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PNC Bank, N.A. v. Nature's Pearl Corporation

United States District Court, M.D. North Carolina

March 16, 2015

PNC BANK, N.A., Plaintiff,


CATHERINE C. EAGLES, District Judge.

This matter is before the Court on a motion for claim and delivery filed by the plaintiff, PNC Bank. (Doc. 73.) The Court will allow the motion in part to the extent PNC seeks prejudgment possession of certain inventory and equipment as to which PNC has met North Carolina's statutory requirements for claim and delivery. The Court will deny the motion to the extent PNC seeks prejudgment possession of accounts receivable and items that are more properly considered fixtures or not owned by the defendants.

In 2007, Nature's Pearl Corporation and PNC's predecessor[1] executed a promissory note, which was renewed and amended several times until 2011. ( See Doc. 1-2.) To secure repayment of the note, Nature's Pearl executed a security agreement granting PNC a security interest in certain personal property, including all of Nature's Pearl's then-owned and after-acquired inventory, accounts, and equipment. ( See Doc. 1-4 at 2-7.) PNC perfected its security interest in 2007 and filed a timely continuation statement to maintain perfection. ( See Doc. 1-4 at 9-10.) Defendant Jerry Smith acted for Nature's Pearl as president in executing the note, security agreement, and various amendments to both, ( see, e.g. , Doc. 1-2 at 4, 16; Doc. 1-4 at 7-8), and also executed a personal guaranty to secure repayment of all amounts Nature's Pearl owed. (Doc. 1-7.)

On May 12, 2013, PNC sued the defendants to recover approximately $4.5 million owed under the note. ( See Doc. 1 at ¶ 28.) According to the complaint, Nature's Pearl defaulted on the note by failing to repay all principal and interest by July 27, 2012. (Doc. 1 at ¶¶ 16-17; see also Doc. 1-2 at 14.) PNC seeks payment of all outstanding amounts owed under the note and guaranty, (Doc. 1 at ¶¶ 24-35), and possession of certain property in which it has a perfected security interest. (Doc. 1 at ¶¶ 43-49.) On December 18, 2014, PNC filed this motion for claim and delivery, seeking an order granting it immediate possession of certain personal property owned by Nature's Pearl. (Doc. 73.)

Rule 64 of the Federal Rules of Civil Procedure makes available in federal actions certain prejudgment remedies, such as replevin, that are available under the law of the state where the district court sits. See Fed.R.Civ.P. 64. In North Carolina, a "plaintiff in an action to recover the possession of personal property may claim the immediate delivery of the property... at any time before the judgment in the principal action." N.C. Gen. Stat. § 1-472; see also Weener Plastics, Inc. v. HNH Packaging, LLC , 590 F.Supp.2d 760, 764 (E.D. N.C. 2008) ("The North Carolina claim and delivery is essentially a statutory form of the common law action of replevin." (citation and internal quotation marks omitted)); Brown v. Cogdell , 136 N.C. 32, 48 S.E. 515, 515 (1904) (noting that claim and delivery "is simply to obtain possession of the property before judgment, or security for its being forthcoming if the plaintiff obtains judgment").

As a prerequisite to seeking claim and delivery, a plaintiff must plead an underlying claim for recovery of the property. See Weener Plastics , 590 F.Supp.2d at 764-65. A plaintiff must also file an affidavit stating:

(1) That the plaintiff is the owner of the property claimed... or is lawfully entitled to its possession by virtue of a special property therein....
(2) That the property is wrongfully detained by the defendant.
(3) The alleged cause of the detention, according to [the plaintiff's] best knowledge, information and belief.
(4) That the property has not been taken for tax, assessment or fine... or [otherwise] seized... and,
(5) The actual value of the property.

N.C. Gen. Stat. § 1-473; see also Weener Plastics , 590 F.Supp.2d at 765.

Here, Nature's Pearl does not dispute that PNC has pled an underlying claim for return of certain personal property in Nature's Pearl's possession. ( See Doc. 1 at ¶¶ 43-49; Doc. 75 at 3-4; see generally Doc. 85.) Nor does it dispute that it borrowed money from PNC's predecessor, signed the promissory note and security agreement, and failed to repay the money it owes.[2] ( See generally Doc. 85.) Instead, Nature's Pearl contends that: (1) this Court should abstain from ruling on PNC's motion for claim and delivery, (Doc. 85 at 4-8); (2) a stay agreement bars PNC from seeking prejudgment possession of personal property, (Doc. 85 at 8-10); (3) there are ...

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