so you gentlemen are coming from the galveston mardi gras to new orleans mardi gras me may it please the court george vi for the appellant matthew wiggins mr wiggins is asking the court this morning to grant one of two alternative types of relief from this bankruptcy appeal the first as he's asking the court as his primary argument to render judgment in his favor as to the award against him of trespass damages because as a matter of law he was not a trespasser but was a mortgage gee in possession  think well i think he did i think he did raise it now understand that the apple he suggests that it was waived first in the in the bankruptcy court there was both testimony at one of the trials and this would be  page two seventy four of the clerk's record he testified that he had remained in possession under the two thousand and nine deed of trust which i'll talk about in a moment notwithstanding the entry of the state court judgment he testified that he was acting as a mortgage e in possession and the second is that in the in the motion to reconsider which is that page three thirty nine from the bankruptcy court judgment council there had also set out the facts of the mortgagee in possession and  then of course the district court expressly considered the arguments about mortgaging and possession and rejected those on them on the merits but clearly took up that argument was briefed by both parties at the district court level there there subsequently foreclosed in january two thousand and ten he then a year later he refinanced the property with a different bank for a million dollars and paid off her debt and that's one of the reasons that he's a mortgage in possession because otherwise she would be getting she would have received the property back free and clear of any debt including her own debt that she had undertaken with the bank mr wiggins extinguish that later by refinancing and and she sued him for wrongful foreclosure breach of contract fraud breach of fiduciary duty in a number of other things the next day the day after he refinanced the property took him for a ride and she took him to the cleaners what but there is a there seems to be on both  district court the trial court and in the bankruptcy trustee a misunderstanding about the underlying state court judgment and i think the best evidence of that is page nine sixty five the record which is  district court's recitation of the facts and this is throughout the record this issue comes up the the court said the district court said the galveston court found that the foreclosure was void as wigan's and kelly had not intended to bind themselves to any agreement that would support foreclosure and that's a misreading of the underlying judgment and what happened in the underlying judgment is that ms ms kelley sued mr wiggins for this wrongful foreclosure she claimed they found there was no notice but specifically preserved to six hundred thousand dollars lien right right but there were other claims that she presented and the first claim that shown in the judgment there's several copies of the judgment in the court's record and they all skipped from question one to question eight question one the first question was that whether mr kemp mr wiggins and ms kelley had intended to bind themselves to an agreement with three terms one was that mr wiggins was going to provide four hundred thousand to purchase renovate the property the second was that ms kelly would be paid by mr wiggins five thousand dollars a month to supervise renovations and the third was that they together would share profits on a sixty forty basis that submitted her claim that there had been an oral joint venture an oral partnership in this case and the man and the jury found no and the missing questions in the final judgment or all the questions that followed about who breached it further it was their breach excused and what were the damages and none of those were answered by the jury because they found that there was no partnership then in question thirteen ms kelley asked the jury did i intend to resign on the property on the day i acquired and the reason she did that is because she claimed that the notice of foreclosure was defective because if she resided at the property under the texas property code she was and how they received twenty days notice and she did not receive the twenty days kno preserve the prior lien that he had that's where the that's where the district court erred is that there's nothing in the judgment that extinguished his prior mortgage and deed of trust and the loan and so it says in one part of the judgment that he has a six hundred sixty thousand dollars judgment for the amount the jury found for improvements but that also there is remaining in place any other liens of record that were otherwise valid and existing on january five two thousand and ten which remain outstanding at the time of judgment which was his lean and deed of trust and in so we go we go back to this first question is mr wi trespasser or is he a mortgage in position if he's a trespasser the quarter watt awarded damages if he was a mortgagee in possession or texas law she wouldn't get the property back until she paid him the money he had advanced in other words yes he he had extinguished her debt to her lender and she would not get it back free and clear as a mortgage imposition and the district court said well he can't be a mortgagee in possession because the jury found there was no agreement between them that would support this four hundred thousand dollar loan and that's that was incorrect