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MVB Bank, Inc. v. Stifel Bank & Trust

United States District Court, E.D. Virginia, Alexandria Division

January 29, 2016

MVB BANK, INC., Plaintiff,
v.
STIFEL BANK & TRUST, Defendant.

MEMORANDUM OPINION

T. S. Ellis, 111 District Judge

In this breach-of-contract dispute arising from the sale of a commercial loan portfolio, plaintiff alleges that contrary to contractual representations, defendant misrepresented that two loans included in the loan portfolio were cross-collateralized and failed to comply with its own policies and procedures when assessing the loans that were sold. On the basis of these alleged breaches of contract, plaintiff seeks to enforce a provision in the Loan Sale Agreement ("LSA") that requires defendant to repurchase the loans in the event of a material breach. Following full discovery, the parties filed cross-motions for summary judgment. As the motions have been fully briefed and argued, they are now ripe for disposition.

I.

The undisputed material facts are as follows:[1]

• Plaintiff MVB Bank, Inc. is a commercial bank with its headquarters in Fairmont, West Virginia.
• Defendant Stifel Bank & Trust is a commercial bank with its headquarters in St. Louis, Missouri.
• On October 31, 2013, defendant acquired by merger Acacia Federal Savings Bank ("Acacia"), which operated a single branch office located in Falls Church, Virginia. At the time of acquisition, Acacia had a commercial loan portfolio of approximately 20 performing loans with above-average risk ratings.
• After acquiring Acacia, plaintiff and defendant began discussions related to the Acacia loan portfolio, and on November 7, 2013, plaintiff signed a Non-Disclosure Agreement with defendant to enable it to perform due diligence on the Acacia loan portfolio.
• Among the 20 loans included in the Acacia loan portfolio were a loan to Northpointe Development Corporation ("Northpointe") in the original principal amount of $5, 300, 000.00 ("Northpointe Loan") and a loan to Town Center Development LLC ("Town Center") in the original principal amount of $6, 725, 000.00 ("Town Center Loan").
• The Northpointe Loan is secured by a first lien against the Northpointe Property and by an assignment of leases and rents generated by the office building located on the Northpointe Property.[2]
• The Town Center Loan is secured by a first lien against the Town Center Property and by an assignment of leases and rents generated by the office building located on the Town Center Property.[3]
• Permvir Singh, the owner of Northpointe and Town Center, along with his wife, Maneesha Singh, executed two separate Guaranty Agreements, one with respect to the Northpointe Loan and one with respect to the Town Center Loan.
• Singh, owner of 100% of the Northpointe stock, also pledged all of the Northpointe stock as additional collateral for the Town Center Loan ("Northpointe Stock Pledge").
• The Town Center loan was also cross-defaulted with the Northpointe Loan such that the "occurrence of an [e]vent of [d]efault under the Northpointe Loan" constitutes an event of default under the Town Center Loan. Def. Ex. 1, Town Center Loan Agreement, § 5.01 (j).
• Defendant made loan documents available to plaintiff, and plaintiff conducted on-site due diligence on November 11-12, 2013.
• Plaintiffs employees examined the loan files, loan documents, and security instruments, including deeds of trusts, assignments of rents, and title opinions. The loan documents gave no indication that any of the loans in the portfolio were cross-collateralized by real restate such that there were reciprocal deeds of trust.
• Although defendant provided a risk assessment for each of the loans, plaintiff performed its own risk assessment of each loan, based on the documents defendant provided. Plaintiff graded the Town Center loan as a "3" based on the knowledge it had at the time, including the knowledge that SERCO, Town Center's largest tenant, was a month-to-month tenant at Town Center.
• On November 22, 2013, Donald Robinson, plaintiffs Chief Credit Officer ("COO"), sent a Letter of Intent ("LOI") to defendant's CEO, Christopher Reichert, in which plaintiff offered to purchase the Acacia commercial loan portfolio for $200, 000 and 10% of the unpaid principal balances of the loans. Defendant accepted plaintiffs offer and signed the LOI, which provided that the closing of the sale would occur on or before December 3, 2013.
• Following the execution of the LOI, the parties' attorneys began preparing the legal documents required to consummate the sale, including the LSA and various exhibits to the LSA, such as an exhibit designated as "Schedule 1" that listed the loans being sold and provided pertinent information regarding each loan. Between November 24, and December 1, 2013, various drafts of the LSA and Schedule 1 were exchanged.
• On November 27, 2013, Singh informed Richard Thomas, defendant's Loan Officer responsible for administering the Northpointe Loan and Town Center Loan, that Town Center had lost SERCO as a tenant.
• Thomas then wrote a risk rating memorandum, recommending a downgrade of the Town Center loan from "Pass" to "Watch" in light of SERCO's departure. Def. Ex. ...

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