[00:00:03] Speaker 00:
Enrae Ramirez, David Ashley Smith appearing for appellant, James Silverthorne appearing for appellee.

[00:00:14] Speaker 05:
Good morning, counsel.

[00:00:15] Speaker 05:
Mr. Smith, would you like to reserve any time for reply?

[00:00:18] Speaker 01:
Yes, five minutes, Your Honor.

[00:00:21] Speaker 05:
Certainly.

[00:00:22] Speaker 05:
We'll reserve five minutes and you may proceed.

[00:00:24] Speaker 01:
Your Honor, the introductory judgment is in fact a final judgment because all issues were tried.

[00:00:32] Speaker 01:
point to any issue that was not tried or any issue that is pending, or to any reason that the bankruptcy judge would change his findings of no net equity.

[00:00:42] Speaker 01:
The bankruptcy court calling the judge interlocutory rather than

[00:00:47] Speaker 01:
in order to be able to deal with possible future issues is just the same as reserving jurisdiction.

[00:00:54] Speaker 01:
Reserving jurisdiction does not prevent a judgment for being final.

[00:00:58] Speaker 05:
If the benefit- That's fine, but isn't the compelling test established by Slimick in the Ninth Circuit that there's nothing to be done and the court's intent that the matter be final?

[00:01:14] Speaker 01:
It called it interlocutory, but it did actually intend that what it said to happen to Furman would be final.

[00:01:22] Speaker 01:
Because if we wait, we send it back, or if he just waits, then all we have is a judgment.

[00:01:30] Speaker 01:
Furman, you stay at Curving Creek as long as you pay the rent.

[00:01:34] Speaker 01:
And the judge doesn't have to do anything.

[00:01:37] Speaker 01:
No more will happen.

[00:01:38] Speaker 01:
When the time finally passes and there's equity,

[00:01:41] Speaker 01:
He says the trustee can sell.

[00:01:43] Speaker 01:
He even says under Heimann, he can just go out and sell if he thinks there's going to be enough money.

[00:01:49] Speaker 01:
Once he sells, he can ask Furman, well, I own half, give me half, or Furman has to leave.

[00:01:58] Speaker 01:
This is a final judgment of his rights.

[00:02:01] Speaker 01:
If you consider that he told the trustee, record this with the Fairfax County recorder.

[00:02:07] Speaker 01:
So the Fairfax County recorder,

[00:02:10] Speaker 01:
They aren't the last word entitled.

[00:02:14] Speaker 01:
Judges are.

[00:02:15] Speaker 02:
Mr. Smith?

[00:02:18] Speaker 02:
Is it Smith or Smyth?

[00:02:19] Speaker 02:
I'm sorry.

[00:02:20] Speaker 02:
Smith.

[00:02:21] Speaker 02:
Mr. Smith.

[00:02:23] Speaker 02:
If we were to treat this as a final judgment, then to the extent that there is a determination that A, there was no breach.

[00:02:34] Speaker 02:
Number two, that the trustee doesn't have authority to sell under 363H.

[00:02:40] Speaker 02:
and the turnover isn't required.

[00:02:42] Speaker 02:
Are those legal issues or factual questions?

[00:02:47] Speaker 01:
Legal issues, turnover would have nothing to do with it because turnover is $5.42 and you cannot get an avoided transfer by turnover.

[00:03:05] Speaker 01:
363-H has gone for a few reasons.

[00:03:08] Speaker 01:
One reason is that the judge, and we like this, of course, not that 360-H doesn't apply.

[00:03:17] Speaker 01:
And his ruling is sort of unique because most avoided transfers, they automatically say it doesn't apply.

[00:03:23] Speaker 01:
But he says it doesn't apply because he didn't have the right title, not having ownership.

[00:03:28] Speaker 01:
So we agree.

[00:03:29] Speaker 01:
But is that a legal question or a factual issue?

[00:03:32] Speaker 01:
That's a legal question.

[00:03:34] Speaker 01:
But there's another thing about 363H.

[00:03:37] Speaker 01:
Because he made that good ruling, he decided to say nothing about 363H3, whether the detriment to Furman is less than the benefit to the estate.

[00:03:55] Speaker 01:
And the evidence came in.

[00:03:57] Speaker 01:
Benefit to

[00:03:58] Speaker 01:
no equity, no money.

[00:04:00] Speaker 01:
Furman, yeah, he got a job now.

[00:04:02] Speaker 01:
He doesn't have to move out of the neighborhood, but he still has to move out of a house he's been in 21 years.

