[00:00:00] Speaker 04:
Enrae Winn, Donald Reed appearing for Appellant, J. Scott Bovitz appearing for Appellee.

[00:00:39] Speaker 02:
forestry when a research in time for a bottle just please uh... five minutes five minutes very good uh... thank you uh... good morning at least the court uh... i represent uh... linda nguyen the appellant uh... the matters in this appeal a relatively simple uh... as far as i'm concerned

[00:00:58] Speaker 02:
There was two good friends entered into what are nominally two joint venture agreements regarding two different properties in Florida.

[00:01:11] Speaker 02:
During the trial, my client testified she understood it to be one agreement where she could transfer net proceeds from one real estate project to the other.

[00:01:22] Speaker 02:
The bankruptcy court disagreed, held out there's two separate agreements.

[00:01:29] Speaker 02:
With respect to one property, there was pre-petition litigation in the state of Washington.

[00:01:33] Speaker 02:
That's called the Forbes property.

[00:01:35] Speaker 02:
That concerned a different joint venture agreement, a different.

[00:01:39] Speaker 03:
I'm not sure it was only about the one property.

[00:01:42] Speaker 03:
Wasn't that case in Washington about both properties?

[00:01:44] Speaker 02:
No, it was only about the Forbes property.

[00:01:46] Speaker 02:
And what it was was.

[00:01:48] Speaker 01:
How did it include the other property then in the calculation of the damages?

[00:01:52] Speaker 02:
It did not.

[00:01:53] Speaker 01:
So how did it get to 330?

[00:01:54] Speaker 01:
I'm sorry?

[00:01:56] Speaker 01:
How did it get to the judgment amount?

[00:01:59] Speaker 02:
Yeah, I believe that the trial judge took into consideration what she had invested total.

[00:02:08] Speaker 01:
But isn't that the downing property including?

[00:02:11] Speaker 02:
Well, the downing property was sold before the Washington.

[00:02:14] Speaker 01:
I understand.

[00:02:15] Speaker 01:
But as the judge found, the monies weren't

[00:02:19] Speaker 01:
depending on who want breach of contract or embezzled or defalcation or willful malicious.

[00:02:26] Speaker 01:
But that is the core of the other half that went into the judgment that was entered and amended.

[00:02:33] Speaker 02:
But it wasn't, the downing property was already sold.

[00:02:38] Speaker 02:
So the judgment was for the money that she had invested with Ms.

[00:02:43] Speaker 02:
Nguyen.

[00:02:44] Speaker 02:
And most of that judgment is actually for the attorney's fees.

[00:02:48] Speaker 02:
But the downing property had already been sold, and there was no damages per se about any sort of misappropriation.

[00:02:53] Speaker 03:
But the Washington State Court judge did include the amount that Ms.

[00:02:57] Speaker 03:
Bui invested in that first property, too, correct?

[00:03:02] Speaker 03:
Was it her total investment in both properties, right?

[00:03:06] Speaker 02:
I believe so.

[00:03:07] Speaker 02:
I'll have to double-check that.

[00:03:08] Speaker 01:
It had to be to then back out the money from Forbes to net down to the 89 before the attorney's fees and the interest and the cost.

[00:03:18] Speaker 03:
So it had to include with the math to it kind of got to work that way.

[00:03:22] Speaker 02:
Yeah, and into a certain extent that to the extent that the Washington court decided that then that is Contradictory to what the actual the what the Bankruptcy Court held because the Bankruptcy Court held that these were two different agreements I mean that was our argument at trial was that

[00:03:42] Speaker 02:
Miss Bowie received about 80% of her investment back.

[00:03:45] Speaker 02:
And that's exactly what the other partner.

[00:03:47] Speaker 01:
But by virtue of the litigation which compelled the sale.

[00:03:51] Speaker 01:
I mean, you're parsing it pretty thin there.

[00:03:54] Speaker 02:
Well, it's in the record.

[00:03:56] Speaker 02:
My client tried to do everything she could to avoid the litigation.

[00:03:59] Speaker 02:
She offered her a note.

[00:04:00] Speaker 01:
And that's not really relevant here.

[00:04:03] Speaker 01:
I mean, unless you can explain why.

[00:04:05] Speaker 01:
But I don't see how that is.

[00:04:07] Speaker 03:
You're only challenging damages at this point, right?

