right on the parties ready to proceed cognizable interest in the proceeds in the insurance proceeds the liability injured or insurance proceeds in this case however the bankruptcy court erred when it used one o five se erred by determining again by using one of five in determining that the proceeds of this liability insurance policy should come into the estate because that decision will circumvent texas state law specifically soriano it will also cause unnecessary surcharge on the proceeds that are should be effectively embarked for the tour claimants this is  statutory construction case which is start with the statute and the statute is section five forty one of the bankruptcy code where property of the estate is defined property of a debtor includes proceeds insurance proceeds or property of the estate looks at the statute of course and articulate the test and the test is whether the debtor would have a right to receive and keep the proceeds went t insurer paid on the claim well it seems to me your statutory argument is missing a step because you're jumping right to edgeworth and saying oh proceeds if they don't if they're not do the de or the statutory hook that you think is lacking because then edgeworth just says well but the proceeds if they're not going to go to the debtor aren't property the a state that's almost an exception to the normal rule the rule th policy is part of the estate but then edward also says but if he called the policy is not going to fully satisfy all the creditors for that then it will revert back to the policy being property of the a state so why doesn't that support the statutory hook of the district courts rule i think the policy is proper to state and that's uniform case law circuit knows where the debtor's interest in that policy is what it paid for to get protection from the insurance company but the proceeds the debtor does not have an interest in now what's being alleged or it says in last it's not going to exhaust because then you go back to the first step where like you said there is the debtor does have an interest in the policy because it's it's protecting it from all these lawsuits well i agree with your honor i don't think i understand addict and let's be honest however it's in the middle district of north carolina it's the baby case but that's directly on point but again to further respond to your honor i think it's uniform that the policy is property a state i do not think the proceeds are and i don't think edward stands for that although there is dicta there and the reason i believe that that shouldn't be applied as a holding is because for two very important reasons one if you bring the proceeds into situations i believe in chapter eleven cases where you have thousands of creditors and you have a continuing going concern and you have chapter eleven provisions that allow you to channel maybe it's best just under five twenty four that i think that a you know i as a i was going to save the if we pulled those proceeds in the ramifications i think are huge one i think that you start surcharging because a serious things come into the estate they become surcharge brother because the debtor owns the policy the carrier owns the proceeds the carrier pays it to a non debtor and not their tort victim and that's what that policy was set up to do and  i'm just saying in theory insurance proceeds should be should be going to the beneficiary and they shouldn't be surcharged by other general creditors but here they just under three they just be going to the people who hire a lawyer the quickest and had the lawyers who made the quickest settlement but we would you be making the same argument if no one had settled before the bankruptcy no settlements and the company the bus company declares bankruptcy well that would depend i guess your honor i mean i and in a lot of times there there are specially in the mass tort context there's agreement on a d r resolution and all this kind of stuff this is a this is an atypical situation i think meaning that i just haven't seen a lot of cases where there's settlements pre filing and there's a accident but in a lot of in a lot of these instances there is a a global agreement on how to treat and resolve the mass tort context and there's not already settlements by the insurance company and you go back to your comment judge i understand that optic all i'm saying is we've got a texas procedure and it goes to my second reason that th pull these into the estate it circumvents what we've got set up and under texas law or soriano and i understand that that optic is unfair and and i think that this action is tragic i do but the case law as acknowledged by the circuit under soriano says that's fair and it promotes elements and so the bankruptcy court you might still win on that right i mean even if it's within the estate the bankruptcy court said it's not yet going to decide whether there's an encumbrance on these proceeds that's actually true your honor i mean if the proceeds are pulled into these day we would say that our settlements are still valid they would argue that it was some kind of executor a contract and it was rejected we would argue against that and say there's only mystery a lack of having to pay the money and so as an executor we conquer but not to get in the minutia there are some other issues up i don't know how he asked the judge got there without one o five the i mean he agrees in his decision he says he says there's no interest in the proceeds and then he goes and says there's this exception to the general rule when there is exhaustion and you know one of five says that the bankruptcy court made as you in the order process your judgment that's necessary or appropriate to carry out the provision of the bankruptcy code and that's has to be what he's been using and that's what other courts do when they use this exception to the general find the procedure property of the estate why do they find out what it took did they use well i think that they're using i think they're you don't want to equitable hook now again there's other circuits like north carolina they're making it clear as to what i'm saying and they adopt the reasoning that didn't you know landry which is the middle district louisiana well reasoned analysis on why this isn't property state but you know i would say that it's a flaw analysis that you know either have an interest in the proceeds or you don't and the one o five pulling it in doesn't make any sense and less it's a chapter eleven contacts and you have some kind of special rule to do it in a chapter seven contests it makes no sense i mean those are the problems with that rule and and again there's only that dicked and edwards and the texas system is been you know approved and there's no reason that we should encourage or set up a mechanism for an influx of involuntary cases by non settling claims behalf of this group of creditors that the pen argues injured parties that the argues has no remedy and my argument i guess first is to dispel the idea that there is no