they please the court my name is john hart from when or why some madison a tree fort and i represent the fallen family the central issue in this case is whether a debtor in possession or a trustee exercising the truong arm powers under the bankruptcy code as a hypothetical bo fide purchaser of real property can retain the benefits of a recorded ratified lease but shed the burdens imposed by the unrecorded portions of that same ratified police state it differently if the trustee decides to administer the mineral lease that has been recorded it must be except all the provisions in the lease including the unrecorded provisions or maybe shed the unrecorded burdensome provisions yeah ask you if he decides to assign it what will the city be required to do to for a trustee to sign the lease he has to assume that lease it's assumption assignment the law of this circuit and the law of other all other circuits in the context of section three sixty five says that a trustee cannot cherry pick the good the good provisions with the burdensome provisions in the context of this deal with me in the context of this deal i would suggest to the court that the result should be the same as it would be under the three sixty five analysis because this case involves an integration clause and the integration clause was uphill by both the district court and the trial some familiarity with bankruptcy law and i thought the mineral leases especially were operating interests lease would be executor contract well there is actually a split of law on whether or not a louisiana mineral lease is an executor or a contract or whether it is a real right judge parker from the middle district in the eighty's and ninety's did the texaco case where he he determined that it was in fact an executor or a contract that was a u s district judge but with respect to there was another decision called up get r t a energy from a bankruptcy judge judge shift in the laugh yet division and he concluded that it is a real right i frankly think that the better view is that it is a real right under louisiana law of the mineral code itself defines please i would like to begin our analysis with a statement which is the public records doctrine does not apply to this case as a result the courts below erred by concluding that the this important it's important because under our louisiana public records doctrine it only protects third parties if you're a party to the interim it you're bound by unrecorded portions of it remember my case centers on this integration clause and so i have something of record but i have an recorded components that's why that integration clause is important if the public records doctrine does not apply that is if the possession is not in fact a third party for purposes of the louisiana public records doctrine then it's bound by all of the unrecorded portions of the trial court assumed without any analysis that the trustee would in fact be a third party i have to tell you it's it's kind of a gut reaction of every bankruptcy lawyer that a trustee is a third party my gut reaction and and your honor i serve as a trustee myself and have for the plas fifteen years and i routinely take the position that i am a third party in other context in this context however the louisiana public record doctrine tells us who is and who is not a third party there is a code article directly on point cited in the brief it is the louisiana civil code article thirty three forty three and it deals with the contract you're no longer a third a third party to that contract for purposes of the wheezy end of public records doctrine actually the code article says this a person who by contract assumes an obligation or is bound by contract to recognize a right is not a third party with respect to the obligations or the right or to the instrument career creating or establishing it now what that means is that for purposes of the public record doctrine you're not a third party he would be banned by the unrecorded portions that do not appear and clean assuming a contract and yes a contract actually according to our louisiana mineral code i would say there should be no difference and that is a different code article that i cited in the brief and that is article twenty eight of the mineral code that sell a r s thirty one colin one twenty eight and that deals with an asset me of a mineral lease and judge jones the question is right on point it says to the extent of the interest acquired and asked sunny or a sup lessee acquires the rights and powers of the lessee and becomes responsible directly to the original lesser work for the performance of the lessees obligation if you assume the waves you become a party to the lease you're no longer a third party if you're not a third party for purposes of the louisiana public records doctrine you're stuck with all of the leaks warts and all the recorded portions and the unrecorded porche why why would the trustee though not be the third party under and it gets to the  because he is exercising in this case as a debtor in possession but it's the same thing the trustee is exercising their rights he has all of the rights and powers of a hypothetical bonafide purchaser of real property in this case the real property is a contract i know that's kind of odd to think of it but louisiana considers this contract this mineral right to be a real right and so he is stepping into the shoes he gets what ever rights a purchaser of that contract would get under louisiana law what we know what rights and obligations that would be i just read it i have to code articles right on point that says