district in montana dismissing western capitals and rd party complaint seeking to enforce a payment obligation against ex partners l l c and guarantee of that payment obligation by sandoval the obligation payment obligation and letter remit again sex patterns in michael sandoval because western capital partners had not established western capitals predecessor interest had not proven either book says conditions proceed to enforcement of those payment obligations and i ask you a column or a question st of all you know one of the things occurred to all of us is subject matter jurisdiction given there's no trustee you know debtor in the courtroom here but we be the primary care we believe we need the bankruptcy court sort of missed the forest for the trees and looking at this can what we all call the condition proceeding paradigm the bankruptcy court believed that had established various conditions preceding it to be able to enforce her right to enforce payment against x patterns i'll see m ichael saying of all in doing so the bankruptcy court looked that debt obligation became evidence by promissory note executed by ex patterns as an acre also signed by mr backed you up on that what what evidence is there to say that to show that this agreement that was embodied in one document is really two separate agreements well we have the debt obligation there was no further contractual condition proceeding to force payment of the debt there may have been ongoing obligations between the parties but that's no different i send it to the court a specific amount on specific date as we have here the lender may have various obligations ongoing over the life of the loan for example an escrow obligation but the the major of the no doesn't get to withhold the payments that are outlined in the promissory note that or do you want specific date the the maker doesn't get to say hey lender i'm going to wait for the thirty year term note to go by to see if you think if you've complied with all of your escrow obligations of a thirty year term i thought about breaches by the lender that occur before a payment is due because that's more analogous to the situation pain obligation and ongoing executive obligations that may or may not become due may or may not be breached the case law says the pain obligation is independent of those ongoing executive order obligations so it's not a condition bridge here's a point where i'm confused on that i mean you've got the color code case which says i think exactly what you said if you have independent promises the breach of one of them doesn't excuse obligation to perform on the other ones but there's also california appellate cases says you look at it and if the breach is material that excuses all performance obligations under the contract so there's easy to views of analyzing the situation where there's reaches on both sides one looks at materiality more looks at independence and these two sets of cases don't even seem to cite or talk to each other so you want me to choose you want us to choose the color cold line of cases why should we do that why should we take the materiality l cases we also think you yeah i agree your honor there to those lie a case of you to be two ships passing a knife on this test situation but i don't know if it's if it really is because the cases also said materiality cases say we don't we load forfeiture  and if we can if we can force an agreement or relationship contractual relationship between parties to avoid for forfeiture we should and in this case i think you have to you have to go with the calpine of cases because what happened d for future but what deference do we owe to the trial court's determination of materiality isn't that essentially a fact a determination that the trial court well to to answer to that question your honor the st of all there's make sure there's material breaches but then there's a question of materiality of the breach you can have material term that is breached but what is but that is not really the focus the focus is what is the materiality of the breach i mean how do you quantify the value of that breach so there's that there's a material material term that can't be breached but if it's at the minimum breach or if it's worth one hundred thousand dollars in damages end the nd part of your question is the bankruptcy court never found as i view the opinion never made a factual finding on the actual materiality of the breach they just said it was a material reconcile it and primarily what it is because even in the dependent independent covenant cases that are that are addressing that topic there's there's consistency in how they they do it there are some cases that basically say if it's an if if there's a payment of money and it's do over time it can't be dependent with other terms and then there's cases that are the complete opposite of that and find exactly that the brown v grimes case for example the way that all these cases seem to to mesh is that what you look at is were the breech terms of vital to the agreement and if the breach terms were vital to the agreement that it seems everyone largely in california is in agreement that if they are vital to the agreement the breach is material then that is when and there's a officially a repudiation of the obligations by the party then those in that situation excuses performance by the other party so i just wanted to kind of start start with that issue is not a way of saying that there's some cases where like sand of all made the mistake of entering into a contract with user blix and as we've seen time and time again each year blix seth does not honor contractual obligations but  investor in x patterns of offspring which were co founded by mr stand of all and in two thousand and seven she threatened to unleash war nuclear war quote unquote on mr sand of all if he didn't agree to sign this letter agreement that's it issued today which gave blix stuffed full ownership of offspring and and offspring at the time had a letter of commitment from the government for one hundred million dollars contract in a concession by mr stand of all he relinquished his ownership an offspring and simultaneously agreed to s x patterns equity into debt giving her preference there was no new money that ever changed hands under the letter agreement the stated purpose of this letter agreement was to provide for a reasonable separation of op springs and a t g o among the parties in a manner that allows for their continuation and resolves the issues between us this is an important fact of this letter agreement because the purpose was not simply let's divide these companies between the two and go our merry way the purpose was let's divide them in a manner that allows for their successful continuation unfortunately this looks that sabotage next patterns almost immediately after signing the letter agreement by among other turning to the other legal issues i want to start with the allegation that the bankruptcy court improperly admitted extrinsic evidence when considering the intent