What will happen is what you expect. Assuming he keeps his army together, you will fight it in C, or one of your armies will invade C and the other will fight his in A or B.
There's apparently also a slim chance the armies will trade places.
It's not quite anything, but its a pretty volatile situation, yeah. The problem is that when two armies have movement which is opposed (A->C at the same time as C->A) the location is decided randomly. People say that the size of the army has some influence on the resulting province of the battle, but I have seen scouts "stop" entire armies. And personally, I have never seen armies switch places. So its tough to tell.
I call the situation you are in being "forked" by the enemy, because he has his army in one spot while yours must attack in parts. Its something you want very much to avoid while you are on offense. Not so bad while you are on defense because you can always fall back and regruop into a friendly prov.
I think you can even have "strange" results if you attack from the same province, when your army is divided among your commanders and a counterattack moves against you. Attackers and defenders in the two provinces are determined randomly then. the one thing to make sure that this does not happen is to group your commanders together (via CTRL or "a"), then they will always act as one and won't be scattered in such a case.
I'm pretty sure I've seen trading places.. quite often I think too.
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