Babalola v. HSBC Bank, United States, N.A.

• Decision Date: 15 November 2013
• Docket Number: No. A13A1351.,A13A1351.
• Parties: BABALOLA v. HSBC BANK, USA, N.A. et al.
• Court: Georgia Court of Appeals

324 Ga.App. 750

751 S.E.2d 545

BABALOLA

v.HSBC BANK, USA, N.A. et al.

No. A13A1351.

Court of Appeals of Georgia.

Nov. 15, 2013.

Gabriel Babalola, pro se.

Baker, Donelson, Bearman, Caldwell & Berkowitz, Linda S. Finley, Jonathan Evan Green, Joshua Neil Tropper, Atlanta, Alexander Frank Koskey III, for Appellees.

BRANCH, Judge.

Gabriel Babalola filed a pro se complaint against HSBC Bank, USA, N.A. and Litton Loan Servicing ¹ asserting claims for wrongful foreclosure, breach of contract, fraud, and the federal Fair Debt Collection Practices Act.² HSBC and Litton filed a joint motion to dismiss the complaint for insufficient service of process and failure to state a claim upon which relief could be granted. The trial court granted that motion with little explanation and dismissed Babalola's complaint with prejudice. Babalola now brings this pro se appeal. For the reasons explained below, we reverse the order of the trial court and remand the case for proceedings consistent with this opinion.

We review de novo a trial court's determination that a pleading fails to state a claim upon which relief can be granted, “constru[ing] the pleadings in the light most favorable to the plaintiff [and] with any doubts resolved in the plaintiff's favor.” (Citations omitted.) Center for a Sustainable Coast v. Ga. Dept. of Natural Resources, 319 Ga.App. 205–206, 734 S.E.2d 206 (2012). And the pleadings to be construed include any exhibits attached to and incorporated into the complaint and the answer. Gold Creek SL v. City of Dawsonville, 290 Ga.App. 807, 809(1), 660 S.E.2d 858 (2008). See also OCGA § 9–11–10(c) (“[a] copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes”).

Babalola's complaint and the exhibits attached thereto show that in August 2006 Babalola obtained an $800,000 mortgage loan from Fremont Investment and Loan. The loan was secured by a promissory note and a security deed on the real property presumably being purchased by Babalola.³ The promissory note was given to Fremont as “Lender,” while the security deed granted a security interest in the property to Mortgage Electronic Registration Systems, Inc. (“MERS”), acting “solely as nominee for Lender and Lender's successors and assigns.”⁴ The security deed contained an acceleration clause providing that in the event of Babalola's default the Lender would have the right to foreclose on the property by means of a nonjudicial foreclosure sale.

Sometime between July 2008 and June 2011 Babalola defaulted on his loan payments, and HSBC thereafter purchased the property at the August 2, 2011 nonjudicial foreclosure sale. Approximately eleven months later, on June 21, 2012, Babalola filed the current action. On September 27, 2012, HSBC and Litton filed their joint “Answer By Special Appearances,” in which they asserted a number of defenses and denied all of the complaint's substantive allegations. Simultaneously with the filing of their answer, HSBC and Litton also filed their motion to dismiss Babalola's complaint for insufficient service of process and failure to state a claim. The trial court granted that motion on January 10, 2013. According to the trial court's summary order, the dismissal was based on its review of “the Motion, the facts of the case, the Court file, [and] the written briefs,” as well as the fact that the court had “otherwise [been] fully advised [of] the premises.” This appeal followed.

1. “A trial court's finding of insufficient service of process will be upheld on appeal absent a showing of an abuse of discretion,” and “[s]uch an abuse occurs where the trial court's ruling is unsupported by any evidence of record.” (Citations, punctuation and footnotes omitted.) Mathis v. BellSouth Telecommunications, 301 Ga.App. 881, 690 S.E.2d 210 (2010). Here, HSBC and Litton argued that because Babalola had not filed the return of service, he had not perfected service of process. The record shows, however, that on October 5, 2012, Babalola filed an Entry of Service as to both HSBC and Litton.⁵ Accordingly, to the extent the trial court's order of dismissal is based upon Babalola's alleged failure to perfect service, that order constitutes an abuse of the court's discretion.

