s car versus us bank and we have three cases one sixty five five nine two zero one six five five nine five six one six five five nine six seven and so we i appreciate these matters i was already i think you came up with a good allocation of the time i was going to come up with one for you but i always like it when the parties talk about this and so the information that we have is that council ever grade to the following that o t h s argues for the first for fifteen minutes then ask our argues next for ten minutes then us bank last am i will tell you because when everyone has appeals it does you know someone's going to get to be last but that that's just the way that it is but i decided that i will allocate one minute for each of you beyond your time and then i'll just go back in that order for you to handle and the any rebuttal and i mean all of this is subject to the fact that the court  know we're basically here to have our questions answered because we have to make a decision in this case so but otherwise i will keep you to time but if any of the judges are asking you questions please continue to answer those questions even if they're difficult questions but now ok so just so that i have this right ocean towers seems to have two lawyers here david robinson and william princeton and there's two people nodding their heads and i'm not sure which one of us which ok ok and since recording they've identified themselves were you going to divide your you have fifteen minutes we're dividing that and handle in separate issues or is one person going to take argument but he's not going to speak you're david writes robinson so he's not going to do the main part of the argument correct all right and and obviously if you want your own reserve any of the fifteen minutes then you've got that as know mr landau you have an assistant here for you and all right so you're allowed to use your assistant as you need are we accommodated to do that were were  i see there's a woman sitting next to mr landau and i'm assuming you're the assistant all right are you seated in a good place for you or do you need to move if you need to move your chair anyway just let me now ok all right all right so i think we're ready to proceed with ocean towers and so if each of you when it because we do record this and sometimes more off the record you can't hear it as much so please make sure to state your name and who you're appearing for good morning please the court my name is david robinson representing ocean towers housing corporation i'll be referring to them as ocean towers for simplicity thank you represent the third party defendant and appellant and appellee we'd like to reserve five minutes for rebuttal because we're also responding to an appeal this morning i would like to take a step back from the briefs and provide this panel with a commonsense overview of this matter it's a little bit complicated because there's three cases but at the end of the day there is a common thread here we have a key document called the recognition agreement which provided a mechanism for the bank to protect its security there was a mechanism where ocean towers which was the co op had to provide notice to the bank in the event one of its tenants went into default and that your tenants essentially they move then and shero who's the tenant that started all of this was pain lease payments and also had a bank payment and had borrowed in excess of a million dollars to a bank at that time that is absolutely correct and so is your common sense approach is you have a windfall of one point three million dollars and you have to explain to us why that's ok well we don't have a windfall your honor we're like an h b o way you got paid your one point three million at the beginning right your honor we didn't get paid one point three million  car was bought that without he didn't have to pay the bill he didn't have to take on her bank at and he got it for like twenty three thousand dollars or are some more you and then you got your past lease payments that michiru had not paid again i was explaining that there is a recognition agreement that provides a mechanism to that protects the bank when one of its tenants fails to pay so rent and make nice clarified there there was a dispute below or an argument below that s bank doesn't even have a right to the right sort any of their rights under the recognition agreement and the court ruled one way then on reconsideration the court said oh no it it basically reversed are you challenging only the and i realize it's very confusing reading this from from the outset at the end of the day the district court made a key ruling here and that is that ocean towers properly followed the notice of procedures in the recognition agreement to give notice to the bank to make a choice as to whether or not they want to cure the default what we're peeling is not that issue we think the district court got that right what we're saying is once we obtained an unlawful detainer judgment by operation of law it also canceled the shares because under california law the shares associated with the lease are part and parcel what we're disputing here is that the court the district court took another paragraph paragraph six a and i'll call paragraph because the court took that paragraph to mean that under no circumstance could the tower exercise its right to put a tenant in default and move for  fact the notice provision and the default expressly allow for that mechanism to help that the bank is complaining that wait a minute this is not fair but we complied with the notice provisions  now in their appeal you will hear from the bank that said well they didn't send it to metro cities and then to t that had gone out of business in two thousand and six with you that notice provisions were properly complied with because for twenty one thousand dollars you're saying there's no right no obligation to protect the bank's interest in any way you know what we're saying your honor is that we went through the steps required under the recognition agreement which was to provide notice to the bank we had an issue with the tenant they weren't paying the rent they weren't paying their maintenance fees the rest of the tenants have to shoulder their fees that's why just like in  the co op has the right to get the property back and release it so they can get the income and then i think that what you when you then when you get rid of those shares and sell them to someone else then you put someone else still some other pending stuff that they could