hoping for my first question is how is the bankruptcy courts decision a final order well the parties agreed to bifurcate the subordination aspect of the case because they could have a confirmed plan until this part of the case was result and so by agreement of the parties that is how we proceed but the confirmation order there's been there's been no confirmation hearing that's been stated correctly is that is true so wouldn't the confirmation order if you if you bifurcated by definition you started with one unit and you split it into two isn't the one you have the confirmation process still pending that is t so how do we have jurisdiction to want to hear the appeal the property and we had a two day trial on this and there were a lot of exhibits there was a lot of testimony to the point that i wanted to make that in order for the bankruptcy court to go ahead and rule for subordination it was set out that there was inadequate purchase price and there was an adequate sales price and this case was a little bit unusual because we were in state court previously and different attorneys in the setting  foreclosure and in that case there was a finding by the state court that there was no special relationship based on this mama g concept the issue of the ineffable  purchase price or an inexorable sales price was not an issue that was addressed until we get to make support and then we get the bankruptcy in the in the state court what was the status of the state court case there was the court of appeals decision was that appealed to the i was supreme court it was not it was not so that's a fun then that that was a final judgment at the time of the trial that the issues were somewhat analogous because what was argued there was that there was misrepresentation as to the sale right the condition of the premises and so what we have argued in our brief basically was many of the issues that go to an unjust are underused from both purchase price either adjudicated in the state court proceeding and therefore res judicata or the bankruptcy court itself ruled for example there was no fraud in the purchase of the motel there was no  parties there was no third party control the court of appeals right was that no special relationship based on the mom concept then the issue that really was before the state court was that there was no basis to rescind the real estate contract so from our perspective with all that evidence how can you have an unjust or unreasonable purchase price claim by the bankruptcy court when all the other findings seem to run contrary to it that it is an length transaction so the argument was that there is no inexorable conduct as to the purchase price because through a combination of the state court find names and award the bankruptcy court rulings there is nothing in there other than maybe a dislike for the purchase price but all other indicators that would create a potential fine for an actual conduct there just not present so for that basis we believe that that conclusion that it was an inexorable purchase price clearly erroneous it's not supported by the actual evidence we laid out in our brief but numbers over time and it's a mixed bag we're looking at a purchase price for a full hotel we're looking at a sale price for the full hotel we're looking at a fire which reduced the number of rooms that were usable we are also looking at a bankruptcy courts opinion as to the value you see a range of values here and so because there is a range of value our position was that it's clearly erroneous to say the values between four hundred four hundred thirty thousand dollars in light of all these other numbers it would and we have some pretty severe pronouncements from the court you have seen those numbers in the face of other numbers and so it it appears that those other figures were not as one point five on the high side where it's seven hundred twenty nine thousand dollars based on an assessment you can't say it's between four hundred four thirty and then i use an apples to apples analysis as well with the court does it with they go ahead and say well we're going to look at the purchase price at the foreclosure of four hundred thirty thousand dollars ok so that person right there we're going to look at an assessment number of four hundred thousand dollars and the number clearly is in that range well i don't think the number was clearly in that range now i think the challenge for this the pronouncement that the numbers are clearly in that range and therefore the six twenty five purchase price is that is a product of overreaching is just not supported by the evidence the court says there no exists no evidence of how the purchase price of six twenty five was justified but we do we think you have to justify a purchase price for a contract i don't think you do and i think in light of what is a bad purchase price and bad sales price we're going to compare those two you have to prove both of those were bad numbers and clearly it's our position that the person price is not a bad number let's go to the sales price here tons of evidence as to what's going on with this property this is a property we haven't offered in the six hundred from silver while you have another number that comes in two hundred eighty eight if you look at the environmental issues that are in the record you look at the the water issues that are in the record you see this is a property that it's abusing the value of the bakers the court said basically that there was no justification for a one dollar purchase price and i'm paraphrasing here well let me ask you about this at one dollar to press her first of all did that ever become final because didn't the tax sale intervene and the property got sold  did the dollar bid ever become anything in other words in the process in iowa what happens after the sheriff so does there have to be a confirmation by the corps or no no in some states you  vests in this case it's a certificate of purchase and that's on july twentieth and then we look by august first and the statutory period for the investing of the tax he has kicked in and they period or something or if there is a redemption period then you definitely have to wait to get a purchase is given so that you have proof that you're the purchaser and you can insure the property and then you basically wait for the sheriffs  issue the deed in that deed should have been issued sometime around august first it just never was issued in that heat because it was moved you know i think the thing this is really important to understand is that the bankruptcy court said all actions taken by claimants appear to have related and directed toward this goal by