Racette v. Bank of Am., N.A.

• Decision Date: 23 October 2012
• Docket Number: No. A12A1499.,A12A1499.
• Citation: 733 S.E.2d 457,318 Ga.App. 171
• Parties: RACETTE et al. v. BANK OF AMERICA, N.A. et al.
• Court: Georgia Court of Appeals

318 Ga.App. 171

733 S.E.2d 457

RACETTE et al.

v.BANK OF AMERICA, N.A. et al.

No. A12A1499.

Court of Appeals of Georgia.

Oct. 23, 2012.

James Paul Blum Jr., Atlanta, Schuyler Elliott, Norcross, for Appellant.

Andrew G. Phillips, Lawrence W. Kelly, Robert James Waddell Jr., Atlanta, Adam Altman, John Huske Anderson Jr., Austin Eugene James, for Appellee.

BARNES, Presiding Judge.

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, 314 Ga.App. 394, 395, 724 S.E.2d 401 (2012). See also Scott v. Scott, 311 Ga.App. 726, 729(1), 716 S.E.2d 809 (2011) (“[I]t is no longer 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. 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.”) (citations and punctuation omitted).

“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, 290 Ga.App. 807, 809(1), 660 S.E.2d 858 (2008). See OCGA § 9–11–10(c). To the extent that there is any discrepancy between the allegations in the complaint and the exhibits attached to it, the exhibits control. H & R Block v. Asher, 231 Ga. 780, 781, 204 S.E.2d 99 (1974).

Guided by these principles, we turn to the complaint and the exhibits attached to it that were filed in this case. The complaint alleges that the Racettes own real property in Paulding County, Georgia (the “Property”). In 1996, they signed a promissory note and security deed for the Property in favor of appellee BOA's predecessor-in-interest in the principal amount of $75,000 (the “Note” and “Security Deed”). The Security Deed was recorded in Paulding County and included a reference to a senior lien existing on the Property: “This deed to secure debt is subject only to that certain Deed to Secure Debt in favor of NationsBanc Mortgage Corporation dated 6–2–93, filed 6–9–93 in Deed Book 327, Page 399, Paulding County records.” However, the document recorded at Deed Book 327, Page 399, in the Paulding County deed records actually concerned a different property and different borrowers.

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.¹ They requested that the trial court cancel and set aside the 2011 Foreclosure Sale, and they sought damages (including emotional anguish damages), attorney fees and costs, and punitive damages. ² ATTACHED AS EXHIBIts to the complaint were copies of the security Deed, the published foreclosure advertisements, and the notice of sale under power for the 2011 Foreclosure Sale.

The appellees moved to dismiss the Racettes' complaint for failure to state a claim upon which relief could be granted. After conducting a hearing where it heard argument from the parties, the trial court entered a summary order granting the appellees' motions to dismiss the complaint. This appeal followed.

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., 285 Ga.App. 744, 747–748(2), 647 S.E.2d 289 (2007). See Heritage Creek Dev. Corp. v. Colonial Bank, 268 Ga.App. 369, 371(1), 601 S.E.2d 842 (2004). In moving to dismiss the complaint for failure to state a claim upon which relief could be granted, the appellees asserted that the complaint disclosed with certainty that the Racettes could not establish breach of duty or causation to support their wrongful foreclosure claim. We disagree with the appellees and conclude that the trial court erred in dismissing the wrongful foreclosure claim on these grounds.

(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, 264 Ga. 285, 285–286(1), 443 S.E.2d 837 (1994).

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 to meet the minimum legal requirements imposed by OCGA § 9–13–140(a),³ the advertisement is defective as a matter of law, and the resulting sale is invalid. See OCGA § 44–14–162(a); Southeast Timberlands, Inc. v. Security Nat. Bank, 220 Ga.App. 359, 360(1), 469 S.E.2d 454 (1996). If the advertisement is not defective as a matter of law under OCGA § 9–13–140(a), the errors in the advertisement 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. See Amirfazli v. VATACS Group, Inc., 311 Ga.App. 471, 473(2), 716 S.E.2d 523 (2011); Aikens v. Wagner, 231 Ga.App. 178, 180–181(2), 498 S.E.2d 766 (1998); Southeast Timberlands, Inc., 220 Ga.App. at 360(2), 469 S.E.2d 454;Williams v. South Central Farm Credit, ACA, 215 Ga.App. 740, 741–742(2), 452 S.E.2d 148 (1994). Hence, to show that the appellees breached their duty to exercise the power of sale fairly and in good faith, the Racettes had to establish that the published foreclosure advertisements either (i) were defective as a matter of law or (ii) chilled the bidding at the 2011 Foreclosure Sale.

(i) Defective as a Matter of Law. Contrary to the Racettes' assertion on...