LEWISBURG – The bank looking to auction the Greenbrier Sporting Club has filed two motions to dismiss a case trying to stop the sale, claiming the companies owned by Gov. Jim Justice failed to state a claim and filed the complaint in the wrong court.
The motions to dismiss and accompanying briefs were filed March 4 in Greenbrier Circuit Court. The sporting club had asked the court for an injunction to block the auction, which was scheduled for today on the steps of the Greenbrier County Courthouse. The bank later agreed to push back the date of the auction to give the court more time to consider the request. A hearing in the matter now is scheduled for April 12.
Carter Bank has since told the court it would reschedule the auction, which was scheduled for March 5 on the steps of the Greenbrier County Courthouse in Lewisburg. That filing states the bank did so to allow the court to consider the merits of the Justice request to stop the auction, noting “homeowners within the Greenbrier Sporting Club development are also very interested in this matter and may be considering undertaking action of their own” because some say they own interest in the club rather than the Justice family.
R. Booth Goodwin II
| goodwingoodwin.com
The sporting club is a group of private residences near the resort, which was purchased by Justice in 2009. Justice’s attorneys had asked the judge to enjoin the auction planned by Virginia-based Carter Bank & Trust, which says the Justice-owned companies owe more than $300 million after defaulting on loans personally guaranteed by the governor, his wife Cathy and son Jay, who oversee the family’s coal businesses.
In the Motion To Dismiss for Failure to State a Claim, Carter Bank says the plaintiffs’ contention that a 2015 deed of trust “violates West Virginia law and is void” is an incorrect statutory interpretation, citing W.Va. Code §38-1-14(b).
“The language of the statute is clear,” the bank argues. “It does not invalidate a credit line deed of trust when future advances exceed the stated amount in the deed of trust. Instead, it provides that those excess amounts are unsecured by that deed of trust. No other reading of the statute makes legal or common sense.
“Although no West Virginia court has been called upon to address the novel argument plaintiffs now advance (perhaps because that argument so directly conflicts with the language of the statute and simple common sense), at least one other jurisdiction has concluded that a virtually identical provision is meant only to identify the total secured debt, even though the total amount of debt (secured and unsecured) may exceed the amount stated in the credit line deed of trust.”
The bank also says the club failed to plausibly allege that the amount of the loan secured by the deed of trust is in dispute. It says the amount of the plaintiffs’ loan obligations is not in dispute.
“Rather than disputing the amounts owed, the complaint alleges only that plaintiffs have separate unliquidated claims for damages against Carter Bank based upon tenuous unadjudicated legal theories – the same theories that plaintiffs voluntarily dismissed with prejudice in 2021 – pending in another court,” the bank’s motion states. “This is not a cognizable basis on which to obtain a declaratory judgment that plaintiffs’ loan obligations are void.”
The bank also argues the plaintiffs do not plead facts supporting the right to a declaratory judgment.
“Instead, they attempt to assert the same breach of contract and breach of fiduciary duty claims that they asset in the 2023 federal action, but devoid of factual allegation and dressed up in the guise of a declaratory judgment action,” the bank says. “This is an improper attempt to litigate the 2023 federal action by proxy. This is not a function of declaratory judgment.”
Carter Bank also maintains the sporting club brought the declaratory judgment claim too late and in the wrong venue.
“No less than seven times in the past two and a half years, plaintiffs and Carter Bank entered into agreements – each one negotiated by respective counsel for the parties – expressly providing that all disputes between the parties related to their commercial lending relationship would be exclusively litigated in the federal or state courts of the Commonwealth of Virginia,” the bank’s improper venue motion states. “West Virginia, like most courts, generally enforces forum selection clauses like the ones found in the loan documents.
“Nothing about the application of the forum selection clauses at issue in this care is unreasonable, unjust or invalid. In the face of a valid and enforceable forum selection clause, plaintiffs, wishing to abrogate the deal they wrote for themselves, filed suit in this West Virginia state court. Although such behavior – disregard for the terms of a prior deal struck – is plaintiffs’ pattern, this court should not tolerate it.”
The Justice companies say the auction shouldn’t occur until the federal lawsuit is resolved, and they say the auction would damage the overall value of the sporting club.
“The Trust Deed — which was prepared and recorded by Carter Bank — falsely states the maximum amount of the debts it secures, in violation of West Virginia law,” their most recent filing states, also noting the deed is valid only up to $250 million. “And the underlying debt itself is the subject of intense dispute: Plaintiffs have sued Carter Bank over breaches of contract and fiduciary duty that would excuse any further performance by Plaintiff — including the surrender or sale of collateral — and for damages of at least $1 billion, which would more than offset any amount owed to the bank.
