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April 15, 2003


The opinion of the court was delivered by: Maxine M. Chesney, United States District Judge


Before the Court is appellant/claimant Rene Hilton's ("Hilton") appeal from the bankruptcy court's order of October 29, 2001, disallowing Hilton's claim against appellee/debtor Richard D. Hongisto ("Hongisto"), and from various other orders made in the course of the proceedings. Having reviewed the briefs filed in connection with the appeal, the Court rules as follows.


On July 30, 1997, Hilton filed a complaint in the Superior Court of California, County of San Francisco, against Ambassador Security, Inc. ("Ambassador") and Hongisto, alleged to be the Chief Executive Officer of Ambassador.*fn1 (Appellant's Record ("AR") Ex. 35.) In his complaint, Hilton alleged that on April 23, 1997, a security officer employed by Ambassador and an undercover police officer accused Hilton of theft and assaulted him outside a Safeway store. (Id.) Hilton alleged that the incident was the result of a conspiracy among Hongisto, Ambassador, Safeway, the City and County of San Francisco, and unknown persons to assault Hilton and cause him to be arrested. (Id.) Based on these assertions, Hilton alleged claims of assault, battery, intentional infliction of emotional distress, false imprisonment, violation of the California Constitution, and violations of California Civil Code § 51.7 (providing right to be "free from any violence, or intimidation by threat of violence" committed because of certain characteristics)*fn2 and § 52.1 (providing cause of action for violation of § 51.7). (Id.)

On September 16, 1999, Hongisto filed a petition for bankruptcy pursuant to Chapter 11 of the Bankruptcy Code, (see Bankruptcy Court Docket No. 1),*fn3 thus effecting an automatic stay of Hilton's state court proceeding against him. See 11 U.S.C. § 362. On January 10, 2000, Hilton filed in the bankruptcy court a proof of claim form, seeking $25,000 against the bankruptcy estate. (AR Ex. 35.) A copy of the state court complaint was attached to the proof of claim form. (Id.) On August 29, 2000, Hongisto filed an objection to the claim, (see Bankruptcy Court Docket No. 158), denying the facts alleged in Hilton's claim. (Transcript of Trial Proceedings, ("Trial Tr."), October 15, 2001, at 30.)

On October 15, 2001, the bankruptcy court conducted a trial, during which proceeding Hilton did not testify or call any witnesses, but did offer exhibits. (AR Ex. 9 at 3.) Hilton's chief exhibit was a set of requests for admission, which he argued Hongisto had fully admitted by failing to respond thereto. (Id.) In response to Hilton's argument, Hongisto asserted that responses to the requests for admission had been sent to Hilton, and, as supporting evidence, offered proof of service on Hilton at Hilton's address of record. (Trial Tr. at 17-19.) When Hongisto then sought to admit his responses, Hilton argued that because he had not received the responses and because Hongisto had not included the responses on Hongisto's exhibit list, the bankruptcy court should not admit the responses. (Id.)

After considering the arguments, the bankruptcy court admitted the responses into evidence, whereupon Hilton moved for a two-week continuance of the trial. (Id. at 19, 22.) When the bankruptcy court inquired as to what Hilton would do in that time, Hilton, as the bankruptcy court noted, did not state that he intended to "prepare proof of facts no longer deemed admitted by Hongisto." (AR Ex. 9 at 4.) Rather, Hilton responded that he would submit a "brief on the law of surprise at trial." (Trial Tr. at 29.) The bankruptcy court, explaining that granting a continuance would eliminate any surprise, denied the motion. (Id.) Hilton subsequently rested his case. (Id. at 36.) Hongisto did not call any witnesses or testify. (Id. at 37.) The bankruptcy court then took the matter under submission. (Id.)

On October 29, 2001, the bankruptcy court issued its memorandum decision, disallowing Hilton's claim in its entirety and finding in favor of Hongisto. (AR Ex. 9.) In its ruling, the bankruptcy court discussed the requests for admission. Two of those requests were uncontested by Hongisto,*fn4 and four were deemed admitted by virtue of Hongisto's having denied those requests generally.*fn5 (Id. at 5-7.) The bankruptcy court held that Hilton had not adequately proven his claim, notwithstanding the admissions. (Id. at 7.) The bankruptcy court reasoned that Hilton had failed to prove "that a conspiracy existed, who along with Hongisto were the conspirators, what acts they took in furtherance [of the] alleged conspiracy, and on what theory Hongisto should be held liable." (Id.)

On November 7, 2001 Hilton filed a timely notice of appeal, which he amended on November 19, 2001. (AR Exs. 1-2.)


