Stooksbury v. Ross et al

Filing 1177

ORDER granting 1093 Motion and Memorandum of Law for Permission to Execute On, Sell, and Credit Bid on Certain Rarity Management Receivership Assets, and Petition to Disallow, Avoid, or Subordinate Certain Claims to Those Receivership Assets. Signed by Magistrate Judge H Bruce Guyton on 01/14/2014. (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 and the Rules of this
Court. Now before the Court is Plaintiff’s Motion and Memorandum of Law for Permission to
Execute On, Sell, and Credit Bid on Certain Rarity Management Receivership Assets, and
Petition to Disallow, Avoid, or Subordinate Certain Claims to Those Receivership Assets [Doc.
1093]. The Court finds that this motion is ripe for adjudication, and for the reasons stated herein,
it will be GRANTED.

I.

BACKGROUND
The Court established the Receivership on May 23, 2012, after finding that the

Defendants had likely engaged in fraudulent conduct in an effort to frustrate the Plaintiff’s ability
to collect on the multi-million dollar judgment, awarded in his favor. [Doc. 548 at 7-8]. The
Court appointed Sterling P. Owen, IV, as Receiver in this case in June 2012. [See Doc. 586].
The Receiver was to take possession of and preserve the assets of the judgment debtors. In

addition, he was to report to the Court regarding any improper conveyances and to identify
property of the judgment debtors that was either in their possession or was in the possession of
others through potentially fraudulent conveyances.
Since his appointment, the Receiver has issued six quarterly reports, which inter alia
identify property of the judgment debtors or related entities as Receivership property. [Docs.
732, 802, 857, 946, 1039, and 1137].
On September 12, 2013, the Honorable Thomas A. Varlan, Chief United States District
Judge, issued a Memorandum Opinion and Order finding that Plaintiff’s request for summary
proceedings on certain Receivership assets was well-taken. [Doc. 1035 at 16]. In overruling
objections to the summary proceedings posed by Athena of SC, LLC, (“Athena”), Chief Judge
Varlan noted that, “[f]or the claims of nonparties to property claimed by receivers, summary
proceedings satisfy due process so long as there is adequate notice and opportunity to be heard.”
[Id. (citing SEC v. Am. Capital Invs. Inc., 98 F.3d 1133, 1146 (9th Cir. 1996)]. Chief Judge
Varlan found that Athena had “received adequate notice and has had ample opportunity to be
heard.” [Id. at 17].
Chief Judge Varlan also stayed transfer of any Receivership assets until the conclusion of
Stooskbury v. Ross, Case No. 3:12-CV-548, (“Stooksbury II”), unless otherwise ordered by the
Court. [Id. at 23]. In so finding, Chief Judge Varlan explained, “This order will preserve the
status quo and ensure the ‘just, speedy, and inexpensive determination’ of the issues raised in in
the context of the receivership.” [Id. at 22 (citing Fed. R. Civ. P. 1)]. Finally, Chief Judge
Varlan directed the undersigned to determine a suitable time for concluding the Receivership.
[Id. at 24].

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II.

POSITIONS PRESENTED TO THE COURT
In the instant motion, Plaintiff moves the Court for entry of an order permitting him to

