read the briefs and the record excerpts we may not have read the entire record so we will appreciate those patients when when you have them we're giving each of you several minutes of free time before we ask questions of the awkwardness of our intervening to ask questions in this format so you're you're aware of that i know and the only other thing i'd mention is that since this is a this case has a lot of sub issues you might want to spend your time on those you think are most important but you may get questions about some of the issues so with that mr taylor think your honor thank you to the panel mark taylor with waller lanston here on behalf of the appellant's and we certainly appreciate as well that the court hearing us on this unusual matter for this important appeal but the fundamental question today is whether to apply parties and the rd party lender to the debtor st for energy the statutory overview overlay for this really starts with section nine point three four three of the texas uniform commercial code the standard u c c provisions for filing and perfection of blaine's the oklahoma journal statute is very similar it's section fifty two point five four nine of the journal statutes and it provides somewhat protections to those in texas essentially what you have is a non possessor security interest in all the gas production on the resulting proceeds that arises by operational law you don't have to have a formal agreement and you don't have to follow anything in the which is one of the issues that's raised by the apple lease this case we believe that the bankruptcy court determined simply rely upon the same create opinion for the delaware bankruptcy court that the delaware u c c provisions apply solely require use of another state's law on perfection a priority undercuts the very purpose which the statutes were designed well that would mean is that the protection of the st purchasers lane but only apply if the st purchaser was incorporated in texas or in oklahoma as the case maybe it was incorporated in or else the texas producers the oklahoma producers would not get those protections in it would require that you actually follow the u c c other provisions and make filings into the necessarily displaces other provisions of article mind that's exactly what i'm talking about and that is if you don't find that the statute that fourteen thousand three hundred and forty three displaces other provisions of article mine or some way  i'm a law does not do so then you're put in the operators ition of having to do the very things that these statutes were designed to make have you not do and that is to have to make certain filings and to have to deal with the laws of other  comment section nine thirty two of the deals with purchasing gas rain clear of the wellhead does recognizing that official comments in the circus recognize that official comments are a good place to look for statutory interpretation it recognizes that other states such as texas have nonstandard u c c provisions that need to be taken into account and the could alter the results we believe in this case the apple e a bank as a judge even recognize the fact that there are privacy in these legal statute provisions in texas and oklahoma law specifically in their loan documents from the credit agreement they excluded st purchase a product or products up to the st purchaser w provisions from the borrowing base calculations so they want even a loan against the money that would be going to my clients or the product that was provided by my clients they also provided that st purchaser statute lanes are permitted lanes under documents again it's a recognition even by the apple in this case that these statutes provide special protections to texas and oklahoma producers so what is the framework for determining whether or not delaware texas law applies well st of all we believe that simply the wording of the statutes in texas and oklahoma lead to that result because otherwise you leave these producers unprotected but if you look at the law either in the restatement or the case law from this which this court said that you look to in a dispute between nonconsensual lanes you know we're going where you're not dealing with two contractually competing against each other you look to the state with the most significant relationship that case ball a link property dispute between nurseries that were located them several different states that provide a product they were claiming an agricultural lane the dispute was between the primacy of their cultural lane versus the simply for choice of law purposes you want to circle and that is where you have to say that we're going to apply delaware law because you look to texas law says look to the state of incorporation as a place to look and then that a lot she'd completely avoid the  nonstandard provisions of the texas u c c i was certainly meant to the court in the texas legislature texas legislature could have worded things better in texas all my life and that would be the st time i've seen that in the texas statute but what you're going to have to look to we believe is what they're really trying to do and what they're really trying to do your best case be a texas or oklahoma is provide protection for oil and gas producers and make sure that they don't have to be subject to the laws of other states i know that look at look at in we're arguing your honor that and that's certainly how we get there to say that this provision is intended to displace the choice of law provisions that would otherwise be a political and the texas uniform for marshall code and i certainly recognize out of the text as you see see unless you're dealing with a texas u c c debtor and certainly we don't believe that's what the texas legislature intended then if you look so way to the issue that you look at under the restatement or this discussed fishback in other cases about the most significant relationship certainly texas has the most significant relationship or oklahoma with respect to the oklahoma production st river energy was headquartered in texas all of its employees were in texas  handful of them here on of the did right before the bankruptcy was filed yet because we were a certain of them were alerted by someone at st for energy that they were about to file and that they're going to be claims made that they were not entitled of the top of my head of but when that happens that means that the corporate entity does not have corporate governance on its own that that's busted in the receiver shortly after that happened st for energy fall in delaware bankruptcy in delaware we believe it was an authorized we then follow the bankruptcy proceeding in texas and the delaware