so i'll be trying to manage my time in that regard may please the court there are a number of issues raised in the appeal and additional issues raised in the cross appeal and i don't mean to i'm going to go to one issue in particular to illustrate one of the points raised in the briefing but i don't mean to skip past or reduce the significance of even the threshold issue of the statute of limitations because a great deal of what we're arguing about with respect preclude it right correct so then what i wanted to go to is on the application of missouri law in particular on leases one through nine of the first master are three master leases here and the first master lease concerns leases one through nine one of the key points the foundations for judge newman's decision not to  thousand and five was considered ultimately by the court to be in violation of that lease provision in the lease agreement and missouri law i've argued in the appeal number of different points about the court's failure to apply missouri law but there's a particular section actually of the commercial code in missouri law that directly addresses that particular issue and it's section four hundred point two a dash three zero three section three zero three is entitled alien ability of parties interest under lease contract in part that's the title  in summary what section three zero three says is that the provision in a lease that forbids the alien ability by either the less or or the lessee of their interest in the lease is not to be enforced as such but that the actual transfer and it includes on the face of the section including a sub lease is effective notwithstanding the contrary lease provision in the lease agreement subject to a potential application or imposition of damages under section four b of section three zero three unexpressed provision of the lease agreement and we have to find clear error correct ok and so tell me why there was clear error now that i'm right and i've argued it quite a bit in the briefs but i want to bring the court's attention to the section three  because the missouri codification of the commercial code specifically says that lease written provisions and lease agreement that for bid alienation of these lesser words or less seize interest in this particular case were concerned about an express provision that forbids alienation of the last season interest that those are not to be enforced and the actual alienation in this case as the district court found a sublease is effective and is to be given fact subject to just a question of whether the other party in this instance sack e d m actually suffered any damages as a result of that  and and the record is clear there's no evidence at all in this case that sack e d m suffered damages in fact seche m i had argued in the briefing that on the course of performance of the course of five six years continued to pay for the leases because it included in leases one through nine there were three of those leases that included equipment purchased actually by h a i that sac e d m could not have otherwise bought and then all of them were all that equipment was in the possession of and used by sacchi d m i mean frankly the definitions in the missouri commercial code define the less see as the party in possession of the equipment and and so it's clear under the commercial code that sac e d m was at all times alessi and therefore obligated by the lease contract which is the bundle of obligations of the parties to pay for the   which is what the district court based its conclusion on so i'd like to hear from you at least today to the chess because i don't think you did that in your brief is your honor and the reason for that is your honor that the fundamental assertion of error by the district court is that judge newman did not address or apply or consider the application of missouri law and missouri law it is is clear that the lease agreement but the lease contract which is that bundle of obligations and rights of the parties on the definition of the commercial code in missouri is is is beyond the actual written lease in other words it includes the course of performance and the course of dealing between the parties and the evidence in this case is very clear that the parties acted at all times or in particular d m acted at all times as the lessee having possession of the quitman paying for the equipment and not disputing the obligations of the lease agreements this argument goes to lisa's one through nine and not ten through twenty terms of those leases the unfavorable terms of those leases true true well and that was with us that the limitation placed by the court was based on a finding a factual finding that there that d heinz misrepresented the rate of interest that's the thirty percent and the duration and the and so the argument on appeal about the clear error on the for the factual findings is that for in reverse order the duration it was clearly expressed that the calculated lease rate was calculated on the basis of sixty months and frankly that's what the court ultimately used as the duration but one thing the court concluded clearly erroneous li was that there was no right of early terminations and that was right on the face of their leases that the lease could be terminated and without penalty the finding was a practical matter they can't because they don't have the money and that the  parties was this would run its course right actually know that the finding was was that that the that the that the lease actually could not be terminated legally the until  enough for for fifty percent of its payments to equal the cost of the equipment plus ten percent and so and so it was a it was a finding by the court that there was a legal prohibition on the face of the of the lease against early terminations and there's not only the face of the lease but also numerous writings even initialed and signed by mr folk that that the lease could be terminated early and the term the way that he could do that would be to pay or he'd be given credit for fifty percent of his payments and you pay the balance plus a ten percent and actually what's even shown that that folke understood that was starting two thousand and nine i believe definitely in two thousand and ten he actually said he wanted to terminate the leases early and