Traders Bank v. Dils

704 S.E.2d 691 (W. Va. 2010)

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Nature of the Case

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Facts

P entered into a $2 million floor plan financing agreement with the dealership to supply the necessary financing for operation of a car dealership. The new motor vehicles purchased from the manufacturer served as the necessary collateral. The agreement was modified to reserve $500,000 of the $2 million Floor Plan for the financing of a line of Dodge vehicles at a second location. In January 2004, P discovered that the dealership was in severe default of the Floor Plan 2 as inventory and proceeds valued at $1,110,000 had disappeared. The dealership was required to pay within two days of a vehicle's sale. P put a financial hold on the financing arrangement it had with the dealership. On February 19, 2004, D, the father, executed a commercial variable promissory note payable to P in the amount of $ 1,110,000.00 to cover the Dealership's 'out of trust' obligation. It was secured by deeds of trust on multiple parcels of real estate owned by D, his wife Pam, and his business, Dils Rental, Inc. P then partially reactivated the Floor Plan. The Dealership went under 14 months later. P called in D's promissory note. P began selling the property used as collateral. Eventually, P initiated a civil action to collect the unpaid principal balance of $665,000 on the note plus interest. D asserted a defense and a counterclaim based on their contention that P had fraudulently induced D into executing the promissory note at issue by verbal assurances that it would fully reinstate the Floor Plan in the amount of $1.5 million and P knew it would not reinstate the full Floor Plan when the promise was made. The court certified a question to the State Supreme Court on whether fraud in the inducement was a proper defense to a claim of merger and integration under parol evidence.