[00:04:10] Speaker 02:
Yeah.

[00:04:10] Speaker 02:
The issue of preclusive effect of that Washington court judgment as to the alleged defalcation and the willful malicious injury.

[00:04:17] Speaker 02:
Those are two different things.

[00:04:19] Speaker 01:
But you're not challenging the embezzlement and defalcation.

[00:04:24] Speaker 02:
I think the standard of review is too difficult for me to cross that bridge with a clear and convincing

[00:04:31] Speaker 02:
standards but then isn't the problem that you have this judgment which sets out the damages and that is really the universe of damages to work with right but the the actual wrongdoing that is non-dischargeable is the embezzlement or the defalcation I should say of the downing sale proceeds

[00:04:51] Speaker 02:
And that's only a tiny subset of what was actually going on in the Forbes action, because the Forbes action... But it sets the damages.

[00:04:59] Speaker 01:
I'm sorry?

[00:05:00] Speaker 01:
But the critical part is that it sets the damages.

[00:05:03] Speaker 01:
And that's established as a judgment.

[00:05:05] Speaker 01:
You don't even have to get to preclusion.

[00:05:07] Speaker 02:
But that judgment concerns different issues, though.

[00:05:11] Speaker 02:
It's not just the alleged defalcation.

[00:05:13] Speaker 02:
It includes her failure to timely sell the Forbes property.

[00:05:17] Speaker 01:
But if you have a breach of contract action, it comes up.

[00:05:21] Speaker 01:
In pre-petition, there's a judgment on the pre-petition contract.

[00:05:26] Speaker 01:
There are tons of cases that flip over into bankruptcy, which is 523, A2, A4, A6.

[00:05:34] Speaker 01:
And that contract damage is going to form the basis, ultimately, of the non-dischargeable judgment.

[00:05:40] Speaker 01:
But there's two contracts here.

[00:05:44] Speaker 01:
And one partnership.

[00:05:44] Speaker 02:
Defalication only happened under one contract.

[00:05:46] Speaker 02:
It did not happen under the second contract.

[00:05:49] Speaker 03:
To the extent that you're saying that, Judge... Are you saying the court found it did not happen under the second contract?

[00:05:54] Speaker 02:
Well, it couldn't.

[00:05:55] Speaker 02:
Yeah, the alleged defalication concerns the downing property regarding the downing contract.

[00:06:00] Speaker 04:
Can I see if I'm following you correctly?

[00:06:04] Speaker 04:
If, in your mind, what the state court did in Washington was really just come to a conclusion about the Forbes property, are you taking the position there was no determinations relevant in the state court in the Downing property?

[00:06:18] Speaker 04:
Correct.

[00:06:18] Speaker 02:
All right.

[00:06:19] Speaker 04:
So to the extent that Judge Albert, the bankruptcy court, believed it was operating on something that was preclusive, there was no such thing?

[00:06:25] Speaker 04:
Is that the idea?

[00:06:26] Speaker 04:
Yes.

[00:06:26] Speaker 04:
OK.

[00:06:27] Speaker 04:
With respect to Downing?

[00:06:29] Speaker 02:
Yes.

[00:06:29] Speaker 04:
OK.

[00:06:31] Speaker 04:
Tells me where you're coming from.

[00:06:36] Speaker 02:
Any further questions?

[00:06:38] Speaker 02:
I may reserve a call.

[00:06:41] Speaker 02:
Then the other issue was the amount of the attorney's fees.

[00:06:47] Speaker 02:
This was a one-day bench trial with another morning of argument.

[00:06:51] Speaker 02:
Ms.

[00:06:52] Speaker 02:
Bui filed a motion for attorney's fees for $230,000, I believe.

[00:06:58] Speaker 02:
In their fee application or in their motion for fees, they admitted that approximately one-third of those fees were essentially for matters unrelated to the adversary proceeding, contested matters in the bankruptcy case and

[00:07:15] Speaker 02:
Fees not incurred in the adversary proceeding so my argument is that those fees were not that portion of the fees were not properly awarded by Judge Albert Okay, all right and reserve the rest of your time.

[00:07:28] Speaker 03:
Thank you.

[00:07:29] Speaker 00:
Thank you Bovitz Morning morning, please correct

[00:07:45] Speaker 00:
We have great jobs.

