Salem, Maurice J. v. Neshewat, Michael

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-1914
IN RE:
MAURICE J. SALEM,
Debtor-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 04 C 7823—Blanche M. Manning, Judge.
____________
ARGUED MAY 2, 2006—DECIDED OCTOBER 10, 2006
____________
Before CUDAHY, RIPPLE, and WOOD, Circuit Judges.
WOOD, Circuit Judge. This longstanding family dispute
about the ownership of a rental house has spawned years of
litigation in both this circuit and the Second, occupying
innumerable hours of bankruptcy, district, and circuit court
time. At this point, the question is simple: did the bank-
ruptcy court for the Northern District of Illinois err when it
dismissed the petition of Maurice J. Salem, the debtor, or
when it made various rulings in conjunction with the case?
Defending the court’s judgment is Michael Neshewat, the
creditor and brother of Salem. We conclude, as did the
district court before us, that the bankruptcy court’s actions
were correct, and we therefore affirm.1
1
We note that the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23 (2005)
(continued...)
2 No. 05-1914
I
Briefly put, the current bankruptcy proceeding arose out
of litigation between the brothers that took place in the
state courts of New York. In 1999, Neshewat obtained a
state-court judgment in the amount of $166,884.86 against
his brother; that judgment was recorded against a rental
house Salem owned located at 7 Gellatly Drive, Wappinger
Falls, New York. Salem responded with a Chapter 7
bankruptcy petition in New York in 2000, the adjudication
of which involved two appeals to the Southern District of
New York and the Court of Appeals for the Second Circuit.
One outcome of those proceedings was a holding that
Neshewat’s judgment against Salem is nondischargeable.
See In re Salem, 290 B.R. 479, 485-86 (S.D.N.Y. 2003),
aff’d 94 Fed. Appx. 24 (2d Cir. 2004) (unpublished).
Following the termination of his Chapter 7 petition in
New York, Salem, now identifying himself as an Illinois
resident, filed a Chapter 13 petition in the Northern
District of Illinois. The plan he offered was a “zero percent
plan” that made no provision for payments to unsecured
creditors and treated Neshewat’s judgment as unsecured.
Neshewat objected, claiming that Salem had sufficient
equity in the Gellatly Drive house to permit Neshewat’s
judgment to attach to it, thereby making the claim secured
but unaccounted for in the plan. Within the Chapter 13
petition proceedings, Salem filed a motion to “convert” his
Chapter 7 petition from New York into his Illinois Chapter
13 case, which the bankruptcy court denied. Then, in a
separate decision months later, the bankruptcy court found
that the house had sufficient value to make Neshewat’s
1
(...continued)
(BAPCPA), was enacted April 20, 2005, and took effect after the
events in this case. See BAPCPA § 1501 (provisions apply 180
days after enactment).
No. 05-1914 3
claim secured. It therefore rejected the Chapter 13 plan for
failing to account for the secured claim and dismissed the
case. We explain more about the progression of this case
below, as needed.
II
Before proceeding to the merits, we must address a
question of appellate jurisdiction noticed by the panel. See
Doctor’s Assocs., Inc. v. Duree, 375 F.3d 618, 621-22 (7th
Cir. 2004); Wingerter v. Chester Quarry Co., 185 F.3d 657,
660 (7th Cir. 1998). This court has jurisdiction over appeals
from final judgments of the district courts. 28 U.S.C. § 1291.
In the bankruptcy context, “[t]he general rule is that a court
of appeals has jurisdiction over a bankruptcy appeal only if
the bankruptcy court’s original order and the district court’s
order reviewing the bankruptcy court’s original order are
both final.” In re Rimsat, Ltd., 212 F.3d 1039, 1044 (7th Cir.
2000). A judgment affirming a bankruptcy court’s decision
to deny confirmation of a Chapter 13 plan and dismiss a
case is typically a final order of the bankruptcy court, as
there are no proceedings left to occur. However, procedural
oddities within this case might lead one to think that this
appeal comes too late. We therefore explain here why we
have concluded that the judgment issued March 30, 2005,
by the district court is final.
We begin with the New York cases; we take judicial notice
of these dockets and opinions. See, e.g., Radaszewski ex rel.
