[00:00:05] Speaker 03:
Mr. Resnick.

[00:00:07] Speaker 02:
Okay.

[00:00:09] Speaker 02:
Good morning, your honors.

[00:00:10] Speaker 02:
May it please the court, Matthew Resnick for Appellant Nicholas Sialao.

[00:00:13] Speaker 02:
I'd like to reserve four minutes for rebuttal.

[00:00:17] Speaker 02:
Here we have a statutory framework of 542B.

[00:00:21] Speaker 02:
It's used to impose a money judgment where the debt itself was clearly disputed.

[00:00:26] Speaker 02:
The statute requires a debt that is property of the estate to be turned over that has matured or is already payable on demand prior to the filing of the bankruptcy.

[00:00:35] Speaker 02:
That debt must be undisputed property of the estate.

[00:00:39] Speaker 02:
The federal statute of turnover does not circumvent state law.

[00:00:43] Speaker 02:
The trustee is arguing that a single line in the tax return is an undisputed debt.

[00:00:47] Speaker 02:
We are arguing that tax and bookkeeping classifications cannot override ownership, or at least underline ownership law.

[00:00:53] Speaker 01:
So to the extent you're arguing that the 542B action wasn't the correct form of action, is that an argument you made below, and where would you direct me in the record to see you press that point?

[00:01:05] Speaker 02:
Your honor, I wasn't the trial attorney below, but that's never a great answer, but Conceited your honor right I do The record shows and on many occasions that they didn't just didn't provide that the debt was Undisputed no that that's the reason why you think 542b shouldn't isn't the appropriate vehicle I get that but did you

[00:01:31] Speaker 01:
Was that argument ever made that, hey, you can't do this under a turnover action?

[00:01:35] Speaker 01:
I'm not sure I see that in the district court record.

[00:01:38] Speaker 02:
And I understand that as I reviewed the record just this weekend, I understand what you're articulating here.

[00:01:43] Speaker 02:
And I think it's because they all went down the rabbit hole of whether or not loans that came in and loans that came out was actually a mathematical equation.

[00:01:52] Speaker 02:
I don't think they actually ever got to whether the debt was mature or payable on demand.

[00:01:56] Speaker 01:
Right.

[00:01:57] Speaker 01:
But then isn't that a forfeiture waiver problem if it wasn't raised below?

[00:02:01] Speaker 02:
Yeah, I don't think that the statutory framework of 543B that Congress intended, 542B, I apologize, Your Honor, that Congress intended for that to be just circumvented irrespective of the arguments of the trial courts that were argued below the trial courts.

[00:02:19] Speaker 02:
That would provide a precedent that would unfortunately

[00:02:24] Speaker 02:
affect third parties that may or may not.

[00:02:27] Speaker 01:
So you think the argument's sort of unwaverable?

[00:02:29] Speaker 01:
It's an unforefeitable or unwaverable argument?

[00:02:32] Speaker 02:
I do believe that it is.

[00:02:33] Speaker 01:
Interesting.

[00:02:33] Speaker 01:
OK.

[00:02:35] Speaker 02:
And that's because I believe that the statutory framework, in fact, I don't believe that not arguing it would immunize a legal error, which I believe was clear based on the statute and based on the representations that were both made to the court about the character of the debt

[00:02:50] Speaker 02:
and whether the debt was actually disputed.

[00:02:53] Speaker 02:
And again, we're looking at tax bookkeeping classifications.

[00:02:57] Speaker 02:
Clearly, those were disputed.

[00:02:58] Speaker 02:
Clearly, there is a mechanical formulation that was provided by the court in determining whether or not this amount was actually owed.

[00:03:07] Speaker 02:
But there was never a vested interest.

[00:03:09] Speaker 02:
It was never matured.

[00:03:10] Speaker 02:
It was never payable on demand.

[00:03:12] Speaker 02:
And I think that's what we were really articulating in our brief.

[00:03:15] Speaker 01:
What's the best evidence in the record that you can point us to actual evidence in the record that your client lent money to?

[00:03:24] Speaker 01:
Pandora that's a great question your honor, and I don't think that we actually had to demonstrate that putting that aside I get it You don't think you had to demonstrate, but is there any evidence in the record that shows that Nicholas allow?

[00:03:37] Speaker 01:
Loaned money transferred money to Pandora well.