bankruptcy court sue a sponsor transferred vinnie i'm sorry lost my train of thought transferred venue to texas because of the fact that all the connections between the debtor and the producers in the creditors were in texas and delaware had nothing to do with that other than that was fact that was incorporated in the state of delaware much as we're dealing with here when  looking at who has the most significant relationship the delaware court found this bankruptcy should be held in texas much as we will the taxes in the home in general statute should apply because they clearly have the most  and delaware has only at most a tenuous relationship to the matters at issue in this lawsuit we believe that the sim crewed the delaware opinion was a situation where someone was attempting to interpret texas law and figure out what texas law may have a great bankruptcy courts but they don't have the level of knowledge in effect a ball of gas law that you have been texas in oklahoma and while i understand the reasoning we believe this simply got it wrong we don't fa appeal did not include the potential for cross appeal and i just have a procedural question and if you like you can give me a direct answer or a file and twenty eight j letter without wasting a purchaser gets that product free and clear of lanes the mind you they're protected both under the texas statute and the oklahoma statute of their good faith purchaser in the order course of their business and there would be no way that attached anyway the syncrude opinion  producer or downstream purchaser we're dealing with an upstream producer and a lender and so the sim create opinion on that issue we believe would be a political but in any event on the clear face of it it's a warranty not a waiver and if there was a breach of contract a breach of the warranty that's the remedy breach of contract but here there would be no damages because the debtor got the product and sold it and kept the money so certain the death it's not damage and the bank got the money so they're not damaged either a see the time is welders i want to cover the primary reasons why the bankruptcy court correctly ruled that the agent had perfected security interests in the accounts receivable and cash in deposit accounts and why he agent security interest priorities over the producers reported security address those primary reasons st are under summary judgment rules the producers burden to show that they have the we that there is a material fact that we did not have priority so in the st instance under summary judgment rules the court was correct  political choice of long rules the bankruptcy court correctly identify and then imply choice of law whirls with respect to the issues that were before the core that is perfection the effect of perfection or not perfection and priority that's what nine creo one governs the court correctly found that the agency security interests needed to be perfected under delaware law by virtue of the choice of law rules under nine hundred and thirty on whether the eight where the producers are saying is that the they didn't need to her fact under that same line three hundred and one because  nd or rd issue as the one you just described your honor and that is the bankruptcy court should pay off but did not find that the producers free and clear warranty of idle to be oil effectively waived all security interests claim one hundred and ninety three dollars for three of the u c c the oil was sold as inventory it was sold free and clear of their liens and a big point when the debtor ownership or gained it soon fresh as the u c c refers to it the agents mean a security interest attached and have priority and there's no effort no effort was made by the producers in this case to perfect their security interest in the proceedings we've also presented opposition to the better producers appeals of the dismissal of their affirmative defenses that our players and we e cross appeal the bankruptcy courts findings regarding be a priority of the oklahomans to the attorney feel ward of the oklahoma statute and with respect to your question about whether or not a cross appeal is permitted we believe an order has centered in i'm sorry to say didn't think about this issue for today's argument your honor we were granted leave to appeal and those summary judgment situation if the producers did not submit a competent summary judgment proof as to the elements of attachment to perfection then they could not prove that they had priority and they could not disprove that the aged priority l r u a little far you're now in the questioning aren't you well i need to ask you about what's what what exactly it is huge here because it struck oppose apparently cease the running of interest even though you're over secured is that a binding agreement that you waived future croll of interest we time of bankruptcy and the banks lien extended to thirteen and fourteen million at the time of bankruptcy although the bank was over secured so are we fighting over t fourteen million dollars of it's already been paid to the bank and the producer is already have a right to be repaid if their liens are good against the letter to the additional thirteen million dollars is that correct roughly correct your honor st of all the the agreement to pay us which we asked for and ordered unburden these state of the ng for us is subject to bet money is subject to discourse a money then we are not seeking additional aid for us at this we're just seeking to protect the payment that was made and it was just really a matter of procedure to relieve the estate of the interest secure claims and said no one objected to that so it's consider on the facia we don't object to the amount of claim for these purposes but we do object to the validity of the lane and we did proceeding substitute for a contested matter in offering an objection to a claim the rules say we've got a file of ever surface again which we did so that evidence required that challenge made when you defend every kid all and thought of judge god as extremely painstaking opinion now you're you're you're arguing that he overlooked what would be the crucial threshold and most decisive an easy issue against you rule i don't think he ignored it your honor he didn't he didn't deal with it but he certainly didn't find you won't find anywhere in his opinion that the texas producers had a attached in in arguing their oh i they've taken the position that ninety three for three is something other than a consensual security but the statute says differently nine for priority over the bank no your honor we've appeal we've tried to appeal they have i think judge jones has indicated that that might not