text:
    A11A2350.
    A11A2351.
    A11A2352.
    SPEEDWAY MOTORSPORTS, INC. et al. v. PINNACLE BANK. SPEEDWAY MOTORSPORTS, INC. et al. v. BLIHOVDE et al. SPEEDWAY MOTORSPORTS, INC. et al. v. BLIHOVDE et al.
    (727 SE2d 151)
   Blackwell, Judge.

Between April 2006 and September 2010, David R. Blihovde, Jr., allegedly defrauded Speedway Motorsports, Inc. and its subsidiary, Speedway Motorsports International, Ltd., of more than $5 million. Speedway discovered the fraud after Blihovde died in October 2010, and about a month later, it filed a lawsuit against several individuals and businesses to whom Blihovde allegedly had diverted the proceeds of his fraud, seeking damages for unjust enrichment, the avoidance of certain transfers under the Uniform Fraudulent Transfers Act, OCGA § 18-2-70 et seq., the recognition of constructive trusts or equitable hens on assets acquired with the proceeds of the fraud, and a declaratory judgment that such assets are the property of Speedway. The court below found that Speedway failed to state a claim against several of these defendants upon which relief properly might be granted, and it dismissed those claims. Speedway appeals from these dismissals.

The standard for a dismissal under OCGA § 9-11-12 (b) (6) for failure to state a claim is settled and familiar. At a minimum, a complaint must contain “[a] short and plain statement of the claims showing that the pleader is entitled to relief,” OCGA § 9-11-8 (a) (2) (A), and “this short and plain statement must include enough detail to afford the defendant fair notice of the nature of the claim and a fair opportunity to frame a responsive pleading.” Benedict v. State Farm Bank, FSB, 309 Ga. App. 133, 134 (1) (709 SE2d 314) (2011) (citations omitted). If the complaint gives fair notice, “it should be dismissed for failure to state a claim only if... its allegations disclose with certainty that no set of facts consistent with the allegations could be proved that would entitle the plaintiff to the relief he seeks.” Id. (citation and punctuation omitted). “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.” Id. (citation and punctuation omitted). “Like the court below, when we assess the sufficiency of the complaint on appeal, we must accept the allegations of fact that appear in the complaint and view those allegations in the light most favorable to the plaintiff.” Bush v. Bank of N. Y. Mellon, 313 Ga. App. 84, 89 (720 SE2d 370) (2011). And on appeal from the dismissal of a complaint, we owe no deference to the decision of the court below, and we must decide for ourselves whether the complaint states a claim upon which relief might properly be granted. See Benedict, 309 Ga. App. at 134 (1).

According to its second amended complaint, Speedway, in March 2004, hired Oasis Trading Group, LLC, of which Blihovde was a member, to provide consulting services to Speedway about opportunities in the petroleum products business. Speedway advanced funds to Oasis each month for expenses incurred in connection with these consulting services, and Blihovde prepared invoices to Speedway reflecting these expenses. Beginning in 2006, Blihovde misrepresented these expenses and sent fraudulent invoices to Speedway, and when Speedway advanced funds for these expenses, he misappropriated substantial portions of the advances for himself. By September 2010, Blihovde had obtained more than $5 million from Speedway by his fraud. Then, on September 30,2010, Speedway notified Oasis that it intended to discontinue its monthly advances of expenses. About a week later, Blihovde died, and soon thereafter, Oasis discovered the fraud and disclosed it to Speedway. We turn now to the specific claims asserted by Speedway that the court below dismissed.

Case No. A11A2350

1. In September 2008, Blihovde purchased a residence in Gwinnett County for nearly $1.5 million. According to Speedway, Blihovde used the proceeds of his fraud to pay a part of the purchase price, and he borrowed $1.2 million from Pinnacle Bank to pay the rest. In connection with his purchase of the residence, Blihovde gave a security interest in the residence to the Bank, and he used the proceeds of his fraud to purchase mortgage insurance for the benefit of the Bank. Blihovde subsequently used more than $200,000 that he obtained by his fraud to make improvements to this residence. In February 2011, the Bank foreclosed its security interest and acquired title to the residence. Based on these allegations, Speedway sued the Bank, contending that the Bank was unjustly enriched by the interests that Blihovde conveyed to it, that the conveyance of such interests are avoidable as fraudulent transfers, and that Speedway has a constructive trust and equitable lien upon the residence, which have priority over the Bank’s security interest and survive the foreclosure. On the motion of the Bank, the court below dismissed the claims against it, and we affirm in part and reverse in part.

As our Supreme Court has explained, “a bona fide purchaser for value is protected against outstanding interests in land of which the purchaser has no notice [, and] a grantee in a security deed who acts in good faith stands in the attitude of a bona fide purchaser, and is entitled to the same protection.” Brock v. Yale Mtg. Corp., 287 Ga. 849, 852 (2) (700 SE2d 583) (2010) (citations and punctuation omitted). Similarly, the Uniform Fraudulent Transfers Act provides that a fraudulent transfer is not voidable under OCGA § 18-2-74 (a) (1) against “a person who took in good faith and for a reasonably equivalent value.” OCGA § 18-2-78 (a). For these reasons, the Bank says, the claims that Speedway asserts against it fail. Perhaps anticipating that the Bank would assert these defenses, Speedway alleged in its second amended complaint that the Bank should be charged with constructive knowledge that Blihovde had defrauded Speedway, averring that Blihovde made false representations on his loan application to the Bank, that these representations would have caused a reasonable lender to make further inquiries, that the Bank had a duty to make such inquiries, and that such inquiries would have revealed the fraud. If the Bank were to be charged with knowledge of the fraud, of course, it might be sufficient to overcome these defenses. On appeal, however, the Bank vigorously disputes that it owed any duty to Speedway to make further inquiry about the loan application, even accepting, for the sake of argument, the allegation that the application was suspicious. About this, perhaps the Bank is right, but it simply does not matter for the purposes of this appeal.

Whether or not Speedway has alleged facts in its second amended complaint that, if true, would be sufficient to disprove these defenses, a plaintiff has no obligation to anticipate and plead away any defenses in his complaint. See OCGA § 9-11-8 (a) (2) (complaint requires “short and plain statement of the claims” and “demand for judgment”). A motion to dismiss for failure to state a claim can properly be granted upon an affirmative defense only when the elements of the defense are admitted by the plaintiff or “completely disclosed on the face of the pleadings.” Murrey v. Specialty Underwriters, 233 Ga. 804, 807 (213 SE2d 668) (1975). See also Ghertner v. Solaimani, 254 Ga. App. 821, 825, n. 4 (563 SE2d 878) (2002) (“Where the facts necessary to establish an affirmative defense are admitted or not controverted, the court may dispose of the matter upon a motion to dismiss----”); Liner v. North, 194 Ga. App. 175, 179 (2) (390 SE2d 263) (1990) (affirmative defense “may be properly raised by motion where the facts are admitted or are not controverted or are completely disclosed on the face of the pleadings”) (citation and punctuation omitted); Flanders v. Georgia Farm Bureau Mut. Ins. Co., 171 Ga. App. 188, 188-189 (318 SE2d 794) (1984) (same). Consequently, if the facts alleged in the complaint affirmatively prove a defense, a court may dismiss the complaint based upon the defense, but if the facts alleged in the complaint merely fail to affirmatively disprove a defense, no dismissal is warranted. Here, the allegations of the second amended complaint may or may not disprove the defenses on which the Bank relies, but they do not affirmatively prove those defenses. For these reasons, we reverse the dismissal of the claims against the Bank under the Uniform Fraudulent Transfers Act and for a constructive trust, equitable lien, and declaratory judgment, as well as the derivative claim for attorney fees and expenses of litigation.

The claim against the Bank for unjust enrichment, however, properly was dismissed. Speedway admitted in its second amended complaint that the Bank, in fact, loaned $1.2 million to Blihovde, and there is no allegation that Blihovde gave any value to the Bank except that to which it was entitled under the terms of the loan. Accordingly, the second amended complaint shows that the Bank has received nothing in the nature of a windfall and has not, therefore, been unjustly enriched. See Eastside Carpet Mills v. Dodd, 144 Ga. App. 580, 581 (241 SE2d 466) (1978) (“[T]he bank was not unjustly enriched, having received only those funds to which it was entitled as a result of its loan. . . .”). For this reason, we affirm the dismissal of the unjust enrichment claim against the Bank.

Case Nos. A11A2351 and A11A2352

2. In November 2007, Blihovde purchased a policy of insurance upon his own life, naming Deborah Blihovde, his ex-wife, as the beneficiary. According to Speedway, Blihovde used the proceeds of his fraud to purchase this policy. In October 2010, just a few days before he died, Blihovde submitted a change of beneficiary to his insurer, naming Deborah, his two adult children by Deborah, and his minor child by his subsequent marriage to Wenona Blihovde as the beneficiaries. After his death, Deborah and his adult children sought payment of the proceeds of the policy. Based on these allegations, Speedway sued Deborah and the children, asserting that they were unjustly enriched by their receipt of the life insurance proceeds and that it is equitably entitled to the proceeds of the policy, at least up to the amount of the premiums paid with funds that Blihovde acquired by his fraud.

In response, Deborah and the children pointed to OCGA § 33-25-11 (a), which, they say, puts the proceeds of the insurance policy out of the reach of Speedway as a matter of law. In pertinent part, OCGA § 33-25-11 (a) provides:

Whenever any person residing in the state shall die leaving insurance on his or her life, such insurance shall inure exclusively to the benefit of the person for whose use and benefit such insurance is designated in the policy, and the proceeds thereof shall be exempt from the claims of creditors of the insured unless the insurance policy or a valid assignment thereof provides otherwise. . . ,

Speedway replied that it is not a “creditor,” as that term is used in the statute, and that OCGA§ 33-25-11 (a), therefore, is no impediment to its claims upon the life insurance proceeds. Speedway reasoned that it is not a “creditor” because, as the unwitting victim of a fraud, it never voluntarily undertook to extend credit to Blihovde. On the motion of Deborah and the children, the court below dismissed the claims on the life insurance proceeds, and although it is a difficult question, we conclude that OCGA§ 33-25-11 (a) precludes any claims in this case against the proceeds of the life insurance policy. Accordingly, we affirm the dismissal of those claims.