[00:07:47] Speaker 00:
You have a great job.

[00:07:47] Speaker 00:
I have a great job.

[00:07:50] Speaker 00:
My job sometimes involves the back and forth of testimony in trial courts, and your job is to look at how the judge pieced that all together, how Judge Albert did.

[00:07:59] Speaker 00:
And I've been here before, and sometimes it's hard to figure out what the Bankruptcy Court was saying.

[00:08:05] Speaker 00:
Not here.

[00:08:06] Speaker 00:
here we have a long memorandum of decision that the judge entered on February 8th after a full day of testimony going through all of the details given the conclusions and then separate briefing

[00:08:19] Speaker 00:
and a separate long decision attached to the ultimate judgment explaining how did the judge get to the attorney's fees?

[00:08:25] Speaker 00:
How did the judge calculate the damages?

[00:08:28] Speaker 00:
So you can see into Judge Albert's mind.

[00:08:30] Speaker 03:
Well, there's one phrase I don't understand that Judge Albert used.

[00:08:33] Speaker 03:
He says he's going to award damages in parallel with the Washington State Court.

[00:08:38] Speaker 03:
Is that preclusion?

[00:08:40] Speaker 03:
Is that based on independent evaluation of the evidence?

[00:08:44] Speaker 03:
Is it both?

[00:08:44] Speaker 03:
What do you think he meant by in parallel with?

[00:08:47] Speaker 00:
He uses the phrase collateral estoppel in one of the briefs, and there were two determinations by the judge.

[00:08:55] Speaker 00:
One, 523A4, he says, whatever Washington State Court, which is King County, King County determined, that's all non-dischargeable in a 523A4.

[00:09:05] Speaker 00:
And then when determining attorney's fees, makes a separate statement with respect to being non-dischargeable.

[00:09:12] Speaker 03:
So he found that with regard to both properties, there was fiduciary defolcation or embezzlement or both.

[00:09:19] Speaker 00:
Both, yes.

[00:09:20] Speaker 00:
523A4, he says, one partnership, two properties.

[00:09:25] Speaker 00:
And in the one partnership, two properties, that was dealt with in King County.

[00:09:29] Speaker 00:
When King County litigation began, there was, in fact, one property had been sold, quote unquote, at the fire sale.

[00:09:36] Speaker 00:
One property just wasn't being rehabbed.

[00:09:39] Speaker 00:
So the money was being held.

[00:09:41] Speaker 00:
The property was being held.

[00:09:42] Speaker 01:
With respect to 523A4... So was that the defalcation?

[00:09:46] Speaker 01:
Was that the property wasn't being rehabbed?

[00:09:49] Speaker 00:
the defalcation was there were two parts of the defalcation in connection with this there were we tried to argue 523-2A misrepresentation with respect to qualifications and so forth but it was the failure to turn over the proceeds that were required in the two agreements that missed when pronounced when the appellant

[00:10:12] Speaker 00:
failed to turn them over, failed to disclose that, and all of the other misrepresentations collectively resulted in two parts.

[00:10:20] Speaker 00:
One, embezzlement with respect to money, and two, defalcation with respect to fiduciary duty.

[00:10:28] Speaker 00:
And the court said it's both.

[00:10:29] Speaker 03:
What's the defalcation with regard to the second property that wasn't sold, wasn't turned into cash until it was under the supervision of the Washington State Court?

[00:10:38] Speaker 03:
What's the defalcation with respect to that property?

[00:10:42] Speaker 00:
She didn't, she, the appellant, Ms.

[00:10:44] Speaker 00:
Nguyen, failed to do anything with it.

[00:10:46] Speaker 00:
She had promised initially four months, then six months, then it ultimately was two and a half years before it was sold under court supervision.

[00:10:54] Speaker 04:
So it's- Well, wasn't the testimony that she didn't finish her kitchen?

[00:10:59] Speaker 00:
Well, that is her testimony.

[00:11:01] Speaker 00:
Okay.

[00:11:02] Speaker 00:
Okay.

[00:11:02] Speaker 04:
But there's a lot of testimony- And Judge Albert said, I do not believe that testimony?

[00:11:07] Speaker 04:
Or how do I ignore that?

[00:11:09] Speaker 00:
No, the judge determined that he thought that the property had not been rehabbed completely.

