[00:00:00] Speaker 04:
Okay, please be seated.

[00:00:02] Speaker 04:
And welcome all of you to this month's sitting of the Bankruptcy Appellate Panel for the Ninth Circuit.

[00:00:12] Speaker 04:
I'll begin with some introductions.

[00:00:13] Speaker 04:
I'm Judge Lafferty.

[00:00:15] Speaker 04:
I sit in the Northern District of California.

[00:00:18] Speaker 04:
To my right is my colleague, Judge Frederick Corbett, who sits in the Eastern District of Washington.

[00:00:24] Speaker 04:
To my left is my colleague, Judge Jennifer Nieman, who sits in the Eastern District of California.

[00:00:30] Speaker 04:
So welcome to your BAP arguments.

[00:00:32] Speaker 04:
I think I see some veterans out there.

[00:00:35] Speaker 04:
So I'll just make a couple of comments about the proceedings.

[00:00:39] Speaker 04:
Those of you who have done this before know that you get 15 minutes, and that's not a lot of time.

[00:00:45] Speaker 04:
So generally speaking, you don't spend that time well just reciting your brief.

[00:00:49] Speaker 04:
We've read the briefs.

[00:00:51] Speaker 04:
We've read the record.

[00:00:53] Speaker 04:
We've tried to digest what the trial court did.

[00:00:57] Speaker 04:
We've talked among ourselves.

[00:00:59] Speaker 04:
We formed some preliminary thoughts.

[00:01:02] Speaker 04:
We have some questions.

[00:01:04] Speaker 04:
The most important thing, the most effective thing that you can do as a litigant in this court is answer our questions.

[00:01:12] Speaker 04:
Because what we're trying to figure out

[00:01:15] Speaker 04:
is not whether somebody had a really good story that the judge really should have gone with.

[00:01:20] Speaker 04:
Was there a mistake?

[00:01:22] Speaker 04:
That's a completely different question.

[00:01:24] Speaker 04:
And what you really have to help us figure out is, if there was a mistake, what kind of a mistake was it?

[00:01:29] Speaker 04:
What can we do about it?

[00:01:31] Speaker 04:
And we're going to ask you different kinds of questions.

[00:01:34] Speaker 04:
Sometimes the questions go to, we're really not sure about something in the record, and you almost certainly know it better than we do.

[00:01:41] Speaker 04:
Sometimes we're not really understanding an argument.

[00:01:44] Speaker 04:
And we need you to help us clarify something or understand it better so you can get us over the line.

[00:01:51] Speaker 04:
In some ways, our questions are the best thing that could ever happen to you, because they'll tell you where we're not sure where you're coming from or where we haven't quite been convinced yet.

[00:02:01] Speaker 04:
And that's your chance to get us over the line and get us to the position you want us to be.

[00:02:08] Speaker 04:
The appellant goes first.

[00:02:11] Speaker 04:
The appellant will have the burden here.

[00:02:14] Speaker 04:
And accordingly, we traditionally ask the appellant if they'd like to reserve some time so you can think about that.

[00:02:19] Speaker 04:
And we'll make note of whatever you tell us.

[00:02:22] Speaker 04:
There is a clock, which I can see and I assume you can see a clock as well.

[00:02:26] Speaker 04:
And it's really on you to observe that.

[00:02:29] Speaker 04:
If you're in the middle of your best argument and you're at 4.59, we're not going to stop you.

[00:02:33] Speaker 04:
It's up to you.

[00:02:34] Speaker 04:
OK, we can let you know that you're getting close to or at or within your time.

[00:02:38] Speaker 04:
But it's totally your discretion.

[00:02:40] Speaker 04:
OK?

[00:02:41] Speaker 04:
All right.

[00:02:41] Speaker 04:
With that, let's call the first matter.

[00:02:44] Speaker 00:
Inray Moradi, Mack E. Nohore, Council for Appellants Fareed Moradi and Leora Moradi, Sanaz Sara Barelyani, Council for Appellee Moran Javaharian.

[00:03:01] Speaker 04:
Okay, do you want to reserve a little time?

[00:03:03] Speaker 01:
Just three minutes for rebuttal.

[00:03:05] Speaker 04:
Okay, three minutes, you got it.

[00:03:07] Speaker 04:
And again, we'll try to let you know if we see you invading it, but it's up to you.

[00:03:11] Speaker 04:
Okay, you bet, go ahead.

[00:03:13] Speaker 01:
Good morning.

[00:03:14] Speaker 04:
Good morning.

[00:03:16] Speaker 01:
This appeal turns on the fundamental of Rule 56 error.

[00:03:21] Speaker 01:
The record reflects genuine disputes of material facts as to the value, intent, and insolvency.

[00:03:28] Speaker 01:
Yet the Bankruptcy Court granted summary judgment by resolving those issues in appellee's favor, an error that requires reversal.

[00:03:37] Speaker 01:
There are four points that I would like to stress to the court.

