations. Those three allegations were therefore deemed admitted under Rule 37(c). Petitioner now seeks to withdraw its deemed admissions under Rule 37(c). Petitioner argues that two of the three deemed admissions, regarding whether petitioner provided certain loan documentation to respondent, are irrelevant. Petitioner also argues that those two deemed admissions are inaccurate because "Petitioner responded to the Respondent's Information and Document Requests . . . and provided documentation when requested". With respect to the other deemed admission, petitioner argues that its "newly retained counsel is diligently investigating and analyzing the facts".
Specifically, we refer to paragraphs 8(h) and 8(i) of respondent's First Amended Answer.
Specifically, we refer to paragraph 8(r) of respondent's First Amended Answer.
Respondent, in addition to disagreeing with petitioner's arguments, argues that New holds only that "when a reply is not filed, the standard for withdrawing deemed admissions under T.C. Rule 37(c) by allowing an extension of time to file a reply under T.C. Rule 25(c) should be the same standard for withdrawing deemed admissions under T.C. Rule 90(c)" (emphasis added). Respondent further argues that petitioner "fails to provide any legal authority establishing that the allegations that petitioner deliberately responded to in the Reply should be withdrawn." We do not necessarily agree with respondent that a Rule 37(c) deemed admission may never be withdrawn when a reply has been filed. New contains general language suggesting that Rules 37(c) and 90(c) and the procedures governing them are similar. In addition, under appropriate circumstances, we have previously permitted a taxpayer to file an amended reply where the taxpayer filed a reply but an allegation was deemed admitted because the taxpayer did not expressly admit or deny the allegation. See Donnora v. Commissioner, T.C. Memo. 1998-187, 1998 Tax Ct. Memo LEXIS 187, at *9-14. Nonetheless, we need not decide whether respondent is correct regarding the limitations of Rule 37(c) because even assuming arguendo that the standards of Rule 90(c) apply to determine whether a Rule 37(c) deemed admission may be withdrawn, petitioner is not currently entitled to the withdrawal of its Rule 37(c) deemed admissions.
Regarding petitioner's averment that it "responded to the Respondent's Information and Document Requests . . . and provided documentation when requested", there is no factual detail or proposed evidence supporting this statement. Therefore, we think that this averment does not show that a trial would serve the presentation of competing evidence. Regarding petitioner's averment that its "newly retained counsel is diligently investigating and analyzing the facts", this statement is also insufficient to show that a trial would serve the presentation of competing evidence for the same reasons as stated in our analysis of petitioner's responses to its Rule 90(c) deemed admissions.
Regarding petitioner's argument that two of the three deemed admissions are irrelevant, we do not think that the instant motion is the proper vehicle for deciding that issue. There are more appropriate methods for attempting to correct, or limit the uses of, a potentially irrelevant Rule 37(c) admission, such as a motion to file an amended reply, see Rule 41(a), or a motion in limine. Petitioner also could have made a motion to strike any of respondent's allegations within 30 days of service of respondent's First Amended Answer on it. See Rule 52. Even if a motion to withdraw deemed admissions were a proper vehicle for deciding this issue, we do not think that the parties have briefed the issue of the admissions' relevance in enough detail to allow us to decide it here. We are therefore not prepared to grant Petitioner's request to withdraw or modify any of the Rule 37(c) deemed admissions on this ground.
Nonetheless, we think it is appropriate to deny petitioner's Motion with respect to its deemed Rule 37(c) deemed admissions without prejudice for the same reasons that we deny petitioner's Motion with respect to its Rule 90(c) deemed admissions without prejudice. We caution petitioner that if it again makes a motion to withdraw its Rule 37(c) deemed admissions, its timeliness in making such a motion before its trial date would likely be a factor in deciding whether respondent is prejudiced by the withdrawal of those deemed admissions. Therefore, it is
ORDERED that petitioner's Motion to Withdraw or Modify the Deemed Admitted Admissions Pursuant to Rule 90(f), filed February 6, 2023, is denied without prejudice.