the parties discussed the reasons why they should go forward in their relationship and m decided to proceed with lisa's doctrine talked him out of it again and told him why it was there and actually at that point this was after starting in two thousand and nine dr heinz said reduce the lease payments from ten thousand to six thousand for instance a month and was giving him concessions where he didn't have to pay a substantial amounts for extended periods so the nature of the relationship wasn't unconscionable doesn't meet the test of unconscious billet he as a court found that test is to prevent the pression and unfair surprise not the disturbance of the allegation or risks because of superior bargain power that's the legal test so i think you're right i want to bring the court's tension i've argued to address your question that the failure by the district court to apply and actually consider the impact of the missouri law is is critical because the lease relationship between these parties is not just defined by the agreements no matter how internally in conflict they may be the lease relationship also is defined by their course of performance i see them at two minutes and thirty seconds so i better thirty percent this year and there's just not thirty percent i mean let me guess to you that can get you to tell me what's wrong with this the thirty percent was added to the payment but this is a five year plan if you divided it up evenly thirty percent over five years is six percent per annum nobody has done thirty percent per annum and in fact if you look at the interest payable in the first year it's sixteen percent it's not thirty percent now the rate goes up because you don't take into account that the principles going down but i'm trying to understand how anybody gets the idea that thirty percent has something to do with the rate on this financing chair so the way that the repayment was structured was this they took a piece of equipment just say it was water jet and they signed a value to it say twenty thousand six thousand dollars at the arithmetics better six thousand dollars and then they took six thousand and they divided that by sixty one hundred dollars a month and came up with that monthly payment and then to that they added ten percent for interest ten percent for overhead and ten percent for profit thirty percent earnings so it's thirty to thirty bucks one hundred thirty bone dollars and then they said that's the monthly payment amount and you have to make that monthly payment amount until you buy the equipment back and the conditional upon which you'll buy the equipment back is your payment of the at a regional amount six thousand plus another ten percent because somehow equipment goes up in value over five years instead of down in value some of this equipment appreciate and understand how it works so here's here's what it seems to me to be pretty easy to count the first month's payment one hundred thirty dollars thirty of that is profit fifty dollars never gets applied to the purchase price fifty dollars does get a proud of the purchase price that's the half of the hundred maybe it's sixty five sixty five at sixty five it's applied so thirty five doesn't get applied and is profit that's sixty five dollars you multiply that by twelve that tell you how much interest you pay in the first year and it's not going to be thirty percent going to be sixteen because i did fifty instead of sixty five but it but it's not going to be thirty percent yeah i think that the point that the district court correctly found is that it's also not ten percent and that's what the contract was sold to my clients as was this is ten percent interest and they weren't paying ten percent interest they were paying more than ten percent which means nobody noticed that this was ten percent over over five years as opposed to ten percent in one year i mean interest per annum is per year if you're doing math over five years it just doesn't work that way again i think that it was sold to my client as a ten percent per year and then that's what the district court said that's what's fair is ten percent because that's what the parties had agreed to that was a meeting of the minds that it would be a sixty month room at ten percent and so the district court said we're not going to let you charge more than that and if i may then ten percent doing the arithmetic the way the parties did so add ten percent of the payment that's how the district court to distribute this recorded so that this record i outlined in its order how it calculated the interest and as judgement there are five issues that we raised in affirmative appeal three of them let's talk about today the first is that the district court found that dr heinze committed a breach of his reduce your duty and construct a fraud in the course of his consulting committed fraud and breach of his reduce your duty in the course of his consulting and then said oh but also he gets to pay to get paid every penny he got paid hundreds of thousands of dollars to self heal and allowing him to keep all of that amounts to rewarding that company's made operating loans to my clients like e d m in just over five hundred thousand dollars and ordered that my client repay that amount fair fine my client got the money he should repay but getting that much money was only necessary because dr heinz was overcharging on the equipment leases and charging my client for the u s bank judgment if you remember the u s bank judgment was the situation where dr heinz orchestrated him owning a judgment against my client and then saying well you have to repay the full judgment plus the fifty thousand dollars you paid me for the privilege of having me be your creditor instead of the bank so if this report found that that was a commission of a breach of produce of fraud and then said still even though the money that was being a land that eventually added up to five hundred twelve thousand dollars the money that was being lent to added up to that much was only lent in that amount to service debts that were incurred by fraud you still have to pay back the full amount plus interest on and that makes no sense because that rewards the fraudulent behavior in the form of collection of interest on the artificially inflated amount if dr heinz had not committed his