army john deere cited in the previous clearly make that point the state that the purpose of this section is not to punish the debtor with the kitchen sink approach but to a stablish continuing liability for those damages that arise from the front question didn't that there was there were quite extensive we're shifting gears here but i thought in this case there were quite extensive findings by the bankruptcy judg yes and they were all in favor of the kellys until the final one they found that there were no findings against lori kelley on the financing on either the kellys as to the financing statements as to the materials that they provided no affirmative misrepresentations those were all found by the court not to be sustained causes of action the court made a single specific finding which was that the court was quote shocked close quote that a license contractor george kelly would not have personally disclosed the fact that permits had not been issued on two properties there were seven properties that were secured by us there were three million dollars permit and there was a stop order in the law and the and on a single property yeah and i just thought that the district court meant the bankruptcy court found that that that they relied on that property that the court exactly the court and found that there were exactly two properties in question and then they threw in an entire set of loans that had no rational relationship to those two properties whatsoever for those long sorry the two properties were collateral for the loans at issue we had a specific limitation signed twice by the plaintiffs in this act and the limitation was solely created by him and his agent and the court had that information i don't know what you mean by the limitation they were collateral for the loans weren't there were those who were collateral for the loan and on exhibit seventy two it specifically states that the only portion of security from the various properties is identified there was one hundred thousand dollars available for the fourth place property there was two hundred thousand dollars for the boulevard property on  sense they wouldn't have made the ones at all if they had known at those properties didn't have permits then where is the conservation problem well they said there is a single broad statement made three years after the fact by m williams to that effect however all of the evidence all of the facts all the documents and all the agreements all in writing made at the time upon which you can establish that there was any reliance were not to that effect they were to the effect that there was a maximum of one hundred thousand and forth place what does that mean and i don't know what you mean by that you have to allocate the damages that related to the fraud the court found there was no fraud with a god the highland properties there were three residential properties the court found there was no fraud with regard to the palms property and the church property those provided five hundred thousand of specified security if you look at exhibit seventy two specifies that what do you think we should you take some kind of ratio of absolutely have to your honor the syriani and all those cases specifically state that it is only damage that relates from the fraud that you can find a way to what i'm reading from the in the bankruptcy  this is it says particularly the court is troubled by mr kelly failure to disclose his lack of permits in the city and as indeed a stop work notice in those a violation for the boulevard property williams to leave the boulevard property to have substantial equity in the value of this property was a substantial factor in his decision to make those loans that clearly erroneous that what we do is that well again if you look at exhibit seventy two it identifies three and one half million dollars in equity but then it specifically identifies as the amount of equity securing the loan there's a column for that it is limited to the boulevard property at two hundred thousand it's limited on workplace to one hundred thousand then on exhibit eight there is a release clause which says if you pay one hundred thousand on four flights is released from security and if you look at that they didn't do it but the question is this is is there some rational relationship between six hundred thousand dollars burgess this three hundred thousand dollars which is the maximum limitation prescribed to by williams the plaintiffs as the value that he was asserting related to securing that loan so it sounds like you're saying it should have been fifty percent of the damages about three hundred thousand out of six hundred thousand i'm saying that and i'll get to some of the other damage elements the syriani ruben and beer say there has to be some relationship from the fraud in question to the damage did you propose an alternative damages amount that use this ratio that you're describing we provided the evidence on that the court asked if there had been a calculation done as she presented her verbal and of course there wasn't because we had no idea we would have had to gone through thirty six permutations you have to go one punch two times all the way up to the seven properties and provide  calculation of damages on every permutation but again that's not the defendant's duty or verdict that was the duty of the plaintiffs to establish now the court should have said all right mr williams now show me which of these damages arise but again and they are you saying you gave a formula you argued for this ratio a kind of formula idea and a formula even if you didn't know which once upon a given we had no ability to do anything except say that there were no damages except what was applied here under seventy two and eight and under exhibit sixty eight which is where they calculated their damages you didn't do any calculations i did not and could not because we were arguing that we had not committed any violation and there was no identification we could only present the evidence of what damage related to what property we did that it's undisputed where do we find this calculation in general formula is it made to the district or it's simply in in the paperwork that the damages have to be related to this issue and what we've said is is that if you look at exhibit seventy two and exhibit eight they say there is a limit on them if you then look at exhibit