[00:00:00] Speaker 03:
24-6068, I apologize.

[00:00:07] Speaker 03:
We've got a jurisdictional question as well as what we thought we were here for originally.

[00:00:11] Speaker 03:
So, Mr. Hoyt?

[00:00:14] Speaker 00:
Yes, good morning, Your Honors, and may it please the Court's Todd Hoyt for appellant insight.

[00:00:21] Speaker 00:
Before I dive in, if I might ask if Your Honors have any questions or issues of concern that I should focus on to start with.

[00:00:31] Speaker 03:
Go for it.

[00:00:32] Speaker 00:
I guess they'll come.

[00:00:33] Speaker 00:
They'll hit me as they come.

[00:00:35] Speaker 03:
Yeah, you'll raise questions as you talk.

[00:00:38] Speaker 00:
The district court here recited the proper standard for analyzing this case on summary judgment, but then it failed to apply that standard.

[00:00:48] Speaker 00:
It recited that it was required to presume in favor of my client drawing reasonable inferences from the evidence in its favor.

[00:01:02] Speaker 00:
on the summary judgment process, but it did not do that.

[00:01:08] Speaker 00:
Instead, it relied on immaterial parole evidence to overlook the unambiguous terms of the controlling contracts, the surety bond, and the master lease agreement.

[00:01:21] Speaker 00:
It did so without making any findings that those expressed terms were ambiguous.

[00:01:26] Speaker 00:
And the bond, clearly on its face, says that it pays claimants

[00:01:33] Speaker 00:
that have a direct contract with the bond principal, that's ICON, for material expressly including rental equipment to be used in the performance of ICON's job on the Air Force Base.

[00:01:49] Speaker 00:
Now, it's undisputed here that my client had a contract with ICON.

[00:01:54] Speaker 00:
It was the master lease.

[00:01:56] Speaker 00:
and that that contract was for the modular unit that was being used on the Air Force Base.

[00:02:01] Speaker 00:
It was to be leased, continued to be leased, and used on that Air Force Base.

[00:02:08] Speaker 00:
And yet, the court relied on immaterial parole evidence to imply or read terms into the bond that aren't there.

[00:02:16] Speaker 03:
Why was it immaterial?

[00:02:19] Speaker 03:
Isn't the bond

[00:02:21] Speaker 03:
Is the payment on the bond dependent on whether your client supplied materials or labor to the project?

[00:02:30] Speaker 00:
Supply, interestingly enough, Your Honor, the word supply doesn't appear in that bond.

[00:02:34] Speaker 00:
And the court read in that to supply, that you have to physically supply, manufacture, deliver, or install in order to qualify.

[00:02:43] Speaker 00:
But the bond doesn't say that.

[00:02:44] Speaker 03:
Those bonds aren't always interpreted that way?

[00:02:48] Speaker 00:
No, no.

[00:02:49] Speaker 00:
In fact, we've cited two cases, the Palico case and the Vital Farms case, where almost identical bonds were held to apply.

[00:02:58] Speaker 00:
In fact, summary judgment was granted to the claimant in Vital Farms that was a lessor of equipment, did not manufacture it, did not install it, did not deliver it.

[00:03:09] Speaker 00:
And at least like here said, I'm not the supplier, the purpose being that they wanted direct warranty claims to the manufacturer.

[00:03:16] Speaker 00:
If that case is identical,

[00:03:18] Speaker 00:
to this one, and yet they held that a finance lease for that equipment in that case qualified under a bond with identical terms here.

[00:03:27] Speaker 00:
So no, they're not interpreted to require that you physically have to supply, manufacture, install, or deliver.

[00:03:33] Speaker 00:
Those are terms the court read into the bond.

[00:03:37] Speaker 00:
They're not there.

[00:03:38] Speaker 02:
Would your argument be the same if you had leased to ICON, a traditional building,

[00:03:49] Speaker 02:
you know, a building that was constructed nearby and was used as the phasing facility.

[00:03:56] Speaker 00:
I'm not sure it would, Your Honor, because that's real estate.

[00:03:59] Speaker 00:
I mean, we're talking about a modular unit that was assembled.

[00:04:02] Speaker 00:
It's like it's a piece of equipment that they used.

[00:04:06] Speaker 02:
Well, they can, you know, modular homes are real estate, right?

