                                                            FILED
                                                             AUG 19 2013
                                                         SUSAN M SPRAUL, CLERK
 1                                                         U.S. BKCY. APP. PANEL
                                                           OF THE NINTH CIRCUIT
 2
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )         BAP No.    CC-13-1015-KiPaD
                                   )
 6   ROBERT B. MANNING and         )         Bk. No.    6:12-12466
     JANA D. MANNING,              )
 7                                 )         Adv. No.   6:12-1149
                    Debtors.       )
 8                                 )
                                   )
 9   LBS FINANCIAL CREDIT UNION,   )
                                   )
10                  Appellant,     )
                                   )         M E M O R A N D U M1
11   v.                            )
                                   )
12   ROBERT B. MANNING;            )
     JANA D. MANNING,              )
13                                 )
                    Appellees.     )
14   ______________________________)
15                  Argued and Submitted on June 20, 2013,
                            at Pasadena, California
16
                            Filed - August 19, 2013
17
                Appeal from the United States Bankruptcy Court
18                  for the Central District of California
19        Honorable Scott C. Clarkson, Bankruptcy Judge, Presiding
20
     Appearances:    Karel Rocha, Esq. of Prenovost, Normandin, Bergh &
21                   Dawe, APC argued for appellant, LBS Financial
                     Credit Union; Appellees Robert and Jana Manning did
22                   not appear.
23
     Before:   KIRSCHER, PAPPAS and DUNN, Bankruptcy Judges.
24
25
26
          1
            This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may have
     (see Fed. R. App. P. 32.1), it has no precedential value. See 9th
28   Cir. BAP Rule 8013-1.

                                       -1-
 1        Appellant, LBS Financial Credit Union ("LBS"), appeals a
 2   judgment after trial determining that the debt of Robert B.
 3   Manning and Jana D. Manning ("Mannings") to LBS was not excepted
 4   from discharge under 11 U.S.C. § 523(a)(6).2   LBS also appeals the
 5   bankruptcy court's orders vacating the entry of default against
 6   the Mannings and denying its motion in limine.   We VACATE the
 7   bankruptcy court’s judgment.   We also VACATE the order setting
 8   aside the default and REMAND with instructions that LBS be given
 9   an opportunity to be heard on the matter.   We further VACATE the
10   order denying the motion in limine and REMAND with instructions
11   that the bankruptcy court consider the conclusive effect of the
12   Mannings’ failure to respond to LBS’s requests for admission in
13   deciding whether LBS met its burden on the issue of willfulness.
14              I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
15   A.   Prepetition events
16        On December 21, 2007, Mannings executed a Note, Consumer
17   Credit Disclosure Statement and Security Agreement ("Contract") in
18   favor of LBS, a California credit union, for the purchase of a
19   2007 GMC Yukon Denali, VIN #1GKFK63857J369308 ("Vehicle"), in the
20   amount of $49,502.15.   Under the Contract, Mannings agreed to pay
21   for the Vehicle by making monthly payments for a period of
22   seventy-two months.   Mannings were required to obtain written
23   consent from LBS if they intended to leave California with the
24   Vehicle for more than thirty days.    They further agreed to not
25   sell or lease the Vehicle until the loan had been paid in full.
26
          2
            Unless specified otherwise, all chapter, code and rule
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The
28   Federal Rules of Civil Procedure are referred to as “Civil Rules.”

                                     -2-
 1   If Mannings defaulted, LBS could accelerate and demand payment of
 2   the unpaid balance (including collection costs and attorney's
 3   fees) or repossess the Vehicle.    At some point thereafter,
 4   Mannings moved to Texas without informing LBS.
 5        In August 2010, Mannings defaulted on the Contract by failing
 6   to make the monthly payments.    LBS's demands for further payment
 7   or return of the Vehicle were unsuccessful.
 8        On January 13, 2011, LBS filed a complaint in the California
 9   state court against Mannings, alleging claims for breach of
10   contract and civil conversion.    LBS sought return of the Vehicle
11   and the balance owing under the Contract of $34,223.11, plus
12   accruing late charges, interest and contractual attorney's fees
13   and costs.   Mannings failed to respond to the complaint.   On
14   May 26, 2011, the state court entered a default judgment against
15   Mannings in the amount of $38,008.66 (including $2,472.13 in
16   attorney's fees) plus interest and ordered that they return the
17   Vehicle to LBS.
18   B.   Postpetition events
19        Mannings, having moved back to California from Texas, filed a
20   chapter 7 bankruptcy case on January 31, 2012.   On April 26, 2012,
21   LBS filed a complaint against Mannings seeking to except its debt
22   from discharge under §§ 523(a)(4) and (a)(6).3   To support its
23   claim under § 523(a)(6), LBS alleged that after Mannings had
24   defaulted on the Contract, they, with willful and malicious intent
25   to injure LBS and its personal property, intentionally absconded
26
27        3
            LBS ultimately dropped its claim under § 523(a)(4) after
     the bankruptcy court informed LBS that its claim for embezzlement
28   lacked merit. LBS does not appeal this issue.

