why don't we wait till things settle down a little bit mr moscow six dismissal and i think that can't be lost at any point when energy operated twenty seven thousand wells twelve states that's twelve states that all got notice of the filing of the voluntary petitions on may eleventh of tw there was a bar date november seventh there was a service last that's in the record that seven thousand pages long a single line including all unclaimed property holders of those eleven  states texas had a headache pre partition unchain were reporting date eleven states had post petition reporting dates under their unclaimed property laws only oklahoma believes that it has a viable cl filed under put a penalty of perjury and indicates a right to payment the term and as of the petition date the oklahoma u p l has a recording and payment date of november one of each year and there's no question that the three seventeen twenty three seventeen eighty five honor and it goes beyond that there's a specific form this attached to each of their their claims not just the first set of claims but also the claims that they filed after the confirmation of this is the exhibit and if you fall they say only that it is an unsecure claim so not only do they say it's an unsecure claim by exclusion from category two as a r c also saying there is not a trust that's so important because during the pendency of a bankruptcy case the debtor is relying on its claims roster figure out how it settles all of its debts well basically you want to take what what did a plan do with this nearly a million dollars that would would have been  unclaimed property under a cloud home alone but planned two things one thing that the plan did is that it said a crude royalties are treated as general unsecured climbs which should have been of no moment to oklahoma because they filed their cla as a general unsecured line i just want to know the bottom line what does the plan do with that million dollars that in other words the people who are for whom it is a trustee under most state law i think it i guess you don't get anything whereas otherwise they would have had a fun a what is it tangible right to the money that had accrued in royalties correct property texas has an unclaimed property statute that they enacted a couple of years ago where it says on march want to be chief here which is also the record date for reporting unclaimed property taxes as a statute that says the holder lives and holds it in trust for the benefit of the state of texas for the unclaimed property holders oklahoma is nothing similar at all there is no trust like statute at all with with respect to uncl property and there is no trust statute at all with respect to oil and gas less wars with with the crude royalty claims there's nothing in the statute i thought they said the oil and gas  part that was a minute by the district court that was so critical that the the last sentence of that statute nothing in this subsection shall create an express trust so there's three expressed trust no implied trust they relied in turn in that case on samson versus him crude which was a four zero seven b r one forty d delaware twenty two thousand and nine because the p r s say requires operators to pay interest to owners of specified rates and otherwise has common commercial terms the court finds the statute concerns a debtor creditor relationship and does not impose a trust relationship didn't you argue of this of the district court th district court was the one that cited the oklahoma p r s i understand that and what did i mean i'm just asking if this is so obvious i was under the misimpression maybe i read the briefs a little too quickly but i was under submitted it and i thought that was what the district court ruled on and that's why i'm asking how come the district court got to got it so wrong why this report got it so wrong is east the just report cited cases that were not cited by oklahoma statute specifically and went through the litany of the statutes oklahoma rely primarily on taking cases out of the debtors own mineral payments motion which of course deals with twelve states and fifteen different types of oil and gas interest picks up little phrases you had no research type of citations to that to that motion and then weaves in a sort of we want a we want the court to find declare that it was a property of the state but he never pled below in the original complaint he never pled for a trust he didn't go through the elements of a trust he didn't cite facts to support a trial you're both a little bit sloppy to begin with because they do say that the mineral payments motion that lynn filed i'm just trying to reach where the facts go here the mineral payments motion that lynn filed said there outside the scope of  outside the scope of his state property and not a date they do cite two or three of the filings that the debtor made that said this is outside the scope of his state property i have two things to say about that one we have the claim the oklahoma claims i know we have your claim and we have we have their claim and we have what you did and you're both inaccurate is basically what you're saying because you're not i don't hear you defending the mineral payments much i can't even the mineral payments move that's what i was asking you about minerals as i said the mineral payments motion was a first demotion not unlike a critical vendor motion that asked to pay things arising in the ordinary course of business and gives a variety of justifications why those creditors would not be among the general unsecured creditors and even if they were that the payment was critical to the ongoing business the fact that they recycle various cases i know that well i know what a first day motion is but what are you saying what was the implication of that for the unclaimed property which the debtor said was outside the estate did that mean they were paying and it meant that they had the  authority to put it but they would only pay if they had a genuine legal