“The bank now seeks to sell off plaintiffs’ property before that dispute is resolved. The attempted sale is nothing more than a race to strip plaintiffs of their assets (in a hastily scheduled auction on the courthouse steps that likely would bring pennies on the dollar) before their claims against the bank can be adjudicated. The court should enjoin it. …
“The Shared Facilities are the principal amenities available to Sporting Club members, and if they become unavailable as the result of a sale, the value of members’ residences would plummet immediately,” the motion states. “The Greenbrier and its affiliated entities, including The Greenbrier Sporting Club, are the lifeblood of Greenbrier County’s economy, directly employing nearly 2,000 people and indirectly supporting hundreds or thousands of additional jobs.”
“The proposed sale directly jeopardizes the jobs of nearly 200 employees who work at the properties defendants seek to sell and would harm the broader business of The Greenbrier as a whole.”
In the original filing, Justice’s attorneys say the auction would be damaging to the companies as well as Greenbrier County in general.
“Plaintiffs’ operations are a significant contributor to the local economy, and plaintiffs are closely intertwined with The Greenbrier resort, which is Greenbrier County’s largest employer,” the February 7 complaint states. “The proposed sale will severely damage not only Plaintiffs but also The Greenbrier, jeopardizing thousands of local jobs,” according to the filing.
Carter Bank placed a legal notice of auction the private club to satisfy a $302 million debt in the February 6 edition of The Charleston Gazette-Mail. It mentions specific lots, including 48 lots as well as more than 370 acres of land. Some of the lots already could be developed.
Last year, Carter Bank filed orders of confessed judgments adding up to $302 million in Martinsville (Virginia) Circuit Court. The claims cited the personal guarantees by the Justices. The confessed judgments are for loans Carter Bank made to James C. Justice Companies, Justice Family Group, Greenbrier Hotel Corp., Greenbrier Golf and Tennis Club, Greenbrier Sporting Club, Players Club LLC, Oakhurst Club, Greenbrier Medical Institute, Justice Low Seam Mining, Twin Fir Estates and Wilcox Industries.
Justice attorneys asked a Virginia judge to have the confessed judgments set aside, claiming Carter Bank placed restrictions on the loans that were too rigid. They also accused the bank of unfair business practices.
But, Martinsville (Va.) Circuit Judge G. Carter Greer dismissed Justice’s requests last month saying the Justice companies had not presented enough of a factual defense to convince him to set aside more than $300 million in defaulted loans. He finalized that denial in a February 21 order.
“The motions contain no allegation of any well-recognized defense in the realm of commercial paper, such as fraud, duress, mutual mistake of fact, statute of limitations or scrivener's error,” Greer wrote in a January 22 memo. “As the plaintiff (Carter Bank & Trust) points out, the defendants do ‘not allege that the confessed judgment claimed amounts that are incorrect or that were not due and owing.’
“Surely, if any such defense existed, the defendants would have alleged the facts to support it. The motions to set aside the confessions of judgment are denied.”
Just last week, foreign judgments were filed against Justice, his wife, his son and the family businesses related to the Carter Bank litigation.
Last month, Greer issued 21 final orders denying requests by Justice, his family and companies to set aside more than $300 million in confessed judgments. The orders in favor of Carter Bank & Trust name Justice, his wife Cathy and son Jay – who oversees the family coal businesses – as well a host of the companies.
On February 26, Carter Bank filed the notices of filing of foreign judgment in several counties, including Kanawha, Raleigh, Greenbrier and McDowell.
The notices, filed by attorney Booth Goodwin, seek to collect the money Carter Bank says is owed after the Justice entities failed to pay loans that Justice, his wife and son personally guaranteed. There were 10 filed in Kanawha County against Jim and Cathy Justice as well as 11 in Greenbrier County, four in Raleigh County and one in McDowell County against various Justice companies.
The Justice companies are being represented by Steven Ruby, Michael W. Carey, Raymond S. Franks II and David R. Pogue of Carey Douglas Kessler & Ruby in Charleston. The defendants are being represented by Goodwin and Carrie Goodwin Fenwick of Goodwin & Goodwin in Charleston as well as by John C. Lynch and Megan E. Burns of Troutman Pepper Hamilton Sanders in Virginia Beach.
Greenbrier Circuit Court case number 24-C-17