[00:00:00] Speaker 00:
In Rea Howard, Brooke L. Bove, Council for Appellant Vincent Dwayne Howard, James R. Self, Council for Appellee, Ray Hodge and Associates LLC.

[00:00:30] Speaker ?:
All right.

[00:00:32] Speaker 02:
Spill when you get settled would you like to reserve time for a reply.

[00:00:37] Speaker 02:
How much.

[00:00:37] Speaker 03:
Five minutes.

[00:00:39] Speaker 02:
Five minutes it is may proceed.

[00:00:41] Speaker 03:
Thank you good morning my name is Brooke both I am here representing Vincent Howard.

[00:00:47] Speaker 03:
I do not have a lot to say that was not in our brief so to save my voice and to save us time I'm not going to go over too much.

[00:00:54] Speaker 03:
Obviously, I will answer any questions the panel has.

[00:00:58] Speaker 03:
I do want to just kind of explain what I think the theme is here, and I think that it's a lack of foundation.

[00:01:07] Speaker 03:
This is where the bankruptcy court erred.

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In my opinion, there was not a foundational evidentiary basis for any of its rulings on standing, on whether or not there was fraud, on whether or not there was justifiable reliance.

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And part of that is because the evidence provided by the appellee was not sufficient on its own to establish justifiable reliance or standing

[00:01:37] Speaker 03:
And I think that the Bankruptcy Court in its ruling also did not lay out, it skipped some steps, some foundational steps in coming to its conclusions.

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I know that the Bankruptcy Court did find that Mr. Howard was not a credible witness, and obviously the Bankruptcy Court is the trier of fact and allowed to make that conclusion.

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But I think even if you take away all of Mr. Howard's testimony, we're still left with a lack of foundational evidence to prove what RHA was trying to prove.

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They were the party bringing the case.

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They have the duty, therefore, to establish standing.

[00:02:19] Speaker 03:
They have the duty to establish evidence that supports their claims.

[00:02:24] Speaker 04:
But they had a contract.

[00:02:26] Speaker 04:
Correct.

[00:02:27] Speaker 04:
He admitted there was an agreement.

[00:02:29] Speaker 04:
He admitted that they had a proof of claim that was filed, which he didn't object to, and that stated that they had a claim against him.

[00:02:38] Speaker 04:
In his answer to the adversary complaint, he admitted there was an agreement between RHA and himself.

[00:02:44] Speaker 04:
The only agreement that was in existence was the contract to loan money or to give him the $150,000.

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That was the only parties that were at issue.

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So I'm struggling with the concept that you say he didn't put on any evidence when your client admitted that those facts were all true.

[00:03:07] Speaker 03:
So let me see if I can make this distinction.

[00:03:13] Speaker 03:
There's a difference between saying RHA is a party to the contract to the agreement is different than RHA is claiming that I owe them.

[00:03:24] Speaker 04:
Who else could have brought the action other than Ray Hodge or RHA?

[00:03:30] Speaker 03:
Just Ray Hodge.

[00:03:32] Speaker 04:
Okay.

[00:03:33] Speaker 04:
Ray Hodge is the sole owner of and managing operator of RHA?

[00:03:38] Speaker 03:
I believe so, but that's an alter ego issue.

[00:03:42] Speaker 04:
And all they had to do was have the real party in interest under Rule 17 bring the complaint, didn't they?

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If Ray Hodge was the real party in interest and he decided that RHA would be the named party, did he effectively

[00:04:00] Speaker 04:
ratify the transaction and allow the action to proceed in the name of RHA instead of Ray Hodge?

[00:04:07] Speaker 03:
But I think this is the problem.

[00:04:08] Speaker 04:
Like, it's a, that's the foundational... No, I think the problem is that your client took the money and didn't pay it back and never made any attempt to do that.

[00:04:16] Speaker 04:
And that's where we, what we're struggling with.

[00:04:18] Speaker 04:
Did he make false representations?

[00:04:21] Speaker 04:
Yes.

[00:04:22] Speaker 04:
Right?

[00:04:23] Speaker 04:
Were all the claims that were listed on Exhibit A to the agreement, were those in fact owned by his company?

[00:04:31] Speaker 04:
No.

[00:04:33] Speaker 04:
Right?

[00:04:33] Speaker 03:
I think some mistakes were made, but I don't think that amounts to fraud.

[00:04:37] Speaker 04:
But she didn't believe anything he had to say.