[00:03:41] Speaker 01:
At first, the bankruptcy court failed to identify the absence of genuine disputes of material fact and instead resolved them adopting appellate position.

[00:03:49] Speaker 01:
Can I?

[00:03:49] Speaker 04:
I don't ordinarily stop people this early.

[00:03:52] Speaker 04:
Can I see if I can frame this in a way that see if we're agreeing about how this plays?

[00:03:58] Speaker 04:
Yes.

[00:03:58] Speaker 04:
The gist of this was the bankruptcy court was convinced there was a fraudulent transfer, right?

[00:04:03] Speaker 04:
Based on the timing of the filing of the deed of trust and that was really yet I mean, I think she referred to that as breathtaking right yes, okay What else do you think the record reflects you relied upon?

[00:04:16] Speaker 04:
Because that's one of them that is a classic badge of fraud for actual intent to defraud right so that when she was quite vocal about Were there others that you thought she she the record reflects she was relying on and if so what were they and why were that?

[00:04:29] Speaker 04:
Why was that wrong?

[00:04:30] Speaker 01:
She basically, her whole ruling was based on the timing of the fight.

[00:04:36] Speaker 04:
Would you say that's insufficient as a matter of law?

[00:04:39] Speaker 04:
Is this a factual question or a legal question?

[00:04:41] Speaker 01:
Well, there's a factual question in that the deed of trust, the main for $500,000, that was for a previous debt.

[00:04:51] Speaker 01:
And that deed of trust was prepared, notarized, and executed three years before the judgment was obtained in this underlying case.

[00:05:01] Speaker 04:
But if it wasn't recorded, it wasn't enforceable, right?

[00:05:05] Speaker 01:
Or not?

[00:05:05] Speaker 01:
Well, Your Honor, when you create a deed of trust for the indebtedness and give it to the creditor, they're the ones that hold in it.

[00:05:14] Speaker 01:
The debtors were not holding that in the trust.

[00:05:16] Speaker 01:
They signed it, they gave it to them, and it was up to them to file it.

[00:05:20] Speaker 01:
And since they found out about this lawsuit, they went ahead and filed it then.

[00:05:26] Speaker 04:
Was it in front of the bankruptcy court that the debtor had nothing to do with that?

[00:05:31] Speaker 04:
I don't remember that from the papers.

[00:05:32] Speaker 01:
Yes, we mentioned it.

[00:05:34] Speaker 01:
Was it in your papers?

[00:05:35] Speaker 01:
An oral argument to the judge, and I briefed also that this was actually executed and notarized.

[00:05:43] Speaker 04:
One of them, the 500,000, should not have been in the discussion, in your view.

[00:05:49] Speaker 01:
Correct.

[00:05:49] Speaker 01:
And then the second one was the interest on the same judgment, I mean on the same indebtedness that was from three years before the judgment.

[00:06:01] Speaker 01:
And that was also pursuant to the promissory note that was executed.

[00:06:04] Speaker 01:
That was just the interest on it.

[00:06:07] Speaker 01:
I do agree that it looks like that, you know, it was like, you know, some intended, but basically it was for the previous indebtedness that they had already executed a deed of trust.

[00:06:18] Speaker 04:
Well, in your argument maybe as well, and maybe I'm just glossing over it, that the intent we're measuring for UVTA purposes is the transferor, right?

[00:06:25] Speaker 04:
Not the transferee.

[00:06:28] Speaker 04:
The intent we have to measure for fraudulent transfer purposes is the transferor.

[00:06:34] Speaker 04:
Yes.

[00:06:35] Speaker 04:
Right?

[00:06:35] Speaker 04:
Not the transferee.

[00:06:36] Speaker 04:
What you're saying is the transferor had no intent here, whatever.

[00:06:38] Speaker 04:
The transferor had delivered the deed of trust.

[00:06:40] Speaker 01:
Yes.

[00:06:40] Speaker 04:
Right?

[00:06:41] Speaker 04:
So it couldn't have been, and the way you're framing it, it could not have been a fraudulent transfer.

[00:06:45] Speaker 01:
Correct.

[00:06:46] Speaker 01:
It's very telling that it was three years before.

[00:06:50] Speaker 01:
I keep saying just to show the court that it was not done with an intent to defraud the appellee here.

[00:06:59] Speaker 01:
And it was not done with intent to strip all the equity from the property.

[00:07:05] Speaker 01:
Okay.

[00:07:05] Speaker 04:
And just beating up one other point.

[00:07:06] Speaker 04:
If we're relying on Husky, I think the implication of Husky is that it's really only actual intent to defraud that would qualify.

[00:07:13] Speaker 04:
So constructive fraud

[00:07:15] Speaker 04:
allegation wouldn't fit under Husky?

[00:07:17] Speaker 04:
Correct.

[00:07:19] Speaker 01:
The court also misapplied Husky to this because Husky also talks about the intent.

[00:07:26] Speaker 01:
Intent cannot be just done by the court.

[00:07:31] Speaker 01:
It's a fact.

[00:07:34] Speaker 01:
It's a question of fact.

