michael mccray me me as i'm sure you all are leer by reading the breeze this case involves what i would consider a complicated and pretty detailed transaction involving the purchase of insurance agency assets i think because of the nature of this transaction the complexity of it the fact that it's probably not the sexiest subject matter in the world i think it is very easy to look at this at a twenty thousand foot level and convenient just to see the document issue as a promissory note the two page case law from kansas which i understand kansas law governs this dispute that supports what you're saying now i'm not sure the the instruments but there's kansas law that  where there are two or more instruments executed by the same parties contemporaneously or even at different times that concern the same subject matter than you read them together and construe them together yes your honor and i think not only the case law but the actual documents that we're looking at if you look at all the documents in their entirety you'll see that they have to work together and if i could just briefly i'm not going to go through i'd be use all my time going through the  he also entered into a series of agreements with brooke corporation and again this is the basis of this was brooke corporation they were national insurance agency they were trying to expand their footprint of insurance agencies around the country they would locate agencies for sale they would then enter into an agreement with that seller they would then five and someone to be their franchisee to purchase that insurance agency and they would have a centrally a sale from brooke to the franchisee just as part of those agreements the agreements between my client and were a credit they included the advancement of loan agreement i think what's important about the advancement loan agreement is that he had to assign all of his rights title and interest to the insurance agency assets to brook credit at that time so at the very moment he executed those documents he never was transferred the title or interest in those assets that he was purchasing it were mediately transferred and signed to bring credit those agreements also required mr mccray me to serve as a franchisee under broke under certain terms and conditions of the agreements with brooke and that brings us to the agreements with brooke they included a franchise agreement which required mr mcraney to allow brooke to be the agent of record which is a term of art in insurance industry which means they are the owner and holder of all the contracts with the insured and the insurance companies in essence my client was really an employee broke during this time working to to pay off the debt in the way the money would because brooke was the agent of record they would receive the premiums they would apply the premiums to the debt to brook credit they would then apply a percentage to themselves or they set as a servicing fee and then they would pay my client the remainder my client never made any type of loan payments or anything like this this was all this one big process and also there were agreements transaction and i don't mean to oversimplify it but as i understand what your opponent's argument is in essence is it's no different than if you buy an automobile from chevrolet in finance or with general motors acceptance corporation and the car turns out to be a lemon you stole the debt you may have a claim against john chevrolet but you still owe the money and that to me that's sort of i guess i don't mean to oversimplify but that seems that of the ad at the bottom that seems to be their argument you bought it from brock brooks sets up a separate financing arm and you financed with you brooke you could have financed a through direct route with dizzee bank you wanted to but but so why is that argument not apply that is very good argument i mean a very good question i'll tell you why done a plaque is in the car d in the car analogy you receive the title to the car it might be a bad car but lease you got title to it lease you own that limit of a car in this case my client never received the title the car it's somewhat similar to i don't know if you were that hooper has started trying to expand its footprint in that the number of drivers the quality of cars as drivers are using by financing the purchase of cars and if you look at think of it that way i think this is the better analogy where ruber use a third party to finance its drivers purchase of new cars but think of it this way where that driver when he buys that car he has to mediately son all all of his rights title an interest to the creditor or to the to the credit coming he then has to agree to all the use that car driving for over hoover then receives the money for that contract in pay then pays the driver what happened here was is that through no fault of mr mccray any the brooke agency failed stop if stop paying its drivers the insurance company stopped pay mr mcrae for three months at the end of those three months what was he to do he called and said and said please let me have the title to the car like it would be of the limit let me do that so i can preserve the collateral they refused to do that so the only thing did he terminate the contract he cancelled the contract he said you have your car back have your limit back your insurance agency back he gave that back to him so is a big difference between buying a car and this is a little different situation because he never owned the car and then let me ask another question if we agree with you that this note is not an instrument where does that leave us well then that puts you into what the document really is which is a contract for the sale goods are really an installment contract and under that you know the seller has a duty to provide what is being purchased the buyer has an obligation to pay for and accept those goods that never happened here unfortunate like i said my client never received the goods that he contract to purchase he never received any title any right though i think he did get pursuant to his the agreement for advancement one he was entitled to use those assets while he was not in default as all he got it be like that over drivers he got to drive the car for over is long as he was complying with all the terms and client never received title to those goods that he was purchasing he properly cancel the contract and his other know whether duty to perform under that contract there is an issue of consideration i know daisy bank has argued the fact that over because my client was able to use the assets its consideration however it's a contract to sell it goods just because you get to use it doesn't mean you actually receive those goods in this case my client did not receive the goods he was buying just an example from jack's where we just got done with the players championship my son of a twelve year old son loves the game of golf and as you can imagine he wants the best and most expensive equipment you can imagine so let's say he goes and i decided teaching a lesson i make him go buy the five hundred dollar driver himself through the pro shop maybe on some sort of installment deal he buys it they say hey listen you can use it here at the course and he want to be you need to leave it here until it's paid off he does but let's say the pro shop loses that he was behind the driver he didn't get in the driver's