[00:04:41] Speaker 04:
She found him incredible, and she found him evasive, and she didn't believe his testimony.

[00:04:46] Speaker 04:
So his only defense was it was a mistake.

[00:04:50] Speaker 04:
It was accidental, and she didn't believe that.

[00:04:53] Speaker 02:
OK, but.

[00:04:54] Speaker 02:
As to the fraud, though, isn't a fraudulent omission of a material fact, doesn't that constitute a false representation?

[00:05:05] Speaker 03:
But that's, again, that's a fraudulent admission.

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It's not a mistake is different than a fraudulent omission.

[00:05:11] Speaker 02:
That's a question of fact.

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Well, he knew that, for example, there was one of the causes of action or clients listed on there, a claim that he would have that was assigned.

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But he'd never signed an agreement with that at that party that party was never his client But he identified that person as his client He knew that that person wasn't his client because he would have been a party to the engagement agreement, but there was never one made I Understand all that so take putting aside the

[00:05:46] Speaker 03:
in credibility of Mr. Howard.

[00:05:48] Speaker 03:
We're still left.

[00:05:50] Speaker 02:
But forget about his credibility, OK, whether that, whether.

[00:05:53] Speaker 02:
But he admits, doesn't he?

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And it's not indisputed at all that this one example I'm giving you is that he identifies, he says, I want to borrow money, and I'm giving you this collateral, this claim that I have based on this case that I own.

[00:06:09] Speaker 02:
But he knows that's not true because he didn't own that, because that client never engaged him.

[00:06:24] Speaker 03:
Again, I would have to go back and check the record, but it's my understanding that, again, that that was a mistake and that was a thing filled out by someone in his office that he didn't know.

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even if we accept all of that is true.

[00:06:37] Speaker 02:
What about that he had assigned some of these claims to another party?

[00:06:42] Speaker 02:
Somebody in his office wouldn't have signed that.

[00:06:44] Speaker 02:
That was another thing.

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He's saying, I have all these claims, but he's assigned them to somebody else.

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And he knew about the CFP action, and he had a duty to disclose that.

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It wasn't somebody in his office that needed to disclose that.

[00:06:58] Speaker 04:
He contracted

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to reveal this information, and to be honest, and the evidence, there's no evidence except his own testimony, which was rejected.

[00:07:09] Speaker 04:
And all the other evidence supported the fact that he didn't disclose it, and he admitted he didn't disclose it, that he had assigned the claims to other parties, Viraj, that were the ones that were listed on the exhibit.

[00:07:20] Speaker 04:
Those were all true facts.

[00:07:23] Speaker 04:
No dispute, unless you believed him, which the court didn't.

[00:07:29] Speaker 03:
I'm going to come back to what I put in our reply brief, which is that if the standard is justifiable reliance, if RHA justifiably relied on this, whether it's or not a justifiable reliance, that has to be established by more than just Mr. Hodge's testimony.

[00:07:45] Speaker 03:
It has to be decided by an expert.

[00:07:48] Speaker 04:
It has to be explained what is... Under California law, is justifiable reliance a necessary element when the cause of action is based upon fraudulent omission?

[00:07:59] Speaker 03:
I believe that's what the field versus man's case says.

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And I believe that fraudulent omission is different than an actual representation.

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And when you fraudulently omit under California law, I'm not sure that the justifiable reliance requirement or causation are necessary.

[00:08:17] Speaker 04:
That's the law.

[00:08:22] Speaker 03:
But is that enough, Mr. Hodges testimony, is that enough on its own?

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even if completely undisputed, is that enough to prove that he was justified in relying on it as a lender?

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If he's the actual lender, is it enough, is their foundation enough, an evidentiary foundation enough to support that sort of finding, that his reliance was justifiable without doing any sort of checking on his own, without doing any sort of

[00:08:54] Speaker 02:
So he should have disbelieved the contracting party?

[00:08:59] Speaker 03:
I think most people would ask for, would do more than just trust that an attorney is not going to lie, or that attorney is not going to be completely forthcoming, or that there's got to be some sort of investigation.

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And Mr. Hodge admitted he did no investigation at all.

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And again, we don't know what the standard is because there's no expert that testified either way on this.

[00:09:22] Speaker 02:
But it's a fact question.

[00:09:24] Speaker 03:
It is a fact question, but California case law holds that, and this is something that was cited by Mr. Hodge's responding brief, industry standards for underwriting litigation finance loans are not something the court can just assume.