Radaszewski v. Maram, 383 F.3d 599, 600 (7th Cir. 2004)
(taking judicial notice of administrative findings);
Menominee Indian Tribe of Wis. v. Thompson, 161 F.3d 449,
456 (7th Cir. 1998) (“Judicial notice of historical documents,
documents contained in the public record, and reports of
administrative bodies is proper.”)
On April 12, 1999, Salem filed an action under 42 U.S.C.
§§ 1983 and 1985 against several defendants, including
4 No. 05-1914
Neshewat; Neshewat’s attorney, Paul Goldstein; and named
public officials. Salem’s basic contention was that these
individuals abused the judicial process in the litigation
resolved by the default judgment that led in turn to the lien
on the Gellatly Drive house. Salem separately filed a
Chapter 7 petition in the Southern District of New York on
February 23, 2000. On May 2, 2000, Salem filed an adver-
sary proceeding complaint as part of his bankruptcy case,
seeking injunctive relief and damages. See Salem v. Paroli,
260 B.R. 246, 252 (S.D.N.Y. 2001). The bankruptcy court
dismissed the adversary complaint. After Salem appealed
to the district court, the court consolidated the bankruptcy
case with the civil rights suit. It affirmed the bankruptcy
court’s decision, id. at 256-57, and dismissed the civil rights
claim under the Rooker-Feldman doctrine, which divests
federal district and appellate courts of subject matter
jurisdiction over a case if the result of the case could be the
reversal or modification of a state court judgment, id. at
253-55. Salem appealed, and the Second Circuit affirmed.
79 Fed. Appx. 455 (2d Cir. 2003) (unpublished). Meanwhile,
the Chapter 7 petition continued, and the bankruptcy court
held on August 8, 2002, that Neshewat’s default judgment
was not dischargeable. The district court affirmed on March
5, 2003, see 290 B.R. at 485-86, and the Second Circuit
affirmed on April 8, 2004, see 94 Fed. Appx. 24. The
mandate issued May 4, 2004, and was received by the
district court on May 11, 2004. According to the bankruptcy
court’s docket, that court took no action after March 11,
2003, when the case closed, and March 13, 2003, when a
final decree issued.
While Salem’s second appeal was pending before the
Second Circuit, his wife Clodia filed a Chapter 7 petition in
the Northern District of Illinois, which was docketed at No.
03-25681 and assigned to Bankruptcy Judge Sonderby.
Salem, who is an attorney, represented his wife. The
dispute in that case also related to whether the property on
No. 05-1914 5
Gellatly Drive would be sold. In the adjudication of Clodia’s
petition, the bankruptcy court ordered the property auc-
tioned off.
In the meantime, in November 2002, Neshewat sued
Salem in the Supreme Court of New York seeking to set
aside as fraudulent Salem’s conveyance of a half-interest in
the Gellatly Drive house and a car to his wife. Salem
removed that case to federal court, and it was stayed during
the proceedings of the bankruptcy court in Illinois in both
Salems’ cases. On April 8, 2005, the district court for the
Southern District of New York noted that although the
court in Clodia’s Illinois bankruptcy case ordered the sale
of her interest in the Gellatly Drive house, it never ad-
dressed whether the conveyances were fraudulent and thus
whether she had any interest. The New York district court
held that the conveyances were indeed fraudulent.
Neshewat v. Salem, 365 F. Supp. 2d 508, 518-21 (S.D.N.Y.
2005). The appeal of that decision is pending before the
Second Circuit. The court also sanctioned Salem for engag-
ing in frivolous litigation, enjoining him “from filing or
prosecuting, without leave of this Court, further actions or
proceedings in the federal courts against Neshewat or his
counsel . . . seeking review of or relief from the default
judgment entered against him in New York State Supreme
Court.”