2. We next address the question of whether Babalola's complaint fails to state a claim upon which relief can be granted. Under current Georgia law, it is not “necessary for a complaint to set forth all of the elements of a cause of action in order to survive a motion to dismiss for failure to state a claim.” (Citations omitted.) Scott v. Scott, 311 Ga.App. 726, 729(1), 716 S.E.2d 809 (2011). Rather, “[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 requirementsof the Act.” (Footnote omitted.) Rucker v. Columbia Nat. Ins. Co., 307 Ga.App. 444, 446(1)(a), 705 S.E.2d 270 (2010). Thus, a motion to dismiss for failure to state a claim should not be granted unless “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.” (Citation and punctuation omitted.) Anderson v. Daniel, 314 Ga.App. 394, 395, 724 S.E.2d 401 (2012). “Put another way, ‘if, within the framework of the complaint, evidence may be introduced which will sustain a grant of relief to the plaintiff, the complaint is sufficient.’ ” (Citation and punctuation omitted.) Benedict v. State Farm Bank, FSB, 309 Ga.App. 133, 134(1), 709 S.E.2d 314 (2011).

(a) Babalola's wrongful foreclosure claim is based on his allegations that the foreclosure violated a bankruptcy stay; that HSBC and Litton failed to provide Babalola with notice of the foreclosure as required by OCGA § 44–14–162.2⁶ and failed to advertise the foreclosure as required by OCGA § 44–14–162⁷; and that neither HSBC nor Litton was a party to either the promissory note or the security deed and therefore neither had standing to foreclose on his property. These allegations support a wrongful foreclosure claim under Georgia law.

A foreclosure sale that is conducted after a bankruptcy stay goes into effect is void ab initio. See Vereen v. Deutsche Bank Nat. Trust Co., 282 Ga. 284, 285, 646 S.E.2d 667 (2007); In re Ford, 296 B.R. 537, 543(III)(A) (Bankr.N.D.Ga., 2003). Babalola has alleged defendants violated an existing automatic stay when they foreclosed on the property.

Additionally, 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.” (Citation omitted.) Racette v. Bank of America, N.A., 318 Ga.App. 171, 174(1)(a), 733 S.E.2d 457 (2012). Such a breach occurs where a secured creditor fails to comply with the statutory advertising and notice requirements set forth in OCGA §§ 44–14–162(a) and 44–14–162.2. Id. at 174–175(a), 733 S.E.2d 457. See also Roylston v. Bank of America, N.A., 290 Ga.App. 556, 559(1)(b), 660 S.E.2d 412 (2008) (“[w]here a foreclosing creditor fails to comply with the statutory duty to provide notice of sale to the debtor in accordance with OCGA § 44–14–162 et seq., the debtor may either seek to set aside the foreclosure or sue for damages for the tort of wrongful foreclosure”) (citation omitted). Similarly, if the contents of the advertisement of sale are defective in some respect, that defect “will support a wrongful foreclosure claim if the debtor can come forward with evidence that the defects chilled the bidding at the foreclosure sale, causing a grossly inadequate sale price.” (Citations omitted.) Racette, 318 Ga.App. at 175(1)(a), 733 S.E.2d 457. See also Gordon v. South Central Farm Credit, ACA, 213 Ga.App. 816, 818, 446 S.E.2d 514 (1994) (where sale price 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 ... such a sale may be set aside”) (citation and punctuation omitted). Here, Babalola has alleged not only that the defendants failed to provide him with the required notice of foreclosure and failed to advertise the foreclosure as required, but also that the sales price was inadequate.

Additionally, Babalola asserts that because neither HSBC nor Litton was a party to either the promissory note or the security deed, neither had standing to foreclose on the property. We recognize that “[u]nder current Georgia law, the holder of a deed to secure debt is authorized to exercise the power of sale in accordance with the terms of the deed even if it does not also hold the note or otherwise have any beneficial interest in the debt obligation underlying the deed.” You v. JP Morgan Chase Bank, 293 Ga. 67, 74(1), 743 S.E.2d 428 (2013). See also Hayes v. EMC Mtg. Corp., 296 Ga.App. 709, 711, 675 S.E.2d 594 (2009) (a secured lender's assignee steps into the shoes of, and becomes subrogated to, the rights of that secured lender). We are unable to determine from the pleadings (as opposed to the evidence presented in support of the motion to dismiss), however, whether HSBC was the holder of the security deed, as it contends it was, or whether Litton was appointed to serve as HSBC's agent with respect to that deed. We are therefore constrained to find that Babalola's assertion that neither HSBC nor Litton had the authority to foreclose on his property supports his wrongful foreclosure claim.

In light of the foregoing, Babalola's allegations that the foreclosure sale at issue violated a bankruptcy stay, that the sale failed to comply with the relevant statutory notice and advertising requirements, and...