Bank of Am. v. Cuneo

• Decision Date: 30 March 2015
• Docket Number: No. A14A1564.,A14A1564.
• Citation: 770 S.E.2d 48,332 Ga.App. 73
• Parties: BANK OF AMERICA v. CUNEO et al.
• Court: Georgia Court of Appeals

332 Ga.App. 73

770 S.E.2d 48

BANK OF AMERICA

v.CUNEO et al.

No. A14A1564.

Court of Appeals of Georgia.

March 30, 2015.

Reconsideration Denied April 14, 2015.

Schulten, Ward & Turner, David Lawrence Turner, Dean Richard Fuchs, Atlanta, for Appellant.

The Strickland Firm, Ryan Thomas Strickland, Marietta, for Appellees.

Opinion

BARNES, Presiding Judge.

In 2003, Bank of America's predecessors refinanced the mortgages on a real property owned by Mark and Traceylynn Cuneo as joint tenants with rights of survivorship, but issued the promissory notes to and obtained deeds to secure debt only from Mr. Cuneo.¹

In 2012, Bank of America (“BOA” or “the Bank”) sued the Cuneos, seeking an equitable reformation of the security deeds to add Mrs. Cuneo's name, contending that her failure to convey her undivided one-half interest in the property when the mortgage debt was refinanced was a mutual mistake contrary to the parties' intentions. The bank moved for summary judgment. Mrs. Cuneo denied that she intended to borrow the money, and the trial court denied the Bank's motion, sua sponte granting summary judgment to the Cuneos instead. The Bank appeals, and for the reasons that follow, we reverse.

On appeal from the grant of summary judgment, [the appellate court] conducts a de novo review of the evidence to determine whether there is a genuine issue of material fact and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.

(Citation and punctuation omitted.) Cartersville Ranch, LLC v. Dellinger, 295 Ga. 195, 758 S.E.2d 781 (2014).

So viewed, the record shows that in July 2001, Mark Cuneo granted to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for Wieland Financial Services, a deed on his home in Fayetteville to secure a $37,100 loan. MERS assigned that deed to Chase Manhattan Bank USA, NA, in July 2001. The deed securing the July 2001 loan recited that it was subordinate to a First Deed to Wieland from Mr. Cuneo dated April 2001, which secured a $275,000 loan.

In addition to the other documents involved in the July 2001 second mortgage, the closing attorney prepared a warranty deed that Mr. Cuneo signed granting himself and his wife, Traceylynn Cuneo, joint tenancies in common with rights of survivorship. The warranty deed was filed at the same time as the deed to secure the $37,100 loan, both of which were signed only by Mr. Cuneo. In response to an interrogatory, Mr. Cuneo said that the July 2001 closing attorney was chosen by the lender or seller, that he did not pay the attorney to draft the warranty deed transferring title to himself and Mrs. Cuneo as joint tenants, and that he did not understand the import of the warranty deed when he signed it, along with all the other closing documents.

In April 2002, both Mark and Traceylynn Cuneo granted a deed to E*Trade Bank on the property to secure a maximum lien of $72,000. This deed refers to both the April 2001 deed from Mr. Cuneo to Wieland Homes securing the $275,000 loan, and the subordinate July 2001 deed from Mr. Cuneo to MERS that secured the $37,100 loan. MERS subsequently assigned the $37,100 July 2001 deed to Chase, and Chase cancelled it in March 2012, but the record does not establish whether or not that loan was paid off from the E*Trade loan.

On June 25, 2003, Mark Cuneo applied to refinance the loan on the Cuneos' house. His loan application, which was completed by an employee of First Integrity Mortgage Corporation, includes no co-borrower information. On the application form, under “Legal description of Subject Property” is written “SEE TITLE REPORT”; under “Title will be held in what Name(s)” is written “Mark Cuneo”; under “Manner in which Title will be held” is written “ Joint tenants”; and under “Declarations,” the form indicated that Cuneo had held an ownership interest in property in the last three years jointly with his spouse. The application showed that Cuneo's liabilities included $270,114 owed to Washington Mutual² and $71,034 owed to E*Trade, and that he sought a loan of $341,148, less “subordinate financing” of $71,000, for a total loan through First Integrity Mortgage of $280,250.