have you're saying they still could have a cause of action against there's still something floating out there that might have to do with because how mr are really good property for twenty three thousand dollars and there are some there are some claims out there are contesting that there might have been some fraud or some those are still pending in the right and that's not our fight your honor that's between our scar and the bank what we're saying your honor is that we followed the notice procedures under the recognition agreement we did the best we could to let the bank know that we're about to get an unlawful detainer judgment and then i get that argument right you followed the notice right i'd agree that it can't be split it can't be done so now the question is whether u s bank retained an interest in both or not sally that's exactly right and what we're saying let's assume for purposes of argument i  remaining in the parties had some stipulation basically put this case before this court right would you go back on the remaining claims well let me focus first on the two the two cases that are the subject of this appeal if this court finds that there's in the visibility between the shares in the lease and if this court finds that ocean towers properly followed the notice of procedures then as a matter of law this court must overturn the district court decision finding that the bank has the right to the shares which the bank will say those shares are worthless because what's really worth something is the lease and the and the this record told them they don't have any security interest in the lease they have right now interest in shares that maybe allow them to vote on who to hire as a manager but they have absolutely nothing with their share you are saying under certain your answer you're saying that if there's a reversal on the district court ruling that interest then shares were retained it's a straight there's nothing left straight reversal here are very very straightforward so i have two questions one is when you did the unlawful detainer in the state court was the state court on judgment it's an involuntary transmission and as a result the chairs are automatically cancelled it doesn't affect when you move for an unlawful detainer it's no different than if you're wondering where it was that the state court was not on any night as well other than it was didn't pay the lease that's it's just a question of did the tenant pay the lease to make that rate rent payment or not are they in arrears with the three day notice properly served just like any other a second question is this in the mortgage agreement in the original mortgage agreement there was a deed of trust with the deed against the deed is against the shares so than there isn't and there is a security interest in the share correct seven thousand dollars and then they would have been fine at your job but you what you're saying is that language says all we have to do is give notice pursuant to that section if no one comes in and stops it then we can proceed with an unlawful and then we can really rent it and that's the end of that's a you know we get it and and then issue new shares and they sickly you've been paid for those shares earlier by the bank and you can give them up even though the bank by your admission has a proper proprietary interest in those shares because they have a deed of trust correct and then this once again this year's rest goes away and the deed of trust is filed is not the deed of trust is recorded as a lien against real estate correct but if you say it's not real estate it's just the shares i know what i'm sorry let me let me clarify co ops are more of it than how this works i'm just interested in how it disappears and no but and no court is given notice that it disappears and maybe there's no statutory protection and that's what you're telling me because it's a corporate entity what i'm saying your honor is that there's a mechanism where the shares and the lease are tied together there tethered if you lose the lease you lose the shares there everything is tethered together there was a mechanism to protect the bank the bank had the option they didn't have the obligation they had the option to cure the default but we we the h away the co op we had then the right to get the unit back so we can get our bills paid and give it to somebody else because you'd already been paid one point three million dollars for the shares and the other person is now paying the rent and the maintenance so that the other tenants don't have to pay th then you want to reserve and then i'll give you yes i think you've got three left and i thought i'd give you another minute so thank you think that's a good so and i'd like to reserve three minutes for rebuttal ok all i watch the clock saw tell you when you're at three but that doesn't but you know you've prepared before this court before so you know that the three minutes is sort of aspirational it's really our time so but but but i'll let you know ok go ahead bruce land appearing on behalf to say fast for us trust the safest for our family trust me please the court i want to address the one question that was made about this deed of trust the fact of the matter is the key to trust is supposedly securing both the proprietary lease and the shares of stock once the proprietary lease is terminated in this case by a valid unlawful detainer then the security interest in that leased is gone so therefore the deed of trust  novelty as to the lease well you're fairly aligned with what ocean tower just sad what that i mean that's you would like the court to reverse that part of it yes and since i'm facing just the cancellation of the instrument which is the deed of trust on the property the fact of the matter is there was a valid unlawful detainer nobody has contested the validity of that unlawful equitable interest in the in the lease hold in the amount of one point three million dollars roughly by the lessee ok you go to the district court and you say well do you go to the state court and in the unlawful detainer and you say the lessee has not paid their rent but you don't tell the court that there's a one point three million dollar equitable interest in the lease ok and the court says ok you're off you can take property you can take your property so that's the conceptual problem that i have with it's not just a regular rental agreement it's a rental agreement with an equitable interest that's been extinguished by the court by operational law without letting the court know