thomas morris on behalf of the appellant dr michael j short i reserve four minutes for about oh please we are asking the court to reverse the bankruptcy courts judgment in favor of the trustee and against dr short judgment was entered on three separate theories on four counts of the complaint the policy issue that unifies all three judgments is whether the law  discourages a business owner from from loaning money to a business to preserve it the fundamental policy of our bankruptcy laws likewise is to help preserve the rehabilitation facilitate the rehabilitation of a troubled business the policy issue in this specific case is whether we should discourage a doctor like dr short who invests in a community hospital in pontiac so that it can continue to employ persons to serve the community to pay its creditors to upgrade the building to buy equipment whether we should punish them for doing that the three judgments entered by the bankruptcy court in this matter got that policy horribly wrong backwards but is is the underlying question whether there were loans made or capital contributions made is that is that the basic question that is the basic question with respect to count three counts three and four in particular and also count one so count one of the complaint was for the we characterise zation of dr schwartz claim dr short had loan to the hospital approximately one million six hundred thousand dollars had been repaid approximately five hundred and seventy one thousand dollars and was owed approximately nine billion two million dollars he followed proof of claim for that amount the bankruptcy court disallowed the claim based upon it being we characterized using the auto style factors this was erroneous for several reasons first of all the bankruptcy court misapplied rule fifty six to be characters ation was granted on the court issue what we might call a trial opinion an opinion not based on summary judgment but based on the evidence and and found that there were capital contributions it didn't except there the bankruptcy court correctly found two of beaumont's those for which they signed no it was still in existence has happened which a sign note had been found were were lums the bankruptcy court ruled that the rest of the  advances were capital contributions so i don't understand your summary judgment point if if the ruling that the bankruptcy court made was they started the evidentiary hearing the eviden issue and then applied the so called rock steel factors to it which are eleven factors including whether there's a sinking fund for example applied those to this the set of evidence and then granted judgment on count one based upon that and also granted judgment on counts or it was a confused procedure but the trustee arguments what's wrong with the bankruptcy court issuing british acts that you think are relevant to the ross stills factors that were not brought out at the evidence you're you hearing yes there would be if if if know applied at all do you know acts that were not brought out well for example the the debtor's financial status its loan to   that because you call these things loans the bankruptcy judge has to view them as lawrence well you not only because my client calls amongst me but because because all of the facts show that they are that it was clear that dr schwartz intent that there would be that there were laws and it was clear also that the other party to be a hospital that is intent was that they would be loans you have to look at how does an organization like that exhibit it's if they're not of the not presented to the court no but moreover and more importantly the trust you have the burden of proof and there was no evidence that there were capital contributions to the debtors records showed that they were loans they've been stated in the in the bankruptcy schedules as moms that every witness testify that they were loans no one testified that anything was a camp a contribution other than the capital contributions which were in the debtors records separate dr short mean of two hundred and fifty and we had beats we had counties and signed copies of the notes an issue and the bankruptcy court dismissed that and how there's no explanation given he says you have evidence that the payments  account so they were tracked separately in the debtor's records rather they were tracked they were in an account and when dr short moan money that created a credit in the account and when th denner paid back money it created a debt of the new account and so these payments were applied to the account and the testimony was consistent with that dr short testify for example that he would ask in time to time how much does the hospital owe me and he always oakland physicians medical center liquidation trust well there's a lot to address and what mr morris has provided you today began with to the extent that we were talking about the hearing itself that was held by the bankruptcy court resulted in a over fifty page opinion after trial with as one might expect substantial references to the evidence that was produced at the hearing prior to that there was a final pretrial  order mr morris expresses his opinion that in fact this was not an issue for the hearing this is it exactly what the hearing was about and in fact i'm looking at the joint final pretrial order that was entered in the bankruptcy court  one of the issues express was in the absence of fully executed promissory notes conductor sure can force the concept that his advances should be treated by the bankruptcy court as loans rather than capital contributions that was the issue at the hearing and we presented evidence based on this court's ruling in the audio file plastics case again mr mo analysis as to whether a debt actually exists really