sixty eight which is the calculation of damages that the court applied that's the calculation that the court applied and they said is it there we said yes ok on that page on exhibit sixty eight it identifies the fact that there are damages fourteen thousand nine hundred eighty two dollars for foreclosure forty nine thousand and two thousand for the dances those are all under subpoena done contradicted made with regard to the church and palms properties they have nothing to do with the fourth street i'm sorry fourth place or boulevard properties in addition this is money that wasn't loaned there's a twenty seven thousand six hundred thirty one dollar bonus that williams claimed he was entitled to from the residential property on highland that he's included so we have over ninety three thousand dollars of completely unrelated principle which the court included the court simply said i don't have another calculation and looked at me that's not the kellys responsibility the argument but at that point in time your honor this was all brand new the court had taken several days and then stepped up to the microphone so you know all these findings that we hadn't done anything and then in the very last one said it's specific as to george kelly for this purpose for these two properties at that point in time i did say it's these properties but that's all there's nothing else there was no more evidence that was being taken there was no more argument being allowed this was the findings of the court after we had our  plaintiffs burden but it's very normal for a defendant to have an expert who has an alternative damages calculation your honor i cannot jumping up and down i can't make it any any more harsh we had building to do that you're talking about us going in and saying well if you got silent but not these five and this one so there's one then we would have had thirty six different permutations of damages and they would have all been different wrote something to the district court for it so where do we find where you where this calculation is in that that were the calculation per se is not there it's the same argument that the damages that were required have to be orally argue but the answer is well if i don't know i understand your honor yes yes i did and it got messed up i can't tell you why the actual physical calculation isn't there i can tell you that all of these numbers are on exhibit sixty eight and that the crystal clear because we argued you can't have this kitchen sink damage you can't just can i ask you a different question and different topics are going to run out of time here if the thirty thousand dollars payments each month had continued could your clients have continued making the mortgage payments yes the the entire situation here was in the evidence is again an contradicted and undisputed the kellys went to gillette williams and said we need five hundred thousand because we're thirty months thirty thousand a month upside down will only do the residential properties they came back and said now we want everything you've got as additional collateral security that's over three million will take eight hundred for five twenty  etc as a practical matter two things only six and i want to address that thirty thousand issue because that addresses lori kelley and thirty thousand dollars know the court found that none of the financing statements or anything laurie kell signed ok i have a different issue with this thirty than thirty thousand dollars was supposed to be made and it was absolutely part of this modification agreement there was no consideration if you look at her you have argued there is no consideration so that they shouldn't have to they should have to pay the thirty thousand dollars back that happened in that last payment but why aren't you arguing that they caused the bankruptcy altogether and you should ask any of that because of that i did that that is the argument that we made to the trial court it was look at there is the thirty thousand dollars was due she found that the modification agreement was valid that's the problem it was going on i understand your argument to be the modification agreement is not valid so we don't have to pay back that last thirty thousand nowhere where you arguing that they caused the entire problem and so you don't have to pay any of it because of the failure to continue to pay the thirty thousand that they owe and i don't see you making that argument i can't remember  to the fact that there is a case that says that argues directly the contrary of mr williams which is if you are stuck with a bankruptcy or financial ruin as your only alternative that in fact is duress the court found that the definition of duress under the law right but that's the reason you're arguing it's duress and that we should not consider that last thirty thousand as a time you have to make i'm sorry she made a separate finding that that was a additional basis for fraud so i want that gone but it is also inherent in that and part of the argument there you can't do that we were entitled to thirty thousand dollars for six more months to make these payments but the court found that because that they found that that agreement was valid we couldn't get around it when the court says that agreement binds you we don't have thirty thousand for six more months coming which we were entitled to the whole basis of the loan was that there should have been thirty thousand dollars a month if you ever argue specifically if they had continued making these thirty thousand dollars payments none of this would have happened we would have still had the properties well yes generally i mean that the argument was there but the historical context this is very very clear and simple these people had three and a half million dollars in equity they said certified it with eight hundred thousand on an escape route release clause basis and they took all this extra collateral and the market collapsed and that's what caused this if they had continued to make the thirty thousand dollars payments they would have it would have gone out several more months when the market started to come back eventually would it have been sufficient i don't know but it certainly was not any kind of fraud or or dispensation with regard to highland church or palms williams got church in palms back he got seventy five thousand dollars identified on exhibit