[00:00:01] Speaker 05:
Good morning.

[00:00:01] Speaker 05:
We have one case today, which is number 145045, Englewood Terrace Limited versus United States Mr. Peel.

[00:00:11] Speaker 02:
Good morning, and may it please the court.

[00:00:14] Speaker 02:
The interesting issue this appeal raises relates to damages and causation.

[00:00:24] Speaker 02:
The central issue and error we contend that the trial court committed here was finding that remote consequences were offsets or breach savings, as we call them in our reply, that should be applied to reduce lost profits previously found by the trial court.

[00:00:44] Speaker 02:
And we contend the trial court erred in that finding because this court already affirmed the trial court's finding that the foreclosure of the Riley mortgage here at issue was not approximately caused by HUD's breach of the HAP contract at issue.

[00:01:01] Speaker 05:
Well, put aside the Riley mortgage, the payments out of the Riley mortgage.

[00:01:04] Speaker 05:
That doesn't include the repairs.

[00:01:06] Speaker 05:
Those expenses were never paid, correct?

[00:01:10] Speaker 02:
There are a couple sets of repairs, so let me just be sure I'm understanding your Honor's question.

[00:01:16] Speaker 02:
There was one category of major repairs of $3.5 million, which were estimated and based on pre-Reilly loan estimates of what might be required to be done to the project.

[00:01:27] Speaker 02:
And those were dating from 2001, and those were actually never ruled on by the trial court.

[00:01:33] Speaker 05:
No, I understand your contention they weren't ruled on.

[00:01:35] Speaker 05:
But the $3.5 million of expenses, which is based on an estimate that you provided, I think it was Exhibit 220 or 230, those repairs were never made and paid for, correct?

[00:01:52] Speaker 02:
Those were not, Your Honor.

[00:01:53] Speaker 02:
More extensive repairs were in fact made pursuant to the Riley mortgage.

[00:01:59] Speaker 05:
But and with respect to the maintenance expenses, do you contend that those payments were made?

[00:02:08] Speaker 02:
Operating expenses were paid by Englewood during the contract damages period.

[00:02:13] Speaker 02:
And the hypothesized operating expenses, again, we contend were not ruled on by the trial court and were in fact created based on projected expenses of the project rather than actual expenses.

[00:02:25] Speaker 05:
OK, but what the trial court said was you have the burden of proof and that you didn't bring in any evidence to show what the expenses were or were not.

[00:02:36] Speaker 05:
and that she said she gave you four opportunities to do that and you didn't come in with evidence.

[00:02:41] Speaker 05:
So what's the response to that?

[00:02:43] Speaker 02:
Well, there was evidence.

[00:02:45] Speaker 02:
That was in the form of the general ledgers, which had earlier been admitted in the case for all purposes and without restriction as to the use to which they might be put.

[00:02:52] Speaker 05:
Well, she found that they were inadequate for that purpose.

[00:02:55] Speaker 02:
Well, this court's case law in other instances finds accounting records to be sufficient proof of damages, and we contend she erred in requiring too stringent proof of damages in this regard.

[00:03:06] Speaker 05:
OK, so the only evidence that you presented to her were the general ledgers, right?

[00:03:12] Speaker 02:
The evidence of the actual expenditures, yes, that was in the general ledgers.

[00:03:17] Speaker 00:
But also in Mr. Samuelson's testimony.

[00:03:19] Speaker 02:
Also in Mr. Samuelson's testimony, absolutely correct, Your Honor.

[00:03:22] Speaker 05:
And in addition... Where did Mr. Samuelson testify that there were no safe expenses?

[00:03:32] Speaker 05:
I'm sorry.

[00:03:33] Speaker 05:
Where did Mr. Samuelson testify that there were no expenses saved?

[00:03:37] Speaker 02:
Those were set forth in the briefs on remand.

[00:03:39] Speaker 02:
There was not testimony taken on remand.

[00:03:42] Speaker 05:
OK, but what she said was you didn't put in any evidence.

[00:03:44] Speaker 05:
So what I'm asking about is what evidence was there in the record.

[00:03:49] Speaker 05:
She says that the only thing you offered were the general ledgers.

[00:03:52] Speaker 05:
They were insufficient.

[00:03:53] Speaker 05:
I'm asking you what other evidence was there?

[00:03:56] Speaker 02:
When the general ledgers were introduced into evidence in the trial court proceedings, Mr. Samuelson offered testimony about the manner and means in which they were created.

[00:04:04] Speaker 02:
I believe that's the testimony to which I was previously referring, Your Honor.

[00:04:07] Speaker 02:
So it's foundational testimony relating to the general ledgers.

[00:04:11] Speaker 05:
So basically your whole case depends on her accepting the proposition that she improperly rejected the general ledgers.

[00:04:19] Speaker 02:
No, Your Honor, and let me explain why that's incorrect from our perspective.

