good morning my name is john bjorkman and i'm representing the appellant hyland bank in this matter and we're sure this morning asking this court to reverse the grant of summary judgment in favor of bank and sure there are three areas i'd like to focus my comments on this morning in the first issue kind of what at the heart of this dispute is the appeal is the competing interests competing policy language between the grant of coverage for forgeries and the exclusion of coverage  any fact there is in the trial court's opinion and your yes your honor i believe the court erred on as a factual matter and in concluding that the guarantee at issue was worthless well did you did your client have the ability to enforce that and not directly your honor i are they hit the lead to bank as would be customary had a right to enforce that we have rights against the lead bank wasn't a lead bank they purchased the assets well first premier it was the arrange the financing for this transaction first premier them participated on the lease schedules to the were first premier bought the assets and then they've used lenders to help them finance that correct so that doesn't make them a lead bank well i'm somebody who bought an asset needs financing to a far well that that's certainly true but i think whether you call him i'm using the term lead bank in the sense that my client viewed this and reported this to the regulators as a participation in which they were participating in a financial transaction with first premier who was acting i'll use the phrase as a lead a you know that bank insured had raised is this even a guarantee to begin with i mean we don't have this was a and it goes to the issue of does my client need to have a legally enforceable right against the guarantee the definition of the guarantee and paul says that my client does not have to have a direct right against the guarantee if it's made out to somebody to  that's part of the problem here the the policy uses the term financial institution it doesn't define what a financial institution is as the briefings indicated there are also you can find all sorts of definitions of what a financial institution is depending on where you look highland urt bank insurance suggested well a financial institution is someone that deals in loans we do that under the facts a lease agreement that shows that they're part of the financing arm of the so i think on the totality of the facts i think the record supports the conclusion that this was in fact a guarantee as that term personal guarantee is that term is used in the policy it did not have to be directly legally made out to highland bank in order for the bank to have relied upon that guarantee in its decision to fund the transaction here like if they were going to rely on it they might have it assigned to them that certainly  honor but i think in terms of reliance i think that's it really a fact issue and there are multiple multiple issues that go into was it justify did the bank properly rely on it let me ask is there any dispute that your client knew that malone had a negative four and a half million dollar net worth yes there it was our expert and soon included in the record went through all calculations based con tax consequences and and concluded that malone actually had a positive net worth but that was your expert after the fact was there any evidence at the time that they thought that malone had a positive network well i i but you know again i believe the record shows that the due diligence that was done by both testimony from mr white testimony from representative from first premier along with the expert that suggest there were also indications that this this this wasn't truly a credit problem and that's kind of the that's the rub that's the dilemma of this case is how does that how does that competing evidence where how does that get weighed fraud versus forgery entirely i reflect that your are there any evidence in the record that she did not she was not had no knowledge of this of this deal with premier and no intention to  personal guarantee along with her or mr player yes i believe there was an affidavit on the record from ms malone that so she was not aware of the personal guarantee and did not when they came up in the context of whether she later ratified the guarantee or here in this case you under the terms of the insurance policy issue the underlying good sense of making long to these people directly or indirectly who has standing to this that  know dispute between your client and the insurance company is it says that if if your client makes a bad law makes a loan and it's based on a forgery argument was that you're as a certified copy of an original that premier taking from the people they were dealing with the policy itself that would address that issue one way or another other them the definition of guarantee itself which says you know it's fine and the participation of the guarantee can be made out to someone other than th issued was the bank entitled to rely on it i believe they were under the case law and then where the district court got struggled here was reconciling the evidence on the credit worth your man or is it is the policy say it says that except you've now invalid if there's fraud involved except if there's a forgery correct and that and that's pine island so the court could certainly city or pine bluff let me tell you my two reactions to playing number one the district court it's presley said it was basing the decision on an aspect of arkansas law that the district court in this case said does not apply to minnesota law and number two when the district court in pine bluff says liberty national labs is a prerequisite for coverage a requirement that the forgery cause the laws that requirement is not stated in the bonn that's flat wrong