Facing a lawsuit from investors, a business run by Chattanooga developer Allen Casey on Monday filed for bankruptcy protection.
River City Resort, which owns a portion of a tract of property on the Tennessee River where a controversial rundown barge is moored across from the Tennessee Aquarium, filed a Chapter 11 petition in U.S. Bankruptcy Court in Chattanooga.
Casey declined comment on the bankruptcy action. An attorney for Casey did not immediately return a call for comment.
However, a lawyer for several people and entities suing River City Resort and Casey said the bankruptcy case was filed just a day before their longstanding civil case was scheduled to go to trial in Hamilton County Chancery Court.
Chattanooga attorney Gary Patrick said the civil trial is delayed at least until Wednesday morning. A bankruptcy court hearing is set Tuesday in Casey's filing there, he said.
Patrick maintained that the bankruptcy filing does not stop the lawsuit as it pertains to Casey himself.
The vacant parcel of property between Manufacturers Road and the river has been eyed by Casey for years for development.
Casey, who originally developed the Chattanooga Choo Choo into a top tourist attraction in Tennessee more than three decades ago, in 2004 announced plans for a 98-room hotel on the riverfront 12-acre tract. He had also proposed 60 condominiums and a restaurant. Nothing was built.
Later, Casey brought the barge from Pittsburgh to Chattanooga with plans to redevelop it into a floating New Orleans-style restaurant and bar. However, in late 2011, the barge became half submerged and its dilapidated state became a lightning rod for critics.
The barge was later refloated and cleaned up, but the U.S. Corps of Engineers said last spring that it was not complying with its permit. Corps officials have termed the barge situation as "an ongoing enforcement action."
The lawsuit that may go to trial this week was originally filed in 2008. An amended complaint brought last year named River City Barge and River Cafe LLC as plaintiffs along with John Winesett, Barbara Winesett, Dave Debter, Roy Roach and Greg Hellwig.
According to the complaint, the plaintiffs executed a promissory note to the defendants in September 1997. Patrick said they were investors in planned developments by River City Resort and they loaned money to the defendants.
In return, the plaintiffs were given interests in River Cafe and River City Barge Co. As added security for the loans, the plaintiffs were assigned River City Resort's voting rights in its 50 percent member's interest in River Cafe and River City Barge, the suit said.
As of September 2008, the amount of indebtedness was $1.5 million, the suit said.
Patrick said the defendants were promised a first mortgage on the property. But, the attorney said, there was already a mortgage on the property.
The suit said that Casey's wife, Emma P. Casey, and the law firm of Miller & Martin had an existing deed of trust against the same property. According to the suit, the defendants failed to notify the plaintiffs or obtain their consent prior to various transfers and encumbrances on the property.
"The defendants have misled and misrepresented facts about financing being available, security interest in the property, repayment of the note, ownership of the property, the soundness of their investment and other facts," the suit said.
However, River City Resort and Casey have denied allegations of wrongdoing.
In an answer to the suit, the defendants said that as security for the loan, the voting rights were pledged to the plaintiffs.
River City Resort and Casey said they represented to the plaintiffs that the company would deliver a deed of trust for recording and that it did so.
The answer said that the deed of trust was not recorded through no fault of the defendants. It asked that the lawsuit be dismissed.
Patrick said it's unclear who actually owns the barge at this time.
"We're trying to sort that out," he said.
Contact Mike Pare at email@example.com or 423-757-6318.