Gregory Hunter & Hunter Family Capital, LLC v. Mountain Commerce Bank
| Decision Date | 28 September 2016 |
| Docket Number | 1:15cv1050 |
| Court | U.S. District Court — Middle District of North Carolina |
| Parties | GREGORY HUNTER and HUNTER FAMILY CAPITAL, LLC, Plaintiffs, v. MOUNTAIN COMMERCE BANK and BOBBY A. BROWN, Defendants. |
This lawsuit arises out of a lending relationship related to the construction of commercial properties in Tennessee. Before the court is the motion of Defendants Mountain Commerce Bank ("MCB") and Bobby A. Brown to dismiss the complaint for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) or for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3). (Doc. 5.) Defendants move in the alternative to transfer this action to the United States District Court for the Eastern District of Tennessee pursuant to 28 U.S.C. § 1404. (Id.) For the reasons set forth below, the motions will be denied.
Viewed in the light most favorable to Plaintiffs Gregory Hunter and Hunter Family Capital, LLC ("HFC"), the complaint and supporting affidavits1 show the following.
Hunter is a citizen and resident of Forsyth County, North Carolina. (Doc. 2, ¶ 2.) He and his wife own HFC, a North Carolina limited liability company, which owns fifty percent of Kingsley Investment Group ("Kingsley"), a Tennessee limited liability company. (Id. ¶¶ 1, 5.) Robert Feathers, a Tennessee resident, co-owns Kingsley with HFC. (Doc. 5-1, ¶ 5; Doc. 5-2, ¶ 5.) Neither Kingsley nor Feathers is a party to this action. During the period in question, Hunter held himself out as Kingsley's CEO and "performed the majority of Kingsley's executive management duties." (Doc. 8, ¶ 7.) Hunter "maintained [his] office for Kingsley in Winston-Salem, North Carolina." (Id.)
MCB is a bank organized under the laws of Tennessee, with its principal place of business in Unicoi County, Tennessee, which abuts the North Carolina border just above the city of Asheville. (Doc. 2, ¶ 7.) Brown, a citizen and resident of Washington County, Tennessee, is MCB's senior vice president and maintains his office in Johnson City, Tennessee. (Doc. 5-2, ¶¶ 2-3.)
This dispute arises from an agreement among the parties for MCB to finance the construction of three restaurants in the Tri- Cities area of Tennessee. The loan was to be supported in part by a guaranty from the Small Business Association ("SBA"). The parties agreed that MCB would complete the application for an SBA guaranty. Hunter and HFC's complaint centers on their claim that on several occasions, MCB misrepresented its expertise and the state of its SBA application.
In 2013, Kingsley planned to build three franchise restaurants in Johnston City, Kingsport, and Bristol, Tennessee. (Doc. 2, ¶¶ 10, 11; Doc. 8, ¶¶ 8-10.) Acting as Kingsley's CEO, Hunter asked MCB for a financing proposal for constructing and furnishing the restaurants. (Doc. 5, ¶ 6; Doc. 8, ¶¶ 7, 10-11.) In March of 2014, Brown responded with a "Summary of Loan Commitment Letter" that provided for a $2 million loan to finance the restaurant construction and furnishings. (Doc. 5-2, ¶ 12; Doc. 8, ¶ 13; Doc. 2-1, ¶ 2.) The loan was to be collateralized by "[a] UCC" on the restaurants' business assets and supported by an SBA guaranty. (Doc. 2-1, ¶ 3.) MCB represented that it had expertise in securing SBA guaranties and agreed to complete the application with the SBA. (Doc. 2, ¶¶ 15, 18, 21.)
Plaintiffs allege that during the following seventeen months, MCB repeatedly misrepresented the state of its application for an SBA guaranty. In fact, during that period, MCB submitted at least three separate applications for SBA guaranties. The first one was "essentially blank" (Doc. 2, ¶ 42), and the second — submitted nine months after the first application and three months after Kingsley threatened litigation against MCB (Doc. 5-2, ¶ 16; Doc. 2, ¶¶ 86-87) — expired due to inactivity (Doc. 2, ¶ 90). The SBA approved the third application — submitted in June of 2015 — and agreed to give MCB a guaranty on the restaurants. (Doc. 2, ¶ 96.) In September of 2015, MCB asked Kingsley to close the original loan. (Id. ¶ 98.) Kevin Horne (who had replaced Brown as Kingsley's primary contact at MCB), an MCB lawyer, Kingsley's members, and Kingsley's lawyer met at MCB's office in Johnson City, Tennessee. (Id. ¶ 99.) At this meeting, MCB indicated that it was not prepared to close the loan but asked Kingsley to sign a release of claims against MCB. (Id. ¶ 100.) Kingsley declined MCB's new terms (id. ¶ 102), and the loan was never closed.
Between March of 2014 (when MCB delivered the Commitment Letter) and September of 2015, MCB's delays in securing the SBA guaranty to support the original loan required Hunter to take out three successive personal loans with MCB as stop-gaps to finance the restaurants' construction and furnishings.
