Stooksbury v. Ross et al

Filing 586

ORDER Appointing Sterling P Owen, IV to serve as receiver for all of the Defendants in this case. Signed by Magistrate Judge H Bruce Guyton on June 6, 2012. (emailed to Mr. Owen) (AYB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
ROBERT T. STOOKSBURY, JR.,
Plaintiff,

v.
MICHAEL L. ROSS,
LTR PROPERTIES, INC.,
RPL PROPERTIES, LLC,
LC DEVELOPMENT COMPANY, LLC,
MICHAEL L. ROSS doing business as
RARITY REALTY doing business as
RARITY POINTE REALTY,
REBECCA ROSE ROSS JORDAN,
RARITY COMMUNITIES, INC.,
TELLICO LAKE PROPERTIES, L.P.,
NICKAJACK SHORES HOLDINGS, LLC,
RARITY INVESTMENT COMPANY, LLC,
RARITY CORPORATION,
RARITY MANAGEMENT COMPANY, LLC,
RARITY PROPERTY MANAGEMENT, INC.,
RARITY RIDGE CLUB, INC.,
RARITY CLUB CORPORATION,
BROADBERRY DEVELOPMENT COMPANY, LLC,
HIAWASSEE PROPERTIES LLC,
RM COMPANY, LLC,
LOM DEVELOPMENT COMPANY, LLC,
VPI COMPANY, LLC,
PATRICIA ROSS ON THE BEHALF OF ESTATE OF
DALE M. ROSS, and
TELLICO COMMUNITIES, INC.,
Defendants.

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

MEMORANDUM AND ORDER
This case came before the undersigned pursuant to 28 U.S.C. § 636, the Rules of this
Court, and the order of the District Judge [Doc. 485]. In a Memorandum and Order entered May
23, 2012, the Court granted the Plaintiff’s Motion for Order Precluding Transfer of Assets and to
Appoint Receiver [Doc. 548].

The Court gave the parties an opportunity to file objections to the Order Precluding the
Transfer or Dissipation of Any Assets of the Defendants and Order Appointing Receiver [Doc.
535-1], proposed by the Plaintiff, or to propose parameters of the receivership. The parties have
made their filings [Docs. 566, 577]. The Court, having considered the filings submitted, the
applicable law, and the record as a whole, ORDERS as follows.
1. Based upon his education, background, and experience, Sterling P. Owen IV is an
appropriate receiver for this case, and Sterling P. Owen IV is APPOINTED to serve as
receiver for all of the Defendants in this case;
2. Pursuant to the inherent equitable powers of the Court to enforce its Judgments,
Defendants are hereby PRECLUDED and ENJOINED from transferring, selling,
pledging, assigning, donating, financing, encumbering, injuring, destroying, deleting, or
dissipating any of their assets, including but not limited to any and all interests in
property of whatever kind or nature, including but not limited to real property, declarants
or developer’s rights in real property, interests in and/or payments from property owners’
association and/or clubs, whether for fees, dues, memberships or otherwise; stock; any
and all personal property; commercial paper; any marketable asset of any kind; furniture,
fixtures and equipment; computers; phones; and any and all records and/or data, whether
in paper form and/or stored as computer data and/or as electronically stored information,
concerning any of the Defendants and any business or association in which any of the
Defendants have ownership and control, except to the extent of the natural (noncorporate) defendants who shall be entitled to use their lawfully exempt property and
their future labors for their personal support and necessary living expenses without first
obtaining approval from the Court;
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3. Mr. Owen is hereby appointed to identify, take possession of, and control of any and all
of Defendants’ assets in the manner best suited to preserve Defendants’ assets, except to
the extent a natural (non-corporate) defendant lawfully exempts such assets, up to the
amount of the Plaintiff’s Judgment1, and for such other purposes as the Court may direct;
that Mr. Owen is hereby vested with the following authority and shall have the following
duties and responsibilities, subject to the further orders of the Court:
a. To take possession of all assets, except for assets exempt under law, documents
and property of every kind whatsoever belonging to each Defendant, including,
but not limited to, all real property, personal property, bank accounts, financial
and business accounts, records and electronically stored information, (excluding
attorney-client and other privileged communication), accounts receivable,
commercial paper, causes of action in law or equity, options and contracts
concerning any interests in real property or personal property, income or
payments due, all interests in real property, including but not limited to all
membership fees, dues and any other payments due or receivable on account of
any interest in any real estate association, whether by ownership, control,
contract, or otherwise, stocks, bonds, debentures, mortgages, earned and unearned
commissions or service fees due and not paid, together with all furniture, fixtures,
equipment, files, records, correspondence or any other documentation, and office
supplies, and to hold all such items referenced above, up to the amount of the
Plaintiff’s Judgment, in trust, pending further orders of this Court;

1

The amount of the Judgment, at this time, is in excess of $25 million [Docs. 390, 562]. However, Plaintiff still has
pending motions for attorney fees and costs [Docs. 250; 399; 403].