execute, sell, and credit bid on certain real property found in various counties within the Eastern
District of Tennessee and three automobiles that are Receivership assets. Specifically, Plaintiff
moves the Court to allow him to execute, sell, and credit bid on:
1. Highway 321, Map 009, Loudon County (Receiver’s September 25, 2013 Preliminary
List of Assets [Doc. 1039-2] at 3);
2. Highway 411 S., Map 084, Monroe and Loudon Counties ([Doc. 1039-2] at 3);
3. Troy Cate Road, Map 013J, Sevier County ([Doc. 1039-2] at 3);
4. Property on White Oak Grove Road, Map 056, Hamblen County ([Doc. 1039-2] at 5);
5. 3560 Hardy Road, Jefferson County ([Doc. 1039-2] at 5);
6. Property on Graysburg Hills Road, Greene County ([Doc. 1039-2] at 5);
7. Two lots on Overlook Lane, Anderson County ([Doc. 1039-2] at 3);
8. 24 commercial apartments in Vonore, TN ([Doc. 1039-2] at 2);
9. 2003 Ford Thunderbird ([Doc. 1039-2] at 9);
10. 2002 Ford Thunderbird ([Doc. 1039-2] at 9); and
11. 1982 Chevrolet C10 ([Doc. 1039-2] at 9).
(hereinafter “the Real Property and Automobile Receivership Assets”) Plaintiff also moves the
Court, pursuant to 28 U.S.C. § 754, Fed. R. Civ. P. 66, Tenn. Code Ann. § 66-3-308(a), and the
principles of equity, to find that title to those assets is held by Judgment Debtor Rarity
Management Company LLC, (“Rarity Management”).
In support of his request, Plaintiff submits that he is a judgment creditor of Rarity
Management and Michael Ross and that the Real Property and Automobile Receivership Assets
were, at all relevant times, owned by Rarity Management [Doc. 1093 at 10-11, 14]. Plaintiff
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argues that any claims arising from transfers of the Real Property and Automobile Receivership
Assets in December 2011 should be disallowed because the claims were acquired through fraud.
[Id. at 14-23]. Alternatively, Plaintiff moves the Court to subordinate claims based upon the
December 2011 transfers to the extent necessary to satisfy the Plaintiff’s judgment. [Id. at 2325].
The Receiver responds to the Plaintiff’s motion by concurring with Plaintiff’s position
that, as a judgment creditor, Plaintiff has the right to execute, sell, and credit bid upon the Real
Property and Automobile Receivership Assets. [Doc. 1115 at 1]. The Receiver notes that these
assets have been listed as Receivership assets in the Schedule of Assets that the Receiver had
filed with the Court. [See Doc. 1039-2]. The Receiver incorporates his previous position that he
has no objection to Plaintiff’s motion, so long as the sale of those assets will be subject to the
satisfaction of the expenses incurred by the Receivership. [Doc. 1115 at 2].
Athena, American Harper Corporation (“American Harper”), Likos of Tennessee
(“Likos”), and Breton Equity Company Corporation (“Breton Equity”) have responded in
opposition to the Plaintiff’s motion. [Doc. 1114]. First, Athena, American Harper, Likos, and
Breton Equity assert that they incorporate their arguments in opposition to previous motions.
[Doc. 1114 at 2]. Athena, American Harper, Likos, and Breton Equity do not state their specific
ownership interests the Real Property and Automobile Receivership Assets. However, they
maintain that the fraudulent transfer allegations should be resolved in a trial in Stooksbury II.
[Id. at 2, 8]. Athena, American Harper, Likos, and Breton Equity assert that Plaintiff’s motion
would prevent them from receiving due process. Additionally, they maintain that the proposed
execution is stayed by the Memorandum Order and Opinion entered September 12, 2013. [Id. at
3].

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John P. Newton, the trustee appointed in In re: Tellico Lake Properties LP, Bankruptcy
Court Case No. 3:12-BK-34034, (“the Trustee”) has filed a Notice and Clarification of the
Bankruptcy Trustee’s Position as to the Pending Motions Regarding Certain Receivership Assets
[Doc. 1121]. Therein, the Trustee represents that he “has no objection to the Court determining
the issues raised in [Plaintiff’s motions] pertaining to the ownership of the assets referenced . . .,
including whether certain claims of ownership are void or avoidable . . . .” [Id. at 2]. The
Trustee states that he “has determined that any interest the Bankruptcy Estate may have in [the
assets at issue] is of no value to the Estate, in part because [Plaintiff’s] final judgment constitutes
a recorded judgment lien [and] was perfected prior to the preference period.” [Id. (emphasis in
the original)]. The Trustee represents that he, therefore, abandons the property. [Id.].
In his reply, Plaintiff notes that none of the judgment debtors in this case filed a timely
response in opposition to the instant motion. [Doc. 1123 at 1]. Moreover, he contends that the
general arguments posited by Athena, American Harper, Likos, and Breton Equity do not support
delaying execution on these assets. [Id. at 3-4].

III.

ANALYSIS
First, the Court finds that Athena, American Harper, Likos, and Breton Equity’s objection

objections based upon a lack of due process are not well-taken.
As an initial matter, the Court finds that Athena, American Harper, and Breton Equity
have not demonstrated that it has any type of ownership interest in the property at issue. Thus,
these entities lack standing to object to the Plaintiff’s motion. Notwithstanding, the Court has
considered all the objections to the Plaintiff’s motion.

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The Court finds that Athena, American Harper, Likos, and Breton Equity’s objections are
not well-taken. Athena, American Harper, Likos, and Breton Equity complain of a lack of due
process, but they were afforded an opportunity to pose such objections and be heard on the same.
The undersigned finds that, as with the summary proceedings addressed in the September 12,
2013 Memorandum Opinion and Order, Athena, American Harper, Likos, and Breton Equity
have been afforded a sufficient opportunity to be heard on this motion.
The Court finds that the general arguments by these respondents asserting that they
would prefer that these matters be addressed by trial in Stooksbury II do not support delaying
satisfaction of the judgment in this case, which was rendered almost two years ago. Further, the
Court finds that the Chief Judge’s Memorandum Opinion and Order does not stay or prohibit the
undersigned from granting the relief requested by the Plaintiff.