We begin with the settled principle that, “[i]n all interpretations of statutes, the courts shall look diligently for the intention of the General Assembly, keeping in view at all times the old law, the evil, and the remedy.” OCGA § 1-3-1 (a). “And when we search for this intention, we always must presume that the General Assembly means what it says and says what it means.” Northeast Atlanta Bonding Co. v. State of Ga., 308 Ga. App. 573, 577 (1) (707 SE2d 921) (2011). As our Supreme Court has explained, the search for legislative intent must begin with the words of the statute, and if those words are clear and unambiguous, it also must end there. See Opensided MR1 of Atlanta v. Chandler, 287 Ga. 406, 407 (696 SE2d 640) (2010) (“When a statute contains clear and unambiguous language, such language will be given its plain meaning and will be applied accordingly”) (citation omitted). See also Frazier v. Southern R. Co., 200 Ga. 590, 593 (2) (37 SE2d 774) (1946) (“[Appellate courts] must frequently construe the language of a statute, but such courts may not substitute by judicial interpretation language of their own for the clear, unambiguous language of the statute, so as to change the meaning.”). In this case, however, the meaning of “creditor,” as that term is used in OCGA § 33-25-11 (a), is uncertain and ambiguous.

“Creditor” is a term that appears in several sections of our Code, but it does not always have precisely the same meaning. As our Supreme Court has explained, the term sometimes is attributed its “generic meaning” and understood to refer to any person to whom another “is liable and bound to pay... an amount of money,” whether that liability arises by contract or as a matter of law, as, for instance, for a tort. Howard v. Long, 142 Ga. 789, 792-793 (83 SE 852) (1914). In some contexts, however, the term is afforded “its more circumscribed and ordinary meaning as denoting the holder of an obligation arising [by contract].” Id. This ambiguity is acknowledged by Black’s Law Dictionary, which explains:

The word [“creditor”] is susceptible of latitudinous construction. In its broad sense [,] the word means one who has any legal liability upon a contract, express or implied, or in tort; in its narrow sense, the term is limited to one who holds a demand which is certain and liquidated. In statutes [,] the term has various special meanings, dependent upon context, purpose of statute, etc.

Black’s Law Dictionary, p. 368 (6th ed. 1990). The context in which “creditor” appears in OCGA § 33-25-11 (a) does not clearly tell us in which sense the term is used. Accordingly, we look to other indicia of meaning.

The statute now codified at OCGA § 33-25-11 (a) was first enacted in 1960, Ga. L. 1960, p. 289, § 1 (56-2505), and it since has been amended on two occasions. See, e.g., Ga. L. 1982, p. 3, § 33; Ga. L. 2006, p. 885, § 1. The term “creditor,” however, has appeared in each version of the statute, and there is no reason to think that “creditor” means something different in the current version than it meant in the earlier versions. For this reason, the history of the statute is helpful, we think, in ascertaining the meaning of “creditor,” as it is used in OCGA § 33-25-11 (a).

In pertinent part, the 1960 statute was modeled after a 1933 statute, which also used the term “creditor,” see Ga. L. 1933, p. 181, § 1, so we begin with the state of the law prior to the enactment of the 1933 statute. With respect to the proceeds of a life insurance policy, the Code of 1910 provided that “[t]he assured may direct the money to be paid to his personal representative, or to his widow, or to his children, or to his assignee; and upon such direction given, and assented to by the insurer, no other person can defeat the same.” Civil Code of 1910, § 2498. In Bennett v. Rosborough, 155 Ga. 265, 272 (116 SE 788) (1923), our Supreme Court considered whether an employer might properly recover, by way of a constructive trust, the proceeds of insurance on the life of its employee, where the employee had embezzled funds from the employer and used them to pay the premiums on his life insurance. Citing the Code of 1910, the Supreme Court concluded that the employer could not recover those proceeds:

Where the husband takes out a policy payable to his wife and does not change the beneficiary, creditors of the husband can not in this State, in a contest with the wife, take the money, even though premiums might have been paid at a time when the husband was insolvent or with money which had been stolen from the creditors.

Bennett, 155 Ga. at 272. It is notable, we think, that the Supreme Court described the employer in Bennett as a “creditor,” notwithstanding that the term “creditor” appeared nowhere in the applicable section of the Code of 1910.

Ten years after Bennett, the General Assembly enacted a statute that carried forward the principle that a “creditor” of an insured generally cannot recover the proceeds of insurance on the life of the insured, but the 1933 statute did give a “creditor” the limited right to recover the amount of any premiums paid by the insured with intent to defraud the “creditor”:

If a policy of life . . . insurance, whether heretofore or hereafter issued, is effected by any person on his own life or on another life, in favor of a person other than himself... the lawful beneficiary or assignee thereof, other than the insured or the person so effecting such insurance, or his executors or administrators, shall be entitled to its proceeds and avails against the creditors and representatives of the insured and of the person effecting the same ...; provided, that, subject to the statute of limitations, the amount of any premiums for said insurance paid with intent to defraud creditors, with interest thereon, shall enure to their benefit from the proceeds of the policy. .. .

Ga. L. 1933, p. 181, § 1. Given the preexisting law, it seems to us likely that the 1933 statute was intended to ameliorate to some extent the harsh result of Bennett that, even when premiums were paid with intent to defraud a “creditor,” the “creditor” could not recover anything at all from the proceeds of the life insurance. And that likelihood suggests that, when the General Assembly used the term “creditor,” it meant to refer not only to voluntary creditors by contract, but also involuntary creditors, such as the employer in Bennett and, of course, Speedway in this case.

In 1960, the General Assembly enacted a comprehensive insurance code, and in doing so, it repealed the 1933 statute, but it nevertheless carried forward the provisions of the 1933 statute about the limited extent to which a “creditor” could recover life insurance proceeds. The 1960 statute provided, in pertinent part:

If a policy of life insurance, whether heretofore or hereafter issued, is effected by any person on his own life, or on another life, in favor of a person other than himself,.. . the lawful beneficiary or assignee thereof, other than the insured or the person so effecting such insurance or executors or administrators of such insured or the person so effecting such insurance, shall be entitled to its proceeds and avails as against the creditors and representatives of the insured and of the person effecting the same.... Subject to the statute of limitations, the amount of any premiums for said insurance paid with intent to defraud creditors, with interest thereon, shall inure to the benefit of creditors from the proceeds of the policy. . . .

Ga. L. 1960, pp. 289, 686-687, § 1 (56-2505). As to these provisions, the 1960 statute tracked closely the language of the 1933 statute, and we must, therefore, assume that the General Assembly meant the 1960 statute to apply to the same “creditors” as the 1933 statute. The 1960 statute was amended in 1982, Ga. L. 1982, p. 3, § 33, and again in 2006, Ga. L. 2006, p. 885, § 1, at which time the limited right of a creditor to recover the amount of premiums paid to defraud the creditor was abolished. Given this statutory history, and given our conclusion that the 1933 statute, to which the current statute traces its lineage, used “creditor” in the “generic sense,” including voluntary and involuntary creditors alike, we conclude that Speedway is a “creditor,” as that term is used in OCGA § 33-25-11 (a).

Speedway argues that such a construction of the statute effectively gives thieves and fraudsters an incentive to launder the proceeds of their wrongdoing through life insurance, and we acknowledge that it might do just that. We do not, of course, “give an absurd construction to a statute,” Northeast Atlanta Bonding Co., 308 Ga. App. at 582 (2), but we cannot say that this construction of OCGA § 33-25-11 (a) is absurd. There are competing policy interests that are furthered by it, including the policy interest in providing certainty for insurers about the persons to whom proceeds of policies should be paid, as well as the policy interest in ensuring that the beneficiaries of life insurance — for some of whom the life insurance proceeds may represent the only valuable asset that the insured has left for their care — promptly receive the proceeds of the policy. It is to further these interests that the General Assembly appears to have written the current version of the statute as it did, and in light of these interests, we cannot say it absurd to construe the statute as we do. It is for the General Assembly, not appellate judges, to strike the difficult balance between competing policy interests. Commonwealth Investment Co. v. Frye, 219 Ga. 498, 499 (134 SE2d 39) (1963). For these reasons, the court below properly dismissed the claims that Speedway asserts as to the proceeds of the insurance on the life of Blihovde, and we affirm the dismissal of those claims.

3. In its second amended complaint, Speedway alleges that Blihovde transferred the proceeds of his fraud to Deborah and Wenona by depositing the proceeds in bank accounts in their names and by using the proceeds to purchase at least two motor vehicles, the title to which he put, at least in part, in the name of Wenona. Speedway also alleges that Blihovde made these transfers with the actual intent to hinder, defraud, or delay his creditors, that he made the transfers without receiving a reasonably equivalent value, and that he was insolvent at the time. Based on these allegations, Speedway brought claims against Deborah and Wenona, contending that the deposits and transfers of title in motor vehicles are avoidable as fraudulent transfers and that Speedway has a constructive trust and equitable lien on the funds deposited and the motor vehicles. It appears to us that these allegations state viable claims against Deborah and Wenona under the Uniform Fraudulent Transfers Act. See generally OCGA §§ 18-2-74 (a) and 18-2-75 (a) (defining fraudulent transfers). And to the extent that Speedway has asserted claims for fraudulent transfers upon which relief properly might be granted, we think it also has stated claims for a constructive trust and equitable lien. See OCGA § 18-2-77 (a) (3) (C) (court may award “other relief [that] the circumstances may require” for fraudulent transfers); see also Hood v. Smoak, 271 Ga. 86, 87 (516 SE2d 301) (1999) (constructive trust is “implied whenever the circumstances are such that the person holding legal title to property, either from fraud or otherwise, cannot enjoy the beneficial interest in the property without violating some established principle of equity”); Total Supply, Inc. v. Pridgen, 267 Ga. App. 125, 126 (1) (598 SE2d 805) (2004) (“Where the constructive trustee has invested such funds or has purchased other property, the real owner can follow it wherever it can be traced.”) (citation and punctuation omitted); Watkins v. Watkins, 256 Ga. 58, 59 (1) (344 SE2d 220) (1986) (an equitable lien is available as a remedy for fraud in the same circumstances as a constructive trust).