[00:09:40] Speaker 03:
We can't just assume what a lender should be doing or what is required for a lender in those situations.

[00:09:50] Speaker 03:
Under it the case says understanding or underwriting standards require expert testimony if we're gonna if mr. Hodge is gonna establish that He just he was justified in relying on on this then he has to offer an expert testimony that says That he was justified.

[00:10:08] Speaker 04:
It's not reasonable reliance unless if there's not a representation

[00:10:12] Speaker 04:
because I've omitted to tell you material information that I promised I would reveal to you if I was aware of it.

[00:10:19] Speaker 04:
And everything that was omitted were things that Mr. Howard knew.

[00:10:26] Speaker 04:
He admitted he knew.

[00:10:27] Speaker 03:
Again, and that's going to come back to that section about the requirements for his disclosure requirements.

[00:10:39] Speaker 03:
That contract provision is vague.

[00:10:41] Speaker 03:
And that vagueness was not addressed by the Bankruptcy Court, and it was not addressed by Mr. Hodge or his counsel at the trial or in their briefing here.

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So when there is an ambiguity on what's required and what is happening, then that ambiguity has to be construed against the drafting party, which in this case was RHA, was Mr. Hodge.

[00:11:05] Speaker 02:
You now, about half a minute into your

[00:11:08] Speaker 03:
OK, I'll save for the reply.

[00:11:11] Speaker 03:
Thank you, Your Honor.

[00:11:11] Speaker 03:
Thank you.

[00:11:18] Speaker 01:
Good morning, Your Honors.

[00:11:19] Speaker 01:
I'm James South.

[00:11:20] Speaker 01:
I represent Appellee Ray Hodge and Associates LLC.

[00:11:25] Speaker 01:
Your Honor, Appellee submits the documentary evidence and testimony at trial of the witnesses that this matter completely supports the court's finding in favor of Appellee and the entry of the judgment in the amount

[00:11:37] Speaker 01:
that was in fact scheduled by Appellant in his schedules.

[00:11:40] Speaker 01:
An Appellee submits that the evidence supports the allegations of the complaint and the testimony of Appellee's manager, who by the way is Ryan Hodge.

[00:11:47] Speaker 01:
He's the son of Ray Hodge.

[00:11:49] Speaker 01:
The trial court issued a lengthy and detailed oral ruling setting forth the evidence supporting the judgment with findings that Appellant, as the court noted, was evasive and not credible.

[00:11:59] Speaker 02:
Council, any evidence?

[00:12:00] Speaker 02:
Could you go over for me, you know, what is the evidence that Mr. Hodge justifiably relied on Mr. Howard's representations?

[00:12:09] Speaker 01:
Mr. Hodge's testimony as to his reliance as the lender

[00:12:14] Speaker 01:
He knew Mr. Howard.

[00:12:16] Speaker 01:
He was actually a friend of his.

[00:12:18] Speaker 01:
Mr. Howard is a well-known and well-regarded trial attorney in Orange County.

[00:12:22] Speaker 01:
He relied on the statements made by Mr. Howard, but he had no reason not to.

[00:12:27] Speaker 01:
And Counsel for Appellant, I think, is trying to flip the issue, saying that it was up to Mr. Hodge and plaintiff to provide

[00:12:34] Speaker 01:
expert testimony as to reasonable reliance by a lender.

[00:12:38] Speaker 01:
In fact, it's the other way around.

[00:12:39] Speaker 01:
If Mr. Hodges, the lender, testified, I relied on these statements, I knew Mr. Howard, I knew that his stature in the community, and I didn't need to do any more.

[00:12:48] Speaker 01:
What more could he have done?

[00:12:51] Speaker 01:
Council suggested in her brief that he could have found this information out.

[00:12:56] Speaker 01:
This is completely contrary to what Field v. Mann says.

[00:12:59] Speaker 01:
which is the, I think the famous quote is, that if I tell you I have no liens on my house and I rely on that to make you a loan, the fact that I could have gone across to the courthouse steps and found that there were loans, that doesn't mean it's not justifiable reliance.

[00:13:13] Speaker 01:
So the fact is, he testified that he justifiably relied on those representations and I think he had a right to do so.

[00:13:19] Speaker 01:
I think the court clearly found that in her findings.