[00:04:10] Speaker 00:
Right.

[00:04:10] Speaker 00:
This was used, I believe, for a dental clinic on the Air Force Base.

[00:04:17] Speaker 00:
Why is that equipment under the... Well, I'm not saying that my argument would be different.

[00:04:23] Speaker 00:
I just haven't considered that proposition if it's more on the real estate side, but if it's still leased for use on the Air Force base.

[00:04:31] Speaker 02:
Well, the building doesn't look like, you know, tools or the sort.

[00:04:36] Speaker 00:
It looks different and... Yeah, I don't believe that argument was presented by the bond company in this case.

[00:04:42] Speaker 00:
I don't believe they made that argument or that it was presented for the appeal.

[00:04:46] Speaker 00:
that somehow this doesn't qualify because it's a modular unit.

[00:04:50] Speaker 00:
I don't believe they were made that argument.

[00:04:52] Speaker 02:
Didn't they object that it was the rental of equipment?

[00:04:56] Speaker 00:
Their objection, Your Honor, was that the finance lease is in essence a loan.

[00:05:03] Speaker 00:
So the court and the court held that what you provided was money.

[00:05:07] Speaker 00:
You didn't provide anything tangible.

[00:05:09] Speaker 03:
And if that was true,

[00:05:12] Speaker 03:
then you wouldn't be able to collect on the bond, is that correct?

[00:05:14] Speaker 00:
If that were true.

[00:05:15] Speaker 00:
And interestingly enough, the cases that they rely on on page 16 of their appellate brief.

[00:05:20] Speaker 03:
You didn't actually answer.

[00:05:22] Speaker 03:
You just repeated my question.

[00:05:24] Speaker 03:
If that were true, do you agree that you would not be entitled to recovery on the bond?

[00:05:30] Speaker 00:
If it was a straight loan, I agree.

[00:05:32] Speaker 00:
I was pointing out that on page 16 of their brief, they recite a bunch of cases that deal with banks

[00:05:39] Speaker 00:
and promissory notes and actual loans.

[00:05:42] Speaker 00:
So they're really not on point.

[00:05:44] Speaker 03:
Well, if the facts here, if the evidence here showed that this was essentially a loan, then you would lose.

[00:05:53] Speaker 03:
Is that correct?

[00:05:55] Speaker 00:
I object to the word essentially in a context where now that would require a factual determination.

[00:06:01] Speaker 00:
And that's the problem here that even if you agree that this is susceptible to that interpretation,

[00:06:07] Speaker 00:
You don't get the finality and summary judgment on that basis because there's at the very least conflicting parole evidence.

[00:06:13] Speaker 00:
We presented a number of parole evidence that is material that was disclosed in the negotiations that they were negotiating for a lease, a finance lease, not alone.

[00:06:23] Speaker 00:
And we provided a UCC filing that said it's a lease and that we have title.

[00:06:28] Speaker 00:
And we provided evidence that we were asked to collect the unit at the end as title holder.

[00:06:34] Speaker 03:
The terminology in your agreement.

[00:06:40] Speaker 03:
can be set aside.

[00:06:42] Speaker 03:
The court is not bound by the terminology in your agreement, is that correct?

[00:06:46] Speaker 00:
No, I disagree, Your Honor.

[00:06:47] Speaker 00:
You have to start with the unambiguous terms of the contracts.

[00:06:51] Speaker 00:
That's all EV Rainbow.

[00:06:54] Speaker 03:
This happens all the time when a contract says this person is an independent contractor.

[00:07:02] Speaker 03:
That doesn't bind the IRS is checking to see whether this person is an employee and should pay Social Security.

[00:07:09] Speaker 03:
It doesn't find the Department of Labor in terms of whether you paid overtime or provided benefits.

[00:07:16] Speaker 03:
The terms of the contract do not bind the third party, which is what we have here.

[00:07:23] Speaker 03:
You keep insisting on the pro-evidence rule.

[00:07:25] Speaker 03:
It has no application in this circumstance, does it?

[00:07:28] Speaker 00:
Well, that's the J.R.

[00:07:29] Speaker 00:
Fulton case they rely on, Your Honor.

[00:07:30] Speaker 00:
That's the only case they cited for that.

[00:07:33] Speaker 03:
There are a number of cases and treatises that say third parties are not bound by a parole evidence rule, unless they're successors in interest or something like that.