[00:04:23] Speaker 02:
First,

[00:04:24] Speaker 02:
The trial court never ruled on either the projected operating expenses of $1.8 million or the major repairs of $3.5 million.

[00:04:33] Speaker 02:
That's clearly set forth on page 829 of the appendix.

[00:04:36] Speaker 02:
The last page of her opinion says, I don't resolve the disputes regarding those issues.

[00:04:42] Speaker 02:
And there were clearly factual disputes in the record.

[00:04:45] Speaker 02:
There was evidence of actual construction made pursuant to the Riley Loan.

[00:04:49] Speaker 02:
that was far more extensive than the $3.5 million estimate, for example.

[00:04:53] Speaker 02:
But she never ruled on that factual issue, finding it unnecessary because the Riley-financed expenses themselves were larger than the lost revenues previously awarded.

[00:05:04] Speaker 02:
So our contention is, Your Honor, that the only thing the trial court ruled on were the Riley-financed expenses.

[00:05:11] Speaker 02:
And as to those, there's a proximate causation problem with that.

[00:05:14] Speaker 05:
No, she said that you didn't present any evidence as to

[00:05:18] Speaker 05:
what the foregone expenses would or would not have been, other than general ledgers, and she found that insufficient.

[00:05:27] Speaker 05:
Is that an incorrect statement?

[00:05:30] Speaker 02:
She made statements to that effect in her opinion, but they didn't seem to be part of her ruling, Your Honor, and perhaps I'm misreading her opinion in that regard.

[00:05:39] Speaker 04:
Was the trial court correct

[00:05:43] Speaker 04:
that you agreed below that the Riley Loan paid the six categories of expenses and cost, the CIC debt service, its balloon payment, the Michigan National Bank loan debt, the real estate taxes, the insurance payments, and the Riley Loan interest payments.

[00:06:03] Speaker 02:
Riley monies were used to meet those expenses, Your Honor.

[00:06:07] Speaker 04:
There's evidence in the records... So she is correct that you agreed to... Yes, that's not a factual dispute.

[00:06:13] Speaker 04:
Okay, because it seemed to me you were arguing otherwise in your reply at page 20.

[00:06:20] Speaker 02:
If I could address that in rebuttal, Your Honor, I'll look at page 20.

[00:06:24] Speaker 02:
Oh, sure.

[00:06:24] Speaker 04:
Yeah, because that's mixed me up there.

[00:06:27] Speaker 04:
So if you're not arguing that she was incorrect, that's fine.

[00:06:31] Speaker 02:
The larger point we are arguing is that money is fungible.

[00:06:34] Speaker 02:
So whether it comes from a lender or comes from a capital contribution of Englewood or comes from the Illinois Housing Department Authority or Riley,

[00:06:41] Speaker 02:
Money is money, and so it doesn't matter.

[00:06:43] Speaker 02:
And there was money put forward at closing in December of 2002, which included the Riley mortgage proceeds, it included proceeds from IHDA, and it included 100-some thousand of capital contribution by Englewood, funds that are not shown to have been contributed by a lender.

[00:07:00] Speaker 02:
So depending on which dollars you say went to which things, one could make an argument that at least some of the expenses were funded out of other things.

[00:07:07] Speaker 02:
The truth is, with respect to the way the Riley Loan worked, many of the payments made through the Riley Loan never came to Engwood and then Engwood back to the vendor.

[00:07:17] Speaker 02:
For example, the construction interest payments, those were capitalized into the loans.

[00:07:21] Speaker 02:
The bank basically paid itself once those draws were approved.

[00:07:25] Speaker 00:
I'd like to return, please, to the major repairs and routine operating expenses.

[00:07:30] Speaker 00:
is it correct general ledger issues with regarding whether the general ledger establishes payment or doesn't establish payment that's only related to the operating expenses right that that's the one point eight

[00:07:46] Speaker 00:
roughly million dollars into the operating expenses.

[00:07:50] Speaker 00:
That doesn't have anything to do with the major repairs.

[00:07:52] Speaker 00:
That's a separate category, right?

[00:07:54] Speaker 02:
Yes, Your Honor.

[00:07:55] Speaker 02:
Their assertions as to major repairs are based entirely on estimates that were prepared prior to the Riley construction program.

[00:08:02] Speaker 00:
Right.

[00:08:03] Speaker 00:
But let me ask you, one of the things the government argues is even if you wouldn't have, we're looking at a two and a half year snapshot, right, of that south point property, what would have

[00:08:15] Speaker 00:
needed to be done or what would the expenses that would have been occurred during this two and a half year window.

[00:08:20] Speaker 00:
And one of the things the government argues is even if you wouldn't have had to do all of the major repairs for which you had received an estimate of 3.5 million, at a minimum you would have had to do the repairs necessary to bring the property up to code compliance.

[00:08:35] Speaker 00:
There are several places in the record where I see in that estimate

[00:08:40] Speaker 00:
that there was an attachment, which is not in the record, that talks about the building having been found not in code compliance, for example, with regard to smoke detectors or the garbage chute and the cover of the garbage chute not properly closing so the chute doesn't operate properly.