The sale of the real property itself (as opposed to particu-
lar interests in it) never took place because of Salem’s own
Chapter 13 petition, which he filed in Chicago the day after
the district court in New York received the mandate from
the Second Circuit affirming dismissal of his Chapter 7
petition. (We note in passing that although it appears that
Salem was cutting it close, he did not pursue relief under
Chapter 7 and Chapter 13 simultaneously in his New York
and Illinois petitions. When a Chapter 13 petition is filed
after a Chapter 7 petition, it has been nicknamed a Chapter
20 filing. See generally Johnson v. Home State Bank, 501
6 No. 05-1914
U.S. 78 (1991) (permitting a Chapter 13 filing after a
Chapter 7 case had closed). Salem’s petitions did not
overlap, but rather were (barely) successive. “Simultaneous”
Chapter 20 petitions are barred in this Circuit, see In re
Sidebottom, 430 F.3d 893, 895 (7th Cir. 2005).) On May 12,
2004, Salem’s Chapter 13 petition was docketed as Case No.
04 B 18739. Salem paid the docketing fee, then $194, for a
Chapter 13 petition. In addition to new Chapter 13 petition,
Salem filed a separate motion to “convert” his closed New
York Chapter 7 proceeding into the Illinois Chapter 13
proceeding. When Salem’s petition was filed, it was as-
signed to Judge Sonderby, probably because of Bankruptcy
Local Rule 1015.1A(1), which provides that “[t]wo or more
cases are related if . . . the debtors are husband and wife.”
On June 16, 2004, Judge Sonderby denied the motion to
convert the New York Chapter 7 petition into the case
before her, reasoning that the New York case was both
closed and not within her district. No notice of appeal was
filed within 10 days of that order, nor was there a re-
quest for an interlocutory appeal filed with the district
court at that time. See FED. R. BANKR. P. 8001, 8002, 8003.
We consider the appealability of the denial of conversion
separately below. Judge Sonderby did not dismiss the
Chapter 13 petition or issue a final judgment at this point.
As the case proceeded, it appears to have been transferred
for some reason, undocumented in the record, from Judge
Sonderby to Chief Bankruptcy Judge Wedoff. Chief Judge
Wedoff both conducted the hearing and issued the judgment
of the bankruptcy court. Since neither party raised issues
about the transfer (which appears to have caused some
confusion from time to time), our only concern is to ensure
that this was one singular case with one final order, rather
than two separate cases—potentially, the conversion of the
New York Chapter 7 (rejected by Judge Sonderby) and the
filing of the Illinois Chapter 13 (rejected by Chief Judge
No. 05-1914 7
Wedoff). We conclude, based on a number of indicia in the
record, that there has never been more than one case here.
Salem paid only one filing fee; the case proceeded under
only one case number; and the denial of Salem’s motion to
convert the Chapter 7 petition from New York into the
Chapter 13 petition appears no different from a ruling on
any other interlocutory motion. It follows from this conclu-
sion that the bankruptcy court’s December 1, 2004, order
dismissing the case and denying confirmation of Salem’s
Chapter 13 plan was a final judgment. This triggered
Salem’s right to appeal to the district court under 28 U.S.C.
§ 158(a)(1). Similarly, the district court’s order affirming
the bankruptcy court’s order was final, reflecting the
termination of the bankruptcy case. With this predicate, our
appellate jurisdiction over the case, which encompasses
both challenges to the final judgment and challenges to
various interlocutory orders, is also proper. See 28 U.S.C.
§ 158(d)(1).
III
Salem argues that the bankruptcy court—and the district
court in affirming it—made several errors in the handling
of his Chapter 13 petition. We review legal issues in a
bankruptcy case de novo and factual findings for clear error.
See In re Heartland Steel, Inc., 389 F.3d 741, 743-44 (7th
Cir. 2004). Essentially, our review is the same as that
performed by the district court. See In re Midway Airlines,
Inc., 383 F.3d 663, 668 (7th Cir. 2004).
