alcohol case number seventeen dash two zero zero one four bailey versus bailey and once you're ready we'll let's get it let everybody get ready and then we'll hear from mister  fact was concealed from the can they claim for when the fact concealed from them is something about themselves we believe the answer to this question is not the question relates to the second and third issues that we bring which concern one of the elements of fraud when there is a concealment and that is that the fact concealed must be one that the party played me wrong on would not have had an equal opportunity to discover in this case the fact that electric was claiming was concealed run it was that electrical substantial amounts of unpaid payroll taxes in two thousand and seven and two thousand and eight this is a fact that was between from electricals own own financial records if we want to look at an individual as having knowledge of this  or am i correct in thinking that there is a difference between paying the payroll taxes and filing the payroll tax returns there is a difference your honor and similar to i could be having withholding every month from my never filed a tax return and those would be two separate wrongs if you will that would be two separate and that's similar in the payroll tax world it is similar in the payroll tax fraud interestingly in the facts and conclusions of the trial court it pointed out that distinction with regard to the fact that surely bailey was receiving tax notices about not solving the nine forty nine forty one returns but that is different from having knowledge of the it looked to me like there was an exhibit that showed that mr bailey knew about the failure to file the tax returns but is which was exhibit twenty three that says according to the i r s none of the quarterly payroll tax returns have been filed but is there any evidence that mr bailey knew the taxes themselves had not been i think i told just barely about the payroll tax liability and then i asked him on cross examination where is it in this july twenty ninth correspondence i'm looking and i don't see it and  goes on to say he says according to iris none of the returns have been filed since i need all of the two thousand and seven tax deposits received by the i r s i'm sending a power of attorney so even this e mail is making that distinction between the returns and the monies the keeping here not the returns in in this whole alleged fraud yes yes it's the money that's over that's the problem filling out a bunch of forms would have been the problem the problem would be if that money was never paid and now there's no money and now what do we do it yes your honor it's the payments as opposed to the non selling of the returns that is the issue and that's just in looking at that that e mail that correspondence harris author of knowledge i didn't say anything about the tax liability i didn't have a round number i was just talking about the returns so i'm going to just bailey's knowledge there was there was no proof of that harris author testified that he never told him testified that he didn't know it just barely knew about the on pay payroll taxes just daley's testimony was in regards to his being in control of the electrical if you're talking about the fabrication in the work going on in the yard he was in control but he never handled the finances should had a jury trial been who would vacate this regardless it so i wanted to ask about this issue whether it's equitable or legal even if quote contract rescission would be viewed as accurate about which i think it is the actual judgment that was entered in this case is you mr jeff got to pay this money which sure sounds legal to me if i had to pay some money that in salad applicable or in equitable either way so i guess what i'm wondering is if the ultimate judgment is you pay money is that legal or equitable and that that is i would say the weakest part of our jury argument case and i would agree with your honor when i look at it i would say if the court had gone based on the pleadings because mind you our complaint was let's focus on the asset purchase agreement what is the responsibility for the payroll taxes under that initially happened pay the taxes what he was just contract he was just seeking a declaration that the contract doesn't make make services responsible for these payroll taxes the trial court decided that against the some summary judgement we've already been up here wants another panel send it back to consider the fraudulent inducement defense but it was only played as a defense it wasn't played as an affirmative claim seeking damages so that would be equitable were i think it crosses the end of the court found fraudulent inducement so when the remedy be rescission of the contract your client gives back all the assets why isn't that what happened and is it cold and no affirmative counterclaims plan the only defense play i had was were looking to avoid the response of our responsibility for the payroll taxes under section two point declaration that you don't jeff didn't have to pay it his parents had it and so if he found that wasn't the case i mean it's one of the up not everyone agrees with that right i mean either the parents had to pay it all or jeff eating your requests for declaratory judgment would mean your client's on the hook for it well now because we were only focusing on the asset purchase agreement your honor there may have been some other element claim there's nothing to bring before a jury