The court below, it appears, did not even consider whether deposits in the bank accounts of Deborah and Wenona might amount to fraudulent transfers. And with respect to the motor vehicles, the court said that Speedway had failed to make allegations sufficient to disprove that the claim as to one vehicle was barred by the statute of limitation and sufficient to disprove that Wenona took the other in good faith. But as we said in Division 1, a plaintiff need not anticipate affirmative defenses and plead around them, and unless an affirmative defense is admitted by the plaintiff or “completely disclosed on the face of the pleadings,” a motion to dismiss cannot properly be granted on the basis of an affirmative defense. See Murrey, 233 Ga. at 807-808. For all these reasons, we conclude that the court below erred when it dismissed the claims against Deborah and Wenona for fraudulent transfer, constructive trust, equitable lien, and declaratory judgment, to the extent those claims are based on deposits in their bank accounts and the titling of motor vehicles in their names, and we reverse the dismissal of such claims, as well as the dismissal of the derivative claims against Deborah and Wenona for attorney fees and expenses of litigation.

Decided March 29, 2012

Smith, Welch, Webb & White, A. J. Welch, Jr., William A. White, Santana T. Flanigan, for appellants.

Thompson, O’Brien, Kemp & Nasuti, R. Michael Thompson, Delia C. Elder, Bret T. Thrasher, Miller & Martin, Denise A. Miller, Andersen, Tate & Carr, Thomas T. Tate, Robert M. Reeves, Meredith N. Atwood, Carlton Fields, Adam L. Hoipkemier, Eugene A. Medori, Jr., John E. Tomlinson, Eric T. Johnson, for appellees.

Judgments affirmed in part and reversed in part.

Barnes, P. J., and Adams, J., concur.

       There is no need in these appeals to distinguish between Speedway Motorsports, Inc. and Speedway Motorsports International, Ltd., so, to keep it simple, we will refer to both as “Speedway.”

       In Case No. A11A2350, Speedway appeals from the dismissal of its claims against Pinnacle Bank, which held a security interest in real property that Blihovde allegedly acquired with the proceeds of his fraud. In Case No. A11A2351, Speedway appeals from the dismissal of its claims against Deborah Blihovde, who was married to Blihovde prior to November 2007, and their adult children, Brent and Ashley Blihovde. In Case No. A11A2352, Speedway appeals from the dismissal of its claims against Wenona Rae Blihovde, who was married to Blihovde at the time of his death, and their minor child, P. B.

       Because we must accept the facts that Speedway alleges in its complaint, and because we must view its allegations in the light most favorable to Speedway, the “facts” set out in this opinion are only allegations of fact. These “facts” have yet to be proven, and it may turn out that the “facts” we accept for the purposes of these appeals are not accurate. See Hudson v. Hall, 231 F3d 1289, 1292 (I) (A), n. 2 (11th Cir. 2000). We express no opinion about the credibility of any facts alleged by Speedway, nor do we speculate about the likelihood of Speedway being able to present evidence to support some of the allegations contained in its complaint.

       Speedway amended its complaint twice before the court below entered its orders of dismissal, and for this reason, we look to the allegations of the second amended complaint.

       More specifically, Speedway alleges that Blihovde acquired the residence for $1,469 million, that Blihovde “used the misappropriated funds to acquire” the residence, and that the Bank loaned $1.2 million to Blihovde in connection with the purchase of the residence. Given our obligation to construe the pleadings in the light most favorable to Speedway, we understand Speedway to allege that Blihovde made a down payment on the residence with the proceeds of his fraud and paid the remainder of the purchase price with funds that he borrowed from the Bank.

       No allegation about the foreclosure appears in the second amended complaint, but everyone seems to agree that the foreclosure occurred, so we will accept that it did for the purposes of this appeal.

       The courts have acknowledged that these are defenses. See, e.g., Henson v. Bridges, 218 Ga. 6, 10 (2) (126 SE2d 226) (1962) (bona fide purchaser for value); Kitchings v. Ameris Bank, 309 Ga. App. 837, 837 (711 SE2d 392) (2011) (bona fide purchaser for value); Warfield v. Byron, 436 F3d 551, 558 (III) (B) (5th Cir. 2006) (good faith and reasonably equivalent value).

       We offer no opinion about whether the Bank owed any duty to investigate the loan application further before funding the loan.

       Nowhere in the second amended complaint does Speedway allege, for instance, that the Bank did not have notice of its alleged interest in the residence or that the Bank acted in good faith when it took a security interest in the residence.

       Actually, according to the second amended complaint, Blihovde and Deborah still were married on November 5, 2007, when the policy was issued. But a divorce proceeding then was pending, and a final decree of divorce was entered only a few weeks later. So, to keep it simple, we refer to Deborah as an ex-wife.

       Speedway does not contend that the policy or any assignment thereof provides that the proceeds would inure to the benefit of anyone other than the named beneficiaries.

       Deborah and the children urge that this case is controlled hy Bennett, but Bennett construed a different law that did not include the term “creditor.” So, although Bennett is instructive as historical context, it does not control the outcome in this case.

       We can think of no reason why the General Assembly would have wanted, so soon after Bennett, to give a limited right of recovery to voluntary creditors, but not to involuntary creditors. After all, a voluntary creditor necessarily assumes some risk that the debt will not be repaid, but an involuntary creditor has no say in the matter. And generally speaking, remedial statutes are to be construed liberally. See Southstar Energy Svcs. v. Ellison, 286 Ga. 709, 713 (1) (691 SE2d 203) (2010).

       In addition, Speedway asserted claims for unjust enrichment against Deborah, Wenona, and the adult children, and it also asserted claims for fraudulent transfer, constructive trust, and equitable lien against Deborah and the adult children with respect to the use of the proceeds of the fraud to pay credit card bills for their benefit. The court below dismissed these claims too, and upon our review, we see no error in the dismissal of these claims for the reasons identified by the court below in its orders of dismissal. Accordingly, we affirm the dismissal of the claims described in this footnote, and we also affirm the dismissal of any claim for attorney fees and expenses against the adult children, inasmuch as no underlying claim against them remains. See United Companies Lending Corp. v. Peacock, 267 Ga. 145, 147 (2) (475 SE2d 601) (1996) (a prerequisite to an award of attorney fees and expenses is the award of damages or other relief on an underlying claim).

       In its order dismissing the claims against Deborah, the court said that “Speedway makes no assertion whatsoever that David Blihovde transferred any money or property to . . . Deborah.” Speedway alleged quite clearly, however, that Blihovde “transferred misappropriated Speedway funds from an Oasis account into [an account owned by Deborah].” In its order dismissing the claims against Wenona, the court did not even mention the deposits in the account of Wenona in the course of assessing the viability of the fraudulent transfer claim against her.


source: Caselaw Access Project

author: PHIPPS, Presiding Judge.

license: Public Domain

text:
    A11A2418, A11A2419.
    GEORGIA CASUALTY AND SURETY COMPANY v. WOODCRAFT BY MACDONALD, INC. et al.; and vice versa.
    (726 SE2d 793)
   PHIPPS, Presiding Judge.

After obtaining monies pursuant to a subrogation clause of a commercial property insurance policy, Georgia Casualty and Surety Company was sued in connection therewith by Brad MacDonald and his company, Woodcraft by MacDonald, Inc. d/b/a Coachcraft (hereinafter “Coachcraft”). They alleged that they were insured parties, yet had not been made whole for their underlying losses. They sought damages from Georgia Casualty, asserting theories of breach of the insurance policy and bad faith refusal to ensure they were made whole. On cross-motions for summary judgment, the trial court rejected Georgia Casualty’s argument that it could not be held liable for pursuing its contractual subrogation rights, but ruled in the insurance company’s favor with respect to the bad faith claim. Because the record establishes that Georgia Casualty was entitled to summary judgment with respect to both claims, we affirm in part and reverse in part.

Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” “In our de novo review of the grant [or denial] of a motion for summary judgment, we must view the evidence, and all reasonable inferences drawn therefrom, in the light most favorable to the nonmovant.”

Background Facts

During the night of February 14, 2004, an underground gas pipeline owned and operated by Atmos Energy Corporation fractured beneath Coachcraft’s business premises. Natural gas filled the Coach-craft building, and at approximately 1:20 a.m. on February 15, a fire and explosion damaged or destroyed the building and certain of its contents.

Coachcraft was in the business of renovating the interiors of recreational vehicles (RVs). Property that was damaged or destroyed by the fire and explosion included RVs belonging to customers, tools and other personal property belonging to Coachcraft employees, and an RV and personal tools that belonged to the company’s owner, Brad MacDonald.

Insurance Coverage and Proceeds Paid

At the relevant time, Coachcraft maintained two insurance policies with Georgia Casualty. One, a commercial garage policy, provided physical damage coverage for customers’ vehicles stored on the Coachcraft property. Pursuant to this policy, Georgia Casualty paid $1,307,169 collectively to customers whose vehicles were damaged or destroyed as a result of the fire and explosion.

The other one was a commercial property policy, which covered damage to Coachcraft’s building and business personal property, as well as Coachcraft’s losses for business interruption and related expenses. Pursuant to this policy, Georgia Casualty paid Coachcraft $220,000 for the damaged building, $100,000 for business interruption, $40,000 for damage to business personal property, and $8,000 collectively to certain Coachcraft employees for damage to their personal property. These payments, totaling $368,000, exhausted all available limits of coverage under this policy. Coachcraft has continued to maintain that the losses it incurred during the fire and explosion exceeded the policy limits.

Subrogation Litigation in Federal Court

In July 2005, Georgia Casualty filed suit as subrogee under the two insurance policies, seeking to recover from Atmos the $1,307,169 paid to the individual owners of damaged personal property and the $368,000 paid to Coachcraft, plus interest, attorney fees and expenses of litigation. According to Georgia Casualty’s suit, Atmos had negligently maintained the natural gas pipeline. Atmos removed the case to federal district court. About two months later, in October 2005, Brad MacDonald and Coachcraft intervened as plaintiffs, seeking to recover from Atmos their alleged losses sustained in excess of the commercial property policy.

Asserting a litany of defenses, Atmos contended that it had no liability to any of the plaintiffs. In addition, Atmos filed various indemnification and contribution counterclaims against Brad MacDonald and Coachcraft, alleging that they had been negligent in failing to properly construct and ventilate the Coachcraft building. To support each of its contentions, counterclaims, and affirmative defenses, Atmos provided expert witness testimony.

