[00:00:01] Speaker 03:
Our final case for argument this morning is A&D Property Consultants against ANS Lending.

[00:00:12] Speaker 03:
Mr. Allitt.

[00:00:15] Speaker 04:
If it please the court, I represent the appellant, A&D Consultants, Inc.

[00:00:23] Speaker 05:
Your Honor, I will be brief in my opening remarks because I've observed

[00:00:28] Speaker 05:
you in the last three cases and seem extraordinarily prepared, so I don't want to go waste our time going over what you already know.

[00:00:34] Speaker 05:
There is one housekeeping matter I want to call to the court's attention.

[00:00:38] Speaker 05:
When this case was first brought against my client by ANS, in the counterclaim they designated my client as A&D, and again my client is called A&D Consultants.

[00:00:50] Speaker 05:
A&D was the name of my consultants for the briefing all the way through the back.

[00:00:55] Speaker 05:
Sometimes

[00:00:56] Speaker 05:
In this briefing and sometimes in the complaint, you will see confusion between A and D and A and S because they had virtually identical designations.

[00:01:07] Speaker 05:
We stopped doing that for the briefing before this court, but that will explain.

[00:01:11] Speaker 05:
You will see that popping up from time to time in the case.

[00:01:15] Speaker 05:
This case involves a complaint that was brought against my client who had not been party to the litigation and

[00:01:24] Speaker 05:
My client then litigated for two years with A&S Consultants about a transaction that had occurred on April 6, 2017 that involved nine interconnected documents, including a deed of trust promissory, no copower agreements, and a number of other documents relating to that transaction on April 6, 2017.

[00:01:48] Speaker 05:
In the complaint, it was alleged that my clients

[00:01:53] Speaker 05:
I had two at the time, the non-party Ms.

[00:01:57] Speaker 05:
Groves now as well as consultants had breached the promissory note.

[00:02:02] Speaker 05:
We denied that allegation in our answer.

[00:02:07] Speaker 05:
The claims on the promissory note that belonged to ANS lending were never brought forward in the litigation.

[00:02:15] Speaker 05:
We believe that is a plain violation of rule 13.

[00:02:20] Speaker 05:
And we have been litigating this now through the

[00:02:23] Speaker 05:
through the BAP and before that.

[00:02:25] Speaker 05:
And we have been faced with some novel arguments raised by the courts to not apply rule 13.

[00:02:32] Speaker 05:
We believe these novel arguments are wrong and that rule 13 should simply be applied according to its plain meaning.

[00:02:39] Speaker 05:
The BAP first argued that my client was an opposing party.

[00:02:45] Speaker 05:
It messed up on that because even after my client was brought into this litigation by ANS,

[00:02:53] Speaker 05:
and has filed another pleading six weeks later, once again, not bringing their claims under the promissory note.

[00:03:03] Speaker 05:
So there can be no doubt by the time that they were filing their pleading, six weeks after they had sued my client, we were an opposing party.

[00:03:11] Speaker 05:
The BAP had tried to say we were not an opposing party at the time we were served because the determination is made the nanoseconds before service.

[00:03:21] Speaker 05:
and not during service.

[00:03:22] Speaker 05:
We don't have to get into that.

[00:03:24] Speaker 05:
The BAP overlooked the subsequent pleadings that were filed by ANS.

[00:03:28] Speaker 05:
The BAP also tried to say that this transaction, which plainly arises out of a single transaction, did not meet the requirements of Rule 13, that it be one transaction.

[00:03:39] Speaker 05:
And the argument was that my client had not put the matter into question, but we had in our answer.

[00:03:47] Speaker 05:
And admittedly,

[00:03:52] Speaker 05:
Rule 13 imposes a penalty for failure to comply that's harsh.

[00:03:58] Speaker 05:
But it does so to avoid the harsh result of putting a litigant through

[00:04:05] Speaker 05:
the same litigation twice.