shirt he was able to use it does that mean the fact that they lost it does that mean that he would have to continue paying on that driver if he was by he was in a contract to buy that driver but me ask you about say your fundamental premise is that all of these agreements were centrally one transaction one agreement that the advancement agreement has an integration clause that excludes the purchase agreement and the franchise agreement what do you make of that it doesn't exclude it has an integration clause but that still doesn't stop the fact that the integration clause includes in it numerous other conditions and one of the conditions is that my client cannot be in default has to comply with the terms of the franchise agreement and that goes to well again i'm not sure if well all that agreement it even says is for the purchase of agency assets the advancement agreement self references this is for the purchase of agency assets it's clear on that document what the purpose of that agreement is for this is the mechanism where he's paying for it and that agreement also includes the obligations of the franchise agreement that the agency agreement also requires that my client he will to use those assets as long as he's not in default my client was never in default before they stopped paying before the before the assets just went away because of the actions of rope so the actual agreement itself provides for that the terms that would allow my client to not be responsible for any further for payments three thriller and an article nine thriller and and now just think back to maybe some corporate experience you have but the standard docs that banksy has are laser pro documents the standard document would be a note a security agreement and a business loan agreement and the only thing that's different to here instead of a business loan agreement we have the agreement for the advancement loan and substituting for the business loan agreement in your standard laser pro doc package and if you look at its official comment one to one of those six it lays that out for you it says it says many notes in commercial transactions are secured by collateral or subject to acceleration event of default or are subject to prepayment a statement of rights and obligations concerning collateral prepayment or acceleration does not prevent the note from being an instrument if the statement is in the notice self in some cases this is the key part it may be convenient not to include a statement concerning collateral prepayment or acceleration in the note but rather read to refer to an accompanying loan agreement security agreement or mortgage for that statement that's exactly what's happened here the only thing that they can point to is the as a firm of undertaking the lender is not to interfere with the collateral but we don't have that right to interfere with a clatter and the absence of a default anyway it's a it's an empty bridge to it is warranty of quiet enjoyment that you see and standard loan documents all the time and the cases that we've cited to you the courts are bending over backwards to find these documents to be instruments when they look like instruments and they look like notes so in that if you look at the new york cases the one notes were contingent upon the vendor delivering the equipment it was a contingency to the notes being a fact of they still found that the agreement negotiable and so the fact that there's this tiny undertaking doesn't take it out of of article three and i think this second dangerous part of this case is to consider this an integrated agreement as if all of the broke entities were one in the same without any evidence of piercing i mean this document is this transaction is structured and intentionally to make the lender bankruptcy remote ok so i mean there's no question what was going on here brooke corporation which is the franchise or and seller to me is the fact that negotiable instrument generally must include all the terms within the note subject to certain exceptions one of which is a security agreement correct so i mean i'm such you know i said you can have a loan you can have a loan document as well under under secured a six but a security agreement presupposes that the debtor owns the collateral otherwise he can't pledge now your opponent argues we didn't even own the collateral this is what makes it different than the typical security agreement contacts where where the borrower ends up the owner and then pledges to collateralize security and to take it one step further it integrates the the advancement for a loan which includes repayment terms which is normally and insurance specific ok so the way this business works mr mclean is what they call an independent agent the big carriers will deal directly with an independent agent they have to go through what they call a managing three hundred of these cases so let me tell you how this plays out so so we sued in the western district of washington connect insurance connect insurance came in and grabbed the the customer clist from the agents even though we ha who manages that relationship with the carriers because he's the he's the person interacting with the customer so if he tells the customer that hey this guy just the end of that but you started by saying it's the negotiations for him because because he's punching the assets but doesn't own anything to pledge that i think he's retained rights if you will you know in other words he's assigned it to brooke to manage the relationship but he has that that there's a property interest in the customer relationship and that's and the only way i can demonstrate to you  because the the agent controls that customer it's a neighborhood it's a neighborhood retail relation so it's not the list is the relationship yes so the list means nothing without the relationship as you because you have you know who the customers are one through one hun introduce any evidence to suggest that the corporate veil of those entities should be pierced so on that basis he doesn't have any proof basis to deduct the damages amount and you should affirm the judgment on that basis that's that's that's how i would answer that question is it and i but i do want to try to persuade you to consider this as a negotiable instrument by by focusing on that official comment and then focusing on those those more recent cases if you looked at the control case which is the case out of the eastern district of california in that case the note referred to two separate documents both a security agreement and a separate loan instrument it's a unconditional promise to pay fixed amount of money payable when it comes into the possession of the holder is my understanding and so i and the advancement agreement borrowers business shall constitute a default under the terms of this agreement so that sounds like to me the advancement agreement is reaching out to  consider the bar as conduct under these other agreements and he why didn't that take it out of the definition is not it's not judgment because it's a standard cross to fall provision that appears in every loan that every poor in america sides i mean that is just standard boilerplate security agreement loan agreement language that you'll find in every loan if a borrower defaults on the other some other financial obligation with any other creditor that it has that's typically a default under on your debt