[00:00:03] Speaker 01:
Good morning, Your Honors.

[00:00:04] Speaker 03:
Good morning.

[00:00:05] Speaker 01:
May it please the Court.

[00:00:06] Speaker 01:
David Shimano on behalf of Satellite Capital.

[00:00:09] Speaker 01:
I'll try and reserve three minutes.

[00:00:11] Speaker 01:
This case has a very long and complicated history with many erroneous rulings that require reversal.

[00:00:19] Speaker 01:
But the gatekeeping issue is whether the Bankruptcy Court had subject matter jurisdiction to adjudicate the fundamental intercreditor dispute that is at issue.

[00:00:28] Speaker 03:
Let me ask you that because

[00:00:30] Speaker 03:
You don't raise that when you're in the bankruptcy court.

[00:00:34] Speaker 03:
And as part of these proceedings, you actually go to the BAP.

[00:00:38] Speaker 03:
And you prevail in the BAP.

[00:00:40] Speaker 03:
And all's well.

[00:00:41] Speaker 03:
There's no jurisdictional issue till you lose, right?

[00:00:46] Speaker 01:
That's incorrect, Your Honor.

[00:00:47] Speaker 03:
Okay.

[00:00:48] Speaker 03:
Why did you appeal to the BAP?

[00:00:49] Speaker 03:
Aren't you the one that appealed to the BAP in the bankruptcy court?

[00:00:52] Speaker 01:
That BAP ruling was not part of this trial.

[00:00:56] Speaker 01:
That BAP ruling was a Rule 60B motion commenced by emaciation outside of this adversary proceeding.

[00:01:04] Speaker 01:
This action was commenced in the Superior Court.

[00:01:07] Speaker 01:
It was removed by emaciation.

[00:01:09] Speaker 01:
And pending our motion to remand, they filed a motion for Rule 60 relief outside of the adversary proceeding.

[00:01:17] Speaker 01:
So that ruling was made outside of the adversary proceeding.

[00:01:21] Speaker 01:
And we appeal to the BAP precisely to say,

[00:01:25] Speaker 01:
We need to get relief.

[00:01:27] Speaker 01:
We need a reversal of the Rule 60 order to make sure that the adversary proceeding trial, wherever it is litigated, federal court, state court is adjudicated properly.

[00:01:37] Speaker 01:
We raised jurisdiction immediately.

[00:01:40] Speaker 01:
The moment they removed, we made a motion to remand and objected to jurisdiction from the start and appealed it to Judge Carney in the first appeal.

[00:01:50] Speaker 03:
But just let me tell you where I'm, I don't know where I land but I'm assuming I have good bankruptcy judges here and so obviously.

[00:01:59] Speaker 03:
But my understanding of the facts just fundamentally are that satellite took over from someone that was a senior lien holder in 2007.

[00:02:16] Speaker 03:
And then emaciation comes in in, I don't know, somewhere 2015 or whatever.

[00:02:21] Speaker 03:
But then something happens and then emaciation becomes the senior lien holder and your predecessor becomes the junior lien holder.

[00:02:31] Speaker 03:
Then emaciation wants to foreclose on there's, it must be a good piece of property, I'm assuming.

[00:02:41] Speaker 03:
But that person was in bankruptcy court and they get stayed on the foreclosure.

[00:02:47] Speaker 03:
So it all gets encapsulated in there.

[00:02:50] Speaker 03:
And then over a period of time, so emaciation can't foreclose, but then emaciation gets, that's kind of an odd name for something I feel like.

[00:03:01] Speaker 03:
Am I saying that right?

[00:03:03] Speaker 00:
Yes, your honor.

[00:03:05] Speaker 03:
Okay, it seems strange.

[00:03:07] Speaker 03:
But because you talk about people being emaciated, I think, or something like that.

[00:03:12] Speaker 03:
But anyway, so they want to, they get sideways with the trustee.

[00:03:18] Speaker 03:
And then they have their, then in bankruptcy court, they have to make the trustee happy and pay, have some settlement with the trustee.

[00:03:28] Speaker 03:
And then this modification, then there's a modification.

[00:03:31] Speaker 03:
And so, all of this involves who it, but some of these pending state court, these sort of parallel state court proceedings.

[00:03:40] Speaker 03:
So, I'm having a hard time pulling all of this out of, it seems like it all, whether you are a senior lien holder, which is what you want to be, right?

[00:03:53] Speaker 01:
Arc, the question that.

[00:03:55] Speaker 03:
Whether you're a, but you want to be the senior lien holder, right?

[00:03:58] Speaker 01:
We want to either be the senior lien holder

[00:04:01] Speaker 01:
Or we want declaratory relief.

[00:04:03] Speaker 01:
This is the original complaint.

[00:04:05] Speaker 01:
We either wanted to be determined to be the senior lien holder so we didn't have to pay them $1 to redeem the property, or tell us what actually we do owe them to redeem the property.

[00:04:17] Speaker 01:
It was alternative relief.

[00:04:18] Speaker 01:
We'll take either one.

[00:04:19] Speaker 01:
We'll take either one.

[00:04:20] Speaker 01:
That was what we filed in the Superior Court.