A. Chapter 7/Chapter 13 Conversion
1. Jurisdiction
After filing his initial Chapter 13 petition before the
bankruptcy court in the Northern District of Illinois, Salem
8 No. 05-1914
filed a motion to convert his Chapter 7 petition from New
York into the Chapter 13 petition in Illinois pursuant to 11
U.S.C. § 706(a). (This is Salem’s terminology; we do not
wish to be understood as endorsing the idea that “conver-
sion” is the right word to use for a request (1) to transfer a
case from one bankruptcy court to another, and then (2) to
convert the case from Chapter 7 to Chapter 13. We are
merely reporting what it is that Salem asked the bank-
ruptcy court in Chicago to do.) At a hearing on the motion,
Judge Sonderby questioned how the bankruptcy court could
have jurisdiction over “a closed New York case.” Before
anyone could think of converting, she held, the Chapter 7
case had to be “an open, pending, viable case in this dis-
trict.” Arguing that the bankruptcy court erred, Salem
takes the extreme position that a debtor has an absolute
right to convert a Chapter 7 petition to a Chapter 13
petition at any time, even after the Chapter 7 proceeding is
closed, and even though it is not just in another district, but
is in another state and another circuit.
Before we can reach the merits of this issue, we must
decide whether it is properly before this court; that in turn
depends on whether it was properly before the district
court. “A court of appeals’ jurisdiction over a district court’s
review of a bankruptcy court order can only be based on a
proper exercise of the district court’s jurisdiction. Whether
the district court had jurisdiction over any particular
matter is a question of law, reviewable de novo.” In re
Vlasek, 325 F.3d 955, 960 (7th Cir. 2003) (internal citations
omitted).
Neshewat argues that Salem forfeited the right to appeal
this issue to the district court and consequently to this
court when he did not file a notice of appeal within 10 days
of Judge Sonderby’s order rejecting his “conversion”—
a move he thinks was required by Federal Rule of Bank-
ruptcy Procedure 8002. In the proper circumstances, this
rule is more than merely procedural; it is jurisdictional. See
No. 05-1914 9
In re Bond, 254 F.3d 669, 673 (7th Cir. 2001). If, for exam-
ple, Salem had failed to file a notice of appeal within 10
days of the final order dismissing the petition, and he could
not show “excusable neglect,” then the district court would
have had no power to hear Salem’s appeal. See FED. R.
BANKR. P. 8002(c)(2) (permitting short extension of time for
“excusable neglect”). See also Matter of Schultz Mfg.
Fabricating Co., 956 F.2d 686, 689 (7th Cir. 1992) (finding
no district court jurisdiction in the absence of a timely
notice of appeal from the bankruptcy court).
But the order refusing to convert the Chapter 7 proceed-
ings from New York into the Chapter 13 proceedings in
Illinois was not a final order. It did not bring the Illinois
Chapter 13 petition to an end; virtually the entire dispute
remained, involving the same parties and the same issues.
Even though the concept of finality is relaxed in the
bankruptcy context, see In re Jartran, Inc., 886 F.2d 859,
861-62 (7th Cir. 1989), this order was interlocutory in the
purest sense of the word. See Caldwell-Baker Co. v. Par-
sons, 392 F.3d 886, 888 (7th Cir. 2004) (holding that, where
an adversary proceeding continues, “[t]he order . . . is no
more a ‘final decision’ than an order denying summary
judgment or denying a request for additional discovery; the
litigation proceeds and the issue will be reviewed if it turns
out to make a difference to an order that is independently
appealable”). See also In re Young, 237 F.3d 1168, 1172-73
(10th Cir. 2001) (holding that the conversion of a Chapter
7 petition to a Chapter 13 petition was not final until the
plan itself was approved); Matter of Kutner, 656 F.2d 1107,
1111-12 (5th Cir. 1981) (holding that an order striking a
standing trustee’s motion to convert a Chapter 13 petition
to a Chapter 7 is interlocutory, not final). Normally, a party
does not have an absolute right to take an interlocutory
appeal from the bankruptcy court. (There are limited
exceptions, but they do not apply here. See 28 U.S.C.
§ 158(a)(2).) Instead, the party must seek the leave of the
district court. See 28 U.S.C. § 158(a)(3).
10 No. 05-1914
The question here is whether the failure to file a notice
and to seek leave to file an interlocutory appeal, as required
by Federal Rules of Bankruptcy Procedure 8001-03, also
prevents a district court from addressing the interlocutory
order upon final appeal, when a proper notice of appeal was
filed following the final judgment of the bankruptcy court.