[00:04:08] Speaker 05:
By the same litigation, we'd call the same witnesses, the same documents, the same discovery all over again.

[00:04:16] Speaker 03:
The BAP expressed some uncertainty as to exactly what it is that you think they needed to assert as a compulsory counterclaim.

[00:04:28] Speaker 03:
Can you clarify what is the counterclaim that you think they needed to bring?

[00:04:35] Speaker 05:
They needed to assert that they believe they were entitled to payments under the promissory note that exceeded what our defenses and payments would be.

[00:04:45] Speaker 05:
They didn't do that.

[00:04:47] Speaker 03:
We do not agree.

[00:04:48] Speaker 03:
And the relief that they would be seeking would have been, what, a money judgment or?

[00:04:54] Speaker 05:
Yes.

[00:04:55] Speaker 05:
Yes, a money judgment for that amount.

[00:04:57] Speaker 03:
And so what about the fact that they have a right to non-judicial foreclosure?

[00:05:04] Speaker 03:
How does that fit in with saying that there's a compulsory counterclaim here?

[00:05:13] Speaker 05:
They, to the extent they retained the right to do a foreclosure, and we don't contend that they didn't, they simply never exercised it.

[00:05:23] Speaker 05:
So the right to do a non-judicial foreclosure has never been impinged or denied by my client in this case.

[00:05:33] Speaker 05:
It's irrelevant.

[00:05:34] Speaker 05:
They had that.

[00:05:37] Speaker 05:
They, by their own pleadings, have said it wasn't useful to them because of their defects in their deed of trust.

[00:05:44] Speaker 05:
and they never went forward with it.

[00:05:46] Speaker 05:
My client never did anything to stop them from doing .

[00:05:48] Speaker 05:
.

[00:05:48] Speaker 05:
.

[00:05:49] Speaker 00:
Mr. Olley, just to follow up on Judge Miller's question, in terms of you're essentially saying that ANS should have been judicially a stop from seeking to enforce its claims against your client, correct?

[00:06:03] Speaker 00:
In the context of consultants, it was not an opposing party in the context of the adversarial proceeding as to Ms.

[00:06:12] Speaker 00:
Groves.

[00:06:14] Speaker 00:
Following up, I guess, on Judge Miller's question, essentially you're saying that ANS is required to assert a counterclaim in that context against consultants, which was not a party to the adversarial proceeding, and thereby has no choice of remedy in terms of a trustee sale or a judicial foreclosure.

[00:06:35] Speaker 00:
There's no remedy.

[00:06:37] Speaker 00:
Ms.

[00:06:37] Speaker 00:
Groves, by the way, the record is, you haven't mentioned, A&D is Ms.

[00:06:41] Speaker 00:
Groves, correct?

[00:06:42] Speaker 00:
She is the only principal.

[00:06:44] Speaker 00:
That's her company, correct?

[00:06:47] Speaker 04:
It is her company.

[00:06:47] Speaker 00:
All right.

[00:06:48] Speaker 00:
So Ms.

[00:06:48] Speaker 00:
Groves and A&D are identical.

[00:06:51] Speaker 00:
There is no other principal behind A&D.

[00:06:53] Speaker 00:
She is the owner, operator.

[00:06:55] Speaker 00:
She is A&D in the corporate context, correct?

[00:07:00] Speaker 00:
Well, yeah, there is, I mean, there is a corporate entity that... Well, I understand, but my point is there's not another shareholder, there's no one else, there's not a limited partner.

[00:07:07] Speaker 00:
It is her corporate, it is her business entity, correct?

[00:07:11] Speaker 05:
She owns it 100%.

[00:07:11] Speaker 00:
100%.

[00:07:13] Speaker 00:
So Ms.

[00:07:13] Speaker 00:
Groves, the underlying principle here is Ms.

[00:07:16] Speaker 00:
Groves proceeds with Chapter 13 personal bankruptcy.