[00:04:21] Speaker 03:
But it seems like it all kind of focuses around interpreting what happened

[00:04:28] Speaker 03:
in the bankruptcy court as to who is senior and who is junior.

[00:04:33] Speaker 03:
So I'm having trouble ascertaining why this is not properly in the bankruptcy court.

[00:04:45] Speaker 03:
There's a rising in and a rising under, right?

[00:04:48] Speaker 03:
Is that the language?

[00:04:50] Speaker 01:
That's part of the language.

[00:04:51] Speaker 03:
And which one's the more permissive?

[00:04:54] Speaker 01:
The broadest is related to.

[00:04:56] Speaker 03:
OK.

[00:04:57] Speaker 03:
So I'm having a hard time seeing because it all focuses on this interpretation of who's senior and who's junior.

[00:05:05] Speaker 03:
Why doesn't this belong in the bankruptcy court?

[00:05:09] Speaker 03:
Why isn't this core or ancillary or pendant jurisdiction?

[00:05:13] Speaker 03:
Just help me.

[00:05:15] Speaker 03:
I got you, Your Honor.

[00:05:17] Speaker 01:
The best way to understand this, why there was no bankruptcy court jurisdiction post-settlement agreement,

[00:05:24] Speaker 01:
is to understand why there was jurisdiction pre-settlement.

[00:05:27] Speaker 01:
There was jurisdiction pre-settlement for two reasons.

[00:05:31] Speaker 01:
One, the property was property of the estate.

[00:05:34] Speaker 01:
So there was in rent jurisdiction under 28 USC 1334E.

[00:05:38] Speaker 01:
The bankruptcy court had jurisdiction in RAM to adjudicate all disputes concerning the property.

[00:05:43] Speaker 01:
And this would be a property dispute that the court had jurisdiction in RAM.

[00:05:47] Speaker 01:
But that disappeared under the settlement agreement because the property was transferred by the trustee out of the estate.

[00:05:53] Speaker 01:
And that's the applicable holding of Fed shopping away in this progeny, which we rely heavily upon.

[00:05:58] Speaker 01:
Once the property is transferred, the in-rem jurisdiction does not follow.

[00:06:02] Speaker 01:
So there was an alternative source of jurisdiction pre-settlement.

[00:06:05] Speaker 01:
As this court held in Blendheim, a secure credit does not have to file a proof of claim.

[00:06:12] Speaker 01:
But if it does, the bankruptcy court has jurisdiction to adjudicate the validity and amount of the claim.

[00:06:20] Speaker 01:
And they followed the claim.

[00:06:21] Speaker 01:
So the bankruptcy court had jurisdiction to determine their claim pre-settlement.

[00:06:25] Speaker 01:
But pursuant to the settlement, the claim was disallowed and released.

[00:06:29] Speaker 01:
So there was no longer a claim against the estate.

[00:06:33] Speaker 01:
So that jurisdictional hook disappeared as a result of the settlement.

[00:06:37] Speaker 01:
And that's true.

[00:06:38] Speaker 01:
even accepting their theory of the case, which is that, notwithstanding what the settlement says, their claim was not disallowed and released.

[00:06:46] Speaker 01:
It was only withdrawn and waived.

[00:06:48] Speaker 01:
Same result.

[00:06:49] Speaker 01:
They still don't have a claim against the estate, so there's no longer any jurisdiction to adjudicate their claim in the bankruptcy court.

[00:06:55] Speaker 01:
So yes, prior to the settlement agreement, the bankruptcy court had jurisdiction to determine all these issues.

[00:07:01] Speaker 01:
But that settlement agreement, the heart of the settlement agreement was the trustee said, I give up.

[00:07:06] Speaker 01:
I can't administer this property.

[00:07:08] Speaker 01:
It's over encumbered.

[00:07:09] Speaker 01:
Amaciation's not cooperating.

[00:07:12] Speaker 01:
I don't want to pay the utility bill anymore.

[00:07:14] Speaker 01:
I give up.

[00:07:16] Speaker 01:
Take your dispute to state court.

[00:07:17] Speaker 03:
When does your appeal to the BAP happen?

[00:07:21] Speaker 01:
My appeal to the BAP happens.

[00:07:23] Speaker 01:
We filed a complaint in Superior Court.

[00:07:26] Speaker 01:
They removed it to the Bankruptcy Court.

[00:07:29] Speaker 01:
Contemporaneous with removing it to the Bankruptcy Court.

[00:07:33] Speaker 01:
They filed outside of the trial proceeding in the main bankruptcy case.

[00:07:39] Speaker 01:
a motion for Rule 60 relief saying, Judge, satellite has filed this complaint and it's messing things up for us.

[00:07:47] Speaker 01:
Could you go, remember that order that said settlement approved?

[00:07:51] Speaker 01:
Could you go back to that order and modify it so that it solves all of our problems?

[00:07:57] Speaker 01:
And we had a hearing in January 2018 prior to the hearing on the motion to remand.

[00:08:02] Speaker 03:
This is all- So the bankruptcy support still has jurisdiction from your view at that point?

[00:08:06] Speaker 01:
It had jurisdiction to consider a Rule 60 motion.

[00:08:09] Speaker 01:
But it did not have jurisdiction to adjudicate any dispute in the trial proceeding itself.