of the pardons there's been a lot of discussion of the bankruptcy court allowed for sand of all to testify subjective intent basically to try to change the terms of the letter agreement but that's not what happened here what happened was they have all primarily was testifying about what the purpose of these terms were and also what their importance was to him this is not trying to change the terms of the letter agreement it's explaining their context their nature and the surrounding circumstances of how the parties entered into that agreement that is permissible parole evidence under california law and  the court did not abuse its discretion by admitting that expense of governance with regard to and in particular one example with regard to the no matter what may happen language said of all testified that that language was put in for the purpose of insuring that if the other mechanisms that were designed in the letter agreement failed to pay down the expert and sloan such as that performance the the guarantee would still exist it was not carte blanche for egypt blix that she just completely ignore all her obligations and ignore all the post closing things she had to do to the c p complain all testimony was self serving and only told one side but usually a party's testimony is self serving so i don't necessarily think that's a valid criticism and he had the same opportunity as sand of all to bring other witnesses in and they failed to do so because the court admitted expert properly admitted extrinsic evidence the standard of review for whether the contract terms are dependent covenants or the contract is an entire agreement is not to novell it's the clear air standard and the court didn't commit clear by determining that the letter agreement was an entire agreement contract isn't visible where it was the intention of the parties to have an entire contract and the contract would not have been entered except upon the clear understanding that the full object of the contract should be performed here the court correctly determined the set of all would not have entered into the letter agreement without the inclusion of the performance fee the confidentiality and the provisions these were important terms to stand of all that protected him from the quote unquote nuclear war that blix had threatened to unleash on him likewise the performance fee was there too to pay down this very experiments obligation which is why we're here the primary cases and we've heard a lot about kolob go and star and very dear from w c p and those cases are distinguishable from the facts of santa all's case this is an unusual this is not your typical sale of  a business and the part at arm's length sale these are this was a settlement agreement this was two parties that had a disagreement who decided to split up their companies amongst themselves but to do so in a manner to allow them to continue different situation from those three cases also none of those cases relied on extrinsic evidence so the standard of review of the parties intent was not deferential to the trial court none of those cases involve multiple trying to raise money and finance as as the court discussed these cases the they have they say things that don't jive with other california cases they make these broad statements that are made in the calico case and it really stands for the proposition that if a party has repudiated its material obligations it cannot still recover after th according to the wilson case which we cite in our brief importance to the contract is what matters not quantification of damages as as we've said throughout our brief in here these were important terms to say  e and also in addition there were damages there was a fifteen million dollars company that was valued at fifty million dollars that ultimately went under following the damage to mr sandal's reputation  brief repeatedly stated that the bankruptcy court gave no weight to send of all testimony and that's just not true the bankruptcy court never once said that it didn't give way to say end of all testimony rather the court for example testimony as credible and it gave weight does not mean that it didn't get weight and that's part of the set off here the b c p just wants the court to grant one hundred thousand dollars set off and say everything is fine the problem is one hundred thousand dollars set off this is about ten years too late stuff was required to make that payment in two thousand and seven i believe and and has not done so and set off does not make the animal whole it ignores all the other breaches that did so it's not really a remedy here likewise the no matter what may happen language is not a waiver of santa fall to contractual predefined waivers by guarantors and likewise any waiver of a guarantees defense must be expressed and particular and the language in the letter agreement does not meet that test the loan guarantee and the loan were not these agreed equivalents the loan is stated in paragraph one and it actually says in paragraph one what the consideration is for the loan and tellingly it does not include the guarantee as consideration in paragraph one really sad of all is guarantee was given for the whole of the obligations in the letter agreement and he testified that he would not have made that guarantee without all of the promises that were made in the letter agreement so unless unless the court has any questions thank you very much thank you you've got three minutes thank you i want to go back to the courts question about this dichotomy i think the answer can be there's a good there's an answer to the question by looking at this whether where it says the payment of money quote the payment of money cannot be made dependent on the performance by the other party of a condition which by the very term of the contract is not to be performed or may not be performed until after the date at which the money is to be paid condition is independent or dependent having it in this case is based on the expressed language of the contract and i would again encourage the court to look at the promissory note because the promissory note says when the payments are either michael san obligation dependent upon something else i believe the court is obligated to construe this pain or obligation as independent and this just makes sense because you can't have particularly again with ten million dollars on either side of the equation obligation that somewhere down the road gives the knob each party a windfall which is what happened here so so are you saying that whenever there's a complicated transaction the provisions of the agreement is i believe when you have an instrument a debt you have an instrument evidencing presently enforceable debt obligation i believe that's what the court is obligated to do subject of course to the maker of the note or a guarantor raising appropriate affirmative defenses which is what should happen here instead of just saying it's not enforceable period and that that's that's my part thank you very much the matter submitted