This appeal arises out of a wrongful foreclosure action brought by Charles and Debra Racette against Bank of America, N.A. (“BOA”) and the law firm which conducted the foreclosure proceedings on behalf of the bank, Johnson & Freedman, LLC and Johnson & Freedman II, LLC (collectively, “J&F”). BOA and J&F moved to dismiss the complaint filed by the Racettes, and the trial court granted their motions, resulting in this appeal. For the reasons discussed below, we reverse the trial court’s dismissal of the Racettes’ claims for damages arising out of the alleged wrongful foreclosure and for equitable relief in the form of cancellation of the foreclosure sale. We likewise reverse the dismissal of their claims for breach of contract, breach of the duty of good faith and fair dealing, attorney fees and costs, and punitive damages. In contrast, we affirm the dismissal of their claim for intentional infliction of emotional distress.
Under OCGA § 9-11-12 (b) (6), a motion to dismiss for failure to state a claim upon which relief can be granted should not be sustained unless (1) the allegations of the complaint disclose with certainty that the claimant would not be entitled to relief under any state of provable facts asserted in support thereof; and (2) the movant establishes that the claimant could not possibly introduce evidence within the framework of the complaint sufficient to warrant a grant of the relief sought. In deciding a motion to dismiss, all pleadings are to be construed most favorably to the party who filed them, and all doubts regarding such pleadings must be resolved in the filing party’s favor.
(Citation and punctuation omitted.) Anderson v. Daniel,
“A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes.” OCGA § 9-11-10 (c). Hence, on a motion to dismiss, the trial court can consider exhibits attached to and incorporated into the complaint. Gold Creek SL, LLC v. City of Dawsonville,
The Racettes ultimately defaulted under the terms of the Note and Security Deed, and BOA declared the entire principal immediately due and payable. In 2010, BOA retained appellee J&F to foreclose under the terms of the Security Deed.
Appellees twice scheduled the Property for sale under the Security Deed, once on the first Tuesday of June 2010, and, then, after the June sale was canceled, on the first Tuesday of February 2011 (the “2011 Foreclosure Sale”). For each scheduled sale, J&F caused advertisements of the sale to be published in the legal organ for Paulding County which stated that the Racettes were in default under the terms of the Note and Security Deed. The advertisements also stated that the Property was being sold subject to a senior lien “in favor of NationsBanc Mortgage Corporation dated 6-2-93, filed 6-9-93 in Deed Book 327, Page 399, Paulding County records.” The reference to a senior lien was in error: the Security Deed was no longer subject to a senior lien at the time the advertisement was published, and, as previously noted, the lien recorded at Deed Book 327, Page 399, in the Paulding County deed records concerned a different property and different borrowers.
Charles Racette appeared at both scheduled foreclosure sales and advised the appellees’ representative on the courthouse steps of the inaccuracies in the advertisements concerning the alleged senior lien. While the appellees did not proceed with the first scheduled foreclosure sale because of the inaccuracies, the appellees later chose to proceed with a second one — the 2011 Foreclosure Sale — despite the continued appearance of the inaccuracies in the advertisements regarding the lien status of the Property.
At the 2011 Foreclosure Sale, the Property was sold to BOA, the only bidder, for $81,872. BOA subsequently authorized a real estate agent to enter onto the Property without the permission of the Racettes.
The Racettes filed a verified complaint naming the appellees as defendants and asserting claims against them for wrongful foreclosure and intentional infliction of emotional distress. The Racettes also asserted claims against appellee BOA for breach of contract and breach of the duty of good faith and fair dealing.
The appellees moved to dismiss the Racettes’ complaint for failure to state a claim upon which relief could be granted. After
1. Wrongful Foreclosure. The Racettes contend that the trial court erred in dismissing their claim for wrongful foreclosure. We agree.
