A federal district court in Santa Ana, California found that a quitclaim deed from a debtor to the debtor’s spouse, named as a defendant in an adversary proceeding, constituted a fraudulent transfer. In re Sui, No. 8:11-bk-20448-CB, findings of fact (C.D. Cal., Sep. 20, 2013). The court’s findings affirmed a report and recommendation by the bankruptcy court. The district court held that the defendant grantee’s failure to respond to the trustee’s discovery requests constituted an admission of the trustee’s allegations, and that the defendant failed to rebut the trustee’s evidence of fraud. It entered a summary judgment order avoiding the transfer and returning the debtor’s interest in the property to the bankruptcy estate.
The debtor filed a petition for Chapter 7 bankruptcy in July 2011. The following November, the court-appointed trustee filed an adversary proceeding against the debtor’s spouse. The debtor and the defendant had previously owned real property in Costa Mesa, California as joint tenants, but the defendant had received full title via a quitclaim deed recorded by the debtor in 2009. The debtor and the defendant were married at the time of the transfer. The trustee alleged that the quitclaim deed was an intentionally fraudulent transfer.
The trustee served the defendant with requests for admissions (RFAs) in August 2012. RFAs are a type of discovery conducted during litigation, in which one party asks another to admit or deny various questions of fact. These can be used to save time later on, such as by asking a party to admit undisputed facts, but they can also put a party on record as admitting or denying issues of fact that are in dispute. If a party does not respond to a set of RFAs within a specified period of time, usually around thirty days from the date of service, the RFAs are deemed “admitted,” and the burden falls on the non-responsive party to “un-deem” the admissions. The defendant in the present case did not respond to the RFAs at all, resulting in the court adopting the trustee’s factual allegations as true. Continue reading