the in the very first complaint that was filed by the bankruptcy trustee in the adversary action and this is around clerk's record page forty eight the trust want i want to recover an accounting and damages from the date of the bankruptcy going forward and in the answer page eighty four the clerk's record mr wiggins said your description of this underlying judgment is not accurate it's wrong he did see from the start the trustee like the district court like the bankruptcy court thought that mr wiggins alone four hundred thousand dollars and there was no agreement and so as a matter of law he could not be a mortgagee imposition may i  me i'm not an expert in texas property law but i do have some questions about how the chesty is able to pursue this action a i assume your liens were recorded with the first  lien for the mortgage or those lien created by the judgment either well the link created by the judgment is in the judgment and the judgments recorded is that supersede the texas recording statute i don't know that it's soup i don't know that it supersedes it the means by which it isn't forced is you return to the trial court and ask for judicial foreclosure of that lien an order of sale which which has occurred in this case all right so in any case the trustee didn't try to avoid billing you know the bankruptcy ok number one number  two this property was declared exempt yes subject i soon as homestead she filed a homestead exemption and this was a this was the one of the quarrels in the district court the question that was submitted to the jury was to establish not on objected to declaration of homestead takes the property out of the main crap like that was our argument i do not understand how she could have a deal with the trustee to have it both ways a it's exempt and b the trustee gets the money i don't understand that and and we complained about the fact your honor the at page ten ninety eight of the record is the stipulation that the trustee and the debtor made about the homestead well it sounds to me like  on authorized deal and i don't know whether you objected to it in the bankruptcy court or not but i do not see how a trustee has a right to pursue a claim with regard to exempt property unless it's some kind of settlement of the claim of objection of the claim of exemption to be i have never heard that and i have some experience with the bankruptcy stuff we complained about it and the impact of it because we were also being sued in the state court by ms kelly who said she was entitled to recover damages for trespass with respect to the property she claimed it was her homestead a contested issue below but she claimed in the bankruptcy court was her homestead no one objected then she thirteen months after the bankruptcy is filed makes this stimulation it's a page ten ninety eight of the record where she says my my captain and the property had no equity that to me yet how could she cap it when she's got no equity did she ever put second probably the first trial liability not only did she amid the she and pay the taxes she didn't even know how much they were he was paying everything and extinguished her debt now and this is a prop what's the status of the property to date as she occupy now we  finally we went to we went to the district court we went to the state district court and requested a judicial foreclosure the lien because she hadn't paid the lien either the court granted that and entered an order sale she filed two manda to the court of appeals one to the texas supreme court all of which were denied she then followed a direct appeal as well and that was dismissed for lack of jurisdiction in a published opinion because there was only one final judgment and it was already final and whatever the court was doing to allow execution to go forward was just execution point is that your client can is in possession and is operating it as a bet is not operating it to my knowledge but we foreclosed upon the property in he's occupying my land i should get a judgment for that family they've they're using the judgment against us to say on the one hand it awards possession of her ignoring the fact that we were taking our lean in the property that it's a technical defect of twenty days notice it's not some as the court said it's not that there's some absence of an agreement that he just gave her four hundred thousand dollars and then the other deal i don't see is how they get damages after she claimed the property was exempt because as i said it's it's right it's hers right and so we had both we had both arguments we the race to the condo we believe is supported by the pleading the affirmative defense which was pled in the answer there were twenty nine months of the forty nine months that were prior to the state court judgment clearly ms kelley when she was suing us in the state court and she that they make it sound as if she wants she lost on everything she's suing is for fraud there was no fraud she sued for breach to do sure it was and she sued us for a  partnership with respect to this property the jury rejected that each side got competing declaratory judgment attorneys fees of fifty thousand and then we set aside the foreclosure on a technicality of twenty days notice and we get our lien for the amount the jury found that we had recently expended the property of six hundred sixty thousand she easily could have said in addition to that i'm suing from the day that the foreclosure until the day that this case goes to trial because you've been trespassing the exact same thing that the trustee as soon