relies on a reference to state law in this case michigan law as it relates to notes and debts and that was i think why aren't these things won operating agreement for the debtor as to how it loans were to be made there were requirements prior to any loans being made under the operating agreement and there was no showing whatsoever that any of those requirements were met as to all of the advances bethy appellant in this case claims are loans what kind of requirements could you be more specific i supermajority vote of the board of directors for decisions regarding incurring any working capital loan or line of credit that's the operating agreement paragraph eleven dollars it goes on to say  paragraph eleven dollars only the board and the authority to borrow money provided that prior to borrowing money from any member in dr short was a member all members should be given the opportunity to participate in such loans in proportion to their distributive shares there were no minutes whatsoever no minutes regarding any of these procedures being followed as to any of these so called loans by this i can say this though about the loans at the hearing and at the deposition of dr short he was specifically asked these payments that you receive from the debtor what loan did they apply to he did not know he could not cool correlate any of the payments with any of the soul called loans and with regard to our site is that important if if he made twenty loans over a period of so called loan if a definitive promise what is that promise well we have unsigned notes we couldn't correlate any of those transfers to the unsigned notes assuming the notes were signed there would be a definite obligation by the borrower the debtor in this case to repay the person who loan the money on a certain date at a certain rate of interest none of that is proven here none of that was followed but did the pr because because you can see this from the amounts that are put into the account that it well there's no correlation between monies advanced and the monies paid back there's no correlation whatsoever to the notes and that was part of the hearing please correlate these monies you receive with these notes it could not be done and that's spelled out in the bankruptcy courts opinion after trial none of this could be correlated into it so you have  sorry to interrupt you if they were capital contributions why would the hospital be paying you back don't know that we have the testimony from dr single who's the chairman of the board that they were essentially just giving money back to these board members at the discretion of the board so so what is it part of what the banks the judge points out to the extent that there's some claim that some of this money might be interest being repaid even those amounts don't match that it defendant d short claimed a small amount of interest in the year in which he received a number of transfers back that have no correlation whatsoever to interest rates in the notes but i think the most problematic part for the  defendant this case and we attached it to our response to one of the motions for summary judgment and it came out at the at the hearing was an affidavit that dr short filed in another case in the oakland county circuit court in michigan one of the other board members had no he had notes they were all signed and he filed suit against the hospital and his name is d jolly anyone because he had the notes he filed a complaint he had the notes and he attached them and i was going to say what gives rise to this case is that dr short filed a proof of claim and claimed monies owed for monies alone the bankruptcy code requires you to attach to your proof of claim if it's based on something in writing the writing nothing was attached to the proof of claim the trustee objected to the proof of claim and then th increase their capital participation how does that play and you're right in fact thank you judge because you actually are leading me to where i was going anyway so in this oakland county circuit court case in which dr jolly it sued  hospital this defendant dr short submitted an affidavit attempting to defeat a motion for summary judgment so dr short said in his affidavit that in fact they had they i'm referring paragraph five of the affidavit if the doctors who owned the hospital did not provide additional funds doctor's hospital would have necessarily failed to meet meet such critical financial needs or liquidated as an expedient method of documenting the contributions he doesn't use the word loans contributions that doctors jolly single and i made we were flecked to be his words cash contributions in promissory notes issued by doctors hospital he goes on to say that in fact they had to do that because they couldn't under by a law make loans they had to make is cash contributions as a result of that  goes on to say that paragraph six although the notes provide for payment at the expiration of their stated terms i can assure the court that this language does not fully and accurately represent the terms of contemporaneous dimia so he goes on to say whatever these notes are ignore them we have other agreements they really aren't what they appear to be and it's all in his affidavit and i have to do it was something we relied on in our motion for summary judgment and the hearing as to whether or not these are capital contributions or advances why is this important in terms of a fraudulent transfer analysis our motion for summary judgment on the project and transfer we had to prove that there was no reasonably equivalent value given for the monies which the hospital paid out not to short but if you're going to say that this is a repayment on a loan that's a reasonably equivalent value tell us which loan and the