Georgia Casualty hired and paid for a team of expert witnesses needed to support its liability claims against Atmos and to defend against the counterclaims that were asserted by Atmos against Brad MacDonald and Coachcraft. Then, after discovery, Atmos filed a Daubert motion, which the federal court denied.

Two-and-a-half years after Georgia Casualty filed its subrogation suit, in J anuary 2008, the insurance company and Atmos reached an agreement in principle: Georgia Casualty would accept from Atmos $950,000 in exchange for a complete release of all of Georgia Casualty’s claims (totaling $1,675,169). As part of this settlement, Atmos agreed to dismiss its counterclaims against Brad MacDonald and Coachcraft; and Georgia Casualty and Atmos agreed that Brad MacDonald and Coachcraft would be allowed to continue to pursue their claims for damages against Atmos. Georgia Casualty filed a motion to dismiss its complaint against Atmos; and Atmos filed a motion to dismiss its counterclaims against Brad MacDonald and Coachcraft.

But Brad MacDonald and Coachcraft filed an objection to Georgia Casualty’s motion to dismiss, and an objection to the settlement between Georgia Casualty and Atmos. They argued that Georgia Casualty was prohibited from settling its subrogation claims with Atmos until such time as they were “made whole.” The federal court conducted a hearing at which counsel for Brad MacDonald and Coachcraft pursued these objections. The court denied the objections, specifically determining that Brad MacDonald and Coachcraft were neither prejudiced nor prohibited from continuing to pursue their non-covered claims against Atmos and stating further that “this will give you something in the case to potentially appeal.” Thereupon, the court approved the settlement and granted the motions to dismiss.

Brad MacDonald and Coachcraft elected not to proceed to trial; they settled with Atmos for $125,000.

The Instant Litigation

Dissatisfied with their settlement amount, Brad MacDonald and Coachcraft made a demand upon Georgia Casualty, asserting that Georgia Casualty was required to pay from the proceeds that it had received from Atmos the amount they claimed would make them whole. (Brad MacDonald would later depose that this amount was approximately $179,130.59 — an amount which represented their alleged total losses of $629,605.66, minus $368,000 paid as policy limits by Georgia Casualty, minus $125,000 paid in settlement by Atmos, plus $42,524.93 in attorney fees incurred in federal court.) When Georgia Casualty denied their demand, this lawsuit ensued.

Brad MacDonald and Coachcraft filed a complaint in superior court, alleging that Georgia Casualty had “breached the contract of insurance by not making its insureds whole for their losses prior to accepting a subrogation settlement with the tortfeasor.” According to them, “Georgia Casualty had a duty to ensure that its insureds, the Plaintiffs, were made whole before Georgia Casualty, as subrogee, accepted money from the tortfeasor.” They claimed that Georgia Casualty had violated “Georgia law and public policy by accepting a settlement from the tortfeasor without its insureds having been made whole for their losses.”

In addition, Brad MacDonald and Coachcraft alleged in their complaint, “Defendants are guilty of bad faith towards its insureds by refusing to ensure that its insureds were made whole for their losses before settling subrogation claims alleged against the tortfeasor and seeking a dismissal from the lawsuit against Atmos Energy.”

Georgia Casualty denied liability and moved for summary judgment, pointing out that it had paid the limits of the policy at issue and arguing further that it could not be held liable for damages under either asserted theory for the reason that Georgia law did not impose the duty alleged. In their cross-motion, Brad MacDonald and Coach-craft conceded that Georgia Casualty had paid the policy limits, but maintained that they had sustained losses in excess thereof. They took the position that

[t]he Georgia “made whole” doctrine means that an insurance company exercising subrogation rights must demonstrate that the insured was made whole for its loss before it may participate in a recovery from the tortfeasor .... The law of Georgia requires proof that the insured was “made whole” for its loss before the rights of subrogation vest.

Brad MacDonald and Coachcraft urged from the superior court a ruling to the effect that Georgia Casualty was bound by such duty and therefore could be held liable.

The superior court granted Brad MacDonald and Coachcraft’s motion. Citing Florida Farm Bureau Ins. Co. v. Martin and Garrity v. Rural Mutual Ins. Co., the court held that “the ‘made whole’ doctrine is applicable to . . . property claims.” Thereupon, it found “Georgia Casualty to be liable to plaintiffs to the extent plaintiffs have not been made whole and that Georgia Casualty has received such sums through subrogation claims.” However, the court granted Georgia Casualty’s motion as to the bad faith claim.

Case No. A11A2418

1. Georgia Casualty contends that the trial court erred by granting Brad MacDonald and Coachcraft’s motion and denying its motion, maintaining that it breached no duty in pursuing its subrogation rights provided by the commercial property policy.

The subrogation clause of that policy stated:

TRANSFER OF RIGHTS OF RECOVERY AGAINST OTHERS TO US. If any person or organization to or for whom we make payment under this Coverage Part has rights to recover damages from another, those rights are transferred to us to the extent of our payment.

Asserting that this language is clear and unambiguous, Georgia Casualty contends that the trial court erred by imposing thereupon a made whole condition. Georgia Casualty proffers three reasons for overturning the trial court’s ruling. First, it points out that the commercial property policy does not place a made whole condition on the right of subrogation. Second, it argues that Georgia law does not require that a commercial property policy contain a made whole condition on the right of subrogation, asserting that the only cases wherein Georgia courts have held that insurance policies must include a made whole condition involve health insurance or workers’ compensation benefits.

Third, Georgia Casualty asserts that, even if a made whole condition applies to commercial property policies, it did not violate it. Georgia Casualty claims that its settlement with Atmos did nothing to prevent Brad MacDonald and Coachcraft from pursuing their claims against Atmos, which still had funds to cover those claims. To the extent they were not made whole, Georgia Casualty posits, it is because they decided to settle short, rather than proceed to trial.

“The right of subrogation can arise from either equity, contract, which is referred to as ‘conventional subrogation,’ or statute.” “Traditionally, a subrogee ‘stands in the shoes’ of the insured and can pursue any cause of action assigned to it.” “In Georgia, insurance is a matter of contract, and the parties to an insurance policy are bound by its plain and unambiguous terms.” “It is general contract law in Georgia that parties are free to contract about any subject matter, on any terms, unless prohibited by statute or public policy, and injury to the public interest clearly appears.” And under OCGA § 13-8-2 (a), “[a] contract that is against the policy of the law cannot be enforced.”

Brad MacDonald and Coachcraft maintain that, as a matter of public policy “in Georgia, the ‘made whole’ doctrine means that an insurance company exercising subrogation rights must demonstrate that the insured was made whole for its loss before it may participate in a recovery from the tortfeasor.” To support their position, they cite Davis v. Kaiser Foundation Health Plan of Ga., Landrum v. State Farm, and two workers’ compensation cases, Canal Ins. Co. v. Liberty Mut. Ins. Co. and Bartow County Board of Ed. v. Ray. While each case acknowledges Georgia’s public policy interests related to subrogation, none of those cases provides for a result in their favor.

In Davis, a medical benefits provider, based on an insurance policy provision, sought reimbursement from its insured for the benefits paid for her medical expenses, notwithstanding that the insured had not been completely compensated. The question posed by the Supreme Court of Georgia was:

Whether the complete compensation rule is applicable to a contract of insurance entered into prior to July 1, 1997, which contract contains an express provision requiring the insured to reimburse the insurer for benefits received as a result of injury or illness caused by a third party or in a motor vehicle accident.

The Court answered yes. In reaching that answer, the Court looked to the legislature’s 1997 enactment of OCGA § 33-24-56.1, which codified the complete compensation rule, then applied principles of statutory construction to hold:

[T]he public policy of this State will not permit insurers to require an insured to agree to a provision that permits the insurer, at the expense of the insured, to avoid the risk for which the insurer has been paid by requiring the insured to reimburse the insurer whether or not the insured was completely compensated for the covered loss.

The Court reasoned, “Where either the insurer or the insured must to some extent go unpaid, the loss should be borne by the insurer for that is a risk the insured has paid it to assume.” Accordingly, the Court concluded that the insurance policy provision involved in that case was unenforceable as violative of public policy because it required reimbursement from the insured without regard to whether the insured was completely compensated.

But under circumstances inapposite to those underlying Davis, this court concluded in Landrum that the “full compensation” rule did not bar the insurer’s subrogation rights against the tortfeasor, notwithstanding the fact that the insured had not been completely compensated. In that personal injury/automobile accident case, State Farm Mutual Automobile Insurance Company proceeded under OCGA § 33-7-11 (f) to recover from the tortfeasor of the automobile accident the amount it (State Farm) had paid the injured party, King, under King’s uninsured motorist coverage. The tortfeasor argued that State Farm could not assert its subrogation rights against him, 'pointing out that King had not received full compensation for his loss. This court rejected this mere circumstance as a bar to State Farm’s pursuing its subrogation rights:

State Farm has not sought reimbursement from King, the injured party. It has not claimed any portion of the [insurance proceeds already] in Kang’s possession. Therefore, the “full compensation” rule codified at OCGA § 33-24-56.1 (b) (1) does not prohibit State Farm’s subrogation claim against [the tortfeasor]. Further, State Farm has not sought to recover medical or disability payments it made to King either from King or from [the tortfeasor] pursuant to a subrogation agreement. Therefore, OCGA § 33-24-56.1 (e) does not apply.

The record confirmed further that

this is not a contest between the insured and the insurer which could result in the insured going unpaid to some extent. Thus, pretermitting whether King was fully compensated for his loss under the circumstances of this case, allowing State Farm to exercise its subrogation rights against [the tortfeasor] will not deprive King of his priority under the full compensation rule. Moreover, to bar subrogation in this case would defeat one of the equitable purposes of subrogation: to deter wrongdoing by placing the ultimate responsibility for paying an obligation on the person who in equity and good conscience ought to pay for it. For these reasons, we find that the full compensation rule does not defeat State Farm’s subrogation rights under these circumstances.

Similarly, in the instant case, Georgia Casualty did not seek reimbursement from Brad MacDonald or from Coachcraft, nor did the insurance company seek to recover medical or disability payments. The “full compensation” rule codified in OCGA § 33-24-56.1, therefore, does not apply.

