Stooksbury v. Ross et al

Filing 1005

ORDER granting 989 Motion to Intervene on a Limited Basis. Signed by Magistrate Judge H Bruce Guyton on 08/23/2013. (KAW)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
ROBERT T. STOOKSBURY, JR.,
Plaintiff,
v.
MICHAEL L. ROSS, et al.,
Defendants.

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No. 3:09-CV-498
(VARLAN/GUYTON)

MEMORANDUM AND ORDER
This case is before the undersigned pursuant to 28 U.S.C. § 636, the Rules of this Court,
and Standing Order 13-02.
Now before the Court is a Motion to Intervene on a Limited Basis [Doc. 989], filed by
RPM Assets, LLC, and Mitchell E. Jones (the “Movants”). Athena of S.C., LLC, (“Athena”),
has filed a Response in Opposition [Doc. 998]. The Plaintiff and the Receiver have filed
responses and replies in support of the Motion to Intervene. [Docs. 991, 993, 1000, 1002]. The
Movants have also filed a final reply in support of the Motion to Intervene. [Doc. 1001]. The
Motion to Intervene is now ripe for adjudication, and for the reasons stated herein, it will be
GRANTED.
I.

BACKGROUND
The background relevant to this matter can be summarized as follows:

A.

Chancery Court Case
In the case of Athena of S.C., as assignee of LTR Properties, Inc. v. RPM Assets, LLC, et

al., (hereinafter “the Chancery Court Case”), Athena asserts that RPM, through its authorized
agent entered into a Promissory Note with LTR Properties Inc., (“LTR”), in the principal amount

of one hundred twenty thousand dollars ($120,000.00) plus interest at the rate of 6.46% per
annum. [Doc. 998-2 at ¶ 6]. Athena further alleges that Movant Mitchell Jones entered into a
Promissory Note with LTR in the principal amount of two hundred sixty five thousand dollars
($265,000.00) together with interest thereon at the rate of 6.46% per annum. [Id. at ¶ 10].
Athena maintains that on March 21, 2012, LTR entered into an Allonge and Assignment of
Notes with Athena transferring both Promissory Notes to Athena for value, and Athena – as a
holder in due course – succeeded to all rights of LTR under the Promissory Notes and Deed of
Trust.

[Id. at ¶ 13].

Athena asserts that it also became the holder of a twenty-percent

membership interest in the assets of RPM, by virtue of an assignment from LTR. [Id. at ¶¶ 17,
18].
Athena further alleges that as RPM and Jones were actively seeking to sell the real
property secured by the Deed of Trust, without protecting Athena’s interest, Athena sought a lien
lis pendens on the real property to protect its interest. [Id. at ¶ 20]. In the Chancery Court Case,
Ahena sued RPM and Jones, respectively, for breach of contract and also asserted a count for
lien lis pendens. [Id. at ¶¶ 21-28].
B.

Post-Judgment Litigation in the Instant Case
On March 6, 2013, the Court entered a multi-million dollar Judgment [Doc. 390] against

various entities in the instant case case. LTR Properties Inc. was among the judgment debtors
against whom Judgment was entered. The post-judgment proceedings in this case have been
litigated vigorously since that time.
The post-judgment proceedings and filings of particular relevance to the issue before the
Court can be stated succinctly. On June 6, 2012, the Court appointed Sterling P. Owen, IV, to
serve as receiver in this case. Among other things, he was charged, “to identify, take possession

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of, and control of any and all of Defendants’ assets in the manner best suited to preserve
Defendants’ assets.” [Doc. 586 at 3]. In his Second Quarterly Report, filed November 30, 2013,
the Receiver identified the Promissory Notes as Receivership assets. [Doc. 802 at 4-5].
On February 7, 2013, the undersigned issued a Report and Recommendation [Doc. 853],
recommending that the District Judge conduct a summary proceeding to address, among other
things, whether Athena is or was “improperly using and controlling Receivership assets” and
whether to stay legal proceedings against Receivership assets. [Id. at 2]. On May 7, 2013, the
District Judge conducted an evidentiary hearing on these issues. [See Doc. 903 at 5-6; Doc.
929]. Following the evidentiary hearing and submission of post-hearing briefs, these issues were
taken under advisement.