[00:08:20] Speaker 01:
And that's exactly what the BAP held on appeal.

[00:08:23] Speaker 01:
It said, Judge Russell, you're trying to adjudicate the adversary proceeding by entering a Rule 60 order.

[00:08:32] Speaker 01:
You can't do that.

[00:08:33] Speaker 01:
If you want to adjudicate these issues, you've got to do it in the context of the trial.

[00:08:39] Speaker 01:
The BAP didn't opine on whether he had jurisdiction.

[00:08:42] Speaker 01:
It simply said you can't do it on a Rule 60 motion where, again, this goes- Did the BAP have jurisdiction to decide that issue?

[00:08:49] Speaker 01:
Absolutely.

[00:08:50] Speaker 01:
The Judge Russell had jurisdiction to consider the Rule 60 issue.

[00:08:55] Speaker 01:
He had jurisdiction.

[00:08:56] Speaker 01:
There was an order entered, an order that said, settlement approved.

[00:09:00] Speaker 01:
And they wanted him to modify it or grant relief from it, whatever they wanted.

[00:09:04] Speaker 01:
Yes, he absolutely had jurisdiction to do that.

[00:09:08] Speaker 01:
But that's a separate question of whether or not the court had jurisdiction on the underlying trial proceeding, the adversary proceeding, the one that was commenced in superior court that was removed.

[00:09:20] Speaker 01:
That's the question, whether he had jurisdiction or not.

[00:09:23] Speaker 01:
And the BAP said,

[00:09:25] Speaker 01:
Again, not opining on jurisdiction.

[00:09:27] Speaker 01:
They said, there's no, you should not grant rule 60 relief because what's an issue in the trial is not the order.

[00:09:33] Speaker 01:
It's the settlement agreement.

[00:09:35] Speaker 01:
And as we know from coconut and Valdez fisheries, just because you were the judge that entered the order that said settlement approved doesn't mean you have continuing jurisdiction.

[00:09:46] Speaker 01:
to adjudicate disputes arising out of the settlement agreement.

[00:09:51] Speaker 01:
And that's why the BAP reversed.

[00:09:53] Speaker 01:
And that's why we said, Judge, you have to remand.

[00:09:56] Speaker 01:
There is no continuing jurisdiction here.

[00:09:59] Speaker 01:
And Judge Russell obviously disagreed.

[00:10:02] Speaker 01:
He thought this is his settlement agreement.

[00:10:04] Speaker 01:
This is his order.

[00:10:05] Speaker 01:
He gets to do whatever adjudication he wants because he approved it.

[00:10:10] Speaker 01:
And Judge Carney, who I think got a lot right in this case,

[00:10:16] Speaker 01:
got the jurisdictional issue wrong.

[00:10:18] Speaker 01:
He tried to reconcile the BAP ruling, which said, it's not about the order.

[00:10:23] Speaker 01:
It's about the agreement.

[00:10:25] Speaker 01:
And he tried to say, well, I don't think that totally controls the jurisdictional issue.

[00:10:31] Speaker 01:
I think he got that wrong.

[00:10:32] Speaker 01:
He got that wrong.

[00:10:33] Speaker 01:
This is valid as fisheries to a T. There's a settlement approved.

[00:10:40] Speaker 03:
So from what you're saying, there isn't a need to publish here.

[00:10:43] Speaker 03:
You have a case.

[00:10:45] Speaker 01:
Stands for the proposition of what you're asking I Think Valdez fisheries is exactly on point This this court's most recent discussion of these issues was the more schauser case while not published.

[00:10:59] Speaker 01:
I think it's extremely persuasive I don't think it's factually distinguishable from this case it involves the court approved a transaction and

[00:11:07] Speaker 01:
and post-transaction, third parties want to fight about things, and the settlement agreement is implicated.

[00:11:16] Speaker 01:
But it doesn't affect the estate.

[00:11:17] Speaker 01:
It doesn't affect the estate.

[00:11:18] Speaker 03:
Well, thank you for indulging me.

[00:11:20] Speaker 01:
My colleagues have questions.

[00:11:22] Speaker 01:
Good questions.

[00:11:24] Speaker 03:
I want them to be able to ask right now.

[00:11:25] Speaker 03:
So go ahead, and if you want to say something for a couple of minutes, then I'll let you have three minutes on rebuttal.

[00:11:32] Speaker 03:
I realize I've dominated.

[00:11:34] Speaker 01:
I really want to get the record very clear about this because it is a very convoluted and complicated record, and this is my opportunity to clarify things for you.

[00:11:46] Speaker 01:
So again, I don't think you have to get past the jurisdictional issue.

[00:11:51] Speaker 01:
I think this is not an easy case, but I think this, you know, bankruptcy judges think they've got a lot of jurisdiction.

[00:11:57] Speaker 01:
And it's up to the appellate courts to kind of explain it to them.

[00:11:59] Speaker 01:
And that's a consistent theme of the Ninth Circuit cases.

[00:12:03] Speaker 01:
And I think that applies here.

[00:12:06] Speaker 01:
I would also say that if you found jurisdiction, I get, I think, Judge Vera's ruling that these are all core proceedings.

[00:12:15] Speaker 01:
I don't understand that.