To the contrary, the

Memorandum Opinion and Order demonstrates a desire to complete the Receiver’s tasks and
wind-down the Receivership. Granting the instant motion and permitting execution is consistent
with that goal.
Athena, American Harper, Likos, and Breton Equity purport to incorporate objections
previously posed by Athena and American Harper into their response on the instant issue. [See
Doc. 1114 at 2]. Thus, to the extent, the respondents request time to file additional exhibits on
this issue, the Court finds that request is not well-taken. First, even if true, the Court finds that
the documents, as described in the previous response, do not undercut the pertinent allegations in
the Plaintiff’s motion. Second, the Court finds Athena, American Harper, Likos, and Breton
Equity have had a sufficient period to file any documents they wish to file in support of their
opposition. Thus, the Court finds that Athena, American Harper, Likos, and Breton Equity failed
to bring forth these documents, and even if they had done so, the filing of such would not

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undercut the Plaintiff’s position on this issue.
With regard to Athena, American Harper, Likos, and Breton Equity’s position that the
Court should deny the Plaintiff’s motion and defer to the Bankruptcy Trustee and the Bankruptcy
Court, the undersigned finds that this position is not well-taken. The Court finds they have no
standing to pose objections on behalf of the Trustee or the Bankruptcy Court, and contrary to
their position, the Trustee has stated that he does not oppose the instant motion. Further, he has
elected to abandon the property at issue due to the priority of Plaintiff’s judgment. Thus, the
bankruptcy proceedings of Tellico Lake do not constitute a basis for denying Plaintiff’s motion.
The Court finds that any judgment debtors or interested persons have been afforded a
sufficient opportunity to be heard on this issue. The Court finds that the Plaintiff’s requested
relief is well-taken, pursuant to applicable federal authority, state authority, and the equities. The
Court finds that title to the Real Property and Automobile Receivership Assets is held by
Judgment Debtor Rarity Management Company LLC, and is therefore, subject to execution by
the Plaintiff, as judgment creditor to Rarity Management Company LLC.
Accordingly, the Plaintiff’s Motion and Memorandum of Law for Permission to Execute
On, Sell, and Credit Bid on Certain Rarity Management Receivership Assets, and Petition to
Disallow, Avoid, or Subordinate Certain Claims to Those Receivership Assets [Doc. 1093] is
GRANTED, as follows:
1. The Receiver is ORDERED to sell the following property in a manner that he deems
appropriate pursuant to 28 U.S.C. § 20011:

“Property in the possession of a receiver or receivers appointed by one or more district courts shall be sold at
public sale in the district wherein any such receiver was first appointed, at the courthouse of the county, parish, or
city situated therein in which the greater part of the property in such district is located, or on the premises or some
parcel thereof located in such county, parish, or city, as such court directs, unless the court orders the sale of the
property or one or more parcels thereof in one or more ancillary districts.” 28 U.S.C. § 2001.
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a. Highway 321, Map 009, Loudon County;
b. Highway 411 S., Map 084, Monroe and Loudon Counties;
c. Troy Cate Road, Map 013J, Sevier County;
d. Property on White Oak Grove Road, Map 056, Hamblen County;
e. 3560 Hardy Road, Jefferson County;
f. Property on Graysburg Hills Road, Greene County;
g. Two lots on Overlook Lane, Anderson County;
h. 24 commercial apartments in Vonore, TN;
i. 2003 Ford Thunderbird;
j. 2002 Ford Thunderbird; and
k. 1982 Chevrolet C10.
2. The Receiver SHALL PERMIT the Plaintiff to credit bid at such sale.
3. The Receiver SHALL DISTRIBUTE any funds realized from such sales in a manner
consistent with the following:
a. Any funds SHALL first be used to pay any approved fees and expenses of the
Receivership that have not yet been paid, including but not limited to the fees
owed to the law firm of Woolf, McClane, Bright, Allen & Carpenter, PLLC.
b. After the fees and expenses of the Receivership are satisfied, such funds SHALL
be surrendered to the Plaintiff to be credited against his judgment. If Plaintiff is
the high bidder at such auctions, the amount of his bid shall be credited against his
judgment.
c. The Receiver SHALL file a notice of completion for any sale that is completed,
stating: (1) the property sold; (2) the date, time, and place of the sale; (3) the

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amount of the winning bid; (4) the winning bidder and the winning bidder’s
mailing address; and (5) how the funds realized were applied (i.e. to fees of the
Receivership, to satisfaction of Plaintiff’s judgment). A notice of completion
SHALL be filed within fourteen (14) days of any completed sale.
d. Both the Receiver and Plaintiff’s counsel SHALL maintain an accounting of any
funds surrendered to the Plaintiff and of any other credits toward Plaintiff’s
judgments.

IV.

CONCLUSION
In sum, the Plaintiff’s Motion and Memorandum of Law for Permission to Execute On,

Sell, and Credit Bid on Certain Rarity Management Receivership Assets, and Petition to
Disallow, Avoid, or Subordinate Certain Claims to Those Receivership Assets [Doc. 1093] is
GRANTED.
IT IS SO ORDERED.

ENTER:
/s H. Bruce Guyton
United States Magistrate Judge

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