“In Georgia, a plaintiff asserting a claim of wrongful foreclosure must establish a legal duty owed to it by the foreclosing party, a breach of that duty, a causal connection between the breach of that duty and the injury it sustained, and damages.” (Punctuation and footnote omitted.) Gregorakos v. Wells Fargo Nat. Assn.,
(a) Breach of Duty. Under OCGA § 23-2-114, “[p]owers of sale in deeds of trust, mortgages, and other instruments shall be strictly construed and shall be fairly exercised.” Where a foreclosing party breaches his statutory duty to exercise the power of sale fairly and in good faith, the debtor may sue for damages for wrongful foreclosure. Calhoun First Nat. Bank v. Dickens,
The Racettes alleged in their complaint that the appellees breached their duty to exercise the power of sale fairly and in good faith by publishing foreclosure advertisements that were defective as a matter of law and that chilled the bidding at the 2011 Foreclosure Sale. If the published advertisement of a foreclosure sale under power fails tomeetthemimmumlegalrequirementsimposedbyOCGA § 9-13-140 (a),
(i) Defective as a Matter of Law. Contrary to the Racettes’ assertion on appeal, the published foreclosure advertisements for the 2011 Foreclosure Sale were not defective as a matter of law. “The minimum legal requirements of a foreclosure advertisement are prescribed in OCGA § 9-13-140 (a), and only a failure to properly include those items will render the advertisement defective as a matter of law.” Southeast Timberlands,
(ii) Chilling of the Bid. Although the Racettes cannot show that the published foreclosure advertisements were defective as a matter of law, it is possible that they will be able to introduce evidence, within the framework of their complaint, to support the conclusion that the defects in the advertisements chilled the bidding at the 2011 Foreclosure Sale, causing a grossly inadequate sales price. Georgia courts have made clear that while an advertisement that fails to mention an existing senior lien on the property, or that references a senior lien that in fact has been cancelled, may not be defective as a matter of law, it is for the factfinder to determine whether the advertisement ultimately chilled the bid. See Smith,
The appellees nevertheless argue that the Racettes’ complaint and attached exhibits demonstrate that the published advertisements could not have chilled the bidding at the 2011 Foreclosure Sale as a matter of law. In this regard, they contend that errors concerning a lien or encumbrance contained in a foreclosure advertisement do not chill the bid if “the true status of the property with respect to any encumbrances” could be ascertained by interested bidders through a search of the county records. West Lumber Co. v. Schnuck,
The appellees’ argument is more appropriate for the summary-judgment stage than the motion-to-dismiss stage of the proceedings. The published foreclosure advertisements attached to the Racettes’ complaint would have led a potential bidder to conclude that the Property would remain subject to a senior lien after the sale. However, the advertisements gave the book and page number in the records of Paulding County for a lien involving a different property and different borrowers, and thus did not point potential bidders to the correct county records for confirming whether there was in fact a senior lien that would remain on the Property. After reviewing the particular county records referenced in the advertisements, a bidder would be uncertain (1) whether there was no senior lien on the Property and the advertisements incorrectly referenced the existence of a senior lien, or (2) whether there was in fact a senior lien but the advertisements identified the wrong recording information as to that lien. And it is unclear from
For the foregoing reasons, the Racettes may be able to introduce evidence, within the framework of their complaint, to support the conclusion that the published foreclosure advertisements containing inaccuracies about the existence of a senior lien on the Property chilled the bidding at the 2011 Foreclosure Sale. Consequently, the Racettes may be able to demonstrate that the appellees breached their duty to conduct the 2011 Foreclosure Sale in a fair manner, and thus may be able to establish the breach-of-duty element of their wrongful foreclosure claim.
(b) Causation. The appellees also contend that the Racettes’ wrongful foreclosure claim fails as a matter of law because it is not possible for the Racettes to show that the inaccuracies regarding the senior lien in the foreclosure advertisements caused them any harm or damage. We disagree.
A debtor’s claim for damages arising from a wrongful foreclosure sale
may lie . . . when the price realized [at the sale] is grossly inadequate and the sale is accompanied by either fraud, mistake, misapprehension, surprise or other circumstances which might authorize a finding that such circumstances contributed to bringing about the inadequacy of price.
(Citation and punctuation omitted.) Brown v. Freedman,
For the combined reasons discussed in Division 1 (a) and (b), the Racettes may be able to establish breach of duty and causation upon further development of the factual record, and it would be inappropriate to dismiss their wrongful foreclosure claim at this early stage of the proceedings. The trial court thus erred in dismissing their claim for damages arising out of the alleged wrongful foreclosure.
2. Cancellation of the 2011 Foreclosure Sale. In the count of their complaint for wrongful foreclosure, the Racettes sought equitable relief in the form of cancellation of the 2011 Foreclosure Sale in addition to their request for damages. The Racettes clarified in their briefing in the trial court that their claim for equitable relief was only asserted against BOA.
3. Intentional Infliction of Emotional Distress. The Racettes contend that the trial court erred in dismissing their claim for intentional infliction of emotional distress. We disagree.
Georgia has long recognized a cause of action for intentional infliction of emotional distress. However, the burden which the plaintiff must meet in order to prevail in this cause of action is a stringent one. To prevail, a plaintiff must demonstrate that: (1) the conduct giving rise to the claim was intentional or reckless; (2) the conduct was extreme and outrageous; (3) the conduct caused emotional distress; and (4) the emotional distress was severe. The defendant’s conduct must be so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community. Whether a claim rises to the requisite level of outrageousness and egregiousness to sustain a claim for intentional infliction of emotional distress is a question of law.
