REDDING, Calif. (CN) – A wood products company claims PremierWest Bank used a bait-and-switch loan to force it into foreclosure so the bank could seize its property, mill and assets. Plum Valley Inc. claims the bank issued a line of credit for an amount it knew the business could not afford, and as the business made payments on time, the bank loaned more money, on worse terms, all the while collecting more and more collateral.
Plum Valley is a small wood products manufacturer that has operated in Redding for 10 years, according to the Redding Record Searchlight. Plum Valley’s owners – Donald Frank, William Hobson and Jeffrey Pluim – sued the bank in Shasta County Court.
The men claim that they relied on bank employee Joye Lidell’s statements that “everything was OK” through nine changes to their line of credit, each more restrictive than the last.
The men say the bank “continued to string plaintiffs along,” though bank officers knew that the loan maturity date would not be extended and that no one was “working on” an extension, as Liddell had told them.
Relying on those assurances, the men say, they continued buying supplies and making payroll. They claim the bank knew the items would not be paid for because the bank was diverting the company’s deposits into a “sweep account,” to pay down the loan, and freezing the company’s funds, which gave it control over Plum Valley’s cash flow and day-to-day operations.
The men say the bank concealed that it was being investigated by the Federal Deposit Insurance Corporation and the Oregon Division of Finance and Corporate Securities, for allegedly engaging in unsafe business practices, and that the bank was going to agree to an order that would prohibit it from keeping its promises to the plaintiffs.
The order gave the bank the opportunity to foreclose on Plum Valley as a sign of compliance with regulators’ edict to get rid of nonperforming loans to boost its capital, according to the complaint.
The plaintiffs want foreclosure stopped, quiet title, the bank ordered to perform on its promises, and punitive damages for fraud, breach of contract and unfair business practices. They are represented by Stewart Altemus with Altemus & Wagner of Redding.