increasing the maximum liability under the dial on mortgage well all we have to do is look at the exhibit that shows the proposed sale to those get there were two mortgages at one time did they both get really get the they were they were both released within a year you know and i mean as of the time of the sale the foreclosure sale were the only of those had been paid and had been satisfied and that should i much prefer to be in the position of the employee i think that the appellant in this case notwithstanding the jurisdictional question that was asked i think the opponent this case has a heavy burden to show that the trial court after two days of trial and we went hot and heavy for those two days judge show deem very carefully analyzed the and viewed the took the record as a whole she took a cold calculating maga patel who sat there basically saying i don't care about any of this i want my money she heard the heard the testimony of the very strange testimony about the thousand dollars that was fleeced out of my client in the car on the way there she heard the testimony that he wanted to see the motel on the way back from cedar rapids if you come down  three eighty from cedar rapids to interstate eighty just to the west of i was city if you take a turn to the west the two exits there's the motel mr patel the not one my client to see the hotel at that time i think th was was six hundred twelve thousand and seventy nine secured and about seventy five thousand and secured and so so basically what the court did was was to take about four hundred fifty eight thousand off of the secured claim yes and based on subordination what happened to that four hundred fifty thousand dollars calling because because we have a stick we ended up with the secured claim of one hundred fifty four in the same seventy five and secure now is it just gone no i think it is below the equity interest holders below the equity yes is there something in the opinion that says they know i believe that's what five ten c would would do and i think that the case law subordinating a first mortgage to a second mortgage i get that but it seems to me that what the bankruptcy court did in this case was to disallow a significant portion of the secured claim and just me to go away well i what i think you are in the first instance that you suggested the subordination of a mortgage that's usually a consensual act but under five ten see if there is as was found in this case in equitable conduct then back subordination is not the consensual subordination where one lender says ok we're going to put another hundred thousand and we'll subordinate to you so you can be in first place this is a case this is a situation where under five ten c the conduct of the claimant has affected not just the debtor in possession but the creditor body and that is where equitable subordination really comes in it's not just damage or injury to the debtor in possession what's required under five ten c is injury to the creditor body and i believe that's what judge show dean found and so i don't think that the i mean it might be a little bit of of alice in wonderland but i do believe the claim is subordinated to the lowest level of claims and in chapter eleven that almost always is the equity interest holders so so basically what you're saying is that you're pla has the a big firm needs to be modified to treat that somehow yes in fact after the after the decision before the appeal judge show dean had issued a doc a text only order indicating the dates that i needed to further amend my chapter eleven plan to be consistent with the litigation  we would have to situate the procedural situation where we would be amending our chapter eleven plan we would be in the same position where they would be objecting to the plan  and then if they wanted to appeal the ruling on the claim they would then appeal it and the amount of time taken i just it seems like the judicial economy would would not be there we would be  further down the line and maybe before your honor's in another year whereas if this issue gets resolved then the potential confirmation of the chapter eleven plan would go forward that if our if the resolution were reversal then presumably there would be other causes of action that would have to be decided eat you would ask that the clean be subordinated to read well a reduced based on other causes of action as well well i certainly would hope that i had a few more arrows in my quiver your honor but in the in the event that this panel does decide to to reverse judge show dean i do believe i would have body here as your honour's molo in chapter eleven the debtor in possession is a fiduciary for the creditors and so we're we're not trying to take care of just one creditor we're looking at our entire creditor bought aren't your other arguments pretty much  mention this in the footnote i did not cross appeal the the she didn't really deny the impairment of collateral but in the impairment of collateral argument would result in a zero liability not merely a subordinated claim and a secured claim of one hundred fifty eight thousand or whatever i thought that was a very strong argument i totally disagree with my learned  colleague that for some reason the state court proceedings and rescission have a heck of a lot to do with this different parties were in that suit different legal issues were in that suit so there's really no even though the arguments made all of this is raised to the codon judge hogan has to follow the state court totally different different issues involved in that granted they come out of the same set of facts but race judicata collateral stoppel issue preclusion they all require that the similarity of the parties similarity of the issues rescission of a contract is not the same thing as five ten c equitable subordination but the bankruptcy court adopted those findings and you didn't take an appeal from it so it isn't about the record before us well no the record is not that because the iowa courts ruled the way they did that she believed that she had to  rule that way the argument is made by i the appellant in the reply brief that under grogan v garner she somehow asked to adopt all those findings will separate apart from that she did in her opinion adopt the findings of the state court findings and didn't want to revisit some of those findings and you're right your honor when i first got this twenty one page decision i'm reading through decision i lose i lose i love  i win now the reason for that is the accretion of conduct in this case and maybe judge show being a she and she did take six months to write the opinion and i  know she worked very hard at