Nor has the alleged tortfeasor in this case, Atmos, been shown to have limited assets such that “either the insurer or the insured must to some extent go unpaid.” Neither Brad MacDonald nor Coachcraft asserted that Atmos had limited resources, thus presenting “a contest between the insured and the insurer which could result in the insured going unpaid to some extent.” Indeed, this particular circumstance drew questions from the federal court judge.

At the hearing, the judge pointedly asked Brad MacDonald and Coachcraft’s counsel for authority to support their position, given that the case was not one in which the tortfeasor was without sufficient assets such that a subrogation settlement between the tortfeasor and the insurance company “impairs the ability of the insured to pursue their claim against the tortfeasor.... You’re going to be able to go to trial and recover whatever damages you can recover against Atmos.” Counsel answered that he had not seen such case, adding: “There’s been an amount of money recovered on this subrogation claim,. .. which is more than it would take to make my client whole for his loss. We have a claim against that money that was recovered from the tortfeasor up —The court interrupted counsel to state “you don’t have a claim against that money, but you’ve got a right to pursue a claim against Atmos for your damages and have a jury decide it just as if there was never any insurance paid.” The court reasoned that “the full compensation rule is ... not to guarantee you some compensation... it’s to make sure that your insurance company, through its settlement of its subrogation claim, doesn’t impair or impede your ability to pursue the tortfeasor.”

But Brad MacDonald and Coachcraft have repeatedly expressed that, without the insurance company’s assistance, they simply could not afford to litigate their claims against Atmos. For example, when they turned to the superior court, Brad MacDonald and Coachcraft alleged in their complaint that “[they] had relied on Georgia Casualty taking the lead role in the litigation [and] that included funding the expense of the litigation”; that by settling out of the case, Georgia Casualty had “damaged or destroyed its insureds’ ability to prepare the case effectively for trial”; and that as a result, Brad MacDonald and Coachcraft were forced to settle for less than the amount required to make them whole.

In his deposition, Brad MacDonald explained that with Georgia Casualty still in the case, “we were, sort of, in essence, riding their shirt tail. They were paying for the [expert] witnesses, because we couldn’t afford that.” Thus, in pursuing their claims against Atmos, they had not hired any expert. When Georgia Casualty was allowed to settle out of the case, Brad MacDonald recounted, “it, pretty much, just left us hanging.” They made no attempt to negotiate a lower rate with any expert, determined they did not have enough money to proceed with a trial, and then settled.

In their brief to this court, Brad MacDonald and Coachcraft cite evidence that Georgia Casualty had vigorously litigated the claims in federal court over an extended period. They maintain, “With Georgia Casualty out of the case, Coachcraft and [Brad] MacDonald could not afford the enormous cost to continue the case, and mitigated its damages by settling with Atmos Energy for far less than its actual losses.”

Yet Brad MacDonald and Coachcraft have cited this court to no authority that would bring those circumstances within the purview of Georgia’s public policy concerns related to subrogation; and we find none. Even assuming that those concerns are invoked in the context of commercial property insurance policies (which Georgia Casualty refutes) and assuming further that Brad MacDonald and Coachcraft were not fully compensated for their losses when they settled with Atmos, we cannot conclude that Georgia’s public policy nevertheless conditioned Georgia Casualty’s contractual subrogation rights upon the insurance company’s first “ensuring” that Brad MacDonald and Coachcraft were made whole — including pursuing, on their behalf, Atmos through trial. Under the circumstances of this case, Georgia Casualty’s exercise of

its subrogation rights against [Atmos] [did] not deprive [Brad MacDonald and Coachcraft] of [their] priority [as would be contemplated] under the full compensation rule. Moreover, to bar subrogation in this case [where the insureds simply determined they could not afford to litigate against the tortfeasor] would defeat one of the equitable purposes of subrogation: to deter wrongdoing by placing the ultimate responsibility for paying an obligation on the person who in equity and good conscience ought to pay for it.

For the foregoing reasons, Georgia Casualty’s subrogation rights were not defeated.

Nothing in the workers’ compensation cases of Canal Ins. Co. and Bartow County Board of Ed., cited by Brad MacDonald and Coachcraft, provide for a different outcome. Those cases hinged on workers’ compensation statutes. The two cases cited by the superior court, and upon which Brad MacDonald and Coachcraft further rely, concern subrogation in the context of property insurance. But both cases are inapposite as involving tortfeasors that lacked sufficient funds.

Decided March 29, 2012

Bondurant, Mixson & Elmore, Naveen Ramachandrappa, for appellant.

Clarence M. Mullin, for appellees.

Because Georgia Casualty therefore was entitled to summary judgment on the claim of breach of contract, the trial court’s rulings as to that claim are reversed.

Case No. A11A2419

2. Given our conclusion in Division 1, there is no merit in Brad MacDonald and Coachcraft’s challenge that the trial court erred in granting summary judgment to Georgia Casualty on their claim alleging bad faith refusal to ensure that they were made whole.

Judgment reversed in Case No. A11A2418. Judgment affirmed in Case No. A11A2419.

Andrews and McFadden, JJ., concur.

       OCGA§ 9-11-56 (c).

        Cowart v. Widener, 287 Ga. 622, 624 (1) (a) (697 SE2d 779) (2010) (citation and punctuation omitted).

       The record does not disclose whether Brad MacDonald or Coachcraft pursued an appeal in federal court. And the parties to this appeal do not assert that issues raised here are precluded.

       (Emphasis supplied.)

       377 S2d 827 (Fla. Dist. Ct. App. 1979).

       253 NW2d 512 (Wis. 1977).

        State Farm &c. Ins. Co. v. Cox, 271 Ga. 77 (515 SE2d 832) (1999) (citation omitted).

        Landrum v. State Farm &c. Ins. Co., 241 Ga. App. 787, 788 (527 SE2d 637) (2000).

        SawHorse, Inc. v. Southern Guaranty Ins. Co., 269 Ga. App. 493, 494 (1) (604 SE2d 541) (2004) (punctuation and footnote omitted).

        Jones v. Jones, 280 Ga. 712, 714 (1) (632 SE2d 121) (2006) (citation and punctuation omitted).

       271 Ga. 508, 510 (521 SE2d 815) (1999).

       Supra.

       256 Ga. App. 866 (570 SE2d 60) (2002).

       229 Ga. App. 333 (494 SE2d 29) (1997).

        Davis, supra at 508-509.

       Id. at 509.

       See, e.g., OCGA§ 33-24-56.1 (b) (1), (e).

       See Landrum, supra at 788.

        Davis, supra at 510 (emphasis supplied).

       Id. at 511 (citation and punctuation omitted; emphasis supplied).

       Id.

       Supra.

       Landrum, supra at 788.

       Id. at 787.

       Id. at 787-789.

       Id. at 789.

       Id. at 788.

       Id.

       Id. at 789.

       Id. at 789.

       Id. at 789-790 (citation and punctuation omitted).

        Davis, supra at 511 (citation and punctuation omitted).

        Landrum, supra at 789.

       But see Chandler v. State Farm Mut. Automobile Ins. Co., 598 F3d 1115, 1120 (III) (A) (2) (9th Cir. 2010) (an insured may not sit back and do nothing to assert its rights against the responsible party, and then expect to be made whole by the insurer who enforces its subrogation rights).

       See, however, id. at 1120-1121 (III) (A) (2) (a rule requiring insurers to make insureds whole before subrogating themselves to insureds’ claims would remove virtually any incentive insured might have to pursue her claims against the third-party tortfeasor, because the insured could simply take her “share” from amount recouped in subrogation by the insurer).

       See generally Winkelmann v. Excelsior Ins. Co., 650 NE2d 841, 845 (NY App. Div. 1995) (rejecting contention that “because the inherently unequal bargaining positions of the insurer and insured in negotiations with the third party’s insurer naturally prejudice the insured,” the insurer’s right of subrogation should not arise until after the insured has been made whole); Muller v. Society Ins., 750 NW2d 1, 3-4 (Wis. 2008) (the made whole doctrine does not apply when an insurer has fully satisfied its obligations under an insurance contract, given its insureds the opportunity to settle their claim with the tortfeasor and the tortfeasor’s insurer, the pool of settlement funds available to the insureds exceeds the total claims of both the insureds and the insurer, and the insureds settle their claim, even though the insureds’ settlement, together with the insurer’s policy payment, does not satisfy the insureds’ total claim; in these circumstances, the inequitable prospect of an insurer competing with its insureds for an inadequate pool of funds is not present, and the equities favor the insurer).

        Landrum, supra at 790 (citation and punctuation omitted); see generally Chandler, supra at 1120 (III) (A) (2) (a rule that would prevent an insurer from recouping its payout until after the insured has been made whole would place the risk of loss on insurer whenever the insured does not attempt to recover from third-party tortfeasor, even when the insured could obtain a full recovery from third-party tortfeasor); Muller, supra.

       See Duncan v. Integon Gen. Ins. Corp., 267 Ga. 646, 647-648 (482 SE2d 325) (1997) (noting that subrogation, a doctrine originating in equity, is founded upon the dictates of refined justice; its basis is the doing of complete, essential, and perfect justice between all the parties, without regard to form, and its object is the prevention of injustice); Landrum, supra at 787-789; see generally Chandler, supra; Winkelmann, supra; Muller, supra.

       Supra.

       Supra.

        Canal Ins. Co., supra at 867 (1) (any claim by the employer or its insurer asserting subrogation rights against a third-party tortfeasor to the extent of workers’ compensation payment made to the employee arises solely by operation of statute).

        Florida Farm Bureau Ins. Co., supra (insurer sought reimbursement under a subrogation claim from funds recovered by the insured, notwithstanding that the loss sustained exceeded the total recovery from all parties); Garrity, supra at 513-514 (amount sought by insured and insurer “was more than what was possibly recoverable under the [tortfeasor’s insurance] policy’).


author: Boggs, Judge.

text:
    A11A2097, A11A2150.
    OLD PEACHTREE PARTNERS, LLC et al. v. GWINNETT COUNTY; and vice versa.
    (726 SE2d 437)
   Boggs, Judge.

