United States of America v. Christopher C. Buchman

Of the Southern District of Indiana, sitting by designation. 1
In the
United States Court of Appeals
For the Seventh Circuit
No. 10-2306
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
CHRISTOPHER C. BUCHMAN,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 08-C-0483—William C. Griesbach, Judge.
ARGUED APRIL 5, 2011—DECIDED MAY 16, 2011
Before EASTERBROOK, Chief Judge, BAUER, Circuit Judge,
and YOUNG, District Judge. 1
EASTERBROOK, Chief Judge. Christopher Buchman de-
faulted on debts to the Department of Agriculture’s
Farm Service Agency. After the United States filed suit
to foreclose the mortgages on land that secured his
notes, Buchman negotiated with lawyers representing the

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2 No. 10-2306
United States. When agreement could not be reached
and time came for a formal answer to the complaint,
Buchman offered none. A default judgment was entered
in April 2009, ten months after the suit began. The day
before the property was to be sold at auction, Buchman
filed a petition in bankruptcy. That bought him more
time—but his lack of a plan to pay these secured debts
led the bankruptcy judge to lift the automatic stay
and allow the sale to proceed. At a public auction in
April 2010, the three parcels fetched a total of $322,000,
not enough to repay all of Buchman’s debts. (A bank also
had loaned money on the security of these parcels. The
bank has been repaid and need not be mentioned again.)
Contending that the price was inadequate, Buchman
asked the judge to set the sale aside. The judge denied that
motion, ruling that the outcome of a competitive auction
is the best indicator of value. The judge also denied
Buchman’s request for an opportunity to redeem the
parcels, observing that he had waited too long. The judg-
ment of foreclosure in April 2009 did not provide for
redemption, yet Buchman did not request an opportunity
until after the property has been sold a year later. More-
over, the judge remarked, the litigation had been
pending for two years, which afforded Buchman ample
opportunity to pay his creditors and retain his property.
He did not do so, and the judge concluded that he is not
entitled to more time. The judge confirmed the sale
and entered a deficiency judgment for the unpaid
portion of the loans (plus interest).
Buchman did not ask either the district court or this
court to stay the transfer of the property to the winning

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No. 10-2306 3
bidders at the sale. The United States contends that the
case therefore is moot. We grant that it is too late to
direct the buyers to return the property. The court
might have the raw power to do this, but only if the
buyers were added as parties to the litigation, a step that
Buchman has not taken. Even if the buyers had become
parties, undoing commercial transactions cannot assist
borrowers. If buyers believe that the parcels they ac-
quire at auction can be snatched back whenever they
have made a good deal, they will pay less at foreclosure
sales—and borrowers such as Buchman will be worse
off as a result. No buyer wants to lose profitable trans-
actions while being saddled with unprofitable ones
(because, if the bidder overpays, the borrower will not
try to upset the sale); fear of such an asymmetric
outcome would lead to lower prices in all sales. Thus
we hold, following established doctrine, that a com-
pleted sale will not be upset. See Duncan v. Farm Credit
Bank of St. Louis, 940 F.2d 1099, 1102 & n.4 (7th Cir. 1991)
(foreclosure); FDIC v. Meyer, 781 F.2d 1260, 1263 (7th
Cir. 1986) (same); Hower v. Molding Systems Engineering
Corp., 445 F.3d 935 (7th Cir. 2006) (bankruptcy auction);
In re Vlasek, 325 F.3d 955, 962 (7th Cir. 2003) (same).
This does not imply, however, that the litigation is
moot. A case or controversy ceases to exist only when
there is nothing that the judiciary can do. To say that
winning bidders at an auction are entitled to keep the
property is not to say that nothing more is at stake. The
United States received a deficiency judgment, which
could be vacated. Indeed, we could order the United
States to hand over to Buchman some or all of the

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4 No. 10-2306
proceeds from the auction. The argument that a com-
pleted sale ends the litigation, even if other relief would
be possible, is redolent of “equitable mootness” in bank-
ruptcy law. Circuits that use that doctrine dismiss an
appeal once a bankruptcy auction has been completed or
a plan of reorganization confirmed and implemented
without a stay. But this circuit does not follow that ap-
proach. We have held that the possibility of financial
adjustments among the parties keeps a proceeding
alive even if the sale cannot be upset and rights under
a plan of reorganization cannot be revised. See In re
UNR Industries, Inc., 20 F.3d 766 (7th Cir. 1994). Likewise
with foreclosure sales. The buyers’ interests are secure,
but the entitlements of Buchman vis-à-vis the United
States remain open to change following appellate review.
Buchman contends that the judgment is erroneous
because it does not afford him an opportunity to redeem
the property. According to Buchman, who relies on
United States v. Einum, 992 F.2d 761 (7th Cir. 1993), a
borrower is entitled to a window for redemption unless
the federal lender or guarantor offered a workout plan
after the default—and the record does not establish
whether such an opportunity was extended. The reason
why the record is silent is that Buchman did not answer
the complaint, and a default judgment was entered. He
waited more than a year after that judgment to protest.
Delay led the district judge to reject Buchman’s argu-
ment without reaching the merits. Buchman’s appellate
brief ignores the ground on which he lost and pro-
ceeds directly to the merits. Such a head-in-sand ap-
proach cannot prevail. The district court did not abuse

