Rieser v. Clayton et al

UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
In re: 	E QUITY L AND T ITLE A GENCY, I NC.,
Debtor
Case No. 	02-34260
Adv. No. 	04-3148
JOHN P AUL RIESER, C HAPTER 7 T RUSTEE,
Plaintiff
v.
S TEVEN L. CLAYTON
JOANNE C LAYTON,
Defendants
Judge Waldron
Chapter 7
DECISION ON ORDER GRANTING
MOTION OF TRUSTEE TO STRIKE
DEFENDANT’S AFFIDAVIT
DATED AT DAYTON, OHIO this 24th day of June, 2005:
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: June 24, 2005
____________________________________________________________
Case 3:04-ap-03148 Doc 46 Filed 06/24/05 Entered 06/27/05 11:17:23 Desc Main
Document Page 1 of 11

2
Background
On June 7, 2002, an Order For Relief (Estate Doc. 7) was entered against Equity
Land Title Agency, Inc. (“ELT”), which had been the object of an involuntary petition.
(Estate Doc. 1) 	Steven L. Clayton was the president, director and majority or sole
shareholder of ELT. (See Adv. Doc. 1 and Paragraph 4 of the Amended Answers – Adv.
Docs. 20 and 21) 	On June 4, 2004, John Paul Rieser, the appointed Chapter 7
Trustee, (the “Trustee”), filed this adversary proceeding against Steven L. Clayton and
Joanne Clayton (collectively, the “Defendants”). (Adv. Doc. 1) Joanne Clayton was and
is Steven Clayton’s wife. (See Adv. Doc. 1 and Paragraph 6 of Adv. Docs. 20 and 21)
The Trustee’s complaint seeks relief in connection with a number of avoidance
claims under the Bankruptcy Code as well as claims under Ohio law. 	The Defendants
originally filed blanket denials as to all of paragraphs of the Trustee’s complaint.
Joanne Clayton asserted a spousal privilege and Steven Clayton asserted the privilege
against 	self-incrimination 	afforded 	by 	the 	Fifth 	Amendment 	of 	the 	United 	States
Constitution. (Adv. Docs. 10 and 11)
On October 26, 2004, the Trustee filed a Motion of Plaintiff for a More Definite
Statement 	Regarding 	Defendant 	Steven 	Clayton’s 	Answer 	Combined 	With
Memorandum In Support and Notice to All Parties in Interest (Adv. Doc. 12) and a
Motion of Plaintiff to Strike Defendant Joanne Clayton’s Answer For Failure to Comply
With Fed. R. Civ. Pro. 8(b) or in the Alternative, Motion for a More Definite Statement
Regarding Defendant’s Answer, Combined With Memorandum In Support and Notice to
Parties in Interest. (Adv. Doc. 13) On November 1, 2004, the court issued Order Setting
Pretrial Conference, Setting Unresolved Motions, if any, Ordering Other Matters and
Case 3:04-ap-03148 Doc 46 Filed 06/24/05 Entered 06/27/05 11:17:23 Desc Main
Document Page 2 of 11

3
Requiring the Attendance of Steven L. Clayton and Joanne Clayton. (Adv. Doc. 14;
underlining in original) In that order, the court noted, while recognizing the pro se status
of the Defendants, that:
The Court enters the following observations, without, at this time, any
determination of any pending issues.
The Court recognizes that long standing Sixth Circuit law requires this
Court 	to 	apply 	“less 	stringent 	standards” 	in 	connection 	with 	certain
pleading requirements to parties appearing without counsel, such as the
Defendants, Steven L. Clayton and Joanne Clayton; nevertheless, certain
basic pleading requirements and certain clear and specific orders of a
Court must be complied with and failure to do so may result in the
imposition of sanctions, including, in some instances, the entry of default
judgments. (Rogers v. Webster, 776 F.2d 607 (6th Cir.1985); 	Jourdan v.
Jabe, 951 F.2d 108, 110 (6th Cir. 1991); Pilgrim v. Littlefield, 92 F.3d 413,
416 (6th Cir. 1996).
Additionally, the Court recognizes that the Defendant, Steven L. Clayton,
has asserted certain rights, arguably available to him pursuant to the Fifth
Amendment of the United States Constitution, and Joanne Clayton has
asserted certain rights, arguably available to her pursuant to certain
spousal privileges.
The Court suggests that each of these parties may benefit from the
services 	of 	an 	experienced 	bankruptcy 	attorney, 	since 	the 	blanket
assertion of either a Fifth Amendment claim or a spousal privilege would
not appear to excuse a party from compliance with certain basic pleading
requirements, nor excuse a failure to appear in response to a specific
court order. 	Bankruptcy Rule 7008 and 7010 (See Rogers v. Webster,
776 F.2d 607, 611 (6th Cir. 1995); North River Ins. Co. v. Stefanou, 	831
F.2d 484, 486-487 (4th Cir. 1987); See also In re Carmean, 153 B.R. 985 (
Bankr. S.D. Ohio 1993).
After the Defendants failed to respond, the Trustee’s motions (Adv. Docs. 12 and 13)
were granted. (See Orders – Adv. Docs. 16 and 17)
The Defendants did subsequently file amended answers on December 2, 2004.
(Adv. 	Docs. 	20 	and 	21) 	In 	the 	amended 	answer 	of 	Joanne 	Clayton, 	the 	Fifth
Case 3:04-ap-03148 Doc 46 Filed 06/24/05 Entered 06/27/05 11:17:23 Desc Main
Document Page 3 of 11