[00:03:40] Speaker 02:
There's no money and there's no

[00:03:42] Speaker 02:
There's nothing in the record other than in the new trial and the request for the new trial where the Chase bank statements were provided and that clearly showed that there were wire transfers going to the Pandora Hospice care account.

[00:03:56] Speaker 02:
But the burden wasn't on the debtor.

[00:03:58] Speaker 02:
I mean, the burden wasn't on the defendant.

[00:03:59] Speaker 02:
The burden here is on the trustee.

[00:04:01] Speaker 02:
They're the ones who are to demonstrate the raise, the property.

[00:04:04] Speaker 02:
What was transferred?

[00:04:05] Speaker 01:
Just by preponderance, right?

[00:04:06] Speaker 01:
They just had it demonstrated by preponderance, right?

[00:04:08] Speaker 01:
Certainly by preponderance.

[00:04:09] Speaker 01:
And so they put in a tax return that seemed to suggest $137,000.

[00:04:14] Speaker 01:
loan to mister slow and there was no nothing on the tax returns indicating uh... a transfer from mister slow to pandora correct those tax returns were prepared in may of two thousand seventeen right before filing two thousand forty-two right in two thousand sixteen so if that sort of meets the proof so and now we're reviewing for clear error whether or not that entry on the tax return provides a preponderance of the evidence right that sort of the structure in which it comes to

[00:04:43] Speaker 02:
I believe so, Your Honor, and I think that there is case law that says that tax filings are merely self-prepared documents, not third-party admissions, and certainly are insufficient to establish ownership or liability.

[00:04:57] Speaker 02:
It's as if the trustee provided to this court a chart without coordinates and said, use the statute to go find the property.

[00:05:03] Speaker 01:
Do you know why Mr. Slau didn't argue set off?

[00:05:06] Speaker 02:
Well, set off, because there was no property of the estate, and most importantly, there was never any money loaned to Mr. Sallow.

[00:05:13] Speaker 01:
Well, right, but he understood he may lose that argument, so couldn't you have argued, or couldn't counsel at the time have argued in the alternative that the extent you find this was a loan from Pandora to Mr. Sallow would be subject to set off.

[00:05:26] Speaker 02:
Well, again, there was, and I don't mean to sound redundant here, Your Honors, but I believe that at first they looked at and determined whether or not there was a matured or payable demand.

[00:05:37] Speaker 02:
And once there wasn't a matured or payable demand, they asked for that evidence.

[00:05:40] Speaker 02:
And once that evidence wasn't provided, well, certainly the amended returns undermined the trustee's argument as to whether or not that tax

[00:05:49] Speaker 02:
inclusion or that categorization for whatever purposes it was there.

[00:05:53] Speaker 02:
It was either a mistake or perhaps it was strategic, but irrespective, it didn't create title or ownership to that land.

[00:05:59] Speaker 01:
I sort of get the Trustee's point that once you've got a debtor in bankruptcy who's amending tax returns, that can be done for a lot of reasons at that point, right?

[00:06:11] Speaker 02:
Well, I admit that it could be self-serving, but it could be self-serving on the other manner as well.

[00:06:15] Speaker 02:
I mean, why wasn't there any discovery done by the trustee?

[00:06:18] Speaker 02:
The trustee could very easily have reviewed the documents.

[00:06:20] Speaker 02:
The trustee stands in the shoes of the debtor.

[00:06:23] Speaker 02:
The trustee has access to all the financial records, all the bank records of the debtor.

[00:06:27] Speaker 02:
It might take a little bit of time, but they certainly have that authority.

[00:06:31] Speaker 01:
This just seems like a case where neither side did a great job of kind of proving up the facts of the case on the record, and then the bankruptcy judge said, I think a couple of times, this is the closest call I've ever seen, and now we're reviewing that for clear error.

[00:06:46] Speaker 02:
Yeah, it brings me back to when I first met with the client, and I talked to him, and I said, and Judge, you and the trial court judge is a fantastic bankruptcy judge.

[00:06:54] Speaker 02:
You're a fantastic advocate.

[00:06:55] Speaker 02:
And he's a fantastic bankruptcy judge.

[00:06:57] Speaker 02:
But I think that they kind of bridged the property of the estate and kind of presupposed that it was already property of the estate before we even got to whether or not it was matured or payable on demand.

[00:07:07] Speaker 02:
But I agree with you.

[00:07:08] Speaker 02:
It seems like it was convoluted from day one.

[00:07:11] Speaker 02:
The trial briefs articulated 543B, 542B.

