Judge clears path for Rarity Pointe foreclosure

By Josh Flory knoxnews.com

Judge clears path for Rarity Pointe sale

Another piece of Mike Ross' real estate empire is apparently headed for the auction block.

A federal bankruptcy judge on Friday dismissed a Chapter 11 case related to Rarity Pointe, the waterfront golf community in Lenoir City. The judge's action clears the way for the project's mortgage holder to auction more than 180 unsold lots and a golf course at a foreclosure sale.

Reading her opinion from the bench, Judge Marcia Phillips Parsons on Friday said Ross, the Maryville developer, did not have the authority to initiate a Chapter 11 proceeding without the consent of his business partners.

While the operating agreement for Tellico Landing LLC, the entity behind Rarity Pointe, did not specifically prohibit Ross or the entity through which he held a 50 percent ownership stake in Tellico Landing from filing bankruptcy, the judge said member control over such a filing was implicit.

Following the hearing, attorney Lewis Howard said his client, mortgage holder WindRiver Investments LLC, would proceed with a foreclosure "ASAP." Howard said a sale would probably happen in three to four weeks.

Asked if his client was pleased, Howard said, "Absolutely. Perseverance has paid off."

The dispute over Rarity Pointe which was backed by Ross, developer Robert Stooksbury and former Knoxville attorney Ward Whelchel has been moving on two tracks in the federal courthouse. Stooksbury in 2009 filed a lawsuit in U.S. District Court accusing Ross and other defendants of a variety of transgressions, which the defendants denied.

This year, though, Ross was hit with a default judgment in that case after failing to adequately respond to discovery requests, and a jury recommended millions in damages. Friday's hearing came in U.S. Bankruptcy Court, where Stooksbury has also been working in opposition to Ross.

Asked for comment, Tellico Landing attorney Lynn Tarpy who has argued Ross' side of the case said the judge "made her decision substantiated by law and facts."

The Rarity Pointe assets in play include a golf course and 184 unsold residential lots. WindRiver had previously purchased the project's debt from SunTrust bank and scheduled a foreclosure sale last year, which was forestalled by the bankruptcy filing.

WindRiver's president is Joseph Ayres, whose son is married to Stooksbury's daughter.

The decision is only the latest setback for Ross, whose Rarity Communities developed upscale residential projects across East Tennessee but was devastated by the financial downturn. In April 2010, three Rarity-related companies filed for Chapter 11 protection two days before a scheduled foreclosure sale at Rarity Mountain in Campbell County and GreenBank later took the property at a foreclosure auction.

GreenBank also took back Rarity Club, a waterfront project in Marion County, and foreclosed on Rarity Rivers in Meigs County.