In these consolidated appeals, we granted interlocutory review of a trial court order denying cross-motions for summary judgment filed by Gwinnett County, Georgia (“the County”), and Old Peachtree Partners, LLC and Gwinnett Community Bank (collectively “Old Peachtree”). In Case No. A11A2097, we reverse in part the trial court’s denial of Old Peachtree’s motion for summary judgment, and Case No. A11A2150 is dismissed as moot.

“On appeal from the denial of summary judgment the appellate court is to conduct a de novo review of the evidence to determine whether there exists 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.) Hood, v. Todd, 287 Ga. 164, 165 (695 SE2d 31) (2010).

The record reveals that beginning in 2005, the County funded engineering and land acquisition activities for the McGinnis Ferry Road extension. As part of this project, the County sought to acquire a fee simple right-of-way and easements from property owned by Old Peachtree. In August 2007, Old Peachtree executed an option agreement giving the County an irrevocable option to purchase from Old Peachtree, within 120 days of the date of the option, 1.867 acres of property for right-of-way and permanent easements for $1,100,000. But when Old Peachtree discovered that the County intended to install a forced main sewer across its property after the purchase of the right-of-way, it informed the County in an October 9, 2007 letter that such action would result in the inverse condemnation of Old Peachtree’s remaining 14 acres of property, destroying its ability to develop that portion of the property. Old Peachtree stated further that it would not proceed with the closing unless the County compensated it for the inverse condemnation of the property that would be affected by the forced main sewer.

Although Old Peachtree essentially withdrew the option in the October 9 letter, the County commission (“the Board”) nevertheless voted to approve the County’s exercise of the option. On December 19, 2007, the County notified Old Peachtree that it was exercising the option to purchase the right-of-way and easements, and that it was ready to close the transaction. When Old Peachtree failed to proceed with the closing, the County sued for breach of contract and specific performance. Old Peachtree answered alleging that the County failed to satisfy a condition precedent to executing the option agreement, and also counterclaimed for inverse condemnation and fraud.

In the summer of 2009, the parties began to discuss a settlement to resolve the pending litigation. On May 1, 2009, Old Peachtree presented the County with a written offer of settlement. Four days later, however, the Board rejected the offer during an executive session, but authorized the county attorney to present Old Peachtree with a counter-offer of settlement that included the sale of the original 1.857 acres plus an additional 15-acre tract. The County, in a letter dated May 8,2009, presented Old Peachtree with the counteroffer of settlement. This agreement (hereinafter “the settlement agreement”) provided in part:

[I]n an effort to bring to above-referenced matter [the pending litigation], as well as the condemnation matter involving the parties, to a resolution, the Board has authorized the following counter-offer of settlement:... The condemnation action involving the... 1.867 acres... will be resolved for the total amount of $1,100,000 ... and Old Peachtree Partners, LLC will sell the approximately 15.0 acres of property... as referenced in your offer of settlement to Gwinnett County, for $4,875,000. . . . This counter-offer of settlement will remain open for acceptance until May 15, 2009.

Old Peachtree accepted the counter-offer in a teleconference with the assistant county attorney on May 12, 2009. The parties then began preparing the documents that were the subject of the settlement agreement, including a purchase agreement and a mutual release.

On June 2,2009, the Board held a public meeting. The agenda for that meeting included as an item: “Approval/authorization for Chairman to execute Purchase and Sale Agreement between Gwinnett County, Georgia and Old Peachtree Partners.” Old Peachtree signed the purchase agreement and notarized it on June 13, 2009, with the intention of proceeding with the sale of the property. But on August 4, 2009, in an open session, the Board voted against the purchase of the property from Old Peachtree.

Following the parties’ failure to settle, the County filed a motion for partial summary judgment on its claim that the 2007 option agreement was a valid and binding contract, and that Old Peachtree breached that agreement by failing and refusing to convey the property. Old Peachtree filed a cross-motion for summary judgment on the County’s claim for specific performance, arguing that option agreement was unenforceable because the offer was revoked prior to the County’s acceptance and because there was a lack of consideration. Old Peachtree later amended its cross-motion for summary judgment to allege that the County breached the 2009 settlement agreement.

The trial court, in denying the cross-motions for summary judgment, ruled that a genuine issue of material fact exists concerning whether the County induced Old Peachtree to enter into the option agreement by “misrepresenting its intended purpose for acquiring the property and/or whether there was a material change in circumstances such that would entitle [Old Peachtree] to withdraw or rescind the [o]ption [agreement.” The court ruled further that the counter-offer of settlement was conditioned upon the approval by the Board of Commissioners at a public meeting, and that since the Board never approved the settlement agreement, the parties are not bound by the proposed settlement. The court then certified its order for immediate review.

Case No. A11A2097

1. Old Peachtree enumerates as error the trial court’s ruling that the settlement agreement was unenforceable.

Under Georgia law, an agreement alleged to be in settlement and compromise of a pending lawsuit must meet the same requisites of formation and enforceability as any other contract. In this regard, it is well settled that an agreement between two parties will occur only when the minds of the parties meet at the same time, upon the same subject matter, and in the same sense. An answer to an offer will not amount to an acceptance, so as to result in a contract, unless it is unconditional and identical with the terms of the offer. To constitute a contract, the offer must be accepted unequivocally and without variance of any sort.

(Citation and punctuation omitted.) Powerhouse Custom Homes v. 84 Lumber Co., 307 Ga. App. 605, 607 (705 SE2d 704) (2011). “In considering the enforceability of an alleged settlement agreement... a trial court is obviously limited to those terms upon which the parties themselves have mutually agreed.” (Citation and punctuation omitted.) Arrow Exterminators v. Gates Condo. Homeowners Assn., 294 Ga. App. 620, 621-622 (1) (669 SE2d 421) (2008). “Whether a settlement is an enforceable agreement is a question of law for the trial court to decide.” (Citation and punctuation omitted.) USA Manufacturing Corp. v. Perfection-Schwank, 271 Ga. App. 636, 638 (1) (610 SE2d 600) (2005).

The issue presented here is whether the settlement agreement is enforceable. The County argues that there was no agreement to settle because the requirement that the settlement agreement be approved with a Board vote in a public meeting was a condition precedent that was not satisfied. But as explained below, the requirement that the Board approve the purchase at a public meeting, while provided for in the purchase agreement, was not a condition of the settlement agreement. And it was the Board that, in fact, authorized the county-attorney to make a counteroffer of settlement with knowledge that the County’s duty pursuant to that settlement would later require the Board’s own approval of the purchase agreement by a Board vote in a public meeting.

It is undisputed that the county attorney was authorized to present Old Peachtree with the counteroffer of settlement; the counteroffer letter expressly provided “the Board had authorized the following counter-offer of settlement.” Old Peachtree presented uncontradicted evidence that it orally accepted the County’s offer by telephone on May 12, 2009. See, e.g., Smith v. Davis, 245 Ga. App. 34, 35, n. 4 (536 SE2d 261) (2000) (oral acceptance of written offer satisfies Statute of Frauds). The parties therefore exchanged mutually interdependent promises: the County offered to settle all pending disputes between the parties in exchange for the purchase of Old Peachtree’s property, and Old Peachtree accepted the offer, thereby establishing a contract. See also, e.g., Bd. of Regents &c. v. Doe, 278 Ga. App. 878, 881 (1) (a) (630 SE2d 85) (2006) (“A contract may be formed . . . when the parties exchange mutually interdependent promises. [Cit.]”); see also DeRossett Enterprises v. Gen. Elec. Capital Corp., 275 Ga. App. 728, 729 (1) (621 SE2d 755) (2005) (acceptance of counter-offer sufficient to create settlement agreement).

Nonetheless, the trial court found, and the County argues, that both parties operated under the assumption that the settlement agreement was conditioned upon approval in a public meeting based upon e-mails between the parties and language in the purchase agreement signed by Old Peachtree. On May 14, 2009, the assistant county attorney sent a draft of the purchase agreement by e-mail to counsel for Old Peachtree. The parties discussed proposed changes to the purchase agreement over the next few days, and in an e-mail dated May 26,2009, counsel for Old Peachtree informed the assistant county attorney, “I would like to have my folks sign [the purchase agreement] before the [c]ommission meeting on June 2nd.” In a May 29 e-mail, counsel for Old Peachtree stated that the documents presented by the County (including the purchase agreement, a mutual release, and final consent order) were acceptable and that “My client will sign the [pjurchase and [s]ale [agreement and drop off to you today.” The last line of the purchase agreement provided: “This Agreement is hereby accepted this_day of_, 2009, subject to approval by the Gwinnett County Board of Commissioners in a public meeting.” And between the spaces provided for the seller’s signature and the purchaser’s signature was a line that read: “This Agreement approved by the Gwinnett County Board of Commissioners in a public meeting this_day of June, 2009.” But the e-mails sent by Old Peachtree’s counsel and Old Peachtree’s signature on the purchase agreement tend rather to show that Old Peachtree considered the public vote to be a mere formality.

The Supreme Court of Georgia’s decision in Jackson Elec. Membership Corp. v. Ga. Power Co., 257 Ga. 772 (364 SE2d 556) (1988), is instructive here. In Jackson, an electric membership corporation (“EMC”) filed suit contending that it had a contract with a business to supply electricity, and that the business breached the contract. Id. at 772-773. The trial court ruled that because the business had not applied for membership to the EMC as required by the contract, and because the EMC could refuse to accept the business as a member, the “attempt to contract failed due to lack of mutuality of obligation.” Id. at 773. On appeal, however, the Supreme Court of Georgia ruled that a valid contract existed because the parties had exchanged mutually interdependent promises. Id. at 773-774 (1). The court held that “membership in the corporation is a condition precedent not to the contract but to the existence and enforcement of an immediate right, that the parties have an implied duty to exercise good faith in accomplishing the condition precedent and that the condition is a mere formality.” Id. at 774 (1).