basis to pay it ahead of unsecured creditors now two things about the movement of payments motion it doesn't talk about on claimed property there is no the estate the property of the a stay includes both legal and equitable interest unless the equitable interest is shown in a procedure in front of the bankruptcy court to not to to to require payment outside the truth of the plan president's personal collection and therefore brand of was a trustee for and i'm just please excuse me if my analogy isn't good i'm just trying to be colorful but suppose the debtor is the trustee for property that means it holds legal title but not equitable title can the plan transform bare legal title into equitable title which is essentially what you're claiming it has done it can because it's the same as it is vitro and other cases that say that a creditor who participates in the bankruptcy and the and who doesn't object to a plan that extinguishes there really the plan is also r as to that if a party comes in and gets a ballot as oklahoma did here it characterizes their claim as six a unsecured and that that reference is four two three eight  and the plan eleven three ninety eight it was clear in absolute notice to oklahoma that it was being treated as a general unsecured client and what standing does oklahoma have to stand in the shoes of the mineral payment holders it just seems to me that this if it's something that is supposed somebody had dropped a diamond necklace at the company headquarters and then suddenly realized the diamond necklace was in the possession of the debtor and the  put it in safety possibly ochs and then files the plan and says here's this it's all being adjudicated it's not your contention that the diamond necklace would be gone by operation of the plan is it it if the owner would have no it was clear notice in the plan that that's what the debtor was going to do and somebody didn't object but the more important point is the minerals weren't severed from the ground where the debtors property they weren't the least the less that there is no trust relationship ownership was in the debt or the plant cut off any possible constructive trust and if it couldn't imagine the policy implications of such a ruling if i just determined that i think that i have a constructive trust does that mean i get to violate the stay or do i have to come into bankruptcy court before the plan is confirmed to to assert that right that's what we're saying and even if it had been asserted it would have been a loser they had no right  they are claiming under their unclaimed property statute not as a mineral holder that's an important distinction here they don't have standing to raise the priority orleans or trust like claims o royalty holder they they are can't coming in and claiming clearly in their claim under the unclaimed property statute that's a an unsecure claim what more could live have done to ferret out the fact that they thought they had something please the court jacob sparks for the argument the plan only dealt with the debtors property if the property of the unclaimed property holders was not the debtors property which it was not whether the problem here did you raise oklahoma the state of oklahoma did file an insecure claim for it was represented after receiving notice of the bankruptcy and the claim said that the property was being held in trust and that it was subject to the state's custody as she says there's no such thing as this trust claim well if the property is not property of the debtors bankruptcy state then i don't know that we need to deal with the equitable brim ity of a trust although i certainly think that when he says that under texas under oklahoma law that its opinion all proceeds from the sale of production shall be regarded as separate and distinct from all other funds any person holding revenue should hold the same for the benefit of the owners legally entitled there to the statute does say that there's not an express trust but it says there's not an sovereign right to enact as she was and it impacted that sovereign power through the oklahoma unclaimed property act which gives the the treasurer custody of the state custody and it's administered by the treasurer but then this but then the way those things entitle to custody of this property and according to the supreme court of delaware versus new york funds held by a debtor become subject as cheap because the debtor has no interest in the funds precisely the opposite of love on that house i mean holding for the benefit is is not all bad different than the relationship that a bank has with a with a deposit or in the bank anna and a deposit or in the bank is a creditor it's a debtor creditor relationship so why is this relationship that you're talking about any different than a debtor creditor relationship between lin and the royal neonates or work in it you know well the de admits in the their brief that it had this property on the petition date it was holding the phones in its bank account we also can see that in the statement of financial affairs that it knows the debtor was holding fifty four million  proceeds so we're looking for the property we're looking for cust delivery of the property but that begs a question because you and it seems to me you're now defining your claim in such way that it doesn't differ from any other royalty ownership claim well to the extent that the debtor was holding somebody else's property that the debtor did not own that is the other five a debtor paid off all the royalty claim sesson for data bankruptcy i do not believe one hundred percent now of course the funds are traceable and under this court's precedents when money is held in a trust you you apply the lowest intermediate balance test this account had fifty four million on the petition date were only looking for about a million dollars and those funds my client's position is that the debtor is holding the property itself and that property should be delivered we are not asserting that in persona