A district court reviews a bankruptcy court's conclusions of law de novo and its findings of fact for clear error. In re Holm, 931 F.2d 620, 622 (9th Cir. 1991). With respect to findings of fact, the appellant must demonstrate that any challenged findings were clearly erroneous. In re Huntington Ltd., 654 F.2d 578, 583 (9th Cir. 1981). A "mere showing that the bankruptcy court could have reached another conclusion based upon the evidence presented is insufficient." Id.


Hilton argues that the bankruptcy court erred by disallowing his claim. He also challenges various orders issued in the course of the proceedings. The Court addresses each of Hilton's contentions in turn.

A. Burden of Proof

In its memorandum decision, the bankruptcy court determined that "Hilton's case fail[ed] for lack of proof" and that the "scant admissions found in Hongisto's Response to Requests 29 and 30 lack[ed] particularity sufficient to implicate Hongisto."*fn6 (AR Ex. 9 at 7.) On appeal, Hilton argues that his proof of claim was prima facie evidence of the validity of the claim and that he was not required to offer any further evidence in support of his claim unless and until Hongisto offered evidence to rebut the presumption of validity and shift the burden of proof back to Hilton.

A proof of claim constitutes "prima facie evidence of the validity and amount of the claim." F.R.Bankr.P. 3001(f). A proof of claim "is deemed allowed, unless a party in interest . . . objects." 11 U.S.C. § 502 (a). The Ninth Circuit Bankruptcy Appellate Panel has explained the burdens of proof with respect to a bankruptcy proof of claim as follows:

Initially, the claimant must allege facts sufficient to support the claim. If the averments in his filed claim meet this standard of sufficiency, it is prima facie valid. In other words, a claim that alleges facts sufficient to support a legal liability to the claimant satisfies the claimant's initial obligation to go forward. The burden of going forward then shifts to the objector to produce evidence sufficient to negate the prima facie validity of the filed claim. . . . The burden of persuasion is always on the claimant.
In re Consolidated Pioneer Mortage, 178 B.R. 222, 226 (9th Cir. B.A.P. 1995) (quoting In re Allegheny International Inc., 954 F.2d 167, 173-74 (3rd Cir. 1992)) (emphasis added). As set forth in Consolidated Pioneer Mortgage, unless the claimant has alleged "facts sufficient to support a legal liability," the claim is not prima facie valid. Id. (holding, because writings submitted with plaintiffs' claim did not support liability, proof of claim was not prima facie evidence of validity under Rule 3001(f)).

Hilton's proof of claim consists of the above-referenced complaint filed in the state court proceeding, in which Hilton alleged he was assaulted as the result of a conspiracy. "Conspiracy is not a cause of action," but a legal doctrine for imposing liability. Applied Equipment Corporation v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 510 (1994). The elements of a conspiracy are as follows: "formation and operation of the conspiracy and damage resulting to plaintiff from an act or acts done in furtherance of the common design." Id. At the heart of any conspiracy is an agreement between two or more people made with knowledge of its unlawful purpose. See Wyatt v. Union Mortgage Co., 24 Cal.3d 773, 784-85 (1979).

Here, the sole allegation in Hilton's complaint specific to Hongisto's connection to the alleged conspiracy is:

[A]s part of a larger conspiracy a conspiracy was formed as follows: People unknown to plaintiff that have formed groups contacted Richard Hongisto and told him that during a week in April of 1997 that they wanted an Ambassador Security guard to assist a San Francisco Police Department decoy, the purpose of which was to assult [sic] the plaintiff.
(AR Ex. 35 at 12.) Missing from the above allegation is any assertion that Hongisto agreed to join the unnamed conspirators or that Hongisto intentionally acted in any way in furtherance of the alleged conspiracy. As a matter of law, Hilton's complaint, and hence his proof of claim, fails to "allege facts sufficient to support a legal liability," and thus does not constitute prima facie evidence of the validity of the claim.*fn7 See Consolidated Pioneer Mortgage, 178 B.R. at 226. Consequently, the initial burden of proof at trial was properly placed on Hilton, and, accordingly, the bankruptcy court did not err in doing so.

Accordingly, Hilton has failed to demonstrate that he is entitled to relief based on the manner in which the bankruptcy court allocated the respective burdens of proof.

B. Responses to Requests for Admissions

Several of Hilton's claims on appeal center around a set of requests for admission, dated August 15, 2000, that he submitted to Hongisto, and Hongisto's responses to those requests, dated September 13, 2000. (AR Exs. 27-28.) Over Hilton's objection, the bankruptcy court allowed Hongisto to offer the responses into evidence. (Trial Tr. at 17-18.) Hilton contends that the responses were improperly admitted into evidence because: (1) the responses did not comply with Rule 7036 of the Federal Rules of Bankruptcy Procedure; (2) the scheduling order issued by the bankruptcy court required the parties to disclose exhibits prior to trial and Hongisto had not disclosed the responses; and (3) the responses failed to comply with Bankruptcy Local Rule ...

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