[00:04:08] Speaker 01:
So you get benefit, zero, no benefit.

[00:04:12] Speaker 01:
There's no money in it.

[00:04:14] Speaker 01:
That's what the judge found.

[00:04:16] Speaker 02:
But did you brief the question about whether or not the detriment under 363H3 was a valid reason for the court to deny the relief?

[00:04:28] Speaker 02:
Or did you not address it at all in your brief?

[00:04:31] Speaker 01:
I addressed it, I would say I addressed it in my 28-J letter.

[00:04:43] Speaker 01:
363-H cases, most of them when they do deal with whether 363-H applies, they just assume it does.

[00:04:51] Speaker 01:
It does, but the judge's ruling is sort of unique and I agree if you take the literal

[00:05:02] Speaker 01:
requires three different common law tenancy and the petition date.

[00:05:07] Speaker 01:
When you transfer the property away, you don't have any interest.

[00:05:09] Speaker 01:
You don't have a tenancy on the petition date.

[00:05:12] Speaker 01:
And since it was a no-fault thing, it's just kind of purely, well, you're transferring it away, Armida, and you didn't own it.

[00:05:23] Speaker 01:
If she's trying to get an exemption, you just

[00:05:25] Speaker 01:
You don't get the exemption.

[00:05:27] Speaker 01:
So the other side of the coin is we don't get to say it was property of the state on the petition date with any title for 363H.

[00:05:35] Speaker 01:
The 363H

[00:05:43] Speaker 01:
would not also apply if like what the judge wants to say is that the PSSA controls, because the PSSA validly weighs the common law titles and statutory relief.

[00:05:55] Speaker 01:
It's in there and it's approved by a case in Virginia, Kramer versus Kramer.

[00:06:05] Speaker 01:
And so,

[00:06:11] Speaker 01:
believe and none of that matters there's two hard pieces of evidence you can't get around no equity no matter what you say there's just no equity and no equity getting everything else is gonna remain no equity and you're not gonna get in any money and the other thing is what the judge

[00:06:33] Speaker 01:
At the end of the first case, as the case is presented, there is no evidence to support turnover count, and in fact, the turnover count was not even pursued at trial.

[00:06:43] Speaker 01:
If that's true, then the recovery count wasn't, because 550A is exactly the same as turnover.

[00:06:52] Speaker 01:
Unfortunately for everyone here, they didn't know that to the end, but you have to use 550A.

[00:06:57] Speaker 01:
You can't use a 542.

[00:07:00] Speaker 01:
But if you say there's no evidence and no evidence presented for benefit, if nothing was presented for 542, then nothing was presented for 550A.

[00:07:11] Speaker 02:
So Mr. Smith, if it's a final decision and Mr. Castaneda was successful on

[00:07:19] Speaker 02:
on the determination that it wasn't a breach of contract.

[00:07:23] Speaker 02:
He was successful on the determination that trustee could not utilize 363H to sell the property.

[00:07:30] Speaker 02:
And he was successful on the claim for turnover.

[00:07:33] Speaker 02:
Why does he have standing to appeal a decision, if it is final, that it was in his favor?

[00:07:39] Speaker 02:
And he won on all the questions presented.

[00:07:42] Speaker 01:
It isn't his favor.

[00:07:44] Speaker 01:
But what isn't his favor is that the judge made a ruling that I can't do anything.

[00:07:49] Speaker 01:
It's interlocutory, David, and you just sit here.

[00:07:52] Speaker 01:
You do nothing.

[00:07:53] Speaker 01:
You do nothing.

[00:07:55] Speaker 01:
And you just wait.

[00:07:56] Speaker 01:
We'll have a status conference.

[00:07:58] Speaker 01:
And I can't appeal interlocutory.

[00:07:59] Speaker 01:
It's very hard to appeal.

[00:08:01] Speaker 01:
And so then what do we do?

[00:08:02] Speaker 01:
We go back.

[00:08:03] Speaker 01:
And the question is, well, no equity.

[00:08:05] Speaker 01:
What are we going to do about that?

[00:08:06] Speaker 01:
Well, how about this, Mr. Cunningham?

[00:08:10] Speaker 01:
Why don't you get an appraiser now?

[00:08:12] Speaker 01:
Well, the reason is he has no reason he couldn't have done it at trial.

[00:08:16] Speaker 01:
He can't go back without showing he couldn't have done a trial.