[00:08:55] Speaker 00:
There are a few instances of specific expenses that you've got estimates for that seem to be unequivocally by the estimate itself because those things were found to have failed the city or state code requirements.

[00:09:11] Speaker 00:
Wouldn't those have been expenses that you absolutely would have had to have incurred

[00:09:16] Speaker 00:
in that two and a half year snapshot since they were things for which you were found to be out of code.

[00:09:22] Speaker 00:
So even if not, the whole 3.5 million is on the table.

[00:09:26] Speaker 00:
At a minimum, isn't it necessary for her, not me, I'm not a fact finder, but to go back and sort through the 3.5 million and figure out, and wouldn't it be reasonable for her to say,

[00:09:36] Speaker 00:
Certainly the ones that require code compliance are things you would have incurred.

[00:09:41] Speaker 02:
If I understand your Honor's question, yes, is the answer to that.

[00:09:45] Speaker 02:
Our belief, however, is that the $3.5 million is wholly encompassed and subsumed within the much larger $7 million plus construction program undertaken in connection with the Riley Loan.

[00:09:57] Speaker 02:
And in our but for world, we assume the Riley Loan exists and we are servicing that loan

[00:10:02] Speaker 02:
during the damages period.

[00:10:03] Speaker 02:
So all of those other major repair issues that were identified back in 2001 and periods before the December 02 Riley Loan would necessarily have been addressed and subsumed and taken care of by the Riley-funded construction program that was commenced.

[00:10:19] Speaker 05:
But where in the record?

[00:10:21] Speaker 05:
I did not understand that the $7 million in repairs were made.

[00:10:25] Speaker 05:
I thought, in fact, in the exchange, in the argument in the Court of Federal Claims,

[00:10:31] Speaker 05:
You agreed that the $7 million had not been spent.

[00:10:35] Speaker 05:
Where is the evidence in the record that the $3.5 million were actually made?

[00:10:43] Speaker 02:
Your Honor, I'll point you to the specific page in the appendix reflecting the expenditures made for construction.

[00:10:48] Speaker 02:
If I could do that in my rebuttal time.

[00:10:50] Speaker 05:
Well, it's pretty key.

[00:10:51] Speaker 05:
I mean, my understanding is that you said, or counsel for Englewood said, that those repairs were not made.

[00:11:05] Speaker 02:
If one looks at the second volume of the appendix, page A, 1133.4970, that's a listing of construction payouts by number, date, amount, and cumulative totals as of September 10, 2004, reflecting that- I'm sorry, 1133. what?

[00:11:25] Speaker 02:
4970.

[00:11:26] Speaker ?:
Okay.

[00:11:26] Speaker 02:
That's a schedule listing out the payments that had been made as of April 2004 on the construction account, which is in excess of 5.7 million.

[00:11:36] Speaker 02:
There are later documents back showing the closing out of the lien claim that the contractor had on the property, showing that there was a certificate of completion issued in May of 2004 by Duffy, the contractor who completed the construction.

[00:11:52] Speaker 02:
That's also in the record.

[00:11:54] Speaker 02:
And I will try and quickly identify that for your honor as well.

[00:12:00] Speaker 02:
I have a dumb question.

[00:12:02] Speaker 00:
Are you saying that these expenses here actually incurred are some of or maybe all of

[00:12:12] Speaker 00:
the major repairs that were discussed because I thought the roof was never fixed for example so are you saying you know the 3.5 million are a precise itemized list of expenses and I thought some of those repairs were not in fact made are you telling me that that no in fact all of those repairs were made or are you saying wait some of them were made here's evidence of it you have to send it back to her for fact-finding on which ones were what are you saying I'm saying

[00:12:41] Speaker 02:
both your honor I'm saying the construction that was actually undertaken pursuant to the Riley Loan was more extensive to renovate the building to a light new condition which was higher than the decent safe and sanitary condition of the building.

[00:12:54] Speaker 03:
Where's your foundational document for

[00:13:17] Speaker 04:
As I look to 1133, but that's not there.

[00:13:45] Speaker 02:
Your Honor, I'm sorry.

[00:13:46] Speaker 02:
I'm fumbling here.

[00:13:47] Speaker 02:
I will give the court specific page references from court filings reflecting the mechanics lien procedure from the general contractor, reflecting a certificate of completion was issued in May of 2004, reflecting that an entire balance of nearly $8 million was expended in construction.

[00:14:06] Speaker 05:
This is inconsistent with what you told the Court of Federal Claims.

[00:14:09] Speaker 05:
Look at page 383 of the record.

[00:14:12] Speaker 05:
She specifically asks you about this.

[00:14:15] Speaker 05:
Well, the major repairs that are referred to were discussed and outlined in August of 2001.

[00:14:20] Speaker 05:
But they actually were expended or not?