liability against the debtor we're looking for delivery of property of claim and that's why we're here today so now that's after confirmation that's that's correct your honor i mean and i don't i don't really disagree with that i am in you know often adjudicate claims after confirmation but i do sort of think it's inconsistent with your position to have filed all these ongoing general and secured claims and then get a ballot in that capacity because what you should have done i believe was if you really felt that you were in a different side we would have in order we would have directed earlier i'm sure my client would have hired counsel earlier but the debtor filed a report with the state of oklahoma in november of two thousand and sixteen disclosing nine hundred sixty five thousand dollars in i don't believe that the plan plainly characterized this property as property of the debtors state i believe that the plan and the confirmation work contain explicit carve outs other confirmations or says notwithstanding anything to the contrary  either plan or the confirmation order the reorganized debtor shall operate their business properties and assets in compliance with any a political federal state or local laws and regulations so under the terms of the debtors plan they were wired to comply with the oklahoma uncl property act so we don't believe that there's any race judicata effect when the plan expressly and notwithstanding anything to the contrary gives the treasurer the right to continue enforcing its s g laws and the reorganize debtors operate their business properties in assets in compliance with any a political federal state or local laws and regulations which is also what twenty eight u s c nine fifty nine says that a debtor in bankruptcy is required to operate in compliance with state law and apply and says notwithstanding anything to the contrary here in nothing in the plan or confirmation orders attended to effect the police or regular regular tory activities of governmental units or other government twenty six some that means it i i ought to know this is the company still in business the reorganized debtor is in business that are still in business well then that means that going forward it's going to pay the unclaimed property right what else is it me well i believe your honor that because the debtor has no property interest in these and in this unclaimed property because it simply holding property that blows to other people it means that it's going to to the state i mean do you have what you know what it you say for the first time the debtor is going after unclaimed property laws now it i assume oklahoma has to deal with a number of these kinds of cases and why are you saying does oklahoma normally and as a matter of routine get paid by debtors and possession for unclaimed royalty or interest payments but my client tells me your honor that they believe this property was being turned over regardless of the bankruptcy of this is well i don't care what they believe you mean that if you know if you i mean you don't cite anything for that regulate well in codex your honor code x was ordered to clean up the property but a receiver was appointed a receiver was appointed who divested kovacs of all of his assets took it all the authority that he had and then the receiver was in charge of cleaning up the property and the receiver tried to collect money from kovacs and the court said that's a claim that's not the situation that we're in because the dead girl has possession of the property that we are seeking to have delivered to the state if i can envision some situations potentially where you know we were in a very different procedural posture in the state of oklahoma had sued the debtor to recover property that had not been turned over that that the debtor had not segregated and were looking for interest and penalties and the state have to forward claiming a million dollars out of fifty four million owed to twelve or fifteen separate jurisdictions is doesn't seem to me power over property through s two laws and according to the supreme court a debtor holds no property interest in those funds and according to the supreme court a debtor cannot distribute other people's insurance case well your honor i don't but i don't believe it applies because we're dealing with the states sovereign power over property located within that state and the debtor has no equitable interest in the property well is it a sovereign powers a trustee for other people you saying it's just a trustee i see those as two separate questions your honor because if this is not a property of the bankruptcy estate we don't have to impose a trust on the property it's just ours we just to show ownership and we can do that because not oklahoma supplements holding it for other people right right so if it's not the debtors property then the debtor cannot now have an equitable interest in the property by virtue of the plan years worth of back royalties from which they are trustee or something constructive trust or something like that in a segregated fund but he's only an unsecured creditor whereas oklahoma who claims to be holding for all but joe smith should never cash their checks or never you know weren't didn't have current addresses or whatever oklahoma has a as a in kind o where at the different i mean is that a valid differentiation there is a big difference for the state of oklahoma and joe smith but i believe joe smith is a property owner and the debtor is holding his funds in an account co mingled or not that money is still there the de have any authority for these are properties for that kind of proposition yes your honor i mean this is a novel issue so there are not a lot of cases from anywhere dealing with this but if you start with gmail or novel because nobody ever thought to raise an argument like this that may be your honor but the other cases that we're dealing with this three of the four were decided before delaware versus new york and the third was decided later that