[00:08:19] Speaker 01:
Well, here's another thing, Mr. Cunningham.

[00:08:21] Speaker 01:
We've been waiting for years now.

[00:08:25] Speaker 01:
It's 2027.

[00:08:29] Speaker 01:
And guess what?

[00:08:29] Speaker 01:
There's equity in the property.

[00:08:31] Speaker 01:
In fact, we got a buyer.

[00:08:32] Speaker 01:
Well, that's evidence that come out in after trial.

[00:08:36] Speaker 01:
Why?

[00:08:36] Speaker 01:
Because the buyer is using the 220

[00:08:40] Speaker 01:
to 2027 value.

[00:08:43] Speaker 01:
So what it is is two bright line things.

[00:08:47] Speaker 01:
One, he missed the statute of limits.

[00:08:49] Speaker 01:
No question about it.

[00:08:51] Speaker 01:
And second, let's say he didn't miss it.

[00:08:52] Speaker 01:
We show off a trial.

[00:08:54] Speaker 01:
He doesn't present any evidence.

[00:08:55] Speaker 01:
He loses.

[00:08:56] Speaker 01:
The judge says, oh, he didn't present evidence.

[00:08:59] Speaker 01:
So we still don't know what's happening.

[00:09:01] Speaker 01:
And we're just going to keep that.

[00:09:02] Speaker 01:
Was he required to present evidence of value?

[00:09:05] Speaker 01:
So for three, he has to present evidence for his cause of action, which is to sell Curving Creek.

[00:09:13] Speaker 01:
That's what his cause of action was, to sell Curving Creek.

[00:09:15] Speaker 01:
And he has the burden on all 363 HPS to show that- We lost.

[00:09:24] Speaker 05:
I mean, why are we arguing that?

[00:09:25] Speaker 01:
We're arguing because if we do nothing, Berman is going to lose this house in one of two ways.

[00:09:34] Speaker 01:
little while from now the judge is going to say I changed my 363h does count it's only interlocker do I change my name there was equity or the other way he's going to say is

[00:09:49] Speaker 01:
this property settlement agreement, which we say counts.

[00:09:54] Speaker 01:
And he said it counts because the integration clause wasn't obeyed.

[00:10:01] Speaker 01:
Only one person signed the next document.

[00:10:04] Speaker 01:
Well, if you look up, that's not true.

[00:10:05] Speaker 01:
He thought Armida was the only one who signed the document that got rid of the

[00:10:10] Speaker 01:
a PSA no he said that's why it applied you look at it both Furman and Artemida signed it it superseded it merged with it got rid of the PSSA so what's going to happen is Furman got rid of the PSSA PSSA is a property settlement right but you said it got rid of the the property settlement what got rid of the property settlement got rid of the property settlement agreement

[00:10:39] Speaker 01:
from Armita to Furman and it was then avoided yes it was avoided but the important thing is there is no need to then merge it merged it merged with the fraudulent transfer the fraudulent transfer was then avoided it was preserved but it wasn't recovered so whatever was transferred you're into your five minutes mr smith and you're about four and a half now so i just want to bring that up okay

[00:11:08] Speaker 05:
Okay, all right, we'll let you reserve then on that point in time.

[00:11:13] Speaker 05:
Mr. Silverthorne?

[00:11:16] Speaker 03:
Good morning, Your Honors.

[00:11:17] Speaker 03:
May I begin?

[00:11:18] Speaker 05:
You may, certainly.

[00:11:21] Speaker 03:
May it please the Court?

[00:11:22] Speaker 03:
I want to start by addressing some of the arguments brought up by Posing Council and more particularly the questions asked in the order regarding oral argument.

[00:11:36] Speaker 03:
First off, under SLMIC, there's two requirements for a judgment to be found final, a complete act of adjudication, and clear evidence of the judge's intention that it be the court's final act.

[00:11:52] Speaker 05:
You enter a judgment after trial, what else is there to do?

[00:11:57] Speaker 03:
So in this particular case, the trustee was actually found to have prevailed on the breach of contract issue.

[00:12:05] Speaker 03:
All right.

[00:12:05] Speaker 05:
I'll put it on the first one.

[00:12:07] Speaker 05:
But did you prevail?

[00:12:09] Speaker 05:
Because I thought there was no damages for breach of contract.

[00:12:13] Speaker 05:
And damages, according to your trial brief, requires, under Virginia law, evidence of damage.

[00:12:18] Speaker 05:
And there was no damage.