[00:12:16] Speaker 01:
I didn't understand that argument at all.

[00:12:18] Speaker 01:
I would have looked at the Morr-Shouser case where it was a quiet title action.

[00:12:22] Speaker 01:
A quiet title action arises in the state court.

[00:12:24] Speaker 03:
Even if we find jurisdiction, you would say it's non-quiet.

[00:12:26] Speaker 01:
Absolutely non-core and that really goes to the fourth cause of action as we argue in the briefs Judge Russell made a factual finding Regarding the credibility of a witness which we think was clear error.

[00:12:40] Speaker 03:
It's inexplicable If we find it we have jurisdiction, but it's non-core where does that put you?

[00:12:49] Speaker 01:
Then there would have to be a remand back to judge back to the district court

[00:12:54] Speaker 03:
On to conduct a trial on the factual rulings Well, did the factual rulings is it a little bit like they're like a magistrate judge and then?

[00:13:04] Speaker 01:
The district court could say could adopt those factual it could but it's a de novo review And we which judge various explicitly did not do explicitly did not do What's assuming can we do de novo review?

[00:13:19] Speaker 01:
I think you can but

[00:13:21] Speaker 01:
Well, it was a credibility finding based upon I guess a witness in it was examined.

[00:13:27] Speaker 01:
I do want to reserve time.

[00:13:28] Speaker 03:
Okay, I'll give you three minutes because you indulged me in answering a lot of questions.

[00:13:33] Speaker 03:
Thank you.

[00:13:33] Speaker 01:
I appreciate.

[00:13:33] Speaker 01:
Thank you, Your Honor.

[00:13:40] Speaker 03:
Okay, I'm sorry to need all this assistance, but go ahead.

[00:13:44] Speaker 00:
That's okay.

[00:13:45] Speaker 00:
Judge Callahan, I think I appeared in front of you 20 years ago, but you're still as sharp as ever.

[00:13:49] Speaker 03:
I still look the same age.

[00:13:52] Speaker 03:
You're looking lovely today.

[00:13:53] Speaker 03:
I'm not going to say that.

[00:13:54] Speaker 00:
I'm not going to say that.

[00:13:56] Speaker 00:
I'm just going to say that your questions are still good.

[00:13:58] Speaker 00:
I want to correct one thing.

[00:13:59] Speaker 00:
You're never wrong, but it was a junior lien holder satellite purchased, not the senior lien holder.

[00:14:04] Speaker 00:
Amation always owned the

[00:14:07] Speaker 00:
first deed of trust.

[00:14:08] Speaker 00:
And this is Ronald Richards.

[00:14:09] Speaker 03:
Yeah, but it had been a senior at some point, right?

[00:14:13] Speaker 03:
No, satellite was never... No, not them, but the person that had it before had been senior in 2007, right?

[00:14:20] Speaker 00:
No, they bought their junior from a bank and took a high-risk underwater junior.

[00:14:27] Speaker 00:
They were always senior to the party that emaciation bought their note and

[00:14:33] Speaker 00:
There was two separate trustees, a senior and a junior.

[00:14:36] Speaker 00:
Satellite's always been a junior.

[00:14:38] Speaker 00:
So they took a high-risk investment, basically buying a note in a deed of trust that could be wiped out on any foreclosure sale.

[00:14:44] Speaker 00:
So when they bought it, the property was way underwater, and then they filed a banker.

[00:14:49] Speaker 00:
So I just wanted you to be aware that they magically wanted to suggest throughout this litigation that somehow the senior lender entered into a settlement with the trustee that released their lien.

[00:15:03] Speaker 00:
The settlement was supposed to provide a quit claim deed.

[00:15:05] Speaker 00:
It was never provided.

[00:15:06] Speaker 00:
The trustee entered into a second settlement agreement to clarify it, and the trial that we had was the impact of the settlement agreement.

[00:15:14] Speaker 00:
So to bring you back to the jurisdictional issue, of course the bankruptcy judge had to adjudicate the settlement agreement.

[00:15:21] Speaker 00:
That's why the BAP, and you should be aware that a BAP opinion was appealed to the Ninth Circuit.

[00:15:26] Speaker 00:
It's a case number 19630.

[00:15:30] Speaker 00:
And that's been stayed administratively for years.

[00:15:33] Speaker 00:
So it had no effect on the trial court.

[00:15:34] Speaker 00:
I don't know why my friend on the other side of the bar keeps citing these opinions that literally are on appeal, that one dealt with the 12b6 motion that was Judge Carney's.

[00:15:43] Speaker 00:
The relevant issue is, the BAP said, we're not going to decide the actual merits of the application of the settlement agreement.

[00:15:50] Speaker 00:
That's what the adversary is for.

[00:15:52] Speaker 00:
They said we're expressing no opinion on that, and then we appealed it anyway.

[00:15:55] Speaker 00:
But the trial was, what's the impact of the settlement agreement?

[00:15:58] Speaker 00:
And did it release the deed of trust?

[00:16:01] Speaker 00:
That was the issue.

[00:16:02] Speaker 00:
And frankly, Satellite lost on every angle.

[00:16:05] Speaker 00:
And the judge had a thorough pretrial order that they violated.

[00:16:09] Speaker 00:
And it was a trial that everybody called all the witnesses that were present in court.