[00:11:14] Speaker 00:
Okay.

[00:11:14] Speaker 04:
But the testimony that's on ... See, here's my problem, and I think it's not unlike Judge Ferris and Judge Sprakers.

[00:11:21] Speaker 04:
I'm not entirely sure what the Washington court did, and to the extent that Judge Alpert says I'm relying on that, I'm further confused.

[00:11:27] Speaker 04:
Let me ask a simple, I'm further confused.

[00:11:31] Speaker 04:
What is the rest here?

[00:11:33] Speaker 04:
What's the race here?

[00:11:35] Speaker 04:
What is it?

[00:11:36] Speaker 03:
R-E-S.

[00:11:37] Speaker 00:
What's the R-E-S here?

[00:11:39] Speaker 00:
The race is the partnership money that was invested.

[00:11:41] Speaker 04:
Not the properties themselves in which it was supposed to go.

[00:11:44] Speaker 00:
It was the money contributed by Ms.

[00:11:46] Speaker 00:
Bui, who's present.

[00:11:47] Speaker 00:
She put in $335,000 into that.

[00:11:50] Speaker 00:
And the partnership then took the money, that is, Ms.

[00:11:54] Speaker 00:
Nguyen took it, and she bought two properties.

[00:11:56] Speaker 00:
That's lovely.

[00:11:57] Speaker 00:
That's lovely.

[00:11:58] Speaker 04:
The result of that is she gets the money back.

[00:12:01] Speaker 04:
That's the judgment.

[00:12:02] Speaker 04:
She gets the amount of money that she had invested back.

[00:12:06] Speaker 00:
Right, plus the pre-petition interest at 12%.

[00:12:10] Speaker 04:
You don't see where the problems are?

[00:12:12] Speaker 04:
I mean, there's an obligation to invest money into a property.

[00:12:17] Speaker 04:
Yes.

[00:12:17] Speaker 04:
I'm not sure what happened with respect to the Downey property.

[00:12:19] Speaker 04:
We can come back to that if we need to.

[00:12:21] Speaker 04:
With respect to the Forbes property, your argument is, well, nobody did what they were supposed to do with this property.

[00:12:28] Speaker 04:
So the property becomes the rest as well, doesn't it?

[00:12:30] Speaker 04:
I mean, why is the right remedy just give her the money back?

[00:12:35] Speaker 00:
Well, because there was a six-year delay between then and now.

[00:12:39] Speaker 04:
What does that change?

[00:12:40] Speaker 04:
I mean, why is the remedy for a defalcation just give her the money back as opposed to assess damages?

[00:12:47] Speaker 04:
They had an agreement.

[00:12:48] Speaker 04:
I mean, as I read the agreement, it was a 75-25 split in the profits if there were any, right?

[00:12:54] Speaker 04:
And the agreement, did the agreement talk about what happens if the property simply isn't completed on time?

[00:13:00] Speaker 00:
It said that it would be completed within six months, ultimately.

[00:13:04] Speaker 00:
It wasn't completed within six months.

[00:13:07] Speaker 00:
The debtor failed to take the actions with respect to both properties.

[00:13:11] Speaker 00:
The first property that was sold took years.

[00:13:13] Speaker 04:
OK, so there's damages.

[00:13:15] Speaker 04:
So why are the damages just giving me the money back?

[00:13:18] Speaker 00:
Well, because there's a delay, delay of time.

[00:13:21] Speaker 04:
OK, I think you should move on.

[00:13:23] Speaker 01:
Why isn't that just breach of contract?

[00:13:25] Speaker 01:
I think it's the underlying point.

[00:13:27] Speaker 01:
How does that get to be embezzlement or breach of fiduciary without defalcation?

[00:13:34] Speaker 00:
Judge Albert determined from all the various statements made at the testimony at trial that Ms.

[00:13:39] Speaker 00:
Wen misled our client with my client.

[00:13:42] Speaker 01:
That sounds like 523A2.

[00:13:45] Speaker 00:
No, he didn't determine if I respect a 523.

[00:13:48] Speaker 01:
That's the point.

[00:13:49] Speaker 01:
I mean, that's piling on what Judge Lafferty is saying, is there's layers of confusion here that we can't align into a straight linear path to get to the judgment that was entered.

[00:14:03] Speaker 01:
Or otherwise, help us do that.