[00:12:20] Speaker 05:
So how did you prevail?

[00:12:23] Speaker 03:
So we prevailed in that the mortgage payments were not made and equity was building in the debtor's estate.

[00:12:29] Speaker 05:
That's not a claim.

[00:12:32] Speaker 03:
With each payment, equity was increasing.

[00:12:37] Speaker 05:
What claim did you prevail on in your lawsuit that would entitle you to be the prevailing party under the marital settlement?

[00:12:48] Speaker 03:
Under the marital settlement, the appellant was required to make those mortgage payments.

[00:12:56] Speaker 03:
They failed to make payments.

[00:12:58] Speaker 05:
I understand that.

[00:12:59] Speaker 05:
You can say that they were required.

[00:13:01] Speaker 05:
We're going to assume for purposes of this discussion, they were required.

[00:13:04] Speaker 05:
They later did, right?

[00:13:07] Speaker 05:
And then the court was very clear.

[00:13:08] Speaker 05:
They did default.

[00:13:10] Speaker 05:
They cured it.

[00:13:11] Speaker 05:
There's no breach of contract.

[00:13:14] Speaker 05:
I mean, there's no recovery.

[00:13:16] Speaker 05:
There was a breach of contract that was cured, and therefore there was no award in favor of the trustee's breach of contract claim.

[00:13:28] Speaker 03:
Right.

[00:13:28] Speaker 03:
There's no award in terms of the contract being cured, but the PSSA also contains an attorney's award fee or an attorney's award

[00:13:37] Speaker 03:
provision that provides attorney's awards to the prevailing party if they are forced to bring the lawsuit later on, which the trustee was forced to do.

[00:13:48] Speaker 02:
But counsel, the award of attorney's fee doesn't make the judgment not final, does it?

[00:13:55] Speaker 02:
Correct.

[00:13:57] Speaker 03:
So I'll move on to the 363.

[00:13:59] Speaker 04:
I have a question, though, too.

[00:14:03] Speaker 04:
Okay, so there was a breach of contract.

[00:14:07] Speaker 04:
you've got no recovery because there were no damages.

[00:14:11] Speaker 04:
If you can't recover anything, how are you with the prevailing party?

[00:14:21] Speaker 03:
Because it was established that there was a breach.

[00:14:24] Speaker 03:
It was since cured and so that kind of eliminated that.

[00:14:30] Speaker 04:
Yeah, I don't mean to be a simpleton here, but you know, normally the prevailing party is one

[00:14:37] Speaker 04:
It gets something, right?

[00:14:40] Speaker 04:
Your client didn't get anything.

[00:14:45] Speaker 03:
Right, and damages, I'm sure would have been awarded had the breach not been cured, but I think I'll sort of- Council, there's more of a fundamental question here, which is what about the agreement if it required him to make the payments awards you anything if he doesn't do it?

[00:15:03] Speaker 02:
because the only rights you have are to indemnity if she is held responsible for a failure of him to pay taxes or the deed of trust or some other expense related to the property, and a judgment is entered against her.

[00:15:18] Speaker 02:
Doesn't give the trustee any rights or any damages, any money, awardable under that agreement, right?

[00:15:28] Speaker 03:
Well, under the agreement, the debtor

[00:15:30] Speaker 03:
And now the trustee after recovering the debtor's rights under that agreement to Curving Creek.

[00:15:39] Speaker 03:
There's a sale provision in that paragraph nine of the PSSA, which entitles the debtor to 50% of the equity.

[00:15:47] Speaker 03:
And that equity continues to grow as mortgage payments are made.

[00:15:52] Speaker 02:
But that doesn't give you any damages for a breach, which is what the fundamental question here that you raised.

[00:15:58] Speaker 02:
You said he breached the agreement.

[00:16:00] Speaker 02:
He didn't make the mortgage payments.

[00:16:02] Speaker 02:
We get damages.

[00:16:03] Speaker 02:
He cured.

[00:16:04] Speaker 02:
God knows why.

[00:16:06] Speaker 02:
But it doesn't have any effect on your right to recover any money for a breach, does it?

[00:16:12] Speaker 02:
It only entitles you ultimately if you can get them to agree to a sale or you get the court to compel a sale, it gets you some ultimate value out of the property.

[00:16:25] Speaker 02:
But there's no claim that you have, is there, for breach of contract?

[00:16:30] Speaker 02:
Because the contract doesn't provide any remedy for you.

[00:16:36] Speaker 02:
Does it?