[00:14:23] Speaker 05:
Mr. Samuelson, no, they never materialized.

[00:14:26] Speaker 05:
Okay, so these dates we're talking about just for major repairs.

[00:14:28] Speaker 05:
Yes, let's be very precise, please.

[00:14:31] Speaker 05:
But they were never paid.

[00:14:32] Speaker 05:
They were never incurred.

[00:14:34] Speaker 05:
They were not made.

[00:14:35] Speaker 05:
They were not incurred.

[00:14:36] Speaker 05:
They were not paid.

[00:14:38] Speaker 05:
How's that consistent with what you're just telling us?

[00:14:41] Speaker 02:
I think there may be some talking past one another right here.

[00:14:45] Speaker 02:
What my understanding of Mr. Samuelson's saying at that hearing was that the specific program of construction outlined in the 2001 proposal was never a proposal that was put into effect, which is not to say that a more extensive proposal wasn't later.

[00:15:00] Speaker 05:
Well, that's inconsistent with what you said.

[00:15:02] Speaker 05:
He was specifically asked by the court whether they were ever paid.

[00:15:05] Speaker 05:
And he specifically said, no, they were never paid.

[00:15:11] Speaker 02:
Repairs were made longer.

[00:15:13] Speaker 02:
I think, again, the court didn't address this on its findings, so certainly a remand could clarify and illuminate these factual issues in the record.

[00:15:20] Speaker 02:
I see that my time has expired.

[00:15:21] Speaker 02:
All right.

[00:15:22] Speaker 05:
We'll give you two minutes for rebuttal.

[00:15:54] Speaker 01:
Mr. Peele, may it please the court?

[00:15:58] Speaker 01:
I think what's being demonstrated here is exactly the problem that Judge Warren had at the trial level.

[00:16:03] Speaker 01:
Despite giving Anglewood four attempts to try to prove their case, they never really submitted substantial evidence that actually showed that repairs were made.

[00:16:14] Speaker 01:
expenses incurred, it was a jumbled mess.

[00:16:17] Speaker 01:
I was going through the ledgers last evening that they produced, that their whole case relies upon, which Judge Horn determined were admitted for the purposes of gross revenue, which the court reversed in its prior opinion.

[00:16:31] Speaker 00:
And if you look at the ledgers from, like, say, 987... Does she actually, when they're admitted, expressly indicate that they're admitted for a limited purpose?

[00:16:39] Speaker 01:
I don't know if there's any language that she's, there isn't.

[00:16:42] Speaker 01:
But there is in her follow-on opinion, so that was clearly the understanding, Your Honor.

[00:16:46] Speaker 00:
In her follow-on opinion, what does she precisely say about the nature of the admission of the letter?

[00:16:49] Speaker 01:
She says in the prior opinion that's currently on appeal that the general ledgers were used primarily for the purposes solely of gross revenue, approving their revenues.

[00:16:59] Speaker 01:
There was no demonstration whatsoever that there were any expenses incurred or that they were saying these were our expenses.

[00:17:06] Speaker 00:
So when we- But what I want to understand, I want you to be precise, was she admitting them for limited purpose or simplifying them insubstantial as a matter of evidence to prove

[00:17:17] Speaker 00:
the point of the expenses, because I didn't see any government objection at any point in time.

[00:17:23] Speaker 00:
I didn't see any motion in limiting about the nature of the use of the ledgers that would be appropriate.

[00:17:30] Speaker 00:
I saw nothing on the part of the government that would warrant diminished use of the general ledgers, either by request or motion or otherwise.

[00:17:41] Speaker 00:
And so I want you to be precise about what you believe it is that she expressly

[00:17:46] Speaker 00:
determined about the nature of the ledgers as evidence.

[00:17:49] Speaker 01:
Yes, thank you.

[00:17:50] Speaker 01:
And that's a fair point.

[00:17:51] Speaker 01:
I apologize to the court.

[00:17:53] Speaker 01:
Yes, we initially objected a trial because during the discovery phase, we were provided nothing on damages besides making the request.

[00:17:59] Speaker 01:
We saw a compilation for these general ledgers, and we asked that the court not admit them for the purposes to prove Angle was damages, which we understood to be

[00:18:09] Speaker 01:
gross revenues, or that they wanted the delta between the actual revenues that they would have obtained but for the breach, less the revenues that CHAP vouchers provided.

[00:18:20] Speaker 01:
A month later, after not receiving any information that showed any of this information, we, you're right, they were admitted.

[00:18:26] Speaker 01:
Did we specifically say we were admitting them for the sole purpose of only general revenues?

[00:18:31] Speaker 01:
No.

[00:18:32] Speaker 00:
When the documents admitted, isn't it admitted?

[00:18:34] Speaker 01:
But it's admitted.

[00:18:35] Speaker 01:
But to the second part of your question, you're absolutely right.

[00:18:38] Speaker 01:
In hindsight, maybe we should have been more precise.

