issue in this case as framed by the district court opinion is whether this circuit in boulder fruit held that any commercial commercially reasonable financing arrangement but that's not the exact language of boulder fruit putting aside whether this arrangement is a sale or something else and we adopted a commercially reasonable sale doctrine or a commercially reasonable commercial arrangement doctrine in reviewing the boulder f opinion the district court misapprehended that opinion i believe the bowl the fruit case is limited to commercial reasonable sales of accounts receivable that that is the standard the commercial reasonable standard is limited to sales why is that it's limited to sales because under ppaca packet applies specifically to secured lenders section five c one of the package says explains the intent and the purpose of the package and it really framed the issue before the court that provision provides financing arrangements that incumbent or give a security interest in produce and any receivables or proceeds from the sale of produce are contrary to the public interest it's dealing with security interests not a sale so in your view does the statute prohibit security interest subordinated to the growers interests it does not prohibit while granting of the security interest however contrary to the public interest sounds it sounds like void language to me it does your honor it does  basically it forbids a security interest in income but assets to the extent to the extent such assets are unavailable to pay the produce suppliers and are freely available at all times to pay t correct and of the statute if it's a sale and assuming us commercially reasonable sale of car accounts receivable that's fine and that and the buyer takes them free and correlations that is correct ok so as a matter of securities law the u c c law how does one sell an asset that has a lien against it free and clear of all leaves well the boulder fruit seems to say can be done have that happens what happens is if a produce company sells an account receivable that receivable is converted into cash and it is removed from the trust and the seller takes free of the trust so long as it pays commercially reasonable value so here we have and let me restructure this deal just slightly from purposes simplicity we said in boulder fruit that if you sold it for eighty percent that was  here whether you call it a loan or a sale let's just assume for a moment that the that the middleman gets eighty percent plus something else and so are we going to say that's not allowed by the statute but a deal that produced last for the growers is no i think it all hinges and that's that's really the issue before let's assume it's a loan from our if it's a loan it's commercially unreasonable because it can never be commercially reasonable no matter what the terms are if it's a loan if they're taking the trust assets ahead of the package trust creditors and i think there's you may be mixing two concepts i'm not sure it matters but every trustee must act in a commercially reasonable fashion that is correct when we have a separate problem of the lien that attaches to these accounts receivable so in my mind at least i would first look at commercially reasonable to see whether it's a good deal now the second question is still what happens to those lean but whether you do it that way or some other way let's assume we have two transactions the boulder creek transaction and this one and let's call this one alone for a moment eighty percent comes in remains with the  middleman who passes it on to the growers and then he's got a chance of getting some more later that's better than the boulder creek deal why should we find it the statue perhaps it's that one statute designed to protect growers while it allows the other that's because that's what congress was difficult he was trying to prevent was secured lenders from trumping the interest of the previous suppliers it doesn't matter what the terms of the loan are the bottom line is the statute says that produce guys trump the interest of secured lenders now what the district court did is said hey if the loans commercially reasonable then it trumps those of the packet headers in other words the district court created  reasonable exemption wrote in an exemption into the pakistan at you that says paying back interest creditors you don't own the package trust creditors you don't trump the secured lenders if that loan is commercially reasonable if congress wanted to put in  commercially reasonable exemption into the statute it would have voted in but it didn't it wanted packet trust creditors to always trump the interest of secured lenders as it relates to pack a trust that let me ask you the sixty four dollar question or it has lots of language that seems like the language that the fourth circuit talks about in its case that it characterized as a loan is this an ambiguous contract on which paul evidence is needed how do i determine whether it's a loan i think collected where does the concept of transfer of risk come from the fourth circuit case comes from the fourth circuit case that also comes from the end to go case those are the two opinions that address the issue of transfer of risk now if you look at the loan documents in this case are capped never sumed any of the risk there was a paragraph one of the main paragraphs of the financing documents that said that ten or more up they would force ten or more to charge back  receivables if agrah kept not collecting the term sheet as part of the of the financing arrangement said that janet morell was the borrower cap was the lender now let's assume the twenty percent was to account for the t receivables that are collected for that i mean and i believe they would also charge back additional sums on top of it in the event that you collect it is that's not an issue in this case is it a chargeback of the eighty percent has already been paid only but they could charge interject a question i didn't really understand your argument that that camp is not subject to risk if it pays out any percent and then it can't recover from the creditor from the account receivable and then it goes to charge it back again to the to the distributor  bought that distributor could be gone or broke were bankrupt and then wouldn't they be out there there are eighty percent  can't we coop it in a bankruptcy to the extent they can recoup it however here's what i did they got also got personal guarantees from the principals of him or they also filed u c c one statements on all the assets of the distributor they made another bank subordinate their interest in the assets of ten a more so that they would have a first priority subject of course to the package trust claims so no they never assumed any of the risk they protected themselves as much as they possibly could if this were true sal kept would pay eighty percent and they would bear the risk and the bar would be free to go on its way and act cap would be stuck with the risk of loss and the lame collection but that's not how it works we're asking a question about our group caps fees its efforts to produce these receive reports or least you know collect or receive so your position that it's fees are not collectable against the  one hundred percent