have been right for appeal but we have appealed it and briefs the issue  yes issue d a division order or make some other voluntary a communication to the interest only that would be the producer in this case recognizing the interest owner's  month of december there was no communication whatever no i'm saying it was your honor but i think you have to look at communication a very closely to see if they have communication  indicated recognize the interests owners right that is recognize the grant of a security and try us in the oil and i'll get to that point as opposed to the way says as with respect to security interests on his shoes of perfection the effect of perfection or non perfection which is all which we have here and priority the texas legislature has looked to the laws of the location of the dead or in this case it's done the work so why he did either analysis under the restatement when you do when you look for a statutory except the statute also requires to this is a lame and it also says it's automatically created and if it's not really a leap if it's not a quote lien but a security agreement then why do you thanks in the credit agreement with the debt i refer to it two times as st purchase or liens well i think of you look at the definition st purchaser lays as industry means that the people who pressed this before the texas legislature must have been totally legally ignorant and i just think you've got to acknowledge at some level that they had a security in things i'm not i'm not i'm not saying that a properly perfected security intro's would not be effective what i'm saying is that the texas legislature security interests in these type of collateral may have been different in two thousand and one an untrue court is where this we've all lived through it in two thousand and one  wist changed with respect to a lot of reasons up the texas legislature determined the order to have an effect of the fission commercial law of the state of texas wish lend against is subject to lanes and what the texas legislature said and so did the doubler legislature in fact some of the all fifty states say but just for purposes of perfection on perfection priority same issues we have here look to the law up of the state of where the debtor is located and they  sold their oil in twenty million one hundred and seventy two thousand and eighteen knew what the rules were those rules has been in effect since two thousand and one and they certainly knew since two city legislature's intention to say this is how you do it this is how we can best promote commercial transactions in state of texas really as it turns out corrupt for so well by so we don't play like statement in the state of the union or parishioner i understand what you're saying there but then the other question the other point i would make is what does this what does this language necessarily displaces those provisions mean if we go back i think it's from a poem very says marilyn cox about the scope of the necessary improper clause and it's pretty generous about what's necessary well necessary displacement this language that was adopted by the texas legislature is ninety three for three so let's see what the texas legislature says about what constitutes displacement much number of ninety three for three they changed the references to the purchase money security interests carve out they changed all those things they knew how to this place things and they're no i don't think anything else other than the express changes that the texas legislature made in the statute i don't think and this was one of the things we call to the court's attention in our response brief that responses to that st the bankruptcy court didn't rule on that and certainly didn't rule that we hadn't proved up that we had a product that was not paid for nd of all we did as judge jones did we have the head fall proofs of claim there was no objection proceeding was a matter of interpret in the lane priority not the fact that we had unpaid product and rd the banks an affidavit filed in this case from deborah cry act of who is a president of st or energy indicated that st were in or she had not pa oklahoma law to know that i that we mentioned it and talked about it it is a much smaller portion it's about a one million and three dollars ish of the amount so it's a smaller amount and we think judge subpoena was very clear that  necessary the last thing i wanted to address was what the court was discussing with mr gerber at the end and that is what is section one point three four three me mr gerber suggested that the producer could simply follow the rules to oklahoma law then all would be resolved and alter is in the legislature and not in the well it and i certainly want to argue with your honor that again the texas legislature could be a lot clearer i would suggest though that these provisions we believe are clear on their face and provide the protections to the oil and gas producers in texas and the fact that the texas legislature has not changed them doesn't mean that they that there's a need to change them they may feel  that they are they were doing everything they need to do to protect texas producers and certainly we believe that section nine point three four three think those producers bankers judge made a compelling case that it does need to be changed  and i certainly do as i said i certainly grew with you and with the bankruptcy judge if it could be clearer and i won't certainly argue that and try to say that it couldn't be clearer that doesn't mean that the effect of it is of the same and the effect of it is whether it's in the jusice see or in a general statute elsewhere that this was a nonstandard provision specifically designed to make sure that the texas oil and gas producers did not have to do the other things that are necessary under the texas uniform commercial code to protect and perfect their interest to counsel mr gerber indicated that well the producers haven't shown that anything else in the u c c has been necessarily displaced by section one point three four three and that's simply incorrect the entire scheme of having to file something to protect your interest having to trace proceeds of having to identify proceeds all of that has been displaced by section one three hundred and forty three and so it is not a leap then to say that the provisions that relate to the choice of and three will one up likewise been displaced because otherwise again you're reading a substantial portion of the statute meaningless by taking that taking that approach and making it meaningless as to most of the o specific nonstandard provision would get the statute thank you very much for your time today thank you gentleman