[00:07:35] Speaker 01:
They have to have a hearing and they have to have a trial.

[00:07:39] Speaker 04:
But you're going to do it by inference.

[00:07:41] Speaker 04:
Even at a trial, you're going to have to rely on it.

[00:07:43] Speaker 04:
People are not going to walk up and say, you got me.

[00:07:45] Speaker 04:
I did it.

[00:07:45] Speaker 04:
You're right.

[00:07:46] Speaker 04:
Let me give you all the money back.

[00:07:47] Speaker 04:
This is always done by inference, right?

[00:07:49] Speaker 04:
So whether it's done at trial or summary judgment, it's inferential one way or the other, correct?

[00:07:53] Speaker 01:
Correct.

[00:07:53] Speaker 01:
But if there's dispute as to the intent, then it's, you know, it's a material fact that's in dispute.

[00:08:01] Speaker 04:
The court... Well, maybe it's more a matter of credibility that the judge really ought to weigh differently?

[00:08:07] Speaker 01:
Well, again, according to the judge, the way... I mean, I'm sure you read the transcript.

[00:08:13] Speaker 01:
Yeah.

[00:08:13] Speaker 01:
It wasn't all that long.

[00:08:15] Speaker 01:
It was pretty quick hearing.

[00:08:16] Speaker 01:
She just basically discarded everything else.

[00:08:18] Speaker 01:
I mean, she didn't even discuss that, okay, the previous deed of trust that was given three years before the judgment, she didn't discuss any of that.

[00:08:27] Speaker 01:
And she just said, because it was filed very close to the judgment, it's fraud.

[00:08:33] Speaker 01:
And that was the gist of the argument that, you know, her basically the total, I mean, that's what she relied on.

[00:08:44] Speaker 01:
That was the only thing, the timing and nothing else.

[00:08:47] Speaker 03:
Yeah.

[00:08:47] Speaker 03:
Council, there's another issue that I want you to comment on.

[00:08:51] Speaker 03:
Yes.

[00:08:51] Speaker 03:
Your time is that the total of the deeds of trust was something a little over $800,000, the totals of the amounts secured by the deeds of trust.

[00:09:01] Speaker 03:
Let's just assume for a second that that was fraudulent and you could do that.

[00:09:05] Speaker 03:
The judgment that was determined to be non-dischargeable was over 2 million dollars.

[00:09:11] Speaker 03:
So for a fraud claim, don't you have to look at what the actual damages are here?

[00:09:16] Speaker 03:
Do we have it wrong?

[00:09:17] Speaker 03:
Is that if the debtor was correct that there was fraud, what was the amount of the fraud?

[00:09:25] Speaker 03:
Is that limited to the 800,000?

[00:09:27] Speaker 04:
Well, if the creditor is correct, there was fraud.

[00:09:29] Speaker 03:
Right.

[00:09:29] Speaker 03:
If the creditor is correct.

[00:09:31] Speaker 01:
Well, if you're going to go that route for the sake of argument, it should be actually limited to the $260,000 interest because the previous leader trust was executed before the judgment.

[00:09:44] Speaker 03:
Okay.

[00:09:46] Speaker 03:
But even if we looked at both, it should be limited in your position.

[00:09:52] Speaker 04:
That may be something your worthy adversary would want to comment on too, but I think that's a very good point.

[00:09:57] Speaker 01:
Yes, I mean, dischargability is a very, I think, draconian

[00:10:05] Speaker 01:
Because even if, let's say, this $500,000 wasn't there or the $800,000, they wouldn't get that much.

[00:10:15] Speaker 01:
And at the time that this was, actually, these were recorded, the exemption was only $100,000, $120,000.

[00:10:24] Speaker 01:
Later on, that was changed to $600,000.

[00:10:28] Speaker 01:
So at the time, they did not strip all the equity from the House.

[00:10:34] Speaker 01:
And that's basically our whole argument that the judge should have considered a logarithm.

[00:10:39] Speaker 04:
How about the argument that came up at the oral argument before the bankruptcy court that you really didn't respond to the Husky points one way or the other in your opposition to the summary judge motion.

[00:10:52] Speaker 04:
Do you want to tell us about that?

[00:10:54] Speaker 01:
I believe that was basically an oversight on my attorney on my behalf.

[00:11:01] Speaker 04:
What do we do with an oversight?

[00:11:04] Speaker 01:
What do we do with an oversight?

[00:11:08] Speaker 01:
Well, we did discuss it during the argument.

[00:11:12] Speaker 01:
It was referenced.

[00:11:14] Speaker 01:
The judge asked me about it.

[00:11:17] Speaker 04:
She asked you why didn't you talk about it, right?

[00:11:19] Speaker 01:
She just asked me why I wasn't going to talk about the brief and we discussed it orally and we brought it up to her attention because it was argued by them but still it was addressed and based on Husky was that she went ahead and issued her ruling.

