Auto-Owners Ins. Co. v. Hale Haven Props., LLC

• Decision Date: 01 June 2018
• Docket Number: A18A0134,A18A0133,A18A0147,A18A0132
• Citation: 815 S.E.2d 574
• Parties: AUTO–OWNERS INSURANCE COMPANY v. HALE HAVEN PROPERTIES, LLC; and vice versa. Bank of America N.A. et al v. Hale Haven Properties, LLC, et al. Hale Haven Properties, LLC v. Bank of America, N.A. et al.
• Court: Georgia Court of Appeals

346 Ga.App. 39
815 S.E.2d 574

AUTO–OWNERS INSURANCE COMPANY
v.
HALE HAVEN PROPERTIES, LLC; and vice versa.

Bank of America N.A. et al
v.
Hale Haven Properties, LLC, et al.

Hale Haven Properties, LLC
v.
Bank of America, N.A. et al.

A18A0132
A18A0134
A18A0133
A18A0147

Court of Appeals of Georgia.

June 1, 2018

815 S.E.2d 578

Rachel Elizabeth Sullivan, Michael Charles Kendall, Douglasville, for Appellant.

Laurie Ellen Dugoniths, David H. Flint, Atlanta, C. Michael Johnson, Eastman, for Appellee.

William James Holley II, Zachary Michael LeVasseur, Atlanta, for Appellant (Case No. A18A0133).

William James Holley II, Zachary Michael LeVasseur, Atlanta, for Appellee (Case No. A18A0147).

Miller, Presiding Judge.

These four related appeals stem from a lawsuit filed by Hale Haven Properties, LLC, against Auto–Owners Insurance Company, Bank of America, N.A., and Regions Bank, Inc. (Bank of America and Regions Bank are collectively, the "Bank Appellants"), to recover payment on an insurance claim for damage to commercial property.

In the first two cases, A18A0132 and A18A0134, Auto–Owners appeals from the trial court’s denial of its motion for summary judgment on Hale Haven’s claims for breach of contract, reformation, enforcement of the check, bad faith, and attorney fees, and Hale Haven cross-appeals from the trial court’s denial of its summary judgment motion against Auto–Owners. As it pertains to Auto–Owners’ appeal, we conclude that although genuine issues of material fact remain on Hale Haven’s reformation claim, Hale Haven cannot show that Auto–Owners breached the insurance policy as written, Hale Haven’s enforcement-of-the-check claim was untimely, and Hale Haven’s claims for bad faith damages and attorney fees fail as a matter of law. Thus, the trial court correctly denied summary judgment on the reformation claim but erred in denying summary judgment in Auto–Owners’ favor on the remaining claims. We also conclude that the trial court correctly denied Hale Haven’s motion for summary judgment because a jury issue exists regarding whether Hale Haven was negligent in its alleged failure to obtain and read the insurance policy, so as to prejudice Auto–Owners.

In the next two appeals, A18A0133 and A18A0147, the Bank Appellants appeal from the trial court’s denial of their motions for summary judgment against Auto–Owners and Hale Haven, respectively, and Hale Haven cross-appeals from the trial court’s denial of its summary judgment motion against the Bank Appellants. Regarding the Bank Appellants’ appeal against Auto–Owners, we vacate the trial court’s denial of summary judgment and remand for consideration of whether Auto–Owners’ cross-claim was time-barred. As to the Bank Appellants’ appeal against Hale Haven, we conclude that the trial court properly denied summary judgment because a jury issue exists regarding the Bank Appellants’ commercial reasonableness in accepting and paying on the insurance check. We also determine that the trial court properly denied summary judgment on Hale Haven’s cross-appeal against the Bank Appellants because the Bank Appellants are not foreclosed from asserting the defense of commercial reasonableness.

Accordingly, we affirm in part, reverse in part, vacate in part, and remand for further proceedings consistent with this opinion.

"On appeal from a grant of summary judgment, this Court conducts a de novo review of the record, construing the evidence and all inferences therefrom most favorably to the nonmoving party." (Citation omitted.) American Mfg. Mut. Ins. Co. v. E A Technical Svcs., Inc. , 270 Ga. App. 883, 608 S.E.2d 275 (2004).

So viewed, the record shows that Hale Haven sold a shopping center to VPS Enterprises, LLC in 2010, while maintaining a mortgagee interest in the property. As part

815 S.E.2d 579

of the sale, Hale Haven and VPS entered into a security agreement, which required VPS to maintain insurance coverage on the property. The security agreement also provided that in the event of a "loss under any such policy of insurance," Hale Haven was authorized to apply the insurance proceeds to the mortgage debt on the property, which was $3,000,000 at the time of the sale.