defendant couldn't could not raise an issue of material fact to show that any reasonably equivalent value was given in exchange for the payment or payments which a dr short received over time i  mean misunderstood yes national's question i thought she was asking you was there some sort of a limitation on the ability of the hospital issue new is i can't i don't know the answer i can see that question i don't know the answer was there ever anything reflected in the equity that's out of the capital of the of the hospital was there any documentation ever shown that equity increased for dr short as a result of these contributions to the best of my knowledge the answer is no there apparently was at some point in time they were going to issue new equity if i recall correctly and then there was a decision made not to do it you know if i recall correctly then there was a decision made that essentially will take that money which was going to reflect a new has a new equity and let's just turn it into loans no that's what it was it was it was a high risk lump basically my point being that for a fraudulent transfer analysis when that transfer is made the diff we showed there was no reasonably equivalent value preferential transfer you're talking about the payment made by the hospital that short later i'm talking about the initial payment by shorting the hospital trying to understand why that's not activity and i think your argument is that the formalities for  for a loan were not correct ok but if but i guess for me the concern is is that enough do you still have to have some evidence that there was actual equity being given to dr short transfers and our analysis with regard to the fraudulent transfers is that for each of these transfers there was no reasonably equivalent value given because there was no money owed at the time of the transfers and as we fight was alone then there actually would be consideration for the bank and then that begs the question what payment what loan was this repaying was there any money owed on the loan at the time the transfer was made in there is no evidence to show that any of these payments correlates to any of those notes correlates to any of these so called loans therefore no reasonably equivalent about you and summary judgment was properly granted on the project and transfer loans in his later years cannot recall and correlate the loans then it's not loans and it becomes a capital contribution that's an absurd notion dr short testify that one time he could correlate these at one time he knew what loans were being repaid he also testified that he spent the last nine months i'm sorry nine of the last eighteen months in the hospital i'm not talking about working in the hospital i'm talking about being in a hospital bed with tubes out of out of there yes orifices near death and he also explained that that's why he did not have the sign notes his he was a practicing doctor went into the hospital nearly died and people went through his office in and closed his office and put papers in places where he couldn't find them your honor the fun the final pretrial where after so many issues here on the final pitch or mr alexian is relying upon one garbled sentence to say that all these issues whatever issue he wants to have come in on a final pitch will comes and i encourage you to review that garbled sentence and see what really holds  all his weight in all the style the deck to his judicial dictates extensive i agree and i'm that this this panel cannot overrule that but it can decline to follow it retroactively characterizations we're talking about with respect to celts three and four on count one it's regular characterization which i argue does not exist thanks chris not authorized to do that on casting for its retroactive this doesn't exist it's unprecedented it was eight it was called for asked for in the trustees complaint and on my motion that was dismissed and the trustee amended his complaint to no longer include it yet the bankruptcy court resurrected this after the trial without it being identified in the final picture and after it had been dismissed that's that was unusual your honor also unprecedented is the reach characterization of debt as equity when the debt is out of proportion to the shareholders or the owners equity dr short own to six percent of the hospital approximately and he made a greater percentage of the loans you are  for someone to make but he ignores the fact that the trustee have the burden of proof also the operating agreement has very specific as judge bush was picking up on the operating agreement has very specific requirements and and provisions regarding  capital counts and i've addressed that in my briefs look at the amounts of money that were transferred from your client to the hospital could be something other than debt or capital contribution only the only other possibility is a gift there's no evidence the only evidence all the evidence was that they were loans as far as the requirements under the operating agreement that the fact that they were supposed to offer the opportunity to other doctors to make loans dr short testified that other doctors had declined that opportunity and it wasn't an issue at the trial this is an expo spectro thing they're trying to raise and they're trying to pretend that dr short have the burden payments were loan repayments the affidavit of two words to say about the affidavit passes and that's the explanation when you read dr schwartz language in the affidavit he's saying that the loans were perry passive and that's why dr jolly shouldn't receive payment before without the other doctors even payment dr dr joye received a judgment to force the company into bankruptcy where the rule as free passes except if your doctor short