[00:07:47] Speaker 00:
Well, that leads to some pretty absurd results that the parties to the contract can't alter their agreement by the parole evidence rule, but a stranger can.

[00:07:56] Speaker 03:
Yeah, that's right.

[00:07:58] Speaker 03:
It happens all the time.

[00:08:00] Speaker 03:
There are lots of cases like that.

[00:08:01] Speaker 00:
Well, they only cited one case for it.

[00:08:03] Speaker 00:
It dealt with a real estate broker.

[00:08:04] Speaker 03:
If you had done more research, you might have found some cases.

[00:08:06] Speaker 00:
It dealt with a real estate broker agreement where they were trying to determine the time it was signed, not reinterpret the terms.

[00:08:13] Speaker 00:
And they said that the parole evidence rule doesn't apply to that.

[00:08:15] Speaker 03:
Do you disagree?

[00:08:16] Speaker 03:
Do you think that when the parties say you're an independent contractor, that finds the IRS and the Department of Labor?

[00:08:22] Speaker 00:
If the contract is between an independent contractor, and I think you have to start with the terminology, and then if there's parole evidence that's material that shows otherwise, you can go to it.

[00:08:33] Speaker 03:
But I don't think you... They don't bother with the terms.

[00:08:36] Speaker 03:
Well, I guess it's one factor, but they have like 12 factors.

[00:08:39] Speaker 03:
That's hardly dispositive.

[00:08:41] Speaker 00:
Yeah, you have to... Independent contractor, you've got to determine where the control lies.

[00:08:45] Speaker 00:
That's a question of fact.

[00:08:46] Speaker 00:
That's a question of fact.

[00:08:48] Speaker 03:
Yeah, and you're not bound by the terminology in the...

[00:08:52] Speaker 00:
Perhaps not, but you have to get there with material parole evidence to show the control.

[00:08:58] Speaker 03:
It's not called parole evidence in this circumstance because the parole evidence rule doesn't apply.

[00:09:02] Speaker 03:
Now, I'm not saying you lose, but... Okay, let's say we're outside the parole evidence rule.

[00:09:09] Speaker 00:
The evidence you present has to be admissible.

[00:09:12] Speaker 00:
It can't be hearsay.

[00:09:14] Speaker 00:
It can't lack foundation.

[00:09:15] Speaker 00:
Here we got an affidavit by a guy that, after the claim was filed, all of a sudden says, oh, this was a sham loan.

[00:09:22] Speaker 00:
in an appellate appendix 819-822 in his deposition, I got him to admit, I never used those terms until NAS attorneys presented me an affidavit that said it was a sham one.

[00:09:34] Speaker 03:
That's conclusory language anyway.

[00:09:36] Speaker 03:
But the court can look at what the substance of the agreement was.

[00:09:41] Speaker 03:
And if the court determined that the substance of this agreement was a loan, then you agree that you couldn't collect under the bond.

[00:09:51] Speaker 03:
Is that right?

[00:09:52] Speaker 00:
I would agree that if there's a factual determination at the end of the day that that's the case, then you're right.

[00:10:01] Speaker 00:
But you can't.

[00:10:02] Speaker 03:
Let's argue.

[00:10:03] Speaker 03:
Let me hear why you say this was not really a loan.

[00:10:09] Speaker 03:
That it really was a supplying of material.

[00:10:12] Speaker 00:
OK.

[00:10:12] Speaker 00:
There's a master lease that sets out the rent terms, the termination of the rent.

[00:10:17] Speaker 00:
That title is with my client.

[00:10:20] Speaker 00:
There's a UCC filing that says it's a lease and title is with my client.

[00:10:25] Speaker 00:
There's a request by icon at the end of the use of the unit that we come get our unit.

[00:10:35] Speaker 00:
So no dispute that we're the owner.

[00:10:37] Speaker 00:
So it's a purchased lease back.

[00:10:40] Speaker 00:
And the fact that they present a witness who signed off on this thing as a master lease without objection,

[00:10:50] Speaker 00:
and started to pay rent.

[00:10:52] Speaker 00:
And then only after the claim is filed with the bond company, because he has an indemnity agreement.

[00:10:57] Speaker 00:
He has to indemnify the bond company for every dollar paid under the bond.