[00:07:21] Speaker 00:
And what underlies here is a matter of how that affects her company, A&D.

[00:07:27] Speaker 00:
And your point is, is that to the extent that she puts this in the bankruptcy posture and there's an adversarial proceeding, that this is some kind of compulsory counterclaim under 13A, a compulsory counterclaim against consultants.

[00:07:42] Speaker 00:
And consultants is not an opposing party in the context of this bankruptcy proceeding.

[00:07:48] Speaker 05:
May I address that, Your Honor?

[00:07:49] Speaker 00:
Sure.

[00:07:49] Speaker 00:
That's what I'm trying to ask.

[00:07:50] Speaker 00:
I think that's essentially the thrust of Judge Miller's question.

[00:07:54] Speaker 00:
I wasn't finished.

[00:07:54] Speaker 00:
I'm sorry.

[00:07:55] Speaker 00:
I'm sorry.

[00:07:56] Speaker 00:
So you understand my question.

[00:07:57] Speaker 00:
In the context of Judge Miller's question, what is the basis to say that because she has structured this corporate entity, that she has filed for bankruptcy, and then within the context of the lien

[00:08:11] Speaker 00:
in terms of half of the proceeds of the sale of the house, which underlies this entire process, that thereby she can impose upon ANS a compulsory counterclaim in terms of exercising its rights.

[00:08:24] Speaker 00:
That's really, to me, the thrust, the underlying thrust of what Judge Miller was just asking, and that's what I need for you to address from my point of view.

[00:08:33] Speaker 05:
Let's go through the procedure first.

[00:08:35] Speaker 05:
Rose brought the complaint.

[00:08:37] Speaker 05:
seeking only a declaratory judgment as to the lien rights in the property that she owned.

[00:08:44] Speaker 05:
ANS then brought a counterclaim with leave of the court in August of 20 seeking reformation of that deed of trust.

[00:08:53] Speaker 05:
And they brought in consultants at that point in time.

[00:08:57] Speaker 05:
At that point in time, consultants became an opposing party because ANS voluntarily elected to bring them into the litigation.

[00:09:06] Speaker 05:
So once consultants was in the litigation, ANS needed to bring all of its claims.

[00:09:12] Speaker 05:
It couldn't claim split.

[00:09:13] Speaker 05:
It couldn't hold back and say, we're just going to litigate part of this transaction, and there's part that we don't want to.

[00:09:19] Speaker 05:
They elected to bring in consultants.

[00:09:20] Speaker 05:
Consultants didn't start this litigation.

[00:09:23] Speaker 05:
Consultants never needed to be in this litigation.

[00:09:26] Speaker 05:
But they brought them in, and having brought them in, they can't litigate halfway with them.

[00:09:31] Speaker 05:
That's our condition, and that's what Rule 13 prevents.

[00:09:35] Speaker 05:
And it's important here, after they brought them in, six weeks later, they filed another pleading, which was an answer to the second amended complaint.

[00:09:43] Speaker 05:
By that point in time, there can be no dispute.

[00:09:46] Speaker 05:
My client's an opposing party.

[00:09:47] Speaker 05:
It's an opposing party because they brought him in.

[00:09:50] Speaker 05:
And once they brought them in, they needed to, in any subsequent pleading, bring all of their claims.

[00:09:56] Speaker 05:
That's Rule 13, and that is claim preclusion, which is the sister companion underlying theory of Rule 13.

[00:10:07] Speaker 05:
So we were an opposing party.

[00:10:10] Speaker 05:
This transaction plainly arises out of the same thing.

[00:10:13] Speaker 05:
The BAP said we needed to do something more than simply deny the liability on the promissory note in our answer to call it into question.

[00:10:23] Speaker 05:
But Rule 13 doesn't contain that.

[00:10:26] Speaker 05:
The plain language of 13 didn't require that.

[00:10:28] Speaker 05:
You're being asked here today, it's a day-novel review, to balance the harm of them losing their claim for not complying with Rule 13 or my client who can't afford a second litigation

[00:10:40] Speaker 05:
finding that as her only remedy.

