100 Lakeside Trail Trust v. Bank of America, N.A.
342 Ga. App. 762
| Ga. Ct. App. | 2017Background
- In 2007 Jum U. Ra’Oof refinanced property owned by the "100 Lakeside Trail Trust" but signed the promissory note and security deed in his individual capacity; he testified the parties intended he sign as trustee. Bank of America later acquired Countrywide’s interest in that loan.
- Ra’Oof defaulted in 2010 after allegedly being told to fall behind to seek a loan modification; the bank published a notice of foreclosure and litigation followed.
- In 2013 Bank of America sued in Fayette County seeking equitable reformation of the 2007 security deed to show the trust (with Ra’Oof as trustee) as grantor, and a declaratory judgment that the deed remains enforceable; appellants counterclaimed for wrongful attempted foreclosure.
- At summary judgment the trial court reformed the deed, declared the security deed was not extinguished, granted the bank summary judgment on appellants’ affirmative defenses, and denied appellants’ cross-motion.
- On appeal appellants argued laches, unclean hands, Statute of Frauds/assignment defects, lack of holder in due course status, wrongful refusal of tender, and bad-faith foreclosure; the Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument (Bank) | Defendant's Argument (Ra’Oof/Trust) | Held |
|---|---|---|---|
| 1. Laches to reformation | Bank: reformation proper; no prejudice and mutual mistake shown by Ra’Oof’s testimony | Appellants: bank waited too long; delay prejudiced them | Reformation not barred by laches; no prejudice shown and Ra’Oof’s testimony supplied key evidence |
| 2. Unclean hands | Bank: alleged misconduct unrelated to reformation claim | Appellants: bank bought Countrywide assets without title review and induced default | Unclean hands inapplicable because alleged misconduct not directly related to parties’ 2007 intent |
| 3. Statute of Frauds / defective assignment | Bank: defense waived (not pled); bank validly stepped into Countrywide’s rights | Appellants: assignment to Bank of America was ineffective under Statute of Frauds | Statute of Frauds defense waived; not considered on appeal |
| 4. Holder in due course / negotiable-instrument defenses | Bank: security deed is not a negotiable instrument; UCC Article 3 inapplicable | Appellants: bank failed to inspect chain of title, so cannot be holder in due course | Rejected: security deed is not governed by Article 3; holder-in-due-course argument inapplicable to reformation of deed |
| 5. Tender and refusal extinguish security deed | Bank: tender was conditional/impractical (demand to exchange original note in person at servicer), so not effective | Appellants: they attempted to tender payoff; bank’s refusal should extinguish deed | Tender was not unconditional; bank’s refusal did not extinguish the security deed |
| 6. Wrongful attempted foreclosure / bad faith | Bank: foreclosure efforts were based on valid (reformed) security interest; notice of foreclosure does not publish derogatory financial info | Appellants: bank foreclosed knowing its interest was defective causing humiliation and damages | Claim fails: attempted-wrongful-foreclosure requires publication of untrue derogatory information about debtor’s finances; here note was in default and alleged inaccuracy did not meet that standard |
Key Cases Cited
- Cowart v. Widener, 287 Ga. 622 (de novo review of summary judgment; view evidence for nonmovant)
- Stone v. Williams, 265 Ga. 480 (laches requires prejudice)
- Whitfield v. Whitfield, 204 Ga. 64 (prejudice may arise from loss of evidence or witnesses)
- Salas v. JP Morgan Chase Bank, 334 Ga. App. 274 (reformation for mutual mistake; scrivener error)
- McCollum v. Loveless, 187 Ga. 262 (reforming deed to make it speak truth will not prejudice grantee)
- You v. JP Morgan Chase Bank, 293 Ga. 67 (security deed is not a negotiable instrument; Article 3 inapplicable)
- Cotton States Mut. Ins. Co. v. Woodruff, 215 Ga. App. 511 (equity may prevent a windfall when correcting mistakes)
- Southern General Ins. Co. v. Ross, 227 Ga. App. 191 (conditional/improper tender does not extinguish debt)
- Sparra v. Deutsche Bank Nat. Trust Co., 336 Ga. App. 418 (elements of wrongful attempted foreclosure claim)
- Aetna Finance Co. v. Culpepper, 171 Ga. App. 315 (same)