[00:11:02] Speaker 00:
So now, all of a sudden, when he's asked to coordinate with the bond provider to get on the same page, he calls it a sham loan.

[00:11:12] Speaker 00:
That's the first time we see that.

[00:11:14] Speaker 03:
This building was built

[00:11:18] Speaker 03:
for the hospital and the hospital paid to have it built, is that correct?

[00:11:23] Speaker 00:
No, ICON built it to provide to the general contractor United for use at Fance Air Force Base.

[00:11:34] Speaker 00:
So it was manufactured there, it was then delivered, it was installed.

[00:11:37] Speaker 00:
There's no dispute that my client didn't manufacture, install or deliver it.

[00:11:42] Speaker 00:
So, okay, but when it was built,

[00:11:45] Speaker 03:
It was built for the specific purpose of using at this hospital.

[00:11:49] Speaker 00:
Is that correct?

[00:11:52] Speaker 00:
For the performance of ICON's contract to provide it to United for that.

[00:11:56] Speaker 03:
Who paid for getting it built?

[00:11:58] Speaker 00:
Well, ICON, I believe, initially.

[00:12:01] Speaker 03:
OK.

[00:12:02] Speaker 03:
So all the material and work that was used to build it would be covered by this bond.

[00:12:09] Speaker 03:
Is that correct?

[00:12:11] Speaker 03:
Yes.

[00:12:11] Speaker 03:
OK.

[00:12:12] Speaker 03:
And now it's built.

[00:12:14] Speaker 03:
And you're saying you're going to be covered under the bond a second time, even though there's nothing more to be built or, you know, it's already built and it's on site.

[00:12:26] Speaker 03:
And now you're going to, now you've got another arrangement and you're going to cover that by the bond.

[00:12:30] Speaker 00:
Well, now it's being rented with mental fees to be paid initially to ICON, but ICON chose to enter into a finance lease with us.

[00:12:40] Speaker 00:
whereby we would become the lessor.

[00:12:43] Speaker 00:
This all is set forth in the contract, the master lease and the bond.

[00:12:48] Speaker 00:
By the way, again, the bond does not require any specific manufacturing installation or delivery.

[00:12:54] Speaker 00:
It just says a contract for the use of the material in performance of ICON's contract.

[00:13:00] Speaker 03:
After the building was built, did the hospital or the general contractor have to pay any rent?

[00:13:08] Speaker 03:
for it to be on site until the project was completed?

[00:13:11] Speaker 00:
Yes.

[00:13:12] Speaker 00:
The general contractor was initially obligated to pay rent to ICON for it.

[00:13:18] Speaker 02:
And wasn't the facility was built and delivered before you entered into the master lease agreement?

[00:13:25] Speaker 00:
Correct.

[00:13:26] Speaker 00:
But again, there's nothing in the bond that says we have to be the provider at the outset.

[00:13:31] Speaker 00:
It just says it's a contract for its use.

[00:13:33] Speaker 00:
Well, its continued use is used in the performance of

[00:13:38] Speaker 00:
Icon subcontract here again.

[00:13:41] Speaker 00:
That would be that be implying a timing element.

[00:13:43] Speaker 00:
It's not there.

[00:13:44] Speaker 00:
I would like to reserve Remainer of my time.

[00:13:47] Speaker 00:
Thank you

[00:14:02] Speaker 01:
May it please the court?

[00:14:03] Speaker 01:
My name is Robert McGreeny.

[00:14:04] Speaker 01:
I represent the appellate and cross-appellant North American Specialty Insurance Company.

[00:14:11] Speaker 01:
This was a financial transaction, pure and simple.

[00:14:14] Speaker 01:
A creative one, but nevertheless a financial transaction that falls well outside the scope of the payment bond that was issued by my client on behalf of ICON.

[00:14:25] Speaker 01:
It would help me.

[00:14:26] Speaker 01:
Yes, sir.

[00:14:28] Speaker 03:
if you went through how this building was built and then who was supposed to pay what and so on.

[00:14:33] Speaker 01:
Absolutely.

[00:14:34] Speaker 01:
We have a federal government project accompanied by the name of United Excel Corporation was the prime contractor.

[00:14:43] Speaker 01:
ICON was a subcontractor to UEC.

