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River Community Bank, NA v. Bank of North Carolina

United States District Court, W.D. Virginia, Danville Division

December 18, 2014



JACKSON L. KISER, Senior District Judge.

Plaintiff River Community Bank, N.A. ("River") originally filed this action in the Circuit Court for the City of Martinsville. Defendant Bank of North Carolina ("BNC") then removed the action to this Court on October 24, 2014 (see Not. of Removal, Oct. 14, 2014 [ECF No. 1]), and promptly filed a Motion to Dismiss for Lack of Personal Jurisdiction, pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, or in the alternative, Motion to Transfer. (See Mot. to Dismiss, Oct. 31, 2014 [ECF No. 11].) The parties fully briefed the issues and appeared in open court on December 9, 2014, to argue their respective positions. I have reviewed the arguments of counsel, the relevant affidavits, and the applicable law. For the reasons stated herein, BNC's Motion to Dismiss will be denied.


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].)[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. (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, [2] River ultimately purchased a 31.5789% interest in the loan to Piedmont. (Compl. ¶ 6.) KeySource executed two copies of a Loan Participation Agreement ("the Agreement") 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 Agreement at its offices in Virginia and returned one copy to KeySource in North Carolina. (See Carter Decl. ¶¶ 9-10.)

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." (Id. ¶ 7.) River relied on KeySource's representations in the Agreement in deciding to 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.) KeySource was permitted to move forward with a foreclosure on the shopping mall in Mebane. (Id. ¶ 23.) Around this time, BNC completed its merger with KeySource, making BNC the only remaining entity. After a year on the market, BNC was only able to secure a buyer for the shopping mall at a sales price of $1, 000, 000.00, an amount substantially less than the loan balance owed by Piedmont. (Id. ¶ 28-31.) The contract for the sale of the property did not provide for an allocation of the proceeds between the real property and the business personal property located on the real property. (Id. ¶ 32.) BNC acquired the business personal property located on the Piedmont site through settlement with another lender for $200, 000.00. (Id. ¶ 33.)

Without consultation with River, BNC allocated $200, 00.00 from the proceeds of the sale to the business personal property. (Id. ¶ 34.) "In doing so, [BNC] attempted to ensure that it would be fully reimbursed for its purchase of the business personal property while at the same time reducing the amount that River Bank would be owed from the sale proceeds based on [River's] percentage participation in the loan." (Id.) After deducting BNC's fees, expenses, and allocation of $200, 000.00 of the sale proceeds to the business personal property, River received $89, 387.85. (Id. ¶ 35.) As of March 2014, River is still owed $1, 409, 464.46 for its share of the loan. (Id. ¶ 26.)

In the three-year period from January 1, 2007, until December 31, 2009, River participated in loans made by KeySource on no less than ten occasions, including the Loan Participation Agreement at issue in this case, and paid KeySource more than $4, 000, 000.00. (Carter Decl. ¶ 4.) On each of those ten occasions, KeySource approached River about participating in the loans. (Id. ¶ 5.) For all ten loan participations, KeySource directed River's payments to River in Virginia. (Id. ¶ 6.) "In this same period, KeySource... paid River [] $2, 200, 000.00 to purchase a participation interest in a line of credit that River [] extended to one of its customers." (Id. ¶ 4.)

On March 31, 2014, River filed suit against BNC, alleging that KeySource/BNC breached the warranties of the Agreement (Count I), and that BNC breach the implied covenant of good faith and fair dealing by unilaterally allocating the $200, 000.00 purchase price of the business personal property (Count II). (See Compl. ¶¶ 40-49.) River also seeks attorney's fees and costs (Count III). (Id. ¶¶ 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.]


When a defendant challenges a court's power to exercise personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), "the jurisdictional question is to be resolved by the judge, with the burden on the plaintiff ultimately to prove grounds for jurisdiction by a preponderance of the evidence." Carefirst of Md., Inc. v. Carefirst Pregnancy Centers, Inc., 334 F.3d 390, 396 (4th Cir. 2003) (citing Mylan Labs, Inc. v. Akzo, N.V., 2 F.3d 56, 59-60 (4th Cir. 1993)). When, as here, a district court is compelled to decide a pretrial jurisdictional challenge "on the basis of only motion papers, supporting legal memoranda[, ] and the relevant allegations of a complaint" without conducting an evidentiary hearing, "the burden is on the plaintiff to make a prima facie showing" of personal jurisdiction. Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989). When making such a determination, a court must "construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction." Id .; see also ...

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