year and doesn't cite delaware new versus new york delaware versus new york is where the court said funds held by a debtor becomes subject as cheap because the debtor has no interest in the funds the debtor in this case had no ownership interest in these funds cannot convert them to its own use o says whether what the status of property is determined by state law so whatever delaware's said beason being new york may apply to delaware new york law but not necessarily to the statutes of oklahoma which are issue here that's correct and you're not claiming that oklahoma owns this property what you're claiming is that they are holding it for the actual royalty owners right yes your honor i'm saying that the debtor does not own this property that the debtor is holding this the owners and that the state is subject to possession of the property under the s g was the state has under oklahoma law the debtor has no interest in this property the debtor is a holder in possession of property belonging to another ever every debtor has property that should be belonging to another person that's the whole point of bankruptcy yes your honor but if you loan me a van gogh and i hung it in my office and have complete control over it in possession of it and then i file bankruptcy the it doesn't become mine it doesn't become mine by virtue of a plan of reorganization or any other way it's still your painting and you don't have to prove a construct of trust unless i sell it and then you've got to prove a constructive trust over a trust over proceeds otherwise you just have to prove that i have yes your honor i believe so and also your honor under the accord in the oklahoma supreme court the public policy supporting custodial taken by a state is superior to any claim that a private holder may assert in unclaimed proceeds so under the state law in question that creates and defines the property right the debtor has no interest in these funds and the state's right of possession is superior right but not when it's dealing with somebody else's property your honor the plant cannot dispose of other people's property the debtor cannot give other people's property to their creditors you know in the absent if  debtor had won the claims objection for instance if we had gone ahead and litigated that as an unsecure claim then the might be a better race judicata argument here although the property will never belong to the debtor it will never be able to be distributed to its creditors its subject  after the confirmation were signed by by spencer fein the law firm that is now representing to you with the same exact same attachment it's an unsecured plying we're not claiming to trust they filed out that same claim and it's the only thing that we have from the state of oklahoma that's filed under penalty of perjury so when they say now that it was never property of the estate then why do they file a claim it is property of the state it's cash is not a van gogh it's cash in a general operating account and that's in the mr harm declaration you mentioned braniff and it triggered something that i had thought about  what if i was a tenant in a lease i was i was in your shopping center and i owed you percentage rent a royalty works exactly like that the fact that oh you percentage rent on how much of my dresses i my dress shop doesn't mean that a warranty gives you a property interest in the various hundred different states law though doesn't it exactly and so it's the confusion i think comes when people think of oil and gas in the ground belongs to the mineral estate but once it's extracted by the producer the producer owns it subject to its its obligation to pay a royalty as it's rent to the mineral estate well that's a matter state law under but not right correct and to the extent that anybody thinks that there is a federal common law issue here they're the same the standards for invocation of federal common law simply are met when what do you say about the perlman case the probably case was obviously issued  fight decided under the bankruptcy act and ignores the wording of the five forty one d is presently inactive by congress under the bankruptcy code also if you look at the circuit's decision in georgia says what should have happened here in that case somebody was asserting a construct of trust and the opinion says you may think you may assert a constructive trust but you have to come to  from the estate if you can prove all of that and what happened here is there is there was no pleading of a trust in the original complaint filed by the oklahoma treasure and there certainly wasn't one in the proofs of the claim so one could resolve this  procedural grounds yes the motion to dismiss was a procedural motion based on the rescue effect of the plan and the fact that there had been nothing done to extract this property from property these day prior to the confirmation order that has several salient provisions that that directly impact the viability of the cause of action that is the discharge injunction to borrow a five sixty one the rel are awake by fifty seven the plan could not have been to the extent that the the treasurer wants to piggyback on the rights of the mineral claimants which i suggest to you there is no basis for there is no subrogation there's nothing in the oklahoma statute that acting as if they have it without arguing and they just simply don't have the standing to assert the rights of third parties and that's what's happening here that's why they're confusing they confuse the texas has a right because you still litigating against them right they had a statutory trust on march one of the texas statute says a trust attaches to the unclaimed property that the record date for which is march one it's not payable until july first we argued a lot about that i thought that provision was designed soley to upset upset the priorities of the bankruptcy code was that was in the legislative history we argued about it we settled we didn't settle for a hundred cents thank you all right