about it was a ceiling case but the c only can't be lower than the floor which is foreclosure value and unfortunately that's what happened here fundamentally a secured creditor when it take oh the the valuation under five zero six doesn't exist in a vacuum because five zero six the second question the first question is it's asking you to value the creditors interest the second question is is what you want to argue for closer value which in this case happens to be it's because under five zero six what it requires is that under the second part of the section five or six the purpose of the valuation has to be considered so when the purpose of the valuations plan confirmation with respect to a secured creditor that necessarily implicate bankruptcy code section eleven twenty nine b in the fair and equitable for us and so when you're talking about value it's going to it's one or two things has to occur here either value becomes meaningless in the context of the entire code or you have to read it within the very section which are valuing and so when you're valuing it under for confirmation purposes you implicate the fair and applicable test which for eighty years has been very clear that the creditor has to realize it's completely contemporary compensatory undubitably equivalent it's  it's it's it's claim or at the property that's where that it's white becomes relevant that's why there is a minimum for that now just because there's a minimum what the rash case is about is the rash cases taking the position of saying that makes the plan unfeasible right of the plant would require substantial more capital to be contributed in order to satisfy the first other plane that's correct while we believe that we satisfied the standards with respect to the planet already at once the once the when the this record on the eve of the end of two thousand and twelve denied the stay the plan was immediately consummated it was there was not an opportunity god staff attorneys on call firm urgency motions and judges get those calls on a recurring basis i guess i'm still not hearing a reason why a wasn't transactions and consummated that means you can't unwind the transaction and a lot of contexts not necessarily because there's the other one of the four standards in some cases there are cases where a party does not even seek a sta and this is not been found there's also the issue of is there under the burden on the innocence or can the bankruptcy court on remand fashion or natural remedy and in this case there's remarkably little that happened when this plan when in fact of well two people put in some money that they hadn't put in before they did the what it what generally when will first of all look at the parties that are involved this case in terms of the innocence there's a few parties that are there are three sets of constituencies the first say is the center of the city in the state of arizona of the the state of arizona and the city of phoenix those parties cut their deal years ago with respect to express  well basically you're saying that the people that brought in new money were at risk so you should never need to seek a stay because they knew they were at risk you know i think we are saying is that we took steps to seek a stay but you didn't to this court not to this court correct on and is there you have any case law that suggested it's ok to stop after you seek it from the district court that you don't have to go to the court of appeals i believe there's case law that says in the circuit that move that case law that suggests you have to go to the circuit justice even i'm not aware of any authority to suggest that you need to go that far i believe that already has more in terms of diligently pursuing rights but not there has to be to that extent in fact the focus tends to be on the focus on the in the fashion you know neck will remedy there are a lot of times there are very complex cases that are out there where you have insurance trust being set up all kinds of things going on maybe there's a property that's sold maybe there's a bank that lends new money and take liens on property or things of that nature  that's not the case here there's actually quite a bit available at the at the bankruptcy court level first of all we're talking about a transfer there was one point two million that was transferred out of that approximately seven hundred thousand dollars was paid out to just simply the professionals in the case money at that time and post petition in connection with litigating this appeal there's very little that went out to any any other other party that many gun what's been paid professionals in the new money be paid back or to the people that put the new money in can they get their money back there's also the i yes they can when they may have already earned it because given that the plan one effect of at the end of two thousand and twelve the effect is that they've earned tax credits of five hundred thirty nine thousand dollars a year over the last two years they were already earned those so the issue for the bankruptcy court and what bankruptcy court is very capable of doing especially going equitable remedy for chica we were dealing with a money issue here we're talking about we're talking about dollars and there's issues the bankruptcy court be able to consider with respect to the tax credits that have been received there's four hundred fifty thousand dollars in cash sitting there at the complex right now that's pursuant to the projections that they filed that are part of the record of connection of the plan is the ira's require that that property remain as low income from you know whatever it can to act eligible property for a certain number of years that i understand that it has to be qualified at the time that the credits taken i don't know  can't speak to the the i r s issues on that so the answer you give us is you don't know what it would require to undo this is the mom line no i think of the issue is there would have to be an assessment of no that's not what you're saying do you know what it would take to  million dollars in value there's cash of four hundred thousand dollars and that's that at least that there that's there there may be insurance proceeds of additional six or seven hundred thousand dollars that's there as well there's enough value down there at the bankruptcy court the bankruptcy court deals with situations all the time that would be a lot more difficult than this one trying to figure out how to sort out and make it provide in ecuador remedy for cornerstone when you say it's worth eight million dollars  in place of court susan freeman on behalf of sunny slope housing limited partnership the investors invested there one point two million dollars only after the bankruptcy court denied the stay and the district court denied the stay there were three remaining days before they invested  on december thirty first in which the bank could have sought an appeal