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*

This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8013-1.

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NC-11-1729-MkHPa

)

FIRST STREET HOLDINGS NV, LLC,) Bk. No. 11-49300

et al., ) (jointly administered with

) Bk. Nos. 11-49301, 11-70224,

Debtors. ) 11-70228, 11-70229, 11-70231,

______________________________) 11-70232, 11-70233 & 11-70234)

) 

FIRST STREET HOLDINGS NV, LLC;)

LYDIAN SF HOLDINGS, LLC; ) 

78 FIRST STREET, LLC; 88 FIRST)

STREET, LLC; 518 MISSION, LLC;)

FIRST/JESSIE, LLC; JP CAPITAL,)

LLC; PENINSULA TOWERS, LLC; )

SIXTY-TWO STREET, LLC, )

)

Appellants, )

)

v. ) MEMORANDUM*

)

MS MISSION HOLDINGS, LLC, )

)

Appellee. )

______________________________)

Argued and Submitted on October 18, 2012

at San Francisco, California

Filed – December 5, 2012

Appeal from the United States Bankruptcy Court

for the Northern District of California

Honorable Roger L. Efremsky, Bankruptcy Judge, Presiding 

Appearances: Robert G. Harris, Esq. of Binder & Malter, LLP

argued for Appellants; Harvey A. Strickon, Esq. of

Paul Hastings LLP argued for Appellee. 

Before: MARKELL, HOLLOWELL and PAPPAS, Bankruptcy Judges.

FILED

DEC 05 2012

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
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1

Unless specified otherwise, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and

all “Rule” references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001-9037. All “Civil Rule” references are to

the Federal Rules of Civil Procedure.

2

INTRODUCTION

Debtor First Street Holdings NV, LLC (“First Street”) and

its affiliates (collectively, “First Street Parties”) seek review

of an order granting relief from the automatic stay under

11 U.S.C. § 362(d)(1) and (2).1

 That order terminated the stay

as to all of the First Street Parties’ real property

(“Properties”), which allowed the movant, secured creditor

MS Mission Holdings, LLC (“Mission”), to proceed with foreclosure

sales against the Properties. The order also terminated the stay

as to all other property of the estate in which Mission held a

security interest. For the reasons stated below, we VACATE AND

REMAND for further proceedings.

FACTS

1. The key players and the underlying loan transaction

In 2006, some of the First Street Parties entered into a

loan agreement (“Loan”) with Mission’s predecessor in interest

Capital Source Financing LLC (“CSF”). The purpose of the Loan

was to enable the First Street Parties to refinance their

acquisition of the Properties and to finance certain development

planning costs. The First Street Parties hoped to obtain all of

the entitlements and approvals necessary to permit themselves or

a future owner of the Properties to tear down the existing

buildings on the Properties and build new, higher-density,

high-rise office, residential and hotel buildings. According to
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2The seven Project Entities were: (1) Sixty-Two First

Street, LLC; (2) 78 First Street, LLC; (3) 88 First Street, LLC;

(4) First/Jessie, LLC; (5) 518 Mission, LLC; (6) JP Capital, LLC;

and (7) Peninsula Towers, LLC.

3The two Holding Entities were: (1) First Street Holdings

NV, LLC; and (2) Lydian SF Holdings.

3

the First Street Parties, their prospective development plan was

linked to the City and County of San Francisco’s Transit Center

District Plan.

Seven of the nine First Street Parties were borrowers under

the Loan. The First Street Parties referred to these seven

borrowing entities as the project-level entities (collectively, 

“Project Entities”).2 The other two First Street Parties

essentially were holding companies (jointly, “Holding

Entities”).3 Between them, the Holding Entities held all of the

membership interests in the Project Entities (“Membership

Interests”).

The Loan was to be made in the principal amount of

$67.1 million, and over $52 million was immediately funded at the

time the Loan transaction closed. At the time of the filing of

Mission’s first relief from stay motion, Mission claimed that the

outstanding Loan balance exceeded $95 million. For their part,

the First Street Parties admitted that roughly $80 million was

owed on the Loan as of the time of their bankruptcy filings. 

However, the First Street Parties claimed that the amount owed to

Mission was subject to a number of different defenses,

counterclaims, offsets and an equitable subordination claim, all

of which would effectively reduce the net amount owed by a
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4

The First Street Parties further admitted that they had

defaulted on their interest-only payments under the Loan

beginning in April 2008 and that the loan had matured in

May 2009.

5

The First Street Parties also claimed that Mission held a

security interest in certain transferrable development rights

allegedly worth $8 million (“TDR’s”). Mission did not

specifically address the TDR’s in any of its relief from stay

motions, nor did it talk about them in its appeal brief. On the

other hand, the language in the order granting Mission’s relief

from stay motion was broad enough to permit Mission to enforce

any liens it had against any and all property of the estate,

including the TDR’s. We cannot tell from the briefs of either

side or from the record whether the TDR’s have been foreclosed

upon or whether Mission even has tried to foreclose upon the

TDR’s.

6

For ease of reference, we collectively refer to all of

Mission’s relief from stay motions in the singular, as Mission’s

“relief from stay motion.”

4

significant but unknown amount.4

Among other things, the Loan was secured by deeds of trust

covering the Properties and by pledge agreements covering the

Membership Interests. Prior to the First Street Parties’

bankruptcy filings, foreclosure was imminent on both the

Properties and the Membership Interests.5

2. The bankruptcy filings and Mission’s relief from stay motions

The Holding Entities filed their chapter 11 bankruptcy cases

on August 30, 2011, and the Project Entities filed their

chapter 11 bankruptcy cases roughly one month later, in September

2011.

