first national bank of oneida versus brant good morning mr lerner good morning you're obviously for the first national bank of the night at in the issues obviously you should the bank so most of the banks claims have been dismissed for failure to state a cause of action standard of review is due no vote and it's if the bank plausibly stated claim there's been an event since this appeal was followed that i think may be significant that i'm concerned know that would be an option and i think it is obvious here very significant event whether that it would help the district or to get some guidance as to what is class forty five and what isn't class forty five well here is my concern it seems that one possibility possible ramification of the dismissal of the case is that the plan is no longer in effect that's one possibility i mean even the dismissal of the case means there is no longer a plan or the plan or the other possibility is that the plan remains in effect ok but the district court has to consider that if the plan is no longer in effect and it would seem that we're back to the status quo ante and the bank has whatever rights it had before there was an up land but there are a lot of messy issues about that in terms of what the interest rate would be and what the rights would be you know before confirmation of the plan so it seems to me that we ought to get the district court to take a first look at that  to speak because of the way individual eleven's are treated and the discharge is either granted or not granted later and so from that perspective that certainly would be one option i just don't to be deemed to have waived any of the other arguments which we have of our own happiness with the approach that the district court judge so is it your indeed think that in fact that that the dismissal of the case means that the plan is no longer in effect place while we still have rights or is is it my says it which your position my position is it's not in place but they were wrong they were wrong the district judge was wrong in the first place even in interpret it if it is in place got ok thank you judge while we're at that point obviously the issue here dealing with the plan itself was that we were not an under secure creditor we were treated throughout as if we were an over secure credit and we were never part of class forty five which is what the district court crammed us into after the fact because we had a deficiency claim you have there you know the conundrum you cannot possibly be over secured and under secured at exactly the same time when the bankruptcy case was filed and that is when claims are determined under section five zero two d of the bankruptcy code you determine the claim as of the date of filing and as we as we know from this court only over secured creditors are entitled to receive interest in that we have now a case which is proceeded through out in bankruptcy that we were over secured and indeed we have the strange scenario the district court has granted this judgment for that post petition interest but at the same time said you didn't comply with the unsecured claim provisions we couldn't have both been unsecured and over secured at the same time after station judge  simple on that the district court we think misunderstood it because it attempted to force us into the box and where it went wrong i think is that in course all of this is only relevant if the plan remains in effect only if the plan does remain in effect as your alternative position and you know the alternative is we don't think it is but right  if it is it was wrong right and so what happened the judge below said we didn't comply with the pleading instructions regarding class forty five what you have to do is look at article two of the plan which defines who goes into class forty five and you have to be a member if of the class before the treatment applies to your son you had no choice when you're over secured there's no way you could this how about when though the plan is being written and negotiated that that's that's the way this happens right and it's negotiated matter if you think your client's over secured  at that point but hey this is real estate everybody knows the market goes up and down why is it you could not have had a provision and a plan that says in the event that the as part of the negotiation written that into the plan no because the plan itself provided that our claim was allowed in full as a secure claim when i face was filed right and the case law confirmation mr brand has mentioned that in his brief but cited absolutely no authority for the proposition that over that over and over secret is over security confirmation is over secured at the filing and that and what you would really have liked to have happen that you could make it happen would be to sell them sell the property right then and there then you get your money but of course that wasn't going to be allowed given this is a chapter eleven and the court was going last him to go forward status quo and continue making the payments or if mr brant had said in his plan which was filed in february of two thousand and ten i give the property back to the bank we just had immediate state relief and we'd have known exactly where we stood well before confirmation when we tried to get state relief after he breached his plan obligations he fortas he didn't want to give up the properties he wanted to keep them  although by that time use in the fall and some of his payments under the plan he could pratt could you were you in any position at the outset to insist we we're not we want to stay lifted we don't care about his promises to pay we want our we don't trust it real estate values are going