River Cmty. Bank, N.A. v. Bank of N.C.

• Decision Date: 19 June 2015
• Docket Number: Case No.: 4:14-cv-00048
• Court: U.S. District Court — Western District of Virginia
• Parties: RIVER COMMUNITY BANK, N.A., Plaintiff, v. BANK OF NORTH CAROLINA, Successor by merger to KEYSOURCE COMMERCIAL BANK, Defendant.

RIVER COMMUNITY BANK, N.A., Plaintiff,
v.
BANK OF NORTH CAROLINA, Successor by merger to KEYSOURCE
COMMERCIAL BANK, Defendant.

Case No.: 4:14-cv-00048

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA DANVILLE DIVISION

June 19, 2015

MEMORANDUM OPINION

By: Hon. Jackson L. Kiser Senior United States District Judge

This matter is before the Court on Defendant Bank of North Carolina's Motion for Judgment on the Pleadings ("the Motion"). [ECF No. 28.] The matter was fully briefed by the parties [ECF Nos. 29, 30, 33], and I heard oral arguments on the Motion on June 11, 2015. For the reasons stated herein, Defendant's Motion will be granted. Because Plaintiff has moved for leave to file an amended Complaint, however, I will stay imposition of this ruling with regard to Count I of the Complaint until that matter has been resolved. (See Pl.'s Mot. to Amend/Correct Compl., June 9, 2015 [ECF No. 43].)

I. STATEMENT OF FACTS AND PROCEDURAL BACKGROUND¹

Plaintiff River Community Bank, N.A. ("River"), is a national banking association with its principal place of business in Martinsville, Virginia. (Compl. ¶ 1 [ECF No. 1-1].) Defendant Bank of North Carolina ("BNC") is a North Carolina state-chartered bank with its principal place of business in High Point, North Carolina. (Id. ¶ 2.) KeySource Commercial Bank ("KeySource") was a North Carolina state-chartered bank located in Durham, North Carolina.

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(Id. ¶ 3.) By virtue of a merger, BNC acquired KeySource on September 14, 2012, and became KeySource's successor in interest. (Id. ¶ 4.)

In 2009, representatives of KeySource called River and inquired whether River would be interested in acquiring an interest in a $3,800,000.00 loan issued by KeySource to Piedmont Center Investments, LLC ("Piedmont"). (Id. ¶ 6.) KeySource forwarded background information regarding the loan to River at its offices in Virginia. (See Decl. of Ronald Haley ¶ 2, Nov. 13, 2014 [ECF No. 16-2].) After several rounds of negotiation and an initial refusal to participate by River, River ultimately purchased a 31.5789% interest in the loan to Piedmont. (Compl. ¶ 6.) KeySource executed two copies of a Loan Participation Agreement ("the LPA") in North Carolina and sent those executed copies to River in Virginia. (See Decl. of Tonya Carter ¶ 9, Nov. 13, 2014 [ECF No. 16-1].) River executed its copies of the LPA at its offices in Virginia and returned one copy to KeySource in North Carolina. (See Carter Decl. ¶¶ 9-10.) The LPA was signed on August 6, 2009. (Compl. Ex. A.)

The loan to Piedmont was secured with real estate located in Mebane, N.C.; specifically, a shopping mall. (Compl. ¶ 10.) One of the tenants was an entity partially owned by Timothy J. Buckley ("Buckley"). (Id.) A written guaranty purportedly signed by Buckley was used to guarantee rent to Piedmont ("the Guaranty"). (Id.) The Guaranty was assigned to KeySource as further security for the loan to Piedmont. (Id. ¶ 13.)

As part of the agreement between KeySource and River, KeySource represented and warranted that "the Loan Documents were validly executed by Borrower and, where applicable, any Guarantor under the Loan," and that KeySource "has taken, will take, and will continue to take whatever additional actions may be necessary and proper to validly perfect and maintain a Security Interest in the Collateral securing the Loan" (hereinafter the "perfect-and-maintain warranty"). (Id. ¶ 7.) River relied on KeySource's representations in the LPA in deciding to

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purchase an interest in the loan to Piedmont. (Id. ¶ 8.) River ultimately delivered $1,200,000.00 to KeySource for its interest in the loan. (Id.)

In actuality, Buckley's signatures on both the Guaranty and the Assignment of the Guaranty were not Buckley's signatures, but were forgeries by Roger Camp ("Camp"), an owner of Piedmont. (Id. ¶ 16.)

