[00:00:17] Speaker 01:
Good morning, Your Honors. Excuse me, I'm a little bit hoarse this morning. May it please the Court. Ray Ayers of Sanders Roberts on behalf of Appellants Candace and Christopher Charles Williams, successor in interest to Thaddeus Wims, who is deceased, unfortunately.

[00:00:33] Speaker 03:
Would you like to reserve a little time?

[00:00:35] Speaker 01:
I would. I'd like to reserve seven minutes.

[00:00:36] Speaker 03:
Seven minutes. You got it. Okay, thank you.

[00:00:38] Speaker 01:
And I know there are a lot of facts here and a lot of issues. I think it boils down to a couple of big ones, but I'm happy to answer questions to make sure we focus on the questions that the court has rather than just repeating arguments.

[00:00:50] Speaker 03:
You know, we're starting to sound like the Supreme Court where the advocates now give about two minutes and then, you know, Justice Thomas goes off. So thank you.

[00:01:01] Speaker 01:
In our view, Your Honor, this case boils down to whether judgment interest constitutes prejudice for purposes of latches. The court here found that it does. We submit that as a matter of law, it does not because judgment interest is a feature, not a bug, as we mentioned. And as part of the panel knows, N. Ray Hamilton held that very same thing, that it's not just to incentivize the debtor to pay.

[00:01:32] Speaker 01:
It's also to compensate the victim of the fraud. So here there was never anything paid on the fraud judgment.

[00:01:40] Speaker 01:
And we think that the court's ruling would be a perversion of the equity that latches is supposed to provide in that it would allow the debtor who didn't list the debt, who paid no money to delay and claim financial hardship or the passage of time to avoid payment entirely. Meanwhile, the harmed party has passed away during the course of this proceeding. So in our view, Your Honors, the right outcome should have been a summary judgment in favor of the appellants because latches as a matter of law cannot constitute – So latches is – there's two issues here.

[00:02:21] Speaker 04:
One, latches is a very fact-intensive determination. So – It's extremely rare, if impossible, to make that determination on a summary judgment motion, right?

[00:02:36] Speaker 01:
We thought it certainly would be here as to the debtor who had the laboring or on that issue as an affirmative defense. Here, we do think it would have been appropriate for appellants because even though it's… Because you're saying there's no prejudice.

[00:02:53] Speaker 04:
As a matter of law, there's no prejudice. Correct. Prejudice. even with the delay, because accrual of interest is not prejudice.

[00:03:02] Speaker 01:
Exactly. As far as I know, all the 50 states and the federal government require interest. It's a public policy. It's in the California Constitution.

[00:03:10] Speaker 01:
As the court noted in N. Ray Hamilton, when it decided that the court could not reduce the interest because it thought that the interest was too high, the court here went even further and said – I'm going to use my equitable authority not just to reduce the interest rate or change the future interest. I'm going to eliminate the debt entirely. And we think that's wholly inappropriate use of the latch's power.

[00:03:34] Speaker 04:
All right. So let me back up a little bit even farther because let's talk about latches. Now, we have the Beatty case, which says that latches can be applicable in a 523A3B case, which is what this is with respect to the claims of a two, four, and six, fraud, breach of fiduciary duty, and malicious injury.

[00:04:00] Speaker 04:
But the court made a sweeping determination that it also applies to your 523A19 claim.

[00:04:06] Speaker 01:
That was a secondary issue.

[00:04:09] Speaker 03:
I think we've got some worries about the summary judgment aspect of this.

[00:04:13] Speaker 02:
I understand that.

[00:04:14] Speaker 03:
Okay, so please address those for us.

[00:04:15] Speaker 02:
So it does in his declaration say that – this will create a financial strain on him. Whether that needs to be fully, we need to have a full trial or evidentiary hearing on that issue, then that would be the issue that needs to go to trial. Was there prejudice that was caused?

[00:04:37] Speaker 03:
Here we are.

[00:04:38] Speaker 02:
But I think that we have an absolute change of position, a substantial change of position, $600,000 of interest that it is accrued from an individual that filed for bankruptcy. We know that he is an advanced age. The judge has observed him under examination where both counsel had the ability to do that. He makes those observations.

[00:05:06] Speaker 04:
It would be a finding of fact, right?

[00:05:11] Speaker 03:
That's great if you have a trial.

[00:05:12] Speaker 02:
So is it reversible error if he saw that? Because he's going to see the same thing again. He's going to see this individual.

[00:05:17] Speaker 00:
Doesn't he have to summary judgment take all reasonable inferences in favor of the non-movement? Isn't that just part of the summary judgment process?

[00:05:28] Speaker 02:
It is.

[00:05:30] Speaker 02:
And that's where I go back and say the amount, as the court said, the amount of time Plus, the amount of interest that accrued is prejudicial. It is a changed circumstance from where he was in 2002 to where he is when this adversary proceeding gets filed in 2023.

[00:05:54] Speaker 02:
It is a significant amount.

[00:05:55] Speaker 00:
That sounds, again, to my point, that sounds like prejudice on collection.