[00:14:05] Speaker 01:
Yes, that's a better way.

[00:14:07] Speaker 04:
We're finding this confusing.

[00:14:10] Speaker 00:
The deal, the whole TRAN concept is just on the side.

[00:14:14] Speaker 00:
That's just changes.

[00:14:15] Speaker 04:
Okay.

[00:14:15] Speaker 04:
For now, sure.

[00:14:16] Speaker 00:
Okay.

[00:14:17] Speaker 00:
That doesn't mean anything.

[00:14:18] Speaker 00:
Ms.

[00:14:19] Speaker 00:
Nguyen said to Ms.

[00:14:20] Speaker 00:
Bui, give me $335,000.

[00:14:23] Speaker 00:
We will, I will, Ms.

[00:14:26] Speaker 00:
Nguyen, on behalf of this partnership, this joint venture is the phrase she uses in her agreements that she drafted.

[00:14:32] Speaker 00:
I will go buy two properties.

[00:14:34] Speaker 00:
I will flip them right away.

[00:14:35] Speaker 00:
The initial testimony at trial is I can do it in four months.

[00:14:39] Speaker 00:
That was one of the exhibits provided with a Vietnamese phrase with respect to that.

[00:14:45] Speaker 00:
And she didn't, Ms.

[00:14:47] Speaker 00:
Nguyen.

[00:14:47] Speaker 00:
got married, did other things, and only after Miss Bowie started to complain was there any action with respect to either property.

[00:14:54] Speaker 00:
The properties were bought right away.

[00:14:55] Speaker 00:
They'd become partnership property under Washington law, even though they're in the name of Wynn.

[00:15:01] Speaker 00:
What happened then is after Miss Bowie continued to complain, Miss Wynn started to do something with respect to the first property.

[00:15:10] Speaker 00:
She sold it and then didn't tell.

[00:15:13] Speaker 00:
Ms.

[00:15:13] Speaker 00:
Bowie had been sold, lied to Ms.

[00:15:15] Speaker 00:
Bowie, admitted on the stand that she lied to Ms.

[00:15:17] Speaker 00:
Bowie with respect to that, and then took the money and paid Ms.

[00:15:21] Speaker 00:
Tran, who Ms.

[00:15:23] Speaker 00:
Bowie testifies, I don't know who Ms.

[00:15:24] Speaker 00:
Tran is or what's going on with respect to that, still has a property, still hasn't moved to redevelop it.

[00:15:30] Speaker 00:
Ms.

[00:15:30] Speaker 00:
Bowie continues to complain for another year.

[00:15:33] Speaker 00:
Nothing happens, and then more than a year after that, first sale, she sues in state court, says, I got a partnership, I put in 335,000 bucks,

[00:15:43] Speaker 00:
I don't have anything.

[00:15:44] Speaker 04:
Well, here's what ... Let me ask a really stupid question.

[00:15:47] Speaker 04:
It sounds to me like the remedy here was just kind of a rescission.

[00:15:51] Speaker 00:
I didn't hear you.

[00:15:52] Speaker 04:
It sounds like a rescission.

[00:15:53] Speaker 04:
You just get your money back.

[00:15:54] Speaker 04:
The Washington State Court remedy.

[00:15:56] Speaker 00:
Yeah.

[00:15:57] Speaker 00:
Well, that wasn't the complaint.

[00:15:59] Speaker 04:
State Court was ... No, I understand that part, but why isn't the remedy ... Doesn't it seem like a rescission remedy to you?

[00:16:05] Speaker 04:
I mean, is anybody assessing damages in the way you think you might?

[00:16:09] Speaker 04:
What might have happened with this property?

[00:16:10] Speaker 04:
What are the expectations?

[00:16:12] Speaker 04:
And why is there a difference between what actually got paid and what should have been paid?

[00:16:16] Speaker 04:
That's nowhere in that judgment, as far as I can tell.

[00:16:20] Speaker 04:
Help me out if it is.

[00:16:21] Speaker 00:
King County entered a partial summary judgment, then a full summary judgment, then a first partial judgment, then an amended final judgment, and went through the specific calculations and ultimately said, this was kind of a good thing for Ms.

[00:16:36] Speaker 00:
Nguyen.

[00:16:37] Speaker 00:
Hey, it was $335,000.

