[00:00:00] Speaker 00: Inray J.S. [00:00:02] Speaker 00: Kalama LLC John D. Neller counsel for appellant J.S. [00:00:08] Speaker 00: Kalama LLC Douglas R. Paul counsel for appellee Wilson oil Okay, Mr.. Now where do you want to reserve a little time? [00:00:19] Speaker 02: Yes, your honor. [00:00:20] Speaker 02: I guess whatever time I might have left. [00:00:22] Speaker 02: Let's say three minutes of this moment Okay, whatever questions may be raised by the reply, okay Okay, go ahead [00:00:30] Speaker 02: I am John Neller, Your Honor, and if the court please, Your Honors, good morning. [00:00:34] Speaker 02: I represent the appellant in this case, which is the debtor in the Chapter 11 case below. [00:00:41] Speaker 02: We're here today because the court entered an order of paying, the bankruptcy court entered an order to distribute some surplus funds out of the bankruptcy estate that should be going to be otherwise paid to the debtor to a third party who is not a party to the bankruptcy case. [00:01:00] Speaker 06: But it's a party as to whom the estate had an obligation, correct? [00:01:04] Speaker 02: Let's say that again. [00:01:05] Speaker 06: It's a party as to whom the estate had an obligation. [00:01:09] Speaker 02: The estate did not have an obligation to that party. [00:01:13] Speaker 02: There was a prior order. [00:01:14] Speaker 02: If the court's referring to the May order, then there was a May order in which there were three parties that came before the court for the approval of a settlement agreement between those three parties. [00:01:26] Speaker 02: And none of those parties were parties of the bankruptcy case. [00:01:30] Speaker 02: So Marrakesh Inc. [00:01:31] Speaker 02: was a tenant to the debtor. [00:01:32] Speaker 06: Let's go back to the beginning, because I think that's where there may be a misconception here, OK? [00:01:39] Speaker 06: All right. [00:01:40] Speaker 06: There's a trustee appointed. [00:01:42] Speaker 06: The trustee decides to sell the property. [00:01:44] Speaker 06: Well, I'm sorry. [00:01:45] Speaker 06: The trustee decides to reject the lease and eject one person with the Somerakas name from the premises, and then to sell the property for what sounds like an amount that was in excess of the amount necessary to pay all claims, correct? [00:01:59] Speaker 05: Absolutely. [00:01:59] Speaker 06: All right. [00:02:00] Speaker 06: And at that point, there was what was effectively kind of a set off, right? [00:02:04] Speaker 06: Because the other obligation that the estate undertook [00:02:08] Speaker 06: was to commence an adversary proceeding that would clarify some ownership rights to some materials left on the premises, be a vehicle to get the premises into a condition whereby the buyer could effectively make use of them, and pursue a rent claim, right? [00:02:25] Speaker 06: Correct. [00:02:26] Speaker 06: It's absolutely an estate obligation, correct? [00:02:29] Speaker 06: It's effectively a set off against the seven million bucks when you think about it, right? [00:02:35] Speaker 02: That was correct. [00:02:35] Speaker 06: Did anybody raise that issue then? [00:02:38] Speaker 06: that this is an inappropriate set off. [00:02:43] Speaker 06: Let me help you with the answer, no. [00:02:45] Speaker 06: Nobody did. [00:02:47] Speaker 02: Effectively, no. [00:02:48] Speaker 02: Yeah, there were arguments about that. [00:02:50] Speaker 02: I know. [00:02:50] Speaker 06: I know. [00:02:51] Speaker 06: And by the way, I'm with you. [00:02:52] Speaker 06: This is an unusual case. [00:02:54] Speaker 06: This is not your run of the mill, how 11s go. [00:02:56] Speaker 06: I'm not resistant to that idea at all. [00:03:00] Speaker 06: What I'm trying to suggest is this dispute is, one way to look at it, it's baked in from the very first transaction here. [00:03:08] Speaker 06: from the very first transaction the estate undertakes to do something else rather than just transfer the property. [00:03:13] Speaker 06: And that's a monetary obligation, correct? [00:03:17] Speaker 02: I think that the confusion here, if there is confusion, is that that $500,000 has already been paid to Wilson Oil. [00:03:26] Speaker 02: That offset has already been paid. [00:03:28] Speaker 02: What we're talking about is an additional $475,000. [00:03:31] Speaker 06: Yeah, but that results from the adversary proceeding, correct? [00:03:36] Speaker 06: The $500,000 was a holdback, right? [00:03:39] Speaker 02: That's a whole other thing. [00:03:42] Speaker 02: Correct. [00:03:43] Speaker 06: Okay. [00:03:43] Speaker 06: But doesn't the original agreement obligate the estate to undertake an adversary proceeding and basically give the benefits of that adversary proceeding to the buyer? [00:03:53] Speaker 02: It did do that. [00:03:54] Speaker 06: Okay. [00:03:55] Speaker 06: All right. [00:03:55] Speaker 06: So