[00:06:01] Speaker 00:
Right? Not the dischargeability.

[00:06:04] Speaker 00:
And the state of California said that...

[00:06:08] Speaker 00:
Those creditors who renew can't continue to collect. It's not prejudicial under state law. Clearly, right? Because the debt is still out there. There is no time limit saying you cannot renew after that period, which we're here in. So why is it prejudicial for discharge purposes?

[00:06:28] Speaker 02:
I think it's prejudicial just under the standard of latches.

[00:06:33] Speaker 02:
Right.

[00:06:33] Speaker 00:
So latches just says if I had known I would have paid it more. I paid it earlier.

[00:06:39] Speaker 02:
Absolutely. If you know that you have a debt.

[00:06:42] Speaker 00:
But your client didn't know he had a debt and he didn't do anything.

[00:06:45] Speaker 02:
And that's what because the latches. No, because he thought he got discharged in his bankruptcy.

[00:06:53] Speaker 00:
But maybe it didn't. And he didn't give notice.

[00:06:56] Speaker 04:
And doesn't he have the same right to file a lawsuit to get this determined because he knows his brother's out there. you know, wanting to collect and that money is accruing.

[00:07:06] Speaker 02:
No, I don't know that the evidence shows that his brother wanted to collect.

[00:07:10] Speaker 00:
He renewed it. Isn't that, again, on summary judgment, wouldn't it be a reasonable inference that if a creditor continues to renew a judgment, for summary judgment at least, there was an intent or desire to continue to collect?

[00:07:25] Speaker 02:
I think that the evidence also shows that he believed the judgment was discharged when he had when he filed in opposition to the renewal in 2020.

[00:07:37] Speaker 03:
But, I mean, the worry here, not to interrupt you, is that it kind of sounds like we're weighing a bunch of stuff, which doesn't sound like summary judgment to us.

[00:07:45] Speaker 02:
I don't think – I think it came down to the unreasonable delay coupled with the amount of interest.

[00:07:52] Speaker 03:
Yeah, and any of those work for our purposes, okay? I mean, we're worried that what happened here is there was some weighing, there was some credibility determinations, which are off the table at summary judgment.

[00:08:03] Speaker 02:
Well, I think latches is an abuse of discretion, and I think that the courts have – Yeah, and how do you – And re-judgment review is de novo.

[00:08:13] Speaker 04:
Yes. Thank you. That's where we are.

[00:08:15] Speaker 02:
No, I think that whether it applies is de novo, but whether latches was – the finding of latches was appropriate is an abuse of discretion. It's whether or not it should have been applied, whether it could be applied. That's where – that's what's de novo. But the application of it, that is discretion. That's an abuse of discretion. Oh, boy.

[00:08:42] Speaker 03:
We're talking about Rule 56. We're talking about everything in Rule 56 is de novo. I just am not seeing it going there.

[00:08:49] Speaker 02:
I think that it says courts apply a hybrid standard of review to grants of summary judgment on the basis of latches. Certain aspects of the district court's decision are reviewed de novo – including whether Latches is available as a potential defense to a particular kind of action and whether the district court inappropriately resolved and disputed material facts in reaching its decision. It says, but the application of the Latches doctrine to the facts is reviewed for abuse of discretion.

[00:09:19] Speaker 04:
I would assume that there's no disputed facts, according to your standard. All right. Go ahead.

[00:09:27] Speaker 02:
And the undisputed fact is, is that there is a 20-something-year delay with $600,000 worth of interest that is accrued that is now this man that believes it's discharged is suddenly saddled with. And I think that that is extremely precious.

[00:09:47] Speaker 03:
Suddenly is reading an awful lot into it, but go ahead. What's that? Suddenly is reading an awful lot into this situation, but you go ahead.

[00:09:52] Speaker 02:
Well, if they're not – if you don't believe that you owe this –

[00:09:57] Speaker 03:
We're talking about belief here, okay? How is that possibly relevant for summary judgment?

[00:10:04] Speaker 03:
He believes one thing. The other side believes something else. You try the issue. You get witnesses on there. You believe one. You don't believe the other. You resolve it. How does that possibly fit within summary judgment? I'm not trying to be funny. That's the challenge we have.

[00:10:20] Speaker 02:
We're trying to figure that out. I guess the difficult part that I find is that when I look at this and I'm sitting there saying, How is this amount of debt, which is a substantial amount of debt.

[00:10:32] Speaker 03:
No doubt.

[00:10:32] Speaker 02:
Right? No doubt. All of a sudden, in your later years, and it's now – you're now liable for something that you did not think was – that you were liable. So you made no plans, no retirement plans for – or you didn't – and you're planning for your retirement. You didn't plan for that. And all of a sudden, you've got to pay it.

[00:10:57] Speaker 00:
I think that that's – I think that that is – That's why either party can bring the action to the court's attention.

[00:11:05] Speaker 00:
Either party can file the action to determine dischargeability. The problem, as my colleagues are saying, is both parties have a belief that is inherently opposite.