from this court it could have posted to supersede respond it's a bank it did nothing at that point in time they invested that money has gone out the door it cannot be recovered they al are subject to one point five million dollars in tax liabilities because they invested pursuant to a ten thirty three exchange it cannot be recovered because if this exchange is unwell and if  this investment is unwound under section ten thirty three of the internal revenue code they will retroactively lose the benefits of that party investment they also would lose the tax credits at page thirteen and twelve answering brief we've cited the treasury reg regulation which provides that not only do they not get ongoing tax credits but the tax credits are retroactively lost back to the date that they were initially when into practice if in fact the property is not used as affordable housing for the full fifteen year initial period the compliance period set forth in the treasury regulations so they lose all of that this is in national bank can foreclose at that point in time the tax credits end and the affordable housing restrictions and that's pursuant to the length of the task credit and lost in the past no at that point in time the credits would not be retroactively lost because it would be pursuant to a foreclosure wealthy person why wouldn't the same thing apply here because it's not pursuant to a foreclosure if in fact the court were to reverse the plan confirmation and then they would lose the benefits of or they would lose all of the one point two million dollars they put it would lose sounds pretty much like a foreclosure to me but it's not it's not until unless the court reverses if the court reverses then there would be a foreclosure at that point in time the individual investors the cornerstone at camelback who is not a party to peel the individuals behind it who are not parties to the scipio and the state of arizona and the city of phoenix who are not parties to this appeal would if they had no option but the point is you're under that if in fact this plane is reversed those are you know as the third parties who will suffer the absence of a stay had no impact on them whatsoever the absence of  meant that the festers were willing to put in money forward this and they will suffer from this as a result the point is you're under that they're independent innocent third party you're never member from a reversal and that's what it's going to do that then i was at the bank wasn't screwed by this i mean they they acquired a note from hyde specifically on terms that provided for the release by of the restrictive covenant no your honor that is from hud no your honor and the other covenants come from the junior mortgages no your honor excuse me that is absolutely wrong the purchase from hud provided for the release of the hud regulatory agreement which only required there to be for the property to be maintained or us the wrong term but i have the right concept hud let go no hud receive hud kept the affordable housing company and restrictions intact that was the idea of a regulatory remit it was not reverse that was part of the original deal hud put in the money bond investors put in the money that funded this capstone loan it was all part of an integrated transaction that first southern knew about would when it bought this and when you bought that property from h sorry it was subject to bankruptcy laws affecting creditors rights it bought it knowing that under the bankruptcy code the bankruptcy code gives you the right to get paid they are paid the full amount of their debt they don't have the right to take out of the bankruptcy estate some increased value as long as the amount of their debt is paid and it will be paid under this plan it gets paid over the forty year period years right over the four years the life of the plan forty years to the life of the plan is forty years it with the life of the original note the the plan the court looked at the fact that there is a market for forty year loans for affordable housing it looked to the fact that there was evidence that there was a forty eight year useful life of this property that there are multiple properties that have you know never with a back bankruptcy practitioner but have a forty year plan and it sounds kind of unique it is the original affordable housing loan had a an interest rate that was a point four percent below the been prime rate now it's one point fifteen percent above the current prime rate it is well within the standpoint of that till regulations or that will statement by the supreme court of interest rates of one percent to three percent above prime the court the bankruptcy court followed till and ra rush did not say that your honor instead to the contrary rash said that foreclosure value would not always be less than the planets that it is typically lower that's at five twenty us that doesn't mean it's ever suggest that it's ever higher i can understand they can be exactly the same but it's not always lower i see nothing in a rash that suggests that because rash talks about the additional risk put on the lender if it's not allowed to foreclose and this case the lender is not allowed to foreclose takes the additional risk and gets a lower amount as a result but your under the original note was eight point five no the value is seven to seven seven to possibly eight there the court with finding seven point six  it is lower than the original note amount but in the hands of this particular buyer that bought it realizing the bankruptcy risk realizing the risk of a stretch out the bank would profit because you bought it a lower amount realizing the bankruptcy risk means yes is translated to mean a realizing that that it might not be allowed to foreclose and would have to accept a value lower than the foreclosure value that it would have to accept a value based upon the use of the displaces a secured creditors state law right to obtain immediate foreclosure appointed debtors default that's what it says and this does in fact because the court the court in rash looked at two things it looked to section five zero six eight of the bankruptcy code which says you value the secured creditors interest by looking at the value of the creditors interest in the state's interest in light of the post disposition or use and the court said you look at the proposed disposition or use you look first at the state's interest in your state's interest is restricted by the disorders issue or used language in particular in a rash i'm sorry the disposition quote the quote disposition or and used by the debtor that's use but but i don't see anything in that use of the word use that suggests used exactly in the same way the debtor's been using it before and would like to continue using it by its preference in this case affordable housing rife said that actual use rather than a foreclosure sale that will not take place is the proper guide under prescription