now we're starting from the same place. [00:03:56] Speaker 06: Now go ahead. [00:03:57] Speaker 06: I'm sorry I interrupt you do so much. [00:03:58] Speaker 06: You go ahead. [00:04:00] Speaker 02: Well, I guess what I'm trying to track with the court a little bit here and try to figure out what the concern is about that particular issue. [00:04:08] Speaker 02: But yes, there was an adversary proceeding. [00:04:10] Speaker 02: That adversary proceeding ended up being assigned to Wilson Oil. [00:04:13] Speaker 02: That's the source of this $475,000 payment. [00:04:16] Speaker 02: Right. [00:04:18] Speaker 02: What happened subsequent to that is that the tenant of the debtor and the tenant's principal, John Somerakas, same principal as in JS Kalama, no question about that. [00:04:33] Speaker 02: entered into some agreement that Said that there was going to be an auction of the tenants property and the proceeds of that were going to pay Some of that may go to the debtor or some not the debtor some of that may go to some rocket sink some of it may go to Wilson oil and if there wasn't that then they agreed that there was going to be some distribution to [00:04:58] Speaker 02: Wilson oil and perhaps the source of those funds would be out of the JS Kalama estate. [00:05:07] Speaker 06: What's the perhaps part of that? [00:05:08] Speaker 06: There's no perhaps to it at all. [00:05:11] Speaker 06: Well, there is a perhaps to it because the only only perhaps is we may get paid from auction proceeds, which didn't work out, right? [00:05:17] Speaker 02: There you go. [00:05:17] Speaker 06: Okay, I got it. [00:05:18] Speaker 06: Okay. [00:05:20] Speaker 02: So that's the source of this disagreement at this particular point. [00:05:25] Speaker 02: The problem that we have with it, the crux of this whole thing is the focus of what was the order in June. [00:05:34] Speaker 02: Excuse me, I guess it was a May order. [00:05:36] Speaker 02: We sometimes talk about May, sometimes June, sometimes August. [00:05:39] Speaker 02: I think the two orders that we have to focus on are the one in May. [00:05:42] Speaker 02: Which is the order on the settlement of the various claims one of which was the Wilson oil claim Wilcox legal claim and the second one is the it was actually entered in August 5th And I think we sometimes refer to that as a June order because that's when the motions commenced in any event the May order Incorporated by reference the motion itself and if I go through the motion papers and [00:06:09] Speaker 02: I think that I added up last night, I was looking at them, like 14 references where it said, this $475,000 obligation is not an obligation of the estate. [00:06:19] Speaker 06: No, it doesn't say that. [00:06:20] Speaker 06: It says there's no liability. [00:06:21] Speaker 06: That's a very different concept. [00:06:24] Speaker 02: I'm not sure how that would be a different concept. [00:06:26] Speaker 06: OK. [00:06:27] Speaker 02: It's either an obligation or, I mean, a liability is an obligation of the estate. [00:06:30] Speaker 06: But it doesn't have to be. [00:06:31] Speaker 06: You can be obliged to do things and not create a liability if you don't do it. [00:06:35] Speaker 06: And that's exactly what it did. [00:06:38] Speaker 02: created a liability? [00:06:39] Speaker 06: No. [00:06:41] Speaker 06: There's a difference between an obligation to do a thing and a liability if you don't do it. [00:06:45] Speaker 06: Those are two different things. [00:06:49] Speaker 02: If we go back to the language of that particular thing, that order says that it doesn't impose any obligation on the trustee to make that payment. [00:07:00] Speaker 02: It's in the same group of language where it says, this is not a debt of the estate, this is an obligation of the estate, there's no obligation of the trustee to make that payment. [00:07:10] Speaker 02: That is the whole basis of the final of the order that was entered by the bankruptcy court in May, and that's the whole crux of this particular appeal. [00:07:19] Speaker 06: And I simply don't agree with you about what it says, so that's not a good place for us to be, okay? [00:07:23] Speaker 06: But keep going. [00:07:25] Speaker 02: Well, I'm happy to explore that further. [00:07:28] Speaker 06: Well, what I think the order says is that it will not create a liability for the trustee if the monies aren't paid. [00:07:36] Speaker 06: There's reasons why. [00:07:38] Speaker 06: We don't have to speculate. [00:07:39] Speaker 06: I think we're going to hear chapter and verse from your worthy adversary here about why it was worded that way. [00:07:45] Speaker 06: But what I'm trying to suggest to you is the notion that that takes the estate out of this entirely is, in my view, just not correct. [00:07:53] Speaker 06: I mean, what's being adjudicated now is an estate obligation. [00:07:58] Speaker 