Tilhance Creek Investments v. BCBank, Inc.

STATE OF WEST VIRGINIA

SUPREME COURT OF APPEALS

Tilhance Creek Investments, LLC, and FILED March 29, 2013 Court House Square Investments, LLC, RORY L. PERRY II, CLERK Plaintiffs Below, Petitioners SUPREME COURT OF APPEALS OF WEST VIRGINIA

vs) No. 12-0290 (Berkeley County 11-C-688)

BCBank, Inc. and Donald Epperly, as Trustee for BCBank, Inc. Defendants Below, Respondents

MEMORANDUM DECISION Petitioners Tilhance Creek Investments, LLC (“Tilhance”) and Court House Square Investments, LLC (“Court House”) by counsel Michael J. Novotny, appeal the Circuit Court of Berkeley County’s “Order Granting Defendant’s Motion to Dismiss” entered on January 18, 2012. Respondents BCBank, Inc., and Donald Epperly, as Trustee for BCBank, Inc., by counsel Charles S. Trump IV, have filed their response. Petitioners have filed a reply.

This Court has considered the parties= briefs and the record on appeal. The facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Upon consideration of the standard of review, the briefs, and the record presented, the Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision is appropriate under Rule 21 of the Rules of Appellate Procedure.

This case arises out of the 2007 purchase of certain parcels of property by petitioners, which were secured by promissory notes by Petitioner BCBank. By December of 2008, both Tilhance and Court House were in default on their respective loans. Instead of seeking foreclosure BCBank agreed to a loan modification wherein the Tilhance loan was secured by the Court House property, and the Court House loan was secured by the Tilhance property through cross-collateralization. Petitioners again defaulted on both loans, and foreclosure began on the Tilhance property on September 10, 2010. After the foreclosure, a sale occurred wherein BCBank was the only bidder and purchased the property for $800,000. Respondent Epperly was the trustee who conducted the sale. The trustee’s notice of sale indicated that this sale was being conducted under the second Tilhance note, which was the cross-collateralization loan. From the $800,000, sale expenses in the amount of $5,568.37 were disbursed, with the remaining $794,431.63 applied to the Tilhance note. Foreclosure upon the Court House property occurred on December 29, 2010, and BCBank was the only bidder, purchasing the property for $3,940,000. The notice of sale for the Court House property indicated that the sale was conducted under both the first Court House note and the second Court House note. The proceeds

of the sale were applied as follows: $3,115,481.66 to the first Court House note and $798,161.20 to the second Court House note.

Petitioners filed their complaint on August 25, 2011, setting forth five causes of action as follow: fraud, conversion, breach of fiduciary duty, breach of contract, and merger of title. Petitioners argued that the proceeds of the first sale should have been disbursed as follows: $5,568.37 to expenses, and $794,431.63 to the Court House note, leaving a balance of $2,321,050.03 on the Court House note. Petitioners then state that after the second sale, proceeds after costs were removed were $3,913,642.86. When this amount is applied to the remaining balance of the Court House note, there is a surplus of $1,592,592.83. Respondents moved to dismiss the action pursuant to Rule 12(b)(6), to which petitioners responded. On January 18, 2012, the circuit court entered the order granting respondents’ motion to dismiss.

On appeal, petitioners argue several assignments of error, all of which involve how the proceeds of the sale were distributed. Petitioners first argue that the Tilhance loan was extinguished when BCBank purchased the Tilhance property at the foreclosure auction conducted solely under the second Tilhance loan. Along the same line, petitioners also argue that the doctrine of merger extinguished the first Tilhance loan. Further, petitioners argue that the circuit court erred in finding that petitioners did not assert valid claims for conversion, breach of contract, and breach of fiduciary duty. Finally, petitioners argue that the circuit court erred in dismissing their claim for fraud due to a lack of particularity and by ruling that equitable factors weigh in favor of the dismissal of petitioners’ complaint.

Respondents respond in favor of the circuit court’s dismissal, arguing first that the Tilhance debt was not extinguished by the first foreclosure, and that the doctrine of merger is inapplicable to this case. Respondents also argue that the claim of conversion is without merit, and that the specific language of the deeds of trust preclude the conversion claim. Respondents contend that the breach of fiduciary duty and breach of contract claims are likewise without merit, and that the fraud claim was not pled with particularity. Finally, respondents argue that equitable factors weighed in favor of dismissal of the complaint, as petitioners defaulted on more than $4.4 million in loans to respondents.

This Court has previously held that “‘[a]ppellate review of a circuit court’s order granting a motion to dismiss a complaint is de novo.’ Syl. pt. 2, State ex rel. McGraw v. Scott Runyan Pontiac–Buick, 194 W.Va. 770, 461 S.E.2d 516 (1995).” Syl. Pt. 1, Posey v. City of Buckhannon, 228 W.Va. 612, 723 S.E.2d 842 (2012). Our review of the record reflects no clear error or abuse of discretion by the circuit court. Having reviewed the circuit court’s “Order Granting Defendant’s Motion to Dismiss” entered on January 18, 2012, we hereby adopt and incorporate the circuit court’s well-reasoned findings and conclusions as to the assignments of error raised in this appeal. The Clerk is directed to attach a copy of the circuit court’s order to this memorandum decision.

For the foregoing reasons, we affirm.

Affirmed. *3 ISSUED: March 29, 2013 CONCURRED IN BY:

Chief Justice Brent D. Benjamin Justice Menis E. Ketchum Justice Allen H. Loughry II

DISSENTING:

Justice Robin Jean Davis Justice Margaret L. Workman