[00:10:42] Speaker 05:
And the Rule 13's already made that decision for the courts.

[00:10:46] Speaker 05:
The party that gets punished is the party that didn't bring their claim, that impermissibly split the claim.

[00:10:51] Speaker 01:
Well, really, at the end of the day, aren't you trying to seek an extinguishment of a lien on non-debtor property?

[00:11:02] Speaker 05:
Now, I think the amount we're... I mean, I read all this.

[00:11:05] Speaker 01:
I mean, the whole theory of bankruptcy with respect to secured creditors is they're protected under the Fifth Amendment.

[00:11:13] Speaker 01:
And there are all sorts of bankruptcy protections for their property interests, including liens.

[00:11:18] Speaker 01:
But as I read through all of your documents, and you can correct me if I'm wrong, what you seem to be seeking is, one, the extinguishment of their lien, two,

[00:11:30] Speaker 01:
denying them allocation of the assets on the sale of the property.

[00:11:34] Speaker 01:
And this involves a non-debtor.

[00:11:41] Speaker 01:
Am I right?

[00:11:41] Speaker 05:
Both parties are non-debtors.

[00:11:42] Speaker 05:
Both parties are non-debtors.

[00:11:43] Speaker 01:
And your argument is that because they didn't either assert their lien rights under rule, you think they should have either asserted their lien rights or lose them under rule 13 or lose the right to distribution.

[00:11:58] Speaker 01:
That's your argument, right?

[00:12:00] Speaker 05:
Well, their claims are under the promissory now.

[00:12:03] Speaker 05:
In other words, the amount that was owing is what's in dispute.

[00:12:07] Speaker 05:
And by not bringing their claims, we never were afforded the opportunity to defend against those claims and raise our defenses that we had.

[00:12:15] Speaker 05:
That's the harm here.

[00:12:16] Speaker 01:
How much money is at stake here now?

[00:12:18] Speaker 05:
$237 is what was paid over.

[00:12:21] Speaker 05:
And to give you an idea, what Groves ended up paying for her half of this debt based on the thing was much smaller than that.

[00:12:29] Speaker 05:
And we were comfortable paying something much smaller, but not the $237.

[00:12:33] Speaker 05:
And we never got a chance to litigate this, even though we were in litigation with this party.

[00:12:37] Speaker 05:
That's the harm here, and Rule 13 prevents that harm.

[00:12:41] Speaker 05:
And my client, consultants, was not a debtor.

[00:12:44] Speaker 05:
They could have proceeded with a trustee sale.

[00:12:46] Speaker 05:
They could have done whatever they wanted to with consultants.

[00:12:49] Speaker 05:
The case law is real clear in the Ninth Circuit that an LLC is not protected by the stay of its principal.

[00:12:55] Speaker 01:
Well, in bankruptcy, you can file multiple adversary proceedings on various stats.

[00:13:00] Speaker 01:
I mean, that's a little bit different from a normal suit in federal court.

[00:13:06] Speaker 01:
It's not unusual.

[00:13:09] Speaker 05:
I'm not sure what, we didn't file multiple.

[00:13:12] Speaker 01:
I know you didn't.

[00:13:12] Speaker 01:
I'm just saying what your argument is that if an issue is raised by adversary proceeding, then there's a compulsory counter-climbing.

[00:13:19] Speaker 01:
You have to bring all of these things.

[00:13:21] Speaker 01:
But in fact, in the reality of bankruptcy, there are a lot of things that are litigated through various adversary proceedings involving some one of the same debts.

[00:13:33] Speaker 01:
Just saying.

[00:13:35] Speaker 05:
Yeah.

[00:13:35] Speaker 05:
My client could not have possibly filed an adversary being a non-debtor.