                                       -3-
 1   with the Vehicle and/or otherwise disposed of it to the detriment
 2   of LBS.   LBS further alleged that Mannings knew or should have
 3   known that their failure to pay LBS the amount due and owing on
 4   the Contract or to return the Vehicle to LBS was substantially
 5   certain to cause injury to LBS.    As a result of Mannings' willful
 6   and malicious conduct, LBS alleged that it suffered
 7   nondischargeable damages of not less than $38,008.06.
 8        Mannings were served with the summons and the adversary
 9   complaint on May 1, 2012.   An answer or other responsive pleading
10   was to be filed by May 29, 2012.    As with the state court
11   complaint, Mannings failed to respond to the adversary complaint.
12   On June 22, 2012, LBS requested the entry of a clerk's default,
13   which was entered on July 2, 2012.
14        After the entry of Mannings' default, the bankruptcy court
15   held a status conference on July 18, 2012.   LBS did not appear,
16   but Mannings did.   We do not have a transcript from the hearing,
17   but the court's tentative ruling for that date states:
18        The Court noted that Default was entered on 7/02/12
          [Dk. 9]. This matter is continued to October 17, 2012
19        at 1:30 p.m. Plaintiff is to file a motion for default
          judgment by no later than August 3, 2012. Appearances
20        excused.
21        On July 25, 2012, the bankruptcy court entered an order
22   vacating the entry of Mannings' default and giving them until
23   July 24, 2012, to file a response to the adversary complaint.      A
24   continued status conference was scheduled for September 5, 2012.
25        Pursuant to the order vacating the entry of default,
26   Mr. Manning, pro se, timely filed a two-page narrative response to
27   the adversary complaint on July 23, 2012.    Mrs. Manning's name
28   does not appear on the response and she did not sign it.

                                       -4-
 1   According to Mr. Manning, he and his wife had moved to Texas to
 2   find employment after losing his job of 32 years with an annual
 3   salary of $140,000 and their home in California.   Meanwhile,
 4   Mannings were unable to make the Vehicle payments, so they entered
 5   into an agreement with a Texas couple named "Tina and Chris" to
 6   take over the payments on the condition that the couple obtain
 7   financing or qualify for a loan with LBS.   LBS ultimately declined
 8   a loan for Tina and Chris, and the couple allegedly made no other
 9   attempts to obtain financing or did not make any further payments
10   to Mannings.   When Mannings asked the couple to return the
11   Vehicle, they became hostile and told Mannings that they would
12   hide the Vehicle where Mannings would be unable to find it.     Mr.
13   Manning claimed that authorities in both Texas and California were
14   contacted about the "stolen" Vehicle.   He further alleged that LBS
15   knew Tina and Chris had the Vehicle somewhere in Terrell, Texas,
16   yet LBS had made no attempts to recover it.    Mr. Manning asserted
17   that even though he was listed as the Vehicle's registered owner,
18   he felt no responsibility for recovering the Vehicle for LBS.
19        On September 5, 2012, LBS filed a motion for reconsideration
20   of the order vacating the Mannings' default.   Specifically, LBS,
21   which did not appear on July 18 due to the court's indication in
22   the tentative ruling excusing appearances, contended that it was
23   prejudiced by the order because it was not given an opportunity to
24   brief or be heard on the issue of Mannings' request to vacate the
25   default, which they had apparently made orally at the July 18
26   status conference.   LBS argued that Mannings should have been
27   required to set forth in writing the "good cause" they had shown
28   for vacating the default so that LBS could respond.   LBS argued it

