Bashir v. Sievers
| Decision Date | 29 March 2018 |
| Docket Number | Case No. 16-cv-1319-DRH,Bankruptcy Case No. 15-31677 |
| Parties | TALAT BASHIR and NAHEED BASHIR, Debtor-Appellants, v. KEVIN SIEVERS and MARY SIEVERS, Claimant-Appellees. |
| Court | U.S. District Court — Southern District of Illinois |
I. Introduction
This is an appeal from the bankruptcy court's November 30, 2016 Order filed by Talat Mahammad Bashir and Naheed Talat Bashir (hereinafter "Appellants") concerning Claim 9-2 filed by Kevin and Mary Sievers (hereinafter "Appellees"). Following a trial on the matter, the bankruptcy court ultimately allowed Appellees an unsecured claim in the amount of $57,595.77 against Appellants. (In re Talat Mahammad Bashir and Naheed Talat Bashir, BK Case No. 15-31677, Doc. 1).1 For the reasons set forth below, the Court AFFIRMS in part and REVERSES in part the bankruptcy court's Order.II. Background
In 2008, Appellee Kevin Sievers, a general contractor, built a seven bedroom residential property at 61 Solar Circle, Litchfield, Illinois. Sievers was unable to sell the property because of the market crisis, so in 2010, he entered into a two-year lease with Appellants Talat and Naheed Bashir. Prior to the Bashirs, Appellee's sons were residing on the property.
The lease provided that the Appellants would pay $3000 per month in rent, the home would remain on the market to be shown during the rental period, and the Appellants would return the home "in its present condition" upon vacating the premises. When the lease expired, Appellants stayed in the home and continued renting the property month-to-month until June 30, 2012, when a one-year lease renewal was executed. The lease renewal agreement raised rent to $4000 per month, of which $1000 was designated for the cost of repairs to the home each month. Appellants later vacated the premises in early July 2013.
After moving out of the home in July 2013, Appellees sent Appellants a bill for $67,000 to cover repairs to the home following their residency. This amount was above the approximately $15,000 Appellants had already paid for repairs. Appellees allege that the Appellants family severely damaged the property to a tune of roughly $80,000. Appellants challenged the bill and Appellees ultimately filed suit in Montgomery County, Illinois, on October 22, 2013.
Subsequent to the Montgomery County action, on October 23, 2015, Appellants filed a Chapter 13 bankruptcy petition. (Bk.Doc. 173). Thereafter, theyfiled a Schedule F, setting forth creditors with unsecured non-priority claims, which identified Appellees Kevin and Mary Sievers as holding a "contingent, unliquidated, disputed" claim of unknown value, subject to the pending litigation in Montgomery County (Bk.Doc. 27). Appellees filed a "Proof of Claim" (Claim 9-1) on January 28, 2016, which was later amended in February (Claim 9-2), alleging a claim of $65,232.96 for damages pursuant to the aforementioned lease and lease renewal. Appellants objected to the claim on various grounds. (Bk.Doc. 81).
On May 19, 2016, the bankruptcy court entered a pre-trial order setting a discovery deadline of July 18, 2016, and scheduled trial on the Appellees' claim for August 18, 2016. (Bk.Doc. 115). On July 22, 2016, Appellants filed a memorandum regarding the status of the case, in which they notified the Court that Appellants' counsel received no discovery responses from Appellees on or before the July 18, 2016 deadline. (Bk.Doc. 124). Thereafter, on July 26, 2016, Appellants filed a motion to show cause for Appellees failure to comply with the bankruptcy court's May 19, 2016 Order. (Bk.Doc. 129). The motion requested that Appellees' claim be disallowed entirely, or in the alternative, sanctions be imposed in the form of attorneys' fees and stricken pleadings. (Id.).
Appellees provided discovery on August 1, 2016, and later filed an objection to the motion to show cause. They argued that the documents provided were virtually identical to those documents already provided in the Montgomery County case (Bk.Doc. 146). A hearing on the motion took place on August 11, 2016, during which the bankruptcy court held that "Kevin & Mary Sievers areprohibited from introducing at the trial any new documents that were not previously in discovery." (Bk.Doc. 147). Appellants request for sanctions was denied. The trial on Appellee's Claim 9-2 was also continued until October 6, 2016. (Id.). Thereafter, on the Appellants' motion (Bk.Doc. 164), the evidentiary hearing was again continued until November 22, 2016 (BK.Doc. 165).
