Babalola v. HSBC Bank, USA, N.A.
324 Ga. App. 750
| Ga. Ct. App. | 2013Background
- In August 2006 Babalola obtained an $800,000 loan secured by a promissory note and a security deed that named MERS as nominee for the lender. The deed included a nonjudicial power-of-sale clause.
- Babalola defaulted between 2008 and 2011; HSBC purchased the property at a nonjudicial foreclosure sale on August 2, 2011. Babalola filed suit on June 21, 2012 asserting wrongful foreclosure, breach of contract, fraud, and FDCPA claims.
- HSBC and Litton (loan servicer) filed a joint special-appearance answer and a motion to dismiss for insufficient service of process and failure to state a claim; the trial court granted dismissal with prejudice.
- Babalola filed an entry of service showing defendants were served in late August 2012; the trial court nevertheless relied on defendants’ motion and exhibits in dismissing without converting to summary judgment or giving notice.
- On appeal the court reviewed pleadings de novo, holding pro se complaints to liberalized standards, and analyzed whether any pleaded facts could support relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Service of process | Entry of service filed (Oct 5, 2012) perfected service on HSBC and Litton | Service was not perfected because return of service not filed earlier | Trial court abused discretion if it dismissed solely for insufficient service; appellate court found service adequate on record |
| Wrongful foreclosure (notice/advertising; bankruptcy stay; standing) | Foreclosure violated an automatic bankruptcy stay; defendants failed to give statutorily required notice/advertising; sale price was grossly inadequate; defendants lacked authority to foreclose | Defendants argued they were proper holders/assignees and had authority to foreclose; sale was valid | Allegations suffice to state wrongful foreclosure claim (stay violation, notice/advert defects, and standing disputed); dismissal was error |
| Breach of contract | Defendants breached the security deed and note by failing to give required notices (including transfer notice and pre-acceleration notice) | Defendants contended exhibits show rights and duties; no contractual duty to send monthly invoices | Complaint (with security deed exhibit) sufficiently pleads breach as to the deed’s notice provisions; invoices claim fails because deed/note did not require monthly bills |
| Fraud | Litton allegedly was the true successor-in-interest and fraudulently transferred/foreclosed; note misstates loan amount | Defendants moved to dismiss for lack of particularity under OCGA § 9-11-9(b) | Fraud allegations lack the required particularity; court ordered leave to file a more definite statement rather than dismissal |
| FDCPA | Defendants acted as debt collectors and used prohibited tactics; loan may have been in default when assigned | Defendants argued servicer/assignee exceptions apply if debt was not in default at assignment | Because loan likely was in default by July 2008 and assignment timing is unclear, FDCPA claim cannot be dismissed at pleading stage |
Key Cases Cited
- Center for a Sustainable Coast v. Ga. Dept. of Natural Resources, 319 Ga. App. 205 (construing pleadings de novo and resolving doubts for plaintiff)
- Gold Creek SL v. City of Dawsonville, 290 Ga. App. 807 (exhibits attached to pleadings are part of the complaint)
- Vereen v. Deutsche Bank Nat. Trust Co., 282 Ga. 284 (foreclosure conducted after bankruptcy automatic stay is void ab initio)
- You v. JP Morgan Chase Bank, 293 Ga. 67 (holder of deed to secure debt may exercise power of sale even without holding the note)
- Racette v. Bank of America, 318 Ga. App. 171 (failure to comply with foreclosure advertising/notice statutes supports wrongful foreclosure and breach claims)
- Bush v. Bank of New York Mellon, 313 Ga. App. 84 (when fraud is pled insufficiently, court should order more definite statement rather than dismiss outright)