Stooksbury v. Ross et al

Filing 913

ORDER granting 872 Plaintiff Robert T. Stooksbury's Motion for an Order Allowing Mr. Stooksbury or the Receiver to Take Possession of the Rarity Bay Boat Docks and to Receive All Rental Income and for an Order for a Complete Accounting Pending Disposition of the Collateral as set forth more fully herein. Signed by Magistrate Judge H Bruce Guyton on April 26, 2013. (mailed to Mr. Ross) (AYB)

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 the referral order of the District Judge.

Now before the Court is Plaintiff Robert T.

Stooksbury’s Motion for an Order Allowing Mr. Stooksbury or the Receiver to Take Possession
of the Rarity Bay Boat Docks and to Receive All Rental Income and for an Order for a Complete
Accounting Pending Disposition of the Collateral [Doc. 872]. American Harper Corporation, a
non-party to this case, has objected to Plaintiff’s Motion. [Doc. 888]. Defendant Tellico Lake
Properties, LP, has not responded in opposition, nor has any other Defendant in this case.
The Court finds that this issue is ripe for adjudication, and for the reasons stated herein,
the Plaintiff’s Motion for an Order Allowing Mr. Stooksbury or the Receiver to Take Possession
of the Rarity Bay Boat Docks and to Receive All Rental Income and for an Order for a Complete
Accounting Pending Disposition of the Collateral [Doc. 872] will be GRANTED.

I.

BACKGROUND
The history of this case is lengthy and well-known to the parties. The Court will not

repeat it herein. With regard to the issue before the Court, it is undisputed that on January 23,
2009, Defendant Michael Ross, on behalf of Defendant Tellico Lake Properties, L.P., signed a
promissory note promising to pay United Community Bank, a principal sum of $650,000. [Doc.
872-1]. In a Loan and Security Agreement executed the same day, Mr. Ross, again on behalf of
Tellico Lake Properties, granted United Community Bank a security interest in all the “accounts
receivable, rental agreements and trade notes receivable.” [Doc. 894-1 at 2].
On the same date, Mr. Ross also signed an Assignment of Rents, Leases, Profits &
Income, [Doc. 872-2], on behalf of Tellico Lake Properties. In pertinent part, the Assignment
states:
[T]o induce [United Community Bank] to advance a loan of money
to [Tellico Lake Properties, Tellico Lake Properties] herewith
absolutely assigns, transfers and conveys unto [United Community
Bank] forever, subject, however, to defeasance upon the
occurrence of the conditions hereinafter set forth, all right, title and
interest of [Tellico Lake Properties] in and to all rents, leases,
profits, income and demises of tenancy . . . including but not
limited to all dock, slip and boat storage rental agreements and
leases . . . .
[Id. at 1]. Further, the Assignment provided that in the event of a default by Tellico Lake
Properties, United Community Bank is entitled under the Lease to inter alia: enter upon, and
take possession of, the real property; to collect the rents, income and profits under the Lease; and
apply rentals and income from the real property to the debt secured by the Note. [Doc. 872-2 at
3].

United Community Bank endorsed the Note to Plaintiff Robert T. Stooksbury, making

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the Note payable to Mr. Stooksbury. [Doc. 872-1 at 5].

II.

POSITIONS OF THE PARTIES
Mr. Stooksbury now moves the Court to enter an Order allowing Mr. Stooksbury or the

Receiver to take immediate possession of the Rarity Bay boat docks, to receive all rental income,
and to insure the property to the extent such insurance is available pending final disposition of
property by the Receiver or the Court. [Doc. 872 at 1]. In addition, Mr. Stooksbury moves the
Court to enter an Order requiring American Harper Corporation to give a complete accounting of
all income and expenses stemming from its possession and/or use of the boat docks. [Id.].
In support of this request, Mr. Stooksbury states that he purchased the Note and related
loan documents to protect this asset pending final disposition by the Receiver or the Court. Mr.
Stooksbury notes that Tellico Lake Properties has been put into bankruptcy, but the Bankruptcy
Court has found that the creditors’ interests are best served by permitting the Receiver or himself
to continue in possession of property. As a result, the Bankruptcy Court has excused the
Receiver from complying with the provisions of the Bankruptcy Code that would normally
require that property be turned over the bankruptcy trustee. [Docs. 18, 96, 124 in No. 3:12-bk34034].
American Harper Corporation, a non-party to this case, agrees to provide an accounting
of its operation of the boat docks. It, however, objects to Mr. Stooksbury’s request that the Court
order Mr. Stooksbury or the Receiver to take possession of the boat docks. [Doc. 888 at 1].
American Harper argues that this Court has no jurisdiction to adjudicate this action, which it
maintains is essentially a foreclosure.

[Id. at 2].

American Harper also argues that Mr.

Stooksbury has not declared the Note or Assignment of Rents to be in default. [Id. at 3].