[00:14:48] Speaker 01:
ICON and ICON alone, designed, fabricated, delivered,

[00:14:57] Speaker 01:
and installed these modular buildings.

[00:15:00] Speaker 03:
And then was it paid for the building?

[00:15:04] Speaker 03:
Was there a lump sum that said, okay, you bought this building?

[00:15:09] Speaker 01:
Absolutely.

[00:15:10] Speaker 01:
So the way the subcontract worked between UEC and ICON, like most subcontracts, ICON was paid on a percent complete basis as it went through the process of design, fabrication, delivery, and ultimate installation

[00:15:26] Speaker 01:
of the modular buildings, what are called the TPFs.

[00:15:30] Speaker 01:
There was then a rental component.

[00:15:32] Speaker 01:
And so your questions earlier to Mr. Hoyt were right on target.

[00:15:37] Speaker 01:
This building had been fully fabricated, delivered, installed, sitting there on the base, ready to earn rental income and in steps.

[00:15:53] Speaker 01:
Okay.

[00:15:53] Speaker 01:
Well, inside investments.

[00:15:55] Speaker 03:
Let's say that last step never occurred.

[00:15:58] Speaker 03:
Yes, sir.

[00:15:59] Speaker 03:
And there were rental payments to be made for that building, and those payments weren't made.

[00:16:06] Speaker 03:
Would that be covered by the bond?

[00:16:08] Speaker 01:
ICON could make a claim against the Miller Act bond that was posted by UEC and its surety.

[00:16:16] Speaker 01:
Because it was providing material.

[00:16:18] Speaker 01:
That's right.

[00:16:19] Speaker 01:
Because it is a true supplier of materials, not a finance company.

[00:16:26] Speaker 03:
Really, the timeline... But then if it sells, if it sold that building to someone else, the rent would still be due for the building and that somebody else could collect on the bond if it wasn't paid that rental.

[00:16:41] Speaker 03:
Is that correct?

[00:16:43] Speaker 01:
Not under the facts of this case.

[00:16:44] Speaker 01:
I mean, is there a theoretical possibility?

[00:16:47] Speaker 03:
I changed the facts.

[00:16:50] Speaker 03:
So you have the company that built the building

[00:16:53] Speaker 03:
It got paid along the way and that's being paid rent.

[00:16:57] Speaker 03:
And you think that rent, if it weren't paid, the owner of the building could collect under the bond.

[00:17:05] Speaker 03:
If the owner of the building then sold that building to someone else and the rent wasn't paid, then that buyer of the building could collect under the bond.

[00:17:19] Speaker 03:
Is that right?

[00:17:20] Speaker 01:
I honestly don't believe so, Judge Hartz, and that gets into a question.

[00:17:24] Speaker 01:
Why doesn't it?

[00:17:25] Speaker 01:
You're specifying material.

[00:17:28] Speaker 01:
I don't know, first of all.

[00:17:29] Speaker 02:
Doesn't matter.

[00:17:29] Speaker 01:
Ownership doesn't matter, does it?

[00:17:31] Speaker 01:
I don't think it matters, and it certainly doesn't matter under the facts of this case.

[00:17:34] Speaker 01:
What matters is whether it's material or not.

[00:17:36] Speaker 01:
Right.

[00:17:37] Speaker 01:
And this issue, as Mr. Hoyt pointed out, we did not get to the point of fully briefing the issue of whether or not a modular building, essentially an office space,

[00:17:50] Speaker 01:
is equipment within the meaning of the bond.

[00:17:54] Speaker 01:
Well, isn't that the core question here?

[00:17:57] Speaker 02:
It is one core question for sure.

[00:18:01] Speaker 02:
If I disagree with you on that Inside is a finance company, if I disagree with you on that, isn't the central question whether the building's equipment or not?

[00:18:14] Speaker 01:
It would be a central question for sure.

[00:18:17] Speaker 01:
If you said that this was

[00:18:19] Speaker 01:
Because if it is equipment, then it's material and would be covered by the bond.

[00:18:24] Speaker 01:
If you said this was a legitimate transaction and not just a finance transaction, I would argue still that number one, the TPF, the modular buildings are not equipment within the meaning of the bond and applicable law.

[00:18:42] Speaker 01:
And I would still argue that the new owner of the building

[00:18:47] Speaker 01:
may not qualify as one of the class of persons who are intended to be protected under a payment bond.