Mission soon filed motions for relief from stay in each of

the bankruptcy cases, which the bankruptcy court consolidated for

hearing and determination.6

 Mission asserted that it was

entitled to relief from stay on three independent grounds. These
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7

As discussed at length below, the scheduling deadlines and

the bankruptcy court’s scheduling order became a major source of

contention, and our disposition of this appeal hinges on them.

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were: (i) § 362(d)(2), because the First Street Parties had no

equity in the Properties and they were not necessary for an

effective reorganization; (ii) § 362(d)(1), because cause existed

due to a lack of adequate protection of Mission’s interest in the

Properties; and (iii) § 362(d)(1), because cause existed where

the bankruptcy cases had been filed in bad faith.

The bankruptcy court held a preliminary hearing on

October 5, 2011 and a scheduling conference on October 12, 2011,

which produced various scheduling deadlines and a scheduling

order. In setting its scheduling deadlines and issuing the

scheduling order, the court endeavored to enable the parties to

complete all reasonably necessary trial preparation in time for a

final hearing to be held on December 1 and 2, 2011. If those

dates were not sufficient, the court reserved an additional date

of December 16, 2011 to be used if necessary.7

After the entry of the scheduling order, on November 9,

2011, the First Street Parties filed an objection to Mission’s

proof of claim. In addition, the First Street Parties filed an

adversary complaint against CSF, Mission and others. In relevant

part, the First Street Parties sought equitable subordination of

Mission’s claim. Both the equitable subordination complaint and

the claim objection, however, were based on the same type of

unsubstantiated allegations as were stated in the First Street

Parties’ opposition to the relief from stay motion.

More importantly, to bolster its argument that it had
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realistic prospects of an effective reorganization, on

November 29, 2011, the First Street Parties filed a draft joint

disclosure statement and plan of reorganization.

The disclosure statement’s plan summary identified the

following key plan terms:

! Substantive Consolidation of the First Street Parties’

cases.

! Monthly payment of net rents to Mission beginning

ninety days after plan confirmation (“Effective Date”).

! On account of interest payments to be paid under the

plan, a lump sum payment to Mission of up to $3 million

at the end of the first year after the Effective Date,

and a lump sum payment of up to $5.5 million at the end

of the second year after the Effective Date.

! The amount of the lump sum payments to be made under

the plan would be based on the difference between the

applicable market rate of interest as determined by the

court and the net rents paid to Mission.

! A final lump sum payment to Mission on the three-year

anniversary of the Effective date, which payment would

fully pay off the remaining balance owed to Mission,

including all remaining interest, fees and charges

owed, but also after liquidating and accounting for all

defenses, counterclaims and offsets that the First

Street Parties claimed to hold against Mission.

! Funding of the Plan by renting out all existing and

future rental space available in the buildings on the

Properties.
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8

The bankruptcy court excluded most of Choo’s direct

testimony when it granted Mission’s motions in limine numbers

2 & 3. The First Street Parties challenged these evidentiary

rulings on appeal, but in light of our disposition of this

appeal, we do not need to reach this issue.

7

3. The final relief from stay hearing

The final hearing on Mission’s relief from stay motion was

held as scheduled on December 1 and 2, 2011. The tenor of the

proceedings shifted significantly, however, when the bankruptcy

court granted Mission’s motions in limine seeking to exclude all

of the testimony of the First Street Parties’ non-appraiser

expert witnesses. The bankruptcy court excluded this testimony

on the basis that the First Street Parties had not timely

disclosed their intent to call any non-appraiser experts as

witnesses. In holding that the disclosure was untimely, the

court relied upon an oral scheduling deadline that was not

included in the court’s written scheduling order.

The court did allow non-expert declarations in lieu of live

direct testimony, and heard live testimony on cross-examination

and on redirect examination from Mission’s percipient witness

John Herr and from the First Street Parties’ percipient witness

David Choo.8 The court also heard the expert testimony of

Mission’s appraiser Robert Farwell (“Farwell”) and of the First

Street Parties’ appraiser Donn Byrne, Jr. (“Byrne”). The court

accepted into evidence both expert appraisals.

The bankruptcy court stated its ruling on valuation of the

Properties at the beginning of the second day of trial, on

December 2, 2011. The court found that both appraisers were good

expert witnesses and that they had submitted good appraisal
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9

The draft EIR (hereinafter referred to as the “EIR”) was

issued by the City and County of San Francisco’s Planning

Department in conjunction with their draft Transit Center

District Plan. Both of these documents are discussed in more

detail in our merits discussion, infra.

8

reports. But the court ultimately held that it would accept

Farwell’s $70.7 million valuation of the Properties “as being the

best evidence as to what the current value of the subject

property at the time this motion for relief from stay was filed

and is being determined . . . .” Trial Trans. (Dec. 2, 2011) at

7:5-8.

Critical to this appeal, the bankruptcy court essentially

rejected Byrne’s $140 million valuation as being too speculative

and hypothetical:

[W]hat troubled the Court were the specific assumptions

that Mr. [Byrne] was required to make. Specifically, he

was to assume that the draft EIR,9

 which is Exhibit #4,

had been [approved], and he was to make specific

assumptions about the square footage about the

building, effectively, or the -- what could be built

upon, which is approximately a seven-fold increase of

the existing floor space of existing buildings on the

Debtors' properties. And in doing that, he came up with

a hypothetical valuation of $140 million.