[00:13:40] Speaker 05:
It would have had to have been mrs. Groves and she was situated differently She didn't need to litigate this issue because they'd already waived their claims with regard to that So they were not filing a proof-of-claim So I'd like to was because it was consultants listed as a creditor creditor in the chapter 13 filing Consultants was not a creditor and was not listed as a creditor You're down to just just over a minute.

[00:14:03] Speaker 03:
Did you want to reserve like to reserve my time?

[00:14:05] Speaker 03:
Yeah, you may Mr. Allen

[00:14:11] Speaker 02:
Morning, Your Honors.

[00:14:13] Speaker 02:
May it please the court, David Allen, representing ANS Lending LLC, which is the lender in this litigation.

[00:14:21] Speaker 02:
As stated by the bankruptcy appellate panel in the very first sentence of its opinion, affirming the trial court order, and I quote, these consolidated appeals call into question a debtor's ability to sell property co-owned with a non-debtor free and clear

[00:14:39] Speaker 02:
leans against the non debtor's interest under 11 USC section 363 F. The court goes on in its opinion to make the statement that the bankruptcy code does not permit bankruptcy court to authorize a sale free and clear of liens and interest

[00:14:58] Speaker 02:
attaching to non-debtor, co-owner share of the property being sold under 363H.

[00:15:04] Speaker 02:
So what we need to do here is we need to separate out 363B1 and 363F from 363H.

[00:15:14] Speaker 02:
The under 363B1 and 363F, as the court knows, the bankruptcy court may authorize the sale of property of the estate, and those are the key words, property of the estate, free and clear of liens if certain criteria are met, including one of which is that there's a bona fide dispute.

[00:15:34] Speaker 02:
Now put that aside and let's look at 363H.

[00:15:37] Speaker 02:
Under 363H,

[00:15:39] Speaker 02:
The power of the bankruptcy court is extended to authorize the sale of property that is not the property of the estate, but what is co-owned by third party when the estate, when there is a co-ownership type of situation.

[00:15:55] Speaker 02:
What Consulans is attempting to do here by their argument is they're totally conflating 363H with 363B1 and F4.

[00:16:06] Speaker 02:
They argue

[00:16:07] Speaker 02:
that the property of a non-debtor owned jointly with the estate can be sold under 363H free and clear under the

[00:16:18] Speaker 02:
state under the conditions of 363B1 and 363F4, which allow a state property to be sole, free, and clear.

[00:16:26] Speaker 02:
The problem with their argument is there's absolutely no law whatsoever to support it.

[00:16:31] Speaker 02:
And not only that, but it really makes no sense.

[00:16:34] Speaker 02:
As stated in the Marco case, which I cite in our brief,

[00:16:40] Speaker 02:
it held that 363F4 could not be used in connection with 363H, as doing so, and I'll quote, risk impermissibly overextending bankruptcy relief to non-debtor parties.

[00:16:53] Speaker 02:
I think this is what your honor was getting to a few moments ago with your question.

[00:16:56] Speaker 02:
When the bankruptcy code only affords such relief to debtors and the bankruptcy estate, the bankruptcy estate can sell property free and clear under certain conditions,

[00:17:09] Speaker 02:
and the bankruptcy court can order the sale of the jointly owned property, but there's no statutory or case or any other authority for the concept being proposed here by the appellant, which is that those two statutes should be jammed together and somehow give the bankruptcy court power to say, hey, you're a non-debtor.

[00:17:32] Speaker 02:
Not only am I forcing you to sell the property under age, but I'm gonna apply, I'm gonna find

[00:17:40] Speaker 02:
E and F to you also and say that your lien is wiped out.

[00:17:44] Speaker 02:
That makes absolutely no sense whatsoever.

[00:17:46] Speaker 02:
There's no authority for that, and I guess I'll move on to the—unless the court has questions on that one, I'm going to move to the compulsory counterclaim issue.