as for here and the trustee in his complaint her and her complaint said she was only going forward and so she said i want damages for possession from going forward now the court's right as well that there's a thirteen month thirteen month period before they en into the stipulation so there's a you know she claims it's her homestead it's not objected to thirteen months later they make this dippy lation she leaves the bankruptcy court she's discharged she goes to state court and starts to sue us too to recover damages under other theories so we believe that race judicata does apply clearly there's identical parties they came from a court of competent jurisdiction the underlying judgment the prior action was concluded with a judgment on the merits a full blown trial and they were the same claims in both suits the only distinction would be that the trustee is different than kelly for this purpose the trustee is not different than kelly she had the opportunity to sue for twenty nine months of alleged trespass damages and those should be we would argue either rendered out if the court render judgment or remanded back for those but the amount is undisputed in terms of how it was presented to the court was four thousand a month that was the number that the court selected so that's twenty nine months the award for the period of time this she claims it's her homestead would be another thirteen months and that the judgment of one hundred fifty nine thousand or so against him should be resolved and either remanded or rendered to reflect that we do think that the the record as a matter of law establishes that he's a mortgagee possession that that argument was the record we're coming we're adding new theories we're bringing in new facts but if we stick to the record this is a much simpler case and the facts aren't as they seem as as they develop here on appeal  and i think it's important to go back because lot's been made of it to the final judgment in state court and that's in the record eleven sixty seven probably the best copy of that and because mr wiggins a of his argument is based upon going back to the state court now tell you that the the record doesn't reflect what the claims were in state court the record doesn't reflect what the jury decline it doesn't reflect on what basis the state court ruled i mean we know i mean as judges here and lawyers we don't go behind the judgment and say well why did the rule unless you put it in the judgment we don't know those things wiggins wants to argue those things about why the judgment was entered or what the judgment means but we all have the judgment and so that's what the bankruptcy court use that's what the chapter seven trustee utilized in pursuing her cause remains vested in plaintiff amelia kelley the storage right out of the judgment it goes on to say ordered a judge and a creed that the subject property is free and clear of any waynes and claim any party to this cause including mr wiggins free and clear any claim or cause subject only to number one a lien against the property created by this judgement in favor of the defend in the amount of six hundred sixty thousand dollars found by the jury for the purchase preservation improvement of the property this deed of trust doesn't exist anymore it's gone well it's got substituted with a judgment only that's correct  completely two different kinds of liens with with completely different remedies and rights completely different one was created when this judgment was entered saying yes less rights after the judgment than he did before the judgement no the judge the judgment tells us what rights he had before the judgment and that was zero right he wants you to believe that he had his deed of trust right that's texas case for the proposition it's not a it's not a proposition of law your honor it's a it's a fact the court said he had no claim ok and he was given a judgment lien of six hundred sixty thousand dollars he says that the reason that the foreclosure was set aside was this notice find that in the judgment it's find that in the record it's not in the record well i saw of the stick or finding side we got him somewhere that's what i'm reading from your honor is necessary i had seen something that had question number one in question number three it's the judge and the judge replicated those things in the final judgment ok and there isn't no finding that this foreclosure was void because of some notice or some homestead that's not what the judgment says the that was well i thought i saw something that looked official about that well and that's what mr wiggins wants you to believe but it's not in the record it's not in the bankruptcy court record it didn't come become a rather complicated area they're not that complicated because once the properties out of the bankruptcy court it out of the bankruptcy court well and that's what's at the very least it seems to me that negates thirteen months if your judgment because it was out of the bankruptcy court and if he was wrongfully possessing the property after it had been declared exam without contradiction in the bankruptcy court you have no right to at least thirteen months of hear of your judgment and i understand but this is why and this is why i talked about suavely riley exemptions under the bankruptcy code really can follow two different passive it and it does get a little bit complicated in talks about this distinction about whether the an exemption is to an interest in the property itself for example if there is an unlimited exemption there not a cap on value