06: This is not parties who have nothing to do with the bankruptcy at all. [00:08:02] Speaker 06: That's a mischaracterization of what the dispute is, in my view. [00:08:05] Speaker 06: And that's the fundamental problem I'm having with your jurisdiction argument. [00:08:08] Speaker 06: If you want to argue that there was something that went wrong before that we can address now, I'm all ears. [00:08:14] Speaker 06: I don't know what that is, but I do not see this as a jurisdiction argument. [00:08:18] Speaker 06: And one of the reasons why is clearly we have an estate that is not yet wrapped up [00:08:23] Speaker 06: There are monies to be paid, and it's a question of who they're going to get paid to. [00:08:28] Speaker 06: If that ain't a rising in, I don't know what is. [00:08:32] Speaker 06: You don't even have to get to related to a jurisdiction. [00:08:34] Speaker 06: That's a rising in jurisdiction. [00:08:36] Speaker 06: Period. [00:08:36] Speaker 06: End of story. [00:08:38] Speaker 06: So if you want to go further with the jurisdictional argument, you can. [00:08:42] Speaker 06: If you want to talk about something else that's fundamentally wrong about where this case ended up, I'm all ears. [00:08:48] Speaker 06: You tell me what you want to do. [00:08:50] Speaker 02: Okay, well if we go back and look at the language in the mail order, what it says is any surplus funds remaining in the possession of the debtor after the final distribution by the trustee shall be distributed to Wilcox to the extent needed to pay the claim settle amount. [00:09:07] Speaker 02: It also says, there's no obligation, let me get that forward here, there's no obligation of the estate [00:09:17] Speaker 02: pay or the proposed order on this motion that obligates the trustee to make any payments to any person or entity other than the debtor. [00:09:27] Speaker 02: Other than the debtor. [00:09:28] Speaker 06: Well, wait a minute. [00:09:29] Speaker 06: If I read the whole paragraph, are you suggesting that sentence means that the debtor has, sorry, the estate has no obligation to pay the 475? [00:09:37] Speaker 06: What are you saying? [00:09:39] Speaker 02: I am. [00:09:40] Speaker 06: Okay. [00:09:40] Speaker 06: All right. [00:09:41] Speaker 06: Okay. [00:09:41] Speaker 06: Well, that, okay. [00:09:43] Speaker 02: Yeah, the estate has no obligation to pay the 475. [00:09:45] Speaker 02: I think the scheme that is proposed by the motions, the declarations, and the order is that the debtor gets the payment, and Mr. Somerakis, if he receives a distribution from the estate, is to pay the Wilcox and Flago from the 475, obviously, if it arises. [00:10:03] Speaker 02: And I think that is the scheme. [00:10:05] Speaker 02: It's not that that comes out of the estate before other creditors, because coming out of the estate before other creditors [00:10:12] Speaker 02: before creditors of the estate, actual creditors of the estate are coming out before people who might otherwise be in the priority chain under either state or federal law are being cut out of the process. [00:10:24] Speaker 06: Well, let's pause on that for a second. [00:10:26] Speaker 06: Nobody raises it. [00:10:28] Speaker 06: This was eminently raiseable as an admin claim, period, end of story. [00:10:33] Speaker 06: Okay, it wasn't for reasons that are up to W&F to explain to us. [00:10:38] Speaker 06: If you're trying to tell me this had no place in the distribution scheme, that is dead wrong. [00:10:43] Speaker 06: This could well have been an admin claim. [00:10:45] Speaker 06: It didn't happen to be one. [00:10:47] Speaker 06: That doesn't make it something that we distribute the surplus and then we pay that. [00:10:52] Speaker 06: I'm just not with you there on the distribution scheme at all. [00:10:56] Speaker 02: Well, and I'm not with you on this could have been an administrative claim, because it's not. [00:10:59] Speaker 02: There's no costs of administration involved in this particular matter. [00:11:04] Speaker 02: It's not something that would be allowable. [00:11:05] Speaker 06: It's part of an approved sale motion. [00:11:10] Speaker 02: part of an approved sale motion. [00:11:12] Speaker 02: Well, the approved sale motion says that it doesn't go directly to Wilcox and Flayville. [00:11:17] Speaker 02: The approved sale motion says it refers and incorporates the motions, the language of the motions, and the order's very short. [00:11:26] Speaker 06: Wait, wait, wait. [00:11:26] Speaker 06: I mean, let's, let's... The sale motion incorporates other matters? [00:11:31] Speaker 06: We're talking about the sale motion now, okay? [00:11:33] Speaker 06: The sale motion creates an obligation of the estate to commence an AP [00:11:36] Speaker 06: and gives the benefits of that to Wilson and whatever, right? [00:11:40] Speaker 06: Yes. [00:11:41] Speaker 02: The order