[00:16:38] Speaker 02:
What am I missing?

[00:16:40] Speaker 02:
The sale is independent of his obligation to pay the mortgage.

[00:16:45] Speaker 02:
That's how they'll divide the proceeds.

[00:16:48] Speaker 02:
But it doesn't say if he breaches the agreement, I have the right to sell the property.

[00:16:53] Speaker 02:
That's my mutual consent.

[00:16:57] Speaker 03:
Well, so the agreement states that neither party shall unreasonably withhold their consent to sell the property.

[00:17:05] Speaker 03:
Right now, it's not unreasonable to withhold consent if you're current on your mortgage payments.

[00:17:11] Speaker 03:
But if you stop making those payments, you put the trustees and the state's interest in that property at risk.

[00:17:18] Speaker 03:
And that's the basis for bringing this sort of challenge to protect those interests.

[00:17:23] Speaker 02:
So let's start at the beginning just for one second.

[00:17:26] Speaker 02:
This action began as a opportunity for the trustee to avoid a transfer of an interest by the debtor pre-petition to Mr. Casaneda that you believed was without consideration or was with the intent to delay or defraud creditors under 548.

[00:17:45] Speaker 02:
Correct?

[00:17:47] Speaker 02:
Correct.

[00:17:49] Speaker 02:
And then the result of that was to enable you then to have the ownership interest in the property, the estate.

[00:17:58] Speaker 03:
The trustee recovered the debtor's ownership interest under the property settlement.

[00:18:04] Speaker 02:
It didn't need the property settlement agreement, did it?

[00:18:07] Speaker 02:
Because by operation of law under 541, once the recovery occurs, it becomes property of the estate.

[00:18:15] Speaker 02:
Under 550 or 551, under 541A3 or A4, doesn't it become property estate as of the commencement of the case?

[00:18:23] Speaker 02:
So the trustee, by operation of law, by avoiding the transfer, becomes the owner of the property under the court's decision, avoiding the transfer.

[00:18:35] Speaker 02:
What additional rights are provided under the PSA that give the trustee any better authority, any greater rights

[00:18:44] Speaker 02:
then the bankruptcy code does if you avoid the transfer under 548 and recover it for the benefit of the estate under 550.

[00:19:00] Speaker 03:
What the court decided was that we recovered the rights and remedies of the debtor under the PSSA.

[00:19:07] Speaker 02:
So let's talk about PSSA for a second.

[00:19:10] Speaker 02:
The PSSA contains spousal maintenance obligations.

[00:19:14] Speaker 02:
Are you collecting the spousal maintenance obligations, or not spousal maintenance, child support?

[00:19:18] Speaker 02:
Did you collect child support obligations in 2018 through the time that the agreement was allegedly breached?

[00:19:25] Speaker 02:
No, you didn't, right?

[00:19:27] Speaker 02:
Did you maintain that he had medical insurance, life insurance that's also provided for in the agreement?

[00:19:33] Speaker 02:
Those all rights devolved to the trustee.

[00:19:36] Speaker 02:
Did the trustee ensure that those rights were performed by Mr. Castaneda?

[00:19:41] Speaker 02:
No, no, of course you didn't.

[00:19:46] Speaker 02:
The only thing you're holding on to is the fact that they dealt with property interests, which was the house.

[00:19:52] Speaker 02:
That's what you care about.

[00:19:54] Speaker 02:
That's what you avoided the transfer for.

[00:19:57] Speaker 02:
The agreement provides you with nothing, does it?

[00:20:02] Speaker 03:
It provides the estate with 50% equity in the house.

[00:20:07] Speaker 02:
But if she has 50% title of the property because you avoided the transfer, then the estate owns 50% without the agreement, doesn't it?

[00:20:17] Speaker 03:
The agreement states that the parties will mutually agree to sell the entire property, though.

[00:20:23] Speaker 02:
But they're not going to mutually agree because she doesn't care and he doesn't want to have it sold.

[00:20:28] Speaker 02:
So what you want to use is the power of sale under 363H, which gives the trustee authority to sell the property.

[00:20:36] Speaker 02:
That's what you really want to do, isn't it?

[00:20:38] Speaker 03:
That or the sale provision in the PSSA

[00:20:44] Speaker 02:
But then according to the judge, you got to wait until there's a breach until you can do it.

[00:20:48] Speaker 02:
And if he keeps it current, the state remains open for inevitably forever until he dies.