[00:07:17] Speaker 02:
I'm sorry, you're on a 542B.

[00:07:18] Speaker 02:
But once we got to trial, it seemed like it turned into more of a mathematical thing.

[00:07:22] Speaker 02:
I think the judge called it a binary concern.

[00:07:26] Speaker 02:
Just because there was money lent doesn't mean that there wasn't money that was owed.

[00:07:30] Speaker 02:
Well, I think that at the very least, you have to demonstrate what money was provided by the debtor to Mr. Silao to determine that that is the actual amount owed.

[00:07:42] Speaker 02:
In fact,

[00:07:42] Speaker 02:
The record went from $135,000 to $137,000, then the amended returns were filed.

[00:07:48] Speaker 02:
So I think that there was enough doubt casted that you couldn't really say that there was a vested interest, that there was really property of the estate.

[00:07:55] Speaker 01:
Why was the new trial?

[00:07:57] Speaker 01:
I mean, so you come forward with that.

[00:07:59] Speaker 01:
Your counsel at the time comes forward with evidence about the payments from the bank.

[00:08:05] Speaker 01:
Is it just too much time had passed?

[00:08:07] Speaker 01:
Was that the idea?

[00:08:07] Speaker 02:
I think there was some manifest error of law and clearly the court had obfuscated 542A and 542B.

[00:08:19] Speaker 02:
A couple of times they mentioned that it has to be something that the trustee can sell.

[00:08:24] Speaker 02:
That's from 542A.

[00:08:25] Speaker 02:
It said a couple of times that it would have to be inconsequential in value.

[00:08:28] Speaker 02:
That's 542A.

[00:08:29] Speaker 02:
Then it went to the mathematical equations.

[00:08:32] Speaker 02:
I think that somewhere it went off the tracks.

[00:08:34] Speaker 02:
And 542B, the matured element, the payable on demand, was never articulated by either side.

[00:08:41] Speaker 02:
But the statute is what the statute is.

[00:08:43] Speaker 02:
Congress didn't intend for that statute to be ignored, and nor do I believe that the court should ignore

[00:08:48] Speaker 02:
the statute as it's written, whether it's matured or payable on demand.

[00:08:51] Speaker 02:
There are lots and lots of causes of action that the trustee could have brought on that day.

[00:08:56] Speaker 02:
But the cause of action they decided to bring was 542B.

[00:09:00] Speaker 02:
And that statute circumvents any state law lawsuits that they're providing.

[00:09:06] Speaker 01:
But one of the reasons you said it shouldn't be waivable is because it impacts third party rights in the context of bankruptcy.

[00:09:11] Speaker 01:
But here, I think third parties would benefit, right?

[00:09:14] Speaker 01:
If by failing to raise this issue, it actually returns some $190,000 to the benefit of other creditors of Pandora,

[00:09:22] Speaker 01:
because Mr. Slau declined to, in part because Mr. Slau declined to raise this argument below, right?

[00:09:30] Speaker 01:
So your concerns about implicating third-party rights aren't necessarily bearing out in this case.

[00:09:36] Speaker 02:
Well, I think that was addressed actually in the charter case that's briefed, and it specifically says why should it be sanctioned act just because the entity seeking to collect disputed funds happens to be a debtor in bankruptcy, meaning for the benefit of all the creditors.

[00:09:49] Speaker 02:
Why should that be?

[00:09:51] Speaker 02:
The bankruptcy doesn't all of a sudden create this veto power or this pass through or this get out of jail free card irrespective of the arguments that were made in the trial court.

[00:10:00] Speaker 02:
And I think that is the concern here and I think that is the reason why the ruling should be overruled.

[00:10:08] Speaker 02:
I would like to reserve the rest of my time unless there's any questions.

[00:10:13] Speaker 02:
Thank you.

[00:10:22] Speaker 00:
Good morning.

[00:10:24] Speaker 00:
Tom Polis on behalf of the Chapter 7 trustee, Carl T. Anderson, may it please the court.

[00:10:29] Speaker 00:
As the party that prevailed both at the bankruptcy court level and at the district court, I will summarize some of the arguments, but I would ask the court obviously to respectfully affirm what both the bankruptcy court and the district court has already ruled on.

[00:10:45] Speaker 00:
As far as your honors raise the issue that the bankruptcy judge judge you and I've been getting very well respected bankruptcy judge down at Riverside.