II.

POSITIONS OF THE PARTIES
The Movants, pursuant to Federal Rule of Civil Procedure 24(b), move the Court for an

order permitting intervention in this action for three limited purposes: (1) to request an
immediate stay of all legal proceedings against Receivership assets until the summary
proceeding issue is resolved; (2) to inform the Court of the Movants’ support for the pending
request for summary proceedings [Doc. 840]; and (3) to request expedited rulings on these
matters.
In support of this request, the Movants submit that if the requested stay is not
immediately granted, there is a significant danger not only of inconsistent judgments. The
Movants maintain that double liability may be imposed on the Movants due to the Chancery
Court Case. The Movants submit that in the Chancery Court Case, Athena has sued the Movants
based on two promissory notes identified by the Receiver as Receivership assets. The Movants

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state that the trial in the Chancery Court Case is set for October 1, 2013. Movants argue that
absent a stay the case, there is a significant danger that assets in the Receivership Estate will be
dissipated.
Athena responds [Doc. 998] that the Motion to Intervene is untimely because the
undersigned entered a Report and Recommendation relevant to this issue on February 7, 2013,
and the Movants did not file the instant motion until six months later. Athena also argues that
there are no common questions of fact between this matter and the Chancery Court Case.
Athena maintains that the Movants have no evidence of fraudulent conveyances relating to the
Chancery Court Case and they cannot show that the issues between the Movants and Athena are
complex. Athena maintains that there is little chance of double liability because the Movants
have not been sued by anyone other than Athena. Athena describes allegations relating to the
dissipation of Receivership assets as “a receiver problem and not a RPM and Jones problem.”
[Doc. 998 at 14]. Moreover, Athena asserts that the Receiver has been given an opportunity to
intervene in the Chancery Court Case and has declined to do so. Finally, Athena notes that the
Court has declined requests to intervene by other entities.
The Movants reply [Doc. 1001], that Athena’s argument that the Motion to Intervene is
untimely is without merit. The Movants argue that there was no deadline for filing the Motion to
Intervene, and the Movants submit that they delayed filing until their prejudice became
imminent, given the upcoming trial date and pretrial deadlines in the Chancery Court Case. The
Movants maintain that the Chancery Court Case would not be a simple proceeding, given the
underlying relationship to the instant matter and numerous transactions. The Movants argue that
Athena has failed to rebut the Movants’ assertion that intervention is proper based upon common
issues of fact and law. The Movants contend that Athena’s assertion that double liability is not

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an issue, because the Movants have not yet been the subject of more than one suit, is flawed.
The Receiver replies [Doc. 1000], that he has not waived or abandoned his designation of
the Promissory Notes and related membership interest as part Receivership Estate. The Receiver
maintains that given the Court’s jurisdiction over the assets of the Receivership, the conflict
regarding Athena’s ownership of the Promissory Notes should be resolved in this Court within
the Petition to Implement Summary Proceedings, Restrain the Transfer of Receivership Assets
and Enter a Stay of All Legal Proceedings Against Any Receivership Property [Doc. 840]. The
Receiver argues that the Court’s goal in appointing a Receiver was, in part, to avoid the type of
multiplicity of litigation that would result from the Chancery Court Suit proceeding.
Finally, the Plaintiff replies [Doc. 1002], that Athena’s response and lengthy exhibits
demonstrate why the Court should allow the Movants to intervene. The Plaintiff submits,
“Despite Athena being keenly aware of the Receivership, of this Court’s injunctions against
Athena’s efforts to foreclose on certain Receivership assets at Rarity Bay, and of the Receiver’s
specific designation of assets in the Receiver’s quarterly reports filed previously in this case,
Athena has persisted in pursuing its litigation against RPM / Jones in state court concerning the
Receivership assets which involve RPM / Jones.” [Doc. 1002 at 1]. The Plaintiff points out that
the Chancellor in the Chancery Court Case has acknowledged that, while a stay from this Court
could affect the Chancery Court Case, no stay has been imposed to date. Plaintiff adopts the
position that the Movants litigating their dispute with Athena in state court would be unfair and
illogical.

