The Cline Drive Land Trust v. Wells Fargo Bank, N.A. ( 2016 )

FOURTH DIVISION
ELLINGTON, P. J.,
BRANCH and MERCIER, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
November 8, 2016
In the Court of Appeals of Georgia
A16A0768. THE CLINE DRIVE LAND TRUST v. WELLS JE-028
FARGO BANK, N. A.
ELLINGTON, Presiding Judge.
Wells Fargo Bank, N. A. sued The Cline Drive Land Trust seeking, on the
grounds of mutual mistake, to reform the legal description of a security deed to
include certain Bartow County real property owned by the Trust. The Trust moved
for judgment on the pleadings, contending that Wells Fargo’s action was barred by
the statute of limitation. The trial court rejected the Trust’s statute of limitations
defense, finding that the statute of limitation did not begin to run against Wells Fargo
until it had acquired an interest in the document in 2011. After the trial court denied
the Trust’s motion, this Court granted its application for leave to appeal the
interlocutory order. For the reasons set forth below, we find that the trial court erred
in concluding that Wells Fargo’s claim could have accrued no earlier than the date of
the assignment of the security deed to Wells Fargo by the original grantee. However,
we affirm the trial court’s judgment under the right-for-any-reason rule because the
pleadings do not show that the Trust is entitled to prevail as a matter of law.
“The issue in a motion for judgment on the pleadings is whether the undisputed
facts appearing from the pleadings show the movant is entitled to judgment as a
matter of law.” (Citation and punctuation omitted.) Bishop v. Westminster Schools,
Inc., 196 Ga. App. 891, 892 (1) (397 SE2d 143) (1990). “For the purposes of a motion
for judgment on the pleadings, all well-pleaded material allegations of the opposing
party’s pleading are to be taken as true, and all allegations of the moving party which
have been denied are taken as false.” (Citation and punctuation omitted.) Trop, Inc.
v. City of Brookhaven, 296 Ga. 85, 86-87 (1) (2014) (764 SE2d 398) (2014). On
appeal, this Court reviews the trial court’s decision de novo. Consolidated Pipe &
Supply Co. v. Genoa Constr. Svcs., 279 Ga. App. 894, 895 (633 SE2d 59) (2006).
The pleadings show that on May 11, 2005, Robert Garnto obtained a $359,650
loan from Lending Street Mortgage (“LSM”). As part of that transaction, Garnto
delivered a security deed to Mortgage Electronic Registration Systems, as nominee
for LSM, in order to secure repayment of the loan. The security deed identifies a 3.56
2
acre tract in Bartow County as the property granted and conveyed thereunder. On the
day the security deed was executed, Robert Garnto and Drusilla Garnto owned 18.56
acres of land (the “Property”) in Bartow County (which included the 3.56 acre tract)
on which was located a single family residence.1 LSM assigned the security deed to
Wells Fargo on June 10, 2011. The Trust acquired the Property from Drusilla Garnto
in 2012.
In its complaint against the Trust,2 Wells Fargo alleged that the parties to the
loan intended for the Garntos’ residence to serve as security for the loan but that the
residence does not lie on the 3.56 acre tract identified by the security deed. Wells
Fargo sought to reform the security deed by removing the description of the 3.56 acre
tract and substituting the legal description of the entire Property.
The Trust moved for judgment on the pleadings on the ground that the seven
year statutory limitation period had run. The Trust maintained that the cause of action
1
On the date of the loan transaction, Drusilla Garnto conveyed her interest in
the 3.56 acre tract portion of the Property to Robert Garnto, who conveyed the 3.56
acre tract to LSM under the security deed. Robert Garnto then conveyed the 3.56 acre
tract to Robert Garnto and Drusilla Garnto, as joint tenants with right of survivorship.
2
Robert Garnto was originally named as a co-defendant but later disclaimed
all interest in the Property. By consent order, the trial court found the Trust to be the
appropriate defendant.
3
accrued in 2005, almost ten years before Wells Fargo filed suit. The trial court denied
the Trust’s motion, rejecting the Trust’s argument that, because Wells Fargo stood in
LSM’s shoes as assignee, its claim was barred by the statute of limitation. Rather, the
trial court concluded, in view of Barron v. Wells Fargo Bank, N.A., 332 Ga. App. 180(769 SE2d 830) (2015), that the statute of limitation began to run against Wells Fargo
only upon the assignment of the security deed to Wells Fargo by LSM.