possible remedy for fifty four of the sixty five injured parties and let us the second that that bus one bus roll over in a two bus company hit the pavement and killed a number of people and injured a large number of people the suggestion that in those circumstances and in the following circumstances that are on refuted in this record that my class will not have a room he simply can't be with everyone agrees there's a common class injured parties on their bankruptcy or by the way i'm not their pla lawyer my group is a member and group of a common class in fact where the vast majority of a common class of injured people we are claims are undisputed that is liability to the claims that are undisputed no one there was any other cause that other than the negligence in fact the insurance company is paying based upon the liability so no one can argue that will come to the court with is a question of liability and how we really do it do we really deserve to be considered along with the same group in our class the third is the unquestionable insolvency and that is important even though even though it would doesn't directly address that in this case it's very important the second that bus flipped on its top and hit the pavement of one bus accident that company was hopelessly insolvent you asked the questions earlier and it's important question is the is the company the other no assets and the company did have two buses yes they're up our own they're assets but not particularly meaningful but there are other assets there are other methods by which charges to the proceeds can be handled that bus has been sold the other assets have been liquidated there may be assets the may be claims with respect to insurance policies but the trustee will handle that portion of the argument i'm not here to do that there is no question of exhaustion even the insurance company admits it that that they're they're going to pay the five million to the to the twelve they selected under some criteria that we have no idea about but that there is no other money to pay fifty four injured in death and injury parties and creditors this estate unless there is a method by  i do agree that the issue is is timely and proper bought for the court judge the in fact that the issue that i want to think that i wanted to i guess most importantly is the idea that these procedure still there now we have one case the physician case that's been cited in some others where the proceeds were distributed and there was a question of going back to get them were not there when what i was called and i was told about the action i was told what was happening i was told that that letters had been sent to the insurance company this is in the record to invite you to a settlement conference overall and letters responded saying will be there then letters from the insurance company saying never mind and the never mind put i guess the target  reference to a by the by the by the appellant to the fact that it is earmarked and in fact it would make the comment that that when you talk about proceeds of a policy that is aimed to be to a particular group of people i believe  says that the distribution to creditors other than victims would be improper and that's true yes but that is all the mass tort cases we always channel those proceeds into a trust for the injured not for other unsecured creditors or vendors  there's nothing about this case that distinguishes it from what it's worth says the law is nor is there anything that distinguishes except the vast amount of dollars and other things that the mass tort cases allow setting asbestos aside because congress gave best best of some special rights but look at the silica cases look at all of them from the big ones down to the little ones to these fifty four claimants they're all the same the policy is exactly the same which is why bankruptcy lawyers are involved in this type of of the fist circuit law that would suggest that that in some fashion these injured parties don't have a right to that public policy to have a bankruptcy judge supervise which by the way this judge has not made a decision on whether or not they have an incumbrance or they have a contract or that they have something non rejectable so all of those still are pinning but it at least at this point the supervision by someone other than an insurance company and a group of four five pla getting together dividing up the money and then telling the rest sorry but you don't get anything has been has been replaced by what public policy says this needs to be replaced that is to impose the bankruptcy code on these parties to allow a proper and orderly supervision and liquidation of the companies so that everyone has a fair share to give their their interest but assuming there were these contracts entered into before the bankruptcy i know there's some dispute about that but let's say there perfectly valid contract signed before the bankruptcy with these settlements that's not the debtor who entered into those contracts i don't want to debtor does that provide for bankruptcy there's all kinds of ways to undo that what's the path for u ndoing those agreements i'll let the trustee maybe more directly tell you but here's my here's my response is that the the answer to that the physician case actually has that circumstance where they went out and they settled and they got a court order ordering the settlement but from the standpoint of you are answering your client claims specifically all that would be left would be for my clients to impose upon the trustee to to exercise some form of or avoidance for instance preferences if you get paid only even on a judgment within ninety days of a bankruptcy then that is a matter that comes back in the state we pro rata district distributed this one would be the same thing less assume there was a settlement we don't think there was we don't there were no filed rule leavens  the miners didn't have any orders but by the by the judge a judge saying we approve your settlement on behalf of matters none of that existed but if it did we would be in the same circumstance as avoidable preference and that is a member of a class receives a greater distribution within ninety days of the bankruptcy then he would otherwise and that then comes back of the state which is what we're suggesting and that would come back and the estate to be distributed among creditors now i don't have a case about that because i don't think any of  have gotten that far but that would be my argument your honor if if i were asked that question in bankruptcy court where there had what actually occurred those issues might actually arise in this case but the judge was the student have to say well i'm going to give you this i'm going to follow it would i listen to what simply says in his case that translates ridgewood into a practical circumstance but i'm not going to rule on the other issues let's find out whether i'm right here and if i am let's decide where we are on that and that process because quite frankly the judge could say