[00:18:57] Speaker 03:
Well, there are two ways in which the owner of the building are getting paid at this point, I gather.

[00:19:03] Speaker 03:
One is it's supposed to be paid rent for the building and the use of it for this project.

[00:19:10] Speaker 03:
Yes.

[00:19:12] Speaker 03:
But here, the problem is that the company that built

[00:19:17] Speaker 03:
the building is not making its payments under a lease or whatever with the party that sold the building to.

[00:19:27] Speaker 01:
Well it's a little more complex than that as it relates to this specific case because remember the building was already built.

[00:19:35] Speaker 01:
ICON's money built the building.

[00:19:37] Speaker 01:
ICON didn't need anything from inside except money.

[00:19:41] Speaker 01:
All right.

[00:19:42] Speaker 01:
The building was there.

[00:19:43] Speaker 01:
It was delivered.

[00:19:44] Speaker 01:
It was installed.

[00:19:45] Speaker 01:
It was ready to earn a rental income.

[00:19:48] Speaker 01:
There would be absolutely no reason for icon at that point to what go sell its revenue stream.

[00:19:55] Speaker 01:
Why would you do that?

[00:19:57] Speaker 01:
And the record is very clear.

[00:19:58] Speaker 01:
Why they did that is because they were going broke and they needed operating capital.

[00:20:03] Speaker 01:
They'd been kind of work in this relationship with inside investments.

[00:20:10] Speaker 01:
inside investments.

[00:20:11] Speaker 01:
They've been working this relationship with them for several years talking about various intricate financing formulas and things of this nature that could help them with cash flow.

[00:20:22] Speaker 03:
They were supposed to be paying, making payments to Insight and what you're saying is the payments they were making to Insight were not for material that's already been taken care of.

[00:20:33] Speaker 01:
Absolutely not.

[00:20:34] Speaker 01:
And in fact, the way it was originally structured, if you look at the schedule one to the so-called master lease agreement, UEC, the prime contractor on the job, initially was going to just start making rental payments directly to inside investments.

[00:20:52] Speaker 01:
And what they were doing, your honor, is repaying the $410,000 upfront funding that was provided by inside investments.

[00:21:01] Speaker 01:
You can think of it in that sense.

[00:21:03] Speaker 01:
What kind of legitimate sales transaction do you sell something, you get paid, and then you have to pay back the sales price?

[00:21:15] Speaker 01:
Because if you look at what's going on and you take this idea that, well, maybe if it was a legitimate transaction, there would be some rental income that's owed from and after a new buyer for the building.

[00:21:29] Speaker 01:
You would have had at the point that this bond claim was made only two or three months worth of rent.

[00:21:35] Speaker 01:
And instead, what they did is they accelerated the balance of the lease agreement because the bottom line was this.

[00:21:43] Speaker 01:
They provided $410,000 in upfront funding.

[00:21:50] Speaker 01:
That is clear in the record.

[00:21:52] Speaker 01:
There are email exchanges days before this master lease agreement was ponied up.

[00:21:58] Speaker 01:
that make it very clear what we are doing is we are providing upfront funding.

[00:22:05] Speaker 01:
We are an equity partner now, an investor with the bonded principle, with ICON construction.

[00:22:14] Speaker 01:
That takes them out of the class of persons intended to be protected in and of itself, which is really what the district court honed in on.

[00:22:23] Speaker 01:
They honed in on two issues, and they are the critical two issues.

[00:22:27] Speaker 01:
Did Insight supply labor and materials?

[00:22:30] Speaker 01:
And the answer is no.

[00:22:31] Speaker 01:
They provided nothing but money.

[00:22:34] Speaker 01:
Did Insight fall within the class of persons intended to be protected by this payment bond?

[00:22:41] Speaker 01:
And the answer is no.

[00:22:43] Speaker 01:
They're a finance company.

[00:22:46] Speaker 01:
If I could mention a couple of things that are I don't think really contested, but I believe are significant.

[00:22:58] Speaker 01:
These bonds do not cover banks.

[00:23:01] Speaker 01:
They do not cover lenders.

[00:23:04] Speaker 01:
They do not cover finance companies.

[00:23:07] Speaker 01:
They do not cover equity partners or joint ventures or companies that invest in the bonded principle.

