Frey Irrevocable Trust et al v. Tennvada Holdings I, LLC et al

Filing 15

ORDER DISMISSING CASE. Signed by Judge James C. Mahan on 04/25/2013. (Copies have been distributed pursuant to the NEF - AC)

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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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FREY IRREVOCABLE TRUST, et al.,

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2:12-CV-1592 JCM (PAL)

Plaintiff(s)/Appellants,

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v.

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TENNVADA HOLDINGS I, LLC,

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Defendant(s)/Appellees.

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ORDER

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Presently before the court is the bankruptcy appeal of Frey Irrevocable Trust et al v.

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Tennvada Holdings I, LLC et al, case number 12-cv-01592-JCM-PAL. Appellant filed an opening

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brief. (Doc. # 8). Appellees filed answering briefs in opposition (docs. ## 11 & 13), and appellants

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filed a reply brief (doc. # 14).

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I.

Background

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On September 2, 2011, Tennvada Holdings I, (“Tennvada”) LLC filed a voluntary petition

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for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the

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District of Nevada. The bankruptcy petition is the result of a loan and deed of trust for certain real

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property, a hotel located at 1837 Union Avenue, in Memphis, Tennessee.

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On December 7, 2007, Integrated Financial Associates, Inc. (“IFA”), a Nevada corporation

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made a loan secured by a deed of trust to an entity named 1837 Tennvada Investments, LLC. The

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deed of trust secured the hotel in Memphis. The hotel became non-operational before 1837

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James C. Mahan
U.S. District Judge

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Tennvada Investments took title.

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The deed of trust was recorded on December 31, 2007 in Shelby County, Tennessee.1 IFA

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subsequently assigned fractional interests in the deed of trust to twenty-one private investors

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pursuant to its Nevada mortgage lending license.

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1837 Tennvada Investments filed a voluntary petition under chapter 11 of the Bankruptcy

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Code on March 1, 2009. The case was dismissed on October 20, 2010, because 1837 Tennvada

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Investments failed to confirm a reorganization plan.

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Appellants in this case are Nevada trust entities doing business in Clark County. Appellants

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made post-petition loans to 1837 Tennvada Investments with the approval of the bankruptcy court.

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On September 25, 2009, the appellants recorded a deed of trust in Shelby County, Tennessee,

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allegedly reflecting post-petition loans made to 1837 Tennvada Investments in the amount of

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$300,000. The recorded document did not provide a legal description of the property to be

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encumbered. Appellants admit this fact in their opening brief, as well as in the answer in the

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underlying bankruptcy proceeding.

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Tennvada is a Nevada limited liability company formed on September 17, 2010, for the

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purpose of acquiring title to the hotel property through a non-judicial foreclosure sale of the IFA

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deed of trust. On or around December 28, 2010, IFA as the loan servicing agent caused the deed of

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trust to be foreclosed in a non-judicial foreclosure. The IFA loan investors assigned their beneficial

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interest in the deed of trust to Tennvada, thereby becoming members of Tennvada with identical

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interests in the company that they held in the IFA deed of trust. At foreclosure, the trustee’s deed

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conveyed title to the hotel property to Tennvada in exchange for a $500,000 credit bid. The

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substitute trustee deed was recorded in Shelby County, Tennessee on February 15, 2011.

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On August 3, 2011, appellants attempted to re-record their deed of trust. Appellants failed

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to record a deed of trust associated with the other debtor in possession loans made during the 1837

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Tennvada Investments bankruptcy.

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...

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James C. Mahan
U.S. District Judge

Memphis is the county seat of Shelby County, Tennessee.
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On September 2, 2011, Tennvada filed a voluntary petition for relief under the Bankruptcy

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Code. On April 3, 2012, Tennvada filed the adversary proceeding complaint against appellants-

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defendants to object to the proofs of claims filed in the Tennvada bankruptcy. Appellants filed an

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answer to the adversary complaint and a third party complaint against appellee-plaintiffs Tennvada

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and William Dyer. The bankruptcy judge granted appellee-plaintiffs motion to dismiss the third

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party complaint. Appellant-defendants appeal the dismissal to this court.

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II.

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Legal Standard
This court has jurisdiction to hear bankruptcy appeals pursuant to 28 U.S.C. § 158(a).