The bankruptcy court held a trial concerning Claim 9-2 and Appellants' objection to the claim on November 22, 2016, and November 29, 2016. At the conclusion of the trial, the bankruptcy court announced its' findings of fact and conclusions of law on the record (Bk.Doc. 173). Thereafter, the bankruptcy court issued a written Order finding that Appellees had an allowed unsecured claim in the amount of $57,595.77 (id.).
Appellants subsequently filed a notice of appeal to have the matter reviewed by this Court on December 8, 2016 (Doc. 1). Appellants filed their brief in support of the appeal on April 7, 2017 (Doc. 17). Thereafter, on May 16, 2017, Appellees filed their brief seeking that the bankruptcy court's order be affirmed in its entirety (Doc. 27), to which Appellants replied (Doc. 37). The Court set the matter for hearing, and on July 20, 2017, the Court heard oral arguments on the appeal (Doc. 41).
III. Standard of Review
Pursuant to 28 U.S.C. § 158, a federal district court has jurisdiction to hear appeals from the rulings of the bankruptcy court. District courts apply a dual standard of review in bankruptcy appeals. The bankruptcy judge's findings of factare reviewed for clear error, while conclusions of law are reviewed de novo. First Weber Group, Inc. v. Horsfall, 738 F.3d 767, 776 (7th Cir. 2013); Stamat v. Neary, 635 F.3d 974, 979 (7th Cir. 2011); Wiese v. Cmty. Bank of Cent. Wis., 552 F.3d 584, 588 (7th Cir. 2009) In re ABC-Naco, Inc., 483 F.3d 470, 472 (7th Cir. 2007). "A finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed." Anderson v. Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)). The Court reviews mixed questions of fact and law de novo. Mungo v. Taylor, 355 F.3d 969, 974 (7th Cir. 2004).
IV. Analysis
In this case, Appellants present three issues as the basis for their appeal of the bankruptcy court's Order concerning Claim 9-2: (1) whether the bankruptcy court applied the proper burdens of proof and persuasion to Appellees' Claim 9-2; (2) whether the bankruptcy court abused its discretion in denying Appellants' request for sanctions based on Appellees' delay in providing discovery responses; and (3) whether the bankruptcy court erred in failing to apply, or consider, Illinois landlord-tenant, contract or tort law in determining the validity and amount of Appellees' claim for property damages. The Court shall address each in turn.
Appellants first argue that the bankruptcy court committed reversible error in erroneously shifting the burdens of proof and persuasion to them in order to disprove Appellees' Claim 9-2. Specifically, Appellants argues that Claim 9-2 failed to comply with Rule 3001(f)'s mandate that a claim must be filed "in accordance with these rules." As such, the claim was entitled to no prima facie assumption of validity. Appellants go on to argue that even if the claim was prima facie valid, Appellees' bore the burden to produce evidence proving their claim and the demanded damages amount. Appellants argue that the bankruptcy court erred in assigning both the burden of going forward and the burden of persuasion to Appellants. Appellee argues that the bankruptcy court's allocation of burdens was correct pursuant to Rule 3001.
Bankruptcy Rule 3001 sets forth the procedures under which claims are filed and adjudicated. The procedural rules applicable to this particular case are as follows:
As cited above, a properly executed and filed proof of claim is prima facie evidence that a claim is valid. FED. R. BANKR.P. 3001(f); In re AiradigmCommunications, Inc., 616 F.3d 642, 659 (7th Cir.2010); Matter of Carlson, 126 F.3d 915, 921-22 (7th Cir.1997). A proof of claim is sufficient if it conforms substantially to Official Form 10, see FED. R. BANKR.P. 3001(a), and gives specific notice of the creditor's intent to hold the bankruptcy estate liable for a debt or other right to payment. In re marchFirst, Inc., 431 B.R. 436, 443 (Bankr.N.D.Ill.2010); In re Hood, 449 F. App'x 507, 509 (7th Cir. 2011). Official Form 10 instructs the claimant to "attach copies of supporting documents, such as promissory notes, purchase orders, invoices, itemized statements of running accounts, contracts, court judgments, mortgages, security agreements, and evidence of perfection of liens."
Prima facie validity simply means that all the facts in the claim are presumed to be true unless disproved by some evidence to the contrary. If a claim's prima facie validity is lost, then the creditor has the initial burden of proving that the claim exists and the amount of that claim. Bankruptcy Rule 3001 provides that proof of claim filed in accordance with...
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