it maybe she could have been a little bit stronger and in certain aspects but i believe that she took the the accumulated evidence in this case of these witnesses and and found that the conduct throughout was inequitable and was designed ultimately to make sure that the highest possible deficiency came out of the ad williamsburg i think that the i want to compliment mr mcdaniel on the excellent use of all of these different potential purchase prices and and figures but they really they really don't help us the prior chapter eleven of the prior owner of the hotel it's really difficult to come up with a value here we went from one hundred twenty rooms where the swimming pool to a burned out shell of thirty four rooms he pointed out that operating the hotel after the fire and were experienced weren't able to make it operate mr patel tried to operate and he was unable to do it uncontroverted testimony was there sometimes was a week that would go by and not one single person would stay in this place i think that judge should be looked at all of the the evan it's from the various witnesses and came up with with this conclusion can you briefly tell us and i know you know how much time left what evidence was there of the of the value assuming you had the burden which i think you did to prove that the that the the price hadn't looked at the property that the assessed value wasn't related to its market value well that the assessor also testified that tax bills are certain amount based on these values and in general people paid their bills based on these values there'd been no protest no change in that evaluation so and so is that the evidence you're relying on for value the what the assessor said well at the at the time that the hotel was purchased for one dollar in two thousand and twelve in two thousand and twelve the only evidence before the trial court the only other and the appellant could have brought i appraiser ok but the burden is on you it was your it was your case for equitable subordination that that's correct and that testimony that testimony in the special was uncontroverted and that is the best evidence that we have of the value at that time again is there any other that you rely on no you are and did mr mcdaniel on cross examination of that witness point out the fact that that wasn't fair market value didn't she concede that it wasn't fair market value honor i i don't want to let you i don't want to answer that question because i'm not sure i just don't know what the record is what the record is you are i believe there was testimony on cross examination that the assessed value  not the fair market value and that's problematic i think well i also think that her testimony was that people pay their bills based on those and i think that is something in the marketplace that does suggest that if they're going to pay their bills they think that's the value except the bills weren't paid in this case well that's true and thank you thank you your honor sir thank  about that and backer l l c and i want l l c one member one manager is the same person so you're saying collateral stop would apply and there is the same parties here by ones involved in the transaction providing additional securities so well whether it does or not the bankruptcy court clearly applying it absolutely and there was no appeal taken from taken from her application of it completely and as been pointed out after never paid their taxes for three years with the taxes that my client had to redeem them after those taxes are redeemed about the seventy two thousand dollars then the next year's taxes were paid and those went to tax eventually the next two years after that taxes were paid so the value that is very questionable i think that i thought was kind of a fair arguments that you look at five ten see if you look all the testimony it's in my brief he was done with it he didn't want anything more to do with it nobody wanted anything to do with it they had a hundred people come through their property ninety six of which came through my client they had two offers that require due diligence on those people purchase that there was no market for that and in the let's keep in mind two thousand and eight two thousand and nine with the credit markets looked like in loans and so forth is it surprising that somebody would bid one dollar fifty a schedule of a foreclosure to foreclose on the property in the end you just walk away and know that anything well you walk away you know that anything we know what the argument is the argument is you should have bid at that foreclosure sale well you wouldn't wouldn't buy the property also bring with it so why ability you've got a building that brings seventy five sixty nine to seventy thousand dollars in taxes it be the d n r notification of the sewer lagoon the water issue and everything gets associated my client did everything he could offering to essentially eliminate that total indebtedness that the person would buy for two eight and they didn't buy  so we think there is a burden on the part of the party asking under five him see to mitigate their damages they didn't do it they sat on the sidelines and did nothing thank you but i have one more quick question and i probably should have asked  is not one of the conditions i have equitable relief and wasn't there an adequate remedy along here to object to the claim on the basis of the failure to mitigate and reduce the claim i think we've kind of done that under the cloak of equitable su before thank you your honor what was the question again didn't die want to have an adequate remedy along here that would not require the equitable remedy that of subordination would have been possible for them to object to the claim on the basis of failure to mitigate and have the secured claim reduced by the amount that was determined to be the result of the failure to mitigate where we subordinating when we have the potential remedial law well i'm not sure that we do have an adequate remedy at law and i do think i tried to bring as many arguments to bear as i could against the claim so i think we raised numerous legal arguments against the claim the judge showed dean chose not to rule on those legal arguments she didn't rule that there was or wasn't an adequate remedy in law but i think that if you look at the nolan case written by judge souter in one nine hundred ninety six in talking about equitable subordination he talks about the fact that he doesn't indicate that all these parties fail to do all these things and this is only a last resort if the three aspects of equitable subordination are met then equitable subordination should occur ok thank you thank you