the issue before the court is what does the phrase commercially reasonable determine it's a value being as it is used in section five sixty two of the bankruptcy code  right there with me when i ask you from a practical standpoint what's at issue here as i understand it your client purchase a and then they were going to buy them back and under the repurchase agreement they had an obligation to buy them back and if they defaulted on that obligation kalyani had a claim for the repurchase price plus whatever interest had accru five sixty two mandates that the damages be measured as of a specific date and that's to prevent speculation on the mortgages going up and that's clovers question is you're getting money you're getting money from these mortgages as we sit here each month you're getting cash and why isn't that good enough because in the coming year do i think maybe you need to explain what you are what your bargain was and commercially reasonable to trumpet on that day now what what the bankruptcy court was concerned about was that we were somehow going to get a windfall because we were holding on to the mortgages that is quite impossible on our deficiency claim whatever that may be with it's not your deal good deal is not to hold your us to get rid of the market right no under our contract we had the right to hold them we have the right under the contract to hold them and  them for the market value that's in that that's in the repurchase agreement we had that right but what i'm saying is there's no downfall here because under the bankruptcy code under section five fifty nine of the bankruptcy code which is the other one is here if we if protected here because i have sixty two prevents a unreasonable value being placed on the mortgages before there's a commercially reasonable pa is so in fact as the evidence in this case was on the on the fab sixty if we elect to hold on until we know bankruptcy here upon a default we we can hold on to the mortgage was the entire term we have to give them a credit of what the market value is if we elect to do that we have one's ensuring our claim here now no one's ensuring our claim the congress i think was very careful in five sixty two to say you've got to measure these claims on a certain day whether you sell them or not that's when you measure them let us assume for a moment that we had sober mortgages on the acceleration day for ten cents on the dollar we would have had a nine hundred million dollar deficiency claimed in the bankruptcy a stand your question correctly your honor i think you know it's our hope position in this case that the value of these things was strictly affected by market forces and that's that's that's what affected the value of these mortgage why didn't we sell the because we know you have a watch deficiency claim would probably get paid to three cents on the dollar and so we decided to hold on to the mortgages until the market is approved a little bit clearer that it's two or three cents on the i think it's pretty i respectfully disagree commercially reasonable determinants of value is a broader term than market value the reason section that's right the reason section five fifty nine used market value is because  very careful to use the phrase commercially reasonable determinants about you because if they just said market why for so long for ten cents on the dollar on the acceleration day and contended that was the market but one that had been commercially to do with the market and that's so clear in this record is beyond dispute has nothing whatsoever to do with market is to purely a mathematical formula i run way over my time and up like to research thank you ok please the court good morning my name is john dorsey i represent american home mortgage holdings inc that all the debtors below and the apple used before this court i'm here with my colleague today  asking this court to do anything other than what calyon itself did outside the context of this litigation and that is to value the mortgage loans based on a discounted cash flow value when we knew that the evidence below showed that when kalyan was determining how to how to record these mortgages on its books and records it used to just kind of casual about you even got that that's for purposes of financing that's a financial measure that you can put on your books you don't have an appraisal you can use that for purposes of financial statement that's not probative the market is it well i think i don't think it's probably to the market i think you're right your honor because there they actually asked their auditors for an opinion well that results in how they carried on their books and records and whether they have to take a loss on those mortgage loans which when the s n c the shared national credit came in and looked at these mortgage loans and said callia given all of the problems you're saying you have with these mortgage loans you should write them off one hundred percent and kalyan said no no no we don't have to do that because there really isn't any problem with these mortgage loans mr dorsey your own expert testify mr clayton he said unless there's something very very strange going on in the market the market value of the assets and the discounted cash value of the assets will be very very similar isn't that an admission that there's something very strange going on in the market and when congress said you use this other provision when there is no commercially reason to determine a value such as when there's a dysfunctional market why isn't that marketplace was not reflective of the actual true value of those mortgages because if you look at the discounted cash flow value they still far exceeded what the market value was if if we determine that congress was talking about this position and i thought well commercially reasonable that term can you tell me when that used in a context other than disposition i sixty two i believe it's used in the context of just determining the value of that repo agreement at the particular time whether it was the date of liquidation terminations or acceleration so it's not necessarily a disposition and if you look at section that's that's putting the rabbit in the hat but can you give me an example of the use of the term is a term of art commercially reasonable in a context other than just position of some type of actions and commercially reasonable has to do with its credit what a creditor does in disposing the asset how can we then say oh but this theoretical  is is what they intend is we've got to figure out what congress didn't understand your honor and i think it does relate to kelley on's actions in this case they chose from the very beginning at the time they accelerated the repurchase screaming for the debtor was even in bankruptcy they had made the decision they were going to hold these mortgage loans that's what the evidence showed here you're saying commercially reasonable means the way they put it on their books i think the fact that they made the decision to hold the mortgage loans and realize the income from those mortgage loans goes to the question of what is commercially reasonable for to perth for purposes of determining what the deficiency claim against the