The problem is, as is also set out in the draft EIR, in

the intended uses of the EIR and the approvals

required, Mr. [Byrne] acknowledged that there were

still 14 points, which are set out at Page 49 of the

draft EIR, I believe it's in Chapter 2, the Project

Description under Subsection "Intended Use of the EIR,

Proof or Requirements" that had not been made. There

still needed to be amendments to the general plan, a

determination of the consistency of the proposed

general plan amendments and the rezoning of the general

plan and Planning Code Section 1.1.1 of the priority

policies of the Planning Commission, amendments of the

Planning Code to create new height in both districts

greater than the current maximum 550 feet, establish

building set-back, separation of tower requirements to

the buildings taller than 550 feet, and it goes on from

there.
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9

Trial Trans. (Dec. 2, 2011) at 4:22-5:19; see also id. at 5:20-

6:15 (listing numerous other EIR contingencies). However, if the

bankruptcy court had admitted the excluded non-appraiser expert

testimony, much of Byrne’s $140 million valuation could have been

corroborated. 

For purposes of determining whether the First Street Parties

had any equity in the Properties, the bankruptcy court found that

the First Street Parties had admitted in a verified complaint

they filed in state court that the minimum amount owed to Mission

was $77.9 million. 

Also critical to this appeal, the bankruptcy court rejected

the First Street Parties’ argument that the amount of Mission’s

claim for purposes of determining equity in the Properties should

be reduced on account of the First Street Parties alleged

defenses, offsets, counterclaims and First Street’s equitable

subordination claim. The court rejected this argument in part

because, having granted the motion in limine excluding the First

Street Parties’ non-appraiser expert testimony, the First Street

Parties had offered no admissible evidence to support their

alleged defenses, offsets, counterclaims and equitable

subordination claim.

The bankruptcy court also found that the First Street

Parties had not proven that they had a reasonable possibility of

an effective reorganization within a reasonable time. The court

noted that the proposed plan likely qualified as a negative

amortization plan, which would be difficult to confirm under the

best of circumstances. The court also noted that the Properties

as of the time of the hearing did not generate enough monthly
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rents to pay monthly operating expenses and property taxes. The

court also doubted that the First Street Parties could raise

sufficient plan funding, as they had proposed, by renting out

additional available space in the buildings on the Properties. 

The bankruptcy court also based its reorganization finding

on the EIR contingencies and on the speculative nature of the

First Street Parties’ development plans:

Frankly, there are just too many uncertainties that

exist at this time. As the Court has noted with

respect to the draft EIR, there are still 14 hurdles

that need to be overcome before the draft EIR can be

confirmed. And there's been argument that the draft

EIR might be approved within the next three to four

months, but again, there's testimony that it should

have been approved over two years ago. And given the

present economy in San Francisco and Northern

California and the country as a whole, the Court has

serious concerns whether it would be serious money that

would come in to try to develop such a project within

the next three, four or five years, if at all, unless

things markedly improve, especially here in the San

Francisco Bay Area.

Trial Trans. (Dec. 2, 2011) at 113:20-114:7.

The bankruptcy court ruled against alternately granting

relief from stay on the grounds of bad faith. According to the

court, there had been no showing of bad faith by the First Street

Parties.

But the bankruptcy court did alternately grant relief from

stay under § 362(d)(1) based on lack of adequate protection. The

court explained:

Section 363(e) of the Bankruptcy Code requires that the

Debtors provide adequate protection to Movant as a

condition of the Debtor's use of the property. The

Debtor's revenue stream from the property is

insufficient to even cover operating expenses, as

previously noted, let alone to provide adequate 

protection to Movant, and the Debtors have no other

source of income other than the proposed sale of

possibly the 81st property or the TDRs. The Debtors
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10This ruling did not seem to be in accord with the facts. 

As an apparently undersecured creditor, Mission only was entitled

to adequate protection payments to the extent its interest in the

Properties was depreciating from the petition date. See First

Fed. Bank of Cal. v. Weinstein (In re Weinstein), 227 B.R. 284,

296 (9th Cir. BAP 1998) (citing United Sav. Ass'n of Tex. v.

Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 382

(1988)). The bankruptcy court made no finding that the

Properties were depreciating, nor are we aware of any evidence in

the record to that effect. Nonetheless, in light of our

disposition of this appeal, we need not further address the

bankruptcy court’s adequate protection ruling.

11

have no assets from which to make postpetition payments

to any party, and no equity cushion exists to protect

the Movant.

Trial Trans. (Dec. 2, 2011) at 115:3-12.10

The bankruptcy court entered its order granting relief from

stay on December 7, 2011, and the First Street Parties timely

appealed on December 20, 2011.

JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334 and 157(b)(2)(G). We have jurisdiction under 28 U.S.C.

§ 158, subject to the discussion set forth immediately below.

During the course of this appeal, after the First Street

Parties advised the Panel that Mission had completed its

foreclosure sales of the Properties, the Panel issued an order

directing the First Street Parties to explain why the foreclosure

sales did not render this appeal moot. After the First Street

Parties responded, a motions panel issued an order deeming the

mootness issue satisfied.