4
Amendment, as well as the spousal privilege was asserted. (Adv. Doc. 20) 	Steven
Clayton continued to assert the Fifth Amendment. (Adv. Doc. 21)
A pretrial conference, attended by the Trustee and Steven and Joanne Clayton,
was held December 21, 2004. 	In that pretrial conference, the court, without reaching
any determination, specifically informed the Defendants that their blanket refusals to
participate in any discovery based on the Fifth Amendment or spousal privilege may not
be appropriate. 1 This was memorialized in a December 22, 2004 Order (Adv. Doc. 22),
in which, among other things, the court noted:
The Court recognized, and discussed with the pro se Defendants their
assertions of Fifth Amendment protection and spousal privilege. 	The pro
se Defendants advised the Court that they were represented by Dennis A.
Lieberman, but only with regard to issues involving criminal proceedings
and not this bankruptcy proceeding; however, the Court suggested to the
Defendants that blanket assertions of either the Fifth Amendment or
spousal privilege may not be appropriate responses to specific discovery
requests by the Trustee. 	The Court is mailing a courtesy copy of this
Order to the Pro Se Defendant’s criminal counsel and suggests the pro se
Defendants review with him, or other counsel of their choice, the Trustee’s
requests and, attempt, to the extent possible, to find an agreed resolution
which will neither impair the pro se Defendants asserted rights, nor
necessarily result in adverse consequences for the pro se Defendants in
this bankruptcy proceeding. 	The Court will review these matters at the
pretrial conference scheduled pursuant to this Order.
The court set a non-expert discovery cutoff of March 31, 2005 and set a further pretrial
conference for April 14, 2005.
On January 17, 2005, the Trustee requested permission to file a motion for
partial summary judgment. (Adv. Doc. 26) 	After notice and, again, no response from
either Defendant, the motion was granted. (Adv. Doc. 28)
On 	February 	28, 	2005, 	the 	Trustee 	filed 	the 	Motion 	for 	Partial 	Summary
Judgment. (Adv. Doc. 32) On March 21, 2005, the Defendants filed separate responses
1 The court has independently reviewed the transcript of the December 21, 2004 pretrial conference.
Case 3:04-ap-03148 Doc 46 Filed 06/24/05 Entered 06/27/05 11:17:23 Desc Main
Document Page 4 of 11

5
to the Motion for Partial Summary Judgment. (Adv. Docs. 39 and 40) 	The document
signed by Joanne Clayton is captioned as a response for both Defendants, but is not
signed by Steven Clayton. (Doc. 39) 	It includes an affidavit of Joanne Clayton which
challenges the “flawed statements and conclusions” of the Trustee. 2 This affidavit is
referenced in the response of Steven Clayton (Doc. 40) 3 .
On March 29, 2005, The Trustee filed a document which included a reply brief as
well as a separate motion to strike the aforementioned affidavit of Joanne Clayton. (Adv.
Doc. 42 – Reply of Plaintiff to Defendant’s Response to Motion for Partial Summary
Judgment Combined with Motion of Trustee to Strike Defendant’s Affidavit Combined
with Notice Hereof) At the April 14, 2005 pretrial conference, although the Trustee was
present, neither of the Defendants appeared. 	At that time, although the court reviewed
these issues with the Trustee and discussed with the Trustee the preparation of certain
proposed orders, as a result of the failure of the Defendants to appear, the court has
subsequently determined to enter its own decisions and orders on the pending issues.
The Court notes that the Defendants have not filed any response to the Trustee’s
Motion to Strike.
2 The affidavit, inter alia, swears to the fact that Joanne Clayton had no knowledge of commingling or of
the insolvency of ELT and generally denies the allegations of fraud. The court notes that although the
defendant, Joanne Clayton, asserts in paragraph iv that the Court advised the defendants that they need
not answer any requests for admissions, a review of the transcript of the December 21, 2004 hearing will
establish no such statement was made. Instead, without making any findings, the court generally noted
the Fifth Amendment protected the Defendants from exposure to criminal liability, but “the Fifth
Amendment won’t necessarily save you way down the line” from civil liability to the Trustee.
3 Without regard to the fact that Steven Clayton did not sign the affidavit, the court simply finds the
affidavit is stricken in regard to both Defendants.
Case 3:04-ap-03148 Doc 46 Filed 06/24/05 Entered 06/27/05 11:17:23 Desc Main
Document Page 5 of 11