that ignores the word direct and directly cost is is right squarely there in the lead in the bond and i said i think that drives me toward an i want to respond proposition that if if the if the forged instrument would not have if would not have protected the bank if genuine then the forgery is not a direct cause law and on that point i disagree and i think the court's analysis was incorrect in that you can have more to be a direct cause opinion goes on and on a great length about what's unique about the commercial other credit cards so you know well done at done get done get it here well what i think it gets me to shear is is the focus in this case should not have been on the direct result wang which of the ensuring agreement that's that's pine bluff it's the lead in to this area the weight the way to rationalize were harmonize all of these cases is to parse out each of these individual elements and what we're suggesting is not there not the credit worth factor that should be considered were our argument is it should not have been considered in context with the direct ross minnesota bankers association criticizes the trial court the valuation of the credit clients credit practices now that tells me that the bankers of minnesota want this bond the big credit insurance no that's exactly what they're saying that the courts are making are wrong if they look if they evaluate the process that tells me that your clients from with association wants what doesn't surprise me they want credit insurance instead of bankers blanket bond coverage well i don't believe that to be true and that's certainly not what my client is attempting to do here what my client is attempting to do is say the courthouse to recognize a scenario where there is a forgery and has to harmonize with the scenario where there is a credit issue wrong your clients that if if if the bankers off say after the fact that a guarantee was one of the things we relied on and putting together a complex loan back then and the and the guarantee one or one of multiple guarantees turns out they have a forged signature doesn't matter how relevant that was to the overall credit evaluation or the ultimate loss there's a couple that's your position right i see my time up so it may answer me that's right that's my understanding and correct me if i'm wrong of your position no that is not our position all than weird words the line drawn the middle ground that would be the position if the court strictly followed pine bluff but the middle ground that takes into account a layer of the takes into account bozeman that takes into account ok just tell me what from the ground in the middle ground you know it's only that the issue becomes a reliance issue  good faith issue under those elements of the insuring clause my client can say we relied on this we want to be issued credit had we not have this guarantee and the insurer still gets their day to argue well wait a minute but first i'm not familiar with that case judge i didn't read it i can tell you that similar cases that talk about but for this speak of it in terms of causation in fact we're talking about and we're thinking now with this but for how how do this and that creates some problems for these other cases dealing with it it does not judge the resulting directly from which is the language in the bond is different from a direct result it's different from similar language for instance during the term results and for instance judge the man a trois case talks about how the different standards are applied managed to walk from the get here quick in that case judge the proximate cause not the cause in fact let me let me address a couple of points that you raised with counsel before i got up here counsel's parting comments was that there's a middle ground where if it's just reliance then it's going to be a fact issue for the jury that essentially ignores the standard it collapses the resulting directly from element into the reliance element there are two separate elements council does not want to deal with the first one he just wants to deal with the second one another issue that you guys ask about was the guarantee and the bank's reliance on it well we know that down below the bank argued that they actually did get an assignment of the guarantee and they tried to find some language in the collateral assignment agreement that supported that they cited in the briefs to judge nelson they've abandoned that now in front of you they say well we didn't take an assignment in the guarant causation but for the fact that joe white got out of bed that morning they wouldn't made the loan but for the fact that these documents were in front of them they would have made the loan that does not  specifically i'd ask you to take a look at paragraph four in there the bank's argument is that well we relied on the guarantee because first premier was our agent and they would have  forced the guarantee on our behalf if you look at paragraph four and they guarantee it says just the opposite it says that first premier if they go after the guarantor they're entitled to do whatever they want with the funds they can pay any obligations they can pay their own obligations and keep in mind judge that this guarantee is in the context of about twenty transactions involving eight or ten institutions so it was up to first premier to do whatever they wanted with the funds collected from the guarantor there was no obligation also keep in mind that the collateral assignment did not provide any recourse by the bank back against first premier each of those least schedules was without recourse so the bank had no rights to go back against first premier in the first place one topic judge that the bank ignored in the first brief and responds to in the last two or three pages of its reply brief is whether there