[00:17:57] Speaker 00:
Mr. Allen, in terms of the application of 363F before we get to E, essentially as I understand

[00:18:06] Speaker 00:
Even if the bankruptcy court erred in authorizing the judicial sale free and clear of liens, it has the latitude under 363E to still provide adequate protection.

[00:18:17] Speaker 00:
And when all is said and done, the bankruptcy court came to the

[00:18:20] Speaker 00:
The court came to the right result in terms of allocating half the funds of the sale of the property to ANS, essentially.

[00:18:27] Speaker 02:
That's exactly correct.

[00:18:28] Speaker 00:
I mean, there may have been an error along the way, but ultimately under 363E, providing adequate protection of an interest that is sold, it is meant to protect the interest of the secured creditor, and ANS was a secured creditor, so the bankruptcy court still got the right result ultimately.

[00:18:46] Speaker 02:
Absolutely.

[00:18:46] Speaker 02:
ANS had a secured debt as to A&D's interest in the property.

[00:18:53] Speaker 02:
That was the outcome of the trial.

[00:18:55] Speaker 02:
Obviously, it was ANS's position that the debt should have covered the bankrupt Ms.

[00:19:03] Speaker 02:
Groves, also her half interest, but we lost on that part of it.

[00:19:08] Speaker 02:
Nevertheless, there's no question that A&D's debt was properly affirmed by the bankruptcy court.

[00:19:15] Speaker 02:
There was never any question about it.

[00:19:17] Speaker 02:
Yeah, I mean, certainly the court came to the correct result by saying, okay, I'm going to order under H, I'm going to order the sale of this property.

[00:19:25] Speaker 02:
However, the secured debt doesn't go away.

[00:19:27] Speaker 02:
And the one half of the sale proceeds belonging to A&D has to be paid over to the creditor, which is ANS.

[00:19:36] Speaker 01:
Can you tell me what the status of the bankruptcy is?

[00:19:40] Speaker 02:
That's probably a better question for Mr. Ella, but it's my understanding that the

[00:19:46] Speaker 02:
discharge was entered and the bankruptcy case is complete.

[00:19:50] Speaker 01:
So there was a confirmed plan?

[00:19:53] Speaker 02:
Yes, there was a confirmed plan.

[00:19:54] Speaker 01:
And under the confirmed plan, how was this debt and the security interest treated?

[00:19:59] Speaker 02:
Well, you're talking about the security interest of A&S was one half.

[00:20:04] Speaker 02:
There was, as Mr. Allen alluded to, there was an agreement for an amount to be paid that was substantially less than the amount of the

[00:20:16] Speaker 02:
of the debt would have been absent the bankruptcy.

[00:20:20] Speaker 02:
I guess I'll put it that way.

[00:20:21] Speaker 01:
Right.

[00:20:22] Speaker 01:
But there was no adjustment as to the lien itself and the bankruptcy plan?

[00:20:29] Speaker 02:
To my knowledge, no.

[00:20:30] Speaker 02:
But again, Mr. Alacroa is a better person to answer that question.

[00:20:33] Speaker 02:
Thank you.

[00:20:34] Speaker 02:
No problem.

[00:20:35] Speaker 02:
On the compulsory counterclaim issue, the

[00:20:39] Speaker 02:
the simple logic of how the position being taken by Mr. Ellett and his client make no sense is that he wants to argue that anytime there is a debt relief action, whether in or out of bankruptcy court, we can keep it in bankruptcy court, but in any event, anytime there's a debt, there's a declaratory relief action regarding this, because here the declaratory relief action was filed by Ms.

[00:21:06] Speaker 02:
Groves as an adversary action,

[00:21:09] Speaker 02:
asking the court to determine the scope of the security.

[00:21:12] Speaker 02:
My client and ANS answered that and at some point the litigation moved it forward, was granted permission to file a counterclaim because it wouldn't make any sense to win on the underlying case and say, yeah, the security is this big when there was ambiguity in the security documents.

[00:21:37] Speaker 02:
So in anticipation of prevailing on Ms.