                                     -5-
 1   was further prejudiced because it had incurred costs in preparing
 2   the request for default and the court-ordered motion for default
 3   judgment, which was due August 3.      Mannings did not oppose the
 4   motion to reconsider.
 5        At the continued status conference on September 5, 2012, LBS
 6   informed the bankruptcy court that it had just filed a motion to
 7   reconsider the order vacating Mannings' default, which was set for
 8   oral argument on October 3, 2012.      In response, the bankruptcy
 9   court asked counsel for LBS to proceed with argument on the
10   motion.   She complied.   After the bankruptcy court grilled counsel
11   about hearing cases on the merits, warning her that LBS would
12   never receive attorney's fees on a § 523(a)(6) conversion matter,
13   and articulating its inclination to deny the motion to reconsider,
14   the court told counsel that it would hear the motion as scheduled
15   on October 3, 2012, and that it would sanction her if she failed
16   to appear.
17        The bankruptcy court then asked counsel when LBS desired
18   trial.    Counsel stated that a trial in February 2013 would provide
19   sufficient time for LBS to do discovery.     Concerned about the
20   usefulness of written discovery or deposition of the Mannings, the
21   court suggested that counsel could inquire as to the whereabouts
22   of the Vehicle at trial.   Counsel responded that LBS was entitled
23   to conduct pretrial discovery.   The court disagreed, asking
24   counsel under which rules LBS was entitled to do so.     After
25   further discussion, the court agreed to allow LBS to conduct
26   discovery until November 30, 2012.     Trial was scheduled for
27   December 2012.   In its discussion about discovery, the bankruptcy
28   court stressed to Mannings the importance of cooperating with

                                      -6-
 1   LBS's discovery efforts, particularly the importance of complying
 2   with LBS's requests for admission, interrogatories and requests
 3   for production of documents.
 4        After the scheduled hearing on October 3, 2012, the
 5   bankruptcy court entered an order denying LBS's motion to
 6   reconsider the order vacating the entry of Mannings' default on
 7   October 19, 2012.
 8        On October 23, 2012, LBS served Mannings with nineteen
 9   requests for admission ("RFAs"),4 which contained nineteen
10   admissions.    Mannings' responses to the RFAs were due on
11   November 26, 2012.    They failed to respond to them or seek an
12   extension of time to do so.
13        On November 30, 2012, counsel for LBS filed a declaration
14   informing the bankruptcy court of Mannings' failure to respond to
15   the RFAs in accordance with Civil Rule 36(a)(3).    Mannings did not
16   respond to the declaration.
17        On December 12, 2012, LBS filed a motion in limine to
18   preclude any evidence, argument, discussion or suggestion
19   contesting issues of fact that had been deemed admitted by
20   Mannings' failure to respond to the RFAs pursuant to Civil
21   Rule 36.    Mannings did not oppose the motion in limine.
22        On December 17, 2012, without a hearing, the bankruptcy court
23   entered an order denying LBS's motion in limine because the RFAs
24   had failed to advise Mannings, who were pro se litigants, that
25   their failure to respond to them within thirty days would deem
26   those matters admitted per Civil Rule 36.
27
28        4
              Proper service of the RFAs was never disputed.

                                       -7-
 1   C.      Trial on the adversary complaint
 2           Trial on LBS's adversary complaint proceeded on December 20,
 3   2012.     Mannings appeared at the wrong courthouse, but were
 4   ultimately connected by video.     At the start, LBS expressed its
 5   disagreement with the order denying its motion in limine.       In
 6   response, the bankruptcy court allowed counsel the opportunity to
 7   move for reconsideration.     After hearing counsel's argument, the
 8   court denied LBS's requested relief on the basis that pro se
 9   litigants require more leeway with the rules of civil procedure:
10           In this case we have a situation with pro se debtors who
             are not very sophisticated and I don't think we will
11           blind side them.
12   Trial Tr. (Dec. 20, 2012) 6:17-19.      The court then asked Mannings
13   to review the motion in limine.     While trying to locate the
14   document in their stack of papers, the court observed that at
15   least one of the envelopes transmitted to Mannings by LBS appeared
16   to have not been opened.
17           The bankruptcy court then conducted direct examination of
18   both Mr. and Mrs. Manning simultaneously.     They admitted to
19   signing the Contract for the Vehicle and that they had defaulted
20   by failing to make the payments.     They denied being in possession
21   of the Vehicle, stating that it was at Chris and Tina's house in
22   Scurry, Texas.     They had no address for Chris and Tina and could
23   not recall their last names.     Mrs. Manning testified that they had
24   given the Vehicle to Tina, who Mrs. Manning knew from working at
25   Denny's in Texas, in March 2010 with the understanding that she
26   would take over the payments of $850.00 per month.     According to
27   Mrs. Manning, the parties had drafted a written agreement stating
28   that Tina would return the Vehicle to Mannings if she were more

