Crossville Chronicle, Crossville, TN

September 29, 2011

Tansi POA files suit over sewer system loan

Suit filed against TWMI, TSUD

By Heather Mullinix
Assistant editor

CROSSVILLE — The Lake Tansi Village Property Owners Association has filed a lawsuit seeking a default judgement against Tansi Waste Management Inc. for nonpayment of loans totaling more than $1.3 million and asks that the transfer of TWMI assets to the Tansi Sewer Utility District be voided.

The loans were made to finance construction of a sewer system in Lake Tansi to serve POA amenities, businesses and various homes.

Dave Sutton, general manager of the Tansi POA, said, “Having these outstanding loans delays needed capital maintenance items and puts a squeeze on our ability to provide the amenities we have in the past.”

The suit was filed Sept. 23 in Cumberland County Chancery Court by Gullett, Sanford, Robinson & Martin, PLLC, attorneys for the POA.

According to the suit, the POA allowed TWMI to use a line of credit established by the POA at First National Bank of Tennessee. Promissory notes were issued by TWMI that included the principal and interest rate of 6.25 percent from the date of the loan. All notes were titled “due on demand promissory note.” There were 11 such promissory notes issued from Feb. 17, 2009 through June 15, 2010, each signed by Claude “Duke” Coyne, president of TWMI and former general manager of TSUD. He retired from the sewer district in November 2010.

Only $187,438.15 has been paid back to the POA, the lawsuit states. Interest continues to accrue on the outstanding balance.

In May 2011, the POA made a demand for payment from TWMI, but no payment has been received at the time the lawsuit was filed and the POA has had additional costs and attorneys fees trying to collect on the loans.

Herb Pallatt, chairman of the TSUD board and a director for TWMI, said he had not yet seen the lawsuit and could not comment at this time.

Ron Alt, president of TWMI, said he also has not seen a copy of the lawsuit and could not comment at this time.

The lawsuit seeks TWMI be declared to have defaulted and ordered to pay the POA for outstanding loans, as well as the costs of collection, including reasonable attorney fees.

It also asks the court declare the transfer of TWMI assets, primarily the sewer collection lines and treatment facility, to TSUD, void. The sewer system was TWMI’s primary asset and the loans to the POA its primary liability.

TSUD has made no payment on the loans. When TSUD accepted the assets of TWMI, it also agreed to pay the POA for the outstanding TWMI notes.

According to the suit, neither TSUD or TWMI had cash on hand to pay the notes at the time of the transfer. TSUD conditioned its repayment of the notes on receiving proceeds from the issuance of public bonds and that the bonds would allow the proceeds to pay the POA.

“Such ‘consideration’ was not reasonably equivalent to the value of the Sewer System transferred by TWMI to TSUD,” the suit states.

The lawsuit asks the transfer of the sewer system by TWMI to TSUD fraudulent, as well as the transfer of any licenses, approvals or permits and attachment issued against the sewer system and any licenses, approvals or permits TWMI may have transferred to TSUD.