On appeal, the Trust contends that the trial court erred in relying on Barron for
the proposition that the statute of limitation accrued when LSM assigned the security
deed to Wells Fargo. We agree. “An action to reform a written document may be
brought within seven years from the time the cause of action accrues.” (Citation
omitted.) Haffner v. Davis, 290 Ga. 753, 756 (3) (725 SE2d 286) (2012). And “[a]s
a general rule, the statute of limitation does not commence to run against an equitable
action for reformation of a written instrument based on mutual mistake or fraud until
the mistake or fraud has been, or by the exercise of reasonable diligence should have
been, discovered.” (Citation and punctuation omitted.) Id. However, “[a]n action to
reform a deed may not be barred by the seven-year statute of limitation . . . if the non-
complaining party will not be prejudiced.” (Footnote omitted.) Cohen v. Wachovia
Mortg. Corp., 332 Ga. App. 109, 111 (770 SE2d 17) (2015). See OCGA § 23-2-32
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(b) (“Relief may be granted even in cases of negligence by the complainant if it
appears that the other party has not been prejudiced thereby.”); Ehlers v. Upper West
Side, LLC, 292 Ga. 151, 153-154 (1) (733 SE2d 723) (2012).
We applied the foregoing principles in Barron. In that case, the appellee bank,
also Wells Fargo, sued Barron to reform the legal description of property securing a
debt owed by Barron to the bank on the ground that the security deed mistakenly
identified only a portion of Barron’s tract of property. 332 Ga. App. at 180. The trial
court granted summary judgment to the bank based on judicial estoppel, finding that
Barron had contended in his personal bankruptcy proceeding that he owned one
parcel of real property and not two, as he now maintained. Id. We devoted the greater
portion of our analysis in concluding that the trial court correctly decided the issue
of judicial estoppel. Id. at 183-185 (1). We also, however, considered Barron’s
contention that the bank’s complaint was untimely. Id. at 186-187 (2) (c). We noted
that “Wells Fargo was first assigned an interest in the property on April 3, 2007, and
it filed suit on August 20, 2012; thus, Wells Fargo filed suit approximately five years
and four months after it reasonably could have been expected to discover an error
regarding the May 2004 security deed.” Id. at 186 (2) (c). We also found, “moreover,”
that “Barron cannot be prejudiced by the contract reformation because he is judicially
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estopped from asserting an unencumbered interest in the property. Thus Wells
Fargo’s complaint was timely.” Id. at 186-187 (2) (c).
We did not hold in Barron that the statute of limitations necessarily begins to
accrue as to an assignee’s action for reformation of contract at the time of assignment.
Unlike in this case, whether the bank’s predecessor should have discovered the error
in the security deed upon exercise of reasonable diligence was not expressly at issue.
Nor do the facts of Barron imply that we necessarily considered the question.3 “A
decision’s holding is limited to the factual context of the case being decided and the
issues that context necessarily raises. Language that sounds like a holding – but
actually exceeds the scope of the case’s factual context – is not a holding no matter
how much it sounds like one” (Citation and punctuation omitted.) Ga. Interlocal Risk
Mgmt. Agency v. City of Sandy Springs, 337 Ga. App. 340 n.1 (788 SE2d 74) (2016).
Notwithstanding Wells Fargo’s reliance on Barron, “an assignee takes the
assignment subject to defenses against the assignor,” including the defense of the bar
of the statute of limitations. Pridgen v. Auto-Owners Ins. Co., 204 Ga. App. 322, 323
3
The evidence in Barron showed that, following the assignment to the bank,
an employee of a title agency filed an affidavit of a scrivener’s error that “‘someone’
at the title agency” had caused the security deed at issue to be filed with an incorrect
legal description. 332 Ga. App. at 182.
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(419 SE2d 99) (1992).4 See Houghton v. Sacor Financial, Inc., 337 Ga. App. 254,
258-259 (1) (b) (i) (786 SE2d 903) (2016) (assignee of a contract could not start a
new limitation period for filing breach of contract action by demanding that the other
party pay the assignee an amount due under the contract). Thus, Wells Fargo took the
security deed subject to the defense of the bar of the statute of limitation and stood
in the shoes of LSM insofar as when the claim for reformation of the security deed
began to accrue. It follows that the trial court erred in concluding that the statute of
limitations accrued no earlier than the assignment of the security deed to Wells Fargo.