[00:11:37] Speaker 04:
Right, so our problem is if you didn't address it in the

[00:11:40] Speaker 04:
pleadings and you it was addressed in the bankruptcy court to the extent the judge said why didn't you address it and you said well we didn't address it and the judge ruled on husky how do we give you any relief now but it it's not that if you know again if we hadn't discussed it during the oral argument you know that's another issue but you know you can bring up you know in oral argument I can argue what I have to do I have to look to see if the judge implicitly allowed you to do that because it's not so clear

[00:12:08] Speaker 01:
Yeah, I mean, the whole thing was basically five minutes, Your Honor.

[00:12:12] Speaker 03:
Did I misunderstand you?

[00:12:13] Speaker 03:
You said the plaintiff brought up Husky in oral argument?

[00:12:17] Speaker 03:
And you responded to that?

[00:12:18] Speaker 03:
Is that the first time that Husky was brought up?

[00:12:21] Speaker 01:
The Husky was brought up, well, it was in their moving papers, very short section, and then in the actual oral argument before the judge, it was brought up.

[00:12:31] Speaker 04:
I think if I can restate it and see if I've got this wrong, the argument from your worthy adversary was you didn't respond to the Husky points in your opposition to the motion for summary judgment, and the bankruptcy court noted that.

[00:12:43] Speaker 04:
Then there was discussion right that fair enough and what we do that discussions a whole other question, but okay, but that that's accurate right got it Okay, thank you.

[00:12:50] Speaker 04:
Okay.

[00:12:51] Speaker 01:
Go ahead um Basically you okay, you want to reserve?

[00:12:56] Speaker 05:
Okay, okay, all right.

[00:12:59] Speaker 05:
Thank you.

[00:12:59] Speaker 05:
Nothing like expedition.

[00:13:01] Speaker 05:
Thank you, okay?

[00:13:14] Speaker 02:
Good morning, Your Honors.

[00:13:15] Speaker 02:
May it please the court, Sanaz Berliani appearing on behalf of Mayor Angeva Harian, APA-Lee.

[00:13:22] Speaker 02:
This case is about debtors who recorded deeds of trust 15 days before a judgment in state court for 1.8 months.

[00:13:30] Speaker 03:
Was it the debtors or was it the secured creditor that recorded the deeds of trust?

[00:13:38] Speaker 02:
Well, the secured debtors which, well, the secured creditors which are,

[00:13:44] Speaker 02:
family friends or insiders of the debtor.

[00:13:49] Speaker 04:
So that's why I referenced that.

[00:13:50] Speaker 04:
That's another batch of fraud there, you'd say, right?

[00:13:52] Speaker 04:
Transfers insiders.

[00:13:53] Speaker 04:
Yes.

[00:13:53] Speaker 04:
Okay.

[00:13:53] Speaker 04:
Well, can we get to kind of, I don't want to dwell on your wonderful argument.

[00:13:57] Speaker 04:
Please do.

[00:13:57] Speaker 04:
We've got two big questions for you.

[00:13:58] Speaker 04:
You've got to hint one of them from Judge Corbett's excellent question before.

[00:14:03] Speaker 04:
Husky is, stands for the proposition that not all fraud under A2A has to be representational.

[00:14:12] Speaker 04:
There are things that can be done that are fraudulent that are actual fraud within the meaning of 523A2A.

[00:14:17] Speaker 04:
And one of them might well be an actually fraudulent transfer, right?

[00:14:24] Speaker 04:
What Husky doesn't tell us, it tells us you still have to have causation because that's part of A2A.

[00:14:31] Speaker 04:
It doesn't exactly tell us how that works.

[00:14:34] Speaker 04:
It does indicate that, well, for example, there could be causation if the fraudulent transfer was to the defendant, right?

[00:14:42] Speaker 04:
and then it sends its case back to have the court deal with that.

[00:14:46] Speaker 04:
One question I think we're all struggling with here is if you got a breach of contract, breach of guarantee judgment, okay?

[00:14:54] Speaker 04:
Two million some odd dollars.

[00:14:56] Speaker 04:
Thereafter, the debtor and good friends do some things that make it hard for you to collect that judgment.

[00:15:03] Speaker 04:
How was the money obtained by fraud?

[00:15:06] Speaker 04:
Help us with that, Parker.

[00:15:08] Speaker 04:
That's a real sticking point here.

[00:15:09] Speaker 02:
That's a great point.

[00:15:11] Speaker 02:
I hope there's a great answer.

[00:15:12] Speaker 02:
Yes, I have an answer for that.

[00:15:15] Speaker 02:
In regards to the obtained by element, that is resolved by Moogler versus Benning.

[00:15:22] Speaker 04:
Sorry?

[00:15:23] Speaker 02:
Moogler versus Benning.

[00:15:25] Speaker 04:
Was that in your papers?

[00:15:29] Speaker 04:
I can check my... You know, I'll tell you, and I'm not... This is just an observation, okay?

[00:15:36] Speaker 04:
It may not be because there was

[00:15:38] Speaker 04:
only a rather glancing reference to this problem in the appellant's opening brief, so you may not have focused on it.