and you're allowed to exempt your car and i'm making this up all right for purposes of the example the supreme court says if i jump that car that car itself may then leave the estate and if i can finish your other however if the exemption talks about that you may examine up to five thousand dollars in value of a car or other personal property and i list five thousand dollars the supreme court has tell told us that that car doesn't leave the estate that by listing the five thousand dollars the debtor is putting everyone on notice that five thousand dollars of that car value of the car she's claim is exempt so when it's liquidated that five thousand dollars comes to her so what that car is worth but there are two problems there number one the texas homestead is absolutely unequivocal and  limited that's right number two there is no reason there's no rational reason for anybody therefore to cap their homes at equity other than the bankruptcy code your honor and excuse me i have never seen have you do it back to when the bankruptcy code was amended added a provision that modifies it it modifies a debtor's ability to exempt a homestead in the state of texas or any state if you're utilizing state exemptions it is five twenty two p it what it does it converts that interest that we that i talked about that car if i have an unlimited value when they talk about has talked about the fact please because if i have an unlimited value exemption on a house and i exempt the house the house leaves however if the bankruptcy code says you may exempt x dollars of the house what the supreme court tells us and the reilly is then it doesn't leave that exemption is as to that value and five twenty two p one does exactly that that's what the statute says five twenty two pieces except as provide in paragraph two of this subsection and sections five forty four five forty eight which are relevant here as a result of electing under subsection b three a which is my right to exempt under the state law instead of the federal law as a result of electing a miss a state law exemptions or to exempt under exempt property under state or local law the debtor may not exempt any amount of interest that was acquired by the debtor during the twelve hundred fifteen day period preceding the date of the filing the petition that exceeds in the aggregate and at the time one hundred forty six thousand four hundred fifty dollars in value what the court has said and what the statute says is it modifies that state exemptions and so the debtor no longer has that right to just take unlimited value of real property as a homestead out of the estate and understand how he could year or entire value whatever it was s us it's in the it's in the record and it was it because it doesn't go to any of the legal issues your honor and that's why he's raising it and i'm arrays i'm just responding it doesn't have anything to do with the issues all right and so the bankruptcy code limits the debtor acknowledged in the chapter seven trustee became involved she acknowledged that the her interest that was acquired under this code that it was cac that's why she entered into the stipulation with the trustee which is that record seven seventy six the stipulation in lieu of the trustee having to object or sue her for the value of that of that exemption and so she stipulated just as she has the right to do under the rules she can a mentor exemptions whatever she wants and you can look at it that way that she amended her exemptions but she stipulated in the face of t trustee confronting her with five twenty two p and the cap because we believed at the time that there was activity and that one of the liens was invalid and you'll see in the complaint that was filed in that and an issue that was tried is that based upon the language of the state court judgment that mr wiggins never had an interest in this property and that's what the state court judge said he had no interest until he was granted and that a judgment lien  the judgment that he didn't have the authority to grant that million dollar lien and there is authority for that the judge didn't buy that argument from us but their state court authority that since he didn't have a right or an interest in that property he couldn't give texas citizens a lien on the property and so that was one of the claims and that's why we dealt with the exemptions before the adversary to try to make it clear that if we were successful her interest was capped at one forty six per the bankruptcy correct and the timing is important abandonment was much later after the adversary proceeding and after the judgment it was really already exam tell can you abandon your honor the exemption was kept at one forty six all right she had a dollar interest in this property the asset wasn't exempt right and it only seems to be a lady with an eye on the prize i don't see why she would have ever given up bad exemptions that i don't represent miss kelly and i don't know what her motivations were she wasn't a party to the litigation and there's no evidence so i don't know ok i don't know other then when confronted with what the statute says and the facts of the case i think she realized that she was subject to the cap how many creditors are there how many claims in a case a dozen i don't know off the top of my head and it's not in the record it wasn't part of the litigation it's not it's not an indication sort of take that as this is not in the record oh let me let's go back a step because you know the more if he is not a mortgage in possession and as i said i don't