was a loss at all we know that the bank paid out three million nine hundred ninety four thousand and fourteen dollars you can find that a p p fifty three fifty nine and sixty five we know that the bank took in on two million six hundred forty eight thousand eight thirty three in lease payments forty eight thousand seven hundred fifteen from the e r e bankruptcy and they sold sixty five percent participation a true participation to the ridge tail bank for one point five million or they did it and if you look at the tool manufacturing case in the universal mortgage case no matter how close the the parent is to the subsidiary it doesn't matter for purposes of analysis of the bond and if it's  subsequently acquired bad debt it's not resulting directly from if you take a step back the bank made a profit of two hundred four thousand dollars on these transactions they took in two hundred four thousand dollars more than they paid out in order for there to be a loss under the bond there has to be a depletion of the bank's assets there wasn't a depletion of the bank's assets you can take a look at that american trust and savings bank that discusses what loss in the pollution of assets means it's the cash in cash out type of analysis the bank ignores that completely except for the last couple pages of their reply brief and they say well there's fact issues about that but they don't cite you to any fact issues they cite you to no fact issues word i'd be making the same argument with respect to lost the argument with result two a loss resulting directly from would be more focused on the worthless fictitious nature of the collateral i would be leading with the fact that the e a a are according to the receiver was not close to being solvent in two thousand  five the first transaction didn't happen until october two thousand and six almost two years later and the bank according to their own credit presentations showed that malone was minus four point five million a tangible net worth during the first transaction by the second transaction her tangible net worth had dropped to a minus thirteen point one million dollars and by the time she hit bankruptcy she had over one hundred million dollars in case is that a p p acts one ninety five to two a one what judge dixon does there is he does a an excellent job of analyzing what the application of bos resulting directly from means relative to the forgery what there with the bank wants to do is they want to disassociate the two they want to have reliance only they don't want to have to show that the loss resulted directly from the forgery here with malone it doesn't matter if it was forged or not it was worthless that's what that whole string of cases the majority opinion throughout the country says that's  what five different judges now in minnesota have said judge dick steam the unanimous court of appeals panel and now judge nelson all five of them have adopted the majority rule judge texting sets out some of the history and puts it in well again judge results from is different from resulting directly from one your last no last argument is there something in the policy that limits the loss to the principle because normally a guarantee would include principal interest attorneys fees all sorts of different things so why would the forged guarantee in this situation why would they be made whole if they just recovered the princip well first their loans are not covered this isn't credit insurance so loans are not covered at all well i understand that and so what we're talking about is the loss that direct result of directly from the forgery right and even analyzing that the courts have said a depletion of bit of the bank's assets that's the am trust savings bank case it says the depletion of the assets it doesn't say you're entitled to make a profit it doesn't say your loss is the difference between the profit that you would have made in the profit that you did made is anticipated interest income an asset it's not a loss under the bond judge but let me just quickly try to better articulate the middle ground here i mean we've got pine bluff on the one hand that if it's but for we don't worry about anything else and boys men the descent and boys men highlights the dilemma with evaluating cases like this strictly on the results directly from instead of analyzing cases like on the face of good faith analysis but the argument is that n c b the supreme court has already telegraph that it would it would favor the alerts decision that isn't other than a laris is an unpublished decision your honor which doesn't include a full by definition for discussion or analysis the result might have been correct the feeling was in the i mean you can you mr nowlan can talk about the supreme court of iowa but our job is to figure out whether a laris is the best evidence of minnesota law and i haven't heard anything to the why it isn't i believe then you don't like it or your client doesn't like it the minnesota bankers association doesn't like it well aware of would have been more properly decided on the reliance element and factually and you could get to that result and say there was no evidence that the guarantee by the sham corporation was valid to begin with and therefore consistent with this worthless collateral line and the result is correct where there is evidence going the other way our contention is a laris doesn't answer that question nor did it attempt to end the dissent in the illustrates the difficulty in the problem and these type of cases and why it's important to apply all of the factors and analyze the reliant analyze the guarantee under the reliance and good faith elements in order to decide is this really a credit risk case or is this a forgery case that's the middle ground that allows us to get to the jury so that highlands interests