As a general rule, the failure to file an interlocutory appeal
does not waive the ability to have an issue reviewed upon
final appeal. See Rivera-Domenech v. Calvesbert Law Offices
PSC, 402 F.3d 246, 249 n.2 (1st Cir. 2005); National Union
Elec. Corp. v. Wilson, 434 F.2d 986, 988 (6th Cir. 1970). To
the contrary, one of the purposes of the final judgment rule
is to permit consolidated review of all interlocutory deci-
sions that still matter. One reason for denying permission
to take an interlocutory appeal, or for passing up the
opportunity to ask for such an appeal, is because many
issues may be effectively reviewed on final appeal. See
Matter of Cash Currency Exchange, Inc., 762 F.2d 542, 547
(7th Cir. 1985).
This court took exactly that tack in Vlasek, 325 F.3d at
960-61. On April 30, 1999, the bankruptcy court issued an
order refusing to dismiss Vlasek’s petition; later, on May 25,
2001, the court issued another order closing the estate and
discharging the Trustee. Vlasek filed a notice of appeal from
the latter order, and on appeal he sought (apparently for
the first time) to challenge the earlier order. The Trustee
argued that the April 30, 1999, order was “final” and
therefore that the notice of appeal was untimely as it
related to that order. In deciding the case, we reasoned that
“denials of motions to dismiss are generally not final orders
even in the bankruptcy context.” Id. at 960 (quoting
Jartran, 886 F.3d at 864). Since the order was not final,
there was no appeal as of right to the district court pursu-
ant to 28 U.S.C. § 158(a). Although we eventually found
that most of Vlasek’s appeal was moot for other reasons, the
notice of appeal from the May 25, 2001, order was sufficient
No. 05-1914 11
to bring the entire case before the district court, and then
this court.
Furthermore, although we note that Salem’s notice of
appeal to the district court identified only the December 1,
2004, order dismissing the case and not the earlier order
refusing conversion, we conclude that the conversion
issue was properly before the district court. A notice of
appeal under Rule 8001(a) of the bankruptcy rules must “(1)
conform substantially to the appropriate Official
Form, [and] (2) contain the names of all parties to the
judgment, order, or decree appealed from and the names,
addresses, and telephone numbers of their respective
attorneys.” In Fadayiro v. Ameriquest Mortgage Co., 371
F.3d 920 (7th Cir. 2004), we observed that the reference
in that rule was “to Official Bankruptcy Form 17, which . . .
has spaces for the docket number of the case, what chapter
of the Bankruptcy Code the case involves, and the date of
entry of the order being appealed from.” Id. at 922. We went
on to speculate, “We are doubtful that a notice of appeal
that failed to indicate the order appealed from could
nonetheless be thought to comply with the rule, . . . for how
could a notice that omitted such essential information be
thought to ‘conform substantially’ to the official form?” Id.(internal citation omitted).
That, however, is not this case. The particular order
appealed from—the final order of December 1, 2004—was
identified in Salem’s notice of appeal. The purpose of
identifying the order appealed from is so that the courts
reviewing the case can determine whether, for example, the
appellant met the 10-day deadline of Rule 8002 and
whether the order is final (permitting appeal as of right) or
interlocutory (potentially requiring leave of court). Salem
was not required in that notice to identify every earlier
decision, including the evidentiary and discovery rulings we
discuss below, that he wanted to challenge. His notice of
appeal was adequate.
12 No. 05-1914
2. Merits
The bankruptcy code provides for the conversion of a
Chapter 7 petition to a Chapter 11, 12, or 13 petition “at
any time”; it also says that a waiver of that right is “unen-
forceable.” 11 U.S.C. § 706(a). Salem understands this
language literally: “any time” means any time, in his view,
no matter what judicial actions have occurred, and thus the
district court erred in upholding the denial of his motion to
convert. Unfortunately, matters are not quite that simple.