[00:18:41] Speaker 01:
But in this case, though, the court, through all the briefings, understood that Englewood was putting these exhibits on or ledgers on to prove the revenues lost, because that was their theory.

[00:18:52] Speaker 01:
And in the subsequent opinions,

[00:18:53] Speaker 01:
she made reference to that, that the fact that these were solely put on as testified by Mr. Samuelson to show gross revenues or lost revenues.

[00:19:01] Speaker 01:
And moreover, it become the weight of an evidence issue.

[00:19:04] Speaker 01:
So we had Mary Anderson, who was the person who dispersed the funds post-breach, claiming exactly what were paid and what wasn't paid and what expenses were paid.

[00:19:13] Speaker 01:
But even let's assume that the ledgers were admitted for the purposes of showing the expenses.

[00:19:18] Speaker 01:
If you look at the ledgers, by looking at the ledgers, and I looked at them last evening, from like, say, 987 to the end of 1014, there is no evidence that Anglewood made any of the payments it says it made.

[00:19:31] Speaker 01:
There's nothing that says it made a $1.7 million payment.

[00:19:34] Speaker 01:
There's nothing that said it made a $750,000 payment.

[00:19:37] Speaker 04:
It's nothing that said it made any type of... Well, that's why I asked for the foundational documents that the Council is supposed to provide.

[00:19:43] Speaker 04:
I mean, I...

[00:19:45] Speaker 05:
The claim about the general ledgers is limited to the maintenance expenses, right?

[00:19:50] Speaker 05:
It doesn't have anything to do with the repairs.

[00:19:53] Speaker 05:
Well, under the theory that- That part that I read seemed to concede that they never made the repairs.

[00:19:59] Speaker 05:
They never paid for the repairs.

[00:20:00] Speaker 01:
Right.

[00:20:01] Speaker 01:
That was a concession that Mr. Samuelson stated.

[00:20:04] Speaker 01:
I don't believe it was a limited concession, as was represented.

[00:20:08] Speaker 05:
Well, what I'm saying is that the issue about the general ledger relates to $1.8 million in maintenance expenses.

[00:20:15] Speaker 05:
There's no claim that the general ledger show repair payments, right?

[00:20:20] Speaker 01:
That's absolutely true.

[00:20:21] Speaker 01:
We're not aware of any major repairs.

[00:20:23] Speaker 01:
That's true.

[00:20:24] Speaker 01:
But even assuming the claim of $1.8 million, if you look at the general ledgers from 2002 going forward, the numbers don't add up.

[00:20:33] Speaker 01:
And that's what Judge Horn found was the problem with the ledgers as substantial evidence.

[00:20:38] Speaker 00:
But I think that maybe we should move on to the major repairs, because if we agree with you,

[00:20:42] Speaker 00:
There's a stipulation in this case to the government's assertions about the six categories, and the routine operating expenses are, I think, stipulated to be in the amount, right, of $1.8 million, roughly, right?

[00:20:56] Speaker 00:
So we kind of, if we agree with you on the general ledger not overcoming,

[00:21:01] Speaker 00:
or establishing that she clearly erred in finding they failed to meet their burden on those, that still doesn't get to the 3.2 million.

[00:21:10] Speaker 00:
I want you to put aside everything related to the Riley Loan.

[00:21:13] Speaker 00:
The only category left that I can tell is the major repairs.

[00:21:16] Speaker 00:
So I'd like you to focus on the major repairs for me and see how do we get to 3.2 million.

[00:21:22] Speaker 00:
Say we're at 1.8, right?

[00:21:25] Speaker 00:
How do we get to 3.2?

[00:21:27] Speaker 00:
Because it doesn't seem, she clearly and expressly did not rule on whether or not the major repairs were necessary, right?

[00:21:33] Speaker 01:
She did not rule because I believe the opinion, if not directly stated, is certainly implicit that she'd already found $4.2 million in obligations that were avoided.

[00:21:42] Speaker 01:
Yes, Your Honor, I agree.

[00:21:43] Speaker 00:
So that's why I want to ask you about, since she did not rule on whether or not the major repairs would have had to have been performed in the two and a half year window, correct?

[00:21:55] Speaker 01:
There is no evidence that we're aware of that shows where these routine maintenance was made.

[00:22:05] Speaker 00:
No, no, not routine operating expenses, major repairs.

[00:22:08] Speaker 01:
Major repairs, we don't find, there's no evidence that we've saw where they've actually made the repairs or actually.

[00:22:12] Speaker 00:
Right, but there's also no proof that the repairs had to have been made in a two and a half year window.

[00:22:17] Speaker 00:
Didn't you expressly argue to the court

[00:22:19] Speaker 00:
when delineating between the major repairs listed in the $3.5 million estimate, that some of these repairs were precisely required to bring the property up to code.

[00:22:31] Speaker 00:
Clearly, those would have had to have been done right away.

[00:22:34] Speaker 00:
And so I thought that there was some lack of clarity in this record.