[00:20:56] Speaker 03:
Not necessarily until there's a breach, but once there's sufficient equity toward his concerns about having to relocate, he will obtain his share from the sale and that will alleviate.

[00:21:10] Speaker 02:
But how does that establish consent under 363B?

[00:21:16] Speaker 02:
You don't have consent with him.

[00:21:18] Speaker 02:
You'll never have consent with him.

[00:21:20] Speaker 02:
He doesn't ever want to see the estates recover any interest in the property.

[00:21:27] Speaker 02:
So you can't use the 63B.

[00:21:32] Speaker 03:
Under the PSSA, neither party can unreasonably withhold their consent.

[00:21:38] Speaker 03:
The debtor is entitled to 50% of the equity in that home, and to never sell that property despite having enough equity to alleviate your concerns is unreasonable.

[00:21:54] Speaker 05:
What's enough equity?

[00:21:57] Speaker 03:
I believe in the appellant's declaration, he stated $30,000 would be... No, no, no.

[00:22:05] Speaker 05:
You said there needs to be enough equity to force a sale because failure to agree would be unreasonably withholding it.

[00:22:13] Speaker 05:
What's enough equity?

[00:22:14] Speaker 05:
Especially given this is the second adversary.

[00:22:18] Speaker 05:
I guess, you know, first appeal, there was at, you know, maybe 30,000 equity if the value was 400,000.

[00:22:29] Speaker 05:
I don't know how you're going to account for the mortgage payments.

[00:22:33] Speaker 05:
That doesn't seem to be addressed by the property, I mean, the marital settlement.

[00:22:40] Speaker 05:
Is there an agreement on how to account for the mortgage payments?

[00:22:43] Speaker 04:
Mr. Sultorna, is the answer to that a related question, if I can piggyback on it?

[00:22:48] Speaker 04:
Judge Breaker, is that how long do we keep this case open?

[00:22:51] Speaker 04:
I mean, when does this asset become burdensome?

[00:22:59] Speaker 02:
The bankruptcy court seemed to indicate that it wouldn't be available for sale until he breached or there was some other basis for you to use 363.

[00:23:09] Speaker 02:
And the agreement itself doesn't provide any timeline for sale, doesn't provide any circumstances,

[00:23:16] Speaker 02:
for sale other than mutual consent, we're just not clear on how long are you gonna remain entitled and force him to continue to make payments?

[00:23:28] Speaker 02:
And you have no rights unless you exercise something under 363-H.

[00:23:36] Speaker 03:
It would essentially stay open until the trustee is able to bring the sale, force a sale, obtain a court-ordered sale under either the property settlement agreement or 363 or a breach.

[00:23:54] Speaker 03:
And so,

[00:23:57] Speaker 03:
The duties of the trustee require that the estate be closed expeditiously, but that is qualified by as is compatible with the best interests of the parties in interest.

[00:24:08] Speaker 03:
And so.

[00:24:11] Speaker 03:
Is the estate solvent?

[00:24:12] Speaker 03:
Is the estate solvent?

[00:24:18] Speaker 03:
Yeah.

[00:24:18] Speaker 03:
I'm not sure right now.

[00:24:22] Speaker 03:
I cannot answer that.

[00:24:24] Speaker 04:
So keeping this open, maybe.

[00:24:27] Speaker 04:
just so that trustee's fee can be paid?

[00:24:30] Speaker 03:
No, that is not the concern of the trustee.

[00:24:38] Speaker 03:
I believe there are still active creditors in the trustee's declaration in the second, or not declaration, but testimony in the second adversary proceeding.

[00:24:49] Speaker 03:
And what we have consistently said is that

[00:24:53] Speaker 03:
Any sort of fees paid out will have a carve out for these creditors.

[00:24:59] Speaker 02:
Council, what Mr. Smith has argued is that this is a final determination and that's something that we have to consider.

[00:25:08] Speaker 02:
But if he's correct, if the trustee believed that 363H was applicable, wasn't it obligated to appeal that decision?

[00:25:21] Speaker 02:
once the judge entered the order saying, I'm gonna find they didn't own it as of the commencement of the case and therefore as a matter of law, they can't sell it?

[00:25:32] Speaker 03:
Yes, but the 363H was sort of a belt and suspenders argument for ordering a sale of the property.

[00:25:43] Speaker 03:
The trustee was relying more on their sale rights under the PSSA.

[00:25:50] Speaker 02:
So if we were to affirm the decision of the court and say it's a final order and it would have race judicata effect on these trustees' ability to ever sell the property under 363H, wouldn't it?