The first two "bridge loans" were closed on April 18, 2014, and August 13, 2014. Hunter and Feathers signed both loans, and each loan was for $500,000. (Doc. 8, ¶¶ 15, 19; see also Doc. 2-2, ¶ 2; Doc. 2-3; Doc. 2-4; Doc. 2-5, ¶ 2.) The April loan closing took place in Tennessee, and the August loan was signed by email. (See Doc. 5-2, ¶ 9; Doc. 8-2.) Both bridge loans provide for Tennessee law to govern (Doc. 2-3, at 3; Doc. 2-4, at 3), and they were collateralized by commercial property Feathers owned in Kingsport, Tennessee (Doc. 2, ¶ 65; Doc. 2-2, ¶ 3; Doc. 2-5, ¶ 3). Hunter signed extensions of the bridge loans in December of 2014, March of 2015, June of 2015, and August of 2015. (Doc. 8, ¶ 46.) He signed these extensions in North Carolina. The record does not indicate whether or where Feathers signed them. (Id.)
On October 14, 2014, MCB issued Hunter a third personal loan, this one for $200,000. (Doc. 8-6.) As collateral, MCB took a security interest in the accounts receivable of Hunter's North Carolina-based financial advisory business and in all proceeds from Hunter's retirement payments. (Doc. 8-6 at 5, ¶ 1; Doc. 8, ¶ 28.) Hunter claims that to meet MCB's collateral requirement, he was forced to retire and to accelerate selling his book of business as a financial adviser. (Doc. 8, ¶ 27.) The agreement also required Hunter to maintain life insurance policies assigned to MCB on himself and his business partner, Tanner Robinson, who would continue to service the book of business to generate the retirement revenues. (Doc. 8, ¶¶ 35, 39; Doc. 8-7.) Robinson is a North Carolina resident. (Doc. 8, ¶ 39.) Hunter also asserts that during this time, MCB "demanded" a mortgage on his North Carolina home. (Doc. 8, ¶ 48.) MCB hired a North Carolina attorney to prepare that mortgage. This mortgage was not mentioned in the written security agreement (id.), and the record is not clear whether the mortgage was ever executed. Hunter made payments on this loan by depositing his retirement proceeds in his North Carolina bank account and then mailing checks to MCB to be drawn against that account. (Doc. 8, ¶ 42; Doc. 8-8.)
This security agreement twice specifies Tennessee law as controlling. (Doc. 8-6, at 4, 9.) The security agreement also provides that "[i]f property described in this agreement is located in another state, this agreement may also, in some circumstances, be governed by the law of the state in which the Property is located." (Id. at 3.)
Plaintiffs allege that MCB misrepresented the state of its application for an SBA guaranty on several occasions and that Plaintiffs relied on them in agreeing to stop-gap financing.
On March 31, 2014, after Brown sent Hunter the Commitment Letter, Hunter and Brown met in Tennessee to discuss the loan. (Doc. 2, ¶ 21.) At the meeting, Brown characterized the SBA application as a "routine matter." At some point, presumably in close proximity to that meeting, Brown told Hunter that MCB was an "expert" at obtaining SBA guaranties. He also referred to the SBA approval process as a "mere formality." (Id., ¶¶ 15, 18, 21.)
On April 8, 2014, Hunter asked Brown how the SBA guaranty application was proceeding. Brown responded to Hunter by email and assured him that "[i]ts [sic] going ok." (Id., ¶ 30.) Ten days later, on April 18, 2014, Hunter and MCB closed on the first bridge loan. (Doc. 2-3.)
On or about May 30, 2014, Brown submitted the first application for an SBA guaranty. (Doc. 2, ¶ 42.) This was the first SBA application Brown submitted. (Id.) The SBA requested numerous missing components and eventually rejected the application, which was "essentially blank." (Id.) Brown did not tell Plaintiffs the SBA had rejected the application. Further, Brown did not submit another application until almost a year later, in March of 2015.
On June 20, 2014, Hunter requested an update on the original loan. (Id. ¶ 47.) Later that day, Brown responded to Hunter by email and told him he would have a commitment within the next week. He did not. (Id.) In the same email, Brown claimed that his delay on the SBA guaranty application was "mainly [his] getting accustomed to everything the SBA requires and in what format." (Id., ¶ 48.) Brown did not disclose that the SBA had already rejected MCB's first application. (Id.)
On August 6, 2014, after Hunter asked for another update on the loan, Brown attributed the delay to his need to transfer certain electronic information to the SBA's paper form. (Id., ¶ 54.) In reality, the SBA application was incomplete because Brown had not submitted it in the format the SBA required. (Id.) On August 8, 2014, Brown again told Hunter the closing would take place "soon." (Id., ¶ 55.)
Late in the summer of 2014, Hunter asked MCB about additional financing for a fourth restaurant. (Id., ¶¶ 73-74.) Brown responded to Hunter and declined to offer financing because he did not want to "upset the process with the SBA" and wanted to wrap up the original loan. (Id. ¶ 74.) This led Hunter to believe that Brown was "diligently...
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