We adopt the motions panel’s mootness ruling. Generally

speaking, an appeal from an order denying or terminating an

injunction becomes moot when the action sought to be enjoined
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11We must acknowledge that our conclusion regarding mootness

leaves us with little satisfaction. Given that all of the

Properties have been foreclosed upon, the potential that

remanding this matter would have any practical or beneficial

impact on any party seems remote. Nonetheless, in light of the

established standard of proof for declaring a matter moot, we see

no alternative to the conclusion we have reached.

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already has occurred. Vegas Diamond Props., LLC v. F.D.I.C.,

669 F.3d 933, 936 (9th Cir. 2012); see also Murphy v. Hunt,

455 U.S. 478, 481 (1982) (holding that a case typically becomes

moot when the issue presented no longer is “live” or when the

parties lack a cognizable interest in the case’s outcome).

Notwithstanding the sale of the Properties here, we have no 

evidence of the sale of the other collateral securing Mission’s

claim. No one has advised us that all of the Membership

Interests or the TDR’s have been sold. As a result, we cannot

conclude that this appeal is moot. Cf. Motor Vehicle Cas. Co. v.

Thorpe Insulation Co. (In re Thorpe Insulation Co.), 677 F.3d

869, 882 (9th Cir. 2012) (stating that the party seeking

dismissal of an appeal based on mootness must demonstrate that

the appeal is moot). Accordingly, we will proceed to consider

the merits of the appeal.11

ISSUES

1. Did the bankruptcy court abuse its discretion when it

granted Mission’s relief from stay motion?

2. Did the bankruptcy court abuse its discretion when it

excluded the expert testimony of the First Street Parties’

non-appraiser experts?
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STANDARDS OF REVIEW

This Panel reviews the bankruptcy court’s relief from stay

order for abuse of discretion. First Yorkshire Holdings, Inc. v.

Pacifica L 22, LLC (In re First Yorkshire Holdings, Inc.),

470 B.R. 864, 868 (9th Cir. BAP 2012). This Panel also reviews

the bankruptcy court’s evidentiary rulings for abuse of

discretion. Johnson v. Neilson (In re Slatkin), 525 F.3d 805,

811 (9th Cir. 2008) (citing Latman v. Burdette, 366 F.3d 774, 786

(9th Cir. 2004)).

Under the abuse of discretion standard of review, we first

"determine de novo whether the [bankruptcy] court identified the

correct legal rule to apply to the relief requested." United

States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc). 

And if the bankruptcy court identified the correct legal rule, we

then determine under the clearly erroneous standard whether its

factual findings and its application of the facts to the relevant

law were: "(1) illogical, (2) implausible, or (3) without support

in inferences that may be drawn from the facts in the record."

Id. (internal quotation marks omitted).

DISCUSSION

We first consider the First Street Parties’ contention that

the bankruptcy court improperly excluded the testimony of their

non-appraiser experts.

At the December 1, 2011 hearing, the bankruptcy court

granted Mission’s motions in limine which sought to exclude the

declaration testimony of the First Street Parties’ four

non-appraiser expert witnesses (collectively, “Non-Appraiser

Experts”). The court held that the First Street Parties had not
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timely disclosed their intent to call the Non-Appraiser Experts

as witnesses. According to the court, this lack of timely

disclosure justified the exclusion of all Non-Appraiser Expert

testimony.

The First Street Parties’ Non-Appraiser Experts included:

1. John Graziano (“Graziano”) – a real estate broker who

described himself as an expert regarding the servicing

of commercial real estate loans and who proposed to

testify regarding CSF’s allegedly improper servicing of

the Loan. 

2. Randy Sugarman (“Sugarman”) - who described himself as

a Certified Public Accountant, a Certified Fraud

Examiner, and a Certified Insolvency and Reorganization

Accountant. Sugarman proposed to testify regarding,

among other things, Mission’s accounting of the amount

it claimed was owed under the Loans.

3. D. Paul Regan (“Regan”) - who described himself as a

Certified Public Accountant and a Certified Fraud

Examiner. Similar to Sugarman, Regan proposed to

testify regarding the accounting on which Mission’s

claim was based.

4. Michael J. Burke (“Burke”) who described himself as a

licensed attorney with over thirty years of experience

in land use development, zoning, and real estate law in

San Francisco.

Burke’s proposed testimony seemed particularly pertinent to

the parties’ ongoing dispute over valuation of the Properties,

which in turn implicated the court’s findings on several key
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issues, including the First Street Parties’ lack of equity in the

Properties, the First Street Parties’ prospects for an effective

reorganization, and whether Mission’s interest in the Properties

was adequately protected. Burke’s proposed expert testimony

offered a relatively straightforward explanation of the alleged

link between the various draft development plans affecting the

Properties and the value of the Properties.

More specifically, Burke was prepared to testify regarding

what he described as the impending approval of San Francisco’s

Draft Transit Center District Plan (“TCD Plan”) and the impending

certification of the EIR accompanying the TCD Plan. According to

Burke, “[i]t is inconceivable to me that the [TCD Plan] will not

be adopted.” Burke Decl. (Nov. 18, 2011) at ¶ 7.

Furthermore, Burke predicted that the San Francisco Planning

Commission would certify the EIR by February 2012 and that the

San Francisco Board of Supervisors would approve the TCD Plan by

April or May 2012. Id. at ¶¶ 8, 11. Burke further stated that

the approval of the TCD Plan would result in the rezoning of the

TCD Plan area, which included the site on which the First Street

Parties’ Properties were located (referred to in Burke’s

declaration as the “50 First Street Site”). Id. at ¶ 3. As Burke

put it, the rezoning would, in turn, immediately increase the

value of the Properties because the rezoning would increase the

permitted development density on the Properties by raising both

existing height limits and Floor-to-Area Ratio limits, known as

“FARs.” Id. at ¶¶ 5, 6.