itself, not the sale motion. [00:11:44] Speaker 02: Order incorporates the sale motion. [00:11:46] Speaker 06: OK. [00:11:46] Speaker 06: You're getting close to three minutes here. [00:11:47] Speaker 06: Maybe you want to regroup a little bit and think. [00:11:51] Speaker 02: Well, I'm happy to continue. [00:11:52] Speaker 02: OK. [00:11:53] Speaker 02: I'd rather answer the court's questions than just ramble on, frankly. [00:11:57] Speaker 05: OK. [00:11:58] Speaker 02: Oh, OK. [00:11:58] Speaker 02: I will pause. [00:12:00] Speaker 05: OK. [00:12:07] Speaker 03: Morning your honors Douglas Paul of the Perkins cooey firm May it please the court. [00:12:13] Speaker 03: I'm here for its Wilson oil doing business as Wilcox. [00:12:18] Speaker 06: I don't I don't mean to butcher names Can I can I just begin with what I suspect is your were their adversaries concern here This begins as an overpayment [00:12:32] Speaker 06: I mean, $7 million appears to be more than enough to pay all the claims. [00:12:36] Speaker 06: So there's a built-in offset with respect to the rent claim, right? [00:12:41] Speaker 06: I mean, that's the way you can look at it, okay? [00:12:43] Speaker 06: So that is, that's kind of sort of, from his perspective, that's kind of sort of an estate obligation, but maybe not exactly one either. [00:12:52] Speaker 06: The obligation is to commence an AP, and when you're successful, to give the benefits over to your client, correct? [00:13:00] Speaker 03: That's one way to look at it. [00:13:02] Speaker 06: Okay, what's the other way? [00:13:04] Speaker 03: Yeah, the adversary proceeding was really to set up a platform to have a discussion about settlement because there was so much junk on the site that we needed to figure out a way to get leverage to move that stuff off. [00:13:20] Speaker 06: Okay, that's a fair point. [00:13:21] Speaker 06: But if I can play my point forward just a little bit. [00:13:24] Speaker 06: From their perspective, [00:13:27] Speaker 06: Is it crazy to look at this and say, okay, that was a quasi-estate obligation to go seek the rent and then pay it to somebody else? [00:13:35] Speaker 06: But when it does get settled, it's not, from their perspective, it doesn't look like an estate obligation anymore. [00:13:42] Speaker 06: It looks like the estate's sort of out of the line of fire here. [00:13:48] Speaker 06: And there is the ambiguous language. [00:13:49] Speaker 06: I mean, I think you have to simply ignore half of the paragraph you're worthy of, as he's quoting from. [00:13:54] Speaker 06: to get to his point. [00:13:56] Speaker 06: I don't know how we do that under contract principles. [00:14:00] Speaker 06: But doesn't it kind of look like this wasn't a state obligation? [00:14:03] Speaker 06: It's not really in a state obligation now because we've resolved it with respect to the people who are the targets of the EAP? [00:14:12] Speaker 03: Yeah, so is it still really in a state obligation? [00:14:16] Speaker 06: I think that's kind of his point. [00:14:17] Speaker 06: It's not a bad one. [00:14:20] Speaker 01: It's not bad. [00:14:22] Speaker 01: I want to add the assignment to that as well. [00:14:24] Speaker 01: Council, I would like to just add the assignment of that as well, because the right was assigned, wasn't it? [00:14:32] Speaker 03: It was assigned as part of the settlement agreement. [00:14:36] Speaker 03: So prior to the settlement agreement being approved, the estate had the obligation to run the adversary. [00:14:43] Speaker 01: I think that gets to Judge Lafferty's point. [00:14:44] Speaker 01: At some point in time, you know, and the assignment transferring the ownership seems to possibly affect the estate, non-estate, right? [00:14:54] Speaker 01: Because while the estate's running the AP, clearly, but then you assign [00:15:00] Speaker 01: the rights under that AP and the benefit of that through the settlement, I'd like you to answer Judge Lafferty's question, but I want you to- You asked it way better than I did. [00:15:12] Speaker 01: No, I want you to add that overlay to it because, sensibly, that's when it transferred. [00:15:17] Speaker 03: It transfers when the settlement agreement is approved, and if you look at- Why doesn't it transfer when the assignment happened before the settlement or as part of? [00:15:26] Speaker 03: So it's a two-step process. [00:15:29] Speaker 03: The sale agreement required the adversary proceeding to be brought by the estate, by the trustee. [00:15:35] Speaker 06: Well, and it contemplated an assignment, correct? [00:15:38] Speaker 03: It contemplated an assignment. [00:15:40] Speaker 06: But it didn't do it at that moment. [00:15:42] Speaker 03: And you have to go kind of deep into the record, but it's supplemental appendix page 100, and that's the purchase agreement, and it talks about the mechanism when [00:15:53] Speaker 