[00:10:53] Speaker 00:
Made the comment that this was a close call but not withstanding that the he had to make a decision He's either close for the other side or closer the trustee the court ruled on Various factors the fact that the we talked about the tax return the 2016 tax return which was in dispute was corroborated by the 2015 tax return and mr. Slough signed both tax all that showed was that there was a

[00:11:18] Speaker 03:
There was a loan for a hundred and twenty seven thousand hundred thirty seven.

[00:11:22] Speaker 00:
I'm sorry hundred thirty seven.

[00:11:24] Speaker 00:
Yeah alone payable By the shareholder mr. Slyle back to the corporate debtor my client to trust so and so is there I mean not the amount here is 135 not 137

[00:11:35] Speaker 03:
Is there more evidence that ties this payment?

[00:11:39] Speaker 03:
Let's assume there's a loan.

[00:11:40] Speaker 03:
I think that's a fair assumption.

[00:11:43] Speaker 03:
Is there other evidence that ties this to there?

[00:11:46] Speaker 03:
There was no like loan document, there was no payment plan, nothing like that.

[00:11:50] Speaker 00:
Nothing that we were able to find.

[00:11:51] Speaker 00:
And as far as what we see a lot in small family held businesses, as far as documentation of loans from insiders to the corporation and vice versa, usually there's not a lot of notes or whatever.

[00:12:05] Speaker 00:
Promissory nodes, you know deeds of trust if it's recorded or collateralized by real estate so to answer your honor's question.

[00:12:11] Speaker 00:
No, we didn't have any and We relied like we do a lot when I represent trustees that this tax returns signed under penalty of perjury by the appellant I'll tell you what I'm struggling with and you know, I just think that I

[00:12:28] Speaker 01:
forced to guess, I would bet that Mr. Salao had loaned money to Pandora and his brothers as well.

[00:12:36] Speaker 01:
It just seems to me, you look, this is a company that its revenues were not exceeding its expenses, so if it was paying its bills, the money had to come from somewhere.

[00:12:45] Speaker 01:
Presumably that's external, and because there weren't other creditors making claims in bankruptcy, presumably it was somebody like the Salao brothers.

[00:12:54] Speaker 01:
Left to my own devices, I would assume that Mr. Solow had lent money to the company.

[00:12:57] Speaker 01:
And if he'd lent money to the company, I would assume that the money going back was a repayment of those loans.

[00:13:03] Speaker 01:
What I'm struggling with though is that's what I might do if I were sitting there as a bankruptcy judge, but now it's a clear error standard of review.

[00:13:11] Speaker 01:
And so trying to put those together is what's been my struggle in this case.

[00:13:16] Speaker 00:
And I understand that.

[00:13:17] Speaker 00:
And I guess there's a distinction in the world I see, the bankruptcy world, that are those monies that are going back into the business, are they loans?

[00:13:26] Speaker 00:
Are they equity infusions?

[00:13:28] Speaker 00:
And it gets very fuzzy when it's a closely held business like this.

[00:13:31] Speaker 00:
And again, the fact that there were no notes and no notes presented at trial,

[00:13:35] Speaker 00:
If in fact he did make loans, and he didn't file a proof of claim in the bankruptcy, if he did make loans back to the corporation... They were listed on the creditor's schedule.

[00:13:45] Speaker 00:
There was a listing as a creditor.

[00:13:47] Speaker 00:
They were listed as a creditor.

[00:13:48] Speaker 00:
I don't know if they were listed as disputed, but at trial, when push came to shove, so to speak, there was nothing along those lines presented.

[00:13:57] Speaker 00:
And that's what I think Judge Yoon made the comment.

[00:14:01] Speaker 00:
And it was kind of like, hey, you had your day in court, and you failed to do that, and this is that.

[00:14:07] Speaker 01:
But a big thing that seemed to drive the bankruptcy judge was the fact that there weren't records showing that Mr. Salao had transferred money to Pandora.

[00:14:14] Speaker 01:
You'd agree with that, right?

[00:14:15] Speaker 00:
Yes, I would.

[00:14:16] Speaker 01:
And then they brought forth the records and said, we'd like a sort of new trial on this element, and he said no, right?

[00:14:23] Speaker 00:
He said, no, you had your chance.

[00:14:24] Speaker 00:
And keep in mind, and noted in the district court's opinion, Judge Youn had a problem with the credibility of Mr. Slau in the fact that he said, I'm a passive investor.