We have painstakingly reviewed the record in order to fully

understand all of the events leading up to the bankruptcy court’s
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12The record does not include an official transcript of the

October 12 Conference, but it does include an unofficial

transcript prepared and offered by the First Street Parties

(“October 12 Transcript”). Mission has not objected to the

October 12 Transcript or challenged its accuracy, so we will

accept it as a generally accurate transcription of the October 12

Conference. While there are certain apparent omissions and

inaccuracies, the key points and themes are reiterated several

times and there can be no reasonable doubt as to what materially

transpired.

16

exclusion of the Non-Appraiser Expert testimony. The most

significant events included:

• The status and scheduling conference held on October 12,

2011;12

• The scheduling order entered on October 14, 2011;

• The motion to correct or clarify the October 14 scheduling

order filed by Mission on November 7, 2011;

• The order amending the October 14 scheduling order entered

on November 9, 2011;

• The First Street Parties’ November 17, 2011 motion to

correct or clarify the amended scheduling order;

• The order denying the First Street Parties’ November 17

motion entered on November 18, 2011;

• The First Street Parties’ November 17 and 18, 2011 filing

and service of their Non-Appraiser Expert Declarations;

• Mission’s November 29, 2011 motions in limine numbers 5 - 8;

• The First Street Parties’ November 30, 2011 opposition to

the motions in limine;

• The December 1, 2011 hearing on motions in limine numbers

5 - 8, held in the midst of the final relief from stay

hearing. 
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13A full narrative summary of relevant events and documents

is attached to this decision as an Appendix.

17

Recounting all of the tortuous facts arising from these

events would be unduly lengthy and confusing, so this Panel

instead will focus on the key points – those essential facts

which are not subject to reasonable dispute and on which our

decision hinges.13

At the October 12 scheduling conference, the bankruptcy

court repeatedly expressed concern regarding its duty under

§ 362(e)(1) to hold the final relief from stay hearing within

thirty days of the preliminary hearing. The court was aware of

no compelling circumstances that would have permitted it to

extend the final hearing beyond December 1, 2 and 16, 2011, which

were the first three days available on the bankruptcy court’s

calendar for the court to hear the matter. The First Street

Parties have not challenged the court’s determination that it

needed to hear the matter on the first dates it had available.

With the concern regarding § 362(e)(1) in mind, the

bankruptcy court orally stated at the October 12 conference

various deadlines for disclosure of witnesses, the exchange of

witness declarations, the deposing of witnesses, and so on.

The bankruptcy court’s October 14, 2011 scheduling order did

not track what the court stated on the record on October 12. 

This scheduling order not only was internally inconsistent but

also was inconsistent with the various deadlines the court orally

stated on October 12. Despite this, Mission waited until

November 7, 2011 to file a motion addressing these problems with
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18

the October 14 scheduling order. In response, the bankruptcy

court revised its October 14 scheduling order on November 9.

The First Street Parties waited even longer, until

November 17, 2011, to file their motion to correct or clarify the

October 14 scheduling order, as amended by the court on

November 9, 2011. According to the First Street Parties, they

were not concerned about the contents of the October 14

scheduling order until the court amended that order on

November 9, 2011.

Before the First Street Parties filed their Non-Appraiser

Expert declarations on November 17 and 18, 2011, they made no

attempt to disclose the identity or existence of their

Non-Appraiser Experts. This conduct was inconsistent with:

(1) the bankruptcy court’s oral deadline, stated on October 12,

2011, for both parties to disclose their expert and non-expert

witnesses by no later than October 31, 2011; and (2) the general

intent of the court to have both parties avoid unnecessary

surprises and delay by disclosing the identity of all of their

witnesses, expert and non-expert, as soon as practicable.

In excluding all of the First Street Parties’ Non-Appraiser

Expert testimony, the bankruptcy court in essence relied upon and

enforced its oral deadline, stated on October 12, 2011, for both

parties to disclose their expert and non-expert witnesses by no

later than October 31, 2011. But there was nothing on the face

of the October 14 scheduling order providing any deadline for

disclosing the identity of non-appraiser experts. When the court

amended the October 14 scheduling order on November 9, 2011, it

sua sponte deleted any provision that would have permitted either
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side to identify any non-appraiser expert witness. This too

amounted to enforcement of the October 12 oral scheduling

deadlines. As far as the court was concerned, the parties had in

essence waived their right to call any non-appraiser expert

witnesses by not disclosing them by October 31, 2011.

With these facts and circumstances in mind, we must hold

that the court erred as a matter of law when it excluded the

First Street Parties’ Non-Appraiser Expert testimony. We know of

no rule or case authority that permits a court to exclude a

significant portion of a party’s evidence as a means of enforcing

an oral scheduling deadline when the court did not include that

deadline in its subsequent written scheduling order. As a matter

of law, a formal written order controls over an inconsistent oral

ruling. See Cashco Fin. Servs., Inc. v. McGee (In re McGee),

359 B.R. 764, 774 n.9 (9th Cir. BAP 2006); see also Rule 9021

(stating that judgments and orders are effective when entered on

the docket by the clerk). 