down we'd like our property sold right now not you really could have don't really do this it was essentially in his mind for his reorganization and he was treating us as over secured the bankruptcy court wouldn't have would have allowed you plan and if there's an ambiguity in his plan it's construed against him not against us and as the distance bank only but my question was are you saying that you were not permitted to reserve the right to pursue an unsecure game you claim the collateral wasn't sufficient to cover the debt we were promised payment in full we and we have to lateral that is what the bankruptcy court recognized it turned out that the collateral eventually proved insufficient as mr cole referenced in his brief perhaps the sales prices weren't adequate perhaps the price change but those are clearly fact issues and so from that  bryant did here you can check to it there was no need to object he was proposing to pay us that why would you object someone is proposing to pay you and leave you to level in place and pay you prostitution interest and give you additional collateral for that there's no basis to object to that at all well you could you could say you know we'd like to reserve our right to pursue a deficiency in the event that we ever have to sell the sell the collateral when it ran proves insufficient that depends on two imponderables one he was stopped paying into who knows what we get at that time and three as we were promised payment in full we had that if if if the district judge had bought your argument below before he's dismissed as a petition how do you put the genie back in the bottle haven't they already sort of divided up the money with the other unsecured creditors has a practical merit you got back now so let's backs on that money to give it to you now know you're not going to basically we a promise to receive one million three hundred sixty two thousand some amount of dollars and sixty cents in the plan right going forward if we have to liquidate our collateral and we come up short we have a separate independent claim and that is why the bad part you're saying is outside the bankruptcy court you have the right to go against him and that is why the bankruptcy court granted a stay relief at the end of two thousand and fifteen to go after him personally it would not have done so previously it allowed us to liquidate the collateral and it him to stood his own plan and allow this thing go after him personally to seek to recover what about the dismissal of the case it seems to me that that occurred after the falling of the appeal the effect of that is something that the district court needs to consider the case has the bank's rights i believe that the case law in the area is on settled but is generally moving in the direction that a chapter eleven plan will be binding on the debtor and creditors even if the case is subsequently that is certainly a possibility for this court your honor i'm not in a position to say whether the case should be remanded for that specific issue but it you know there is an unsettled i don't know why you're not in a position to do  a new cause of action if the plan was found to not be binding so they could lance our return to district court if the plan is no longer in place and because of the dismissal of the case it seems to me that you've returned to the status quo ante and they have whatever rights they would have had before the case was fought and they've had the sale of the collateral if there's a deficiency it would seem to me that they might be entitled to pursue it but that would all be a matter of the contract between your client and the bank i believe or not has chosen its remedy and chose to bird essentially jump the gun and pursue the debtor goza remedy in a bankruptcy proceeding that it's explained it's missed but it proceeded to district court if it thinks that the dismissal of the case changes the impact of the plan or the credit court said that that failed to state a claim because it was inconsistent with what the plan states yes you are and if if the dismissal of the bankruptcy case means that the plan is no longer in effect it would seem to me that one thing the district court my crew is that it's earlier by the earlier reasoning of its border dismissing their complaint for failure stated no longer applies that's a possibility another possibility is that can return to district court filing new action based on the dismissal and this case can proceed on the facts that were at issue when it was originally filed which is why don't i to chose to proceed i'm interested the fact that in your read briefing you asserted that if you were denied a discharge in bankruptcy faced were dismissed you can say did that first national could proceed it was obviously an oversight on my part and i developed more of that oversight well it was a mistake to have said that yes the case law is not settled on that matter in any event the issues not ripe for appeal is a technical matter at this point all the more reason to send it back that's quite possible but in any event i think the crux of my argument is that oneida admitted in its claims that the collateral was worth as much as what  own admissions that are key here in that it filed truce of claim on its own behalf it valued the collateral it was under no obligation to provide a value for the collateral it could have said unknown or it wasn't even obligated to file claims in this case and submit itself to the jurisdiction  the bankruptcy court because it was a secured creditor he could have chosen not to file claims chose to file the claims it chose to put values for its collateral on those claims it should ha come in and said we're under