In Re Elm Inn, Inc., Debtor. Eldon Anderson Shirley Anderson v. Elm Inn, Inc. Continental Savings of America

This appeal involves a complicated dispute over a parcel of land which figures in a bankruptcy proceeding.

I

The Bankruptcy Appellate Panel (BAP) has set forth the relevant facts in exhaustive detail in its opinion, and the parties have not challenged that recital. See In re Elm Inn, Inc., 105 B.R. 546, 547-48 (Bankr.9th Cir.1989). For convenience, we restate the highlights here.

In 1981, the Andersons leased the relevant parcel of land and four others to Ru-mubhai and Urmila Patel, who were then doing business as The Elm Inn. Three years later, the Patels purchased the four other parcels in fee simple from the Andersons with the help of a $3.6 million loan from appellee Continental Savings of America (“Continental”). As collateral, the Patels offered a deed of trust on the four purchased parcels, and, as additional security, they assigned Continental their leasehold in the first parcel. Significantly, the Patels’ interest in all five parcels was subject to a junior deed of trust for the benefit of Frank Paratore.

During their tenancy, the Patels defaulted on their lease numerous times. The Andersons attempted to enforce the lease and to evict the Patels, but the Patels filed…