[00:22:41] Speaker 00:
Certainly, plaintiff argued we didn't have to do all $3.5 million worth of repairs.

[00:22:46] Speaker 00:
I mean, just because you bring a contractor out to your house,

[00:22:48] Speaker 00:
and tell them, take a look, what do you think you need to be fixed here, and how much would you charge me?

[00:22:53] Speaker 00:
It doesn't mean you have to do all those things.

[00:22:56] Speaker 01:
Very true.

[00:22:56] Speaker 01:
But one is, it was plaintiff's burden.

[00:22:58] Speaker 01:
So it was plaintiff who had to put that information in.

[00:23:01] Speaker 05:
I thought the source of the $3.5 million was their own estimate, based on this August 6, 2001 letter saying that the government said you had to make $6 million in repairs, but we think only

[00:23:14] Speaker 05:
This is a letter from Samuelson.

[00:23:20] Speaker 05:
It's not in the Joint Appendix.

[00:23:22] Speaker 05:
I don't know why it's not in the Joint Appendix.

[00:23:24] Speaker 05:
But it's available on PACER.

[00:23:26] Speaker 01:
It's available, and we can submit it to the court.

[00:23:28] Speaker 01:
We did not add it or include it in the joint appendix primarily because the court, one, we didn't think it was in dispute.

[00:23:33] Speaker 01:
The court had made a factual finding that that was their estimate.

[00:23:36] Speaker 01:
To bring it up, I agree, Your Honor, to circle back to your question for the 3.5 million repairs.

[00:23:41] Speaker 01:
But the real issue was is.

[00:23:43] Speaker 00:
I agree, Your Honor.

[00:23:45] Speaker 01:
The 3.5 million was the minimum amount of repairs to make it decent, safe, and sanitary.

[00:23:50] Speaker 00:
No, no.

[00:23:51] Speaker 00:
Who said that?

[00:23:52] Speaker 00:
Where did the district court say that?

[00:23:54] Speaker 00:
But the triangle would say that angle would said that when they were responded to the react inspection when they got to me what document or anywhere in this record we're in Englewood says they would have had to perform through all three point five million dollars worth of repairs to bring the property up to see angle would five I don't have the site your honor and I can submit it in a supplemental brief but in angle would five which was where we were found to be liable for the breach of the HAP contract

[00:24:17] Speaker 01:
In response to the REAC report, Anglewood submitted as showing that they did the 100% inspection and what repairs would be done, the Ted Danae architecture report.

[00:24:28] Speaker 01:
So that was what we understood that Anglewood was submitting to be $3.5 million.

[00:24:33] Speaker 05:
I thought the $3.5 million came from the Samuelson letter that I just mentioned.

[00:24:37] Speaker 01:
Well, yes, but the basis for that Samuelson letter, Your Honor, was the Ted Danae architecture report.

[00:24:43] Speaker 05:
But moreover, though... But didn't the August 6th Samuelson letter say, we agree that 3.5 million repairs have to be made?

[00:24:54] Speaker 01:
I believe so, Your Honor.

[00:24:55] Speaker 01:
I don't have it in front of me.

[00:24:56] Speaker 01:
But I do believe that there is no dispute that we understand from the record that plaintiffs think that a minimum of 3.5 needed to be made.

[00:25:03] Speaker 01:
Moreover, if you look to the Kennedy report, which was submitted with their loan application, that was basically in November.

[00:25:12] Speaker 00:
Well, right here, I mean, at least as argued to us in this court,

[00:25:17] Speaker 00:
And so I think that's part of why I'm wanting you to show me in the record where there is proof that Inglewood admitted 3.5 million had to be made during the damages period.

[00:25:26] Speaker 00:
Because by the way, that estimate talks about phase one repairs, phase two repairs.

[00:25:31] Speaker 00:
That, to me, would imply some of these repairs are repairs that you'd be making right away, and others are less important repairs you'd be making at a later stage.

[00:25:39] Speaker 00:
And so on page 26, at least, of the gray brief, they expressly argued to us that there is no evidence in the record to suggest that the hypothesized expenses would have been incurred by Englewood during the damages period, the two and a half year critical window, in addition to the operating costs funded by the Riley Law.

[00:25:57] Speaker 00:
So I understood them to be arguing to us that that $3.5 million is a wish list, but that's not necessarily things that had to be done right away.

[00:26:09] Speaker 00:
And that's why I thought I understood you to argue to the trial court, well, wait a minute, Judge, the code necessary repairs, the repairs to bring the property up to code clearly would have had to be done right away.

[00:26:20] Speaker 00:
We said that.

[00:26:20] Speaker 00:
Why would you make that argument if it wasn't in dispute as to which repairs had to be made and which ones did not?

[00:26:26] Speaker 00:
Why would you have made that argument?

[00:26:29] Speaker 01:
Because that would have been required to maintain the property in decent, safe, and sanitary condition.