secured and that's really not true what would your response have been well if they had said they were under security put in unknown value for collateral it would have put the debtor on notice that either he needed to seek a valuation for the collateral or provide a different treatment for a night in his plan but then you probably the court might well have been allowed creditor to make the best out of a bad situation and go and sell the property at the time the case was filed the debtor was current on his payments to a night out but i'm saying if he comes in with saying it's undervalued that you had a strategic interest in not and not having them do that because you didn't want the property so you want to keep it right i don't think the credit the bankruptcy court would have granted state relief pre con from ation even if they were under secured part of valuation and i think the night also chose to be an over secured credit creditor because there are benefits to that they get their interest there also consequences they don't get to participate as an unsecured creditor in the unsecured creditor class in less they take certain affirmative steps to reserve their rights  indicating that on the face of the claim so an item also proceeded as an fully secured creditor in this case and that was the choice that oneida made knowing fully that there were both benefits to that and there were consequences particularly where they failed to reserve their rights i was going to ask the same question that i asked opposing counsel was there anything to prevent them from reserving the right to pursue an unsecured line now and in fact that's the standard operating procedure for secured creditors in bankruptcy at this time is that if they are secured creditor who is going to be paid through the plan they will include a reservation of their right that in the event they have to take the collateral back they will be able to either participate as non secured creditors seek a deficiency that puts the debtor on notice that he either needs to value the property object to the claim or provide a different treatment in the plan and puts the other creditors on notice that there is this potential looming issue out there that in the future there could be an additional unsecured creditors who either diminishes what they are receiving out of a pop plan or even in this event may scupper the plan in the future by making it impossible to fulfill the plan by the  so it gives everyone notice and bankruptcy courts and other courts have essentially required that if a creditor wishes to seek to participate as an unsecured creditor in the future or attain to these deficiencies that it needs to indicate that at the beginning of the case  creditor chose not to do that they will should have been aware that there were consequences for that by allowing them to proceed now you essentially upset the applecart of bankruptcy here by making it very difficult for credit for debtors to receive their fresh start because every time they attempt to keep a secured piece of property the secured creditor can simply sit on its rights and then years later come and say well now there's a deficiency or we wish to participate as an unsecured there were several other creditors who had not been paid ok so of so he wasn't complying with the client there were issues with the plan yes with his plan compliance yes you are ok and  but in the event that the court were to find in favor of a night it could have knock on issues for other bankruptcy cases obviously then we also have to look at one evaluation data curves although congress doesn't specify the bankruptcy courts have provided for various states the petition date evaluation hearing date a confirmation date in the plans effective date none of them occur post the effective date essentially all night is seeking to now revalue the property after the plan is already become effective in order to pursue unsecured deficiency claim that it believes it has what the district court really said is you need to comply with the plan language or at least have reserved your rights in order to proceed they didn't meet their condition precedent here the all of which depends on whether the plane is in effect or not of course your honor but the game is played a confirmation they voted in favor of this plan they didn't object they did not raise their absolute priority rule objection at that time they did not reserve their rights to seek a deficiency claim and by filing their claims they admitted that the properties were worth what was therefore there's simply no grounds for them to seek a deficiency against mr bran provided the plan is effective thank you thank you mr cole mr leonard use a reserve team and i did it was dismissed because he failed to pay the lawyers who represented in the original chapter eleven  a reasonable payment schedule which he couldn't give and basically said no go make a decision whether you dismiss or not and they dismissed he requested to of course this is his plan here that is lawyers then who are who have been paid with the dismissal of the case are not state from collecting oh no in fact one of his other lawyers who was involved in the interim who is the one who when we talk about disrupting a payment schedule bear in mind that this was a hundred percent payout to unsecured creditors as well so whether we're whichever can't agree we're in we're supposed to be paid one hundred cents on the dollar the only difference is we get interest on area and that's why we got post petition interest because we're always secured when the case was filed and that basically is our position judge thank you thank you mr leonard we have your case will proceed to the last