claim to be an expert in title law but if he is not a mortgage  concession it is it still looked highly dubious to me in fact not not likely that the trustee could recover rent during the period that the property was examined and it also appeared to me that race that phrase until there's a supplement to the earth motion for reconsideration it's not in the answer it wasn't pled it wasn't or did the district court dealt with that correct the district so right up here on the district court decide now this court considers what the bankruptcy court decided with some i think you can look and see what they do which are you're what you're reviewing what the bankruptcy court is dying to stand that  and so i don't think like they raise for the i'm not i'm not i'm not convinced if you waiver argument but go on well and if i can get to my final point there they're barred as well and it's much more clear that they're barred from this mortgagee in possession they're arguing that that that they were allowed to be in possession will go back to the state court judgment possession was determined in that case the state court determined who was in the had the right to possession and mr wiggins was a party to that litigation and he didn't raise it there and if he did it was denied because they ruled that miss kelly was entitled to possession as she was entitled to any writ in which she was would request in order to take possession right and so possession was determined way back in two thousand and ten when mr wiggins was a party to the litigation and he should have raised it then if he was entitled to it and we don't know that he didn't maybe he did an because it's not in the record but now he's bringing it up five years later to say oh i defied that state court order because there's this other theory in which i could be the five that judge and not give up possession and stay in possession and rent it out i mean he's a glorified squatter is what he was when the court said he will in fact have been the case she would have immediately gone to you know forcible entry and detainer and instead a few months later she files bankruptcy right know not necessarily i don't know her financial situation i didn't represent her now i don't know how sophisticated she was and i can't i can't presume that she would have gone right to jane to know oh now i need to go to j p court and get a know i'm not going to think for her honor all i know is what did happen i know what did happen is the state court and galveston county said mr wiggins you're not entitled to possession mr kelly is mr wiggins you have no interest in this property miss kelly does it's hers in fee simple he says that in simple words plain and simple mr wiggins you have no lien on this property other than this judgment i'm giving you going forward and what's m wiggins response i don't care to stay in position for there's a bankruptcy filed trustee says please turn over possession he says no i'm not going to i get a judgment against him for possession and what is his response no wait you know when he finally turned over possession one day before trial on damages that was after the opinion an order from the bankruptcy court that he was in required to turn over possession and he still  nose after the property became exam the property didn't become exempt your honor there was a value of one hundred forty six for fifty in that the profits and mean that the trustee has the right to assert and whether cause of action is a separate piece of it is a separate asset and property of the estate that they're not the section might have been the property of the estate by the time you were going up there for damages the property was no don't remember the dollars as five that my equipment is worth five thousand dollars and she took the federal exemptions which allowed or exempt property up to five thousand dollars and that's what you put on her schedules no one objected to her exemptions and the trustee went to sell her property when the trustee found out later that her property was worth ten thousand dollars and get on making up the numbers but more than the exemption and she said wait a minute you never objected to my exemption my property left the estate you can't touch it in the u s supreme court says well that's not exactly what happens you don't have to object when that's the case when we're talking about values we haven't objected to the asset itself to take the asset out you don't have to object it remains because that was the argument that the trustee the chapter seven trustee didn't object to the exemptions and then moved to sell later much after thirty more days after the creditors meeting in the supreme court says that's the way it works right because this exemption speaks in terms of the value estate of the property that's exempt and not the property itself with unlimited value and therefore the property doesn't leave that exemption claimed this puts the world on notice and then even a year later if the if the trustee finds out that property is worth fifty thousand dollars can sell that property in the five thousand goes to the debtor and that's the way the system works and that's the way it works here is the cap was on a dollar amount therefore the that the property did not leave the estate now and i'll say that the bankruptcy court also ruled that way in the district court in the issue wasn't raised this issue also was a race and we were here on a bunch of issues that pop up for the first time after the record screen to me it went to the standing of the trustee to raise it  