03: the assignment is going to actually move from the estate or the trustee to my client and that occurs. [00:16:01] Speaker 03: either when there's a judgment, or there wasn't a judgment in the adversary proceeding, or when we accept it. [00:16:07] Speaker 03: So until we accept that assignment, it's a burden on the estate to manage and run with the adversary proceeding. [00:16:14] Speaker 03: So I'm not sure I'm getting to the concern of the question, though. [00:16:19] Speaker 03: That's the mechanism of when it moves. [00:16:22] Speaker 03: And part of that, this was a settlement agreement that wrapped up a bunch of different things. [00:16:26] Speaker 06: We'll come back, I suspect, to who signed off on the settlement and who [00:16:31] Speaker 06: thinks they didn't, maybe, or now believes they didn't. [00:16:34] Speaker 06: But the effect of the settlement agreement then is to at least nominally to turn something from what was clearly an estate obligation to something that's not so clearly an estate obligation. [00:16:44] Speaker 06: Is that fair? [00:16:45] Speaker 06: Yes. [00:16:46] Speaker 06: Okay. [00:16:46] Speaker 06: And that might be what's rubbing the debt of the wrong way here, is that that's being enforced and it's not really an estate obligation. [00:16:52] Speaker 06: So why should that be invading the surplus? [00:16:56] Speaker 03: Because this was part, again, of a comprehensive settlement that brought significant benefits to the estate. [00:17:04] Speaker 03: And so it's not just, as the appellant argues, some narrow agreement that – or narrow obligation. [00:17:15] Speaker 03: It is a – it's part of a package. [00:17:17] Speaker 03: And we agreed to host this auction on our property. [00:17:20] Speaker 03: We agreed to give the estate very early priority refunds or receipts from proceeds of the auction. [00:17:29] Speaker 03: We agreed to step back on [00:17:33] Speaker 03: structural restoration of the site. [00:17:36] Speaker 03: But a bunch of these pieces of machinery coming out were going to cause damage. [00:17:40] Speaker 03: In the original settlement agreement that was the one fully signed and filed with the court, we had those coming out as a, quote, cost of sale. [00:17:51] Speaker 03: That was a top priority return. [00:17:54] Speaker 03: We agreed to step back on that as part of the order. [00:17:57] Speaker 03: So again, I'm looking for [00:17:59] Speaker 03: benefits to the estate of us agreeing to host this auction and agree to a flow of funds that benefit the estate. [00:18:07] Speaker 03: to put the 475 settlement in context. [00:18:11] Speaker 03: I think everybody expected this 475 was going to come out of the auction. [00:18:15] Speaker 03: We had heard big things about the value of these pieces of property. [00:18:19] Speaker 03: It just didn't. [00:18:21] Speaker 03: So here we are at the end of the auction. [00:18:24] Speaker 03: We don't have it. [00:18:26] Speaker 06: We had this sort of backstop of the surplus. [00:18:30] Speaker 06: Let me get two questions out there, which I'm sure you're going to want to deal with, and I'll just get them out sooner rather than later. [00:18:37] Speaker 06: Look, you go to a hearing, there are objections with respect to the settlement. [00:18:41] Speaker 06: At some point, maybe it's ambiguous, maybe in your mind it's not at all, the parties agree that they're going to seek a consensual order, right, and an order is entered. [00:18:52] Speaker 06: Correct. [00:18:53] Speaker 06: And from your perspective, it resolves all the objections, correct? [00:18:57] Speaker 03: That's what was said. [00:18:58] Speaker 06: Is there any ambiguity about that in your mind? [00:19:00] Speaker 06: Okay. [00:19:01] Speaker 06: Was there any ambiguity raised by the fact that there was some, as one would expect, there were some modifications to the eventual form of the order and there's a little bit different procedure with respect to the auction proceeds, I think? [00:19:17] Speaker 03: There was nothing related to the surplus. [00:19:20] Speaker 06: Nothing related to the claim settlement amount, right? [00:19:22] Speaker 03: That didn't change. [00:19:23] Speaker 03: We conceded a number of things. [00:19:25] Speaker 06: Well, there's a little bit different mechanism for how the auction proceeds might get paid out. [00:19:30] Speaker 03: There's a doubling of the holdback. [00:19:33] Speaker 03: that is coming back. [00:19:35] Speaker 03: So we're going to replenish the holdback. [00:19:37] Speaker 03: We're going to also replace the holdback. [00:19:40] Speaker 03: So that really frees the estate to go away and we'll just deal with the site at that point. [00:19:46] Speaker 03: So we added another layer of what full replacement of the holdback for the estate. [00:19:52] Speaker 04: So is it your it's your position that the debtor is bound because