Rome Granite, Inc. v. Pinnacle Bank

872 S.E.2d 895

ROME GRANITE, INC., et al.

v.PINNACLE BANK.

A22A0447

Court of Appeals of Georgia.

May 5, 2022

Reconsideration Denied July 13, 2022

Richard Dale Campbell, Elberton, Jonathan Wade Stidham, for Appellant.

Aaron Marcus Kappler, Norcross, Viraj Prashant Deshmukh, for Appellee.

Hodges, Judge.

Pinnacle Bank sued Rome Granite, Inc., David A. Giannoni, and Giannoni Granite Sales & Equipment, LLC (collectively, "Defendants") seeking, among other things, equitable reformation of a security deed, modifications of that deed, and a deed under power based on an allegation that, due to a mutual mistake of the Bank and Rome Granite, the documents did not accurately reflect the collateral that should have been secured.¹ The parties all agree that two tracts of land were never secured as collateral or foreclosed upon following Rome Granite's default, but disagree as to whether the parties intended to secure these tracts. The parties each moved for summary judgment, with the Bank seeking summary judgment on its reformation claim and Defendants’ counterclaims, and Defendants seeking summary judgment as to all of the Bank's claims. The trial court granted summary judgment to the Bank on its reformation claim and Defendants’ counterclaims and denied Defendants’ cross-motion for summary judgment as to all of the Bank's claims.

Defendants now appeal the trial court's order granting summary judgment to the Bank on its reformation claim and the denial of their cross-motion for summary judgment on the issue of mutual mistake. We agree that the Bank failed to meet its burden to establish a mutual mistake justifying equitable reformation; thus, we reverse the grant of summary judgment to the Bank on its reformation claim. Furthermore, we reverse the denial of Defendants’ summary judgment motion concerning the Bank's reformation and declaratory judgment claims (Counts I and II), and we remand the case with direction for the trial court to grant Defendants’ cross-motion for summary judgment as to those claims.² We affirm the denial of Defendants’ cross-motion for summary judgment as to the Bank's remaining claims.

Summary judgment is appropriate if the pleadings and the undisputed evidence show that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). On appeal from the grant or denial of summary judgment, the appellate courts conduct a de novo review, construing all reasonable inferences in the light most favorable to the nonmoving party.

Bank of N. Ga. v. Windermere Dev., Inc. , 316 Ga. App. 33, 34, 728 S.E.2d 714 (2012).

So viewed, the evidence shows that in 2012, Rome Granite and David A. Giannoni (collectively the "Rome Defendants") consolidated several debts with the Bank into a single debt secured by commercial land located at two addresses, including 1177 Ruckersville Road in Elberton. The parties executed a deed to secure debt which contained the legal description for five tracts of land. Shortly thereafter, the Bank quitclaimed two of the tracts back to Rome Granite, leaving three tracts secured as collateral.³ Not included in the description of the property secured were two tracts, called Tracts 6 and 7 by the parties, which were obtained by Rome Granite in 2004, after the inception of its relationship with the Bank. Eventually, Rome Granite built a loading dock on the property which spanned Tracts 3, 6, and 7. In 2015 and again in 2016, the security deed was modified, but no additional changes were made to the secured collateral.

Rome Granite defaulted on its obligations to the Bank, and the Bank conducted a nonjudicial foreclosure of the secured land in 2019 pursuant to a deed under power. The Bank purchased the property at the foreclosure sale. In the year following the foreclosure sale, all parties acted as if the Bank had foreclosed upon all of the land previously owned by Rome Granite, including Tracts 6 and 7. Rome Granite's owner, Giannoni, testified that he believed the Bank took all of the land and did not realize that the Bank did not have a security interest in Tracts 6 and 7. The Rome Defendants learned that those tracts were not included in the foreclosure sale when they were informed by the county tax assessor in 2020 that Rome Granite still owned the land. After this discovery, Rome Granite quitclaimed its interest in Tracts 6 and 7 to Giannoni Granite Sales & Equipment, LLC.