                                       -8-
 1   than thirty days late on a payment, but the agreement had been
 2   lost during a move.    Mrs. Manning testified that she notified LBS
 3   in September 2010 of the parties' agreement and that Tina had the
 4   Vehicle.    Both Mr. and Mrs. Manning testified that Tina had made
 5   payments for the Vehicle to them for the months of April, May,
 6   June, July and August 2010, which they in turn used to pay LBS.
 7   Mrs. Manning testified that once Tina stopped making payments,
 8   Tina asked for LBS's contact information to see if she and Chris
 9   could qualify for a loan for the Vehicle.     Tina contacted LBS, but
10   its representative told Mr. Manning that Tina and Chris could not
11   qualify for a loan.    Mrs. Manning testified that Tina and Chris
12   had stolen the Vehicle from them and LBS, and that she had tried
13   to file three police reports for it.
14           John Kuecks ("Kuecks"), LBS's representative familiar with
15   Mannings' account, testified next.      Kuecks confirmed LBS's receipt
16   of the Vehicle payments for the months of April through August
17   2010.    Kuecks testified that Mannings had not informed LBS prior
18   to September 2010 that they had taken the Vehicle to Texas, and
19   that LBS had never given Mannings permission to sell or lease the
20   Vehicle to a third party.    Kuecks further testified that Tina and
21   Chris had never contacted LBS about applying for a loan for the
22   Vehicle, which LBS could not have approved anyway because it
23   cannot provide loans to residents outside of California.     However,
24   after reviewing his notes regarding a September 2010 conversation
25   with a "Tina Ditman" about her ability to keep the Vehicle, Kuecks
26   refreshed his recollection that he must have spoken with Tina
27   about the Vehicle at that time.    Kuecks informed Tina that he
28   could not discuss the Vehicle loan with her since she was not the

                                       -9-
 1   credit union member.   Kuecks then read into the record an internal
 2   company note written by LBS representative and Vice President of
 3   Collections, Al Parent ("Parent"), from September 21, 2010.
 4   According to Parent's note, a "Chris Niette" had contacted him
 5   saying that he had a contract with Mannings regarding the Vehicle,
 6   that he had been making payments for the past seven months, and
 7   that Mannings had tried to take the Vehicle back, but the police
 8   refused to intervene once Chris produced the parties' written
 9   agreement.   Finally, Kuecks testified that LBS made multiple
10   attempts to repossess the Vehicle at various locations in Texas,
11   to no avail.
12        Parent, LBS's next witness, confirmed Kuecks's testimony that
13   LBS had made multiple, unsuccessful attempts to repossess the
14   Vehicle in Texas.   Parent testified that as of December 2010, the
15   Vehicle's blue book value was $34,200.
16        Kuecks was then recalled to the stand and testified that,
17   according to an internal note written by another LBS employee in
18   January 2011, Chris had told the employee that Mr. Manning had
19   come in the middle of the night and taken the Vehicle.   According
20   to another internal note written by a different employee in
21   November 2010, Chris had told the employee that he no longer had
22   the Vehicle because Mr. Manning had taken it in the night about
23   two-and-a-half months prior, and that he had been scammed by the
24   Mannings.
25        On cross-examination, Mrs. Manning admitted that the Mannings
26   entered into an agreement with Tina and Chris without LBS's
27   permission, and that they were not allowed to sell the Vehicle to
28   a third party without LBS's permission.   On his cross-examination,

                                     -10-
 1   Mr. Manning admitted the same.   Mr. Manning further testified that
 2   he had "no clue" as to the whereabouts of the Vehicle, and he
 3   denied ever taking it back from Tina and Chris in the middle of
 4   the night.   He admitted that LBS had made attempts to recover the
 5   Vehicle.
 6        A witness for Mannings, Walter Gene Kinal, testified that
 7   Mannings had an agreement with Tina and Chris regarding the
 8   Vehicle, and that Mannings were not in possession of the Vehicle
 9   when he helped them move back to California from Texas.
10        After LBS and Mrs. Manning presented their closing arguments,
11   the bankruptcy court announced its oral ruling in favor of the
12   Mannings.    The court determined that LBS had proven malice, but
13   the debt could not be excepted from discharge under § 523(a)(6)
14   because Mannings had not intended the consequence of damaging LBS
15   by selling the Vehicle to a third party; their intent of that act
16   was to get LBS paid.
17        The bankruptcy court entered a judgment in favor of Mannings
18   on December 28, 2012 ("Judgment").      LBS timely appealed.
19                             II. JURISDICTION
20        The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
21   and 157(b)(2)(I).   We have jurisdiction under 28 U.S.C. § 158.
22                                III. ISSUES
23   1.   Did the bankruptcy court err in setting aside the entry of
24   default without notice to LBS?
25   2.   Did the bankruptcy court abuse its discretion in denying the
26   motion in limine and sua sponte withdrawing the admissions?
27   3.   Did the bankruptcy court err when it entered the Judgment in
28   favor of Mannings on LBS's claim under § 523(a)(6)?