[00:13:22] Speaker 01:
The transcript that is attached to the excerpts of record make it quite clear.

[00:13:26] Speaker 01:
This was a very detailed understanding by Judge Smith.

[00:13:30] Speaker 01:
She went through the facts, she went through the testimony, and she went through all the elements of 523A2, and she made her decision.

[00:13:38] Speaker 01:
There were numerous representations, as the Court is aware, not only omissions, such as the $75 million CFPB lawsuit,

[00:13:47] Speaker 01:
the fact that his entire workers' compensation practice had been stolen right at the time the loan was made, that Mr. Howard was suing to get those cases back, which he never did.

[00:13:56] Speaker 01:
None of that was ever disclosed to Mr. Hodge.

[00:14:00] Speaker 01:
There were also intentional false representations, such as the representations of the cases listed and attached to the agreement, representations that he was going to use the funds and the loan proceeds for business expenses when, in fact, it was clear from the bank statements

[00:14:15] Speaker 01:
they were introduced to trial, that the funds were all used to pay his personal credit cards and personal expenses.

[00:14:20] Speaker 01:
Not only that, the fact that Mr. Howard continued these false representations well after the loan was made, after his firm had closed and he was now a full-time employee at another law firm, he was still sending out emails listing his firm as if Howard Law PC was still active.

[00:14:38] Speaker 01:
He was sending out case status updates

[00:14:40] Speaker 01:
as recently as I think it was two months before the bankruptcy filing saying still working still doing discoveries till trying to suss out a class size discovery ongoing there were no lawsuits this was a complete fabrication and this was designed to continue to

[00:14:57] Speaker 01:
So Mr. Hodge would believe everything was moving well.

[00:15:00] Speaker 01:
If he had known the truth, he could have taken action before the bankruptcy was filed.

[00:15:04] Speaker 01:
He would have had his civil remedies that he could have resorted to.

[00:15:07] Speaker 01:
In fact, he learned all about this only when the bankruptcy was filed.

[00:15:15] Speaker 01:
I think the issue of standing was clearly addressed in the colloquy with counsel.

[00:15:20] Speaker 01:
The contract was with Ray Hodge and Associates LLC.

[00:15:24] Speaker 01:
and Vincent Howard an individual.

[00:15:26] Speaker 01:
Clearly, Ray Hodge had the standing to file the lawsuit.

[00:15:30] Speaker 01:
They're a creditor.

[00:15:31] Speaker 01:
They hold a claim.

[00:15:32] Speaker 01:
They can bring an action for non-dischargeability.

[00:15:35] Speaker 01:
I have really nothing else to say.

[00:15:38] Speaker 01:
It's been fairly showed.

[00:15:39] Speaker 01:
I'm happy to answer any questions the court may have.

[00:15:42] Speaker 04:
I don't have any other questions.

[00:15:44] Speaker 01:
Thank you so much.

[00:15:44] Speaker 01:
Thank you very much.

[00:15:45] Speaker 02:
Reply.

[00:15:51] Speaker 02:
You have about four and a half minutes.

[00:15:53] Speaker 03:
Well, I don't think I need to take that.

[00:15:55] Speaker 03:
I think it's probably pretty clear where this is going.

[00:15:58] Speaker 03:
Again, I just don't think if we reread the court's ruling, I know it's very detailed, but I think it misses the foundational mark and it jumps to conclusions on contract, like considering the enforceability or the applicability or the ambiguities in the contract itself.

[00:16:16] Speaker 03:
If we're gonna base the ruling on the contract, then we better understand clearly what the contract says.

[00:16:21] Speaker 03:
And I think the court jumps to conclusions on that without laying that foundation.

[00:16:26] Speaker 03:
I think the court also, in its comments on standing, made several conclusionary jumps as well and cherry-picked parts of the agreement which to rely on and ignored other parts that would help describe, would help understand the standing issue.

[00:16:44] Speaker 03:
And I think that that lack of an expert that Mr. Howard maybe should have brought an expert to, but there

[00:16:55] Speaker 03:
The RHA was the party bringing the case they have the duty to bring them to bring the evidence and to lay the foundation All they brought was his own testimony, which says he relied on it, but that doesn't make his reliance justified under the law So with that I'll submit.

[00:17:10] Speaker 03:
Thank you very much.

[00:17:11] Speaker 02:
Thank you your honors Right case will be submitted.

[00:17:14] Speaker 02:
Thank you very much for your argument