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Dean T. Kirby, Jr. 090114 Martin T. McGuinn 82530 HOVEY & KIRBY, A P.C. 402 West Broadway, Suite 1500 San Diego, California 92101-8509 Telephone: (619) 685-4000 Facsimile: (619) 685-4004 Attorneys for TRI Acceptance Corporation fka TRI Capital Corporation

UNITED STATES BANKRUPTCY COURT Southern District of California

In re SHARNEE FAMILY TRUST PARTNERSHIP Debtor(s) SSN/ID UNKNOWN ) ) ) ) ) ) ) ) ) Bankruptcy Case No. 01-13141-LA-7 (Involuntary Petition) MOTION FOR RELIEF FROM STAY AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION DATE: February 15, 2002 TIME: 10:00 a.m. DEPT: 4 Room 328 (Hon. Peter W. Bowie)

TRI Acceptance Corporation fka TRI Capital Corporation, (TRI CAP) hereby submits the following Motion for Relief From Stay and memorandum of points and authorities in support of its motion for relief from the automatic stay to permit it to join the involuntary debtor entity, the Sharnee Family Trust Partnership, as a party defendant in complex multi-party consolidated proceedings in Clark County Nevada Superior Court. I SUMMARY OF RELIEF REQUESTED TRI CAP or Movant seeks relief to enable it to join the involuntary debtor, Sharnee Family Trust Partnership ( Sharnee Partnership or Debtor) in a declaratory relief consolidated action in Clark County Nevada Superior Court (Case Nos. A373771; A387820; A382272 and A387150, or the Action). A copy of the proposed amended complaint for declaratory relief which is on file is attached to the Declaration of

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Wallace B. Adams, as Exhibit 1, to the Adams Declaration. The purpose of adding the Debtor to the Action and requesting declaratory relief against the Debtor is to obtain a final determination by the court as to the rights and obligations, if any, of various entities, including the Debtor, in connection with two promissory notes, one in the principal amount of $500,000 (PID $500,000 Note) and one in the principal amount of $1,500,000 (PID $1,500,000 Note), originally in favor of Preatorian International Development, LTD. (PID) and allegedly owed by Victory Village Limited Partnership III, a Nevada Limited Partnership (VV). Dwight Jory in his capacity as Trustee of the Sharnee Family Trust, (Trust) stated in a declaration filed in the Action on November 14, 2001 that the Trust is the general partner of the Debtor. There are muddled statements in Jorys declaration regarding various assignments of both PID notes which may or may not have been assigned to the Debtor depending on which alleged statement of fact by Mr. Jory one believes, if any. For example, Mr. Jory declares that the PID $500,000 Note was assigned by PID to the Sharnee Family Trust, which in turn, assigned it to the Debtor, who in turn assigned it to the Rorabaugh Group as collateral for a $700,000 loan, with the Debtor retaining a residuary interest. Mr. Jory further declares that the Debtor in its previous bankruptcy proceeding obtained an order of this court to sell its interest in the Praetorian Note. However, that Order related to the PID $1,500,000 Note, not the PID $500,000 Note. (See Request for Judicial Notice [hereafter RJN] Nos. 6 and 7. The PID $1,500,000 Note was the only PID Note listed as an asset of the Debtor in it schedules filed in the previous bankruptcy proceeding. (See RJN No. 2, Schedule B in Case No. 00-03615-PB-11 filed in United States Bankruptcy Court for the Southern District of California.) In contradiction to the Debtors ownership of the PID $1,500,000 Note, Mr. Jorys declaration asserts that he Sharnee Family Trust is the assignee of PID $1,500,00 Note. The November 14, 2001 Jory Declaration was filed by Mr. Jory in opposition to a motion for summary judgment filed by one of the parties in the Action on the PID $500,000 Note. Mr. Jory gets further confuses the issues concerning the ownership of both the PID Notes in his correspondence of November 14, 2001, to opposing counsel in the Action, wherein he asserts that the Sharnee Family Trust and/or Rorabaugh retain sole ownership in the Praetorian Notes. (See Exhibit 2 to the Adams Declaration.) Movant holds approximately 85% of the limited partnership interests in VV.III. The purpose of the
In re Sharnee Family Trust Partnership Motion and Memorandum of Points and Authorities in Support of Motion for Relief Bankruptcy Case No. 01-13141-LA-7 Page No. 2