[00:15:45] Speaker 04:
It's nonetheless a problem, we think.

[00:15:47] Speaker 02:
I don't know if the specific case of Moogler is in there, but I did reference, I believe, obtained by, and I could double-check it.

[00:15:53] Speaker 05:
So help us how that works.

[00:15:54] Speaker 05:
How does that work?

[00:15:55] Speaker 02:
Obtained by was determined by the Moogler case that it doesn't have to be a direct benefit.

[00:16:03] Speaker 02:
It could be an indirect benefit.

[00:16:04] Speaker 02:
Here, the indirect benefit was that

[00:16:07] Speaker 02:
the Maratis were able to still maintain control and possession of their home and their equity.

[00:16:14] Speaker 04:
Let's say, we'll come back to that in a minute.

[00:16:17] Speaker 04:
We still have to get to causation here, which I don't think that entirely addresses.

[00:16:20] Speaker 04:
But Judge Corbett's question was, okay, in the best of all worlds, from your perspective, what the debtor did was hide $800,000 of equity so you couldn't get it.

[00:16:31] Speaker 04:
Why is there a judgment for fraud for 2.2 million?

[00:16:34] Speaker 04:
How does that possibly follow?

[00:16:37] Speaker 02:
They looked at the fraudulent acts as being, under common law, fraudulent intent encompasses fraudulent or deceptive acts.

[00:16:48] Speaker 04:
But the damages on that measure could only have been the $800,000, right?

[00:16:53] Speaker 04:
How could you get to $2 million of a fraud claim from what you allege the debtor and friends did?

[00:17:00] Speaker 02:
Well, their actions just prevented any type of collections.

[00:17:05] Speaker 03:
$800,000 worth.

[00:17:05] Speaker 03:
$800,000, right.

[00:17:07] Speaker 03:
I mean, one of the elements for a fraud claim, you know, all the elements of misrepresentation and so forth, but at the end, you could have some fraudulent or misrepresentations, but it caused no damage.

[00:17:20] Speaker 03:
I mean, here, if the misrepresentations you base the claim on were in fact made,

[00:17:28] Speaker 03:
what damages did your client suffer and we see what they transferred away was about $800,000 worth of value.

[00:17:35] Speaker 03:
So why isn't the non-dischargeability judgment limited to that $800,000?

[00:17:45] Speaker 02:
I don't think that that was addressed.

[00:17:48] Speaker 02:
However, I would say that the $800,000 that was hindered and delayed

[00:17:57] Speaker 02:
The amount is besides the point.

[00:17:59] Speaker 02:
It's the act that's the most important.

[00:18:01] Speaker 02:
And so that opens the door for the full value to be seen as non-dischargeable.

[00:18:07] Speaker 04:
That kind of gets us back to causation, which is you had a perfectly valid pre-petition judgment for 2.2 million for breach of contract, breach of guarantee.

[00:18:19] Speaker 04:
Okay.

[00:18:19] Speaker 04:
That's clearly dischargeable.

[00:18:21] Speaker 04:
Okay.

[00:18:22] Speaker 04:
Bankruptcy gets, well, needs a trust to record it.

[00:18:24] Speaker 04:
Bankruptcy gets filed at that point.

[00:18:27] Speaker 04:
And I think this did come up during the hearing.

[00:18:28] Speaker 04:
It wasn't entirely resolved.

[00:18:30] Speaker 04:
I know it was resolved in another fashion by the actions the trustee took.

[00:18:35] Speaker 04:
At that point, you are no longer the plaintiff in a fraudulent transfer action, right?

[00:18:39] Speaker 04:
You can't do that.

[00:18:39] Speaker 04:
That's up to the trustee.

[00:18:41] Speaker 04:
So you can rely on it theoretically under Husky to allege that, yeah, there was fraud in this transaction, but it's a totally different transaction from the one that got you the judgment.

[00:18:52] Speaker 04:
We're struggling with the causation part.

[00:18:54] Speaker 04:
So I will suggest to you, even if the Moogler case is helpful, tell me how that got addressed and how the bankruptcy court resolved that in the hearing and the 14-page transcript that we got to read.

[00:19:07] Speaker 02:
So basically, if there is no competing inference, the court can look at the circumstantial evidence in order to determine if there's fraud.

[00:19:19] Speaker 04:
But that's whether there was a fraudulent transfer.

[00:19:21] Speaker 02:
right and that has nothing to do with the judgment you got again right well the fraudulent transfer the fraudulent conveyance allows for determination of fraudulent intent which is needed but with respect to the fraudulent transfer not with respect to the two million dollar judgment you got right those are two totally different things

[00:19:40] Speaker 02:
Well, it turns a possibly non-dischargeable judgment into a non-dischargeable.

[00:19:47] Speaker 04:
If there's causation.

[00:19:48] Speaker 02:
Yes.

[00:19:49] Speaker 02:
Well, that's what we're struggling with here.