debtor is going to be in there has to be some certainty as to what that official see claim is going to be we can't wait to decide to go ahead and sell these in the marketplace at some point in time down the road and the idea that they have to hold these for thirty years is overstates the position the evidence showed fact the stipulated facts of the hearing were that in the one year period from august of two thousand and seven when the debtor one of the bankruptcy and august of two thousand and eight when calyon says that was the first time nor was a commercially reasonable market value they collected two hundred twenty two million dollars on these mortgage loans and they if you take into account what they earned after august of two thousand and eight through the date of the hearing that was a another according to their fact when it's another fifty three million dollars it raises up to twenty five percent that they've already recovered from these mortgage loans judge son she talked about i mean what you're arguing is what's commercially reasonable is depending upon the context and yes what the what a creditor has done and then you determine based on what they're doing with the asset what's the value to them just such really didn't get into that did i mean i think it's an interesting approach but he didn't reason that way to try to remember his it was a long opinion i don't  correction and if you look at five fifty nine it's clear that what congress but i think your honor was correct when you were talking with mr ackerley that congress knows when to put market value in when it means market value in five fifty nine uses market value in property you know master netting agreements swap agreements they may not have them may not be market so i mean it would seem to me when it says if there are not any commercially reasonable determinants of value referring to all these different kinds of things security clearing agencies and seem to me if they say market value you might have a problem figuring out a market for some of these well i think some of those things your honor would dollars each year and that's where you got your twenty percent and then when you know the twenty percent would have been the actual amount received from august your sage this hundred percent of one twenty percent of the total one point one billion ok all right an increase in default rates and things like that but that's the way mortgages work we all know we all have mortgages and they're all front loaded with interest so you pay mostly interest in the first five or six or ten years when th he did take a default rate into account your honor now he did testify on cross examination with mr accurately that he didn't take into account the potential increase in the fall rate going into the future i mean that would be more correct but that's consistent with section five sixty two which says you have to look at the value of the repo agreement on the date that they accelerated it and as dr clayton testified the only way to do this kind of cash was to look at the default rate on that specific day not looking at and i was going to point out in section five fifty nine there is there is a scenario that the congress understood could happen where you might have it liquidation without a disposition there's language in fy fifty nine that says in the event of a liquidation you any excess of the market prices received on liquidation and then an apparent that eclipse says or if any such assets are not disposed of on the date of congress understood that there might be instances where you are liquidating but you haven't disposed of it now if they had liquidated and come up with a huge deficiency claim but you then argue that they're liquidation was not commercially reasonable because they could have held on should have held on these mortgages absolutely on five six this is how you determine the deficiency claimant by sixty to use the term was there a commercially reasonable determine a value on the date of the liquidation and if they had liquidated them at ten cents on the dollar when if they could have held them for four five six years and recovered the entire amount due then it would be fundamentally unfair and an equitable to have so you have no problem with reading martially  ackerley correctly pointed out under the terms of the repo grima here they had the right to hold these loans if they made that decision so obviously calyon when they drafted the contract understood there might be a situation where we don't like the market price so we're going to hold them instead and  let me just address some of the points which were raised by mr dorsey his his definition of commercially reasonable is not consistent with the well known understanding of what commercially reasonable means it deals with disposition the marketplace if the phrase came from the uniform commercial code and it's an article not of uniform commercial code which deals with how a secured creditor must dispose of the collateral in order to have a deficiency claim and the disposition of the collateral must be commercially reasonable so also the legislative history to five default if we were going to liquidate the collateral we had that we had to do it in accordance with market conditions what the market would pay for them and so that's a commercially reasonable standard and of course the other commercially reasonable standard is the acceptable you see see definition of commercially reasonable so we we think we think i mean when i read the statute to begin with insult commercially reasonable determinants of value the first thing that came to my mind was article mat of uniform commercial code because that's been beat into our heads for about forty or fifty years on the other hand you said yourself that had you proceed to a disposition it would have had a huge deficiency correct and as we learn from mr dorsey he would have your say your disposition was not commercially reasonable because you would have been you would have been doing that when you had a good option there are lots of times when there are mortgage foreclosures and you can say oh you shouldn't have foreclosed because of ash flow because you have mortgage payments of course they're all in default so the only commercially reasonable thing to do is to foreclose but here where you didn't attack the methodology of the expert as to what the discount account really is you know you're kind of backing yourself into the thought that auctioning off as compared to this just kind of cash flow is not commercially reasonable  as ten cents on the dollar we could have sold your honor but the sale would not have been commercially reasonable because it was so i do live under the u c c that's that's right so if if if we had sober ten cents on the dollar  that a discounted cash flow valuation will give you a value on these mortgage just if there are tomic bombs going off in philadelphia they will do that but it might not be commercially reasonable sections b and c a facet to with respect to mortgage agreements in any other doc sort of payment document that's covered under five sixty two to his regular monthly payments you're simply writing it out of existence you're making the statute is that