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Action is to finally adjudicate the claims of all general and limited partners against each other and to determine which parties are actually partners in VV III. In addition, to settling the ownership issues, the Action also seeks to determine the party which owns the $500,000 Note and whether VV III owes money to the legal owner of the $500,000 Note or whether VV III has offsets against the holder of the $500,000 Note. The Action further seeks a declaration by the court that the PID $1,500,000 Note was canceled pursuant to the terms of the partnership agreement. The number of parties and relationships between them is extremely complex and several diagrams are being provided to the court to enable it to follow the text of the motion. This is a case where you cannot tell the players without a scorecard. The Action concerns a real estate limited partnership which built a large apartment complex in Las Vegas, Nevada. Movant used its financial resources to obtain 18 Million Dollars in bond financing which was guaranteed by the Department of Housing and Urban Development (HUD). The HUD Funds were used to build the apartment complex and service the debt while the project was being built. There are four pending actions involving the Victory Village Project which have been consolidated for trial in Las Vegas on April 16, 2002. The apartment complex was sold and escrow closed at the end of 1998. Unfortunately for TRI CAP, as is often the case in real estate deals gone sour, the sale of the project did not stop the litigation between the partners over their rights, obligations and liabilities to each other. Two of the alleged liabilities of the VV III are the PID $1,500,000 Note and the PID $500,000 Note, which were originally held by PID. The Second Amended Limited Partnership Agreement of VV III at paragraph 8.23 canceled the PID $1,500,000 Note. Despite its legal obligation to cancel the note, Praetorian purportedly assigned the PID $1,500,000 Note to the Sharnee Family Trust. Since the initial assignment of the PID $ 1, 500,000 Note and the PID $500,000 Note, numerous parties claim rights in both PID Notes, including the Debtor. The Debtor has filed a previous bankruptcy case (Case No. 00-03615-PB-11, the Prior Case) in this bankruptcy court. The case was dismissed by order of the Court. See RJN No. 1, the Docket from the Prior Case (Docket Entry No.80). According to the testimony of the Debtors representative, one Dwight Jory, at a 341a hearing on May 11, 2000 in the Prior Case, (See McGuinn Declaration Exhibit 1, at page 21 ) the Debtor has two general partners, the Sharnee Family Trust dated January 7, 1994 (the Trust) and the Sharnee Irrevocable
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Trust (the Irrevocable Trust). Jory testified he was the alleged trustee of the Trust, but the Partnership Agreement whichhe produced for the United States Trustee on May 11, 2000 indicated that he was the trustee of the Irrevocable Trust. ( See McGuinn Declaration Exhibit 2, the Partnership Agreement of the Debtor.) The Debtor, its partners and principals are no strangers to the Southern District of California Bankruptcy Court. Two prior cases, one involving the Debtor and the other involving the Sharnee Family Trust Dated January 7, 1994 ( Case No. 99-08450-PB-7. ( Both cases are collectively referred to as the Prior Bankruptcies) have graced this courts docket. The Trusts bankruptcy, Case No. 99-08450 is an almost exact replica of the pending case. The formula used the Debtor is to have one of its prior counsel, Richard Katzman, an admitted friend of the principals of the Debtor file an involuntary petition in conjunction with another cohort, Robert Graham. The same two individuals are petitioning creditors in this case. See the Involuntary Petition filed in this case. During the course of the 1999 Trusts bankruptcy, it transferred title to a piece of real property on Calle Privada in Rancho Santa Fe, California to the Debtor without court order on the day the Trusts bankruptcy was filed, October 18, 1999. After the transfer of title the Trust had its counsel file an emergency motion to reimpose the automatic stay without disclosing to Judge Bowie the fact that title had been transferred to the Debtor. Judge Bowie reimposed the stay on November 20, 1999. See Request for Judicial Notice (RJN} Nos.5, 6, and 9). Jory admitted under oath at his 341a hearing in the Prior Case that he failed to tell anyone about the transfer of the Calle Privada Property to the Debtor. See McGuinn Declaration, Exhibit 1, Page 34, Lines 10 and 11. Thus, Jory allowed his counsel to file an emergency motion to reimpose the stay knowing the debtor in Case No. 99-08450-PB-7 no longer owned the real property which was the subject of the emergency motion!! Movant obtained relief from stay in the Debtors Prior Case in June 2000. See RJN No.1, Docket No. 54 and RJN 6. In September 2000 after the Debtor borrowed funds and paid off a lien in favor of Movant, the Debtor and the United States Trustee worked out an arrangement whereby the Debtors prior case 0003615-PB-11 was dismissed upon payment of $4000 in outstanding US Trustee fees. The Debtor filed an Emergency Motion (the Emergency Motion) without notice to Movant even though Movant had filed and served a request for special notice seeking approval of the Sale of the PID$1,500,000 Note to the Rancho Santa Fe Group for $4000. The court approved the sale and Movant believes the funds were paid to the US
In re Sharnee Family Trust Partnership Motion and Memorandum of Points and Authorities in Support of Motion for Relief Bankruptcy Case No. 01-13141-LA-7 Page No. 4