[00:16:39] Speaker 00:
I, the court, ordered the sale of this second property, you've got 240,000 bucks.

[00:16:45] Speaker 00:
I subtract that from 335, I get 89.

[00:16:48] Speaker 00:
But now, I add to that, because of this long delay of time, pre-judgment interest at 12%, it's high in Washington, but that's their state thing.

[00:16:57] Speaker 00:
Post-judgment interest, awarded $100,000 of attorney's fees, less a credit for a sanction that had been awarded, and that equals,

[00:17:05] Speaker 00:
roughly the same amount.

[00:17:06] Speaker 00:
It's not that the court said, then I'm going to award $330,000 for the money.

[00:17:11] Speaker 00:
He said, you only have $89,000 left to principal.

[00:17:16] Speaker 00:
And for that, here's your judgment.

[00:17:18] Speaker 00:
Now, before that amended final judgment was entered,

[00:17:22] Speaker 00:
this went and filed chapter seven we had to get relief from the stay annulment to go back and allow the court to do the calculations and then with all of those pleadings of the two hundred fifty nine pleadings that we admitted there are some thirty six exhibits uh... two hundred fifty nine exhibits including pleadings we had a lot of pleadings that went in washington where there was a lot of difficult back and forth but in the stage of pleadings the court

[00:17:48] Speaker 00:
went through some careful calculations.

[00:17:50] Speaker 00:
The amended final judgment actually has line by line how they came up with that amount of money.

[00:17:56] Speaker 00:
Then the testimony of the how and why.

[00:17:59] Speaker 00:
How'd you get the money?

[00:18:00] Speaker 00:
What did she do with it?

[00:18:01] Speaker 00:
What were the reasons for the delay?

[00:18:03] Speaker 00:
Did it matter that she was pregnant or not pregnant?

[00:18:05] Speaker 00:
That's a measure by Judge Albert who says, I determine, he determined, not an abuse of discretion based on the testimony, based on the exhibits, that that was a 523A4.

[00:18:17] Speaker 03:
The top line number that the Washington State Court began with, the 335, that's the amount that Ms.

[00:18:26] Speaker 03:
Bowie invested.

[00:18:27] Speaker 00:
That wasn't the amended final judgment.

[00:18:30] Speaker 03:
No, I understand.

[00:18:31] Speaker 03:
But the top line, he started from making the calculations, right?

[00:18:34] Speaker 03:
Yes, Your Honor.

[00:18:35] Speaker 03:
Okay.

[00:18:36] Speaker 03:
That to me sounds like the beginnings of a rescissionary remedy.

[00:18:39] Speaker 03:
Give her back the money she invested.

[00:18:40] Speaker 00:
Well, if that had been the prayer in connection with the state court, perhaps that would have been something.

[00:18:46] Speaker 00:
Maybe there wouldn't have been a bankruptcy.

[00:18:48] Speaker 00:
Maybe the judge would have made a determination in Washington for something different.

[00:18:53] Speaker 00:
But the judge in King County did not.

[00:18:56] Speaker 00:
Then the question is, of course, 523, that's the jurisdiction of the Bankruptcy Court.

[00:19:02] Speaker 00:
The court said 523A2A.

[00:19:04] Speaker 00:
Now, Bovitz, she made some misrepresentation, some boastful exaggerations about Ms.

[00:19:09] Speaker 00:
Wynn's skill.

[00:19:10] Speaker 00:
That's not enough.

[00:19:11] Speaker 00:
523A4 determined both breach of fiduciary duty, because there was a partnership, and the various obligations set forth in the agreements that Ms.

[00:19:20] Speaker 00:
Nguyen drafted were not provided for.

[00:19:23] Speaker 00:
That's a breach of that and its embezzlement.

[00:19:26] Speaker 00:
And then under 523A6, the court said, there is a difference for damages.

[00:19:30] Speaker 00:
523A6 is, well, how much money did you get from that first sale, and what did you do with it?

[00:19:36] Speaker 00:
From the first sale, which is the downing property,

[00:19:39] Speaker 00:
You took $156,000 or whatever the exact number is, I can't remember, and you distributed it to your creditor, Ms.

[00:19:48] Speaker 00:
Tran, and then you kept the rest and quote unquote loaned $10,000 to Ms.

[00:19:53] Speaker 00:
Bowie.