The October 14 scheduling order contained a provision,

paragraph 10(b), which permitted the parties to file and serve

non-appraiser expert declarations by no later than November 29,

2011. But the same order did not contain any deadline for either

side to disclose the identities of the non-appraiser expert

witnesses who would provide these declarations. Thus, by

omitting the disclosure deadline, the October 14 scheduling order

was inconsistent with the bankruptcy court’s October 12 oral

scheduling deadlines. 

Neither side has cited us to any rule or case authority that

would permit the type of deadline enforcement the bankruptcy
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14We note the additional problem that the most relevant 

rule cited, Rule 7016, only applies in Rule 9014 contested

matters when the court explicitly directs that it will apply. 

See Rule 9014(c). There was no such explicit direction here. 

Nonetheless, if the October 12 oral scheduling deadline had been

included in the October 14 scheduling order, we suspect that the

bankruptcy court properly could have enforced that deadline under

Rule 7016 even if the court had not explicitly designated Rule

7016 for application in this contested matter. See Adams v.

Dorsie's Steak House, Inc. (In re Dorsie's Steak House, Inc.),

130 B.R. 363, 365-66 (D. Mass. 1991).

20

court employed here. The Rules, Civil Rules and cases the

parties cite are inapposite because they all involve deadlines,

requirements or restrictions written into the rules themselves or

contained in a written order of court. See, e.g., Rules 7016,

7026 and 7037 (incorporating Civil Rules 16, 26 and 37); Price v.

Syedel, 961 F.2d 1470, 1474 (9th Cir. 1992).14

While the First Street Parties did not specifically couch

their challenge to the bankruptcy court’s evidentiary ruling in

due process terms, the issue raised is fundamentally one of a

lack of due process. 

Due process requires reasonable notice and a meaningful

opportunity to be heard. See Mullane v. Cent. Hanover Bank &

Trust Co., 339 U.S. 306, 314 (1950); see also Mathews v.

Eldridge, 424 U.S. 319, 333 (1976) (“The fundamental requirement

of due process is the opportunity to be heard at a meaningful

time and in a meaningful manner.”); Berry v. U.S. Tr. (In re

Sustaita), 438 B.R. 198, 210 (9th Cir. BAP 2010), aff'd, 460 Fed.

Appx. 627 (9th Cir. 2011) (“prior to sanctioning a party, the

court must provide the party to be sanctioned with particularized

notice to comport with due process.”). 
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15We further note that, in their November 17, 2011 motion to

correct or clarify the amended version of the October 14

scheduling order, the First Street parties suggested that a brief

extension of the deadline to depose their Non-Appraiser Experts

would remedy any prejudice to Mission. However, the bankruptcy

court’s November 18, 2011 order denying the First Street Parties’

November 17, 2011 motion indicates that the bankruptcy court

refused to consider the extent of prejudice to Mission, whether

that prejudice could have been remedied by a brief extension of

the discovery deadline, or whether any sanction less than the

exclusion of all Non-Appraiser Expert testimony would have

sufficed under the circumstances to enable to court to maintain

control over its docket and to ensure the timely and fair

resolution of Mission’s relief from stay motion. Even if the

October 12 oral scheduling deadline had been enforceable under

Rule 7016, it would have been appropriate for the bankruptcy

court to consider these types of issues before excluding all of

the Non-Appraiser Expert testimony. See generally Price,

961 F.2d at 1474 (listing factors the trial court must consider

before excluding unlisted witnesses).

16In order to reverse based on either an erroneous

evidentiary ruling or on a due process violation, we must

conclude that the appellant was prejudiced. See Rosson v.

Fitzgerald (In re Rosson), 545 F.3d 764, 776 (9th Cir. 2008);

Harper v. City of Los Angeles, 533 F.3d 1010, 1030 (9th Cir.

2008).

21

In light of all of the circumstances set forth above, we

cannot conclude that the First Street Parties had reasonable or

particularized notice of the bankruptcy court’s intention to

enforce the October 12 oral scheduling deadline as if it had been

included in the October 14 scheduling order. Nor can we conclude

that the First Street Parties had a meaningful opportunity to be

heard when the court excluded all of their Non-Appraiser Expert

testimony based on their noncompliance with the oral scheduling

deadline.15

Furthermore, we are persuaded that the bankruptcy court’s

error was not harmless.16 The proposed testimony of the
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Non-Appraiser Experts, particularly Burke’s expert testimony,

likely could have influenced a number of key determinations of

the bankruptcy court, including its determinations: (1) that the

First Street Parties had no equity in the Properties, (2) that

the First Street Parties did not have a realistic prospect for an

effective reorganization, and (3) that Mission did not have

adequate protection of its interest in the Properties.

We acknowledge that Mission also sought to exclude

significant portions of the Non-Appraiser expert testimony on

alternate grounds, such as hearsay, lack of foundation and

relevance. However, the bankruptcy court did not rule on these

alternate grounds for exclusion, and this Panel declines to do so

in the first instance on appeal. On remand, the bankruptcy court

remains free to make its own determinations on these alternate

grounds for exclusion, and we express no opinion on their proper

disposition.

CONCLUSION

For all of the reasons set forth above, we VACATE the order

granting relief from the automatic stay and REMAND this matter to

the bankruptcy court for further proceedings.