i find that that they've all been settled and then say but i find that there's an avoidance action available or i don't find any avoidance action available they said you can't reject their contract it's not executive order and as a result i'm going to leave the money and in this in the application of those settlements as it is because they never followed rule eleven takes rules of civil procedure judge really really which requires their settlement to be put in the state court case the texas district court case that they filed they didn't do that the evidence is clear the summary judgment evident shows under an admission by the insurance company that no settlement was ever fall in any of those cases so they're on in forcible under rule eleven of the texas rules civil procedure and as a matter of law under three sixty five of the bankruptcy code they were automatically rejected sixty days after the order of relief was intern in the case they're deemed rejected as a matter  now what i do is a bankruptcy trustee to go after those even though the cut the debtor wasn't a party to the contracts but if the debtors were also your honor he is a he's a necessary party to the lawsuit because he's the defendant  not a he it's a company your honor that the defendant company was the bus company was the defendant in the state court lawsuits because you can't sue in texas directly the insurance company like you turning louisiana so there were state   everybody but me probably knows the answer but how is a bankruptcy court going to handle the resolution of the claims of the words you have toward victims i'm asked to work and i obviously it gets handled in state courts all the time so that they're going to become like a creditor in a bankruptcy court while the abilities that made it damages are on determine so how does a bankruptcy court go about determining damages with question rather begin with i've been doing this chapter seven trustee work for over twenty five years i have had a lot of experience with claims resolutions the bankruptcy court has a lot of experience with claims resolutions it's the process you're on and that's what one of the major tenets of bankruptcy is that is that we would deal with claims and and we make sure under government under court supervision that there's a fair and equitable distribution to the creditors there's different procedures that will be followed your honor for one thing this isn't the first mass toward in bankruptcy and and there are formulas that can be established as a as a mechanism to deciding whether someone that has a broken arm gets x dollars versus somebody that had to have back surgery some certain or serious injury those are happens within the bankruptcy court i mean a bankruptcy court doesn't of a formula by agreement to resolve everybody's calling us and there are sixty five claims your honor in and to briefly address counsel statement about i'm going to surcharge all of this five million dollars to begin with your honor the creditors in this case are the sixty five injured victims of this horrible horrific  bus accident the only other creditor is the company that financed the insurance policy which paid the five million dollars they have about an eight thousand dollars claim there's really an answer to your question the assets in this case or five million dollars in the court registry and six thousand dollars in my bank account not a lot of money but it's still six thousand dollars and and that will happen by the sale of the bus the second bus that wasn't involved and the and i paid off the lender own that and and so there's a road out so they're only creditors in this case or the sixty five injured parties and that one premium creditor for the insurance payment of the insurance price it's my surcharge i have a statutory fee that sliding scale but it amounts basically to three percent so if you took three percent of the hundred of the five million you get me with about one hundred fifty thousand dollars the appellant's want to surcharge their lawyers are going to get two million they're going to get forty percent of the five million dollars and and argument that there's chapter seven should be different then maybe recognizing this exception in chapter eleven why there are i mean the injured folks or the injured folks the creditors or the creditors what chapter eleven reorganize so you can pay the creditors chapter seven we liquidate to pay the creditors the end result is the same we're trying to get the creditors the most that we can and you know i don't think this court should focus only all sixty five of the injured in a case and i know you said that's not the case here but in a case where there were creditors in addition to the personal injury climate it's only one no no i'm saying let's assume we have a case where there are other creditors would those creditors be able to make a claim against the proceeds from this insurance policy i don't know that i know the answer to that judge graves i have not seen a case own that when property is probably of the estate it comes in and it's certainly subject to the administrative cost of the case because that's how congress created bankruptcy the creditors injunction in this case like they haven't masterwork cases that are specially provided for in chapter eleven chapter eleven is absolutely different in chapter seven i don't think the rules should be different but they are absolutely different and as your de berry opinion points out you get the snapshot rule versus post petition  activity so there is a difference and when you're liquidating there's not a going concern to provide and so there's not the special provisions of chapter eleven the settlement is in the record at ten thirty five to forty two those are settlements there are there ruhleben agreements they have not been filed with the court they as we briefed they are valid but they haven't been enforced but they're valid contract they just haven't been a force because there was an automatic stay but we believe they're valid  this whole talk about even distribution that's absolutely a policy goal of the bankruptcy code but that assumes that this is a property of the state i think again i understand that there is optic unfairness here but this is  but isn't that goal of equitable distribution that's why edgeworth created that secondary impact exception i guess i guess i just don't think they created the exception because again it wasn't applied it was just referred to there was no mention of secondary impacts so again i don't think they had the situation in front of them like that so again i think that was dicta again i think that there will be some surcharge here and i'm not again i'm not saying that there is some optic unfairness here and it's a tragic accident but i believe that the state system has been working and we shouldn't promote or have a mechanism and  creditors including the professionals i mean the chapter seven trustee and that i think that's a bad rule to have for the future we get to promote and volunt