Further, the pleadings show that the alleged mistake in the legal description was
apparent on its face and could have been ascertained by LSM with reasonable
diligence by reading the security deed. See, e.g., Cohen v. Wachovia Mortg. Corp.,
332 Ga. App. at 111 (statute of limitations not tolled where the lender alleged a
mutual mistake in the mistaken omission of the co-owner of secured property as a
grantor under the security deed, but the lender knew or should have known of the co-
4
An assignee “stands in the shoes” of its assignor, and thus “obtains no greater
rights than the assignor possessed at the time of assignment.” (Citations omitted.)
Southern Telecom Inc. v. TW Telecom Inc. of Georgia L.P., 321 Ga. App. 110, 114
(741 SE2d 234) (2013). In other words, “the assignee has no more rights under the
contract than the assignor would have in dealings with the other contracting party.”
Algernon Blair, Inc. v. Nat. Surety Corp., 222 Ga. 672, 673 (151 SE2d 724) (1966).
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owner’s interest in the property at the time of the loan); Layfield v. Sanford, 247 Ga.
92, 93 (274 SE2d 450) (1981) (reformation of instrument denied where complaining
party had “not bothered to read the deed or have it read to him or have the property
surveyed”).
Although the trial court erred in its analysis, the pleadings do not establish that
Wells Fargo would be unable to prevail on its claim for reformation of the security
deed.5 In the case of a mutual mistake, reformation of an agreement to reflect the
parties’ actual intent is not necessarily prejudicial to the non-complaining party. See,
e.g., Hill v. Agnew, 199 Ga. 644, 646 (34 SE2d 702) (1945) (“If [defendant] gets what
he bought, then he can not be hurt by reforming the instrument, so as to keep him
from getting what he did not buy.”) (citation and punctuation omitted); McCollum v.
Loveless, 187 Ga. 262, 267 (3) (200 SE 115) (1938) (“[T]he defendant will not be
5
See Harper v. Patterson, 270 Ga. App. 437, 439 (2) (606 SE2d 887) (2004)
(A motion for judgment on the pleadings, absent the introduction of affidavits,
deposition or interrogatories in support of the motion, is equivalent to a motion to
dismiss for failure to state a claim, which “should not be granted unless the averments
in the complaint disclose with certainty that the plaintiff would not be entitled to
relief under any state of facts which could be proved in support of [its] claim.”)
(citation and punctuation omitted); Auerback v. Maslia, 142 Ga. App. 184, 186 (2)
(235 SE2d 594) (1977) (“Judgment on the pleadings may be granted only where it
appears from the pleadings themselves that the person against whom judgment is
sought can in no event prevail.”) (citation omitted).
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prejudiced by the reformation of the deed so as to make it speak the truth.”). And, as
we noted above, the limitation period may not bar a reformation claim if the non-
complaining party will not be prejudiced. Cohen v. Wachovia Mortg. Corp., 332 Ga.
App. at 111. The Trust argues that it would necessarily be prejudiced by the
reformation of the security deed in that the Trust was a bona fide purchaser for value
who took without notice that Wells Fargo claimed an interest in all of the Property.
See Haffner v. Davis, 290 Ga. 753, 756 (3) (725 SE2d 286) (2012) (subsequent
purchasers would be prejudiced by the reformation of the warranty deed as they were
“bona fide purchasers who had no notice of the mistake until after” they bought the
property). Here, although it can be inferred from the deed to the Trust that it paid
value for the Property, the Trust does not point to anything in the pleadings that
establishes it had no notice of the alleged mutual mistake in the security deed or that,
as a matter of law, Wells Fargo could not prevail by showing a lack of prejudice to
the Trust if the security deed was reformed. See, e.g., Whiten v. Murray, 267 Ga. App.
417, 421 (599 SE2d 346) (2004) (“Notice sufficient to excite attention and put a party
on inquiry shall be notice of everything to which it is afterwards found that such
inquiry might have led.”). The Trust has not established, at this stage of the litigation,
that it is entitled to judgment. See Gamble v. Pilcher, 242 Ga. 556, 558 (250 SE2d
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416) (1978) (trial court erred in granting judgment on the pleadings where appellee
had not shown that it took the security deed without knowledge of the materialman’s
claim against the property). Accordingly, we affirm the trial court’s denial of the
Trust’s motion for judgment on the pleadings under the principle of right for any
reason. See Ford v. Atkinson Dredging Co., 222 Ga. App. 593, 594 n.1 (474 SE2d
652) (1996) (“[A] judgment right for any reason will be affirmed.”).
Judgment affirmed. Branch and Mercier, JJ., concur.
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