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III.

ANALYSIS
The Court has thoroughly considered the parties’ positions, along with the procedural

posture of both this case and the Chancery Court Case, and the Court finds that the Movants’
request to intervene is well-taken under Rule 24 of the Federal Rules of Civil Procedure.
Pursuant to Rule 24, a Court may permit a person or entity who “has a claim or defense
that shares with the main action a common question of law or fact,” to intervene in the action.
Fed. R. Civ. P. 24(b)(1). A person or entity who intends to intervene must serve notice upon the
parties as provided in Rule 5. Fed. R. Civ. P. 24(c). In deciding whether to allow permissive
joinder, the Court “must consider whether the intervention will unduly delay or prejudice the
adjudication of the original parties’ rights.” Fed. R. Civ. P. 24(b)(3).
Initially, the Court finds that no party or other entity has objected to the request to
intervene based upon a lack of notice, and it appears from the record that proper notice has been
given.
The Court finds that the Movants have a possible defense to Athena’s attempts to recover
on the Promissory Notes, which shares common questions of law and fact with the instant case.
The Court finds that the Receiver has identified these Promissory Notes as Receivership assets,
to potentially be used to satisfy the judgment in this case. The Receivership and the Chancery
Court Case share the common legal question of who is/are the owner(s) of the Promissory Notes
and/or who are holders in due course of the Promissory Notes. Additionally, there are common
questions of fact regarding the circumstances and transactions through which Athena, the
Movants, and the Receiver came to allegedly interests in the Promissory Notes.
The Court further finds that intervention will not unduly delay or prejudice the
adjudication of the original parties’ post-judgment rights. The Court finds that the issue of

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summary proceedings is pending before the District Judge, and the Receivership has not yet been
wound down. The Court has considered Athena’s objections to the Motion to Intervene arguing
that the request is not timely. The Court finds that, given the present procedural posture of the
case, the request is timely and is not likely to unduly delay adjudication of the post-judgment
issues.
The Court also finds that the Motion to Intervene is distinguishable from previous
requests to intervene made by entities like RL REGI-TN OAK, LLC. First, the previous requests
to intervene referenced by Athena did not identify a specific piece of property – e.g. the
Promissory Notes – that was likely to be disposed of in the court of the Receivership. [See Docs.
626, 697, 766]. Second, the previous requests for intervention were not limited to specific
purposes. [See Docs. 626, 697]. Further, the previous requests for intervention moved the Court
to expand the scope of the Receiver’s duties. [Doc. 626]. Finally, the Court would note that
Athena, itself, was afforded the opportunity to intervene for a limited purpose earlier in this
litigation when a specific piece of property – the 1957 Ford Thunderbird – was at issue, [see
Doc. 627].
Based upon the foregoing, the Court finds that the request to intervene is well-taken, and
it will be granted.1

The instant Memorandum and Order constitutes decision on only the Movants’ request to intervene. This
Memorandum and Order should not be interpreted as a ruling on or any indication of a likely ruling on the requests
that the Movants intend to make upon intervening in this case, including the request for a stay.
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IV.

CONCLUSION
In sum, and for the reasons more fully stated above, the Motion to Intervene on a Limited

Basis [Doc. 989] is GRANTED.
IT IS SO ORDERED.
ENTER:
s/ H. Bruce Guyton
United States Magistrate Judge

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