[00:14:33] Speaker 00:
This is just kind of the family business.

[00:14:35] Speaker 00:
I don't have much to do with it.

[00:14:36] Speaker 00:
When it turns out he signed the tax returns, he wrote checks on behalf of the corporation.

[00:14:40] Speaker 00:
So as far as saying, I'm just a passive investor.

[00:14:43] Speaker 00:
It's my brother's business, blah, blah, blah, it turns out he was more than that.

[00:14:47] Speaker 01:
Harkening back to an earlier case today.

[00:14:49] Speaker 01:
There's no suggestion the bank records are fabricated right.

[00:14:52] Speaker 00:
I mean we've not no we've not made that suggestion so But again, I would ask the courts And I'll leave any court has any questions and the panel has any questions for me that the especially the district court opinion that laid out sort of the roadmap on all the issues as far as the the the sort of the

[00:15:12] Speaker 00:
The pieces of the puzzle, we used that on an earlier case today, the pieces of the puzzle here show that there was a loan, there was a 2015 tax return, the 2016 tax return.

[00:15:22] Speaker 00:
And as the evidence provided, Mr. Anderson, the trustee, we see a lot where after you, I don't want to say get your hand caught in the cookie jar, but sort of speak, hand caught in the cookie jar.

[00:15:32] Speaker 00:
You're entitled to benefit of the doubt.

[00:15:34] Speaker 00:
Well, the IRS, somebody relied on those tax returns in those prior years.

[00:15:38] Speaker 00:
You're sort of a stop later to say, oh, Mr. Trustee, and by the way, the trustee.

[00:15:42] Speaker 03:
I don't see their argument, maybe I'm wrong, as there was no loan.

[00:15:46] Speaker 03:
I think they're saying this payment was for something else.

[00:15:50] Speaker 03:
Am I wrong about that?

[00:15:52] Speaker 03:
But payment for what?

[00:15:53] Speaker 03:
Well, I thought there was also, I thought the question was, there was an earlier loan.

[00:15:59] Speaker 03:
I thought it was which loan was the 130.

[00:16:01] Speaker 00:
I think it was one loan, and it was the same receivable, the same shareholder.

[00:16:05] Speaker 00:
And so, again, corroborated by the 15 return and the 16 return.

[00:16:09] Speaker 01:
I think what the bankruptcy judge said, if I'm not mistaken, is even if Mr. Salao had loaned $440,000 to Pandora, that doesn't mean Pandora could not have the next year loaned $137,000 to Mr. Salao.

[00:16:25] Speaker 01:
could be true, right?

[00:16:26] Speaker 00:
I think that was what... He used the word, as counsel noted, the binary concept.

[00:16:31] Speaker 01:
It doesn't have to be one or the other.

[00:16:32] Speaker 01:
It could be both.

[00:16:33] Speaker 01:
So rather than 137 being a payment on the 442, it could just be a new loan to Mr. Slau, notwithstanding this, that he's also owed 442 on this note.

[00:16:43] Speaker 01:
So he'd still be owed 442 after he paid back the 137.

[00:16:48] Speaker 01:
It could be alone in both directions.

[00:16:49] Speaker 00:
He's an unsecured creditor.

[00:16:50] Speaker 00:
So if the 137 is paid to the estate, he would share pro rata with the other creditors.

[00:16:57] Speaker 00:
And again, you raise the issue about the set-off defense.

[00:17:00] Speaker 00:
Never raise the trial.

[00:17:01] Speaker 00:
Never raise in a pretrial statement.

[00:17:03] Speaker 00:
And again, I sort of feel bad for counsel that he sort of had to pick up the ball at this point.

[00:17:07] Speaker 00:
But those issues have been raised.

[00:17:10] Speaker 01:
If it had been raised, would you concede they're linked in a way that set-off would apply to them or not?

[00:17:15] Speaker 00:
I'm going to say it depends, a typical lawyer statement.

[00:17:19] Speaker 00:
Yes, it could be that there could be some self.

[00:17:21] Speaker 00:
But again, there's issues of set up, mutuality, timing, blah, blah, blah.

[00:17:25] Speaker 00:
So again, I see that there's a few minutes left.

[00:17:29] Speaker 00:
I would ask, unless the court has any questions, I would ask that your honors to please affirm both what the bankruptcy court has done and what the district court.

[00:17:37] Speaker 00:
And thank you.

[00:17:38] Speaker 00:
Thank you.