                                      -11-
 1                           IV. STANDARDS OF REVIEW
 2           Whether a particular procedure comports with basic
 3   requirements of due process is a question of law we review de
 4   novo.    Garner v. Shier (In re Garner), 246 B.R. 617, 619 (9th Cir.
 5   BAP 2000).
 6           A decision on a motion to set aside an entry of default is
 7   reviewed for an abuse of discretion.     Educ. Credit Mgmt. Corp. v.
 8   Bernal (In re Bernal), 223 B.R. 542, 546 (9th Cir. BAP 1998)
 9   (citing O'Connor v. Nev., 27 F.3d 357, 364 (9th Cir. 1994)).
10           The bankruptcy court’s evidentiary rulings are reviewed for
11   abuse of discretion.    Latman v. Burdette, 366 F.3d 774, 786 (9th
12   Cir. 2004).    See also United States v. Geston, 299 F.3d 1130, 1138
13   (9th Cir. 2002)(trial court’s ruling on motion in limine reviewed
14   for abuse of discretion); 999 v. C.I.T. Corp., 776 F.2d 866, 869
15   (9th Cir. 1995)(we review the district court's decision to permit
16   the withdrawal or amendment of an admission for abuse of
17   discretion).    A bankruptcy court abuses its discretion if it
18   applied the wrong legal standard or its findings were illogical,
19   implausible or without support in the record.     TrafficSchool.com,
20   Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).
21           In reviewing a bankruptcy court’s discharge determination, we
22   review its findings of fact for clear error and conclusions of law
23   de novo.    Oney v. Weinberg (In re Weinberg), 410 B.R. 19, 28 (9th
24   Cir. BAP 2009).    A factual finding is clearly erroneous if it is
25   illogical, implausible or without support in the record.     Retz v.
26   Samson (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010)(citing
27   United States v. Hinkson, 585 F.3d 1247, 1261-62 & n.21 (9th Cir.
28   2009)(en banc)).

                                       -12-
 1                              V. DISCUSSION
 2   A.   The bankruptcy court erred by not allowing LBS a meaningful
          opportunity to oppose setting aside Mannings' default.
 3
 4        LBS appeals the order vacating Mannings' default entered on
 5   July 25, 2012, contending that it was prejudiced because Mannings
 6   were allowed to present an opposition they would not have been
 7   allowed to present had the default remained in place.5
 8        In general, the effect of an entry of default, if not set
 9   aside, is to establish the liability of the defaulting party as a
10   basis for default judgment.   10 MOORE’S FEDERAL PRACTICE § 55.32[1][a]
11   (3d ed. 2007).   After defaulting, the defaulted party has no right
12   to dispute the issue of liability.     Id.   See Geddes v. United Fin.
13   Grp., 559 F.2d 557, 560 (9th Cir. 1977)(default by defendants
14   establishes liability but not the extent of damages).     Under Civil
15   Rule 55(c), incorporated by Rule 7055, an entry of default may be
16   set aside for "good cause."
17        At the status conference on July 18, 2012, Mannings either
18   made an oral motion to set aside the entry of default or the
19   bankruptcy court raised the issue sua sponte.     See Kingvision
20   Pay-Per-View Ltd. v. Lake Alice Bar, 168 F.3d 347, 351 (9th Cir.
21   1999)(trial court can sua sponte set aside a default judgment
22   under Civil Rule 60(b)).   LBS did not appear at that hearing
23
          5
            Generally, a trial court's grant of a motion to set aside a
24   default is not an appealable final order because it opens the door
     to a trial on the merits. Joseph v. Office of Consulate Gen. of
25   Nigeria, 830 F.2d 1018, 1028 (9th Cir. 1987). However, such
     orders become final and appealable once a judgment is entered.
26   United States v. 475 Martin Lane, 545 F.3d 1134, 1141 (9th Cir.
     2008) (under the merger rule interlocutory orders entered prior to
27   the judgment merge into the judgment and may be challenged on
     appeal). Hence, the order at issue became final and appealable on
28   December 28, 2012.

