good morning senior judge five judge i could judge kristin paulie's appearing on behalf of elizabeth smart and christopher hamilton who are the debtors and a chapter eleven bankruptcy may please the court this decision is about  bankruptcy court or this case about a bankruptcy court decision finding that certain activities of a creditor arabs are outside the automatic stay of section three hundred and sixty two dollars the creditor elite brought an action against a an affiliate of the debtors a company a family owned business that the debtor customer hamilton works for the operating agreement of that company provided certain indemnity rights to the debtor and after debt to the debtor the creditor can sue that rd party to have the property or the debt applied to the judgment it is difficult to imagine an action more closely related to the so i look at the statute and the statute talks about when the duty to indemnify arises as opposed to the common law which is basically in other words i'm just trying to draw the distinction between what out just for short temper persist talk about the right to be reimbursed credit that's correct ok so that now you are going to explain why he is the beneficiary yes your honor he is the beneficiary of an indemnity obligation out of this operating agreement but interject a question there because when i looked at the language of the operating a agreement agreed to pay the judge that it agreed to pay chris hamilton should he have have obligations under the judgment but hamilton's obligations were subject to a chapter eleven dollars plan but the important part of that analysis your honor is chris liability to a lead hamilton is the beneficiary of that obligation so he is alive all right because there is a judge at at the time it was entered there was a question as to what the scope of the liability would be in light of the chapter eleven plan your honor judge that's correct or on this that was the whole idea of what drove a chapter eleven there's absolutely no doubt about that so this distinction is critical because that's what makes it property the bankruptcy estate in the whole point of chapter eleven is to allow a debtor to reorganize their affairs take the property rights that are due to them and put them into a plan to pay creditors such a plan was proposed we're going to be talking about that on the next appeal but the basic where the bankruptcy court erred fundamentally was finding that this was and elite and that is that is just not the case the california supreme court has ruled that this is a garnishment statute this is in effect only exercising property or control over property that debtor owns and applying it to pay a judgment that the debtor is obligated to a creditor and that's why this seems to me to be a very simple and straightforward case that you guess case that had to do with a ship that was independently liable there was a lien on the ship and that's what the creditor grap the the advanced ribbon case had to do with the pledge of stock in a debtor which was neither property of the debtor and it was independently liable to the creditor because of the pledge the same thing buscher was taken away from parties the right to control their obligations and negotiate their own their own destiny now sleave said that the connection with h c c years property of the estate was that ever listed in any of the negotiate in conjunction with something like the nd or rd attempt in an amended plan you ended up with six right we did your honor now three of those were informal review type status where we changed them to satisfy what were in formal discussions with creditors three went to a confirmation process and every day you just said that it was disclosed is that the same as listing it as property i am not a bankruptcy expert but i would think if you won the lottery after petition you would be required to to schedule that in some way that right or not i'm not sure would require you to amend the petition the petition literally is a statement of the property of the bankruptcy estate on the petition date after acquired property question about whether this should have been listed counsel made a statement that the indemnity didn't the rise until much later in the case while the operating agreement is on its face is effect of april t prepared at some point in time and signed in two thousand and fifteen after they've already made these representations as to the existence of the indemnities and in the declaration that was filed when that document was disclosed mrs diane hamilton the mr hamilton's mother said something to the effect of we put the court one of this agreement in writing so we put it in writing  dollars sixty five cents in the court says the debtors attempts to distinguish this case from the guarantor cases is without substance and while this is a different sort of distinction i think it's likewise without substance when indemnities were executed effective before the bankruptcy at that point in time the judgment had already been entered and we hadn't gotten to the point of it being determined to be nondestructive all but the did hamilton have a right to demand that that it be paid by a c c yes did they use that in the plan no to the plan say anything about causing the c to pay this judgment in the plan or in any fashion no you know you just hit on one of my questions is there anything in the record to indicate that mr hamilton or the hamiltons have demanded payment no your honor there is absolutely nothing the only the only use that that indemnity has been made of is to provide at this point for over two million dollars in attorney's fees accountancy professional f satisfied before there could be a lawsuit against the rd party and what the ruling was in that case was not that the the injured party the creditor could never sue the rd party but instead the court reversed and you go it sent back to the trial court with instructions to dismiss that action against a rd party without prejudice to it being refile once and i guess  amended and it's in the legislative comment to the to the statute all those preconditions were eliminated so it's clear at this point there is no no necessity whatsoever to go through the  indemnity that's the quote it's at page eleven of their brief well the quote was in fact in the case but we had the court in chembur own actually quoting from the and it goes on and in fact what happened was that when the court didn't say that you could never do it this court said you could you just have to have an obligation and ability to have an underlying judgment and once you have that then you can go ahead and sue your honor i may have just mixed my my cases up a bit in that but but the the real point on these cases is that it's not  it's it's not a question of whether the automatic station apply those cases go to whether h c c has a defense in the state court if if if police not entitled to sue because of these cases they can distance himself from ownership of the of the of this entity called the council call it a family business well supposedly it's his mother's business now this may go more towards our next hearing than this one but i think it's clear that what's going on here is is simply another stall tactic there's nothing in the record that supports the idea that that elite is trying to get property the state trying to get money from h c c that money does not belong to hamilton it's not proper to state we're not trying to wipe out his indemnity agreement if you want to demand that they pay elite surely would be happy do correct one glaring inaccuracy of what mr sims is presented to the court with respect to the existence of these indemnity rights and the notice of intended action that was circulated during april of two thousand and fifteen indeed my office to prepare notice of intended action to be paid or attorney's fees exercising mr hamilton's indemnity rights under his employment agreement that was later that year the court asked us to clarify the terms to make sure it included the right to pay the fees in these cases because the payment of attorney fees and a chapter eleven dollars would naturally come under the activities of a fairly standard indemnity agreement which was his existing employment agreement the noise made new preference to an operating agreement within demetre rights because that operating agreement did not exist either that agreement was dated later in two thousand and fifteen it was an amended version of an earlier operating agreement i did not see this until about december of two thousand and fifteen so the the sort of contention that this thing existed before then is simply incorrect that is not correct and it's an important one the nd thing is that if you also look there's no rd party beneficiary allowed in that operating agreement so elite's contention that this thing it benefits or that they can sue directly because the right they give this right under so no eight dollars to ten dollars exercise indemnity rights is simply inaccurate the language of the agreement tells us that there is no intended rd party beneficiary so there should not be any direct right of action and