eight as return money that is not if i man the one issue that i didn't get an opportunity just on lori sally the findings of the court or the georgia kelly did this there is no finding that lori kelley had the knowledge or did the concealment thank you  little thank you and here's me for my coffee cold would ask the court to affirm the decision of the bankruptcy court and as affirmed by the district court that the debt was non discharge e to go to my client due to the fact that the original loan was procured through fraud and the modification the thirty thousand dollars was procured through a mis representation the original loan was procured through fraud because the kellys to obtain one loan secured by seven properties did not disclose that most of the properties have problems the  business of fixing up properties and then selling them or renting them out mrs kelly and mr kelly were in the business together for nine years together they're pulling they were married and they were in business before this loan was made mr kelly was in the middle east involved in the business throughout the whole time and when this loan was made and on at least one of the properties mr kelly was being prosecuted for violating a stop work notice on the boulevard property which had a conversion from a motel to apartments that was in violation of zoning and taking the carports and turning them into apartments without permits and none of this was disclosed to mr williams the bankruptcy court found which was supported by evidence that if mr williams had known that mr kelly what had done work to these properties  and without permits he would not have made the loan at all so even if we agree with you about that non destructive realty is an equitable remedy that you're seeking and i'm worried about whether your client has unclean hands and is not entitled to that remedy because you had a contract that said you'd pay thirty thousand dollars every month to help them pay the mortgage payments and that's what you knew the thirty thousand was for because of the history of the negotiation and you stopped paying the thirty thousand and then they stopped paying the mortgage payments and that's what caused the bankruptcy that you're now seeking to not an discharge so i'm it seems like you're part of the problem here and i'm struggling with whether we can give you this remedy well let me disagree with your characterization there for a couple of reasons  one is that the contract which is reflected in the escrow instructions which is the only place where it discusses this thirty thousand dollars a month payment gave mr williams the option to make advances or not it specifically says at its discretion but more importantly i don't read it that way so let's if your hands are going to make this thirty thousand our payments every month and that was what the contract was it specifically says that so more importantly though the evidence was clear that when the this loan in september their plan was not to make payments on the senior loans and beginning with the october first payment on all their loans they made half payments to the lenders because in their mind they thought if they were delinquent thing could they could negotiate loan modifications with the lenders so even though they were supposed to use this money to make the payments to the senior loan lien holders the way they did not want to answer the question was why did she pay him the thirty thousand dollars by by march you know when the thirty thousand dollars payment agreement was made where the agreement was we're i will make you an additional payment if you promise that you'll make you'll bring the you'll pay the you'll keep the senior loans current miss they they represented that to j e w to mr williams and he made the payment but it was very clear in the evidence that at that moment they were mrs kelly knew they were so far behind in making their payments that there was no way that she was going to catch up but but they that's true they were making partial payments they were negotiating but it was all still floating in till you stop making the payments that they were using to make the payment that there's no evidence just suggest that the evidence is that they were desperate because they knew they were losing everything in other words there is no evidence that would support the argument that if for the thirty thousand dollars payments were made that they would have been able to turn things around because by then all the it already why was an excuse for  reasons one was the escrow our position and the judge brinkema she judge agreed was our the he was not obligated to make any more advances number one and number two there was a modification agreement where the parties agreed that this would be the last advance and so the agreed that he wouldn't have to make any more than a saturday and they had no they had no choice because you are saying i'll give you one more payment or i'll give you no more payments and so they said ok we'll give us one more payment but there was no consideration you had an obligation to continue making payments so i don't see how you can rely on a modification agreement to get yourself out of this problem and i'd also like to ask you about so page five of the escrow agreements it  says on the first of each and every month thereafter for eleven months the sum of thirty thousand dollars per month will be will be funded so i don't understand how you say that the contract doesn't say you have to do that in my brief i point to the language i point to there's some other footnote that seems to be about a different issue that as i read it there is language in there the talks about the other language that talks about the discretion but let me address the point directly that you're making mr williams did not cause the kellys financial problems they caused the financial problems by not making their payments for months and months before march of two thousand and and nine the contract provided and the  consideration to two things one is we don't believe under the california law consideration was necessary to make that modification to the existing contract and we cited the law in our brief the second thing is that in the escrow agreement it provides that the in other language size the language that you quote and the bankruptcy court agreed that there was no requirement to make the additional