[00:23:18] Speaker 02:
Could you clarify one answer you previously gave?

[00:23:21] Speaker 02:
Yes, sir.

[00:23:23] Speaker 02:
If Insight never came on the scene and United stopped making payments to ICON,

[00:23:29] Speaker 02:
Would the North American bond cover those failed payments from United to ICON?

[00:23:38] Speaker 01:
If ICON failed to pay, or if UEC failed to pay ICON?

[00:23:42] Speaker 01:
Yes.

[00:23:43] Speaker 01:
No, no, no.

[00:23:44] Speaker 01:
Not the North American bond.

[00:23:45] Speaker 01:
Let me be clear about that.

[00:23:46] Speaker 01:
It could be the United's bond.

[00:23:48] Speaker 01:
Yeah, the UEC bond.

[00:23:49] Speaker 01:
And that actually happened.

[00:23:50] Speaker 01:
I mean, the thing that you can't get from the record

[00:23:54] Speaker 01:
Although there are actually footnotes all throughout the briefing that Mr. Coyote and I did.

[00:23:59] Speaker 01:
There was so much litigation and still is litigation stemming from this very creative financial arrangement between Inside Investments and ICON.

[00:24:09] Speaker 01:
And there were lawsuits, ultimately an arbitration between ICON and UEC.

[00:24:17] Speaker 01:
ICON would qualify as a proper Miller Act payment bond claimant.

[00:24:23] Speaker 01:
against UEC and UEC's surety.

[00:24:26] Speaker 01:
ICON can't make a claim on its own bond, of course.

[00:24:30] Speaker 01:
These folks do not qualify as a legitimate claimant under the ICON bond because they are not a supplier of labor or materials.

[00:24:41] Speaker 01:
They are a finance company.

[00:24:43] Speaker 02:
And you do need to explain to me why the, assuming I disagree with you on that, why the facility is not equipment that would be covered by the

[00:24:52] Speaker 02:
the lease.

[00:24:55] Speaker 01:
Because the term equipment as used customarily in the construction business and as I believe it's intended to be used in the bond and in applicable law is things like scaffolding, cranes, vehicles that might be rented, pulling up a mobile home and

[00:25:22] Speaker 02:
for a temporary office, why wouldn't that follow?

[00:25:27] Speaker 02:
It's a tool in a sense for completing the project.

[00:25:31] Speaker 02:
It's a living space.

[00:25:32] Speaker 02:
I don't know.

[00:25:33] Speaker 03:
Do you have any cases that involve that situation with the temporary building useful for construction of a project and whether that, how, if at all, that's covered by bonds?

[00:25:46] Speaker 03:
Are there any cases that you know of one way or the other?

[00:25:48] Speaker 01:
There is a case that actually is from, I believe, the Western District of Oklahoma.

[00:25:56] Speaker 01:
It is BKJ Solutions, I think, is one of the parties.

[00:26:00] Speaker 01:
I know it's cited by Mr. Hoyt.

[00:26:03] Speaker 01:
We mentioned it as well in our briefing.

[00:26:06] Speaker 01:
The issue in that case, unfortunately, is not whether or not a modular building is an item of equipment.

[00:26:13] Speaker 01:
The issue in that case is that the prime contractor and its surety were taking the position that the Miller Act bond only applied to actual physical site work on the project.

[00:26:27] Speaker 01:
And I believe it was Judge Vicki Miles-Lagrange who determined, and quite frankly correctly determined, that the Miller Act bond itself is not so limited.

[00:26:38] Speaker 01:
It doesn't just apply to physical work.

[00:26:41] Speaker 01:
It can apply to other types of labor materials actually furnished.

[00:26:47] Speaker 01:
But again, these folks didn't provide the TPF.

[00:26:52] Speaker 01:
All they provided was money, and what they

[00:26:55] Speaker 01:
really want to do here and why there's been so much focus on the parole evidence rule is they want to take the position that the surety company is one, bound by the parole evidence rule, which we're not, and number two, that we're bound by the characterization of the relationship, the label placed on it by ICON and Inside Investments, which is not the case.

[00:27:20] Speaker 01:
And this court, in fact,

[00:27:22] Speaker 01:
was one of the leading jurisdictions in a case called St.

[00:27:29] Speaker 01:
Paul versus I believe it's H.C.