Camp was ultimately indicted for bank fraud in June of 2011 due, in part, to his role in fraudulently inducing KeySource to issue the loan to Piedmont. (Id. ¶ 19-21.) Shortly thereafter, Piedmont filed a voluntary petition for bankruptcy. (Id. ¶ 22.) Around this time, BNC completed its merger with KeySource, making BNC the only remaining entity.

On March 31, 2014, River filed suit against BNC, alleging that KeySource/BNC breached the warranties of the Agreement (Count I), and seeking attorney's fees and costs (Count III). (Id. ¶¶ 40-45, 50-53.) On October 24, 2014, BNC removed the action to this Court (see Not. of Removal, Oct. 24, 2014 [ECF No. 1]), and filed a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction or, in the alternative, motion to transfer on October 31, 2014. [ECF No. 11.] That motion was denied on December 18, 2014. (Order, Dec. 18, 2014 [ECF No. 22].) On February 18, 2015, Defendant filed the present Motion for Partial Judgment on the Pleadings, pursuant to Rule 12(c). [ECF No. 28.] After mediation was unsuccessful (see Report of Settlement Conference, May 21, 2015 [ECF No. 41]), the motion was set for hearing on June 11, 2015.

II. STANDARD OF REVIEW

Rule 12(c) permits a party to move for judgment on the pleadings "[a]fter the pleadings are closed—but early enough not to delay trial . . . ." FED. R. CIV. P. 12(c). A motion under Rule 12(c) is reviewed under the same standards as a motion under Rule 12(b)(6). See Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). The Sixth Circuit has advised:

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The standard of review for entry of judgment on the pleadings under Rule 12(c) is indistinguishable from the standard of review for dismissals based on failure to state a claim under Rule 12(b)(6); the difference between the two rules is simply the timing of the motion to dismiss. For a dismissal under Rule 12(b)(6), the moving party must request judgment in a pre-answer motion or in the answer itself, whereas a motion for dismissal under Rule 12(c) may be submitted after the answer has been filed.

Jackson v. Heh, Case No. 98-4420, 2000 WL 761807, at *3 (6th Cir. June 2, 2000) (per curiam) (unpublished). To survive a Rule 12(b)(6) motion to dismiss, 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, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S. Ct. at 149. In determining facial plausibility, the Court must accept all factual allegations in the complaint as true. Id. at 1949. The Complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief" and sufficient "[f]actual allegations . . . to raise a right to relief above the speculative level . . . ." Twombly, 550 U.S. at 555 (internal quotation marks omitted). Therefore, the Complaint must "allege facts sufficient to state all the elements of [the] claim." Bass v. E.I. Dupont de Nemours & Co., 324 F.3d 761, 765 (4th Cir. 2003). Although "a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations," a pleading that merely offers "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555.

"Although a motion pursuant to [Rule 12(c)] invites an inquiry into the legal sufficiency of the complaint, not an analysis of potential defenses to the claims set forth therein, dismissal nevertheless is appropriate when the face of the complaint clearly reveals the existence of a

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meritorious defense." Brooks v. City of Winston-Salem, 85 F.3d 178, 181 (4th Cir. 1996). The statute of limitations is one such "meritorious" defense that a court may consider at this early stage of litigation. See United States v. Kivanc, 714 F.3d 782, 789 (4th Cir. 2013) ("The statute of limitations is an affirmative defense that may be raised in a Rule 12(b)(6) motion to dismiss for failure to state a claim.").

III. DISCUSSION

A federal court sitting in diversity applies the statute of limitations of the state in which it sits. Gimer v. Jervey, 751 F. Supp. 570, 572 (W.D. Va. 1990). This is an action for breach of contract, and Virginia's statute of limitations for breach of a written contract is five years. Va. Code Ann. § 8.01-246(2) (2014). Virginia law, however, contains a "borrowing" statute that incorporates another state's statute of limitations when that state's substantive law governs the contract:

No action shall be maintained on any contract which is governed by the law of another state . . . if the right of action thereon is barred either by the laws of such state . . . or of this Commonwealth.

Id. § 8.01-247. The Loan Participation Agreement ("LPA") which governs this dispute states that North Carolina law controls (see Compl. Ex. 1, pg. 3 [ECF No. 1-1]), and North Carolina has a three-year statute of limitations for breach of contract actions, N.C. Gen. Stat. § 1-52(1) (2014). North Carolina's statute of limitations applies to this action, see Hansen v. Stanley Martin Cos., 266 Va. 345, 352 (2003). Neither party disputes this.

Because this lawsuit was filed on March 31, 2014, North Carolina law bars any claim that accured before March 31,...