[00:19:51] Speaker 02:
Okay, the causation, I would say, is looking at the circumstantial evidence, the badges of fraud, that there is fraudulent intent here.

[00:20:01] Speaker 04:
Okay.

[00:20:01] Speaker 04:
Well, again, one argument from this side is that

[00:20:05] Speaker 04:
That was there because the judge didn't have enough to get to a determination on summary judgment.

[00:20:10] Speaker 04:
That's one issue.

[00:20:12] Speaker 04:
But another issue that we're really struggling with here is where's the causation between the perfectly lovely $2 million commercial judgment that you got?

[00:20:19] Speaker 04:
They didn't pay a debt.

[00:20:20] Speaker 04:
They guaranteed it.

[00:20:20] Speaker 04:
They owe us $2 million.

[00:20:22] Speaker 04:
And the alleged later fraud that made that harder to collect.

[00:20:27] Speaker 04:
I mean, that's really, I mean, the second piece of this, if it's fraud, we have to tie that back to the judgment that you got.

[00:20:34] Speaker 02:
It's the act of recording the illusory notes and the timing.

[00:20:40] Speaker 03:
But the act of recording the notes caused your client to lose $800,000 worth of equity, not $2 million.

[00:20:47] Speaker 02:
Well, that potentially and more.

[00:20:50] Speaker 02:
He speaks about the homestead protection being 100,000 or 600,000.

[00:20:55] Speaker 02:
I think that's just besides the point.

[00:20:57] Speaker 02:
It just totally took away my client's right to collect whatever that amount would have been.

[00:21:03] Speaker 02:
He could have just sat on the property until the value went up and collected the full amount.

[00:21:08] Speaker 02:
So I don't think that you're just limited to that particular deed.

[00:21:13] Speaker 02:
It's the whole picture.

[00:21:15] Speaker 04:
And again, going back to the record,

[00:21:18] Speaker 04:
If you're right, that one could articulate a fraud connection in that, well, now you have a benefit of not having to pay my judgment.

[00:21:28] Speaker 04:
Was any of that discussed and resolved at the bankruptcy court level?

[00:21:31] Speaker 04:
Because if it was, I sure as heck didn't see it.

[00:21:34] Speaker 04:
No, I think that there was no evidence by the... So should we remand to have the judge consider that?

[00:21:40] Speaker 02:
Because this is an argument that I don't think was... I think the main issue here is that Judge Saltzman ruled properly because

[00:21:48] Speaker 02:
The Morales did not provide any evidence that would provide a competing inference.

[00:21:56] Speaker 02:
And so she had nothing to go by.

[00:21:58] Speaker 02:
And the only inference she had was the information that we provided.

[00:22:03] Speaker 02:
Mr. Morales provided a self-serving declaration.

[00:22:06] Speaker 04:
I'm getting at a different point, which is that this causation argument that we're raising now does not appear to have been discussed at all at the bankruptcy court.

[00:22:15] Speaker 04:
We raised it.

[00:22:16] Speaker 04:
You cite a case that you

[00:22:18] Speaker 04:
tell us would support the proposition that their later fraudulent activity could provide some kind of causation.

[00:22:26] Speaker 04:
That was not on anybody's radar when the judge was determining that this was a fraudulent transfer and Husky justified a judgment here.

[00:22:37] Speaker 04:
So if we have a problem with causation, would the right answer be to remand this and have the bankruptcy court hear your wonderful arguments about Moogler?

[00:22:48] Speaker 02:
I think that there's enough on the record for this panel to rule de novo here instead of remanding back to the bankruptcy court with Judge Saltzman.

[00:23:03] Speaker 04:
I don't think there's a necessity to... I've been interrupting you from the beginning, so you go ahead and finish your argument.

[00:23:08] Speaker 04:
Thank you for dealing with our questions.

[00:23:11] Speaker 02:
They're important to us.

[00:23:16] Speaker 02:
I guess at this point I wanted to just speak about the undisputed facts that compel a single inference.

[00:23:23] Speaker 02:
There was no other reasonable inference.

[00:23:25] Speaker 02:
As I mentioned under Nigel versus Sears-Robach, a self-serving declaration without evidence is not something that can be taken into consideration.

[00:23:35] Speaker 02:
So even if we went back to Judge Saltzman, there would be no additional evidence that would help her decide

[00:23:43] Speaker 02:
if there was a reason to go to trial or not.

[00:23:49] Speaker 02:
I think that that was the only thing.

[00:23:51] Speaker 02:
And in regards to Husky and obtained by, I believe that just going by the common law definition of actual fraud, that this is a very squarely put example of fraudulent

[00:24:13] Speaker 02:
action and in terms of not receiving a direct benefit, I think as long as this is something that Judge Thomas brought up on dissent in Husky as being possibly problematic, but

[00:24:33] Speaker 02:
They didn't rely on Moogler at the time.

[00:24:35] Speaker 02:
And now Ninth Circuit has Moogler that we can rely on.

[00:24:38] Speaker 05:
I'm sorry?