hinged to the properties disposition or use we don't have a foreclosure sale that's taking place under this plan what we have is used as affordable housing which is the use that first southerns for any thoughts or body into every i don't see anything in a rash that takes use be on the fact the debtor has retained the part about the affordable housing part it's housing it's the additional limitation makes it affordable housing that has a substantial impact on the value what in a rash says that the cram down can include the lesser value of affordable housing from the creditors respective i can understand why they think they've been shortchanged what raj says is that you look at it from the standpoint of that that debtors use yet and that the someone in the debtors trade business or situation would pay to  like property this debtor was in the trade business or situation of affordable housing that's all it was created to do that's all it would get but then look at what rush goes on to say and do if a debtor keeps the property and continues to use it the creditor obtains at once neither the property nor its value and is exposed to double risks and your client is saying as a result of being exposed to double risks the bank gets less because it's less than the foreclosure value how does not follow the bank it's less than the amount that it went out and bought it's at a song with the expectation of making a quick profit and less for the alternative this rash says the alternative is the foreclosure value and it's getting markedly less than that in this particular instance it is unusual that the foreclosure value it also higher and then says sent with the logic of rash which says if the if the creditor takes additional risk it ought to get additional value for that and you're saying no in this case it gets last despite taking the additional risk because what you get in bankruptcy is not the right to get your property has it's appreciated you get the right to have your debt paid and their debt is being paid in accordance with the bankruptcy code and in accordance with the bankruptcy code as interpreted by rash if you also look to the fact that you have the right to be paid in accordance with the fair and equitable test of the bankruptcy code which gives you three options one of which is paying over time value standard accurately gauge is the debtor's use of the property close quote once replacement value here it's the replacement value of unavoidable housing complex that's what anyone would be able to buy i would also no that with respect to the fair and equitable test their argument is completely contrary to the supreme court's opinion in red lax because in red like the court said that in debatable equivalent is one of the three methods of paying pursuant to the respect to the fair and equitable test set forth in the bankruptcy code he said i'm dealing with fairness and equity as those terms may be used in the new york times i've never something based upon what the actual bankruptcy co standards are your time is running out but could you give me a favor and just explain to me the situation on remained after went back for the valuation including the the tax credits there was a two aspects of that one is as analyzed by the district court and the district court can of course look at the two plans and two contracts and evaluate it and the district court said that this particular plan as confirmed the second time around with not any different if there were no changes to the planned terms themselves the only change in fact that ended up they got a better deal it got a better deal didn't adversely affect it and it has to materially change the plan so it was tantamount to the secured creditor the right to kind of get the upside if there is any defaults later on during the course of the of the plane term and that's what the secured creditor got in this case it has that remedy that effective equity cushion that kicks in where that would be a foreclosure and also eleven eleven eleven be the only argument that they gave for needing eleven eleven be with that the best interest test industry and underwriting of security loans to understand there could be a success situation where it's compelled to receive less than foreclosure value sometimes banks make an error and they get a little bit little in foreclosure but that's the risk they take and not what occurred in this case second there's been a number of comments from sunny slope about how first southerners so how some how paid and fall under the current plan what they mean by that is that over the course of forty years the first southern would receive the aggregate amount of eight point nine million dollars but of course we know under section eleven twenty nine we don't talk about aggregate dollars we talk about present value and so when they say payment in full they're not being genuine with the court payment in full under this foreclosure value issue would be you would have an eight million dollars or so secured claim paid and even if you used four point four percent interest you're going to get fourteen more million dollars paid over the course of forty years than what the what they're talking about so this is  plan all the first southern receives is a secured claim of three point nine million dollars the cash flow and the three point nine million dollars of four point four percent interest over forty years doesn't quite get to the eight point nine million dollars which is the face amount of the debt as we stand here today so the that's why there is even at the end of the forty years there's a balloon payment to get to the eight point nine million how much should the bank pay the bank the bank it's in the record about roughly five million dollars so we knew it was taking a risk as well barton it knew it was taking a risk as well whether a bank is making a loan in the first place or whether it's buying paper which is a very important part of commerce that there are parties out there they're willing to buy papers from for example the f b i see or hide in this case they have an expectation that there's a claim and if it was understood that somehow by buying a no they were second class citizen i don't not think they'll be well received in the marketplace well they knew they didn't have eight million dollars in their pocket because they only had to pay foreclose on property collecting in short order almost all of an eight million dollar no that's the guess the current balance outstanding on the hud and so if the property value is seven a half million has been tossed around and they'll wind up making a profit of two and a half million dollars in a few years well the issue is there's always a risk involved with these situations and it's not and that's exactly the question that i'm posing this the bank went into it knowing there was risk involved they understood that they would be able to recover a foreclosure value they have that expectation yes