or c who was obviously that they the middle man thought there were some risk in and that they weren't were you know he couldn't get them all and therefore he sent them out to a factor to go collect so your position is that even if the factor by its efforts produces some of these collections that might not have been produced otherwise they can take a fee for you know they can because it's the trust the counter seeable always remain trust assets subject to the claims of the package trust creditors it's always client is that vacating and we said before before you you get to the question of whether the sales commercially reasonable you need to have a separate inquiry on assumption of risk whether it's really a sale or alone as the fourth circuits if we did that what would be the consequences and the factoring industry the consequences would be in the factoring industry they would have to stop they have to make a decision are we truly going to buy these receivables and make a true factory relationship like the court held in boulder fruit the financing arran allowed or are we still going to try to protect ourselves pretended to sell and really create a revolving line of credit for the factoring industry as the house report noted when they passed the statute in one thousand nine hundred four this was known to the lending lending world they knew they could adjust how they lend money to produce suppliers or receivers so we are in closing i'd just like to say the judge would by refusing to analyze the substance of the documents in question here created a commercially reason exemption to the package which is going to reduce it to a knowledge ship so what do you asking us to do here asking us to remand it to the district court to analyze the documents yes your honor i would like it remained it to the district or thank you your honors in boulder for this court analyzed the exact question that it's presented with again today and that is very simply if a produce beneficiary of the trust has already once received the benefits of the conversion of the receivable can it then come back a second time and ask for the return of that receivable in essence expanding the trust from its original size for one dollar for every dollar purchased or sold by them two t d i they want two dollars worth of protection they want the dollar that was then or the ninety eight cents in this case that agger cap paid to t d i that was then used to pay them the beneficiaries as the statute was intended but they also want then agora capped to return that dollar in receivable what is ha or do they want the two cents no that is i understand their position they've got a lien against the receivables to the extent of the amount of money that the middleman owes them right  what the they're not asking just for the two cents i know i'm not asked for so what they're asking for i want understand what the law provides let's assume i'm the grower and i sell an apple to the middle man for a dollar and the middle man sells it to the grocery store for a dollar fifty there's an account receivable over dollar fifty right yes i'm in the middle i'm as the grower my lean is only a dollar though isn't it so there's only one piece of fruit involved in the soldiers my line is a dollar  it's not technically a lien which is where i think i've got my but you know if you're interested my partner already has a dollar yes ok so tell me why they're asking for the dollar fifty year i don't understand because what has happened is this is a series of transactions so for that one dollar they then have sold the t d i t d i turned around at the dollar and fifty from aggregate from from the seller or the the supermarket in most cases they take that dollar and fifty invoice and sell it to receivable to agra cap and receives sales or lands with precious i for a second receives eighty cents or eighty cents or a dollar twenty which of the two well and is it eighty percent of the receivable it's actually ninety eight percent of the receivable ultimately big that's because it's eighty percent of the dollar fifty no because for each receivable that aggregate factor actor cap received it paid ninety eight cents the dollar numbers here are the receivables that that's at the end of the day because of collections know that this initially eighty percent it's of a dollar fifty right technically it's it's you pay a hundred percent less the fees which in this case averaged to be two percent so ninety eight cents of every receivable was paid by aggregate i mean let me ask the question differently what was paid at the initiate let's again let's just take one number  initiation of the deal when the contract was signed how much money was advanced due to the middleman let's assume you had a dollar fifty in receivables how much money would be advanced to the middle man at that point time it would be initially the eighty per cent of a dollar waived of the dollar fifty but with the right to then collect i understand the extra twenty less the fees so the extra eighteen cents and just so that i'm unclear here the total amount of receivables that agrah fact agrah cap received was twenty point six million of which they paid twenty point four million to the middle man right so of and i'm still this may be just a complete misunderstanding on my part but bear with me on this once the growers have received one hundred cents on the dollar of the debt from the middleman to the growers you get to keep the rest under any scenario correct  once i'm not sure i am not allowed to make a real simple i'm a grower yeah i sold an apple to the middle man for a dollar once i get a dollar back everything extra you collect with respect to that apple remains in the factors here to correct yes ok so i'm not sure i understood your position in the beginning about why they're seeking two dollars on the dollar they're seeking one dollar on the dollar of the amounts owed them by the middleman correct well the the moneys that agra kept paid to is they're asking for the disgorgement not just of the balance but of the entire amount that agra kept receipt or acquired because i want to ask them that when they stand up it seems to me then that that no matter what the correct legal position in the case is the remedy that you say they're seeking may be excessive well that of but the argument that you're making it seems to me is an argument with the statute what's let's put excite the fact of the argument of whether it's a factory  agreement let's just say you're your bank and t d i comes and says i want to finance my business with a loan and i'm going to give you as collateral my accounts receivable now the bank loans a million dollars they made some of it hopefully goes to the growers some goals for utilities and other expenses but that million dollars of a concert siebel some is still on collected is subordinate to the to the trust isn't it  no it is not your honour's the there are concepts that have been expressed that are not in the car in the pack a green packet regulations and law itself the regulations in the law ar precisely what this court in boulder cruet look to which says there shall be no just of any transaction that dissipates trust assets is improper that's the standard on your position is to force circuit is wrong oh yes