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Trustee. See RJN Nos. 7 and 8. The Debtor admitted in the Emergency Motion that the PID $1,500,000 Note was of dubious value. The Debtor did not tell Judge Bowie that its predecessors agreed in writing to cancel the PID $1,500,000 Note. Dwight Jory is a friend and business partner of one Charles McHaffie. McHaffies current wife and child are the beneficiaries of the Family Trust. Jory was the representative of both the Family Trust and the Debtor in the Prior Cases. Jory stated at the 341a hearing in the Prior Case on May 11, 2000 that the consideration for the transfer of the Calle Privada property to the Debtor was the agreement by the Debtor to assume the litigation costs which the Family Trust was engaged in with Movant which was subsequently dismissed with prejudice in July 2000. See McGuinn Declaration Exhibit 1, Pages 45, 47 and 48). The only other purported consideration was the purported assignment of the PID notes from the Family Trust to the Debtor. See McGuinn Declaration Exhibit 1, Pages 42, 43, 47 and 48). Jory also stated that while the Debtor did not have a contractual relationship with the petitioning creditors herein, Katzman and Graham (old cronies of Jory and McHaffie) the Debtor nonetheless agreed to be responsible for those obligations. See McGuinn Declaration Exhibit 1 Page 45. II FACTUAL BACKGROUND There is a complicated relationship by and between the Debtor, the Sharnee Trusts and Charles McHaffie. McHaffie married Robin Sloan (Robin). Charles McHaffie and Robin had a son, Charlemagne. The purported beneficiaries of the Family Trust are Robin and Charlemagne. (See McGuinn Declaration Exhibit 1, Page 20). As detailed in the pleadings filed in the Action (Exhibit 1 to the Adams Declaration and the Adams Declaration, Page 2 Lines 9 to 19, and Page 4 Lines 1 to 8) the ownership of the PID 500,000 Note is a major issue in the Action because Fort Worth and Step N are claiming they own the right to payment under the PID $500,000 Note due to an assignment of the Note by PID through its alleged agent, Charles McHaffie. However, the Debtor contends that its assignor, the Family Trust had a prior assignment of the PID $500,000 Note. After the $500,000 PID note was allegedly assigned to the Debtor, the Debtor allegedly assigned it to the Rorabaugh Group as collateral for a $700,000 loan, retaining a residuary interest. Movant believes the
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Debtor also assigned the PID $1,500,000 Note for $4,000 pursuant to this Courts Order dated September 14, 2000. (RJN No. 8) However, Mr. Jory, the Trustee for the Sharnee Family Trust, states in his Declaration opposing the summary judgment in the Action that PID $1,500,000 Note was assigned to the Sharnee Family Trust. Because the Action is proceeding to trial on April 16, 2002, it is imperative Movant obtain relief and be allowed to join the Debtor in the Action, to clarify once and for all time who owns the PID Notes and how much, if anything, is owed on the PID Notes. A motion is set for hearing in the Action on February 1, 2002 to amend the complaint to add the parties with a claim of ownership interest in the PID Notes, except the Debtor. Movant intends to add the Debtor as a party once the Court lifts the stay to allow the Action to proceed against the Debtor. The Motion was continued on February 1, 2002 to February 11, 2002 because Marrcshare Leasing Inc., Ralph Mann, Dwight Jory and Macer Associates Inc. demanded more time to respond to the motion. Thus, Jory, the Trustee and General Partner of the Debtor, is well aware of the circumstances behind the filing of the motion. Jory individually is a party to the Action and is represented by counsel in the Action. Two of the petitioning creditors are long time associates of McHaffie in his various ventures. Katzmans 2004 exam in the Family Trusts Case ( See Exhibit 3 to McGuinn Declaration at pages 31 to 35, is revealing of the fact that Katzman, if he had a bona fide claim for legal fees has long let the statute of limitations lapse for the enforcement of his alleged fee agreement. Further, Jorys 341 a testimony (See McGuinn Declaration, Exhibit 1, Page 45) is clear the Debtor never had an attorney client relationship with Katzman, and never retained Katzman to do anything on its behalf. Further, Katzman admits the last thing he did for the Family Trust, the alleged client, took place in late 1996 or early 1997 more than five years ago. See McGuinn Declaration Exhibit 3, Pages 26, lines 3 through 8 and page 66 lines 10 to 14). Katzman has represented not only McHaffie, and Robin individually, both also, Robins mother, Donna Ferrera who was the former trustee of the Family Trust, and Robins father Robert Sloan while he was a principal of Moonridge Development Company, (MDC). MDC was a general partner of VV III and a limited partner of VV III. Katzman was a busy person because he represented Praetorian at the same time as he represented the Trust, Robert, and MDC. See McGuinn Declaration Exhibit 3, Katzman Transcript Pages 26 through 29 and pages 42 and 43.. III THE TOTALITY OF THE CIRCUMSTANCES CONFIRM THE INVOLUNTARY PETITION WAS NOT FILED IN GOOD FAITH OR FOR A PROPER PURPOSE.