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Mr. Stooksbury replies that he is not attempting to foreclose on the property. Mr.
Stooksbury argues that he, instead, seeks to exercise only his right to take possession of the
property and collect rent. [Doc. 894 at 2]. Mr. Stooksbury argues that the Note has been in
default since the moment American Harper took possession of the subject property in March
2012, because American Harper’s possession constituted a default under the terms of the Note
and Assignment of Rents. [Id.]. Mr. Stooksbury alleges that American Harper, Mr. Ross, and
Tellico Lake Property have all failed to insure the property, failed to pay property taxes, and
failed to pay on the Note since at least March 2012. [Id. at 4]. Finally, Mr. Stooksbury cites the
Court to an Order entered by the Bankruptcy Court granting leave for Mr. Stooksbury to take
possession of the boat docks. [Doc. 124 in No. 3:12-bk-34034].
Finally, the Receiver has confirmed in writing that he “has reviewed the request
presented on behalf of Mr. Stooksbury and has no objection to the proposed operation of the
Rarity Bay Boat Docks by Mr. Stooksbury.” [Doc. 880 at 1]. Further, the Receiver states that he
is in agreement that an accounting from American Harper is appropriate. [Id.].

III.

ANALYSIS
As an initial matter, the Court finds that American Harper has agreed to provide an

accounting.

Mr. Stooksbury’s request for an accounting is not disputed, and it will be

GRANTED.
With regard to the disputed issue, the Court would, first, note that American Harper’s
standing to object to Mr. Stooksbury’s request is not clearly established. American Harper does
not direct the Court to an assignment or other duly executed conveyance from Tellico Lake
Properties. American Harper has not explained in its Response [Doc. 888] how it came to be the

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entity in possession of the boat docks, nor has it made any showing of its being a bona fide
purchaser. The Court has, nonetheless, considered all of American Harper’s objections.
The Court finds that it does not lack subject matter jurisdiction over this issue. Through
the establishment of the Receivership, the Court has recognized its ongoing jurisdiction in this
matter, based in part on the Defendants’ continued disregard for the Orders of this Court. [See
Doc. 695].
Further, the Court finds that the request for relief before it is not a request for a
foreclosure. Mr. Stooksbury is not asking the Court to foreclose the right of redemption afforded
to Tellico Lake Properties, and thereby, change title to this property. Mr. Stooksbury is, instead,
asking that the Court allow the Receiver or Mr. Stooksbury to take possession of the boat docks
and that the rents be accounted for and assigned to Mr. Stooksbury. The Court finds that the
relief requested does not exceed the purview or jurisdiction of this Court.
The Court has reviewed the Note [Doc. 872-1] and the Assignment of Rents, Leases,
Profits, and Income [Doc. 872-2].

Neither document includes a notice provision or other

provision requiring that a default be declared. American Harper has not cited the Court to any
language in the Note or Assignment that requires the owner of the note – at this time, Mr.
Stooksbury – to “declare a default.” To the contrary, the Note states that upon default, Mr.
Stooksbury “shall have the right and privilege, without the necessity or requirement of notice” to
use rents, income, or other property to off-set the debt owed on the Note. [Doc. 872-1 at 3-4].
Accordingly, the Court finds that neither the Note nor the Assignment require that Mr.
Stooksbury “declare a default” prior to seeking a remedy for an event of default.

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The Court finds that American Harper and/or Tellico Lake Properties have breached
numerous covenants of the Note and Assignment, by failing to make monthly payments of
$4,660.00 [see Doc. 872-1 at 1], and assigning the rents or income from the boat docks to
American Harper [see Doc. 872-2 at 2]. The Court, thus, finds that American Harper and/or
Tellico Lake Properties are in default under the Note and Assignment.
Finally, the Court finds that Mr. Stooksbury is in the best position to take over the boat
docks, and he shall operate them with due diligence and care until the Court orders otherwise.
The Court, further, finds that Mr. Stooksbury’s possession and operation of the boat docks is not
precluded by the involuntary bankruptcy of Tellico Lake Properties. [See ¶ 2 of Docs. 96, 124 in
No. 3:12-bk-34034].1

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Agreed Order, endorsed by the Honorable Richard Stair, Jr., United States Bankruptcy Judge, finding that
“Stooksbury, or a Receiver, is allowed to take possession of the Collateral and any proceeds thereof pursuant to the
terms of the Note, deeds of trust, absolute assignments, loan and security agreement, UCC financing statements,
loan documents, the Uniform Commercial Code, and at equity or law.” [Doc. 124 at ¶ 2].

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III.

CONCLUSION
Based upon the foregoing, the Court finds that Plaintiff Robert T. Stooksbury’s Motion

for an Order Allowing Mr. Stooksbury or the Receiver to Take Possession of the Rarity Bay
Boat Docks and to Receive All Rental Income and for an Order for a Complete Accounting
Pending Disposition of the Collateral [Doc. 872] is well-taken, and it is GRANTED. It is
hereby ORDERED that:
1. Robert T. Stooksbury SHALL TAKE possession of the Rarity Bay boat docks. He
SHALL RECEIVE all rental income from the boat docks, SHALL MAINTAIN the
boat docks in an appropriate manner, and he SHALL INSURE the property to the extent
such insurance is available pending final disposition of the collateral by the Receiver or
the Court; and

2. American Harper Corporation SHALL PROVIDE a full and complete accounting of all
income and expenses stemming from its possession and/or use of the Rarity Bay boat
docks from March 20, 2012 to the present.

American Harper SHALL FILE this

accounting with the Clerk of Court on or before May 10, 2013.

IT IS SO ORDERED.
ENTER:

s/ H. Bruce Guyton
United States Magistrate Judge

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