[00:26:08] Speaker 03:
Yeah, I do believe that would be the effect.

[00:26:14] Speaker 03:
But I still do not believe that the judge intended the order to be final, which is the second element required under SLMIC.

[00:26:25] Speaker 03:
They focused sort of on the language in the judgment and we contrasted there in that they merely stayed the adversary and further ordered that a status conference would be scheduled in the future.

[00:26:44] Speaker 03:
All right.

[00:26:46] Speaker 05:
Thank you.

[00:26:46] Speaker 05:
I see your time's up.

[00:26:47] Speaker 05:
Judge Gannon, any additional questions?

[00:26:50] Speaker 05:
No.

[00:26:51] Speaker 05:
Judge Corbett?

[00:26:53] Speaker 05:
All right.

[00:26:54] Speaker 05:
Thank you very much.

[00:26:54] Speaker 05:
We'll return to Mr. Smythe.

[00:26:57] Speaker 05:
I believe you have, looks like a little bit over four minutes of reply.

[00:27:02] Speaker 01:
Let me proceed.

[00:27:04] Speaker 01:
541A3 says that an avoided transfer is not property of the state until it's recovered.

[00:27:11] Speaker 01:
Then you have 541A4, which says,

[00:27:14] Speaker 01:
it's not property of the state till it's preserved.

[00:27:17] Speaker 01:
Since all transfers are preserved.

[00:27:20] Speaker 05:
Well, Mr. Smythe, let's get into the heart of your argument.

[00:27:26] Speaker 05:
Why did the trustee bring the avoidance action in the first place?

[00:27:31] Speaker 01:
The trustee brought the avoidance action, and it's complicated because my argument really didn't come in.

[00:27:39] Speaker 01:
But basically, they

[00:27:43] Speaker 01:
I don't have anything to do with you, Furman.

[00:27:46] Speaker 01:
I'm going to put you and Curving Creek behind me.

[00:27:48] Speaker 01:
I'm deeding the property to you.

[00:27:50] Speaker 01:
You keep it.

[00:27:51] Speaker 01:
That's it.

[00:27:53] Speaker 01:
But you don't mess with me with the children.

[00:27:56] Speaker 01:
You don't go after.

[00:27:57] Speaker 01:
Well, that's not legal consideration.

[00:28:00] Speaker 01:
Our defense was

[00:28:02] Speaker 01:
And the judge never even mentioned it.

[00:28:04] Speaker 01:
It was tenets by the entirety property.

[00:28:06] Speaker 01:
There was one joint tenant.

[00:28:07] Speaker 01:
The transfer did not harm the joint tenant, pen fed, because the property curving creek and Furman were still liable to the only person who had to be paid.

[00:28:18] Speaker 01:
But the judge didn't go for it.

[00:28:20] Speaker 01:
So it didn't even talk about it.

[00:28:22] Speaker 01:
But I just want to give one sentence.

[00:28:24] Speaker 01:
Really, the most important thing is the statute of limitations.

[00:28:28] Speaker 01:
They missed it.

[00:28:29] Speaker 01:
The judge said, I always believe avoided transfer equals return of the property to the estate right away, or as of the petition date, it doesn't.

[00:28:40] Speaker 01:
I want to mention how 5-4, I'll just tell you the case that explains it.

[00:28:44] Speaker 01:
I'd like to say something too.

[00:28:47] Speaker 05:
We're going to let one speaker at a time.

[00:28:50] Speaker 01:
Yeah, okay.

[00:28:51] Speaker 01:
The case that sends it, and it's a lower case, says, how can you have 541A3, that's for recovery, when you don't need it if preservation does it?

[00:29:04] Speaker 01:
Well, the case is Parker versus Titan Mining.

[00:29:08] Speaker 01:
It's a lower court, 2022 bankruptcy, Lexus 1000 at page 29.

[00:29:16] Speaker 01:
case that the Ninth Circuit follows and the Ninth Circuit doesn't have one.

[00:29:20] Speaker 01:
All the other ones follow this one, but Ninth Circuit itself doesn't have one.

[00:29:24] Speaker 01:
But the other case of the Ninth Circuit is Colonial Realty, 980F, 2nd, 125.

[00:29:31] Speaker 01:
It's not property of the estate, despite 541A4, unless it's a lien.

[00:29:38] Speaker 01:
then the lien is gone, title is cleared up, and the possessory interest.