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b. To be compensated out of the funds or assets of the Defendants which either are
in the possession of Mr. Owen or which come into his possession:
i. For his time at a rate of $175 per hour plus reimbursement for expenses,
including but not limited to travel expenses2. Mr. Owen shall submit
periodic applications for compensation, which shall be supported by
adequate documentation of the services rendered, and thereafter, the Court
will determine the compensation to be rendered to Mr. Owen;
ii. For employment of legal counsel, accountants, clerks, and such assistance
as he deems necessary, and to receive and/or authorize the payment of
such reasonable and necessary costs and expenses, as approved by the
Court;
c. To evaluate and operate the business of each Defendant corporation, partnership
or limited liability company, and each business entity or association owned and/or
controlled by each Defendant as Mr. Owen deems necessary, including but not
limited to any property owners’ association or entity operating or controlling any
asset, real property or association with any interest in real property, to avoid waste
or dissipation and to protect and to maximize the value of each business entity and
each association pending sale or other disposition upon approval of this Court;
d. To commence, defend, and/or intervene in any legal action in which any
Defendant or any related entity is a party, may become a party, or should be a
party, whether any such action is pending or is commenced before or after the
2

The Court relies on the recent order of the U.S. District Court for the Eastern District of Tennessee (Defining
Powers of Receiver) in Raceday Center, LLC v. RL BB Financial, LLC, et al., No.:2:11-CV-17 [Doc. 28]
(E.D.Tenn., Greer, filed March 8, 2011).

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entry of this Order, if Mr. Owen determines that commencing, defending, and/or
intervening in any such legal action is in the best interests of preserving assets up
to the amount of the Plaintiff’s Judgment (this shall not preclude any Defendant in
this case from continuing to pursue any right, defense or appeal in this case
independently of Mr. Owen);
e. To commence, defend, intervene in, and/or maintain any and all legal actions as
deemed necessary by the Receiver for the proper administration and/or disposition
of any of the assets of Defendants in order to preserve assets up to the amount of
the Plaintiff’s Judgment;
f. To direct and/or discharge forthwith any and all officers, directors, agents,
accountants, and employees of any or all business or association owned and/or
controlled by each Defendant, to the extent Mr. Owen deems it necessary or
advisable to prevent the dissipation of assets up to the amount of the Plaintiff’s
Judgment;
g. To identify and to report to the Court regarding any improper and/or fraudulent
conveyances involving any property and/or assets of any of the Defendants and to
prosecute and/or facilitate the prosecution of any and all appropriate legal
proceedings to secure and take possession of any and all such property and/or
assets in order to preserve assets up to the amount of the Plaintiff’s Judgment;
h. To maintain records of any and all assets, except for lawfully exempt assets, of
the Defendants which Mr. Owen identifies, to be able to account for any and all
such assets and any and all expenses Mr. Owen incurs, and to report such matters
to the Court on a quarterly basis, or as the Court hereafter directs;
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i. If necessary, to maintain a separate account with a federally insured banking
institution with offices in the State of Tennessee in the Receiver’s own name, as
Receiver; and
j. To apply to this Court as Mr. Owen finds or deems it necessary for any further
guidance and/or instructions for the discharge of his duties.
4. Mr. Owen, upon taking possession of any of Defendants’ assets, shall obtain a bond in an
amount equivalent with the amount of liquid assets taken in his possession, but in no
event less than $50,000, the cost of which is to be paid by Plaintiff. However, the
Receiver shall not be individually liable for losses provided that the Receiver has acted in
good faith to perform his duties, and has not committed gross negligence or intentional
misconduct.
5. Defendants are hereby enjoined from initiating any litigation of any kind, including but
not limited to any bankruptcy proceeding, without leave of this Court;
The Court shall retain jurisdiction of this cause for the purpose of granting such other further
relief as the Court finds to be equitable and just.
IT IS SO ORDERED.
ENTER:

s/ H. Bruce Guyton
United States Magistrate Judge

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