fraud he would not have been able to collect any money on the u s bank and he would not have been able to collect four hundred thirteen thousand dollars in equipment leases that's what the district court found that four hundred thirteen thousand dollars in change was based of payments from my client to dr heinz and his companies was based on these equipment leases that should never have been transferred so my clients paid over six hundred thousand dollars in the service of debt that was the result of produce your duty in fraud and borrowed five hundred twelve thousand of those six hundred thousand plus dollars and the court says we got the money the five hundred twelve you have to pay it back and as i said all right fine my client got the money he should pay but then my plan is to pay almost three hundred thousand dollars in interest on that two hundred ninety one thousand dollars and say wait a minute what if it wasn't three hundred thousand what if it was three million what if the amount that was loaned wasn't five hundred thousand but if it was five million or fifty million because of some point my client was just a conduit dr h lending money to my client my client was paying it right back to dr height so mike didn't matter what the amount was whatever my client got he paid out it could have been five million or fifty million and the interest then would have gone up instead of three hundred thousand when three million or thirty million and according to this district court ruling michael would have to pay back the interest on that not only encourages and rewards that behavior it incentivizes fraudulent behavior it incentivizes dr heinz or somebody like him to do it exactly the same way to somebody else later and then say well i get interest on the money that i lent even though i only landed in that amount because of my fraud and that makes no sense the third issue i want to talk about is the life insurance policies the district courts finding doesn't animate the agreement and the meeting of the minds of the parties dr heinz is the one who said we need key man life insurance on each other because if you are one of us dies the operation is likely to be able to to run probably i don't want my family getting stuck with this giant operating on of two hundred or three hundred or four hundred five hundred thousand dollars and in addition if you die and we can't run the operation i don't want your wife or your kids to have to pay me back the operating line so here's what we'll do we'll take our life insurance policy and we'll agree that the death benefit will get used to retire the operating on whatever it is ok that's what the parties agreed to and then what the district court says is that well my client has to pay the premiums on the life even though he asked in june of two thousand and nine he said i don't want to do this any more this life insurance thing anymore you're committing fraud you you change just a whole life policy you own and this is what we agreed to doctor had says no i'm not going to change it tough he continues to bill for the district court says well he still has to pay that amount and pay the premium but now dr hynes gets double the benefit because he has an order that says my client has to pay back the full operating on so if my client pays and pays half a million then when the death benefit triggers which it will trigger because it's a whole life policy and dr heinz is guaranteed to die at some point when that triggers his estate will get another five hundred thousand dollars using the order requires flow to continue paying the premium going forward yes that's what the order should say it should say sack e d m has to continue to pay the premium and the operating that is retired but that's not what it says it is what it is what it is they can they can stop so going going for doctor if dr hymes wants to keep the policy he has to pay the premium sure that's what the order says presently and so what the order should say is one of the following the first is what your honor identified that second d m has to continue to pay the premium and then get the benefit that there is higher end of the operating what happens upon the death benefit which is no reason to make it happen then just make it happen now or ever to find that second game doesn't have to pay the premium from the time that i asked to stop the policy in the first place which is june two thousand and nine the date that the judge inserted as the last date upon which jackie d m has to have paid the premium is the date of the order april two thousand and seventeen that's a totally arbitrary date in relationship to the life insurance is there anything in the record that shows what the value of the proper policy is now no because dr heinz ever produced a policy and judge and gave him a pass on you never produce the policy it's not part of the record so it shouldn't be that my client has to pay the premium and not get any benefit the other legacy those are the three major points i want to talk about there are two minor points as well one of them is with respect to the prevailing party and equipment leases missouri law provides for two different a prevailing party the district court should apply the missouri law which provides for two different methods of analyzing who the prevailing party is in a contract the first is what the court calls the main issue analysis and that just looks at it and says well who won this issue on the on the on these equipment leases it's hard to say because there were twenty leases on nine of them my client won eleven they won and it's hard to say that one party or the other was the prevailing party with respect to the main issue of the leases but the other analysis is the net prevailing party analysis and that looks at the the dollars and says well who got more well here that can be done with precision here my client got fo option on which to apply yes yes the missouri law provides for two different methods and this is raising our briefing and so so why did how i'm trying to figure out how the district court erred or hear the district court with the split it seems well but it didn't the district court didn't make any finding as to the prevailing party was the district court didn't say on some issue is the prevailing party and the other issue doctor has