[00:19:54] Speaker 00:
and for that it's 523.86 and that's why the judge had us brief further and argue with respect to the calculation of damages after the big memorandum of decision the court says tell me how I should do that and we had fat briefs going back and forth in connection with this and in the end the court said

[00:20:13] Speaker 00:
got it and I'm going to determine 523A4 a hundred percent equal to Washington State and 523A6 a lesser amount and gave the calculation in connection with that.

[00:20:27] Speaker 03:
I want to ask you a question about the attorney's fees before you run out of time and that is

[00:20:32] Speaker 03:
One thing that gives me pause is the, I understand, it looks to me like the amounts you billed include work done on the objection to exemptions, which is set for trial in December.

[00:20:44] Speaker 03:
That hasn't been decided yet.

[00:20:46] Speaker 00:
Has not been decided yet, yes.

[00:20:48] Speaker 03:
Right.

[00:20:48] Speaker 03:
Why is it appropriate to include those services for an amount that's still pending in the fee award in this matter?

[00:20:56] Speaker 00:
Actually, in the objections to exemptions, they have been partially resolved.

[00:21:00] Speaker 00:
There were five different items, four of them been resolved.

[00:21:03] Speaker 00:
What remains is the homestead, and that's not done.

[00:21:06] Speaker 00:
The reason is the same reason Judge Albert said.

[00:21:08] Speaker 00:
It's almost impossible to break apart the exact work on a given moment as to whether it's working ultimately toward the 523 or toward the objections or exemptions or toward a resolution, consensual or otherwise.

[00:21:21] Speaker 00:
That's the reason, Your Honor, not because some work doesn't deal with all of those different aspects.

[00:21:26] Speaker 01:
So will you include future fees in that?

[00:21:29] Speaker 00:
I didn't hear you, sir.

[00:21:30] Speaker 01:
Will you include future fees in some form of manner of an attempted judgment, either to amend the 523 or within the order that you get as to the exemption?

[00:21:42] Speaker 00:
Well, I believe that Ms.

[00:21:44] Speaker 00:
Mui would want to reserve her right to ask for further fees.

[00:21:47] Speaker 00:
I don't know if she would, or she would authorize that to happen, or even in connection with this appeal.

[00:21:51] Speaker 00:
Depends, of course, on the result.

[00:21:53] Speaker 00:
In connection with that, I don't know, Your Honor.

[00:21:57] Speaker 00:
I appreciate it.

[00:21:58] Speaker 00:
It's an unusual and interesting case, and thank you for your time.

[00:22:06] Speaker 03:
Okay.

[00:22:09] Speaker 03:
Mr. Reed, you've got quite a bit of time.

[00:22:11] Speaker 03:
Eight minutes left.

[00:22:12] Speaker 04:
You were very cannily reserved a lot of time.

[00:22:18] Speaker 02:
Thank you, Your Honor.

[00:22:19] Speaker 02:
First, the parties did litigate the fraud issue, the fraud and the inducement of the two contracts where the total damages would

[00:22:30] Speaker 02:
The total amount invested would arguably be non-dischargeable, but Ms.

[00:22:37] Speaker 02:
Nguyen won on that issue.

[00:22:38] Speaker 02:
The judge did not find that as she committed fraud in the inducement.

[00:22:43] Speaker 02:
The only non-dischargeable or the wrongful conduct that gives rise to the non-dischargeable judgment is the defalcation or the misappropriation of the downing sale proceeds.

[00:23:00] Speaker 02:
The trouble is that's the wrongdoing and then making an entire judgment that largely sounds in restitution non-dischargeable is essentially overstepping and awarding more damages than the actual wrongdoing that warrants the non-dischargeable judgment.

[00:23:22] Speaker 03:
Do you have an argument against the smaller award he gave for the 523A6 component?

[00:23:28] Speaker 02:
Yes, because that's also, as your honor was saying, it starts with the $330,000 figure.

[00:23:38] Speaker 02:
And so that's the combined investment under the two agreements.

[00:23:42] Speaker 02:
And so from that point, the whole calculation of damages in the Washington case started with the total amount of the investment rather than just the one project on Downing Street.

[00:24:00] Speaker 03:
So you're saying the 523A6 award is also based on the Washington judgment as well?

[00:24:08] Speaker 02:
Yes, it is.