[00:17:39] Speaker 00:
Thank you.

[00:17:39] Speaker 00:
Thank you.

[00:17:39] Speaker 00:
We'll give you a rebuttal.

[00:17:44] Speaker 02:
Thank you, Your Honors.

[00:17:45] Speaker 02:
I think there is one consensus here, and that is that there was no tracing done, that there is no documents, and that there really was no property that was identified that was actually loaned.

[00:17:55] Speaker 02:
All we had was this tax return.

[00:17:57] Speaker 02:
And I believe that was insufficient evidence.

[00:18:00] Speaker 03:
Why?

[00:18:00] Speaker 03:
I mean, if it was insufficient evidence,

[00:18:04] Speaker 03:
and he lied to the IRS?

[00:18:06] Speaker 03:
I don't understand.

[00:18:07] Speaker 02:
Well, that's why there was an amended return.

[00:18:09] Speaker 02:
And I believe it's declaration under penalty of perjury and in all cases, whether it's legal or whether it's taxes, it's to the best of your information and ability.

[00:18:18] Speaker 02:
And this was a nurse practitioner.

[00:18:19] Speaker 02:
He was a passive investor.

[00:18:21] Speaker 02:
He was also took over the business after his brother, who was the doctor,

[00:18:25] Speaker 03:
And the amended return took off the loan at all.

[00:18:28] Speaker 03:
Yeah, and that was really... I mean, why was the whatever put on there?

[00:18:32] Speaker 03:
I mean, if you amended it, it's like, oh, wait, now I understand the implications of saying it's a loan.

[00:18:39] Speaker 03:
Now I want to change my mind.

[00:18:42] Speaker 02:
I certainly don't want to bore you with the facts of the case.

[00:18:45] Speaker 02:
I don't, because I know you know the facts of the case.

[00:18:47] Speaker 02:
But the defendant, Mr. Silau, took over once the real owner, the one who was managing the business every single day, had cancer.

[00:18:59] Speaker 02:
There was no more referrals because he was the doctor who would get the referrals.

[00:19:02] Speaker 02:
And all of a sudden, Neil pops in there.

[00:19:04] Speaker 02:
No tax returns were done for a couple of years.

[00:19:06] Speaker 02:
as he was dealing with the cancer and as he was dealing down with the winding down of the company.

[00:19:11] Speaker 02:
So here we go.

[00:19:11] Speaker 02:
We go to an accountant.

[00:19:12] Speaker 02:
The accountant prepares all the tax returns.

[00:19:14] Speaker 02:
We want to file for bankruptcy because we want the trustee to administer all the receivables after a failed process.

[00:19:19] Speaker 01:
So that's why I've been wondering why the first tax return was filed a couple of years late, but that's why it's... That's right.

[00:19:25] Speaker 02:
Exactly.

[00:19:25] Speaker 01:
It was filed.

[00:19:26] Speaker 02:
They were all filed in May of 2017.

[00:19:28] Speaker 02:
Right.

[00:19:28] Speaker 02:
They go to the 341A.

[00:19:30] Speaker 02:
They hear that, hey, look at this loan to officers.

[00:19:32] Speaker 02:
That can't be right.

[00:19:33] Speaker 02:
They go back.

[00:19:36] Speaker 02:
Keith Owen of Venable goes back to the trustee and says, hey, that was wrong.

[00:19:40] Speaker 02:
Here's some amended returns.

[00:19:41] Speaker 02:
This is around November, December.

[00:19:43] Speaker 02:
It wasn't as if it was two or three or four years later.

[00:19:45] Speaker 02:
It was literally six months later when those returns were amended.

[00:19:47] Speaker 01:
So the first one was filed after the declaration of bankruptcy or not?

[00:19:52] Speaker 02:
I think it was right before the bankruptcy.

[00:19:54] Speaker 02:
Right before.

[00:19:54] Speaker 03:
And then after the amended comes in.

[00:19:56] Speaker 02:
Just a few more and the amended comes in after the three forty one eight.

[00:20:00] Speaker 03:
Maybe I'm asking the same question that Judge Cole asked earlier, but I mean, maybe you're right on this, but why did the give your best case for why the bankruptcy court committed clear error with these facts in hand?

[00:20:14] Speaker 03:
It could go either way.

[00:20:15] Speaker 03:
It's a toss up.

[00:20:16] Speaker 02:
I think there was manifest error just in the law in the application.