[00:11:16] Speaker 02:
And they could have brought that complaint.

[00:11:17] Speaker 00:
And you could have too.

[00:11:21] Speaker 02:
You're right. Any party could have, but there wasn't. And they're the ones that are collecting, trying to collect on this debt without really doing anything, like enforcement actions for this very long period of time. And then when an actual action is taken, there is a dispute of that. So had it been done before, he's sitting on his rights.

[00:11:50] Speaker 02:
There's no judgment debt or examination. There's none of this other stuff that would have said, hey, this guy is – really coming after me to enforce a judgment, I need to file an adversary proceeding. This is a family dispute. There's all kinds of stuff that is going on there. And I think that it's for him to have had the burden of bringing an adversary proceeding doesn't negate or the fact that he could have does not negate the fact that the appellant didn't bring one.

[00:12:22] Speaker 02:
And we're 23 years later, and we have this huge sum of money that is due.

[00:12:27] Speaker 03:
Okay. You're about an hour – I'm sorry, about a minute over. So unless you have one last brilliant remark, I think we'll move on and go back to the – Well, you have. I mean, you've both done a wonderful job. Thank you. Thank you very much.

[00:12:44] Speaker 01:
So I'll just briefly deal with the A-19 issue. We think Irigoyen clearly – lays out the standard there. I disagree respectfully with Council's analysis. We think that this panel is uniquely qualified to be able to determine what Irigoyen stands for with respect to the need for dischargeability proceeding for A19. With respect to latches under A3B, we do agree that it is available in very limited circumstances. And I was thinking as I was listening to Council, it reminded me of a Seinfeld episode where George Costanza said, it's not a lie if you believe it.

[00:13:20] Speaker 01:
And to me, it seems pretty crazy that the debtor's subjective belief that he doesn't owe the money means he doesn't owe the money. That just seems Kafkaesque to me.

[00:13:31] Speaker 01:
We don't think that.

[00:13:32] Speaker 03:
Well, could you conclude that no jury could reasonably believe that? Absolutely.

[00:13:36] Speaker 01:
That's the point. That's my point. And that's the other issue here is there shouldn't be going back to why is this judgment not enforced? This gentleman had a home in Del Mar, California worth almost $2 million. I have a declaration in the record. that I submitted because I had it appraised. I got a litigation guarantee before we went to foreclose. The house was in an irrevocable trust in his daughter's name. His other brother was the trustee and put it back into his name in 2019. So the idea that Mr. Thaddeus Williams, who doesn't have the wherewithal, who lives in Virginia, is supposed to be hiring attorneys to do all these things for all these years, and because he didn't, the debtor shouldn't have to pay, strikes me as not equitable.

[00:14:18] Speaker 01:
And, in fact, it took an attorney who was perhaps willing to take the case on a contingent fee basis in order to move the matter forward at all. But we don't want to get into the facts.

[00:14:30] Speaker 01:
If you look at the summary judgment papers, the parties have had plenty of time to do discovery and to introduce all of the arguments they want. There is no argument of financial hardship as such. There's no argument that I didn't plan. There's no argument that I would have done this. That's simply not in the record. That's attorney argument. The only thing that's in the summary judgment papers and the supplemental briefs and the supplemental discovery that was submitted is that interest is unfair because it's so large. It's $620,000.

[00:15:00] Speaker 01:
And if there was a concern about ability to pay, the fact that there's a house out there worth 1.7 belies that concern. And so we don't think it's appropriate to send this back for a trial on the issue of all the the medical elements and the financial issues that that Mr. Williams has allegedly incurred. We don't think that's even part of the analysis here, because as a matter of law, interest cannot be prejudicial.

[00:15:29] Speaker 01:
And so he never said he couldn't pay it. He said it would be a hardship. And so and we cited to Beatty, which says, you know, and particularly noting that the debtor has the burden of proof here. And he says where the party has based his latches argument. of prejudice almost entirely on a contention that is without legal support and has not, despite ample opportunity, adduced any specific evidence of harm due to the unavailability of evidence or the like, remand for further factual consideration would be futile.

[00:16:02] Speaker 01:
It would be inappropriate after discovery has been done, and there's been no evidence of anything that was done to change position on finance. I don't want to get into what the discovery has shown, but there's nothing like that out there. The issue is simply, and counsel actually said it, which is it's unfair because of the passage of time and the accrual of interest. And we submit that as a matter of law, it's not. And that, therefore, the case should be remanded with instructions to enter summary judgment in favor of the appellants.

[00:16:32] Speaker 04:
Thank you. Any questions? No.

[00:16:35] Speaker 03:
Thank you both for your excellent arguments. This is really interesting. I know that's never comfort to the lawyers. It's really interesting, but it is.

[00:16:42] Speaker 01:
As an attorney, I did enjoy the briefing, but there's a lot at stake for the lawyer.

[00:16:47] Speaker 03:
Very, very good job. And under submission, we'll get your written decision as soon as we can. Thank you very much. Thank you very much. Thanks. Okay, our next matter. Thank you.