[00:27:31] Speaker 01:
Jones to say that surety companies on payment bond claims have every right to look into the true nature of the relationship.

[00:27:40] Speaker 01:
So there's no question here that the district court did the right thing and they looked at the true nature of the relationship.

[00:27:47] Speaker 01:
And they looked at whether or not there was a real sale and lease back, or was this just a paper transaction?

[00:27:54] Speaker 01:
And this was just a paper financial transaction that's not covered under the bond.

[00:28:00] Speaker 01:
Let me say briefly, we did have a cross appeal.

[00:28:03] Speaker 01:
We did seek attorney's fees.

[00:28:06] Speaker 01:
They were denied by the court, I will say very quickly, in the last 30 seconds.

[00:28:14] Speaker 01:
The outcome of this case, obviously favorable to us, is not determinative of the nature of the action that was initiated against us.

[00:28:25] Speaker 01:
120936 mandates an award of attorney's fees for the party that prevails in an action to recover for labor and services rendered.

[00:28:36] Speaker 01:
That was the nature of their claim.

[00:28:39] Speaker 01:
And we prevailed because they didn't provide labor and services.

[00:28:43] Speaker 01:
But that doesn't change the basis for which they sought a recovery.

[00:28:48] Speaker 01:
Thank you very much.

[00:28:48] Speaker 01:
Thank you.

[00:28:55] Speaker 03:
Do you have a little time for rebuttal?

[00:28:58] Speaker 00:
Yeah.

[00:28:59] Speaker 00:
Let me go back to your point about they can challenge the nature of the transaction.

[00:29:05] Speaker 00:
Even if that were the case, they haven't cited a single case that says that can be done on summary judgment.

[00:29:11] Speaker 00:
loan versus lease.

[00:29:13] Speaker 00:
The cases they've cited all dealt with full evidentiary hearing and factual determinations, not the least of which would be the credibility of the key witness.

[00:29:21] Speaker 00:
Well, if it turns on credibility, you're not getting summary judgment.

[00:29:23] Speaker 00:
Right.

[00:29:24] Speaker 03:
That has nothing to do with parole evidence.

[00:29:26] Speaker 00:
Right.

[00:29:27] Speaker 00:
But I would submit that Mr. Cale, we presented enough evidence to show his credibility was hugely challenged that I should be allowed to cross examine him at a trial because he was the key witness calling this a sham

[00:29:41] Speaker 00:
So that at the very least creates a fact issue, as does the other conflicting evidence.

[00:29:47] Speaker 00:
Put aside whether it's parole or not, there was plenty of conflicting evidence that the court was not allowed to make factual determinations on in the summary judgment context.

[00:29:58] Speaker 00:
Now, their position would be that law will not recognize a purchase and lease back as a true lease, and that's his fault.

[00:30:08] Speaker 00:
A finance lease in the Palico and Vital Farms case of equipment was held to be a true lease, notwithstanding almost identical terms to what we're talking about here.

[00:30:18] Speaker 00:
Those are legitimate leases.

[00:30:20] Speaker 00:
He says they didn't need us, but they're going broke, but yet they did need us.

[00:30:25] Speaker 00:
Yes.

[00:30:26] Speaker 00:
Thank you, Your Honor.

[00:30:27] Speaker 00:
Thank you, Counsel.

[00:30:28] Speaker 00:
Well, might I address just the attorney's fees issue since that was a cross-appeal for 30 seconds?

[00:30:35] Speaker 00:
Okay.

[00:30:38] Speaker 00:
I would just point out the cases they cite for that.

[00:30:40] Speaker 00:
There was no dispute that there was a subcontract, a contract for labor material.

[00:30:46] Speaker 00:
The issue was whether the claimant prevailed under that contract.

[00:30:51] Speaker 00:
Here the very issue was,

[00:30:53] Speaker 00:
They challenged that there wasn't any such contract.

[00:30:57] Speaker 00:
And the point is that they also waived it because in all of their pleadings, their pre-trial, final pre-trial statement, they stated, we are not seeking attorney's fees from Insight because the statute doesn't apply.

[00:31:24] Speaker 03:
Thank you, Council.

[00:31:25] Speaker 03:
Case is submitted.

[00:31:26] Speaker 03:
Councilor excused.

[00:31:27] Speaker 03:
We're going to take a short break.