[00:29:44] Speaker 01:
I just want to leave, well, not leave, but.

[00:29:47] Speaker 02:
So wait, Mr. Smith, just so I can understand your argument, your argument is the trustee made a motion or filed an adversary proceeding to recover the transfer pre-petition by the debtor to Mr. Castaneda for the benefit of the estate,

[00:30:06] Speaker 02:
and wanted to recover that for the benefit of the estate, got a judgment that said that.

[00:30:11] Speaker 02:
But because the judge didn't include the specific language that it's recovered for the benefit of the estate in the original pleading under 551, as well as 550, that that somehow makes the judgment deficient.

[00:30:27] Speaker 02:
And his attempt later to change that, to alter it,

[00:30:31] Speaker 02:
express his intent is still violative of the law.

[00:30:35] Speaker 01:
Absolutely.

[00:30:36] Speaker 01:
Two statute of limits for an avoided transfer and you have to clear them both.

[00:30:40] Speaker 01:
AVI is the main case and it's a BAP case.

[00:30:44] Speaker 01:
And if you do them in the same case like everyone does, you don't even notice them.

[00:30:48] Speaker 01:
But if you end the case, AVI and Madoff, if you end the first case and only get avoidance, and the judge said, we only got avoidance.

[00:30:57] Speaker 01:
He said, benefit of the estate is the future.

[00:31:00] Speaker 01:
Benefit of the estate is what 550A says.

[00:31:03] Speaker 01:
He said it wasn't done.

[00:31:04] Speaker 01:
One thing was done.

[00:31:06] Speaker 01:
AVI.

[00:31:07] Speaker 01:
And Madoff, and they all say it, no question.

[00:31:11] Speaker 01:
There's two statute limits.

[00:31:12] Speaker 01:
None of us knew about it.

[00:31:14] Speaker 01:
He missed it.

[00:31:15] Speaker 01:
The judge let him dismiss the case without turnover because he had no appraiser.

[00:31:21] Speaker 01:
And he was in a safe position.

[00:31:22] Speaker 01:
Little do we know, a year later, looming in the future was 550F, and he missed it.

[00:31:30] Speaker 01:
Madoff, AVI are exactly like our case.

[00:31:33] Speaker 01:
He missed the statute of limitations.

[00:31:37] Speaker 01:
case that I cited called Parker shows how you can't say, well, you know, the 540A3 doesn't matter.

[00:31:49] Speaker 01:
A4 means everything is preserved.

[00:31:54] Speaker 01:
And so we don't need to recover.

[00:31:55] Speaker 01:
And no, they absolutely say it's not property of this state until it's voided.

[00:32:01] Speaker 01:
and the 541A4, and I think it's explained best in the Parker case.

[00:32:06] Speaker 01:
So one, we did beat him on the statute of limitations.

[00:32:10] Speaker 01:
Two, we showed up at trial.

[00:32:12] Speaker 01:
We won.

[00:32:12] Speaker 01:
They lost.

[00:32:13] Speaker 01:
They showed no evidence in the jury at all.

[00:32:16] Speaker 01:
We don't know enough.

[00:32:17] Speaker 01:
Well, you don't know enough because the other side didn't present evidence.

[00:32:21] Speaker 01:
So what do we do?

[00:32:21] Speaker 01:
Give them a chance.

[00:32:23] Speaker 01:
If this is sent back, we're going to be in shoots and ladders between the appeal court.

[00:32:27] Speaker 01:
We're going to do a motion for abandonment.

[00:32:31] Speaker 01:
No equity.

[00:32:32] Speaker 01:
Well, the judge will say, yeah, there is equity.

[00:32:34] Speaker 01:
We'll do a motion.

[00:32:35] Speaker 05:
I think we're over the limit now, and I think that's

[00:32:40] Speaker 05:
Probably enough.

[00:32:41] Speaker 01:
Okay.

[00:32:42] Speaker 01:
Thank you.

[00:32:42] Speaker 05:
Thank you very much.

[00:32:44] Speaker 05:
All right.

[00:32:44] Speaker 05:
Thank you both for your argument.

[00:32:46] Speaker 05:
The matter will be deemed submitted and we'll try to get our decision as soon as possible.

[00:32:50] Speaker 05:
But thank you very much.

[00:32:51] Speaker 05:
I'll conclude the hearing in Castaneda versus Hopper.

[00:32:59] Speaker 05:
Madam Clerk, can you go ahead and call the third matter, please?