that that's what they've done and to that extent i'm the stranger to the prior trans and i agree with you after the fact and take a property that has you know that could have protected its security interest in the shares of stock by filing a uniform a u c c one financing statement which would have protected the bank and they did not do that soon as i said i don't have  for your standpoint i disagree what your client isn't completely out of the woods though and a sense that there's still some action that are still in the district court right well the  have to do with because there are some which we're not getting into here but there are some allegations that some people that were on the h o a board or something told this guy hey you and they and they're supposed to get fair market value when they sell things and so there's there's this isn't going to completely go away we just we're here to rule on what we can do it may go away with regard to the cancellation the instrument because as long as you can split the stock from the lease under the civil code that portion goes away to the extent that there may be some subsequent cause of action for fraud which has already been dismissed or tolling but it was without prejudice is out there holding that arrow in the of the issue in separate litigation but that is not the fact that the instrument should be cancelled and the property should be free and clear that the trust i think we under i think we understand that and so ocean towers got paid the money from the bank and then they got lease payments from miss shero until she defaulted then their position is that then they under the agreement they reassured the sheriff for the amount of money that they were of out and back lease payments or something like that right correct and to the extent that there's a fight between us bank and ocean towers on a contractual right which is the recognition agreement mean and that's what the district court says that lien because they split the stock from the lease under civil code section forty six forty you can't split the stock from the lease that we all like what you're saying is that because the parties all agree that the shares can't be split from the lease this is judge when by the way yet if you prevail on that issue here you are out of the case that's correct because because whatever fraudulent transfer claims counterclaim what i was preserved to the tolling an agreement for the parties to come up here that's between ocean towers and us bank and that maybe maybe with my client too but that's a separate issue to be separately decide don't deal with that when you when you're back in the district court of face that one next to the extent that the lien want to be off the property at the present time the fact of the matter is once there's just out of curiosity oh i wish i was still exist in the bank who could sue meszaros but i think the bank dismissed the cause of action against her she's the original bar or they still have the rights against her mean do you know the circumstances of her default that's my question and i know that's now said she she didn't default as she was she appeared in the case you mean the circumstances why she didn't bend why she's not pan up and i think it much so now we're going to us bank for fifteen minutes and so if you state your name and appearance for the record and then you can proceed thank you good morning may it please us bank if i could start by addressing some of the questions at the panels already asked that i don't think they've gone clear responses or frankly accuracy sponsor's to with regards to judge telling its question regarding the deed of trust it is it does provide security both for the lease and the shares that make up the unit one thousand eight b n ocean towers with regards to mr lindau saying that his client is somehow an innocent third party that's not necessarily true he was made aware in the stock whopper of purchase agreement the document that ocean towers claims transfer the right in the property to mr asghar that there was this pending lien by the bank like there were a number of people that were in between and so let's talk about what us bank didn't do bright in terms of the original company i don't metro interest cities the metro cities it sounds like it should be a phone carrier or something like that but it but that being the case there were a lot of people in between so you were neither the paperwork was not up to date well you honor i guess i'll start by saying you're correct that metro cities what i don't want to do i can't if i don't think u s bank could've done everything right or you should have been on the deed which you were right not necessarily your honor what what is done in you so this loan was made by men at on south a company that was acquired by bank of america and subsequently us bank acquired the trustee interest for numerous trusts that bank of america acted as trustee so that's sort of the the history of how the ownership interest to u bank with regards to what notice they should have provided i agree that it would have been in the best interest of the banks that every time the loan changed ownership that notice be provided to ocean towers as well name that's it and what happens your honor is first one i would say under the recognition agreement there is no requirement that that any notice but that a change in the address where such notices are to be provided is given with regards to the recording of a assignment of deed of trust what those those are recorded for the purpose those are recorded are in basically in advance of a foreclosure proceedings so they will be felt would be recorded mortgage and you weren't intending to foreclose so you never filed the deed address because your honor in may of two thousand and eleven this the default on the loan to shero was cured and therefore as a may two thousand and eleven there was no longer any notice of a of an assignment but if i if i may with regards to that assignment that was on that is recorded in the title documents the ones that ocean towers council said he reviewed it does identify bank of america but it also provides the address to which notices should be provided and that's care of the loan service or select portfolio servicing stock portfolios servicing is still the loan servicer and has been since june of two thousand and ten remains remain pointed out in may of two thousand and eleven this loan was the default on the loan was cured therefore the there's a rescission of the notice of default there's no longer