CLARKSBURG –- A Virginia-based financial institution alleges the Gilmer County Clerk's Office did not follow state law when it failed to list all the debtors in 2008 financing statement.

Summit Community Bank of Winchester, Va., filed a cross claim against the Gilmer County Clerk's Office on Oct. 18 in U.S. District Court. The cross claim is part of the answer Summit's Moorefield branch filed in the lawsuit brought against it, New Horizon Home Sales and Gilmer Housing Partners in March by Textron Financial Corporation for breach of contract.

Textron alleges Summit failed to abide by the terms of a 2005 agreement in which Textron helped Summit purchase property in Glenville to build a home. They added Gilmer Housing Partners and Summit as co-defendants as a result of their seeking a declaratory judgment asserting their claims outweigh any Gilmer Housing Partners and Summit have against New Horizon.

In its cross claim, Summit alleges having to defend itself in the suit is partly a result of the clerk's office's negligence.

Conflict occurs in 2008

In the original complaint filed on March 10, Textron, a Providence, R.I. commercial finance business on Sept. 26, 2005, agreed to finance Horizon's acquisition of property in the River's View subdivision in Glenville. Based in Athens, W. Va., Horizon sells modular homes.

Nearly three years later on July 2, 2008, New Horizon acquired title to two lots from the previous owner, Gilmer Housing Partners. According to the Secretary of State's Office, Gilmer Housing Partners is a for-profit real estate development business whose sole incorporator and manager is Glenville State College President Peter B. Barr.

Purchase of the two lots was secured through a deed of trust Gilmer Housing Partners granted New Horizon in exchange for a $30,000 promissory note. The deed of trust was recorded on filed with the clerk's office on Aug. 8 with Glenville attorneys Timothy and R. Terry Butcher listed as the trustees.

Later on Dec. 1, Textron maintains it filed a Uniform Commercial Code filing statement with the clerk's office asserting an interest in a modular home New Horizon was placing on the property it purchased from Gilmer Housing Partners. The suit does not provide any details of the home.

According to the suit, New Horizon 10 days later took delivery of the home, and placed it on the property. Twelve days later, they granted a lien to Summit through a real estate deed of trust.

Records show, the deed of trust was recorded in the clerk's office on Jan. 30, 2009, with Mark H. Wright and C. David Robertson of Moorefield listed as the trustees.

According to the 2005 agreement it reached with Textron, New Horizon "agreed to keep the Collateral free from all liens and encumbrances except for the security interest granted to [Textron] in the Collateral." Also, New Horizon was to "hold the proceeds from any sale of Collateral in trust for [Textron] and upon receipt of sale proceeds, remit ... the total unpaid invoice cost of each modular home unit sold from its inventory."

In the suit, Textron alleges New Horizon breached their contract when they not only "received permanent financing from Summit," but also when they sold two additional modular homes totaling $160,462 without remitting unpaid invoice costs.

After it did not receive a reply to its first notice of default letter on June 30, 2009, from Jones, Textron says it sent a second letter dated Dec. 17, 2009, asking for all unpaid invoice costs of $270,166.77.

In the suit, Textron asks for recovery of the $270,166.77 as well as court costs, and attorney fees. They are represented by Arch W. Riley, Jr. and Christina S. Terek from Spilman Thomas and Battle's Wheeling office.

Defective filing

In the answer he filed, Summit's attorney Edward D. McDevitt with the Charleston law firm of Bowles, Rice, McDavid, Graff and Love, admitted they have a priority lien on the home New Horizon placed on the Glenville property. However, Textron cannot claim Summit was "noticed" of its interest in the property through the Dec. 1, 2008,

UCC filing with the clerk's office because it was defective.

In the cross claim, McDevitt alleges the filing only listed Jack Jones, New Horizon's president, as a debtor, and not New Horizon. On an unspecified date, Summit inquired to incoming Clerk Jean Butcher why New Horizon was not listed as a co-debtor on the fixture filing.

Last month, Butcher was elected clerk to replace Beverly Marks who retired.

According to Butcher that's "'the way it's been done for years'" since "there is no policy, rule or law that designates" otherwise. However, she said if someone put a note on the filing specifically asking that another party be listed, the clerk would do it for no additional fee.

The clerk's "customary office practice," McDevitt said, is contradicted by state law. Specifically, he quoted West Virginia Code 39-2-2 which requires "the clerk to index the writing under 'all grantors and grantees,' which would include all debtors and creditors on a fixture filing."

Because the clerk's office "willfully and negligently breached its statutory duty by failing to file the fixture filing under New Horizon's name," McDevitt said Summit now has to defend itself in Textron's lawsuit. They seek judgment against the clerk's office for all litigation costs, including attorney's fees, associated with its defense.

In response to the cross claim, the clerk's office's attorney, Wendy Greve, with the Charleston law firm of Pullin, Fowler, Flanagan, Brown and Poe filed a motion to dismiss on Nov. 29 citing the failure of Summit to state a claim on which relief can be granted, and the Gilmer County Commission's immunity from lawsuits.

The case is assigned to Judge Frederick P. Stamp, Jr. It is scheduled for trial March 29.

U.S. District Court for the Northern District of West Virginia, case number 10-cv-39

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