The application does not identify Traceylynn Cuneo anywhere and was signed only by Mr. Cuneo, as was a 30–year promissory note also dated June 25, 2003, for $280,250, which identifies the lender as “America's Wholesale Lender” (“America's Wholesale”). The record also contains two deeds of the same date signed only by Mark Cuneo, one securing the $280,500 loan from America's Wholesale and naming MERS as the grantee, and the other securing a loan for $71,000 from Countrywide Bank. The record does not include the $71,000 promissory note referred to in the second security deed, but the deed indicates that the terms of this loan differed from the first, being for example a 15–year loan rather than a 30–year loan and from a different lender. Both the first mortgage debt to Wieland Homes for $270,114 and the second mortgage debt to E*Trade were paid from the proceeds of the June 2003 loan. The deed to secure the $72,000 debt from the Cuneos to E*Trade was cancelled in August 2003. MERS assigned its interest in the $280,250 mortgage to BOA's predecessor in November 2010.

In July 2010, the Cuneos filed a joint petition for a Chapter 7 bankruptcy. The Cuneos represented in their schedule of real property that they jointly owned the property at issue here and that it was currently valued at $256,000 and encumbered by a secured claim for $315,934. Their bankruptcy “Schedule D–Creditors Holding Secured Claims,” identified the bank's predecessor as holding a secured claim on the property for the first mortgage of $250,245, none of which was unsecured, and identified the Bank's predecessor as also holding a second mortgage claim of $65,689–$59,934 of which was identified as unsecured. Both debts were labeled as joint. The Cuneos claimed that the property was exempt from being used to pay their creditors, that the value of their exemption was zero, and that they intended to retain the property and reaffirm the debt secured by the property.

In November 2010, the Bank moved for relief from the automatic bankruptcy stay and obtained a hearing date of December 10, 2010, but the Cuneos received a discharge from the bankruptcy court prior to the hearing date. Finally, the record includes a March 2011 application and affidavit from both Mark and Traceylynn Cuneo as co-borrowers on the property, seeking a hardship mortgage modification of the loan serviced by the Bank's predecessor under the “Making Home Affordable Program.”

In July 2012, the Bank as the successor-in-interest of both 2003 lenders filed a complaint against Mark and Traceylynn Cuneo, seeking equitable reformation of both 2003 security deeds by adding Mrs. Cuneo's name to them as an additional grantee, “to make these security deeds consistent with title ownership of the Property.”³

Following discovery, the Bank moved for summary judgment on its equitable reformation claim, arguing that both of the Cuneos had applied for the loan, that the loan application completed by the lender indicated that Mr. Cuneo's interest in the property was a joint tenancy, and that the title report the lender received before closing revealed that the property was owned by both of the Cuneos. It further argued that the two security deeds were mistakenly executed by only Mr. Cuneo and that without both names on the deeds, the Bank could only foreclose on Mr. Cuneo's undivided half interest in the property.

The Cuneos objected to the motion, and Mrs. Cuneo submitted an affidavit denying that she had intended to borrow the money and averring that any mistake in excluding her from the deeds and notes was not mutual. She further claimed that she would be prejudiced by having her name added because if the Bank then foreclosed, the foreclosure would appear on her credit report and affect her ability to borrow money. The Cuneos further argued that Mr. Cuneo did nothing to deceive the Bank, which knew the property was jointly owned before the closing, as indicated by the loan application and title report. They concluded that because the mistake was not mutual, the Bank's negligence combined with the prejudice to Mrs. Cuneo if the deeds were reformed, foreclosed the Bank's right to the equitable relief it sought.

At a hearing on December 4, 2012, the trial court made an oral ruling denying the Bank's motion for summary judgment, but the order was never reduced to writing and filed. In February 2013, the Bank filed a motion for reconsideration of the court's (unfiled) order denying its motion for partial summary judgment, and the court held another hearing in August 2013. At the end of the hearing, the Bank agreed with the trial court that its only remaining claim was for equitable reformation and that the court was entitled to rule sua sponte on summary judgment to the defendants. A written order denying the Bank's motion for partial summary judgment was finally filed in October 2013, immediately followed by an order denying the Bank's motion for reconsideration and sua sponte granting summary judgment to the Cuneos.⁴

In its written orders, the trial court found no dispute as to the following facts: the 2003 loan application and the lender's title report showed that the property was titled as a joint tenancy; Mrs. Cuneo was never required to sign a promissory note or security deed during the refinancing; the lender had a full and fair opportunity to litigate Mrs. Cuneo's obligation on the debt during the Cuneos' bankruptcy proceeding; the only claim remaining in the case was for reformation of the security deed; and the Bank presented evidence and argument in opposition to a grant of summary judgment in favor of the Cuneos in addition to evidence and argument in support of its motion. The court concluded that the Bank was stopped from asserting that Mrs. Cuneo was obligated on that debt,...