In 2011, an agent for VPS, Dennis Pack, procured insurance coverage for the property from Auto–Owners, and asked for Hale Haven to be named as the mortgagee on the policy. The policy application provided for both property coverage and general liability coverage, and, on the application, Hale Haven was named as a mortgagee for both types of coverage. An underwriter with Auto–Owners approved this application. However, when the formal one-year insurance policy was issued, Hale Haven was only listed as a mortgagee on the general liability section and not the property coverage section. This same insurance policy was automatically renewed in 2012.

In 2013, VPS made a property insurance claim to Auto–Owners, stemming from damage after a hailstorm.¹ On the "proof of loss" form, Hale Haven was listed as having an interest in the property. In November 2013, Auto–Owners issued a check as payment on the claim to "VPS ENTERPRISES LLC AND HALE HAVEN PROPERTIES LLC," in the amount of $465,346.96, and Auto–Owners gave that check to Pack. Auto–Owners added Hale Haven to the check because it had conducted a title search on the property and learned that Hale Haven was a mortgagee.

On November 25, 2013, Pack formed a limited liability company named "vps enterprises and hale haven properties llc," and on the company’s articles of organization, he was listed as the sole registered agent and organizer for the company. An IRS employer identification number was assigned to the company, and the company was also issued a certificate of organization from the State of Georgia.

The next day, Pack presented these business documents at a Regions Bank branch and he opened a business account named "VPS ENTERPRISES AND HALE HAVEN." Pack deposited the insurance check into this new account, but because he did not endorse the check, Auto–Owners requested that Regions Bank rescind the deposit. Regions Bank complied, and Auto–Owners reissued the check in the same amount, again making it payable to "VPS ENTERPRISES LLC AND HALE HAVEN PROPERTIES LLC." In depositing this new check, Pack signed his name on the reverse and printed, "VPS ENTERPRISES LLC HALE HAVEN PROPERTIES LLC." Bank of America, with whom Auto–Owners had its account, was the drawee (or payor) bank. After the funds were deposited by Bank of America into the Regions Bank account Pack had opened, he wired $450,000 to an international checking account and he appears to have later left the country.

Hale Haven only became aware that the property had been damaged when a roofing contractor sought payment for repairs that had been performed on the property. When Hale Haven visited and inspected the property, it found the repairs to be incomplete and contacted Auto–Owners. Auto–Owners, however, informed Hale Haven that it had already issued full payment on a hail damage claim made by VPS, that Hale Haven was named on the check, and that Auto–Owners was not responsible for any improper signature on that check. VPS ultimately defaulted on its mortgage payments for the property, and Hale Haven repurchased it at foreclosure for $1,200,000, and then resold it at a loss for approximately $800,000.

After receiving no payments from the insurance claim, Hale Haven filed suit in Fulton County State Court in June 2014, alleging breach of contract against Auto–Owners and conversion against Bank of America.²

815 S.E.2d 580

Hale Haven dismissed this state court case without prejudice in September 2015. Then, less than five months later, Hale Haven filed a renewal action in the Fulton County Superior Court, pursuant to OCGA § 9–2–61. In addition to its initial breach-of-contract claim against Auto–Owners, Hale Haven requested reformation of the insurance policy, and added claims for enforcement of the check under OCGA § 11–3–309 ; bad faith damages and attorney fees under OCGA § 33–4–6 for a refusal to pay the insurance claim; and attorney fees under OCGA § 13–6–11 for stubborn litigiousness. Hale Haven also added Regions Bank to the lawsuit, suing them for conversion of the check. Auto–Owners then filed a cross-claim against the Bank Appellants, arguing that they "failed to comply with commercially reasonable and necessary steps" before approving payment on the check.

Auto–Owners and the Bank Appellants moved for summary judgment on all the claims filed against them. Hale Haven also filed a motion for partial summary judgment on its conversion claim against the Bank Appellants and on its claim that Auto–Owners was obligated to pay Hale Haven the amount of the insurance proceeds. After a hearing, the trial court denied all the parties’ summary judgment motions, and these appeals followed.

The threshold question for each of Hale Haven’s claims against Auto–Owners is whether they were timely under the renewal statute in conjunction with the two-year limitation period in the insurance policy.

OCGA § 9–2–61 (a) permits a plaintiff to dismiss and recommence a suit within the original applicable period of limitation or within six months after the dismissal, whichever is later. If the statute of limitation has not run, the plaintiff

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