Similarly, in Doe, supra, 278 Ga. App. at 878, the Board of Regents authorized Georgia Tech to conduct a search for a new dean. Id. at 879. Georgia Tech conducted the search, offered the position to Doe in a letter that provided that the offer was “tentative pending approval of the Board of Regents,” and Doe accepted the offer. Id. Georgia Tech announced that Doe would be the incoming dean, allowed him to meet with faculty concerning administrative matters, and encouraged him to conduct fundraising activities. Id. When Georgia Tech officials were informed of allegations of inappropriate behavior by Doe, Georgia Tech withdrew the recommendation and the Board did not vote on Doe’s approval. Id. at 880. Our court held that “Georgia Tech and Doe formed a contract when they exchanged ‘mutually interdependent promises’ that contained all of the essential terms of a contract. The provision regarding the Board’s approval created an implied duty for both parties to exercise good faith in securing such approval.” Id. at 882 (1) (b). Here, as in Jackson and Doe, a contract was formed between the County and Old Peachtree, and a condition of contract performance was the approval of the purchase agreement by a Board vote in a public meeting.

Although the trial court’s order notes that Old Peachtree took no steps to determine the extent of the county attorney’s authority to settle the matter, such steps were not necessary where, as here, the settlement offer plainly states that the Board authorized the counteroffer of settlement, and the county attorney had the authority to act on behalf of the county pursuant to a county ordinance. See Gwinnett County Code of Ordinances, Part II, Ch. 2, Art. III, Div. 5, Sec. 2-106 (5) and (10); DeKalb County v. DRS Investments, 260 Ga. App. 225, 226-227 (1) (581 SE2d 573) (2003) (county attorney had unconditional authority to bind county pursuant to county ordinance); see also OCGA§ 36-60-13 (a) (county authorized to enter into purchase of real property); OCGA § 45-6-5 (powers of public officers are defined by law). Nothing in OCGA § 45-6-5 or DRS Investments, supra, mandates a different result, because they do not alter the county attorney’s authority to make the settlement offer on behalf of the Board. As we have explained, while a vote in a public meeting was a required formality to effectuate the purchase of the property, the Board’s failure to complete that formality in good faith when voting in the public meeting cannot destroy an already existing settlement agreement.

The settlement agreement was therefore enforceable, and the trial court erred in denying Old Peachtree’s motion for summary judgment on this ground.

2. Old Peachtree also contends that the trial court erred in denying its motion for summary judgment on its assertion that the option agreement is unenforceable. But this claim is rendered moot by our holding in Division 1 that there was a valid settlement agreement to settle the pending claims between the parties, including those arising from the option agreement.

Case No. A11A2150

3. Because we have held in Division 1 that the settlement agreement was enforceable, the County’s appeal from the trial court’s denial of its motion for summary judgment on its claim that Old Peachtree breached the option agreement is dismissed as moot.

Decided March 8, 2012

Webb, Tanner & Powell, Anthony O. Powell, Balch & Bingham, Malissa Kaufold-Wiggins, Michael J. Bowers, for appellants.

Michael P. Ludwiczak, Karen G. Thomas, Michael V. Stephens, for appellee.

Judgment affirmed in part and reversed in part in Case No. A11A2097. Appeal dismissed in Case No. A11A2150.

Mikell, P. J., and Miller, J., concur.

       The County also filed a separate condemnation action against Old Peachtree.

       One of the commissioners deposed that he believed the Board voted against the settlement offer because of an e-mail from the Gwinnett County district attorney, and a second commissioner deposed that he “felt [the e-mail] to be a consideration.” This e-mail, sent to each Board member on June 1, 2009 stated:
      Frankly, it is with a great deal of shock that I read this agenda item [(the purchase of Old Peachtree’s property)] particularly with what I know about the ownership of the property and in this time of budgetary distress. If this item goes forward tomorrow, you can expect to be explaining this and other recent land purchases to the Grand Jury.

       The County also points to the Board’s written policy that “while land acquisition may be discussed in a closed meeting, any vote will be taken in a public meeting,” and argues that this policy constituted an express limitation on the settlement authority of the county attorney. But this does not affect our analysis here because while this Board’s policy may have been an express limitation on its ability to approve the acquisition of land, it did not constitute an express limitation on the county attorney’s authority to make a counter-offer of settlement which was unconditional in this case.


author: BARNES, Presiding Judge.

text:
    A11A1528.
    HADLEY et al. v. COUNTRYWIDE HOME LOANS, INC. et al.
    (727 SE2d 183)
   BARNES, Presiding Judge.

William Hadley and Wendy Hadley, pro se, appeal the trial court’s denial of summary judgment to them and grant of summary judgment to Countrywide Home Loans, Inc., Bank of America Corporation, and BAC Home Loans Servicing, LP (hereinafter “Countrywide,” unless specifically referencing the separate entity), in this case involving cross-claims for breach of contract. They argue that these entities lack standing, and that under a settlement agreement, their duty to make monthly payments for private mortgage insurance (“PMI”) to be held in escrow was waived by agreement. For the reasons that follow, we affirm in part and reverse in part the trial court’s summary judgment ruling.

When reviewing the grant or denial of a motion for summary judgment, this Court conducts a de novo review of the law and the evidence. To prevail at summary judgment, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.

(Footnotes omitted.) Smith v. Gordon, 266 Ga. App. 814 (1) (598 SE2d 92) (2004). See OCGA§ 9-11-56 (c).

Reviewed in this context, the record reflects that in November 2005, the Hadleys obtained an adjustable rate mortgage loan from Countrywide for $244,800. Under its terms, the Hadleys were to make monthly interest-only payments of $1,326 for ten years as well as monthly payments for insurance and taxes to be held in escrow. In 2006, the Hadleys filed suit in federal court against Countrywide seeking to rescind the loan and alleging that it was originated in violation of the federal Truth in Lending Act, 15USC§ 1601 et seq.

In May 2007, the parties entered into a “Confidential Settlement Agreement and Release of Claims and Potential Claims,” in which Countrywide agreed to change the Hadleys’ loan to a fixed rate of 6.5 percent in exchange for the couple’s agreement to dismiss with prejudice the federal action. The settlement also provided that, after a four-month payment suspension period, the Hadleys

will make all suspended payments to Countrywide and Countrywide will modify the terms of [the] Loan .... After modification, [the] Loan . . . will conform to the following terms: (a) a fixed interest rate of 6.5%; and (b) waiver of the escrow requirements set forth in Section 3 of the security deed securing payment of [the] Loan . . . subject to the condition that the Hadleys will resume making escrow payments as set forth in Section 3 of the security deed if the Hadleys should fail to timely make any other payments required under the loan documents.

(Emphasis supplied.) The Hadleys also entered into a “Suspended Payment Agreement” in which Countrywide agreed to suspend the couple’s mortgage payments for the months of May, June, July, and August 2007, after which “[on] September 10, 2007 Countrywide will offer to modify your Loan on terms set forth in the Confidential Settlement Agreement and Release of Claims and Potential Claims, to which this Suspended Payment Agreement is attached.” (Emphasis supplied.) The Suspended Payment Agreement further “incorporate [d] in full all terms of the Confidential Settlement Agreement.”

In a November 30, 2007, letter to the Hadleys’ attorney, Countrywide’s attorney expressed frustration that the parties were having difficulty negotiating the terms of a loan modification agreement per the settlement agreement. The letter also said:

As previously discussed, while Countrywide has waived escrow requirements, it is not practical to require the Hadleys to purchase their own mortgage insurance (“PMI”). Therefore, the Hadleys’ monthly payments will also include PMI. Once PMI is included, the Hadleys’ total monthly payment during the interest-only period of the loan will be $1,515.42. In 2016 and afterwards until maturity in December 2035, the Hadleys will make monthly payments of interest and principal in the amount of $1,659.08. Adding in PMI, the Hadleys’ total monthly payment during this time will be higher than is shown on the enclosed documents, specifically the total monthly payment will be $1,785.56.

The attorney further directed that he should be contacted “if you or your clients object to any portion of the revised loan modification agreement.”

In December 2007, the Hadleys entered into a “Loan Modification Agreement” (hereinafter “the Agreement”) with Countrywide, under which they were to make interest-only payments of $1,388.94 per month beginning on January 1, 2008 until January 1, 2016, followed by principal and interest payments of $1,659.08 per month until the loan matured on December 1, 2035. The Agreement also provided that the “Borrower will comply with all other covenants, agreements and requirements of the Security Instrument, including . . . the Borrower’s covenants and agreements to make all payments of. . . escrow items.”

Countrywide accepted the Hadleys’ payments of $1,388.94 from January 2008 to November 2008, then on December 9, 2008, rejected and returned the Hadleys’ check for the same amount. Countrywide thereafter rejected and returned the Hadleys’ next three mortgage checks, which were dated January 2, 2009, February 1, 2009, and February 19, 2009. On March 25, 2009, the Hadleys filed the underlying “Complaint for Injunction from Foreclosure, Enforce Loan Modification Agreement and Equitable Relief” against Countrywide, alleging that it breached the Agreement by rejecting four of the Hadleys’ loan payments, after which they set aside the rejected payments into a separate account for Countrywide’s benefit and would continue to do so.

Countrywide answered and admitted rejecting some of the Hadleys’ payments that were allegedly untimely or insufficient. It also counterclaimed for breach of contract and sought payment of amounts due under the adjusted loan. The Hadleys amended their complaint to add Bank of America Corporation as a defendant because the bank had acquired Countrywide Financial Corporation, and the mortgage company was a subsidiary of Countrywide Financial Corporation. The parties were unsuccessful in several attempts to settle the case, and Countrywide thereafter filed a motion for summary judgment.

In support of its motion, Countrywide argued that it was undisputed that the Hadleys owed $1,388.94 in interest payments each month and had not paid Countrywide since March 2009. It further argued that no evidence supported the Hadleys’ contention that the PMI had been waived. Countrywide also filed a motion to add BAC Home Loans Servicing, LP, a subsidiary of Bank of America Corporation and the servicer of the loan, as a party to the action and counter-claimant for the breach of contract action, which the trial court granted.

The Hadleys responded to Countrywide’s motion for summary judgment and filed a cross-motion for summary judgment, contending that Countrywide lacked standing because BAC Home Loans was the real party in interest. They also argued the Agreement clearly modified the original loan by waiving all escrow requirements. Thus, they contended, Countrywide breached the Agreement by rejecting their payments of $1,388.94. Following a hearing, the trial court granted Countrywide’s motion and denied the Hadleys’ motion, finding that Countrywide did not breach the Agreement because the amounts the Hadleys tendered were insufficient because they did not include payments for PMI premiums, for which the Hadleys remained “contractually obligated to pay.”