Indeed, the Supreme Court recently granted certiorari in In
re Marrama, 430 F.3d 474 (1st Cir. 2005), cert. granted 126
S. Ct. 2859 (June 12, 2006), to decide “whether the right to
convert a chapter 7 bankruptcy case to another chapter can
be denied notwithstanding the plain language of the statute
and the legislative history.” 2006 WL 295220 (petition for
certiorari filed Jan. 30, 2006). The First Circuit in Marrama
found that “at any time” meant “simply [ ] that the debtor
may seek to convert at any time during the pendency of the
bankruptcy case” and that the statute does not prevent a
court from refusing to convert based on the debtor’s own
“willful misconduct, such as an intentional abuse of the
bankruptcy process.” 430 F.3d at 479 (emphasis added). See
also In re Finney, 992 F.2d 43, 45 (4th Cir. 1993) (holding
that bad faith in a § 706(a) conversion permits the court to
consider sua sponte whether the petitioner engaged in
abuse of process under 11 U.S.C. § 105(a)). In contrast, a
bankruptcy appellate panel for the Tenth Circuit and the
Fifth Circuit have both held that the right to convert is
absolute and may be exercised even after the debtor
received a discharge under Chapter 7. See generally In re
Miller, 303 B.R. 471 (10th Cir. BAP 2003); In re Pequeno,
126 Fed. Appx. 158 (5th Cir. 2005) (unpublished).
Fortunately, we need not choose sides in this circuit split
nor await the Supreme Court’s resolution in order to resolve
this appeal. Regardless of whether conversion may occur “at
any time” without any exceptions for bad behavior or other
No. 05-1914 13
circumstances, it is clear that the conversion cannot occur
in a district other than the one where the case is pending
without a proper transfer under 28 U.S.C. § 1412. Salem
admits that he never sought to transfer his Chapter 7 case
from the bankruptcy court in New York to the Northern
District of Illinois. Federal Rule of Bankruptcy Procedure
1014(b) provides specific transfer procedures that apply
when two petitions involving the same debtor are filed in
different courts. In such cases, “on motion filed in the
district in which the petition filed first is pending and after
hearing on notice to the petitioners, the United States
trustee, and other entities as directed by the court, the
court may determine, in the interest of justice or for the
convenience of the parties, the district or districts in which
the case or cases should proceed” (emphasis added). This
rule suggests that Salem should have requested a transfer
from the Southern District of New York. The fact that the
case there was finished one day before this one was filed
does not relieve him of that obligation. Since he chose not
to file a motion before either court to transfer the two
petitions to the same venue, there was nothing related to
the Chapter 7 case properly before the bankruptcy court in
Illinois upon which it could have acted. See also FED. R.
BANKR. P. 1015(a) (“If two or more petitions are pending in
the same court by or against the same debtor, the court may
order consolidation of the cases.”).
B. Trial Rulings
We need not tarry on Salem’s remaining points, all of
which relate to the bankruptcy court’s management of the
case. For the reasons we explain briefly below, the court did
not abuse its discretion nor did it make any errors of law in
the course of the proceedings.
14 No. 05-1914
1. Expert Appraisal Testimony
The bankruptcy court permitted Neshewat’s expert
appraiser to testify over Salem’s objection. In passing, the
court commented that the principles from Daubert v.
Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993),
apply “with less force in the context of a bench trial” and
reasoned, “I can accept the evidence. And if I find that it’s
not well grounded by experience and expertise in the
witness, I can ignore that. The gatekeeping function that
Daubert talks about is most pointedly at issue in a jury trial
where a jury might be misled by an expert who doesn’t have
sufficient qualifications.”
Salem seizes on this remark and urges us to find that the
court erred as a matter of law by failing to hold the expert
to the standards codified in Federal Rule of Evidence 702
and by finding those standards inapplicable to a bench trial.
He also contends that for the proffered expert to be an
expert in evaluating the worth of a property the expert
necessarily must have expertise in making or estimating
the cost of repairs because, in his view, the value of the
house is significantly reduced because of the need for
extensive repairs.
Salem’s argument misses the bankruptcy court’s point. It
is not that evidence may be less reliable during a bench
trial; it is that the court’s gatekeeping role is necessarily
different. Where the gatekeeper and the factfinder are one
and the same—that is, the judge—the need to make such
decisions prior to hearing the testimony is lessened. See
United States v. Brown, 415 F.3d 1257, 1268-69 (11th Cir.
2005). That is not to say that the scientific reliability
requirement is lessened in such situations; the point is only
that the court can hear the evidence and make its reliability
determination during, rather than in advance of, trial.
