In re Westbrooks
| Decision Date | 16 December 2010 |
| Docket Number | Bankruptcy No. 10-10672,Adversary No. 10-2032 |
| Citation | 440 B.R. 677 |
| Court | U.S. Bankruptcy Court — Middle District of North Carolina |
| Parties | In re Kenneth A. WESTBROOKS, Debtor. Kenneth A. Westbrooks and wife, Sherrie P. Westbrooks, Plaintiffs, v. FNB United Corp., a holding company for CommunityOne Bank, N.A., Daniel J. Gillespie, III, Nancy W. Gillespie, and Beverly A. Corbett, Defendants. |
J. Marshall Shelton, Ivey, McClellan, Gatton, & Talcott, LLP, Greensboro, NC, for Plaintiffs.
W. Walt Pettit, Rogers, Townsend & Thomas, PC, Charlotte, NC, for Defendants.
Daniel J. Gillespie, pro se.
Nancy W. Gillespie, pro se.
Beverly A. Corbett, pro se.
This matter came before the Court on November 12, 2010, upon the Motion to Dismiss filed on August 16, 2010, by defendants FNB United Corp. ("FNB") and CommunityOne Bank, N.A. ("CommunityOne") (collectively the "Bank Defendants"). J. Marshall Shelton appeared on behalf of Kenneth A. Westbrooks and Sherrie P. Westbrooks, and Lacey M. Moore appeared on behalf of the Bank Defendants. For the reasons stated below, the Motion to Dismiss will be denied.
The Court has jurisdiction over the subject matter of this proceeding pursuant to 28 U.S.C. §§ 151, 157 and 1334, and the General Order of Reference entered by the United States District Court for the Middle District of North Carolina on August 15, 1984. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A), (B), (C), and (K), which this Court may hear and determine.
Mr. Westbrooks is a member and owner of Keck Co. Acquisition Inc. ("Keck Acquisition") and Keck Co., Inc. ("Keck Co."), along with defendant Daniel J. Gillespie, and an individual named Andrew Corbett. While the facts alleged in both the Westbrooks' complaint and the Motion to Dismiss are not entirely clear, it appears that on February 28, 2001, Keck Acquisition and Keck Co. obtained a loan from Alamance National Bank in the principal amount of $950,000.00. The credit applicationon behalf of Keck Acquisition and Keck Co. was signed by the members and owners of Keck Acquisition. The purpose of the loan was to finance the acquisition of Keck Co. by Keck Acquisition. 1 As a condition of the loan, Alamance National Bank required the debtor, Mr. Westbrooks, and his wife, Mrs. Westbrooks, to execute an unconditional guaranty of the company debt, as well as a deed of trust securing the guaranty. The Westbrooks allege that Mrs. Westbrooks has no connection with or interest in Keck Co. or Keck Acquisition other than the fact that her husband is an owner, member, and employee of Keck Acquisition. Alamance National Bank also required the wives of the other members of Keck Acquisition to execute guaranties of the promissory note and to execute deeds of trust to secure those guaranties.
The Westbrooks allege that, prior to acquiring the guaranties of the three wives, Alamance National Bank made no determination of the independent creditworthiness of Keck Acquisition or the members of Keck Acquisition, nor did the bank offer any explanation to Mr. Westbrooks, Mr. Gillespie, or Mr. Corbett as to why they were not independently creditworthy before requiring their wives to sign personal guaranties and deeds of trust.
On April 10, 2003, Keck Acquisition entered into a Modification Agreement with Alamance National Bank that modified the terms of the original loan. The Westbrooks allege that Alamance National Bank did not give the three wives notice of the modification agreement, yet the bank continued to assert that they were liable under the modified agreement and demanded that they execute additional deeds of trust, all without making an independent determination regarding the creditworthiness of their husbands.
On April 20, 2004, Keck Acquisition executed an additional promissory note in favor of Alamance National Bank in the principal amount of $300,750.00. The Westbrooks allege that the bank again required them to sign a personal guaranty of the promissory note and another deed of trust securing the guaranty without making an independent determination of their creditworthiness or offering an explanation as to why Mr. Westbrooks alone was not independently creditworthy. Later in 2004 and on April 10, 2005, Keck Acquisition entered into Modification Agreements with the bank, which modified the terms of the April 20, 2004 promissory note.2 Each time, Alamance National Bank required Mrs. Westbrooks' signature on the guaranty and additional deeds of trust 3 without making a determination that Mr. Westbrookswas not independently creditworthy or offering an explanation to the Westbrooks as to why he was not independently creditworthy.