even after discharge and proceeds are not reinvested the bankruptcy courts have been helped those proceeds if they're not reinvested are property of the estate even though the exemptions been allowed later and i can get you the cites to those cases if the court is is interested but there's also talk about whether property actually leaves the estate or not i think presentation on that yes the i would have to do that by letter brief i think to be most accurate about the holding of the case going back to the the stipulation that was  made and the argument about the stipulation again that's a page to ninety eight of the record and it was entered into in january two thousand and thirteen the record and the argument was that i was referring to things that were not in the record about or that there was no evidence on the record about the reason for the foreclosure being set aside and that being the twenty days notice so the record shows that they make the stipulation on january two thousand and thirteen and then the record shows that page fourteen thirty four that been wrongfully for foreclosed on because the proper notice had not been given and she says that it page fourteen thirty five and it page fourteen thirty seven she refers to the state court suit with the twenty day right to cure which had been a the prior lawsuit in her favor the other thing about this petition which she files a month after she enters into this stipulation about the homestead if she turns around and sue her trespass them and that her first cause of action to page fourteen thirty eight of the record and that was one of the complaints we had about this is that we pled race judicata it's in the answer we argued that the trustee is suing us for the same thing that she could have sued us for in fact the trustee was suing us for the same thing she is suing us for their both soon as for trespass and that's in the record and the argument was she could have done it before she didn't do before the trustee can't do it now there's nothing about this agreement they made there's nothing about the law that would permit the property to leave the bankruptcy estate is being exempt to have the property abandoned because it had no value the trustee admitted there was no money to operate the bed and breakfast there's no money to pay the flood insurance there's no money to pay the taxes there's no money to upkeep it it operates at a loss the property leaves the bankruptcy estate but the trustee says he can see that she can still sue for damages her complaint limits the damages to the initiation of the bankruptcy proceeding but the judgment gives them another twenty something months before the bankruptcy is ever filed that nobody raised before could have raised before i understand we're arguing about this underlying st judgment but it's clear that there was a question in that state court judgment that submitted how long whether she had resided on the property and she says another pleadings that's because i was entitled to twenty days notice of that was true mr wiggins couldn't be faulted for not giving notice that she claimed she was entitled to as a resident when she had never claimed it as her residence that was one of the issues litigated in the state court trial that was jury answer number seven and with what evidence  that being litigated was before the bankruptcy court in this matter well that in other words i had the judgment everybody talked about question thirteen the argument was that it was the reliance on the property code provision she to the extent that she was in the bankruptcy proceedings before she left she was arguing with her homestead she filed that is exempt as are homestead that but my point is just chronologically and i think that's the reason the dist the bankruptcy court wouldn't award p damages against mr wiggins for trespass he couldn't have anticipated she was going to claim that this bed and breakfast was her residence and he he makes a loan to her for her to develop it and she never does any never pays a penny on it and then comes in and gets a jury finding that she intended not that she did jury question thirteen as i intended to reside at the property back then and then she uses that to claim homestead in the trial she used to claim notice and that the nose was latin the other thing is that the court judgment the court's judgment says that the property council read it to you but he stopped with number one there's three things in the judgment it says the subject property is free and clear of any liens and claims of any party to this cause subject to one the lane that was created in this judgment because the jury found the mr wiens it spent over six hundred thousand dollars of his money fixing up and maintaining the property and the jury found that that was appropriate and so the court grants the traditionally in there for six  hundred sixty thousand but then it says to any other liens of record that are otherwise valid and existing on january five two thousand and ten which remain outstanding at the time of the judgment that's in the court's judgment for a reason it's there because if there are any other judgments are liens of record including his deed of trust for four hundred thousand dollars it remains of record it survives it was not extinguished three the reimbursement rights of mr wiggins for property taxes that have been paid since the verdict it was all about preserving his interest in a property that he had spent all the money on and that was being set aside a foreclosure on a lack of twenty days notice and the