and therefore even regardless of whether jury or judge there's no evidence you should win outright that if the new trial that is correct your honor when this case was remanded back in two thousand and fourteen it was remanded to consider the fraudulent inducement defense that had been briefed to the summary judgment stage the case then seven district court for two years and we were set for jury trial with thirty days notice i believe when you the one doing the daily book she knows more than anyone but what reason would it's only she was stealing the payroll tax money that would be a reason for her to keep quiet what reason would she keep it from jeff who's overseeing the day to day at this point why would what would be the reason to keep him out of the no first off jeff never had any experience or training on the electrical issues but going as to reason or motive as i see it there would have been would not have been one i mean tell surely this is the amount that we know for payroll taxes shortly bailey who was the person in control of the bank of england now up in moon arkansas or scott arkansas the account from which the money was taken d taxes would have flowed to electrical and surely and know that's a month after the asset sale but what they talked about we should have revealed this in april or may but you know we do reasons why we didn't want johnson's testimony was the reason why they did and that that was just arbitrary bots use before the sale the reason why they did was they did they they did not know in april when that but my my first argument on that that i made to the word and pointed out to it was that's an e mail between  which i'll focus on does not say the taxes were not paid says the returns were not bought so can you point to evidence that jeff was told before the sale closed that the taxes were not pa brought in to look over the finances harris author stated that he had discussed with bailey and with roy johnson on several occasions b early oh tell me that  i've been reading has been very good read it has not been clear and this e mail to me undercuts the argument that jeff knew about the taxes rather than about the tax returns i don't have the specific site but mr author's testimony what aristotle or discovered i believe it's at twelve seventy four there is also if it's exhibit twenty which is it twenty seven ninety three of the record and hair solders testimony about him having talked to they on was at record one two eighty one eighty four and ninety five now you have to understand that harris author is putting the financing package together for jeff bailey to buy the assets the asset sale agreement itself says that mr bailey has been in full and complete control of the operation management of the company prior to the sale so it's not as if he knew nothing about the taxes knew nothing about the finances he hired all the c p a s that work for the company he hired you know harris author he hired mr weinstein he hired everybody that had any part in then as we go towards the closing the wells fargo bank is providing the funding for this transaction and the testimony is undisputed that the financial records generated by mr bailey and bob harris author that were given to wells fargo reflected that those taxes had been paid which was in error which was not true and which everybody agrees was a material misrepresentation that those s evidence that he knew they weren't and yet represented that's the key he could be thinking the tat you know if if judge casa tells me paid his taxes i would believe that tell everybody paid his taxes and that would not necessarily mean he had i'm sure he has but you see what i'm saying so that the problem is that we need something that pinpoints that mr jeff before the sale knew the taxes weren't paid and yet he goes around saying they work  may which is cooperation the conversation after all right tell me about the jury trial issue because it seems to me that whatever anybody thought they were doing the actual result of this was a legal ruling that you got to pay these taxes so how can you say that's equitable i mean if they had rescinded the contractor but he gives back what they hadn't and does the deal i say i agree that's a that's equitable but saying you know her the money instead of me that to me is legal but there's not a judgment being song there was no claim for damages in the case that was before judge and how can you can sustain this judgment i mean the judgment that's entered is mr jeffs got to pay x y z equable the statutory and so it's driven by the underlying like what are you getting if it had been a declaration that somebody is entitled to an injunction that would be accurately declaration that the contract has to be undone that's equitable but a declaration that you've got to pay money instead of her well you're not because if i think you caused the car wreck than you would have to pay for me but if they say no katherina you caused the car wreck then i got to pay for me that's money but now your honor if you ask for damages i would agree but if you're only asking for declaratory judgment or responsibility and you're not seeking damages there's a there's a distinction under this judgment who has to pay the i party could take this judgment and use it against mr jeff as it says he has to pay and he's a party to it so why isn't he get a jury trial a man it's our position in this case that when  get the assets back to yes you're correct but no one wants to do that no one wants to undo