                                     -13-
 1   because, according to the court's tentative ruling, appearances
 2   were excused.   The tentative ruling also instructed LBS to file a
 3   motion for default judgment.   Thus, nothing in the July 18
 4   tentative ruling indicated that the hearing was to be anything
 5   other than a pretrial conference.   LBS had no notice that a motion
 6   to set aside the default would be considered, much less granted.
 7        According to its order entered on July 25, 2012, the
 8   bankruptcy court stated its reasons for setting aside the default
 9   “on the record.”   Unfortunately, LBS did not include a copy of the
10   transcript in the record for our review.    If a bankruptcy court’s
11   findings of fact and conclusions of law are made orally on the
12   record, a transcript of those findings is mandatory for the
13   Panel’s appellate review.   McCarthy v. Prince (In re McCarthy),
14   230 B.R. 414, 416 (9th Cir. BAP 1999).   Without the required
15   transcript, which precludes our ability to review what "good
16   cause" Mannings may (or may not) have demonstrated to support the
17   bankruptcy court’s decision, we may summarily affirm its ruling.
18   Ehrenberg v. Cal. State Univ., Fullerton Found. (In re Beachport
19   Entm't), 396 F.3d 1083, 1087-88 (9th Cir. 2005); Morrissey v.
20   Stuteville (In re Morrissey), 349 F.3d 1187, 1189 (9th Cir. 2003)
21   (failure to provide a critical transcript may result in summary
22   affirmance).
23        Nevertheless, even without the required transcript, we
24   conclude that the bankruptcy court erred.   Despite the broad
25   discretion afforded a court in setting aside defaults, and the
26   strong policy favoring resolution of disputes on their merits, the
27   bankruptcy court violated LBS's procedural due process rights when
28   it considered Mannings' oral motion (or its own) to set aside the

                                     -14-
 1   default at the status conference and entered an order vacating the
 2   entry of default without giving LBS adequate notice and a
 3   meaningful opportunity to be heard.     See Mullane v. Cent. Hanover
 4   Bank & Trust Co., 339 U.S. 306, 314 (1950); see also Mathews v.
 5   Eldridge, 424 U.S. 319, 333 (1976)("The fundamental requirement of
 6   due process is the opportunity to be heard at a meaningful time
 7   and in a meaningful manner.").   Procedural due process must be
 8   afforded to LBS or fundamental fairness is lacking.    We likewise
 9   conclude that the hearing on LBS's motion to reconsider did not
10   cure the due process deficiencies arising from the absence of
11   prior notice of the order vacating the entry of default.
12        Accordingly, we VACATE the order setting aside the default
13   and REMAND so LBS may have an appropriate opportunity to be heard
14   on this matter.
15   B.   The bankruptcy court abused its discretion when it denied
          LBS's motion in limine and sua sponte withdrew the
16        admissions.
17        LBS appeals the order denying its motion in limine,
18   contending that the bankruptcy court abused its discretion by
19   withdrawing the admissions when Mannings failed to request such
20   relief, and that it further abused its discretion by imposing a
21   requirement in Civil Rule 36 that a party must inform pro se
22   litigants about the consequences of their failure to respond to
23   requests for admission.6
24        Civil Rule 36, made applicable in adversary proceedings by
25   Rule 7036, permits a party to serve on any other party a written
26
          6
            As with the order vacating the entry of default, the order
27   denying LBS's motion in limine was an interlocutory order that
     merged into the final Judgment. 475 Martin Lane, 545 F.3d at
28   1141.

                                      -15-
 1   request to admit the truth of any matters within the scope of
 2   Rule 26(b)(1) set forth in the request relating to statements or
 3   opinions of fact or the application of law to fact.    Civil
 4   Rule 36(a)(1); Tillamook Country Smoker, Inc. v. Tillamook Cnty.
 5   Creamery Ass'n, 465 F.3d 1102, 1111 (9th Cir. 2006).     In short,
 6   "[t]he purpose of Rule 36(a) is to expedite trial by establishing
 7   certain material facts as true and thus narrowing the range of
 8   issues for trial."    Asea, Inc. v. S. Pac. Transp. Co., 669 F.2d
 9   1242, 1245 (9th Cir. 1982).    "Unless the party securing an
10   admission can depend on its binding effect, he cannot safely avoid
11   the expense of preparing to prove the very matters on which he has
12   secured an admission, and the purpose of the rule is defeated."
13   Advisory Committee Notes, at 48 F.R.D. 487, 534 (1970).
14           Civil Rule 36(a)(3) provides that a party's failure to timely
15   respond to a request for admission within thirty days of being
16   served results in the admission being conclusively deemed
17   admitted.    Conlon v. United States, 474 F.3d 616, 621 (9th Cir.
18   2007).    Mannings' responses to the RFAs were due on November 26,
19   2012.    They failed to respond.   The bankruptcy court observed at
20   trial that Mannings brought to trial at least one unopened
21   envelope.    As noted above, Mannings have shown a propensity to
22   ignore legal deadlines and judicial pleadings.    As a result of
23   Mannings' failure to answer the RFAs, the facts set forth in the
24   requests became admitted facts.
25           The operation of Civil Rule 36(a)(3) is automatic and self-
26   executing.    F.T.C. v. Medicor LLC, 217 F.Supp.2d 1048, 1053 (C.D.
27   Cal. 2002)("No motion to establish the admissions is needed
28   because Federal Rule of Civil Procedure 36(a) is self-executing.")