the debtor signed the sale agreement because the debtor [00:20:01] Speaker 04: made an objection and then settled the objection. [00:20:03] Speaker 04: How is it that you bind the debtor? [00:20:06] Speaker 03: I think the key thing for binding the debtor is not so much that they raise an objection, raising all these specific things that they're now bringing back again. [00:20:14] Speaker 03: It's that [00:20:16] Speaker 03: They show up at the hearing and they withdraw that objection. [00:20:20] Speaker 03: The more important thing is the following day, the order approving the settlement, which includes the form of stipulation that Mr. Sommarakis himself filed individually, that order is approved. [00:20:34] Speaker 03: And it's worth paying attention to the language in Mr. Miller's email. [00:20:39] Speaker 03: Sommarakis approves the order. [00:20:42] Speaker 03: Well, Samourakis, who's Samourakis? [00:20:45] Speaker 03: We have Mr. Nella representing the debtor, and he's speaking in the language that we understood. [00:20:51] Speaker 03: Mr. Samourakis, he wears three hats here. [00:20:54] Speaker 03: He's a tenet and he's Mr. Samarakis. [00:20:57] Speaker 03: I'm not sure what Mr. Samarakis has to do with anything individually. [00:21:01] Speaker 04: Either the tenant or the debtor. [00:21:03] Speaker 03: Mr. Samarakis comes to us with this form of stipulation. [00:21:09] Speaker 03: The surplus will be yours if you don't get paid out of the auction. [00:21:12] Speaker 03: We rely on that. [00:21:14] Speaker 03: That seems like a commitment from the debtor. [00:21:16] Speaker 03: Mr. Neller wasn't involved. [00:21:18] Speaker 06: Well, would you say if there was ambiguity meant to be preserved, it should have been? [00:21:24] Speaker 06: I mean let's put it that way. [00:21:26] Speaker 03: That was the time before Judge Lynch, that was the time to discuss and it just wasn't. [00:21:32] Speaker 06: Now Mr. Nellor also makes a point and he's technically right about the language that [00:21:38] Speaker 06: There seems to be this disjunction between the money's going to flow this way, but there's no liability by the estate. [00:21:45] Speaker 06: So go ahead and give us your thoughts about that. [00:21:47] Speaker 03: I think the court already has that wired. [00:21:49] Speaker 03: It's an obligation of the estate to do something, which is expressly provided for in the order. [00:21:57] Speaker 03: The trustee has obligations. [00:21:59] Speaker 03: The trustee's obligated. [00:22:01] Speaker 03: is authorized to go forward and carry out those obligations. [00:22:05] Speaker 04: But if he fails to do so, there's no liability for the trustee for not doing it. [00:22:10] Speaker 03: We're not going to come back to the trustee and say, you pay us personally, or you, the estate, pay us. [00:22:16] Speaker 03: We're saying these are surplus funds. [00:22:17] Speaker 03: And if there are no surplus funds, then I guess we get a goose egg here. [00:22:22] Speaker 03: But there were surplus funds. [00:22:25] Speaker 03: The fact that there's a trustee makes this a little bit different. [00:22:29] Speaker 03: The trustee was very protective and you can see that in the trustee's response to Mr. Neller's objection. [00:22:38] Speaker 03: Very protective of people using the debtor label and trying to speak for the debtor. [00:22:44] Speaker 03: I'm the trustee, I speak for the debtor. [00:22:46] Speaker 03: Mr. Neller, you're not retained to speak for the debtor. [00:22:49] Speaker 03: Well, that's how that sort of pushback came from the trustee. [00:22:55] Speaker 03: We ended up. [00:22:58] Speaker 03: having that called out directly by Judge Lynch, Mr. Samourakis, you file the stipulation, and within an hour, you file an objection to the stipulation. [00:23:08] Speaker 03: It's Samourakis v. Samourakis. [00:23:11] Speaker 03: There's a point I want to make sure that we catch here. [00:23:14] Speaker 03: There is language in the motion that is at odds with the underlying documents in terms of the timing that this is to be a post-bankruptcy transfer. [00:23:27] Speaker 03: to the extent that these funds are in the possession of the debtor. [00:23:32] Speaker 03: That's what's said in the motion and it's just simply incorrect and it's something I should have caught at the time but I didn't. [00:23:41] Speaker 03: Mr. Neller has made the argument several times for the first time in his reply that the language of the motion is incorporated into the order. [00:23:50] Speaker 03: The order incorporates the language from the motion. [00:23:53] Speaker 03: There is nowhere that we have found that that is occurring. [00:23:56] Speaker 03: I don't see any citation to that. [00:23:58] Speaker 03: I don't see it in the order. [00:24:00] Speaker 03: I don't think it occurred. [00:24:02] Speaker 03: But on the merits, if that's the argument, it's