[00:21:42] Speaker 02:
Rowe's claim, A&S, my client, filed the counterclaim

[00:21:48] Speaker 02:
And as Mr. Ellis said, for reformation, saying, okay, based upon the way that the security was intended to be, this is what the data trust should say.

[00:21:57] Speaker 02:
There was never any discussion, never any issue about how much was the debt, whether the debt was legitimate.

[00:22:05] Speaker 02:
There was nothing.

[00:22:07] Speaker 02:
And the problem with Mr. Ellis' position is it's a very important right to a security creditor to have the right of non-judicial foreclosure.

[00:22:16] Speaker 02:
And if that could be taken away by the debtor simply by filing a debt relief action saying, well, you know, we think the scope of the

[00:22:29] Speaker 02:
of the secured property is unclear here, so we want the court to adjudicate that.

[00:22:34] Speaker 02:
Mr. Ellis would then say, well, then we have to file.

[00:22:36] Speaker 02:
The creditor then has to come in and file a claim to collect in a judicial manner the note.

[00:22:43] Speaker 02:
In other words, a judicial foreclosure, which totally is a much more involved, lengthy, expensive process.

[00:22:52] Speaker 02:
than simply the non-judicial foreclosure to which the creditor has the right.

[00:22:57] Speaker 02:
And that right can simply not be taken away because of the fact that there was a debt relief action filed.

[00:23:06] Speaker 02:
As the court knows, the Arizona and the federal courts use the logical relationship to determine

[00:23:14] Speaker 02:
if a claim arises out of the same transaction or occurrence for the purpose of Civil Rule 13A, making it a compulsory counterclaim if a logical relationship exists between the prospective counterclaim and the adverse party claims.

[00:23:29] Speaker 02:
Here,

[00:23:30] Speaker 02:
As correctly found by the bankruptcy appellate panel, not only is there no logical relationship, there is no relationship.

[00:23:39] Speaker 02:
The fact that Mr. Elliott argues, well, yeah, there's nine different documents that were signed as part of a loan package.

[00:23:46] Speaker 02:
That doesn't mean that there's any relationship.

[00:23:48] Speaker 02:
between an action brought by a debtor to obtain a declaration regarding the scope of the security and an action by the lender to collect the debt.

[00:23:59] Speaker 02:
And so there's case law also cited in the ANS's brief, the case of Douglas versus NCMB, Texas National Bank, that states that the federal counterclaim rule, FRCP 13A, is inapplicable

[00:24:16] Speaker 02:
if it abridges, enlarges, or modifies the plaintiff's or defendant's substantive rights.

[00:24:22] Speaker 02:
Under Texas, and for that matter, Arizona, I throw that in law, lenders have a substantive right to elect judicial or non-judicial foreclosure in the event of a default, and debtors have no right to force the lender to pursue a judicial foreclosure remedy.

[00:24:38] Speaker 02:
That very clearly applies here.

[00:24:41] Speaker 02:
To follow Mr. Ellis' argument, the rights of the

[00:24:46] Speaker 02:
creditor, my client, would be very much abridged or modified in contravention of Rule 13A that just you can't do that.

[00:24:58] Speaker 02:
You can't do what he wants to do.

[00:25:00] Speaker 02:
And so in any event,

[00:25:05] Speaker 02:
I guess the last thing I'll mention because there was discussion by Mr. Ellen about and the court had asked questions about the opposing party issue.

[00:25:13] Speaker 02:
For the reasons that I just argued under 13A, it doesn't really matter in this instance because of the lack of a logical relationship.

[00:25:21] Speaker 02:
However, to address it, the consultants was not a party at all in the adversary action that was brought by Ms.

[00:25:30] Speaker 02:
Groves.

[00:25:30] Speaker 02:
It only was brought in as a necessary party on the reformation action filed by ANS.

[00:25:38] Speaker 02:
That was their limited involvement.