[00:16:14] Speaker 00:
And they're just unhappy with the ruling.

[00:16:17] Speaker 00:
But the jurisdictional issue is very simple.

[00:16:19] Speaker 00:
Had the judge vacated his own settlement agreement with the trustee, of course it would impact the bankruptcy estate.

[00:16:25] Speaker 00:
So that's the only person on the planet that could have adjudicated

[00:16:28] Speaker 00:
their own settlement agreement with Judge Russell because he's, in the bankruptcy case, he's a party to the extent the court has to approve it.

[00:16:35] Speaker 00:
So if he's going to undo it, then that affects the estate.

[00:16:39] Speaker 00:
That could affect a lot of things.

[00:16:40] Speaker 00:
Our claim would go back into play.

[00:16:42] Speaker 00:
I mean, there's many things.

[00:16:43] Speaker 03:
So in your analysis as a bankruptcy lawyer, explain to me, if we were to find, hypothetically, that there is no jurisdiction here,

[00:16:54] Speaker 03:
Hypothetically, tell me where that puts us with your friend on the other side cited a case that he thinks is exactly on point for the proposition that he's asserting with the court.

[00:17:06] Speaker 03:
So tell me your response to that.

[00:17:09] Speaker 00:
I direct you to the record at 13 ER 2927 to 2936, the settlement agreement, paragraph 6.7.

[00:17:17] Speaker 00:
The parties agreed the court would retain jurisdiction.

[00:17:21] Speaker 00:
These arguments were never flushed out below, I believe,

[00:17:24] Speaker 00:
They were written in the briefs, as you pointed out.

[00:17:27] Speaker 00:
There was never a serious contention that somehow the bankruptcy court couldn't adjudicate a trial on an adversary case, on a case that was removed, to whether the settlement agreement was impacted, both Judge Vera, the district court judge, and Judge Russell, thoroughly.

[00:17:44] Speaker 00:
I mean, this was honestly what I would call a throwaway argument.

[00:17:50] Speaker 00:
that the bankruptcy court doesn't have related jurisdiction or ancillary jurisdiction to decide.

[00:17:55] Speaker 03:
So how would you define the jurisdiction?

[00:17:58] Speaker 03:
Is it arising in, arising under, arising?

[00:18:02] Speaker 03:
What is it?

[00:18:03] Speaker 00:
I would say related to or arising under.

[00:18:06] Speaker 00:
I think it would be both prongs.

[00:18:08] Speaker 00:
Because the adversary, so the court's aware of procedure, because bankruptcy is like a mixed up type of procedure for a lot of people.

[00:18:19] Speaker 00:
Yeah, so I'm not expecting everyone to totally appreciate sometimes how mixed up it is for lawyers.

[00:18:28] Speaker 00:
But Mr. Shimano, when he was unhappy with the court approving the settlement agreement, filed a state court action that basically was going to undo the settlement agreement.

[00:18:37] Speaker 00:
So we immediately removed it to the court to say, hey, this person is trying to interfere with the settlement with the trustee, this junior lien holder, the judge

[00:18:47] Speaker 00:
Mr. Shimano, his client, tried to do a restraining order, stop the sale.

[00:18:51] Speaker 00:
Ultimately, the property was foreclosed on.

[00:18:53] Speaker 00:
And the judge had to decide this case because the settlement agreement was inextricably intertwined with the estate administration.

[00:19:04] Speaker 00:
And so you cannot unscramble that.

[00:19:07] Speaker 02:
The property was transferred out of the estate, correct?

[00:19:10] Speaker 00:
It never got transferred.

[00:19:11] Speaker 00:
The settlement agreement called for a quit claim.

[00:19:14] Speaker 02:
The judge, what happened was... The settlement agreement had, tell me if I'm wrong about this, but as part of the settlement agreement, the property that was foreclosed on was pulled out of the estate.

[00:19:25] Speaker 00:
It was supposed to be pulled out with a quit claim deed to another entity, but it never happened.

[00:19:30] Speaker 02:
But I'm not sure I understand the relevance of the it never happened.

[00:19:34] Speaker 02:
If once that settlement agreement transfers the property out of the estate,

[00:19:40] Speaker 02:
Explain to me how the adversary proceeding would have any effect on the underlying bankruptcy The reason the mechanics of why it became out of the estate was the judge granted relief from the automatic stay on our motion And then it went to a non-judicial foreclosure under a state court process Right still not answering my question, which is how does the adversary proceeding?

[00:20:04] Speaker 02:
have any effect on the underlying bankruptcy?

[00:20:07] Speaker 02:
Because the adversary proceeding was attacking the impact of the settlement agreement to suggest... And I think what you're trying to do here is to say anything that in any way sort of even touches on or mentions the settlement agreement somehow then all of a sudden gets absorbed into the bankruptcy proceeding.

[00:20:25] Speaker 02:
But that, you know, simply because there may be

[00:20:30] Speaker 02:
a settlement agreement that deals with some of the property that at one point was part of the bankruptcy proceeding that doesn't make it related to.

[00:20:38] Speaker 02:
There's nothing that the bankruptcy court, in my view, can really do with respect to that property that has been taken out of the estate based on the settlement agreement.