The Westbrooks allege that on May 1, 2006, Keck Acquisition executed a promissory note in favor of First National Bank and Trust ("First National Bank") that renewed the obligations of the April 2004 and April 2005 notes. According to the Westbrooks, the May 1, 2006 note purports to make First National Bank the successor in interest to the initial April 2004 and April 2005 notes as well as the guaranties executed along with those notes. The Westbrooks, however, allege that neither of them personally signed the May 1, 2006 note.
The Westbrooks allege that CommunityOne acquired both promissory notes from Alamance National Bank 4 and attempted to collect on the guaranties. On June 23, 2009, Keck Acquisition and Keck Co. each filed a Chapter 7 bankruptcy (case numbers 09-11143 and 09-11144, respectively). On July 8, 2009, the Chapter 7 trustee for Keck Co. moved for the authority to auction all of the assets of the company. As a result of this motion, CommunityOne filed a response in which it claimed an interest in the assets of Keck Co. The Keck Co. trustee and CommunityOne agreed to allow the sale and to transfer the claims of liens to the proceeds of the sale. To date, $10,046.55 has been disbursed to CommunityOne pursuant to this agreement. In addition, CommunityOne took possession and control of a certificate of deposit pledged by Mr. Corbett as security for the obligation of Keck Acquisition that he guaranteed—the same promissory note purportedly guaranteed by the Westbrooks.
The Westbrooks alleged that they made repeated requests for a complete accounting of the outstanding obligations that they owe to CommunityOne, but they have received no accounting. Other than their guaranty of the debts of Keck Acquisition to CommunityOne and the secured debts on their residence, the Westbrooks allege that they have no joint debts.
On April 13, 2010, Mr. Westbrooks filed a Chapter 13 bankruptcy. On July 14, 2010, the Westbrooks filed an adversary proceeding against FNB, CommunityOne, Mr. Gillespie, Nancy W. Gillespie, and Beverly A. Corbett, alleging violations of the Equal Credit Opportunity Act ("ECOA"). The Westbrooks' complaint requests, inter alia, that the Court (1) find that the Bank Defendants violated the ECOA and (2) void the guaranties and deeds of trust signed by Mrs. Westbrooks.
On August 16, 2010, the Bank Defendants filed their Motion to Dismiss. They argue that: (1) the Westbrooks do not qualify as "applicants" under the ECOA because they were merely guarantors and because the loan was extended to Keck Acquisition, so that Mr. Westbrooks, individually, was not denied credit; (2) the ECOA claims of Mrs. Westbrooks are barred by the statute of limitations; and (3) the relief requested by the Westbrooks—specifically, the cancellation of the guaranty and the deed of trust securing it—is not a remedy that is available under the ECOA. The Bank Defendants have consented to this Court's jurisdiction overthe claims of Mrs. Westbrooks, a non-debtor.
In response, the Westbrooks argue that: (1) guarantors have standing to bring claims under the ECOA, or, in the alternative, Mr. Westbrooks may have been a co-applicant; (2) the Westbrooks' ECOA claims are brought defensively and therefore are not subject to the statute of limitations under the statute, or, in the alternative, the practice of the Bank Defendants of requiring spousal signatures for each loan modification constitutes a continuing violation under the ECOA that starts the time period running anew; and (3) the Court may void the guaranty and deed of trust pursuant to its power to grant equitable relief under the ECOA.
In order to survive dismissal pursuant to Fed.R.Civ.P. 12(b)(6), a complaint must "contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, ---U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). When deciding whether to grant a Rule 12(b)(6) motion to dismiss, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Iqbal, 129 S.Ct. at 1949. However, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. at 1950. Furthermore, the plaintiff's factual allegations must "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). The test is not whether the claimants will ultimately prevail but whether they are entitled to offer evidence to support their claims. In re Bernstein, 259 B.R. 555, 556 (Bankr.D.N.J.2001).
The Equal Credit Opportunity Act, codified at 15 U.S.C. § 1691 et seq., provides in pertinent part:
(a) It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction—(1) on the basis of race, color,...
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