[00:25:40] Speaker 02:
It doesn't make them.

[00:25:41] Speaker 02:
There was no opposition or no opposing with respect to the debt itself.

[00:25:47] Speaker 02:
The only issue being litigated in the adversary complaint and counterpoint

[00:25:51] Speaker 02:
was the issue of the scope of the security in which Ms.

[00:25:57] Speaker 02:
Gross prevailed on that particular issue.

[00:25:59] Speaker 02:
But in any event, it was certainly not, under those limited circumstances, I would argue that A&D or consultants, as we call them, is not an opposing party under these circumstances for the application of 13A.

[00:26:19] Speaker 02:
So I think unless the court has any questions, I believe I covered it.

[00:26:23] Speaker 03:
Thank you very much.

[00:26:24] Speaker 02:
Thank you, Anders.

[00:26:26] Speaker 03:
Mr. Allen.

[00:26:27] Speaker 05:
Some quick answers.

[00:26:28] Speaker 05:
Chapter 13 was 100% payment plan in full.

[00:26:32] Speaker 05:
All creditors were paid in full.

[00:26:33] Speaker 05:
Mr. Groves, the ANS was not paid on their claim, which they refused to file.

[00:26:39] Speaker 05:
Having failed to file it, we didn't have to pay them anything than what their lien interest was.

[00:26:43] Speaker 05:
Paid everybody in full, though.

[00:26:44] Speaker 05:
The deck, it would be a Rule 11 violation.

[00:26:48] Speaker 05:
I've never in my life.

[00:26:49] Speaker 01:
Did the shares of stock that your client, that she owned pass through the Chapter 13 plan?

[00:26:56] Speaker 05:
Yes, because it was 100% payment plan.

[00:26:59] Speaker 01:
And I gather there was no determination as to the real property at issue in terms of the lien.

[00:27:07] Speaker 05:
That was resolved in my client's favor, both clients' favor in the first action, that the lien only meant what it said.

[00:27:15] Speaker 05:
The reformation action was unsuccessful.

[00:27:17] Speaker 05:
Right, I understand that.

[00:27:19] Speaker 01:
But I mean, I'm saying the plan did not alter any of that, correct?

[00:27:23] Speaker 05:
No.

[00:27:24] Speaker 05:
Yeah.

[00:27:24] Speaker 05:
It's 100% payment plan.

[00:27:25] Speaker 05:
The debt relief action did not trigger Rule 13.

[00:27:29] Speaker 05:
It was when they filed the reformation and brought my client in that triggered the requirements of Rule 13.

[00:27:36] Speaker 05:
There's a safe haven.

[00:27:37] Speaker 05:
for a debtor's action under 713.

[00:27:39] Speaker 05:
So there was no, nothing about the debt relief action triggers this.

[00:27:42] Speaker 05:
It's the reformation action.

[00:27:44] Speaker 05:
363F plainly allows for the sale of property, not estate property, provided that such entity consents.

[00:27:53] Speaker 05:
Both owners consented to the sale of the property.

[00:27:56] Speaker 05:
We clearly could sell the property under 363F.

[00:27:58] Speaker 05:
The adequate protection in E is meant to protect not only the creditor, but the co-owner.

[00:28:06] Speaker 05:
And the co-owner never was afforded the opportunity to litigate this because they didn't bring it when they were supposed to.

[00:28:13] Speaker 05:
They didn't bring it by filing a proof of claim.

[00:28:15] Speaker 05:
They didn't bring it under Rule 13 in the litigation.

[00:28:18] Speaker 03:
They shouldn't be allowed to do that.

[00:28:20] Speaker 03:
Thank you, Mr. Allitt.

[00:28:21] Speaker 03:
We thank both counsel for their helpful arguments, and the case is submitted.

[00:28:26] Speaker 03:
And we are adjourned for the day.

[00:28:28] Speaker 01:
All rise.

[00:28:31] Speaker 01:
This court for this session stands adjourned.