                                        -16-
 1   (citing Schwarzer, Tashima & Wagstaffe, CAL. PRACTICE GUIDE: FED.
 2   CIV. PROC. BEFORE TRIAL, at ¶¶ 811-12 (Rutter Group 2002)).      Thus,
 3   whether LBS even had to file a motion in limine to effectuate the
 4   deemed admissions is questionable.       However, even if it did, the
 5   bankruptcy court abused its discretion in denying the motion
 6   because Mannings never moved to withdraw or amend their
 7   admissions, and the court could not withdraw the admissions for
 8   them sua sponte.
 9        Although treating a request for admission that is not timely
10   disputed as a conclusively deemed admission is mandatory and does
11   not require court action, in the exercise of its discretion, a
12   trial court may allow an admission to be withdrawn, but only under
13   statutorily prescribed rules.   Asea, 669 F.2d at 1248.      Civil
14   Rule 36(b) gives the court discretion to allow the moving party to
15   withdraw or amend its admission if two conditions are met: (1) if
16   such withdrawal or amendment would facilitate determination of the
17   action on its merits; and (2) if the court is not persuaded that
18   the adverse party would be prejudiced by the withdrawal or
19   amendment.   See Conlon, 474 F.3d at 621.      The moving party must
20   show that the withdrawal or amendment will facilitate a
21   determination on the merits, whereas the adverse party has the
22   burden of proof to show prejudice.       Id. at 621-22.
23        Mannings never sought relief from their admissions either by
24   written motion or oral request.    Even after the court admonished
25   them for not responding to the RFAs, they offered no excuse for
26   failing to respond.   They also never opposed LBS's declaration of
27   no response or its motion in limine.      Nonetheless, the bankruptcy
28   court essentially withdrew the admissions sua sponte when it

                                       -17-
 1   denied the motion in limine and allowed Mannings to testify at
 2   trial about the admitted facts.    This was an abuse of discretion.
 3   See Am. Auto. Ass’n v. AAA Legal Clinic of Jefferson Crook, P.C.,
 4   930 F.2d 1117, 1120 (5th Cir. 1991)(holding that district court
 5   abused its discretion in sua sponte withdrawing admissions without
 6   proper motion by affected party); Layton, 2008 WL 1734191, at *1
 7   (citing Am. Auto. Ass'n and concluding same).
 8        Even if the bankruptcy court could sua sponte withdraw the
 9   admissions, it abused its discretion by imposing a notice
10   requirement not found within Civil Rule 36 or required by Ninth
11   Circuit law.   The court denied the motion in limine because the
12   RFAs failed to advise Mannings, who are pro se litigants, that
13   their failure to respond within thirty days would deem the matters
14   admitted, citing Medina v. Donahoe, 854 F.Supp.2d 733, 748 (N.D.
15   Cal. 2012).    While Medina may be persuasive, it is not binding on
16   this Panel.    It is also distinguishable because, in that case, the
17   non-responding pro se plaintiff had opposed the defendant's motion
18   for summary judgment, she had been deposed by defendant, she had
19   responded to defendant's other discovery requests, and the entire
20   record in the prior administrative proceeding regarding her claims
21   was available.   Id. at 749.   In other words, she actively
22   participated in the case and the defendant knew the basis of her
23   claims.
24        Furthermore, while we often afford pro se litigants certain
25   leeway, it is also true that pro se litigants "must follow the
26   same rules of procedure that govern other litigants," King v.
27   Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987)(citation omitted),
28   overruled on other grounds by Lacey v. Maricopa Cnty., 693 F.3d