[00:20:20] Speaker 02:
I think just as we're speaking here now, we see it's a disputed debt, and that it wasn't matured.

[00:20:25] Speaker 02:
And the code section specifically says it must be matured or payable on demand.

[00:20:29] Speaker 01:
But that argument wasn't made below, right?

[00:20:32] Speaker 01:
It was back and forth was it precisely made no, but was it argued by the trustee well Where should I look in the record for how it was most closely argued on behalf of your client that it doesn't meet?

[00:20:44] Speaker 02:
452 B's required by 42 I apologize I might have put you down the wrong track with that I get my numbers confused as well and

[00:20:52] Speaker 02:
You know, I don't think directly in the record does it say that this debt isn't matured or that this debt isn't payable on demand.

[00:21:00] Speaker 02:
But what does show is that the debt is disputed.

[00:21:03] Speaker 02:
And where the debt is disputed, this type of action can't be found under 542B.

[00:21:10] Speaker 02:
We just can't skip over the statute.

[00:21:11] Speaker 02:
There were lots of ways that the trustee could file a cause of action and take, by the way, the same amount of time.

[00:21:17] Speaker 02:
There's Mount Quantameroet.

[00:21:18] Speaker 02:
There's accounting.

[00:21:19] Speaker 02:
There's breach of contract there's there's there's preferences by the way and which you can go back after the insider for payments Sure, I was actually although look like this may have been outside the preference period or not.

[00:21:32] Speaker 02:
Yeah, it's more than two years before 2015 is when the long reimbursements were made, but then there's a fraudulent conveyance that can go back four years You're not disagreeing there was a hundred and thirty five thousand dollar payment made

[00:21:43] Speaker 03:
You're just saying there was no loan for that.

[00:21:45] Speaker 02:
There was loan repayments made to Mr. Sialao, as well as reimbursement expenses.

[00:21:50] Speaker 02:
It wasn't just loan repayments.

[00:21:51] Speaker 02:
If you look at the memos, if you look at the actual checks that are in the record, they'll say loan reimbursement or they'll say... I thought they all said loan repayment.

[00:22:01] Speaker 02:
Loan reimbursement or reimbursement for expenses.

[00:22:03] Speaker 01:
Oh, did some say reimbursement for expenses?

[00:22:05] Speaker 01:
I believe so.

[00:22:06] Speaker 01:
I'll look again.

[00:22:07] Speaker 02:
All right.

[00:22:08] Speaker 02:
Your honor, it looks as if you've really read the record, so I might have conflated a couple things, but the testimony of Mr. Salao certainly says that some were loan reimbursements and some were expenses, and I'd hate to misdirect you in the wrong manner, your honor.

[00:22:22] Speaker 02:
And with that, I don't believe that we forgot about the prejudgment interest.

[00:22:27] Speaker 02:
And I believe 3287.

[00:22:28] Speaker 02:
And I think right now, we could determine that we never knew when the property vested.

[00:22:33] Speaker 02:
We never knew with the determination of the loan.

[00:22:35] Speaker 02:
So the prejudgment interest.

[00:22:37] Speaker 03:
Your point is if it accrues at all, it can only accrue at the time that the trustee filed its action.

[00:22:42] Speaker 02:
I don't believe it accrues at all, Your Honor.

[00:22:46] Speaker 02:
I don't believe it ever.

[00:22:47] Speaker 01:
But why not when the trustee files the action?

[00:22:49] Speaker 01:
What's your best argument that it isn't?

[00:22:51] Speaker 01:
When the trustee files the action, why isn't that the demand on the amount?

[00:22:55] Speaker 02:
And that's when prejudgment is... Because it's a federal statute, and this determines a property right, and property rights under Butner are determined under state law, and state law is under 3287, and 3287 specifically says that

[00:23:09] Speaker 02:
It must be ascertainable, identifiable, and of vested interest.

[00:23:14] Speaker 02:
And I think that undermines the argument with respect to just the 542B argument.

[00:23:21] Speaker 02:
And with that, I conclude, Your Honor.

[00:23:22] Speaker 03:
Thank you.

[00:23:22] Speaker 03:
We ask for reversal.

[00:23:23] Speaker 03:
Thank you.

[00:23:24] Speaker 03:
Thank you to both counsel for your arguments and a technical case, and you've helped us out.

[00:23:29] Speaker 02:
Thank you.

[00:23:30] Speaker 03:
The case is now submitted.