[00:20:53] Speaker 02:
And I understand why it's convenient for you to be able to argue to the bankruptcy court that you

[00:21:00] Speaker 02:
Want the bankruptcy court to deal with this that that is favorable to your position?

[00:21:03] Speaker 02:
But that doesn't that's not a legal basis to be able to find related to jurisdiction And I'm not disagreeing with your honor.

[00:21:10] Speaker 00:
We cited fits versus great Western savings and so did the underlying District court it's a 852 f second 455 at page 457 the issue is administration what I'm trying to explain to you is until the property is

[00:21:27] Speaker 00:
transferred out of the debtor, it is still part of the bankruptcy estate.

[00:21:31] Speaker 00:
So this litigation was going to determine whether that settlement agreement would be allowed.

[00:21:37] Speaker 02:
All sorts of very perverse incentives that can occur if what you're trying to argue to this court were to be permitted, which is that parties can operate outside of the bankruptcy proceeding, engage in all of this conduct, including the settlement agreement,

[00:21:54] Speaker 02:
while it's favorable to their position, only until there's something that they're unhappy about and then they can go back to the bankruptcy court and seek relief.

[00:22:02] Speaker 02:
And I just think that there are really, you know, that is not what's contemplated and why we have sort of limited jurisdiction because otherwise parties can engage in this kind of gamesmanship.

[00:22:15] Speaker 00:
Well, I know, but respectfully, there was no gamesmanship.

[00:22:17] Speaker 00:
The settlement was not between some outside party.

[00:22:19] Speaker 00:
It was the trustee of the estate.

[00:22:21] Speaker 00:
It was a Chapter 7 trustee.

[00:22:24] Speaker 03:
Do you agree that satellite's claims arise under state law and not under Title 11?

[00:22:29] Speaker 00:
No, I believe that they cited Section 506 and I believe that the bankruptcy administration applies to their claims, that those claims would directly affect the outcome of how this estate would be administered because otherwise... So tell me, explain how satellite's claims do affect the bankruptcy estate.

[00:22:53] Speaker 03:
Because the settlement, the bankruptcy estate... In other words, I guess what I'm saying, if satellite were to succeed on their claims, what effect would that have on the bankruptcy?

[00:23:02] Speaker 00:
Well, the $108,000 that was paid to the estate would have to be returned.

[00:23:06] Speaker 00:
The asset would be in jeopardy because there was a settlement agreement that allowed a foreclosure, and there would then be a settlement agreement that was ratified, but now somehow,

[00:23:22] Speaker 00:
is in peril because the contention would be that the court had no authority to approve the settlement.

[00:23:29] Speaker 00:
And even my colleague concedes there was jurisdiction at the time the court made the settlement.

[00:23:35] Speaker 00:
The issue.

[00:23:36] Speaker 02:
No, it approved the settlement.

[00:23:38] Speaker 02:
I mean, I think what he said was the bankruptcy court had jurisdiction to approve the settlement agreement.

[00:23:43] Speaker 02:
That is not a debatable or controversial position.

[00:23:48] Speaker 02:
I think that that factually is correct.

[00:23:50] Speaker 02:
But I think what you're saying

[00:23:52] Speaker 02:
is not exactly right just because the bankruptcy court has the ability to approve the settlement agreement.

[00:23:58] Speaker 02:
It doesn't have the ability to go in and, you know, change the terms or adjudicate a dispute between the parties in this sort of adversary proceeding relating to a dispute on the settlement agreement.

[00:24:12] Speaker 02:
You'd agree with me, right?

[00:24:13] Speaker 00:
Well, I know, but the problem is satellite was not a party to the settlement agreement.

[00:24:18] Speaker 00:
They were some outside party.

[00:24:20] Speaker 00:
I think, again,

[00:24:22] Speaker 00:
I think my colleague does a great job of confusing the issue.

[00:24:25] Speaker 00:
The settlement was with the trustee and the first lien holder.

[00:24:27] Speaker 00:
Satellite was not a party at all.

[00:24:29] Speaker 00:
In fact, the settlement says it is not binding.

[00:24:32] Speaker 00:
No other party could use this settlement.

[00:24:34] Speaker 00:
So if a third party is claiming that the asset was either wrongly foreclosed or the asset shouldn't have been allowed to be foreclosed,

[00:24:42] Speaker 00:
that directly impacts the deal between the trustee and the first lienholder.

[00:24:46] Speaker 00:
Satellite filed a lawsuit to ingest themselves to try to blow up or cancel the settlement that was made with the trustee.

[00:24:54] Speaker 00:
There would be no way for the court to make a finding that the settlement, that the claims for relief in the claim that was removed would not directly imperil the settlement agreement that was made with the bankruptcy court trustee who works for the Department of Justice.

[00:25:10] Speaker 00:
I mean, this wasn't some

[00:25:12] Speaker 00:
I would understand the court's concern if these were two random parties that had nothing to do with this case.

[00:25:18] Speaker 00:
But the trustee is the quintessential representative of the court that is making this settlement agreement.

[00:25:26] Speaker 03:
Well, let me turn you to the merits.

[00:25:27] Speaker 03:
Just so hypothetically, let's say that we, and this is all hypothetical because we haven't conferenced on this case.

