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Frey Irrevocable Trust, et al v. Tennvada Holdings I

April 25, 2013

FREY IRREVOCABLE TRUST, ET AL.,
PLAINTIFF(S)/APPELLANTS,
v.
TENNVADA HOLDINGS I, LLC, DEFENDANT(S)/APPELLEES.



ORDER

Presently before the court is the bankruptcy appeal of Frey Irrevocable Trust et al v. Tennvada Holdings I, LLC et al, case number 12-cv-01592-JCM-PAL. Appellant filed an opening brief. (Doc. # 8). Appellees filed answering briefs in opposition (docs. ## 11 & 13), and appellants filed a reply brief (doc. # 14).

I. Background

On September 2, 2011, Tennvada Holdings I, ("Tennvada") LLC filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Nevada. The bankruptcy petition is the result of a loan and deed of trust for certain real property, a hotel located at 1837 Union Avenue, in Memphis, Tennessee.

On December 7, 2007, Integrated Financial Associates, Inc. ("IFA"), a Nevada corporation made a loan secured by a deed of trust to an entity named 1837 Tennvada Investments, LLC. The deed of trust secured the hotel in Memphis. The hotel became non-operational before 1837 Tennvada Investments took title.

The deed of trust was recorded on December 31, 2007 in Shelby County, Tennessee.*fn1 IFA subsequently assigned fractional interests in the deed of trust to twenty-one private investors pursuant to its Nevada mortgage lending license.

1837 Tennvada Investments filed a voluntary petition under chapter 11 of the Bankruptcy Code on March 1, 2009. The case was dismissed on October 20, 2010, because 1837 Tennvada Investments failed to confirm a reorganization plan.

Appellants in this case are Nevada trust entities doing business in Clark County. Appellants made post-petition loans to 1837 Tennvada Investments with the approval of the bankruptcy court.

On September 25, 2009, the appellants recorded a deed of trust in Shelby County, Tennessee, allegedly reflecting post-petition loans made to 1837 Tennvada Investments in the amount of $300,000. The recorded document did not provide a legal description of the property to be encumbered. Appellants admit this fact in their opening brief, as well as in the answer in the underlying bankruptcy proceeding.

Tennvada is a Nevada limited liability company formed on September 17, 2010, for the purpose of acquiring title to the hotel property through a non-judicial foreclosure sale of the IFA deed of trust. On or around December 28, 2010, IFA as the loan servicing agent caused the deed of trust to be foreclosed in a non-judicial foreclosure. The IFA loan investors assigned their beneficial interest in the deed of trust to Tennvada, thereby becoming members of Tennvada with identical interests in the company that they held in the IFA deed of trust. At foreclosure, the trustee's deed conveyed title to the hotel property to Tennvada in exchange for a $500,000 credit bid. The substitute trustee deed was recorded in Shelby County, Tennessee on February 15, 2011.

On August 3, 2011, appellants attempted to re-record their deed of trust. Appellants failed to record a deed of trust associated with the other debtor in possession loans made during the 1837 Tennvada Investments bankruptcy. . . .

On September 2, 2011, Tennvada filed a voluntary petition for relief under the Bankruptcy Code. On April 3, 2012, Tennvada filed the adversary proceeding complaint against appellants-defendants to object to the proofs of claims filed in the Tennvada bankruptcy. Appellants filed an answer to the adversary complaint and a third party complaint against appellee-plaintiffs Tennvada and William Dyer. The bankruptcy judge granted appellee-plaintiffs motion to dismiss the third party complaint. Appellant-defendants appeal the dismissal to this court.

II. Legal Standard

This court has jurisdiction to hear bankruptcy appeals pursuant to 28 U.S.C. ยง ...


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