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No. 10-2306 5
its discretion in treating this contention as forfeited by
delay.
The only argument preserved for appellate review is
Buchman’s contention that the sale price was too low. He
tendered appraisals estimating that the parcels’ market
value was $513,000, substantially more than the $322,000
realized from the auction. Buchman did not, however,
contend that there was anything wrong with the auction.
It was advertised and well attended; the bidding was
competitive. The district judge thought competition
superior to appraisals as a means of establishing market
value: an auction yields a real price, while appraisals
are just forecasts. See In re Excello Press, Inc., 890 F.2d 895,
905 (7th Cir. 1989). Appraisers often produce estimates
that favor their employers’ interests, so Buchman’s ap-
praisals might well be on the high side. And appraisers
usually generate estimates by examining sales of com-
parable properties. When the market is down, as the
real estate market has been for several years, appraisals
based on pre-decline transactions do not produce
reliable estimates of current market value.
The United States agrees with Buchman that Wisconsin
law supplies the rule for determining whether the price
at a foreclosure sale is too low to allow confirmation. See
United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979).
Wisconsin requires the confirmation of a procedurally
adequate sale unless the price is so low as to “shock the
conscience” of the court. Bank of New York v. Mills, 270
Wis. 2d 790, 799, 678 N.W.2d 332, 336 (Ct. App. 2004).
A plastic standard of this kind implies deferential appel-

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6 No. 10-2306
late review. Buchman has not established that the
district judge committed a clear error, or abused his
discretion, by not displaying a shocked conscience.
Instead of engaging either Wisconsin’s substantive
standard or the limits of appellate review, Buchman
wants us to assume that, as a matter of law, foreclosure
sales produce inadequate prices because they lack a
willing seller. Yet Wisconsin has not adopted such a
presumption—and for good reason. As long as the
auction is competitive, the price will be accurate whether
or not the seller has veto power. See Jeremy Bulow & Paul
Klemperer, Why Do Sellers (Usually) Prefer Auctions?, 99
Am. Econ. Rev. 1544 (2009); Paul Klemperer, What Really
Matters in Auction Design?, 16 J. Econ. Perspectives 169
(Winter 2002); Robert G. Hansen & Randall S. Thomas,
Auctions in Bankruptcy: Theoretical Analysis and Practical
Guidance, 18 International Rev. L. & Econ. 159 (1998). Self-
interested action drives the price to true value. If these
parcels really were worth more than $500,000, then the
unsuccessful bidders were leaving money on the table.
Instead of allowing the land to go for $322,000, another
bidder could have offered $350,000 and left room for a
handsome profit; someone else would have topped the
$350,000 bid. That process would have continued until
none of the (losing) bidders anticipated making a profit
at a higher price.
What’s more, if the property really were worth more
than $322,000, Buchman himself should have bid. His
problem, as counsel conceded at oral argument, was
that banks were unwilling to loan Buchman the funds

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No. 10-2306 7
he needed to enter the auction. This implies that persons
other than the judge doubted the $513,000 appraisals.
Buchman also was unwilling or unable to cover the
down payment that potential lenders required, which
suggests that even he was skeptical about his appraisers’
estimates—and, if Buchman could not or would not put
up even 10% of the property’s value, he was hardly
going to be able to redeem the parcels or repay any loans.
Lack of a willing seller could matter in two ways.
First, the property’s current owner could place an idio-
syncratic value on the property. Land could be worth
$500,000 to its owner and $400,000 to everyone else.
The difference might be attributable to sentiment (per-
haps the owner grew up there) or to the fact that the
owner’s skills enable him to make the land more produc-
tive than anyone else. Buchman does not make such
an argument, however, and it is not relevant in a fore-
closure sale. By agreeing to repay the loan or give up
the land, a borrower surrenders arguments of this
kind. A borrower can realize on any private value by
buying at the foreclosure sale, but as we have observed
already Buchman did not try to do this.
Second, there could be a problem of timing. Perhaps
property should be held until a higher-valuing buyer can
be located. This is normal in sales of real estate,
paintings, or other assets, where reserve bids prevent
a sale unless a minimum price has been met. An ex-
tended search may be required to achieve the asset’s
full value, because it takes time for news to reach the
person who can make the best use of the asset, and so is

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8 No. 10-2306
willing to make the highest bid. When assets are not
fungible (as real estate is not), it is common for buyers to
value the assets differently, so that a search for the highest-
valuing potential buyer can make sense. See Partha
Dasgupta & Eric Maskin, Efficient Auctions, 115 Q.J. Econ.
341 (2000); Jeremy Bulow & Paul Klemperer, Auctions
versus Negotiations, 86 Am. Econ. Rev. 180 (1996). The fact
that the initial buyer can resell the asset to a higher-valuing
user, and therefore will bid more at the auction (because a
prospect of a profitable resale is part of the property’s
value to every bidder), does not entirely pass that value
back to the owner; the middleman is compensated for
this service. Yet Buchman had two years to search for
the highest-valuing buyer and apparently did not try.
He was determined to hold on to the parcels, not to
sell them at the best price. Even now, a year after the
sale, Buchman has not identified anyone who would
pay (or would have paid in April 2010), $1 more than
the price obtained at the auction. The district court’s
order confirming the sale is not vulnerable on appeal.
AFFIRMED
5-16-11

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