[00:24:40] Speaker 02:
The Ninth Circuit has Moogler that we can rely upon in terms of the obtained by.

[00:24:45] Speaker 02:
I don't think going back to the bankruptcy court would provide any different answer.

[00:24:54] Speaker 04:
Let me try a different version of what I think is Judge Corbett's question.

[00:24:57] Speaker 04:
Let's just say there weren't a bankruptcy, okay?

[00:25:00] Speaker 04:
and your client had a $2 million judgment and your client thinks that the debtor and friends squirreled away at $100,000 worth of value, what would your remedy be?

[00:25:13] Speaker 02:
Bring a fraudulent conveyance action in state court.

[00:25:15] Speaker 04:
And what would you get if you did that?

[00:25:18] Speaker 02:
Set aside the two.

[00:25:20] Speaker 04:
You might get a lien on the thing transferred, right?

[00:25:24] Speaker 02:
I would put on a lien, yes.

[00:25:26] Speaker 04:
Okay.

[00:25:26] Speaker 04:
Why do you get a $2 million fraud judgment here?

[00:25:30] Speaker 02:
I'm sorry.

[00:25:30] Speaker 04:
Well, if the remedy absent the imposition of a trustee, if the remedy would have been limited to the thing transferred, why is it any different here?

[00:25:39] Speaker 02:
I don't think that it would be limited to that.

[00:25:40] Speaker 02:
The homestead also... No, no, no, no.

[00:25:43] Speaker 04:
In terms of what you could get out of a fraudulent transfer, you'd get the thing back and you'd get a lien on the thing, okay?

[00:25:49] Speaker 04:
You wouldn't get a fraud judgment for $2 million under the UVTA.

[00:25:52] Speaker 04:
You just wouldn't.

[00:25:53] Speaker 04:
So why do you get one now?

[00:25:59] Speaker 02:
That's a fair point.

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

[00:26:01] Speaker 04:
Look, this is really hard.

[00:26:05] Speaker 04:
Fraudulent transfer cases are difficult.

[00:26:07] Speaker 04:
They're difficult at summary judgment.

[00:26:10] Speaker 04:
I mean, I've granted them in published decisions at summary judgment.

[00:26:14] Speaker 04:
I know it's doable, but it ain't easy.

[00:26:16] Speaker 04:
So we're taking this very seriously.

[00:26:18] Speaker 04:
And I want to thank you for the very constructive back and forth you've had with us.

[00:26:22] Speaker 04:
It's been very helpful.

[00:26:25] Speaker 04:
And you've got two minutes.

[00:26:25] Speaker 04:
I don't mean to interrupt you anymore.

[00:26:27] Speaker 04:
So if you have any final points, go ahead.

[00:26:29] Speaker 02:
No, I think everything was decided.

[00:26:31] Speaker 02:
I don't think you can necessarily parse a value just because values change and it was the fact that their fraudulent act should not allow them to benefit by just receiving a partial judgment versus the full.

[00:26:51] Speaker 02:
Thank you.

[00:26:51] Speaker 04:
Thank you very much.

[00:27:05] Speaker 01:
Just a couple of quick points.

[00:27:08] Speaker 01:
First of all, we did find the notes of judicial notice.

[00:27:10] Speaker 01:
I don't know if Your Honor saw that.

[00:27:14] Speaker 04:
Yeah, I think we'll deal with that in what we call the Dispo.

[00:27:18] Speaker 04:
Thank you.

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

[00:27:20] Speaker 01:
Basically, this goes to the point that

[00:27:24] Speaker 01:
Judge Corbett brought up regarding the amount of the, you know, let's say fraudulent activity.

[00:27:32] Speaker 01:
And what happened was subsequently this matter.

[00:27:36] Speaker 01:
After taking away the two deed of trust that were recorded, the trustee went ahead and

[00:27:48] Speaker 01:
appraised the property and found out how much equity is in it, deducted the homestead exemption, and whatever was left, my client paid it to the trustee.

[00:28:02] Speaker 01:
So basically, that's how much they would have received.

[00:28:06] Speaker 01:
That was $500,000.

[00:28:09] Speaker 01:
And another thing is,

[00:28:14] Speaker 01:
You got also if you look at fraudulent intent or fraudulent activity, what was my client's incentive in that?

[00:28:23] Speaker 01:
Because he's just like replacing one creditor for another.

[00:28:28] Speaker 04:
If you read the scholarship on this, the running question is,

[00:28:33] Speaker 04:
Are we really talking about preference claims and not fraudulent transfer claims?

[00:28:36] Speaker 04:
You get to that point, and that's your point, right?

[00:28:38] Speaker 04:
But the point is your client liked one creditor better than another.

[00:28:41] Speaker 03:
He's going to be out of the money anyways, regardless of who... Actually, couldn't your client have benefited by transferring that equity to a friend that would not have executed on their house so that they could stay there?

[00:28:55] Speaker 03:
Isn't there a benefit to having a friendly creditor as opposed to someone that you've been in litigation with and got a $2 million judgment and doesn't like you?