directly contrary to the documents that we signed and were approved by the court. [00:24:11] Speaker 03: So that's a problem. [00:24:15] Speaker 03: Other questions? [00:24:16] Speaker 06: Well, I mean, does that sort of get to what I'm suspecting your answer is to the Jebik question? [00:24:20] Speaker 03: No. [00:24:21] Speaker 03: And I realize I didn't answer your question about this is a liability. [00:24:26] Speaker 03: The trustee was being very protective, did not want anything to create a bankruptcy claim or a liability for the estate or for the trustee. [00:24:35] Speaker 03: This was just surplus funds and that's why that language is in there. [00:24:40] Speaker 03: It was in there from the beginning. [00:24:42] Speaker 03: We had a term sheet in February, February 28th term sheet that by the way is a binding document signed by Mr. Samourakis, member of JS Kalama, member of the debtor. [00:24:55] Speaker 03: also signed by the trustee, but the trustee was being more cautious about making binding statements at that point. [00:25:03] Speaker 03: It hadn't been approved. [00:25:06] Speaker 03: So that term sheet starts the process of we're going to look to surplus funds as a backstop for the Wilcox payment. [00:25:18] Speaker 03: That term sheet is specifically incorporated into the settlement agreement. [00:25:22] Speaker 06: It's attached so it's right on the back so you can you can see this was a commitment all the way through this deal and we asked Judge Heston to enforce it and that's what we're asking this panel to a poll Well, then let me let me rephrase the question this way and see if I'm maybe not getting you If the estate had an obligation to pay the 475 From whatever source you want to call it if it's an estate obligation. [00:25:50] Speaker 06: That's one that [00:25:52] Speaker 06: you could argue has to be satisfied before you pay a resulting surplus to the debtor. [00:25:57] Speaker 06: If that's the position you're taking, then you could argue Jevic really isn't implicated, because it's something that wouldn't necessarily have to be performed before you would... I mean, the surplus is a residual. [00:26:09] Speaker 06: It's what's left. [00:26:10] Speaker 06: Now, if that's not what you're arguing, I think Mr. Neller's got something more to tell us as to why JEVET might be quite relevant here. [00:26:16] Speaker 04: So my question is, is JEVET not applicable because of the settlement and not because... That's the other point, right. [00:26:22] Speaker 03: Not because it's a... I think that's right, and I think that [00:26:29] Speaker 03: We don't have a structure dismissal yet. [00:26:33] Speaker 03: I don't think that is really the question here. [00:26:36] Speaker 03: I think it is more back to we have a settlement. [00:26:40] Speaker 03: We have a consensual. [00:26:41] Speaker 03: I mean, that's a safe harbor under JEVIC. [00:26:43] Speaker 03: I don't think we really have. [00:26:45] Speaker 06: No, I thought there were maybe two bases. [00:26:47] Speaker 06: It sounds like the first bases I was describing isn't really one you're relying on. [00:26:50] Speaker 01: No. [00:26:50] Speaker 06: Okay, I got it. [00:26:51] Speaker 01: Okay, thank you. [00:26:52] Speaker 01: It seems there's a potential confusion between the use of distributions and jevic structured dismissal Yeah, and then you know through jevic all the references to 726. [00:27:04] Speaker 01: I think that's part of at least my confusion. [00:27:07] Speaker 01: Yeah, because You don't have a plan It's not in seven and you want payments and usually that's difficult and [00:27:15] Speaker 01: except if there is a settlement or an agreement pursuant to the sale and I think that what Judge Gann is getting at is really how do we look at this because there will be no plan but there's no structure dismissal yet either. [00:27:27] Speaker 03: It's close. [00:27:28] Speaker 01: It's in the record. [00:27:29] Speaker 01: Well, I mean, but this is it. [00:27:30] Speaker 01: I mean, you want the money now. [00:27:32] Speaker 03: We want the money as part of the final report and accounting. [00:27:36] Speaker 01: But there can be no final report and accounting. [00:27:38] Speaker 01: This is not going to be a seven, and it's not going to be through a plan. [00:27:44] Speaker 01: So technically, there is no final. [00:27:46] Speaker 01: It's just dismissed. [00:27:47] Speaker 01: But you want the money to flow this way. [00:27:50] Speaker 01: But the question I think Judge Gaines is getting into is it's really flowing as a result, I would say, from the sale through the settlement [00:27:57] Speaker 01: to the flow, it's not really a distribution, is it? [00:28:00] Speaker 01: I think that's right. [00:28:02] Speaker 06: Okay. [00:28:02] Speaker 06: Thank you. [00:28:02] Speaker 06: We're a little over the time. [00:28:03] Speaker 06: Unless