if you assume the lease if it's assigned to you or you assume the lease you step into the shoes if the logic of zana and you have c understand this area well is that there really what we're doing is imagining a fiction we've got a preposition goodrich and we've got a post petition steps into the shoes of the hypothetical predator or purchaser judge wiener actually says it does not give the trustee either stilts are seven league boots to augment the ordinary footwear of the  on my client's behalf that it does not say bonafide third party it says bonafide purchaser and so you get whatever rights a purchaser would get under louisiana law and i would suggest that your honor with with respect to article one twenty eight this court has already addressed the application of one twenty eight with respect to the louisiana public records doctrine i heard you ask in the other case that came before us what is your best case i would say my best case is a case decided by this circuit it is one that it is not cited in my brief i would like to submit a twenty eight j letter to give you the citation but it is singular versus continental illinois energy development corp found it seven eighty six f second six forty seven and i'll be glad to do it twenty eight j letter to mineral lease has privity of contract under article one twenty eight and therefore the law of registry has no bearing so i would say that this court's prior precedents would say that the public records doctrine does not apply the same would be true of the judicial when creditor problem the same result would would occur because in that case the lane creditor does not get to wipe away the unrecorded provisions of the mi the lien creditor has a right in our state to ask the sheriff to seize and sell this contract we don't we do not have self help in the state of louisiana he would have to ask the sheriff to seize and sell this contract and what with the sheriff  would sell it to an ultimate purchaser who stands in the shoes of the mineral lessee now i don't want to put all of my eggs in one basket because i believe that if the public records doctrine does apply to this case felon family has complied with that public records doctoring as a result of goodrich would be bound by the terms of the integrated document which includes the ratified document the ratified police the the settlement agreement and the note which of course are on record order didn't signal room there was anything on parade i'm after consideration it does it it indicates with respect to the consideration of that promises were exchanged there is no consideration i would like to answer judge davis's question about whether or not a a document a lease is required to say whether all consideration has been paid the phalen family could have recorded a very skimpy document called a notice of lease and louisiana in lieu of recording thing entirely to parties may record a four things your honor that are required under louisiana law with respect to recording a noticeably one is the parties names and addresses two is the property description three is the date of the lease and the term and fo with respect to a mineral lease it must also include the primary term of the lease as well as any additional period during which the lease may be maintained by the payment of rentals my point is that the document that was recorded that is in the record before this court complies with that and as a result there is no duty of a party to a lease to have all these other things that popped up in the bankruptcy case such as a description of the dissolution ri forty two it's not required it is absolutely not required of a party to a lease to have put these things there is no duty to record and the property records the existence of statutory remedies or a factual not the one who argued it well what judges are is a former real estate lawyer and a very smart guy and what do you think would have led him so far astray from the arguments you're making the he told the court he is a very good bankruptcy judge he gave this thoughtful analysis frankly i just disagreed with the end result because it's not required of of any party to at least in louisiana to put these things a record to your point is that is there a difference between a sale and a lease with respect to what needs to be disclosed yes and if any and in my view the court just took a wrong turn and took all of those cases dealing with dissolution and put and said you need to disclose these things that record all of those cases dealt with the sale ok well let me just ask you though you're live in the leeward case involves and when it did all the property of the company became property the bankruptcy estate and the creditors as a whole as represented by the trustee was vested with all the property rights of the debtor including all the real property rights and they didn't just get those rights in any fashion the trustee representing the creditors as a whole received those property rights with the all the rights and powers of a bona fide purchaser and a judicially creditor under eleven u s c five forty four and that's what the bankruptcy code provides that again the trustee gets those the highest rights to that property unless there's another party that can come along and show a superior legal right to determin answer to that question is no that's just not the case because under louisiana law dissolution is not affective against a third party where the real property records show there was no credit sale and this is the essence of louisiana civil code thirty three forty two which is the provision that states