[00:29:03] Speaker 01:
Well, regardless of how you look at it, my clients were not going to lose their house.

[00:29:09] Speaker 01:
Even if the example, that's why we have the judicial notice to show that, you know, they did obtain a loan to pay whatever equity was in the house, so to keep the house.

[00:29:20] Speaker 01:
And right now, they have the house, they paid the 500,000, and they still have the lien, the two liens on the property.

[00:29:26] Speaker 04:
This isn't an 11, right?

[00:29:28] Speaker 04:
So there's no substantial contribution plan that this senator might have made.

[00:29:32] Speaker 04:
Because what happened here is they brought to light something that sure looks like a fraudulent transfer.

[00:29:36] Speaker 04:
The bankruptcy court said, well, I can't grant these folks that because they're not the trustee.

[00:29:41] Speaker 04:
The trustee woke up, threatened to sue somebody, and you settled it, right?

[00:29:44] Speaker 04:
I mean, you settle a fraudulent transfer claim is the essence of it, right?

[00:29:48] Speaker 01:
Yes.

[00:29:48] Speaker 01:
And my client basically, they gave away the homestead exemption.

[00:29:51] Speaker 05:
I get it.

[00:29:52] Speaker 05:
I get it.

[00:29:53] Speaker 05:
OK.

[00:29:54] Speaker 05:
I get it.

[00:29:55] Speaker 05:
Want to talk about causation at all?

[00:29:59] Speaker 01:
Well, I believe you already understand that we have a problem with causation because there was no fraudulent $2.2 million act here.

[00:30:13] Speaker 01:
And they cannot show that they lost that money.

[00:30:17] Speaker 01:
And again, the intent

[00:30:22] Speaker 01:
matters, that's a statement of fact.

[00:30:25] Speaker 01:
And there was no, I mean, the judge didn't even discuss that, you know, okay, 550,000 of this was actually done before the judgment.

[00:30:35] Speaker 01:
But she just put both of them together, and then she went ahead.

[00:30:39] Speaker 01:
And also, I don't think that even the $260,000 interest is fraudulent, because it was based on a promissory note that was already executed about, you know,

[00:30:52] Speaker 01:
six, seven years prior to this whole thing.

[00:30:57] Speaker 01:
And so they were just like trying to basically

[00:31:03] Speaker 01:
I mean, they had no control over the deed of trust, the 550 being recorded when, because the creditor had it.

[00:31:09] Speaker 04:
Well, can we put it differently?

[00:31:10] Speaker 04:
There's no evidence about that in the record.

[00:31:12] Speaker 01:
Well, there is.

[00:31:13] Speaker 01:
The deed of trust itself, it shows when it's recorded.

[00:31:17] Speaker 04:
No, no, no.

[00:31:17] Speaker 04:
There's no evidence in the record about who said what to whom between your client and their very good friends who didn't record a deed to trust for three years.

[00:31:24] Speaker 04:
Nothing about that, right?

[00:31:25] Speaker 04:
And maybe that's a problem, too.

[00:31:28] Speaker 01:
Right.

[00:31:30] Speaker 01:
I understand what you're saying.

[00:31:31] Speaker 01:
There was actually the document itself.

[00:31:34] Speaker 01:
It says that it was executed.

[00:31:36] Speaker 01:
And basically, you don't keep it yourself.

[00:31:38] Speaker 01:
If you're executing a deed of trust, what good does it do?

[00:31:41] Speaker 04:
Because remember, the recordation is a transfer.

[00:31:43] Speaker 04:
The recordation is a transfer.

[00:31:45] Speaker 04:
That would have been the fraudulent transfer of the recordation, not the giving of the thing.

[00:31:49] Speaker 01:
Right.

[00:31:49] Speaker 01:
But then again, you don't execute a deed of trust and have it notarized and then keep it.

[00:31:55] Speaker 04:
Well, unless you're really good friends with the person who gave it to you, which is kind of the problem here, right?

[00:32:00] Speaker 04:
I mean, that may all have to get resolved later.

[00:32:02] Speaker 04:
We'll see.

[00:32:03] Speaker 01:
Right, but there was no problem then when it was executed.

[00:32:06] Speaker 01:
There was no judgment.

[00:32:07] Speaker 01:
There was nothing.

[00:32:08] Speaker 04:
Well, that's maybe to be determined.

[00:32:10] Speaker 04:
Okay.

[00:32:13] Speaker 01:
All right.

[00:32:13] Speaker 01:
So go ahead.

[00:32:14] Speaker 01:
Yeah, okay.

[00:32:15] Speaker 01:
Thank you, Your Honor.

[00:32:17] Speaker 04:
Thank you for your very good arguments.

[00:32:18] Speaker 04:
We will take the matter under submission and we'll get you a written decision as soon as we can.

[00:32:22] Speaker 01:
Thank you.

[00:32:22] Speaker 04:
Thank you very much.

[00:32:23] Speaker 01:
Thank you.