                                       -18-
 1   896 (9th Cir. 2012), and they "should not be treated more
 2   favorably than parties with attorneys of record."    Jacobsen v.
 3   Filler, 790 F.2d 1362, 1364 (9th Cir. 1986).     "The hazards which
 4   beset a layman when he seeks to represent himself are obvious.      He
 5   who proceeds pro se with full knowledge and understanding of the
 6   risks does so with no greater rights than a litigant represented
 7   by a lawyer, and the trial court is under no obligation to become
 8   an 'advocate' for or to assist and guide the pro se layman through
 9   the trial thicket."    Jacobsen, 790 F.2d at 1365 n.5 (quoting
10   United States v. Pinkey, 548 F.2d 305 (10th Cir. 1977)).
11           The RFAs served on Mannings stated that they were served in
12   accordance with "Rule 36 Federal Rules of Civil Procedure,
13   applicable to this proceeding through Rule 7036 of the Federal
14   Rules of Bankruptcy Procedure," and were "to be answered within
15   (30) days of service."    If Mannings had looked up either of these
16   rules when they received the RFAs, they would have learned of the
17   consequences of not answering or objecting to them.    Civil
18   Rule 36(a)(3).    They affirmatively chose not to respond to the
19   RFAs.    Their lack of response is even more disturbing considering
20   the bankruptcy court's repeated warnings about the importance of
21   their complete and timely compliance with discovery requests.
22           Accordingly, the bankruptcy court abused its discretion when
23   it sua sponte withdrew the admissions, denied the motion in
24   limine, and allowed evidence at trial contrary to what Mannings
25   had admitted in the RFAs.    The result of denying the motion was
26   particularly harsh when it was done on the eve of trial.
27   Therefore, we VACATE the order denying the motion in limine and
28   REMAND this matter with instructions that the bankruptcy court

                                       -19-
 1   consider the conclusive effect of the Mannings’ failure to respond
 2   to LBS’s requests for admission in deciding whether LBS met its
 3   burden on the issue of willfulness.
 4           While the bankruptcy court certainly has discretion to
 5   determine whether each of the requests for admission is proper
 6   under Civil Rule 36(a)(1) and the effects of the admissions on the
 7   issues to be tried, it is not free to consider evidence presented
 8   at trial that contradicts those matters deemed admitted in the
 9   RFAs.    Once a matter has been deemed admitted under Civil Rule 36,
10   even by default, the court may not consider evidence that is
11   inconsistent with the admission.    See 999, 776 F.2d at 869-70.
12   C.      We express no opinion on the merits.
13           As for its claim under § 523(a)(6), the bankruptcy court
14   determined that LBS had proven malice, noting that causation and
15   damages were proven, although it did not articulate specific facts
16   to support its ruling.    LBS does not appeal that ruling and, in
17   any event, we agree.    Mannings admitted to selling the Vehicle to
18   a third party in violation of the Contract, they did it
19   intentionally without any just cause or excuse, and LBS was
20   injured by the loss of the payments and the Vehicle.
21           LBS appeals the bankruptcy court's ruling on the willfulness
22   prong.    While we must VACATE the Judgment of the bankruptcy court,
23   because we are remanding the default and admissions matters, we
24   need not determine whether the bankruptcy court erred.
25                                VI. CONCLUSION
26           For these reasons, we VACATE the bankruptcy court’s judgment.
27   We also VACATE the order setting aside the default and REMAND so
28   that LBS may have an appropriate opportunity to be heard on this

                                       -20-
 1   matter.   We also VACATE the order denying the motion in limine and
 2   REMAND this matter with instructions that the bankruptcy court
 3   consider the conclusive effect of the Mannings’ failure to respond
 4   to LBS’s requests for admission in deciding whether LBS met its
 5   burden on the issue of willfulness.7
 6
 7
 8
 9
10
11
12
13
14
15
16
17
18
19
20
          7
             In remanding this matter, we express no opinion on the
21   underlying merits of LBS's claim or the substance of the RFAs. We
     note that while RFAs may properly relate to "the application of
22   law to fact" as set forth in Civil Rule 36(a)(3), "[r]equests for
     admissions cannot be used to compel an admission of a conclusion
23   of law." Playboy Enters., Inc. v. Welles, 60 F.Supp.2d 1050, 1057
     (S.D. Cal. 1999); 8B Charles Alan Wright & Arthur R. Miller,
24   FEDERAL PRACTICE AND PROCEDURE § 2255 (3d ed. 2012). We note, however,
     that should LBS be successful upon remand, it may be entitled to
25   attorney's fees based upon controlling language in the Contract.
     See Fry v. Dinan (In re Dinan), 448 B.R. 775, 786 (9th Cir. BAP
26   2011)(noting that Cohen v. de la Cruz, 523 U.S. 213 (1998), is not
     limited to cases involving statutorily-based attorney's fees; it
27   applies equally to cases in which fees are provided for by
     contract)(citing Redwood Theaters, Inc. v. Davison
28   (In re Davison), 289 B.R. 716, 725 (9th Cir. BAP 2003)).

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