Thus, where the factfinder and the gatekeeper are the
same, the court does not err in admitting the evidence
No. 05-1914 15
subject to the ability later to exclude it or disregard it if
it turns out not to meet the standard of reliability estab-
lished by Rule 702.
We see no error in the court’s conclusion that Neshewat’s
expert was entitled to present his testimony. He testified
that he had been certified by the State of New York as an
appraiser for 15 years, that he specialized in residential
appraisals, and that he had performed more than 4,000
appraisals, the majority of which were in the same county
as the Gellatly Drive house. The purpose of an appraisal is
to determine the market value of the existing house, after
all, not to determine how much it would cost to change it,
either by repairs or otherwise. Many properties are sold in
which the appraisal is tied wholly to the value of the land
itself, where it is expected that the building on the property
will be demolished. Furthermore, the bankruptcy court is
quite capable of separating out what the witness is an
expert in and what he is not. The testimony on the market
value of the house was important for determining the
amount of Salem’s equity in the house. This case is light
years away from Ancho v. Pentek Corp., 157 F.3d 512 (7th
Cir. 1998), in which the district court properly excluded a
mechanical engineer’s expert testimony from a case about
an accident in a plant involving moving conveyer belts.
There, the engineer possessed “no expertise in plant design
and [ ] he had failed to observe the transfer car in opera-
tion, much less even take the time to visit the accident site.”
Id. at 516. In this case, the expert appraiser was experi-
enced, had visited the house twice, made appraisals on the
standard form used by Fannie Mae, and had used quantita-
tive sales comparison analysis to help determine the market
value of the house. The bankruptcy court was well within
bounds to permit this testimony.
16 No. 05-1914
2. Discovery
Salem also argues that the bankruptcy court erred in
denying his motion seeking to exclude Neshewat’s evidence
on the basis that Neshewat failed to exchange witness lists
and exhibits by November 24, 2004, and to file witness and
exhibit lists with the court, as required by the amended
trial order. He contends that this prejudiced him by not
permitting him to impeach the appraiser.
In order to prevail, Salem must show both that the
bankruptcy court abused its discretion, Sims v. GC Services
L.P., 445 F.3d 959, 963 (7th Cir. 2006), and that the ruling
worked “to his actual and substantial prejudice,” Walker v.
Mueller Indus., Inc., 408 F.3d 328, 334 (7th Cir. 2005). He
has done neither. The bankruptcy court had a concrete
problem to address, and it adopted a reasonable solution.
Salem claimed that he never received the appraisals and
other documents and that he did not have the expert
witness’s name so as to be able to investigate him.
Neshewat pointed out that the same appraiser was used for
two appraisals, one in February and one in October, that
the appraiser’s name was given to Salem so that the
appraiser could access the house, and that the appraisals
were timely tendered. The other exhibits Neshewat wanted
to use were Salem’s own schedules and plans from the
bankruptcy proceedings in both Illinois and New York.
Neshewat also proffered a fax transmission sheet as proof
that he had complied with the bankruptcy court’s order to
exchange exhibits by November 24.
The bankruptcy court docket confirms that Neshewat filed
a list of witnesses on November 24, 2004, that was modified
on November 29, 2004, to include exhibits. Salem’s com-
plaint about his purported lack of knowledge about the
identity of the expert rings hollow, because the witness list
was filed when it was due. Moreover, given that Neshewat
used the same expert to perform both appraisals and
No. 05-1914 17
arranged for him to be given access to the house in October
2004, Salem had some familiarity with the expert and could
not have been prejudiced as his identity was not a surprise.
Even if Salem might have preferred a different course
of proceedings, he has not shown prejudice from any of the
judge’s decisions. The trial transcript demonstrates that
Neshewat proffered only two significant exhibits—the two
appraisals by his expert, which were on standard forms.
This is not a case with thousands of pages of evidence.