6
Issue
May the Defendants, who have asserted blanket privileges pursuant to the Fifth
Amendment of the United States Constitution or asserted state law spousal privileges,
refuse to respond to proper discovery requests during an adversary proceeding and,
thereafter, in response to a motion for partial summary judgment, file in that same
adversary proceeding an affidavit containing specific denials of the factual issues
presented by the motion for partial summary judgment or must such an affidavit be
stricken upon proper motion?
DETERMINATION
Upon a proper motion, the Court must strike an affidavit, containing specific
denials of factual issues, filed in response to a motion for partial summary judgment
from a defendant who asserted spousal privilege and/or Fifth Amendment protection
and failed to respond to proper discovery requests.
Analysis
The decision in Gutierrez-Rodriguez v. Cartagena, 882 F.2d 553 (1st Cir. 1989),
although a nonbankruptcy case, is instructive. 	In that case, the driver of an automobile
was shot by the police and received a large award in a civil lawsuit. 	The trial court did
not permit the officer/defendant to testify at trial since he asserted his right to Fifth
amendment protection during discovery. In affirming this ruling, the First Circuit noted:
Trial courts have broad discretion in fashioning remedies during discovery.
See National Hockey League v. Metropolitan Hockey Club, 427 U.S. 639,
643, 96 S.Ct. 2778, 2781, 49 L.Ed.2d 747 (1976). Discovery sanctions are
appropriate "not merely to penalize those whose conduct may be deemed
Case 3:04-ap-03148 Doc 46 Filed 06/24/05 Entered 06/27/05 11:17:23 Desc Main
Document Page 6 of 11

7
to warrant such a sanction, but to deter those who might be tempted to
such conduct in the absence of such a deterrent." Id. The viewpoint of
National Hockey League was echoed in the advisory committee note to
the 1983 amendment of Fed.R.Civ.P. 26: "Rule 26(g) is designed to curb
discovery abuse by explicitly encouraging the imposition of sanctions."
Courts have not been afraid to bar a party from testifying where doing so
was necessary to prevent the "thwarting [of] the purposes and policies of
the discovery rules." Meyer v. Second Judicial Dist. Court, etc., 95 Nev.
176, 591 P.2d 259 (1979); see Lyons v. Johnson, 415 F.2d 540, 541-42
(9th Cir.1969), cert. denied, 397 U.S. 1027, 90 S.Ct. 1273, 25 L.Ed.2d 538
(1970).
The district court's decision to bar Soto from testifying at trial due to his
previous 	refusal 	to 	testify 	during 	discovery 	is 	supported 	by 	ample
precedent.
The Federal Rules contemplate that there be "full and equal
mutual 	discovery 	in 	advance 	of 	trial" 	so 	as 	to 	prevent
surprise, prejudice and perjury. "It is an effective means of
detecting and exposing false, fraudulent, and sham claims
and defenses." 4 Moore, Federal Practice 26.02[2] at 1034-
35. The court would not tolerate nor indulge a practice
whereby a defendant by asserting the privilege against self-
incrimination during pre-trial examination and then voluntarily
waiving the privilege at the main trial surprised or prejudiced
the opposing party.
Duffy v. Currier, 291 F.Supp. 810, 815 (D.Minn.1968); accord Rubenstein
v. Kleven, 150 F.Supp. 47, 48 (D.Mass.1957), aff'd on other grounds, 261
F.2d 921 (1st Cir.1958) (defendant's claim of privilege during deposition
precluded his testimony as to certain evidence at trial); Costanza v.
Costanza, 66 N.J. 63, 328 A.2d 230, 232 (1974); see also Bramble v.
Kleindienst, 	357 	F.Supp. 	1028, 	1035 	(D.Colo.1973) 	(applying 	same
sanction to a plaintiff), aff'd, 498 F.2d 968 (10th Cir.1974), cert. denied,
419 U.S. 1069, 95 S.Ct. 656, 42 L.Ed.2d 665 (1974); 8 C. Wright & A.
Miller, Federal Practice and Procedure § 2018, at 149 (1970) ("[I]f a party
is free to shield himself with the privilege during discovery, while having
the full benefit of his testimony at trial, the whole process of discovery
could be seriously hampered."). We find these cases persuasive.
The Supreme Court's reasoning in an analogous situation supports the
constitutionality of the holdings cited above. In Williams v. Florida, 399
U.S. 78, 80, 90 S.Ct. 1893, 1895, 26 L.Ed.2d 446 (1970), the Court upheld
a Florida notice-of-alibi rule requiring that a criminal defendant "submit to a
limited form of pretrial discovery by the State whenever he intends to rely
at trial on the defense of alibi." The Court stated:
Case 3:04-ap-03148 Doc 46 Filed 06/24/05 Entered 06/27/05 11:17:23 Desc Main
Document Page 7 of 11