with with your lender that's just might fall back on that is what again we're focusing solely on whether you need to look at that advancement alone to determine there what's actually doing to the know if you don't you can look at just a note determine what the payment obligations are and that's that's what the string of cases that we've cited you know they've only cited to that one florida case where the court for clearly states that a retail installment contract is not a and negotiable instrument and so they're they're taking a retail installment contract out of the negotiation instruments right away and then you'll see a thread a thread of cases one of the one of the cases i apologize talks about the close connected this doctrine and they said that that doctrine applies in consumer transactions but not and there's a noncom that's an see is a non competition paragraph isn't that an additional  undertaking it is sure it is but i my position is that because it doesn't affect the payment obligation and other which what's due under the note it's not an undertaking within the concept of negotiable instrument under  but to the extent and i just want to reiterate to the extent that you're inclined to adopt this notion that it's not a negotiable instrument then i beg you then to focus on what claims that mr macrae would have against book credit corp and your book credit funding because those that that was the lender and in the absence of piercing the corporate veil there's no there's no claim there's no claim then they mention in their in their brief at the end that they asked for our cooperation and moving the collateral to  secured in other words we'll we'll cooperate with you and we did it with other agents provided that you continue doing knowledge arleen interest but you can't say i'm not i'm not acknowledging anything and then expect us to agree to allow transfer of a collateral we're not we're not going to do that and so i guess part of the argument is what happened in the prior appeal is that you're asking them to acknowledge that dadt the two separate parties both say we have valid assignments on and until you can figure out who you have valid assignments under the u c c so he's supposed to just assume you're right and they're wrong without i mean this you went through a whole appeal to the one circuit over that issue in the last right and i and my argument then once you get a firm on the record you get a firm based on the law that time but i mean we turned out we were right i mean we were proven right in all of our representation regarding article nine were correct but apparently three judges didn't think they did your letter was bang and i don't mean to misrepresent the record i think that was a view that came out later october two thousand and eight two thousand and nine timeframe that that that was that that actually arose but but the point is thank you thank you goods i think opposing counsel made reference that this was not a controversal of goods it was a contract to enter into a franchise agreement to be real clear this was to purchase insurance agency assets the franchise agreement was a condition of mr mcrae need purchasing those insurance agency assets he was purchasing the answers a c s said he was going to have to operate as that franchise until it was paid off and at the time it was paid off the franchise made to that insurance companies don't deal with independent agents i'm from lake city florida also live in jacksonville in the west side i can tell you there are independent insurance agencies throughout north florida that have that are not affiliated with any national broker or national agency that have direct contractual obligations and relationships with those insurance companies i also just want to get into the negotiat realty again in the additional terms i think there's there are some case law out there i think opposing counsel cited several cases we did cite to the one case from florida i want to be clear though that you really need to look at the facts if you can look at the law all day long but you apply the law to the facts and kansas law is clear that there cannot be any additional conditions or obligations and this is when you look at the face of the two page document issue it says additional terms in all caps see advancement agreement i want to ask you about your impairment of capital defense let's assume that you can only pursue defenses z bank it's convenient they kind of claim that we just had a security interest in that but if they didn't have they only had a security interest they contacted mr mcrae any in october before they foreclose on the collateral offering to transfer mr macrae the agent of record status if they were just a secured owner how would they have the right to do that mr mcrae though at that point had already terminated and cancelled his agreement at that point the insurance companies had already cancelled all their relationships with brooke in other words the damage had already been done before mr mcrae me cancelled and terminated he tried he contacted and then there's this does not refute it on the record to try to get him to transfer the agent of record status to him so he could preserve the collateral he testified if i had that i would have continued paying i would have had a viable asset he never received that and it was only upon the fact when he never received that we never got what he bargained to purchase that he said and he wasn't getting paid he was working for free for three months he cancelled the contract if it broke credit impair the capital what what would be the remedy would be a send off or it would be a set off and there was testimony  think there would be an apparent of collateral argument against easy bank also i think d c bank under the agreements that they're claiming they took ownership of that note being the amended and restated credit security agreement  there in that document there was an insurance company that was a den of five as the backup master agent service or that company was there to step in if something happened to either broke or to mr mcrae any in the testimony at trial was clear that the z bank did nothing to try to have that back up master agent service or come in and protect the collateral same credit they did not do anything to protect that so that valuable asset that could have been sold i mean these e bay continued to receive payments afterwards i mean it had it was a viable business it could have been sold it was worth money is the evidence on the record from which we could determine the amount of the settle well there was testimony from mr mcrae any about the income that was being produced the unfortunate nature of as the trial court just never really addressed that issue but can i ask one other quick like what happened to the assets where they just gone dissipated or did to d c bank make any attempt to sell though the agent of record status to some does some other agent continue to collect on the premiums that were coming in and nothing else they did nothing mr mcrae had to walk away from an insurance agency that he spent eight years of his life building and he only walked away when he stopped getting paid for three months straight and in the three months that's when he said i can't do this anymore please give me these assets so i can protect them they were not provided to him he just essentially had to walk away