Actually, that's putting into layman's terms exactly how the justice system works, well not the piece of shit part, that's just an opinion... Judges have something called "discretion."

Here is an excerpt from the appeals court decision to overrule that judge's ruling:

The withdrawal of admissions is governed by Indiana Trial Rule 36(B), which provides, in part:

"Any matter admitted under this rule is conclusively established unless the court on motion permits withdrawal or amendment of the admission. Subject to the provisions of Rule 16 governing amendment of a pre-trial order, the court may permit withdrawal or amendment when the presentation of the merits of the action will be subserved thereby and the party who obtained the admission fails to satisfy the court that withdrawal or amendment will prejudice him in maintaining his action or defense on the merits."

This provision grants our trial courts discretion in deciding whether to allow the withdrawal of admissions, and we will reverse only for an abuse of that discretion. City of Muncie v. Peters, 709 N.E.2d 50, 54 (Ind. Ct. App. 1999), reh’g denied, trans. denied. Here, we must conclude that the trial court abused its discretion when it denied part of Costello’s motion to withdraw his admissions.

The ruling goes on to say that the trial judge was obligated to consider whether or not the technicality of rule 36 would result in a summary judgement (i.e. Zavodnik would win the case based on a technicality). As such the trial judge was obligated to use discretion to decide whether the case actually had any merit in the first place (which obviously didn't given the fact he had lost in small claims court previously).

Furthermore, the appeals judge went on to reinterpret "the spirit of the law" of rule 16. Basically, the appeals judge said that the reason rule 36 exists is to ensure that the litigants have time to prepare their case before going to trial, but because no court date had been set for their lawsuit, the 30-day limit was meaningless.