Appendix Follows
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17The record does not include an official transcript of the

October 12 Conference, but it does include an unofficial

transcript prepared and offered by the First Street Parties

(“October 12 Transcript”). Mission has not objected to the

October 12 Transcript or challenged its accuracy, so we will

accept it as a generally accurate transcription of the October 12

Conference. While there are apparent omissions and inaccuracies

from time to time, the key points and themes are reiterated

several times and there can be no reasonable doubt as to what

materially transpired.

23

APPENDIX

NARRATIVE SUMMARY OF EVENTS LEADING TO EXCLUSION

OF THE FIRST STREET PARTIES’ NON-APPRAISER EXPERT TESTIMONY

The bankruptcy court held a preliminary hearing on the

relief from stay motion on October 5, 2011. At that preliminary

hearing, the court set a status and scheduling conference for

October 12, 2011 (“October 12 Conference”). This conference

played a pivotal role in this controversy.17 During the course

of the October 12 Conference, the court orally stated that it was

going to set the following schedule leading up to and including

the final relief from stay hearing or “trial.”

October 14, 2011: Mission to file and serve an accounting for

its claim and their expert appraisal report;

October 31, 2011: Both Parties to disclose any non-appraiser 

witnesses for trial (estimated at the time by

the parties as one or two other witnesses per

side);

November 18, 2011: The First Street Parties to file and serve

their expert appraisal report, and both

parties to file and serve all other witness

declarations;
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November 21-25, 2011: Witness depositions

November 25, 2011: Discovery cutoff 

December 1 & 2, 2011: Trial (with an additional day of

December 16, 2011, held in reserve)

See October 12 Transcript at pp. 7-10.

Significantly, at the time of the October 12 Conference, the

court clearly intended disclosure of all witnesses by no later

than October 31, 2011. For their part, the First Street Parties

represented that, as of the time of the October 12 Conference,

they had no idea as yet what other witnesses besides their

appraiser they would call. They proposed a deadline for

disclosing all witnesses of one week before trial, but the

bankruptcy court explicitly rejected that deadline and instead

orally stated that it would set an October 31 deadline:

Judge: So, Mr. Macdonald, I know you may or may not

have an appraisal done but as far as other parties who

do you . . . do you have an idea at this point who you

will be calling?

Macdonald [the First Street Parties’s Counsel]: No I

don't. Usually the scheduling order with the courts of

this district witnesses are disclosed a week before.

Judge: I'm just trying to have no surprises as far as

if they are going to depose Mr. Choo or Mr. Graham. I

didn't know if there was anybody else. I'm just trying

to get this down to expedite the discovery process and

so there is no surprises and give you as much time as I

can to get an appraisal and so you can take the

appraiser deposition. If you aren't in a position to

say, simply just say today and then set a date at this

point.

Macdonald: No, I'm not.

Judge: I would guess an early date for the designation

of witnesses.

Macdonald: How about October 31st?

Strickon [Mission’s counsel]: I'm not saying we have
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18See § 362(e)(1).

19The First Street Parties have not challenged the

bankruptcy court’s interpretation of § 362(e)(1), nor have they

(continued...)

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to designate a specific appraiser, but whoever the

debtors' appraiser.

Judge: No, I think that is more than fair. The 31st. 

So Mr. Macdonald would designate -- both sides would

designate any witnesses -- expert and . . . .

Macdonald: No.

* * *

Judge: I'm just going to say that you have until

October 31 to identify any witness, the witness who

will testify and it's not to give a whole laundry list,

it's simply who you intend on calling . . . .

October 12 Transcript at p. 7.

Moreover, the bankruptcy court repeatedly expressed its

overarching concerns that Mission was entitled by law18 to an

expeditious final hearing as soon as practicable and that the

court needed to nail down as much as possible as quickly as

possible in order to avoid unnecessary surprises and delay in the

discovery and pretrial process. The following statement is

typical of the court’s commentary:

Judge: The expected problem is that we are looking at

the property is appreciating. I don't know if it is or

isn't. There is nothing being paid as adequate

protection to its creditors. The situation technically

they're entitled to have a hearing within 30 days of

their initial preliminary hearing and set forth

compelling reason to the court. The only one that I

have is basically my schedule and those are the initial

dates that I have [December 1 and 2, 2011]. That's the

earliest I can get the parties into it. The debtor has

to realize that they filed the bankruptcy and they were

going to be faced with a relief from stay motion that

may not have gotten formal appraisals.

October 12 Transcript at p. 5.19
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19(...continued)

argued that there were other compelling reasons why the court

should have delayed the final hearing from December 1 & 2, 2011.

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On October 14, 2011, the bankruptcy court entered its

scheduling order based on the October 12 Conference. 

Unfortunately, the October 14 scheduling order contained a number

of deadlines that created internal inconsistencies in the

document and that were inconsistent with what the court orally

ruled at October 12 Conference. The most pertinent and

problematic paragraphs were paragraphs 4 and 10(b)(i). The

following chart summarizes the key differences between the

bankruptcy court’s October 12 oral ruling, paragraph 4 of the

October 14 scheduling order and paragraph 10(b)(i) of the

October 14 scheduling order:

OCTOBER 12

ORAL RULING

OCTOBER 14

ORDER, ¶ 4

OCTOBER 14

ORDER, ¶ 10(b)(i)

10/31/11

Parties to

disclose all

non-appraiser

witnesses, both

expert and nonexpert

Parties to

disclose all nonexpert witnesses

and to exchange

non-expert decls.

and exhibit lists 

N/A

11/18/11

Parties to file

and serve all

non-appraiser

witness decls. 