any foreclosure proceedings the wall firm is retained as the foreclosure trustee for the limited purpose of carrying out the foreclosure sale whenever there is no longer a foreclosure sale or foreclosure proceeding active what happens is the wolf farm or any other foreclosure trustee closes the file on that and the reason that's relevant in this case as as was testified to by the employee at select for value which said she did not recall receiving it no record ever seeding it is not in her email and the reason that and the reason i point that out is because communications between the wall firm and slot portfolio do not go through e mail and the reason that is is because multiple people at each whether it's at the foreclosure trustee or at the loan servicer handle the loan therefore whenever you call up or anybody calls up they want to be able to pull up as a system that has all of the notes relating to that well where there's no act of foreclosure that system's not in place and there's no it in there's no indication but to me on the notice issue i mean the parties can fight about whether they're temp sufficient or not but you know you have to basically this is a contractual obligation to comply with notice procedures are specifically set out and i don't see where there's a violation in terms of the the playing requirements set out in the recognition agreement right they they were obligated to notify metro city and that's going to speed metro city went out of business your they ran a title report disagree with with first off they keep repeating this idea that metro city's out of business that's just not true there's nothing they don't cite anything but cities was acquired by another entity was still located at the same address was contacted by mr orlando at ocean towers  with prior default you know exactly how to contact them he had done so and when they ran the title report it metro cities popped up on that title report no and again in the title document as judge of time was noting there is an assignment that was recorded prior to the review of the title search done by ocean towers council and in that in those title documents there is an assignment to bank of america and note and then a fight select portfolio as the ante to contact relating to saying is whether if the f if it's a notice if it requires it you're saying they had to do more and they're saying we did what it said we had to do it's contractual and you needed to do more to protect yourself i would argue two things one if the court is going to say you have to follow the strict language in the contract it requires that unless there's a change of address which there wasn't then you have to send notice to metro cities the lender they didn't do that at the court's going to say that because the loan had actually been transferred and they're required to then give notice then they had to use good faith efforts to identify the proper entity which was part of the title documents that they reviewed and the reality is that this and that they properly comply with the requirement under the recognition agreement you agreed that the district court erred in splitting the interest in the shares in the lease right correct but you want us to reverse one is that paragraph six that they're not that they can't cancel the shares or terminate the lease unless and until the loan is fully repaid and that's correct if you can't let's say it only applies to the shares  as as a district court concluded if you cannot cancel the shares and the natural consequence of terminating the lease is cancelling the shares then you can't terminate the lease either you can't take a step which and do something which has the natural consequences of leading to a cancellation if you disagree with the district court's interpretation or reading section six then the case doesn't end it will be a reversal of the district court ruling but you still preserve certain claims and you just go back and proceed in the district court on those claims is that what will happen well i think if if the court rules against the bank on the breach claims well i'm not sure what what the you know whether there would remain a fraud claim because you know it depends on what how the court rules and whether our simply took an action that was consistent with  contract or not i just want to be sure i understand this is kind of novel to me if if ocean towers had contacted metro city's mortgage bank as they were required to under the contract you would have been notified well you know they were evidence of the record but metro cities or the entity that acquired a prospect in other cases does for those notifications so yes i believe so do you want to retain any at the time i will were there but and i had my next question is the didn't basically i'm looking back to those district court opinion if the district court says that that meant that ocean towers had fulfilled its notice for responsibility then by implication the court accepted them in effect flying in the metro cities was no longer in business no i think they i think what the court concluded was that metro city's no longer was the beneficial interest in the no but that's different from saying that they're out of business because they're not if they were not out of business there's no evidence of that there could be no evidence of that because they were acquired by another entity so unless you're using out of business the me acquired by another company but i don't think that's what opposing counsel is really referring to ok ok so you still have to forty plus the one technical trying to i have to remember on this i know you didn't reserve your full five with him for how much did he have left ok so it was three fifty six and i said i'd give one so that what i want to get to is the concern of the court that there was some windfall in the ocean towers got one point three million dollars and the bank is getting taken advantage of not true i agree with you i misspoke because you were already paid but it goes back for ocean towers owns the fee interest in all these units when you want to buy an expensive unit in the area which you buys a lease and shares this is share of water from somebody else let's say hypothetically for one point two million dollars they got the one point two million all ocean towers ever gets from whoever owns the unit is the writ to pay the mortgage and pay the gardener and pay the insurance that you  ask are we got a unit back after the u d and it's subject to a on title if you look at the stock co op purchase