[00:25:34] Speaker 03:
We're just asking you questions.

[00:25:36] Speaker ?:
Right.

[00:25:37] Speaker 03:
Do you agree if we determined this is a non-core proceeding that we have to reverse and remand for the district court to review the case de novo?

[00:25:47] Speaker 03:
Do you agree on that point?

[00:25:49] Speaker 00:
No, because I think it would be a waste of time at this point because the court gave very thorough findings and the district court affirmed it already.

[00:26:00] Speaker 03:
So it's not like the district court... But it didn't affirm it under de novo review, did it?

[00:26:06] Speaker 00:
Well, I think the issues that he's asking to be reviewed under de novo are ancillary and irrelevant.

[00:26:12] Speaker 00:
The factual findings, the district court is going to uphold the case.

[00:26:19] Speaker 00:
I just don't see the basis.

[00:26:21] Speaker 03:
And also- Well, okay, but then I also asked your friend on the other side.

[00:26:26] Speaker 03:
If we say we have jurisdiction, but that it's non-core, and that the review then becomes de novo, can we do that?

[00:26:36] Speaker 00:
You can, but you certainly can do that.

[00:26:40] Speaker 03:
But you're saying the district court did that?

[00:26:43] Speaker 03:
Or are you saying it's futile?

[00:26:45] Speaker 00:
It's futile.

[00:26:46] Speaker 00:
I think the district court thoroughly went through all the issues raised that did the appeal and didn't make any findings that would suggest that if he reviewed some issue that was never even pointed out, that it would change the outcome.

[00:27:02] Speaker 00:
And I think that the

[00:27:04] Speaker 00:
that the district court found it was a core proceeding regardless.

[00:27:08] Speaker 00:
But he also went through each and every argument and rejected them anyway.

[00:27:13] Speaker 00:
I don't think him reviewing the bankruptcy court's findings, the fact, is going to change the factual findings, which would be subject to clear error.

[00:27:23] Speaker 00:
I mean, he found the main witness non-credible.

[00:27:26] Speaker 00:
There was many issues in the trial that were within the court's discretion.

[00:27:31] Speaker 00:
And again, the main issue of the trial was,

[00:27:34] Speaker 00:
was the settlement agreement, did it release the first lien?

[00:27:39] Speaker 03:
So what is the best evidence in the record that the settlement agreement did not extinguish emaciation's lien?

[00:27:46] Speaker 00:
The best evidence in the record is you have the admission of two contracts, the 2017 settlement agreement and the 2018 settlement agreement, which clearly show the intent of the parties was to receive a payment of $108,000 and then allow

[00:28:04] Speaker 00:
first deed of trust to go forward with a foreclosure.

[00:28:07] Speaker 00:
And then there was supposed to be a quit claim deed, but it was never tendered in a recordable format.

[00:28:13] Speaker 00:
And then Mr. Shimano filed multiple motions to try to get a restraining order.

[00:28:18] Speaker 00:
And that's what delayed.

[00:28:19] Speaker 00:
And then the court ruled on all those motions.

[00:28:21] Speaker 00:
And then finally, the property went to a non-judicial foreclosure.

[00:28:24] Speaker 00:
So it's been solved.

[00:28:26] Speaker 00:
It's gone.

[00:28:26] Speaker 00:
It's gone.

[00:28:26] Speaker 00:
And also, he never even named the current owner in the litigation.

[00:28:31] Speaker 00:
I mean, there was an indispensable party shoe.

[00:28:33] Speaker 00:
But the best evidence is really the parties to the agreement, both parties to the agreement, the trustee testified and you have both independent evidence, which is not hearsay, there are two contracts that the court analyzed and said that there is no question nobody would pay $108,000 to release their first lien.

[00:28:52] Speaker 00:
And so it's not for satellite to adjudicate how the trustee and emaciation capital made a contract.

[00:29:00] Speaker 00:
The two parties to the contract

[00:29:02] Speaker 00:
Both came to court, both testified at trial with respect to the, I testified and so did the admission of the two agreements.

[00:29:13] Speaker 00:
And so the issue was simply, did these two agreements reverse or cause a reconveyance?

[00:29:20] Speaker 00:
And if you read the settlement agreements,

[00:29:21] Speaker 00:
There's the word reconveyance is not even in the agreements.

[00:29:24] Speaker 00:
So the whole theory was why, in the satellite's mind, why they should jump to first position is they waited until the settlement was approved.

[00:29:33] Speaker 00:
They did not object to it intentionally.

[00:29:36] Speaker 00:
And then the day after it was approved, they said, oh, the settlement released your lien.

[00:29:40] Speaker 00:
So how could you suggest that the bankruptcy judge shouldn't interpret that agreement, that that was not the intent?

[00:29:46] Speaker 00:
Then we had a subsequent agreement.

[00:29:49] Speaker 03:
Let me make sure my colleagues don't sure additional questions.

[00:29:52] Speaker 03:
Okay.

[00:29:52] Speaker 03:
Okay.

[00:29:53] Speaker 01:
Thank you See if I can summarize nine years and three minutes your honor a Lot of what my colleague just said is just factually not true and if you simply review the record

[00:30:17] Speaker 01:
Follow the briefs.