Section 158(a) states:

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(a) The district courts of the United States shall have jurisdiction to hear appeals
(1) from final judgments, orders and decrees;
(2) from interlocutory orders and decrees issued under section 1121(d) title 11
increasing or reducing the time periods referred to in section 1121 of such title . . .

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28 U.S.C. § 158(a).

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The Ninth Circuit Bankruptcy Panel has held that finality for purposes of jurisdiction under

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28 U.S.C. § 158(a)(1) in adversary proceedings does not differ from finality in ordinary federal civil

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actions under 28 U.S.C. § 1291. In re Belli, 268 B.R. 851, 855 (BAP 9th Cir. 2001) (“Thus, we hold

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that finality for purposes of jurisdiction over ‘as of right’ appeals under 28 U.S.C. § 158(a)(1) in

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adversary proceedings does not differ from finality in ordinary federal civil actions under 28 U.S.C.

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§ 1291"). “[A] decision is ordinarily considered final and appealable under § 1291 only if it ‘ends

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the litigation on the merits and leaves nothing for the court to do but execute the judgment’”

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Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 712 (1996) (quoting Catlin v. United States, 324

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U.S. 229, 233(1945)).

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Federal Rule of Civil Procedure 54(b) controls the analysis of finality of judgments for

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purposes of appeal in federal civil actions, including bankruptcy adversary proceedings. Belli, 268

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B.R. at 855. Bankruptcy Rule 7054(a) incorporates by reference Rule 54(b). See id. A judgment

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James C. Mahan
U.S. District Judge

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in a consolidated action that does not resolve all claims against all parties is not appealable as a final

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judgment without a Rule 54(b) certification. See Huene v. United States, 743 F.2d 703, 704-05 (9th

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Cir. 1984); Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 8 (1980) (“Not all final judgments

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on individual claims should be immediately appealable, even if they are in some sense separable

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from the remaining unresolved claims.”).

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III.

Discussion

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In appellants’ opening brief, appellants do not even address the Rule 54(b) requirements or

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make any argument that this court may hear a non-final order on appeal. Instead, appellants go

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straight to the merits of the decision by the bankruptcy judge in the underlying consolidated case.

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Appellees argue simply that this court does not yet have jurisdiction to hear the instant appeal.

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The court agrees with appellees. This appeal is not from a final order. The bankruptcy

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court’s dismissal of the third party complaint did not end the litigation so that all that was required

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was for that court to execute judgment. The bankruptcy court must still resolve the adversary

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bankruptcy claims that initiated the lawsuit. Further, appellants did not seek an interlocutory appeal

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from the bankruptcy court, pursuant to Rule 54(b) or otherwise, and the bankruptcy court has not

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granted an interlocutory appeal.

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In the reply brief, appellants argue that this court should hear the bankruptcy appeal despite

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the fact that they are appealing a non-final order. Pursuant to Federal Rule of Bankruptcy Procedure

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8003©) and 28 U.S.C. § 158(a)(3), this court may, at its discretion, still hear the appeal. 28 U.S.C.

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§ 1292(b) states that a court may grant or hear an interlocutory appeal if the order being appealed

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from “involves a controlling question of law as to which there is substantial ground for difference

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of opinion and that an immediate appeal from the order may materially advance the ultimate

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termination of the litigation.” 28 U.S.C. § 1292(b); see also Cardwell v. Chesapeake & Ohio Ry.

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Co., 504 F.2d 444, 446 (6th Cir. 1974).

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Appellants appeal the bankruptcy court’s dismissal of their third party complaint allegations

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of alter ego, fraud, and damages. The court finds that this bankruptcy appeal does not meet the §

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1292(b) standard.

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James C. Mahan
U.S. District Judge

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In this case there has been no final order by the bankruptcy court, there has been no

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interlocutory appeal granted by the bankruptcy court, and this court does not find that the situation

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warrants an interlocutory appeal. Therefore, this court does not have jurisdiction and this bankruptcy

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appeal is dismissed.

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Accordingly,

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IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the appeal of the

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bankruptcy case, Frey Irrevocable Trust et al v. Tennvada Holdings I, LLC et al, case number 12-cv-

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01592-JCM-PAL be, and the same hereby is, DISMISSED.

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DATED April 25, 2013.

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UNITED STATES DISTRICT JUDGE
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James C. Mahan
U.S. District Judge

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