In re Sharnee Family Trust Partnership Motion and Memorandum of Points and Authorities in Support of Motion for Relief

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In seeking to curb abuse of the judicial process and the filing of bankruptcy petitions for purposes other than reorganization, courts have applied a threshold good faith standard to limit a partys access to bankruptcy relief. The Ninth Circuit [In Re Marsch 36 F. 3d 825] warns against strategic manipulation of the bankruptcy process (fn. 2, page 830), serving a subtle warning that courts are becoming less tolerant of tactical bankruptcies. While the instant case was not filed by the Debtor, Katzman, the Family Trusts former lawyer, and close friend of the Family Trusts settlor (McHaffie) and beneficiary (McHaffies wife Robin Sloan) filed a second involuntary petition against an entity, the Debtor, whose general partner, Jory, admits under oath in the Prior Case, that the Debtor had no legal obligation to Katzman. Katzman, McHaffie and Jory are scheming for some improper purpose, likely to once again prevent the foreclosure of the Calle Privada Property, which is the ultimate reason why the case was filed. Katzman just as he did in the involuntary case he filed against the Family Trust in 1999 has taken no action to prosecute the instant case other than file the involuntary petition. While Movant is seeking relief from stay not dismissal in this motion, the basis for seeking relief is cause under 11 USC 362 (d) (1). Cause is clearly demonstrated by Movant in detailing the prior bad faith actions of the Debtor and its Principals in the Prior Bankruptcies. Movant has clearly shown that two of the Petitioning Creditors have filed an involuntary case against the Family Trust and also failed to prosecute it. Movant is trying to bring to an end years of litigation over the Victory Village Project and needs relief from stay to enable it to bring all parties with an interest in two substantial potential obligations of the limited partnership in which it holds at least an eighty five (85) per cent ownership interest. The conflicting statements by Mr. Jory over who actually holds an interest in the PID Notes coupled with the claims of Forth Worth, Step N Investments, Sharnee Family Trust , the Debtor, and Rorabaugh Group who all claim legal rights in the PID Notes justify the granting of relief from stay to allow the Nevada Court to make a determination as to the ownership and rights of the various parties to the PID Notes. There can be no final determination or distribution of partnership assets until the ownership and validity of the PID notes is finally determined. The logic of the cases regarding dismissal for bad faith filing are equally applicable to the circumstances surrounding the filing of the instant case. See also In Re Southern California Sound Systems 69 B.R. 893 (Bankr. S. D. Cal. 1987). See also In Re 2218 Bluebird Ltd. Partnership 41 B.R. 540 (Bankr. S.D. Cal. 1984) at pages 542-43 wherein the Court stated: There is no precise definition as to what good faith entails. However, evidence of an
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intent to cause hardship or delay to creditors by resorting to the Chapter 11 device, merely for the purpose of invoking the automatic stay without an intent or ability to reorganize financial activities, is an abuse of the bankruptcy process. Such conduct is sufficient cause upon which a case may be dismissed, and, where appropriate, subject to sanctions. Whether the Debtor holds an interest in the $1,500,000 PID Note or the $500,000 PID Note, it should be required to litigate its rights along with those of its predecessors, successors, assignees and creditors

5 6 7 to prepare for trial, the court is requested to grant the relief from stay and allow 8 Movant to litigate all issues regarding ownership of and rights to the PID Notes within the confines of the 9 Action. Movants rights are severely impacted by the continuation of the stay which was created by the filing 10 11 12 other parties to the Action. 13 14 Dated: February 4, 2002 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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in the one forum which has been created for the purpose of adjudicating the rights of all parties to the VV III Partnership. Given the impending trial date of April 16, 2002 and the need for all parties to have sufficient time

of the involuntary case. Given the prejudicial impact on Movant by not having all parties before the Nevada Court in the Action, Movant requests that the Court lift the stay immediately to avoid prejudice to Movant and

HOVEY & KIRBY A P.C.

_/s/ Martin T. McGuinn_________ By: Martin T. McGuinn, Attorneys for TRI Acceptance Corporation

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