[00:30:18] Speaker 01:
You'll see it's not correct in many ways.

[00:30:21] Speaker 01:
But let me just say this.

[00:30:24] Speaker 01:
The rising under issue, this is Wilshire Courtyard.

[00:30:27] Speaker 01:
This is not a rise under.

[00:30:28] Speaker 01:
We did not assert a claim under 506D.

[00:30:31] Speaker 01:
You can't confuse jurisdiction with the merits.

[00:30:33] Speaker 01:
Our merit claim is, did you have a senior lien?

[00:30:38] Speaker 01:
Did you disallow your claim?

[00:30:40] Speaker 01:
Not, is it void under 506D?

[00:30:42] Speaker 01:
That's not a rising under.

[00:30:44] Speaker 01:
Regarding impact on the estate.

[00:30:47] Speaker 01:
Council said this the trustee will have to give back the hundred eight thousand dollars.

[00:30:52] Speaker 01:
It's just not factually not true This was a quit claim with no reps or warranties.

[00:30:57] Speaker 01:
You can't undo the settlement at this point That they sued to rescind they filed a complaint to rescind and the trustee filed a motion to dismiss and it was dismissed with prejudice So it's just factually not true regarding the merits um

[00:31:18] Speaker 01:
Blenheim says what it says.

[00:31:20] Speaker 01:
This allowance is a harsh result.

[00:31:23] Speaker 01:
And it's a trap for the unwary.

[00:31:27] Speaker 01:
This is a dispute that you learn in the first week of contracts.

[00:31:32] Speaker 01:
A party comes to the court and says, what I drafted has an effect that I didn't intend.

[00:31:40] Speaker 01:
How do you answer that question?

[00:31:41] Speaker 01:
The answer is the objective theory of contracts.

[00:31:43] Speaker 01:
That's a policy decision.

[00:31:45] Speaker 01:
You look at the text.

[00:31:46] Speaker 01:
You look at the reasonable susceptibility of the text.

[00:31:49] Speaker 01:
You exclude extrinsic evidence except in limited circumstances.

[00:31:52] Speaker 01:
You don't allow uncommunicated subjective understanding as not admissible.

[00:31:56] Speaker 01:
You separate interpretation from reformation.

[00:32:00] Speaker 01:
That's this case.

[00:32:01] Speaker 01:
This is the objective theory of contracts case.

[00:32:04] Speaker 01:
I know you don't like string sites.

[00:32:05] Speaker 01:
I could do a string site of hundreds of cases where parties said, well, my release, I did a release.

[00:32:11] Speaker 01:
I didn't mean to release them.

[00:32:13] Speaker 01:
Fix it for me.

[00:32:14] Speaker 01:
What do courts do in that site?

[00:32:16] Speaker 01:
They apply the objective theory of contracts.

[00:32:18] Speaker 01:
We give you a ninth circuit case, could have done a string site for 100 cases.

[00:32:23] Speaker 01:
They could have done this a million ways.

[00:32:27] Speaker 01:
And I want to point out to you that when they did the settlement agreement,

[00:32:31] Speaker 01:
That's one more factual thing.

[00:32:34] Speaker 01:
He said the property was never transferred out of the estate.

[00:32:36] Speaker 01:
Look at the pretrial facts.

[00:32:39] Speaker 01:
They delivered the quit claim.

[00:32:41] Speaker 01:
That transferred the property under state law.

[00:32:44] Speaker 01:
To preserve jurisdiction, they refused to record it.

[00:32:48] Speaker 01:
But it was transferred.

[00:32:49] Speaker 01:
Refusing to record it did not create subject matter jurisdiction.

[00:32:52] Speaker 01:
That's gamesmanship.

[00:32:53] Speaker 01:
But the point is I wanted to make, actually I'll conclude with what the bankruptcy judge said when he made the ruling.

[00:33:00] Speaker 01:
It's stated in the briefs, but it can't be repeated too often because it really summarizes nine years of litigation.

[00:33:06] Speaker 01:
When the bankruptcy judge ruled after hearing everything, he said, quote, the BAP said no, can't do that, whatever, unquote.

[00:33:17] Speaker 01:
Judge Russell refused to remand explicitly to ensure the substantive result that he wanted.

[00:33:24] Speaker 01:
And trial judges sometimes do things like that.

[00:33:29] Speaker 03:
Well, I think we can assure both of you that any opinion or memdispo we do will not say whatever.

[00:33:36] Speaker 03:
We will not say whatever.

[00:33:38] Speaker 01:
I hope so, Your Honor.

[00:33:40] Speaker 03:
Well, thank you.

[00:33:41] Speaker 03:
Your time is up.

[00:33:42] Speaker 03:
Thank you both for your argument.

[00:33:43] Speaker 03:
And it was helpful.

[00:33:45] Speaker 03:
And I think that

[00:33:47] Speaker 03:
those externs watching.

[00:33:49] Speaker 03:
I think that you've both acquitted yourself and represented your clients well.

[00:33:53] Speaker 03:
Thank you.

[00:33:53] Speaker 01:
Thank you very much.

[00:33:55] Speaker 03:
All right.

[00:33:55] Speaker 03:
The next matter on calendar is BB a minor and versus Capistrano United Unified School District.