In response to learning that it did not own Tracts 6 and 7, the Bank filed a verified complaint and brought the following claims: (1) request to equitably reform the security deed, modifications to the security deed, and deed under power to include Tracts 6 and 7 in the property secured as collateral on the basis that they were excluded due to the mutual mistake of the parties; (2) to obtain a declaration that the security documents included Tracts 6 and 7 and that the transfer of title by Rome Granite to Giannoni Granite Sales & Equipment, LLC was ineffective; (3) unjust enrichment; (4) equitable subrogation if the security documents are not reformed; (5) constructive trust; (6) tortious interference with contract for Rome Granite quitclaiming its interest; (7) voidable transaction concerning the quitclaiming of Rome Granite's interest; and (8) attorney fees and punitive damages. Defendants answered and counterclaimed asserting numerous claims against the Bank. The Bank moved for summary judgment as to its reformation claim and as to Defendants’ counterclaims. Defendants filed a cross-motion for summary judgment as to all of the Bank's claims. The trial court granted the Bank's motion and denied Defendants’ cross-motion, and this appeal followed.

1. In two related enumerations of error, Defendants contend that the trial court erred in granting the Bank's motion for summary judgment on its reformation claim, and denying its motion for summary judgment on that claim, by finding that the reason Tracts 6 and 7 were excluded as secured collateral was due to a mutual mistake of the parties such that the security documents could be reformed. We agree.

Georgia law provides that "[a] mistake relievable in equity is some unintentional act, omission, or error arising from ignorance, surprise, imposition, or misplaced confidence" and that "[t]he power to relieve mistakes shall be exercised with caution; to justify it, the evidence shall be clear, unequivocal, and decisive as to the mistake." OCGA § 23-2-21 (a), (c). "[T]he burden on the party attempting to prove mutual mistake is a heavy one." (Citation and punctuation omitted.) First Chatham Bank v. Liberty Capital, LLC , 325 Ga. App. 821, 827 (2), 755 S.E.2d 219 (2014) (physical precedent only). More specifically,

[t]o authorize reformation of an instrument, the burden of proof is on the [Bank] to show by clear, unequivocal and decisive evidence that both [Rome Granite] and [the Bank] made a mutual mistake in preparation of the instrument and that the [Bank] was not so negligent in executing the instrument or in discovering any mistake appearing therein as to be estopped to ask for reformation. A "mutual mistake" in an action for reformation means one in which both parties had agreed on the terms of the contract, but by mistake of the scrivener the true terms of the agreement were not set forth.

Cox v. Smith , 244 Ga. 280, 282-283 (1), 260 S.E.2d 310 (1979) ; see also Black v. Nationstar Mortgage , LLC , 344 Ga. App. 217, 221 (a), 809 S.E.2d 487 (2018) ("A mutual mistake in an action for reformation means one in which both parties had agreed on the terms of the contract, but by mistake[,] the true terms of the agreement were not set forth. In other words, it is the parties to the original instrument that must be mutually mistaken for reformation to occur.") (citation and punctuation omitted). "There is an exception that permits the grant of relief even in cases of negligence when the other party has not been prejudiced." Haffner v. Davis , 290 Ga. 753, 756 (3), 725 S.E.2d 286 (2012).

Here, there is conflicting evidence as to the intention of the parties and the Bank has not met its "heavy" burden of establishing by "clear, unequivocal, and decisive" evidence that the parties intended Tracts 6 and 7 to be included in the secured collateral for the 2012 security deed, subsequent modifications, or related deed under power. There is evidence that the parties intended Tracts 6 and 7 to be part of the secured collateral, including: testimony from the Bank's loan officer and senior vice president that they believed in 2012 that all of Rome Granite's property had been secured as collateral for the loan consolidation; the fact that the property's loading dock spans three tracts which include Tracts 6 and 7; the fact that Tracts 6 and 7 are located at the street address mentioned in the security documents; the fact that Tracts 6 and 7 are included in the property insured by Rome Granite for which the Bank is listed as the mortgagee; and David A. Giannoni's behavior and admission that he did not realize that Tracts 6 and 7 were not included in the secured collateral.

There is, however, a lack of evidence of specific discussions concerning the scope of the collateral to be secured in 2012 or thereafter, and there is evidence supporting a conclusion that the Bank did not intend to include Tracts 6 and 7 in the secured collateral. As to the first point, there is no testimony that the Bank specifically informed the Rome Defendants that it intended or sought to take a security interest in Tracts 6 and 7. The Bank's loan officer testified that he had no specific discussions with the Rome Defendants about the property to be subject to the security deed and the Bank's president had no recollection of any such discussions with the Rome Defendants. David A. Giannoni deposed that no one mentioned including Tracts 6 and 7, that he signed what the Bank handed him without understanding what property was identified on the...