that a party cannot contradict the terms of the record document to the prejudice of the third party no difference between sale and lease no difference between sale and lease i'm glad that they brought up the title thirty one of the mineral code section one twenty eight because if you look at the comment look at that statute the first comment under there yes is that let me say it correctly the application the articles twenty four forty eight and twenty four forty nine two assignments of mineral leases subjects these transactions to law of sale so the middle code says that these men are least transactions are subject to the law of sale and so we cite cases that have mineral leases and but we also that that all the consideration has been paid and didn't the court came out and said well you can get dissolution anyway do you have a single case that involves a mineral levy's where the where the room where this argument was made law but what bothers me about this case is if this were in texas and it were mineral e s you couldn't cherry pick take the good and leave the bad you have to assume and assign right which would have meant that they'd have had to pay the outstanding hundred that nine hundred thousand whatever was well it is now and you're trying to say that under louisiana law the result is different because of these you know dissolution recording statutes  i'm not actually suggesting that i think that result in texas and oklahoma in the other all the gas states would be the same i think that you know is it in these large these only gas bankruptcies to the middle east don't go through an assumption or a rejection process in and they're considered the  trustee but it is is subject to the recorded interests in real estate and not subject to the unrecorded interests and that is that is kind of the conventional a so it's a state law bankruptcy and in that case they don't have the eleven u s c five forty four to fall back on but the court in that case thought through this process and said look the rehabilitate or of this of this insurance company has got to be able to rely on the public records or third party and if you've got a record in question is from how big was this goodridge petroleum how big was it i think the total amount of claims in the  don't i don't know like i mean operate a bunch of lead is yes you want to sell several hundred million dollars of debt and in the case under seven hundred million dollars well the trustee apparent surely did do a certain amount of due diligence and in the file on this ok but so your your contention would be to put together those no nothing in those documents gave any indication the goodrich money on an outstanding agreement in connection with the clarifying what that document says the ratification doesn't say anything about a promissory note doesn't say anything about any money being owed it doesn't make any reference to that furthermore it confirms the reader that that is not the case absent that there is absolutely not the case it says now therefore for the promises and covenants exchange below and other good and valuable consideration exchanged by the parties on or near this date the receipt insufficiency of which is hereby acknowledged the parties agree and then it goes one two three four which elements it doesn't say anything about money owed or money due it says that the considerations been paid on or near the near the state and what the real estate lawyer to mean the reason this is put in here is to confirm to the reader of the public records  consideration has been paid this is not subject to a fair consideration issue that's why it's in there we're going to we're going to get to thirty three forty three yes i could i'm going to turn to that next thirty three forty three argument is which they're saying the trustee is not a third party under the louisiana law that's not the seriously wrong argument and that's the key for four reasons and i want to walk through those with you first is the in result a case which is a fist circuit case that just holds the polar opposite of that and in that case the fist circuit just specifically looked at this intersection between eleven u s c five forty four and the louisiana public record stockton and what it held was that for the purposes of the louisiana public record stock for a creditor or a purchaser is a third person applying that doctrine to section five forty four it is clear that the trustee is a third person for the purposes of the public records resumes the status of a hypothetical creditor a bona fide purchaser as of the commits move the case i think we have controlling the circuit law on this point step into the shoes of it subject to the public record stocked so a party if you have a if you have a two page document the first page is a deed in the second page is a mortgage when you're buying a house you buy the house you record to beat you fail to record the mortgage and you sell the house to someone that someone does not take the house subject to that mortgage they stepped into the shoes of that deed that they took but it's the mortgage is on record it that the third party wouldn't take it subject to the unrecorded mortgage it would it would always be true that if yes a third party's interest came before the reparation of the mortgage right you know that that would always be that would always be true this is the second part real big problem with their argument a thirty three forty three is that it ignores the judicial lien creditor prong of five forty four it's a completely addressed at the moment of it's a bona fide purchaser promising