[00:26:34] Speaker 00:
Yes, but those were a subset of the $3.5 million.

[00:26:36] Speaker 00:
What you're arguing to me now is Inglewood admitted that they would have had to do all the $3.5 million.

[00:26:41] Speaker 00:
I don't see that admission.

[00:26:43] Speaker 00:
And why would the government have argued and delineated between codex ones of the 3.5 million necessary to meet code and ones that were not necessary to meet code if there wasn't a dispute about the 3.5 million?

[00:26:57] Speaker 00:
That's what I don't understand.

[00:26:58] Speaker 01:
I think our arguments always were in response to Anglewood's positions.

[00:27:03] Speaker 01:
And what I would circle back then, Your Honor, is that what we do know, what Anglewood wanted, when the HAP contract was terminated and they applied for a 221D loan for HUD, they came forward and asked for about $6.6 million in construction.

[00:27:19] Speaker 01:
requirements.

[00:27:20] Speaker 01:
Now, I fully admit that part of that construction loan was to pay off some of their old debts.

[00:27:27] Speaker 01:
But the Kennedy report at 730-1 through 20, which is what was provided to the government saying these are the needed repairs.

[00:27:38] Speaker 01:
Moreover, we know in May 2004 that Mr. Samuelson came back to HUD asking for $1.6 billion more for additional repairs.

[00:27:48] Speaker 01:
We apologize to the court if we didn't specifically get into all the details as to what Anglewood avoided from their obligations.

[00:27:55] Speaker 01:
But it really wasn't our burden.

[00:27:58] Speaker 01:
We were just putting these things up and going.

[00:28:01] Speaker 01:
We've asked plaintiffs since the beginning of this case, show us some canceled checks where you actually paid these costs, and that the government and the taxpayer didn't pay these costs, and they haven't shown those costs.

[00:28:11] Speaker 00:
Yes, but that's not any of the questions that we've asked you today.

[00:28:15] Speaker 00:
We're assuming, I think,

[00:28:17] Speaker 00:
that these are expenses that were not in fact paid.

[00:28:20] Speaker 00:
Have you, from any of our questions, understood us to be concerned over whether these were paid or not paid?

[00:28:25] Speaker 00:
I'm assuming the major repairs were not paid.

[00:28:30] Speaker 00:
I understand their argument to the contrary.

[00:28:32] Speaker 00:
But the question to me is, and that's what I've tried to get you to focus on time and again, is to what extent do we know those repairs that would have had to have been incurred in the two and a half year window?

[00:28:42] Speaker 00:
Because that's the only thing that's supposed to offset the profit earned during that time period, right?

[00:28:48] Speaker 00:
Is expenses they would have incurred during that same time period.

[00:28:52] Speaker 01:
Those repairs, in addition to the mortgage payments and things like that, yes.

[00:28:55] Speaker 01:
But I guess it was, we were always going under the assumption that we felt that the repairs, the minimum amount of repairs that were needed were those that they listed in the DNA report.

[00:29:05] Speaker 01:
So given the lack of evidence as to exactly what they thought that they were going to have to do, that's what we relied upon.

[00:29:11] Speaker 01:
The other option we had is we had Mr. Samuelson's admission that he thought $7 million in construction fees were required.

[00:29:17] Speaker 01:
We also have the Kennedy report that lists a laundry list of repairs.

[00:29:21] Speaker 01:
Let me just cut through.

[00:29:23] Speaker 01:
So I apologize.

[00:29:23] Speaker 01:
I'm sorry.

[00:29:24] Speaker 01:
That I don't have those answers for the court that you want.

[00:29:26] Speaker 01:
If you want supplemental briefing, we'll gladly provide it.

[00:29:29] Speaker 04:
Let me just cut through with one question, OK?

[00:29:32] Speaker 04:
I asked your opposing counsel.

[00:29:34] Speaker 04:
about six categories of expenses that the Riley loan paid in full.

[00:29:40] Speaker 04:
And he said he agreed that indeed it had, and they weren't disputing that.

[00:29:45] Speaker 04:
And I'm taking that as a given then.

[00:29:48] Speaker 04:
And it seems to me that the expenses paid that he agrees were paid by the Riley mortgage totaled $4 million plus, almost $4,300,000 more than the damages award.

[00:30:05] Speaker 04:
And if so, that's why the claims court reduced it to zero.

[00:30:08] Speaker 04:
Doesn't that simply end it?

[00:30:10] Speaker 01:
That was our argument below.

[00:30:12] Speaker 01:
And maybe that's why they stopped with the damages.

[00:30:14] Speaker 01:
The evidence, uncontroverted evidence, shows that the government.

[00:30:17] Speaker 04:
But he agrees with that, I'm not going to spend.

[00:30:22] Speaker 01:
And we've made that concession.

[00:30:24] Speaker 01:
And that's the end of the case.

[00:30:25] Speaker 01:
And that's consistent, though, with the law.