anybody have another question, we're good? [00:28:05] Speaker 06: No. [00:28:06] Speaker 06: Okay. [00:28:07] Speaker 06: Okay. [00:28:07] Speaker 06: Mr. Nellor, you got almost four minutes and I think you got more to talk about now. [00:28:14] Speaker 02: Well, if I can go through the... Yeah, go ahead. [00:28:16] Speaker 02: Go for it. [00:28:17] Speaker 02: ...notes here. [00:28:18] Speaker 02: I'm not exactly sure. [00:28:22] Speaker 02: Where do we begin? [00:28:26] Speaker 02: The basic problem here is the debtor was not a party to these agreements. [00:28:30] Speaker 02: And that's kind of the basic agreement and the fundamental problem with the whole settlement concept. [00:28:36] Speaker 02: The debtor didn't sign off on a settlement agreement. [00:28:39] Speaker 02: The debtor itself did not have any authority [00:28:43] Speaker 02: to sign off on these agreements. [00:28:46] Speaker 02: Mr. Somerakis, who signed off on these agreements, had no authority to bind the estate or bind payments out of the estate. [00:28:56] Speaker 02: He had no authority to agree on behalf of J.S. [00:29:00] Speaker 02: Kalama. [00:29:02] Speaker 02: The estate was controlled by the trustee at that particular point in time. [00:29:07] Speaker 02: And the trustee obviously was taking great pains to not create an obligation that he had to pay out of the estate to Wilcox and Flagel. [00:29:18] Speaker 02: I mean, that's kind of the fundamental problem that I'm seeing in this whole concept. [00:29:24] Speaker 02: And I think that's even supported by the motion to distribute funds in support of this supposed ultimate structured settlement of some kind. [00:29:35] Speaker 02: If the trustee had thought, remember, this all arose because the trustee made a motion to distribute funds and close out the estate. [00:29:42] Speaker 02: And those funds, the trustee said, would be distributed to the debtor. [00:29:46] Speaker 02: Wilcox and Flagell objected to that, and so we circled back and had another motion. [00:29:50] Speaker 02: If the trustee had thought it had an obligation to pay out of the estate, it has said in his motion to pay Wilcox and Flagell, not the debtor. [00:30:00] Speaker 02: So the interpretation of that language is what's key here, is what is it that the estate agreed to? [00:30:09] Speaker 02: What is it that JS Colama agreed to? [00:30:11] Speaker 02: That was all controlled by the trustee, and the trustee did not agree [00:30:15] Speaker 02: Hey, Wilcox and Flago out of the estate. [00:30:22] Speaker 02: Does the court have other questions? [00:30:23] Speaker 02: I don't want to just ramble on if we're not, but I'm not focusing on what the court's concerned. [00:30:29] Speaker 06: I mean, I guess we should go back to the settlement notion and what sounds like a withdrawal of an objection. [00:30:37] Speaker 06: If you think it's more complicated than that, go ahead and tell us. [00:30:42] Speaker 02: What did we agree to? [00:30:45] Speaker 02: What did we withdraw? [00:30:46] Speaker 02: We withdrew the objection to the entry of the order. [00:30:51] Speaker 02: Why would we have done that? [00:30:52] Speaker 02: Because of the language in the motion and the understandings raised by that language that this was not an obligation of the estate and that the trustee was not going to be obligated to pay for it. [00:31:04] Speaker 02: This whole thing, you know, if we even circle back to the beginning, this whole sale was a $7 million sale. [00:31:10] Speaker 02: The only interest of JS Calama was in the excess proceeds that would be coming out. [00:31:16] Speaker 02: JS Calama as an entity coming out of the bankruptcy case is coming out with some excess funds. [00:31:25] Speaker 02: It agreed because we had a $7 million sale. [00:31:29] Speaker 02: And there would be funds coming back to it. [00:31:33] Speaker 02: What we're ending up with is this wasn't a $7 million sale, it's a $6 million sale. [00:31:37] Speaker 02: And the funds are not coming to the JS Kalama. [00:31:44] Speaker 02: So the whole premise even of the sale starts to fade away in a hurry, because the result, the consideration for that sale passing through the estate, the creditors, and the debtor goes away. [00:31:56] Speaker 02: Does the court have other questions? [00:31:59] Speaker 06: Thank you very much. [00:32:00] Speaker 06: Thanks to both of you for your good arguments. [00:32:02] Speaker 06: We don't see this happy circumstance every day. [00:32:06] Speaker 02: Thank you, Your Honor. [00:32:07] Speaker 06: Thank you very much. [00:32:09] Speaker 06: Okay, thank you. [00:32:10] Speaker 06: And we will take the matter on submission and we'll get your written decision as soon as we can. [00:32:13] Speaker 06: Thank you very much. [00:32:15] Speaker 02: Thank you. [00:32:15] Speaker 06: Okay, nice to see you. [00:32:16] Speaker 06: Nice to meet you.