look if you purchase you require you assign you assume then you have to sept all the on record of interest i think that's wrong but eleven u s c five three four eight one talks about a judicial lien creditor clearly someone if you're injured on the on somebody's property you go out and get a judgment and you put a lien on the property your third party your third party there's no possible argument that that person is not a third party they've completely in the briefs he talked a little about a moment ago that i mean the briefs completely skipped over that point so you know if you thirty three forty three argument i think we still went under eleven thirty scuse me thirty three point three part of the general sales provisions are the mineral code it's in the civil code by general sales  have the general laws saying it's part of the public records doctrine sure ok but there's no question that the mineral code and the mint mineral leases that the public records stocks and applies to that article thirty three thirty eight of the civil code says that that any transaction involving a movable has to be recorded and section like the mineral code thirty one law applies to the third point i want to say about this thirty three forty three argument is that it just proves way too much and it goes back to the example i was making about the pay the mortgage where you got to what the first page is a deed in the second requirements for mineral leases for leases ok so that's yes that's a great question six a good deal of sense actually yes and i think that's completely supports our point i mean this is about inquiry notice and so yes you can follow your memorandum of lease and you can put out that that it's out there and then the reader knows that you've got to find out what's what's in that lease the point is that that did not happen here there is nothing that says memorandum of settlement agreement memorandum a promissory note of zero or that there's going to be  leases or their leases all over the place for you know multi story buildings and vast mineral holdings and and you never put all the truck imitation on the record it you never identified in the recording instruments  cases that we cite say is that if if there is an inkling in the document that there's been a credit sale then dissolution is a possibility if the court if the document reflects at all the consideration has been paid  then the third party is going to prevail in that case and i mean we've got just a number of cases in the house of water this tells us that that's the correct outcome under what we see in a law does that mean you cannot have dissolution in the case of a finance transaction now you can have dissolution in the case of a finance transaction and in fact they cite a case of that i think is very good for our side called mann skalkaho versus the united states where you've got a finance transaction and you have a widow she sells her house to this gambler tax evader bad guy and it's a credit transaction and they record the document in the public records and it explains how he's got to make these payments and then the interest comes in later and puts a lien on the property against this fellow and irises saying hey arlene  superior in the courts no no you can get dissolution in that case because there's a credit sale in it's in the public records and so there's the case as the converse of the case of all the cases we cite that tells us ok dissolution with the correct recording dissolution can be there i mean they could have in this case recorded that the promissory note or a reference that there was a payments due on credit or they could have negotiated for security that the way most leases what i mean like  many commercial leases of man strike many and so you're saying that they all have to if you've got you know you you're building a building in your set leasing it silent on the topic there some of that authority for us on that but it's if it says that the consideration has been paid then yes it does the forty becomes overwhelming let me address just it at this point briefly our alternative grounds to affirm that i wanted to write that i wanted to make sure that i covered just at a moment goodrich did not breach the settlement agreement ok as a threshold question to this whole matter so what's your point about didn't breach will in order that their claim is that they have a right to dissolve they don't have a right dissolve if there wasn't a bridge and say you owe them nine hundred thousand dollars so how can that not be a breach but because there's a so if you look at the settlement agreement there's only two obligations for goodrich goodrich has to pay six hundred fifty thousand dollars up front which they did and goodrich has to deliver subsequent a promissory note which it did goodrich delivered  the the settlement agreement that was originally given to the trial court first is the one that was ultimately corrected and is the one in the record if you look at the motion for consideration that appellant while at the at the bankruptcy court it's the one that they agree and settlement agreement says that the promissory notes specified here in our separate notes  let me also make this let me also make this point the the appellants have made throughout the who have argued that well how is it fair that the the debtor gets to keep the benefit of of these leases and not have to pay the burdens of those leases and it's kind of a fairness point and i just want to point out that that's that's really not it's really just not correct in terms of how bankruptcy works every creditor in the