the prevailing party and as a result issue analysis which it seems i agree with you it seems the court said i can't really decide on the main issue so then the court should have went to the net prevailing party analysis and said the party that won the most is the grilling party but the court didn't do that i mean i'd characterize it as a punt and so if you had a case where the only issue was a lease and the plaintiff filed a lawsuit and said you owe me six hundred thousand dollars and the ultimate ruling was you owe me eighty thousand dollars the party th got to judgment for the eighty thousand dollars would be the net prevailing party because that's who's favor the judgment is in i would not have thought we did it the way you just suggested which is to say well the defense really is better off by five hundred twenty thousand or whatever the math is and you only got eighty so well you're not missing it it's just that the analysis in my view that you just provided this is not quite on senator to the case that we had here specifically  in the hypothetical you raised if there was a single issue it was just the leases and the plaintiff wanted four hundred thousand for example and only got eighty they would still be the prevailing party even though they didn't get everything they were asking for it still be the prevailing party if however there were cross complaints and the plaintiff wanted four hundred and the defendant wanted two hundred say right and then the plaintiff only got eighty and the defendant got two hundred point it wouldn't be the prevailing party are complicated if there were multiple issues as there are here wouldn't analyze the entirety of the judgement to determine the net prevailing party because the entirety of the judgement doesn't carry with it the obligation to pay attorney's fees from the loser to the winner that's only by a creature of contract and the contracts that are in play are only with many of the statements by counsel and much of their briefing is without citation the wreckers is actually contrary to what the record shows contrary to what the district court found and it's illustrated by each of these three points in the first issue on consulting fees the argument is that consulting fees collected by dr heinz should be discords because of his behavior generally because he committed constructive fraud in certain aspects but the district them and frankly the business loans were beneficial otherwise sack e d m would have had no choice but to file bankruptcy at the start of two thousand and five or two thousand and four even and so  the district court specifically found factually that the actions by dr hinds were not constructive fraud that respect and there's no showing of clear error factually you haven't talked today about the u s bank wound but debt than to have the debt forgiven and have to pay the tax yes because of the combination of the tax advantage of sac e d m being able to write off those payments on its current taxes we don't you don't you don't run off the principal payment you just but but well no you do it because it's a it because it's a payment of a judgment and so you would write off the principle payment and the second ok well so so then the second point made by counsel that getting the five hundred thousand of operating loans was only necessary because of the leases that's completely contrary to the record the leases that the lease payments were completely subsumed payments were paid for within the joint venture and at the end of five years okla medium showed a profit of six hundred thousand dollars if the lease payments had been half as much the savings would have been use for other things right when the money was still funneling the same way well it well true but the but but but the what the district court found and shown in footnote fifty in particular and shown by the testimony of shannon gomez who's not one of these competing parties was that mr folke was actually funneling money out of sac e d m for his own personal expense understand he's doing other money but the other that is if the lease payments have been half as much sack e b m would have been better off he might have used it for his own personal purposes but he also might have used it to pay down the operating lines right that the amount for the for the sale leaseback transactions the findings were clear that the cost the purchase price for  counsel on the basis of the record to the operating loans and the leases and so and it's directly contrary with district found and and like i say the operating loans were but and keep in mind the record is clear also that the remaining balance of the operating loans that were were owed by sacchi and were actually incurred about july or august two thousand and eight to january two thousand and nine so all the prior make our brain loans to sac e b m that were paid back and the final point on the life insurance it's just a misunderstanding of the nature of insurance this case was about the contractual obligation of  mr fuld to pay for the premium during the life of that policy during their business relationship this is standard by sell insurance as long as i understood it was term insurance i was right with you but if it's whole life it's got a cash value now oh and that's another argument raised by mr folke that's whole life the evidence is absolutely contrary well let's say dr heinz testified without any rebuttal by mr folke of any documents to show otherwise that it was termed at all times john so so you're right if this case has been made difficult for the district court frankly and even on appeal by the distortion of the facts by mr polk and sac e b m and his counsel without evidence sharee basis without record basis frankly oftentimes without legal basis and so the evidence was in dispute because mr polk claimed that it was some sort of ordinary or whole life but d heinz actually and that the advantage to the advantage the destroyed had in this case was the very extensive documentary record there were correspondence and contracts and signed e mails and documents almost on a monthly if not weekly basis and many of those documents made it absolutely clear that it was term insurance so thank you very much and thank you both for your presentations and arguments here today to the case of sacramento