8
The adversary system of trial is hardly an end in itself; it is
not yet a poker game in which players enjoy an absolute
right always to conceal their cards until played. We find
ample room in that system, at least as far as "due process"
is concerned, for the instant Florida rule, which is designed
to 	enhance 	the 	search 	for 	truth 	in 	the 	criminal 	trial 	by
insuring both the defendant and the State ample opportunity
to investigate certain facts crucial to the determination of
guilt or innocence.
Id. at 82, 90 S.Ct. at 1896 (footnote omitted in original).
The Court did not find that the Florida rule violated defendant's fifth
amendment privilege.
At most, the rule only compelled petitioner to accelerate the
timing of his disclosure, forcing him to divulge at an earlier
date 	information 	that 	the 	petitioner 	from 	the 	beginning
planned to divulge at trial.
* * *
We decline to hold that the privilege against compulsory self-
incrimination guarantees the defendant the right to surprise
the State with an alibi defense.
Id. at 85-86, 90 S.Ct. at 1898.
We find the principles enunciated by the Williams Court instructive in the
case at bar. Soto made his decision not to give deposition testimony on
August 24, 1987 and held that position throughout the next six months
prior to trial. The district court's decision to bar Soto's testimony did not
burden his due process rights, it merely forced him to abide by his
decision 	and 	protected 	plaintiff 	from 	any 	unfair 	surprise 	at 	trial. 	A
defendant may not use the fifth amendment to shield herself from the
opposition's inquiries during discovery only to impale her accusers with
surprise testimony at trial. See Bramble v. Kleindienst, 357 F.Supp. at
1035-36 (citing Lyons v. Johnson, 415 F.2d at 541-42).
Id. at 576-77.
The 6th Circuit’s decision Traficant v. Comm’r, 884 F.2d 258 (6th Cir. 1989)
provides further guidance in this area. 	In that case, the defendant invoked the Fifth
Amendment rather than answer certain interrogatories concerning the authentication of
a signed statement and certain tape-recorded conversations. 	The trial court limited
Case 3:04-ap-03148 Doc 46 Filed 06/24/05 Entered 06/27/05 11:17:23 Desc Main
Document Page 8 of 11

9
cross-examination on those matters. 	The Sixth Circuit affirmed, but limited the trial
court’s legal holding:
We believe it was proper under principles of reciprocity for the Tax Court
to 	bar 	Traficant, 	once 	he 	had 	invoked 	the 	privilege 	against 	self-
incrimination on the authenticity of the statement and the tapes, from
introducing other evidence on that matter. Such limits are properly within
the scope of cases holding that a party to civil litigation or other non-
criminal proceedings may encounter costs imposed in exchange for the
assertion of the Fifth Amendment privilege as long as they are not so high
as to force abandonment of the privilege. Spevack v. Klein, 385 U.S. 511,
515, 87 S.Ct. 625, 628, 17 L.Ed.2d 574 (1967); see also Baxter v.
Palmigiano, 425 U.S. 308, 96 S.Ct. 1551, 47 L.Ed.2d 810 (1976). Note,
however, that when the issue is whether a court may impose broad limits
on the admissibility of evidence, the cases permit only limits directly
related to the scope of the asserted privilege. Securities and Exchange
Commission 	v. 	Cymaticolor, 	106 	F.R.D. 	545 	(S.D.N.Y.1985); 	In 	re
Anthracite Coal Antitrust Litigation, 82 F.R.D. 364 (M.D.Pa.1979).
Id. at 265.
It is significant that neither of the Defendants in this adversary responded to any
discovery sought by the Trustee; but, rather, asserted a blanket Fifth Amendment or
spousal privilege assertion in connection with all of the Trustee’s proper discovery. Cf.
Traficant.
It is clear from the allegations in the Trustee’s complaint (Adv. Doc. 1), the
combined discovery request by the Trustee, which was not responded to in any fashion
by 	either 	Defendant 	(See 	Adv. 	Doc. 	30 	– 	Certification 	of 	No 	Response 	By 	the
Defendants 	of Requests For Admission 	by 	the 	Trustee – 	which 	includes, 	as 	an
attachment, Plaintiff, John Paul Rieser, Trustee’s First Combined Set of Interrogatories,
Request for Admissions and Request for Production of Documents to Defendant
Joanne 	Clayton 	Pursuant 	to 	FRBP 	Rules 	7033, 	7034 	and 	7036 	and 	a 	similar
attachment concerning Steven Clayton), that the Defendants are attempting, through
Case 3:04-ap-03148 Doc 46 Filed 06/24/05 Entered 06/27/05 11:17:23 Desc Main
Document Page 9 of 11