agreement that's in the record you will see the ocean tower said to mr ask are the reason why you're getting this for twenty thousand dollars as you're probably going to get sued by the bank and so we're not warning title we're not giving you any title insurance and worse and it's likely to happen we want you to indemnify us when it happens that's happening right now so  they made it crystal clear and they are the bank can come in and protect its rights whatever they are living with mr lando but the final thing i want to say is we got no windfall out of this and the judge correctly concluded that we're not responsible the point that metro cities was out of business i cite to the record e r fifty two there's an undisputed fact that says metro cities is out of business and the bank admitted it so it's a non issue in this case the other point i want to address is that the bank states that the s p s address was in the online search conducted by mr hamburg if the court looks at the record at yard five seven four three five seven six it will not find the s b s address what it will find is the wall firm identified as the trustee for bank of america thank you ok and you i think are taking the position that taking that second step was actually more than you had to do or something art to go to the wall for you said we not only come you complied when you did the first thing but you did more and then that was enough we complied by sending the notice to the welfare and that was identified as the trustee ok and the title search thank you right so mr deland is coming back to the podium and he has got about three minutes left how much you three fifty and then i can have if if you really what needs to go back to the district court to the extent that the court did not cancel the instrument which is the diva trust i think if this court reverses then that chaos with respect to say fast by that cancels the deed of trust and we have that property fear and clear of that lien the other thing that goes back to the district court is the finding that ocean towers breached the recognition agreement if they  gets reversed also then that done and we're finished with this case other than what other potential causes of action are against everyone that's still reserved i think that takes care of  don't care if you're all done down below right we don't care about that discrete legal issues that each they each one of you and and life has consequences so whatever's left for all of you we don't care i mean not that we don't care as people but we don't we won't we're not going to that's not how we decide cases and our discrete issue is that the cancellation of the deed of trust has to occur because there is no question that the unlawful detainer was valid that the judgment occurred there's a finality of that judgment and to the extent that that happens then under civil code section forty six forty the shares get cancelled by operation of law and therefore the lien is off the property and my client gets the property free and clear of the lien that's what happens with respect to my client as it relates to us bank the one other point that everyone is ignoring in terms of notices is that it was clear that the wool firm was they named as the agent for the service or and therefore by giving notice to the agent that gave notice to the service or so i think ocean towers title documents the corporation assignment of the to trust that identifies like portfolio servicing is volume four of us bank supplemental excerpts of record at pages nine ninety five through nine ninety seven with regards to  the agent the wall firm it is an agent for a limited scope as the foreclosure trustee the fact that it can that it can receive any notice is that's not correct with regards to or has any that it's agency goes outside of the that limited scope is just simply and correct and it's not the the entity identified within the recognition agreement to receive any notices with regards to the metro cities entity again if out of business means that the entity metro cities no longer exists that's correct it was acquired by an entity that retained that was still located at the exact same address so i mean it's really a non starter and then i'd like to finally say i know we focused on the notice here but what i would say is as the district court concluded regardless of whether they comply with the notice obligation does not allow ocean towers to avoid their obligations in the rest of the recognition agreement including in paragraph s which is the only way that the ocean powers can get around paragraph six is essentially read it out of the contract what we're doing here isn't much different then any condominium building in any way we're going to zation would face if they had a defaulting owner they want it taken up be allowed to extinguish the underlying lien that the bank had they would basically be any purchaser what essentially be buying with the obligation to the bank so this idea that it's you i think as commercially and reasonable that just simply isn't correct if that were the case then every single condo and every single a joe way across the state california that had it that had a unit owner that wasn't paying their fees would have the same argument that how can they continue to run their h away if they if they have to if they're not receiving those fees and the bank has the senior lien here all that's happening whenever you're requiring them to pay back the bank if they decide to take back the lease and the shares is to pay back the bank that's it that's what they provided to the lender through this recognition agreement and exchange for the bank making that loan within a co op now the fact that the co op has some differen t is a different problem or shine anywhere on the loan agreement right i'm sorry no but a recognition agreement does reference the loan and the security and i would argue that those documents would be incorporated into the recognition agreement as mr orlando who signed these documents on behalf of ocean tower stated these this recognition green was part of a a group of purchase agreement documents that included the deed of trust the loan the pledge agreement the pledge holder think that i i haven't confirmed with the panel but i think i can speak on behalf i think that all of you did a very good job of presenting your best arguments on all of the issues and i think that w while this is complicated i think that we understand what all of the stated and thank you for your arguments in this matter this concluded argument