1. On appeal, the Hadleys claim that Countrywide, Bank of America Corporation, and BAC Home Loans Servicing, LP, lacked standing to maintain a motion for summary judgment. They contend that Countrywide and Bank of America lacked standing because their note was assigned to Federal National Mortgage Association (“Fannie Mae”), and also contend that BAC was not a real party in interest because it was merely a servicing agent.

“The real party in interest is the person who, by the substantive governing law, has the right sought to be enforced.” (Citation and punctuation omitted.) Allianz Life Ins. Co. &c. v. Riedl, 264 Ga. 395, 398 (3) (444 SE2d 736) (1994). In McCray v. Fed. Nat. Mtg. Assn., 292 Ga. App. 156, 159 (1) (663 SE2d 736) (2008), we recognized that both the owner of money due under mortgage and its loan servicer may have standing to sue for deficiencies. Id., citing Bankers Trust v. 236 Beltway Investment, 865 FSupp. 1186, 1191 (E.D. Va. 1994).

In this case, the record indicates that after the Hadleys obtained the adjustable rate loan with Countrywide in November 2005, Fannie Mae “became the investor on the Hadleys’ loan” in December 2005. Countrywide Home Loans Servicing continued to service the Hadleys’ loan after Fannie Mae acquired it, and when Bank of America acquired Countrywide in 2008, Countrywide Home Loans Servicing changed its name to BAC Home Loans Servicing and apparently continued to service the Hadleys’ loan.

Regarding the Hadleys’ real-party-in-interest defense related to each individual entity — Countrywide, Bank of America Corporation, and BAC Home Loans Servicing — although Countrywide and the Hadleys were the original parties to the settlement agreement, the record does not reflect whether Countrywide currently has the right to enforce the Agreement’s terms after Fannie Mae acquired the Hadleys’ loan in 2008. The record is unclear as to whether all rights related to the Hadleys’ loan were assigned to Fannie Mae or whether Countrywide retained some interest. Likewise, regarding BAC Home Loans Servicing, per the Hadleys’ security deed, the loan servicer collects the payments due under the note and performs other loan servicing obligations. The deed further provides that the servicing obligation remains with the loan servicer “not the Note purchaser unless otherwise provided by the Note purchaser,” and also that if there is a change in the loan servicer “the Borrower will be given written notice of the change which will state the name and address of the new Loan Servicer, the address to which payments should be made and any other information RESPA requires in connection with a notice of transfer of servicing.”

Summary judgment is appropriate only when the evidence shows that “there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” OCGA § 9-11-56 (c). OCGA § 9-11-17 (a) provides, in pertinent part, that “[e]very action shall be prosecuted in the name of the real party in interest.”

Here, Countrywide and Appellees have failed as a matter of law to establish their status as the holders of an interest in the Agreement, despite the Hadleys’ allegation that their loan had been assigned to Fannie Mae. Further, other than the bank’s averment that servicing of the loan was transferred to BAC Home Loans Servicing, the record does not include written notice of the transfer of service or any other documentation of a servicing agreement between the Hadleys and BAC Home Loans Servicing.

To prevail on its motion for summary judgment, Countrywide, as movant, had the burden of “establishing the non-existence of any genuine issue of fact,” including the Hadleys’ assertion that Countrywide is not the real party in interest, and “all doubts are to be resolved against [Countrywide].” (Citation and punctuation omitted.) Sawgrass Builders v. Key, 212 Ga. App. 138 (1) (441 SE2d 99) (1994); see Rigdon v. Walker Sales &c., 161 Ga. App. 459, 462 (288 SE2d 711) (1982) (“[Wjhere it appears from the contract itself that the original seller . . . assigned all its rights, title and interest in said contract to an assignee..., the assignee is the real party in interest.”).

Accordingly, because there were genuine issues of material fact as to whether Countrywide and Bank of America Corporation retained an interest in the loan modification agreement after Fannie Mae became an “investor” in the loan, and whether, per the servicing agreement, BAC had the right to take action against the Hadleys, the trial court erred in granting Countrywide’s motion for summary judgment.

2. The Hadleys also contend that the trial court erred in finding as a matter of law that Countrywide did not breach the loan modification agreement by refusing to accept their payments of $1,388.94. They argue that the agreement is binding and enforceable under the law, and that it clearly provided that the escrow requirements in the original security deed would be waived.

The Hadleys maintain that the loan modification amount reflected the terms reached in the Settlement Agreement that the escrow requirement would be waived. They argue that Countrywide breached the terms of the Settlement Agreement by rejecting their payments for the agreed-upon amount of $1,388.94. Countrywide contends that the Settlement Agreement containing the waiver of escrow was merely an “agreement to agree” and that the loan modification did not contain any provisions waiving the Hadleys’ escrow obligations, and the parties agreed that the Hadleys would continue to make escrow payments to cover PMI. It also asserts, in the alternative, that even if there were a waiver, when the Hadleys missed a payment in May 2008, under the terms of the Settlement Agreement, the couple was required to resume paying all escrow items.

Under Georgia law, an agreement alleged to be in settlement and compromise of a pending lawsuit must meet the same requisites of formation and enforceability as any other contract. In this regard, it is well settled that an agreement between two parties will occur only when the minds of the parties meet at the same time, upon the same subject matter, and in the same sense.

(Citations and punctuation omitted.) Wilkins v. Butler, 187 Ga. App. 84,85 (369 SE2d 267) (1988). Thereby, “[a]n answer to an offer will not amount to an acceptance, so as to result in a contract, unless it is unconditional and identical with the terms of the offer. To constitute a contract, the offer must be accepted unequivocally and without variance of any sort.” (Citations and punctuation omitted.) Herring v. Dunning, 213 Ga. App. 695, 698 (446 SE2d 199) (1994). A purported acceptance of a settlement offer which imposes conditions or otherwise varies the offer will be construed as a counteroffer to the offer. Id. See also Auto-Owners Ins. Co. v. Crawford, 240 Ga. App. 748, 750 (1) (525 SE2d 118) (1999) (meeting of the minds and mutual assent can be found only when the acceptance of an offer was unconditional, unequivocal, and without variance of any sort).

Contrary to Countrywide’s contention that there was no enforceable settlement agreement, per the explicit language of paragraph 5 of the Agreement, in exchange for the Hadleys dropping their federal civil action with prejudice, Countrywide agreed to modify the couple’s original loan to “conform to the following terms: (a) a fixed interest rate of 6.5%; and (b) waiver of the escrow requirements set forth in Section 3 of the security deed.” Further, the Agreement stipulated that “[t]he documents necessary to effectuate the loan modification described in paragraph 5 will be delivered to Countrywide and executed by [the Hadleys] prior to the end of the four-month... period described in paragraph 5.”

Additionally, the Agreement stated that “if the facts with respect to this [Settlement [A] greement, or upon which this [S]ettlement [A] greement is based, are found hereafter to be other than or different from the facts now believed to be true,” then “this [S]ettlement [A] greement shall be and remain effective, notwithstanding such difference in facts.” The Settlement Agreement was not an agreement to agree as argued by Countrywide, but the acceptance of an offer that was unconditional and unequivocal — 6.5 percent interest and waiver of escrow. Consequently, the Settlement Agreement was binding and enforceable against Countrywide, or its assignee, and its terms were not superseded by the parties’ loan modification agreement. “Any change in the nature or terms of a contract is called a ‘novation’ [and] such novation, without the consent of the surety, discharges him.” OCGA § 10-7-21. The question of whether the parties mutually intended a novation is ordinarily a question reserved for the trier of fact. Georgialina Enterprises v. Frakes, 250 Ga. App. 250, 254 (551 SE2d 95) (2001).

Thus, the trial court erred in finding as a matter of law that Countrywide did not breach the loan modification agreement by refusing to accept the Hadleys’ payment, and finding that the Hadleys breached the loan modification agreement by refusing to make the PMI payments. Accordingly, the grant of summary judgment to Countrywide was in error.

Countrywide also maintains that per the loan modification agreement, the Hadleys were required to pay all escrow items, and that even if the requirement was waived, under the Security Deed, the waiver could be revoked at any time. The Security Deed provides, in pertinent part, that “Lender may waive Borrower’s obligation to pay to Lender Funds for any or all Escrow Items at any time,” and that “lender may revoke the waiver as to any or all Escrow Items at any time by a notice given in accordance with Section 15.” Section 15 provides that the waiver revocation notice be in writing, and mailed or delivered to the borrower at the property address unless another address is designated.

Decided March 30, 2012.

William Hadley, pro se.

Wendy Hadley, pro se.

Hunton & Williams, Charlotte M. Ritz, Lawrence J. Bracken II, for appellees.

Although the record reflects that Countrywide’s attorney communicated with the Hadleys’ attorney that despite the earlier “waive [r] of escrow requirements” the monthly payments would include PMI, genuine issues of material fact exist as to whether his communication evinced a revocation of the waiver and written notice to the Hadleys as required by the Security Deed.

Countrywide contends that even if there were a legitimate waiver of escrow, the Hadleys missed the May 2008 loan payment, which triggered an automatic provision in the Settlement Agreement requiring an immediate resumption of escrow payments. The record reflects, however, that after the Hadleys purportedly missed the May payment, Countrywide continued to accept the Hadleys’ payments for the next six months, rather than rejecting the payments outright because the amount did not include the PMI. Thus, there exists a jury question as to whether by accepting the payments without the PMI Countrywide waived the provision requiring resumption of escrow payments. “A waiver maybe express, or maybe inferred from actions, conduct, or a course of dealing. Waiver of a contract right may result from a party’s conduct showing his election between two inconsistent rights.” (Citation and punctuation omitted.) Kusuma v. Metametrix, Inc., 191 Ga. App. 255, 257 (3) (381 SE2d 322) (1989). Whether the party’s conduct caused a waiver and effected a quasi-new agreement ordinarily is a question for the jury. Id.

Likewise, because there are genuine issues of material fact as to whether after missing a loan payment the Hadleys were required per the Settlement Agreement to resume escrow payments, the trial court did not err in denying their motion for summary judgment.

Judgment affirmed in part and reversed in part.

Adams and Blackwell, JJ., concur in judgment only.