10
the affidavit filings (Adv. Docs. 39 and 40) to, for the first time assert, but still without
any specificity, the central legal issues related to the Motion for Partial Summary
Judgment are not correct; notwithstanding that each Defendant refused to supply any
information in connection with such assertions throughout the entire discovery process.
While the court is cognizant of a motivating reason the Defendants have chosen
to assert Fifth Amendment and spousal privilege protections in this adversary4 , parties
cannot avail themselves of the shield of the Fifth Amendment and, having refused to
respond to proper discovery requests, collapse, at moments of their choosing, that
shield into a sword to be used to attempt to stab holes in the opponent’s case. See
generally Wright, Miller and Marcus, Federal Practice & 	Procedure, § 2018 – Privilege
Against Self-Incrimination (2005).
Conclusion
The Motion of Trustee to Strike Defendant’s Affidavit is GRANTED. 	An order in
accordance with this decision will be simultaneously entered.
SO ORDERED.
c:
John Paul Rieser, Esq., 1520 First National Plaza, 130 West Second Street, Dayton,
Ohio 45402 (Plaintiff)
Steven L. Clayton, 2545 Hilliard Rome Road, #305, Hilliard, Ohio 43026-9471
(Defendant)
Joanne Clayton, 2545 Hilliard Rome Road, #305, Hilliard, Ohio 43026-9471 (Defendant)
4 The Defendant Steven Clayton is currently the subject of criminal charges pending in Montgomery
County.
Case 3:04-ap-03148 Doc 46 Filed 06/24/05 Entered 06/27/05 11:17:23 Desc Main
Document Page 10 of 11

11
J. 	Michael 	Debbeler, 	Esq., 	Graydon 	Head 	and 	Ritchey, 	Post 	Office 	Box 	6464,
Cincinnati, Ohio 45201-6464 (Atty. for the Defendants, Union Savings Bank & The
Cincinnati Insurance Company)
Arthur R. Hollencamp, Esq., 2107 First National Plaza, 130 W Second Street, Dayton,
OH 45402 (Atty. for National City Bank)
Bryan K. Stewart, Esq., 249 South Garber Drive, Tipp City, Ohio 45371 (Atty. for
Monroe Federal Savings & Loan Association)
Robert G. Sanker, Esq.,/ Brian P. Muething, Esq., 1400 Provident Tower, One East
Fourth Street, Cincinnati, Ohio 45202 (Atty. for the Defendant, Fifth Third Bank)
Joel E. Sechler, Esq.,/Timothy R. Bricker, Esq., 280 Plaza, Suite 1300, 280 North High
Street, Columbus, Ohio 43215 (Atty. for Olympic Title Insurance Company)
Timothy J. Robinson, Esq.,/P. Brian See, Esq., 1300 Huntington Center, 41 South High
Street, Columbus, Ohio 43215 (Attys. for First American Title Insurance Company)
Courtesy Copy:
Dennis A. Lieberman, Esq., 318 West Fourth Street, Dayton, Ohio 45402-1437 (Atty. for
Defendants)
Montgomery County Prosecutor’s Office, George B. Patricoff, P.O. Box 972, Dayton,
Ohio 45422-0972
###
Case 3:04-ap-03148 Doc 46 Filed 06/24/05 Entered 06/27/05 11:17:23 Desc Main
Document Page 11 of 11