(Citations and punctuation omitted.) Frank v. Fleet Finance &c.,
“[I]t is true that an intentional wrongful foreclosure can be the basis for an action for intentional infliction of emotional distress” under certain circumstances. (Citation and punctuation omitted.) Blue View Corp. v. Bell,
4. Breach of Contract Against BOA. The Racettes further contend that the trial court erred in dismissing their claim for breach of contract asserted against BOA. We agree.
In seeking the dismissal of the breach-of-contract claim, BOA argued that the claim should be dismissed because the Racettes’ complaint did not set forth the basis for the claim in sufficient factual detail to give BOA proper notice of the claim. But “[t]he Georgia Civil Practice Act requires only notice pleading and, under the Act, pleadings are to be construed liberally and reasonably to achieve substantial justice consistent with the statutory requirement of the Act.” Rucker v. Columbia Nat. Ins. Co.,
Construed in the light most favorable to the Racettes, the complaint alleged that BOA owed obligations to the Racettes under the Security Deed, and that BOA breached those contractual obligations by going forward with the 2011 Foreclosure Sale despite the error in the published foreclosure advertisements. The Racettes’ complaint, coupled with the attachment of the Security Deed as an exhibit thereto, was sufficient for purposes of the Civil Practice Act to put BOA on notice of the breach-of-contract claim being asserted against it. See, e.g., City of Acworth v. John J. Harte Assoc.,
BOA also argued that the breach-of-contract claim should be dismissed because there was no defect in the published foreclosure advertisements and no causal connection between the advertisements and any harm sustained by the Racettes. BOA’s argument fails for the same reason discussed in Division 1. Thus, the trial court erred in dismissing the breach of contract claim.
5. Breach of the Duty of Good Faith and Fair Dealing against BOA. The Racettes also contend that the trial court erred in dismissing their claim for breach of the duty of good faith and fair dealing asserted against BOA. Again, we agree.
In moving to dismiss, BOA argued that there could be no claim for breach of the duty of good faith and fair dealing for the same reasons that there could be no claim for breach of contract. Hence, BOA’s argument fails for the same reasons discussed in Division 4, and the trial court erred in dismissing the claim for breach of the duty of good faith and fair dealing.
6. Attorney Fees, Costs, and Punitive Damages. An award of attorney fees, costs, and punitive damages is derivative of a plaintiff’s substantive claims. See Daimler Chrysler Motors Co. v. Clemente,
Judgment affirmed in part and reversed in part.
Notes
Initially, the Racettes brought additional claims against BOA and J&F for violations of the Georgia Fair Business Practices Act and for unfair and deceptive practices against the elderly, and claims of breach of contract and breach of the duty of good faith and fair dealing against J&F, hut they later withdrew those claims.
The Racettes also requested a temporary restraining order and interlocutory injunction enjoining BOA from dispossessing them from the Property during the pendency of the case. BOA stipulated to entry of a consent order that granted an interlocutory injunction enjoining it from taking any steps to evict or dispossess the Racettes from the Property during the pendency of the action, and that ordered the Racettes to pay monthly rent into the court registry so long as the injunction remained in effect.
OCGA § 9-13-140 (a) provides in relevant part that the foreclosure advertisement shall give a full and complete description of the property to be sold, making known the names of the plaintiff, the defendant, and any person who may be in the possession of the property. In the case of real property, such advertisement shall include the legal description of such real property and may include the street address of such real property, if available, but provided that no foreclosure shall be invalidated by the failure to include a street address or by the insertion of an erroneous street address.
Commentators have noted the importance of foreclosure advertisements containing correct information about whether other liens or encumbrances will remain on the property. See Frank S. Alexander, Ga. Real Estate Finance and Foreclosure Law § 8:4 (2011-2012 ed.) (“It is critical that the advertisement identifies specifically those interests which will continue to encumber the property following the sale. The rationale for this is that a potential bidder at the sale needs to take into consideration in making a bid the extent of the continuing encumbrances.”) (footnotes omitted).
BOA further asserts that the published foreclosure advertisements were proper as a matter of law because the advertisements simply recited the same incorrect information contained in the Security Deed regarding the senior lien. We are unpersuaded because, as alleged in the complaint, Mr. Racette placed the appellees on actual notice that no senior lien remained on the Property and that the references in the advertisements to the hook and page number in the records of Paulding County were inaccurate.
J&F initially sought dismissal of the Racettes’ claim for equitable relief, hut counsel for J&F made clear at the hearing on the motion to dismiss that J&F was withdrawing its challenge to that claim, given that the Racettes had clarified that the claim was asserted only against BOA.