case of all the bondholders and so on and so forth did not get what they bargained for if they were if you well if you look at it and in terms of the right to continue to be in the working to be the operator on these oil and gas leases and they have a right to whatever compensation scheme is provided for in that lease as long as they continue to be the operators so from that standpoint there is little doubt that they are keeping the good part in throwing away the bad and that lease that you have to assume or reject under sixty five and cure the deficiencies in order to assume that that's correct your honor in the court ruled there's a non executive or a contract it doesn't have to be a super rejected under eleven you a c three sixty five and that's a point trade predator that sells pipe to goodrich for three million dollars goodrich gets to keep the pipe they still have the pipe they're using the pipe on wells today and they did not have to pay the three million dollars that three million dollars was dealt with under the planning confirmation order in the bankruptcy and this is the same thing they settled their claim they gave an unsecured promissory note for their claim it didn't have a security interest it wasn't recorded and they were at risk of a bankruptcy with respect to that nine hundred thousand dollars just like a cr the question was posed by judge jones to counsel question what about the bare bones recording dr do you have anything to say about the question what about the inquiry notice provided for by these barebone documents response there is no notice of lease or memorandum of police your honour's he does not matter what it is called there is no requirement under louisiana law to call it a notice of lease or a memorandum of lease we can all agree what was recorded wouldn't have given notice about the promissory note it would not that correct it would not have given notice of about the promissory note but it is inquiry notice it's it's not required under louisiana law judge jones is absolutely correct this is the normal way it is done in the louisiana just like it is in texas another state what about my question is does the louisiana law and differentiate between silence hence inquire further and consideration was sufficient it might for sales not for leases we know what the recording requirements are for leases and as judge jones described it it's bare bones and i've complied with that and once the statute is really strong once you comply with the barebones notice inquiry elements everybody is bound by the lease even the unrecorded portions as judge jones noted the typical scenario is you don't even every month which is typically not disclosed in the public records third parties are in fact bound by that so with respect to the inquiry notice when it comes to leases the wall of registry requires disclosure of the existence of the lease to third parties and then in the lease scenario it is assumed there will always be unpopular and obligations there are lawyers in my office that spend days preparing ten stopping letters in the landlord to stop the letters it's a typical document that is found in most asset purchase agreements when there is a buying and selling of commercial property but why do they have these tended to stop the letters and  land or to stop the letters it's because you cannot tell from the public record what the least is about it is inquiry notice judge jones is question was right on point inquiry notice is all that is required third parties are put on  notice and in this case third parties were put on notice about the terms of the dismissal third parties were also put on notice with respect to the  initial list pendants that was filed a settlement was done as to some but not all parties not all claims were resolved in this lawsuit a prudent lay in may and looking at the records would have concluded i need to ask about this lease i need to find out what the terms are i need to see what is unperformed that the trial court eroni asli concluded that because the disclosures about the dissolution rights were not mentioned in this seven forty two that is correct and in judges goes opinion where is it for the wrestles with this or he did not address it at all for nor did he address article one twenty eight of the mental code nor did he address article thirty three forty three that his analysis was silent on that thirty three forty three was not mentioned one twenty eight was not mentioned nor was the notice of lease provisions mentioned well i think his feeling about at least thirty three forty three and one twenty eight might have been that the us code supersedes those that the terms of five forty four hypothetical you know the stronger clause supersedes and and i would say rely upon judgement wieners language in the cited case the trustee gets what ever rights or available to the hypothetical modified purchaser or lean creditor that was created under state law well now mr raines argument was a piece of the thirty three forty three that you are proving too much that you would undermine a whole lot of  you know lean transaction or super sales subsequent transactions by saying that the things be recorded with respect at least or that a reference about not fully paid until it might be the case with respect to sales there is no risk of that happening with respect to leases it's a bare bones inquiry notice and as you noted yourself your honor that is the typical scenario work without exception and that is that standard whether it's a mineral lease or a commercial lease that is the standard it's bare bones inquiry notice