this is that what's going to mean i think to not be the normal result now but can't you also get rough can you also get reformation of a contract based on fraudulent inducement yes i think you could so could you so in it it doesn't really spell this out but could the court of said ok i find fraudulent inducement therefore i'm going to reform the contracts so that the tax liabilities the undisclosed tax liabilities as the court found it assuming there was a basis for that those passed on to jeff in the agreement the court and reformation would be equitable  of this is i mean the the judgment is so strange because the court doesn't go through any of those steps stipulated that we were both seeking equitable is more important than this money and it will decide this case on the law i'm not here to repair your family but if you do care about your clients you will try because one day it will be too late for the repair and they will be sorry whoever's left behind will be sorry or i think it was apparent at the trial it's past but may i go back to the question on the jury trial it's our position that even if there were a right to a wasn't a whole lot of time in there to deal with it first of all or try to figure out what the trial was going to be there was still summary judgment bandying there's a lot going on and we have case law that suggests that finding a waiver of a jury trial is something we do very we waiver but here they did before they knew how judge hughes was going to rule on the case and before they presented any evidence they did say hey we demanded a jury trial like we're supposed to and let's assume argue into that they're entitled to one that it's a legal issue at least  transpired and then they asserted that again before the trial began why isn't that good enough because washington released err on the side of a jury trial which is a very fundamental right that he because we also approach the court midstream on the us with the trial and then they show pop up the morning of it i'm not saying they didn't get adequate notice of the trial but you know i would tell you back when i started on the state court not started noticing up trials that in cases of missing there for five years  forty five days notice which is the texas rule which are taught to believe me we had a lot of lawyers run in and all upset about that because they weren't ready so it's a short timeframe in my experience both as a lawyer and as a judge seeing the reaction of lawyers don't you know it is a case for a waiver of the they didn't wait until yes now or in the middle of trial we don't like the way judge chooses handling the case a let's object they did object before it began albeit no we continue to seat was in the corner already alerted by the original demand for a jury trial why does the court get to try to play a gotcha with the lawyers by setting it for that's the way opera see i think that's the way the parties perceived it and even in the court's clarification order that was entered in this case they made reference to this will give the parties the opportunity to present additional evidence  support of the motion for summary judgment that was a understanding that i think the court head as evidence by the orders as well as the party said and proceeding to trump it was only like i say at six forty two the night before that the objection to a bench trial was  you tell them the taxes hadn't been paid and the answer was we haven't we never fail and if you look at if you were to say did jail not know about the taxes being paid he never and that this is overlay of family in this case it's hard to get away from again we will decide the case on the law on the facts and i don't want you to think i'm going to get immersed in the family issue and airsoft at that directed him back to his mother in harris author on september the thirt h was the one that disclosed that the taxes and ahmed paid for the first time he said that's a first time surely daily news and these are trust fund withholding tax right o for electrical he then began working for services the company that was started after these assets purchase because again this is this was not a sale where the stock of electrical was purchased it was an asset sale and so those september e mails whatever else they showed you clearly show that johnson and reid were keeping it from surety because they say we haven't told her about it we've known about it since april in may so you know a fact inferences based on the circumstances again what jeff hires johnson he's overseas him what reason with these underlings have to not pay the taxes and to keep that from s f didn't know it was directing him to do that i dunno personal benefit to them from not but put it at the same time it was michelle that was on the phone with shirley daily jeff was dealing with the finances michelle sat if she would johnson's testimony was we didn't know but going to your motive it comes down to an issue of ok who enjoyed the benefits of this surely barely out of fifty one percent of electrical her husband roger and me other forty nine percent here it was your honor but it also comes into issue here with respect to the unclean hands which we had talked about much and that is the fact that the the day before the sale you know yes this is a family but the day before the electrical and the next day services assumed the obligation for that debt they're back increasing the amount that services was paying for these assets by over a half million dollars and all