[00:30:27] Speaker 01:
Englewood, in the record, had been losing money the previous three years.

[00:30:32] Speaker 01:
It's inconceivable, by having the government breach the contract, that it automatically becomes some profit factory that's generating profits over and over, especially given the conditions of the property.

[00:30:43] Speaker 01:
And we know the conditions of the property were bad, because even the first receiver report talked about that.

[00:30:49] Speaker 01:
My time is not subject to your questions.

[00:30:53] Speaker 01:
We ask that the court affirm the judgment of the trial court.

[00:30:55] Speaker 01:
Thank you.

[00:31:03] Speaker 05:
Let me ask you about that August 6 letter from Mr. Samuels.

[00:31:07] Speaker 05:
Are you familiar with that?

[00:31:08] Speaker 05:
I am, Your Honor.

[00:31:09] Speaker 05:
So doesn't he there say that three and a half million dollars in repairs are necessary?

[00:31:16] Speaker 02:
It's not a judicial admission.

[00:31:17] Speaker 02:
It's not a sworn statement.

[00:31:18] Speaker 02:
He later took it back in the record when it was discussed on the remand proceeding.

[00:31:22] Speaker 02:
So he said that was one line in a six page letter

[00:31:25] Speaker 02:
that was never undertaken and never went to fruition.

[00:31:28] Speaker 02:
It's exactly the hypothetical that Judge Moore depicted where a contractor comes out to your house and you say, well, gee, maybe we could do this, that, and the other thing.

[00:31:35] Speaker 02:
In my very limited time, I'd like to point the court to a couple of things.

[00:31:39] Speaker 02:
First, with respect to the construction undertaken by the Riley Loan, this is found in page A-160.

[00:31:45] Speaker 02:
This is one of the earlier opinions.

[00:31:47] Speaker 02:
The HUD-insured section 221D4 loan required that Englewood restore South Point to like new condition.

[00:31:54] Speaker 02:
a standard that went beyond the decent, safe, sanitary condition requirement of the 2000 HAP contract and REAC inspection.

[00:32:03] Speaker 02:
Therefore, the courts already found that the Riley construction program exceeded what the contract was requiring.

[00:32:09] Speaker 02:
Moreover, if you turn to page in the appendix of page A4975 and A4976, you can see the original contractor's claim for mechanic lien submitted by Duffy.

[00:32:21] Speaker 05:
statement that Mr. Samuelson made to the court where she specifically asked him, were these payments made?

[00:32:27] Speaker 05:
Were the repairs paid for?

[00:32:28] Speaker 05:
And he said no.

[00:32:30] Speaker 02:
Because I don't think he understood that question to mean, were these individual items ever completed?

[00:32:37] Speaker 02:
Was this program of construction outlined in this 2001 document undertaken?

[00:32:42] Speaker 02:
And the answer is no.

[00:32:44] Speaker 02:
So I don't think he understood the question in the same way that your owner now understands that testimony.

[00:32:49] Speaker 02:
I would also point, Your Honor, to the foundational documents for the schedule that we looked at earlier.

[00:32:54] Speaker 02:
Those can be found in the advance documents, which are found on pages, for example, A1109.4737.

[00:33:02] Speaker 02:
You'll see there that's one of the advance for insurance for mortgage proceeds.

[00:33:06] Speaker 02:
And you'll see the first item on that line is construction costs

[00:33:09] Speaker 02:
per form HUD 92488.

[00:33:11] Speaker 02:
That number then ties back to the schedule you saw later.

[00:33:15] Speaker 02:
There's also some other schedules in the appendix that itemize the draws and the amounts that went directly to the contractor.

[00:33:23] Speaker 02:
Those can be found in A1129, A1130, A1131.

[00:33:27] Speaker 04:
Excuse me.

[00:33:30] Speaker 04:
I saw that that was related to an application for insurance.

[00:33:34] Speaker 04:
I asked you for your foundational documents, not for the document to which they were attached.

[00:33:41] Speaker 04:
Do you have anything that shows me these things are true and accurate?

[00:33:44] Speaker 02:
They were produced by the government with no indication that authenticity was ever an issue.

[00:33:50] Speaker 02:
And they were admitted into the record without objection by agreement of the parties, Your Honor.

[00:33:56] Speaker 04:
I understand they're authentic.

[00:33:57] Speaker 04:
I'll accept they're authentic.

[00:33:59] Speaker 04:
Are they true and accurate?

[00:34:01] Speaker 02:
Yes, your honor.

[00:34:04] Speaker 02:
Was there any testimony to that?

[00:34:06] Speaker 02:
There was no testimony taken with respect to that.

[00:34:08] Speaker 02:
Well, okay.

[00:34:11] Speaker 05:
Thank you.

[00:34:11] Speaker 05:
All right.

[00:34:12] Speaker 05:
We're out of time.

[00:34:13] Speaker 05:
Thank you, Mr. Peel.

[00:34:14] Speaker 05:
Thank both counsels.