payment but before the payment was made they reached this in other words there's a dispute they had to say if they had a dispute if they had a dispute let's say the kelly said well you you need to make me the payment make the payment to me and mr kelly says no i don't well then the enter into an agreement which resolves that dispute which is i'll make the out that this the what is it the prospect of the one that was didn't have the building permits and you had a stop order that did that all that had happened when they first found out that the seriously delinquent on their loans after the jadeveon made the thirty thousand dollars payment in april because it was after that payment was made that mrs kelly provided the loan statements from the lenders showing all of these delinquencies like months and months of delinquencies and that and it was after that point after that point april of two thousand and nine that williams and mr gillette discovered decision i might just be missing it do you know is there a page where the bankruptcy court held that some not sure if it was express or it was implied in her rejection of their argument that it didn't have to be made but you said possible on a clean because the arrangement was that he would make the thirty thousand dollars payment on a discretionary basis and every month they would ask and which is what they did the evidence isn't in the record that they did ask every month and then he would make the payment that he would make the event where's the evidence in the record that they asked every month that wasn't triggered by the contract well the fact of the matter is that and i think that mr mrs kelly test of our mid mr gillette testified that one of them testified that every month they would ask another words whether or not it was triggered they would ask every month for you know where that is on the record i believe it's in mr gillette's testimony i can i can provide it about the request for the payment because that would be helpful to me i read it as a contract obligation so if they actually didn't interpret it that way as the parties that would be interesting to know if you also want me to point out where in the escrow instructions what you already did that and i didn't think it was  i so i don't believe that there was any finding and there was evidence to support that williams had unclean hands the loan was procured through fraud for the failure to and he never would have made in the loan in the first place if he had known that the properties that that mr kelly and mrs kelly were at their practice was to make these changes without in violation of zoning and permits and taking away the bankruptcy court decision because of some unclean hands on behalf of mr williams i think that i mean a couple of points real quick on the damages question coing supreme court case which i cited word their expert reports on damages there were no expert reports money either sat on either side of mr gillette the real estate broker who was also the collection agent he prepared exhibit sixty eight because it was with his calculation of the amounts of road there's no evidence whatsoever in the record contradicting anything that's on that and there's no evidence in the record parsing out the loan i would point out that on the back of bankruptcy court is in the sense  equity court to deficiency laws and i wanted to point out that that was not raised in the bankruptcy court waived it was not raising the accounts for even this appeal so it was waived the only time it was mentioned was in the staff at the end of the reply brief in front of the bankruptcy court or the district court in the district court said it was waived but in a footnote footnote seven addressed the issue and said and i deficiency laws don't apply when the when the issue is was along procured by fraud and so those laws don't even apply with regard to the issue of the duty to pay if you look at exhibit eight on the first two pages there is a specific signed documentation that says that it is upon the request and it's at the discretion of the borrower to deliver the rest of the money not mr williams the lender that is consistent with the fact that it's a five hundred twenty thousand dollars total loan five hundred twenty thousand dollars was recorded as a full security on seven properties and it's also consistent with the language in the i'm sorry the the notice fully signed and with the language in the escrow the footnote that they refer to consistently as exonerating them was a reference to the start of escrow before the escrow closed that the escrow instructions themselves did not constitute the obligation the obligation doesn't arise until escrow is closed the note signed and then those terms become part of the agreement there's an absolute duty to do that with regard to the identification of whether or not the thirty grand a month would have been sufficient if you again all the numbers are on exhibit sixty eight if you look williams advanced forty nine thousand to keep the matters current the residential properties were already sold and the forty nine thousand that he had vance kept current on his properties and that was done by june they would have received ninety thousand dollars by that date not just forty nine so that identifies that lastly the court's finding as i quoted on page seven of the opening brief sound that if gillette had been accurate the loans would never have been made and with regard to submitting additions i can provide calculations based exclusively on exhibit sixty eight  ok and in my response than i would address that one issue you wanted to well i'd like to see where in the record you can show that the parties thought that they needed to ask every month for the thirty thousand dollars so that's what i think you are submitting i guess he's submitting calculations and probably you will say it's too late but you can do whatever you want to respond to his calculation and i'm not sure that i said the parties thought they had to ask i mean as a matter of fact they did write well if you can show us that they did that would be evidence that they thought they had have an opportunity to respond to his that make the need to my first thank you so you now have a chance to respond to him he will give you give us simultaneous wanted supplemental submissions and then you can each within ten days and you can each have