Salem says that with more time he would have had his own
appraiser review the appraisals, but he proffers no evidence
indicating that they have done so and found them to be
flawed. He cross-examined the witness on the appraisals
and the differences between them and on the appraiser’s
lack of expertise regarding repairs. The only limitation
placed on the cross-examination came when Salem engaged
in what can only be described as a classic fishing expedi-
tion, in an attempt to link the expert to various people who,
he alleges, conspired against him in New York. Any trial
court would be well within its discretion to put an end to
such a line of questioning. The bankruptcy court did not
abuse its discretion in its management of the discovery
process.
3. Exclusion of Two Documents
Salem argues that the bankruptcy court erred by exclud-
ing two documents: a 1992 complaint against the builder of
the house, and a decision by a state court dismissing that
complaint. The bankruptcy court found this evidence
irrelevant: “What happened in your litigation with the
developer is not important. The question is what the
condition of the house is right now, regardless of who was
responsible for it.” Salem thinks that the evidence would
have bolstered his own testimony about the defects and
thus the absence of value in the house. We review the
18 No. 05-1914
exclusion of evidence for an abuse of discretion. Goodman
v. Ill. Dept. of Financial and Professional Regulation, 430
F.3d 432, 438-39 (7th Cir. 2005). This evidence, at most,
sheds light on the condition of the house prior to 1992. The
court had before it the more recent appraisals of two
different experts as well as testimony about the condition
of the house. The excluded documents were quite unneces-
sary.
4. Burden of Proof/Ultimate Valuation
The bankruptcy court held that the debtor in a Chapter
13 case “has the burden of establishing each of the elements
for confirmation of a plan and if there is an objection, it
puts the debtor to his proof of each of those elements.” The
bankruptcy court also ultimately held that Salem had
equity in the property, which meant that Neshewat’s
default judgment from New York was secured rather than
unsecured. Salem argues that the bankruptcy court erred
by placing the burden of proof on him to prove an absence
of equity in the house. Instead, he contends, Neshewat
should have been required to produce some evidence before
the burden of proof shifts back to him. He also argues that
the court clearly erred in its ultimate conclusion on the
value of the house.
The allocation of the burden of proof has been the subject
of some debate. Federal Rule of Bankruptcy Procedure
3001(f) makes a proper proof of claim with the accompany-
ing documents “prima facie evidence of the validity and
amount of the claim.” The Supreme Court observed in
Raleigh v. Illinois Department of Revenue, 530 U.S. 15(2000), that “the burden of proof is an essential element of
the claim itself; one who asserts a claim is entitled to the
burden of proof that normally comes with it.” Id. at 21. “The
legislative history indicates that the burden of proof on the
issue of establishing claims was left to the Rules
No. 05-1914 19
of Bankruptcy Procedure.” Id. at 22 n.2. The Court observed
that the rules are “silent on the burden of proof for claims”;
although Rule 3001(f) provides that the claim itself is prima
facie evidence, the Rules are silent as to what to do when a
trustee, or in this case the debtor, “disputes a claim.” Id.This open question has two obvious potential answers. One
is that the submission of the claim itself, with proper
supporting documentation, shifts the burden of production
to the debtor to provide evidence why the claim is invalid,
leaving the burden of persuasion with the creditor. The
alternate is that once the claim is filed, both the burdens of
production and persuasion shift to the debtor.
Interesting though the question may be, we need not
resolve it here, because in the end it makes no difference.
Either way, the bankruptcy court did not clearly err in
finding equity in the Gellatly Drive house. See, e.g., In re
Schoonover, 331 F.3d 575, 577 (7th Cir. 2003). With his
initial objection, Neshewat produced records showing that
the judgment was attached to this house, as well as evi-
dence about the value of the house including Salem’s own
bankruptcy schedule valuing the house at $170,000. Thus,
under Rule 3001(f), Neshewat made a prima facie case.
Then, at the hearing, Neshewat presented the expert
testimony of his appraiser, while Salem presented his. The
court evaluated all the testimony before coming to an
ultimate valuation. Its conclusion, in turn, established
that Neshewat’s judgment was secured.
IV
This court on April 8, 2005, granted a stay of the bank-
ruptcy court’s order dismissing this case. We now AFFIRM
the judgment of the district court affirming the dismissal of
the petition by the bankruptcy court. We also VACATE the
stay to permit the bankruptcy court’s dismissal to take
effect.
20 No. 05-1914
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—10-10-06