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Dickson Properties, LLC v. Wells Fargo Bank, N.A.

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

September 28, 2017

DICKSON PROPERTIES, LLC, Plaintiff,
v.
WELLS FARGO BANK, N.A., successor in interest to WACHOVIA BANK, N.A., Defendant.

          MEMORANDUM OPINION

          Elizabeth K. Dillon United States District Judge

         Plaintiff Dickson Properties, LLC (Dickson) sues defendant Wells Fargo Bank (Wells Fargo), asserting claims for a violation of the Bank Holding Company Act, 12 U.S.C. § 1972 et seq., and breach of contract. Wells Fargo moves to dismiss. It argues that Dickson's complaint fails to state a claim upon which relief can be granted, and so it must be dismissed under Federal Rule of Civil Procedure 12(b)(6). The court heard oral argument on the matter on September 14, 2017. Because the court concludes that res judicata bars Dickson's claims, Wells Fargo's motion will be granted and Dickson's complaint will be dismissed.

         I. BACKGROUND

         In March 2016, the Fourth Circuit issued an opinion in a case brought against Wells Fargo by Dickson's parent company, Providence Hall Associates (Providence Hall), a Virginia-based limited partnership. Providence Hall Assoc. Ltd. P'ship v. Wells Fargo, 816 F.3d 273 (4th Cir. 2016). Specifically, the court affirmed the dismissal of Providence Hall's Bank Holding Company Act and breach of contract claims against Wells Fargo on res judicata grounds. Id. at 276. The court reasoned that the litigation of sale orders in bankruptcy court by Providence Hall's Chapter 11 bankruptcy trustee precluded Providence Hall from later bringing claims that called into question the debt those sale orders served to extinguish. This case is, in all relevant aspects, identical, with one twist: it involves a bankruptcy “designee” rather than a trustee.

         Dickson is a wholly owned subsidiary of Providence Hall, and the two entities were jointly liable on their debts to Wells Fargo. (Dickson designee order, Dkt. No. 11-17 at 3.) Dickson alleges that, during loan agreement negotiations with Wells Fargo, Wells Fargo indicated it would not provide a loan unless Dickson also agreed to enter into an interest rate swap agreement as a necessary condition of the loan. (Compl. ¶¶ 58-60, Dkt. No. 1-2.) Dickson agreed to do so, and the parties executed a loan agreement on February 16, 2006. (Id. ¶ 4.) Dickson's $500, 000 loan was to come to maturity on February 28, 2011. (Id. ¶ 7.) According to Dickson, Wells Fargo falsely represented to it that a forbearance agreement was forthcoming, even though the bank had no intention of renewing the note or forbearing from collecting it. (Id. ¶¶ 42-44.) A forbearance agreement never came, and on March 4, 2011, Wells Fargo informed Dickson that its line of credit must be fully paid off. (Id. ¶ 45.) Shortly over a week later, Wells Fargo declared Dickson in default under the master loan agreement. (Id. ¶ 51.)

         That same month, Providence Hall, Dickson's parent company, filed a Chapter 11 bankruptcy case in the United States Bankruptcy Court for the Eastern District of Virginia. (Dkt. No. 11-24.) Providence Hall did not list any claim against Wells Fargo as an asset on its bankruptcy schedules. (Case No. 11-11656-BFK, Dkt. No. 1, at Schedule H.) The bankruptcy court granted Providence Hall's sale motions and required that all net sale proceeds be paid to Wells Fargo. (Dkt. No. 11-13 at 2-3; Dkt. No. 11-18 at 4; Dkt. No. 11-21 at 2-3.)

         Two months later, in May 2011, Dickson executed and recorded a quitclaim deed that transferred its interest in Dickson County, Tennessee, property to Providence Hall for no consideration. (Dkt. No. 11-17 at 1.) Because the property was subject to a lien in favor of Wells Fargo, the quitclaim deed allowed Dickson to obtain the benefit of an automatic stay. (Id.)

         Dickson likewise filed a Chapter 11 bankruptcy case in the United States Bankruptcy Court for the Eastern District of Virginia in December 2011. (Dkt. No. 11-17 at 2.) Like Providence Hall, Dickson did not list any claim against Wells Fargo as an asset on its bankruptcy schedules. (Dkt. No. 11-22 at 2; Dkt. No. 11-17 at 1.) The bankruptcy court authorized Marc Albert (Albert), whom it had already appointed as Providence Hall's Chapter 11 trustee, to act as Dickson's designated representative, or “designee.” (Dkt. No. 11-17 at 2-3.)

         Albert received the bankruptcy court's approval in August 2012 to sell the Dickson County property in order to apply the net sale proceeds to the Wells Fargo debt. (Dkt. No. 11-13 at 2-3.) That fall, Providence Hall and Dickson moved separately to dismiss their respective bankruptcy cases, as the debt to Wells Fargo had been paid in full. (Dkt. No. 11-23 at 1-2.) In its motion, Dickson stated that it had no assets, operations, or creditors independent of Providence Hall, and that all of Dickson's creditors would be paid from the Providence Hall bankruptcy estate. (Dkt. No. 11-22 at 2-4.) The court granted the motions in December 2012. (Dkt. No. 11-23.)

         On February 28, 2014, Providence Hall filed a complaint against Wells Fargo in state court, in Loudoun County. (Dkt. No. 11-24.) Four days later, Dickson filed an almost identical complaint in the circuit court for Roanoke City. (Dkt. No. 1-2.) The cases were removed; Dickson's removed case is the instant case. The District Court for the Eastern District of Virginia dismissed the Providence Hall complaint on res judicata grounds because of the bankruptcy court's sale orders allowing Providence Hall to pay Wells Fargo in full. Providence Hall Assoc. Ltd. P'ship v. Wells Fargo, No. 1:14-cv-352, 2014 WL 12704845 (E.D. Va. May 20, 2014). The Fourth Circuit unanimously affirmed dismissal of the Providence Hall complaint on res judicata grounds. Providence Hall Assoc. Ltd. P'ship, 816 F.3d at 276.

         Wells Fargo urges the court to dismiss the Dickson complaint for the same reason. (Def.'s Mot. to Dismiss, Dkt. No. 11.) Dickson counters that res judicata cannot apply because, while trustees are in privity with debtors, designees are not. (Pl.'s Resp. in Opp'n to Mot. Dismiss (Pl.'s Opp'n), Dkt. No. 15.)

         II. DISCUSSION

         A. Standard of Review

         A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a plaintiff's complaint to determine whether the plaintiff has properly stated a claim. Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). To avoid dismissal, the “complaint must establish ‘facial plausibility' by pleading ‘factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Clatterbuck v. City of Charlottesville, 708 F.3d 549, 554 (4th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). ...


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