[00:24:08] Speaker 02:
And the wrongdoing under the 523A6 mirrors the wrongdoing under the 523A4, which was the misappropriation of the downing of proceeds.

[00:24:19] Speaker 02:
So for that reason, I don't think the Washington court decided the same issue.

[00:24:27] Speaker 02:
as Judge Albert, as far as its calculation of damages, as far as the narrow scope of wrongdoing.

[00:24:35] Speaker 04:
Where I don't know that I'm really tracking what's going on here so well is if—was there an embezzlement claim that Judge Albert acknowledged with respect to the first transaction?

[00:24:49] Speaker 02:
As far as the Downing Street, I'm not sure what you're pointing at.

[00:24:52] Speaker 02:
That's what I mean.

[00:24:53] Speaker 02:
Yeah, the Downing Street, right.

[00:24:55] Speaker 02:
She sold the property.

[00:24:56] Speaker 02:
She was supposed to divvy up the property.

[00:24:59] Speaker 04:
Let me just tell you where I'm having a problem with that.

[00:25:02] Speaker 04:
Money is given to your client.

[00:25:05] Speaker 04:
Your client uses that money and maybe something else to buy the property.

[00:25:10] Speaker 04:
Right, or not?

[00:25:12] Speaker 04:
Is there something left over after they bought the property?

[00:25:15] Speaker 04:
No.

[00:25:17] Speaker 04:
Okay, so if embezzlement is wrongfully taking money that's been entrusted to you, it kind of sounds like a client did what she's supposed to do, she bought the property.

[00:25:27] Speaker 04:
Right, so after the fact, I mean, I'm having trouble figuring out why there's an embezzlement claim for what happens after the property is sold.

[00:25:35] Speaker 04:
I mean, the money wasn't trusted.

[00:25:37] Speaker 04:
It was used the way it was supposed to be used.

[00:25:39] Speaker 02:
Correct, and that's why Ms.

[00:25:41] Speaker 02:
Nguyen prevailed on the 523A2.

[00:25:42] Speaker 04:
Well, no, I mean, I'm struggling with why that's even, why that's embezzlement.

[00:25:47] Speaker 04:
I mean, if you, look, if later on you do something bad, it may well be a defalcation because you had a duty under the agreement to pay the money out.

[00:25:55] Speaker 04:
I'm struggling with the embezzlement piece of that.

[00:26:00] Speaker 04:
If Judge Albert relied on that, I don't know what help that is.

[00:26:07] Speaker 04:
I guess it's my question.

[00:26:09] Speaker 02:
Yeah, I don't know.

[00:26:11] Speaker 02:
I struggle to see that too.

[00:26:13] Speaker 04:
Okay.

[00:26:14] Speaker 04:
On the A6 part, there had to be something more than just there was a right under a contract to be paid a profit, right?

[00:26:22] Speaker 04:
That's effectively a contract claim.

[00:26:24] Speaker 02:
Yeah, 523A6 requires an intentional tort, so to speak.

[00:26:29] Speaker 02:
And yeah, I think he was piggybacking on the alleged defalcation.

[00:26:36] Speaker 02:
OK, got it.

[00:26:37] Speaker 04:
OK, yeah, got you.

[00:26:38] Speaker 04:
OK, thank you.

[00:26:39] Speaker 02:
Yeah.

[00:26:40] Speaker 02:
And then as far as the attorney's fees,

[00:26:45] Speaker 02:
Miss Bowie is entitled to attorney's fees under the contract, right?

[00:26:50] Speaker 02:
But the contract's only as to the joint venture agreements.

[00:26:53] Speaker 02:
Anything ancillary regarding the exemptions and objection to exemptions in the bankruptcy case, that doesn't arise under the contract.

[00:27:00] Speaker 02:
And I don't think those fees were properly awarded.

[00:27:05] Speaker 02:
Unless the court has or the panel has any other questions.

[00:27:07] Speaker 02:
I'm all set.

[00:27:07] Speaker 02:
Thank you very much.

[00:27:08] Speaker 04:
Thank you very much.

[00:27:09] Speaker 04:
Thank you.

[00:27:09] Speaker 03:
OK, thanks to both of you.

[00:27:11] Speaker 03:
The matter's submitted.

[00:27:12] Speaker ?:
Yeah.