N/A N/A

11/29/11 N/A N/A

Parties to file

and serve all

witness decls., both expert and

non-expert

In accordance with the October 14 scheduling order, the

First Street Parties filed and served on October 31, 2011, a nonexpert witness list naming three percipient witnesses. Mission
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20Contrary to the bankruptcy court’s October 12 rulings,

Mission advocated in its November 7 motion that paragraph 10 was

“right” and paragraph 4 was “wrong.”

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did not file anything on October 31, 2011. The next thing

Mission filed was a motion, on November 7, 2011, seeking

correction under Civil Rule 60(a) of “clerical errors” in the

October 14 scheduling order. The bankruptcy court entered an

order on November 9 only partially granting Mission’s motion.20

The court acknowledged that corrections were necessary, and

apparently concluded that some extension of the deadlines with

respect to non-expert witnesses was necessary in order to remedy

any confusion caused by internal inconsistencies in the

October 14 scheduling order. Accordingly, the court’s November 9

order extended the deadline in paragraph 4 for both disclosure

and declarations of non-expert witnesses from October 31, 2011 to

November 15, 2011. In addition, the November 9 order deleted

paragraphs 10(b) and 10(c) essentially for two reasons:

(1) because these provisions were inconsistent with its

October 12 oral ruling and (2) because the court was still

committed to completing the discovery and pretrial process in an

expedited fashion that would allow trial to proceed on December 1

and 2, 2011.

The net effect of the bankruptcy court’s November 9, 2011

amendments to the October 14 scheduling order was to sua sponte

omit any and all provisions for disclosure of non-appraiser

expert witnesses. Apparently, with respect to non-appraiser

experts, the bankruptcy court intended to hold the parties to the

deadline it had stated in its October 12 oral ruling, requiring
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both parties to disclose all non-appraiser experts by October 31,

2011, even though no such deadline had been set forth in the

October 14 scheduling order. The court apparently concluded

that, since no party had disclosed any non-appraiser experts by

October 31, 2011, no provision for them was necessary in the

amended scheduling order.

The First Street Parties did not offer any immediate

response either to Mission’s November 7, 2011 motion to clarify

or to the bankruptcy court’s November 9, 2011 order. Moreover,

the First Street Parties never disclosed the identities of their

Non-Appraiser Experts before they filed and served their

Non-Appraiser Expert declarations on November 17 and 18, 2011. 

Instead, on November 17, 2011, the First Street Parties

filed their own motion to correct or clarify the amended

scheduling order. According to the First Street Parties, the

amended scheduling order erroneously omitted any provision for

Non-Appraiser Experts, and they requested, among other things, a

new deadline of November 18, 2011 for filing and serving their

Non-Appraiser Expert declarations, as well as a brief extension

of the discovery cutoff in order to give Mission an opportunity

to depose their Non-Appraiser Experts. Notably, the First Street

Parties still did not disclose at this late date the identities

of their Non-Appraiser Experts, for whom it intended to file and

serve declarations the very next day. 

The bankruptcy court entered an order on November 18, 2011

denying the First Street Parties’ November 17, 2011 motion to

correct. The court based this denial on the following factors:

1. The First Street Parties represented to the court at the
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21This is a misstatement of the record. Both the unofficial

October 12 Transcript and the bankruptcy court’s later comments

at trial reflect that the First Street Parties actually 

represented on October 12 that they did not know yet whether they

would seek to call any non-appraiser experts.

22Mission also argued that portions of the Non-Appraiser

Expert declaration testimony should be excluded on hearsay,

relevance and foundation grounds. But the bankruptcy court never

ruled on these grounds.

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October 12, 2011 Conference that it had no non-appraiser

experts to designate as witnesses;21

2. The court relied on the First Street Parties’ supposed

representation in issuing its October 14, 2011 scheduling

order (but as noted above, there was no indication in that

order or in the November 9, 2011 amendments thereto of any

deadline for designating non-appraiser experts);

3. During the next month after the issuance of the October 14

scheduling order, the First Street Parties neither sought

amendment of the scheduling order nor disclosed the

existence or identities of their Non-Appraiser Experts.

The First Street Parties went ahead and filed and served one

of their Non-Appraiser Expert declarations on November 17, 2011,

and the rest on November 18, 2011.

Mission never deposed the Non-Appraiser Experts. Instead,

on November 29, 2011, Mission filed its motions in limine numbers

5 - 8, seeking to exclude all testimony of the Non-Appraiser

Experts on the ground that the submission of their testimony

contravened the October 14 scheduling order and the November 18,

2011 order denying the First Street Parties’ November 17, 2011

motion to correct.22 The First Street Parties filed an
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opposition to the motions in limine on November 30, 2011.

During trial, the bankruptcy court granted Mission’s motions

in limine numbers 5 - 8, and excluded all of the Non-Appraiser

Expert Testimony. The court noted that, starting with the

issuance of the October 14 scheduling order and through the

amendment of that order on November 9, 2011, and up to the filing

of the First Street Parties’ November 17 motion to correct, the

First Street Parties were content to not disclose whether they

would be offering any non-appraiser expert testimony, even though

the dates on their Non-Appraiser Expert declarations reflect that

they knew at least by early November that they would be using at

least some non-appraiser expert testimony. The court also

expressed concern that, even after the court amended the

scheduling order on November 9, 2011, omitting any provision for

non-appraiser expert testimony, it still took the First Street

Parties eight days to address the issue by filing their

November 17, 2011 motion to correct.