Hale Haven Properties, LLC v. Bank of America, N.A.

SECOND DIVISION
MILLER, P. J.,
ANDREWS and BROWN, JJ.

NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules

June 1, 2018

In the Court of Appeals of Georgia
A18A0132, A18A0134. AUTO-OWNERS INSURANCE
COMPANY v. HALE HAVEN PROPERTIES, LLC; and vice
versa.
A18A0133. BANK OF AMERICA N.A. et al v. HALE HAVEN
PROPERTIES, LLC, et al.
A18A0147. HALE HAVEN PROPERTIES, LLC v. BANK OF
AMERICA, N.A. et al.

MILLER, Presiding Judge.

These four related appeals stem from a lawsuit filed by Hale Haven Properties,

LLC, against Auto-Owners Insurance Company, Bank of America, N.A., and Regions

Bank, Inc. (Bank of America and Regions Bank are collectively, the “Bank

Appellants”), to recover payment on an insurance claim for damage to commercial

property.

In the first two cases, A18A0132 and A18A0134, Auto-Owners appeals from

the trial court’s denial of its motion for summary judgment on Hale Haven’s claims
for breach of contract, reformation, enforcement of the check, bad faith, and attorney

fees, and Hale Haven cross-appeals from the trial court’s denial of its summary

judgment motion against Auto-Owners. As it pertains to Auto-Owners’ appeal, we

conclude that although genuine issues of material fact remain on Hale Haven’s

reformation claim, Hale Haven cannot show that Auto-Owners breached the

insurance policy as written, Hale Haven’s enforcement-of-the-check claim was

untimely, and Hale Haven’s claims for bad faith damages and attorney fees fail as a

matter of law. Thus, the trial court correctly denied summary judgment on the

reformation claim but erred in denying summary judgment in Auto-Owners’ favor on

the remaining claims. We also conclude that the trial court correctly denied Hale

Haven’s motion for summary judgment because a jury issue exists regarding whether

Hale Haven was negligent in its alleged failure to obtain and read the insurance

policy, so as to prejudice Auto-Owners.

In the next two appeals, A18A0133 and A18A0147, the Bank Appellants

appeal from the trial court’s denial of their motions for summary judgment against

Auto-Owners and Hale Haven, respectively, and Hale Haven cross-appeals from the

trial court’s denial of its summary judgment motion against the Bank Appellants.

Regarding the Bank Appellants’ appeal against Auto-Owners, we vacate the trial

2
court’s denial of summary judgment and remand for consideration of whether Auto-

Owners’ cross-claim was time-barred. As to the Bank Appellants’ appeal against Hale

Haven, we conclude that the trial court properly denied summary judgment because

a jury issue exists regarding the Bank Appellants’ commercial reasonableness in

accepting and paying on the insurance check. We also determine that the trial court

properly denied summary judgment on Hale Haven’s cross-appeal against the Bank

Appellants because the Bank Appellants are not foreclosed from asserting the defense

of commercial reasonableness.

Accordingly, we affirm in part, reverse in part, vacate in part, and remand for

further proceedings consistent with this opinion.

“On appeal from a grant of summary judgment, this Court conducts a de novo

review of the record, construing the evidence and all inferences therefrom most

favorably to the nonmoving party.” (Citation omitted.) American Mfg. Mut. Ins. Co.

v. E A Technical Svcs., Inc., 270 Ga. App. 883 (608 SE2d 275) (2004).

So viewed, the record shows that Hale Haven sold a shopping center to VPS

Enterprises, LLC in 2010, while maintaining a mortgagee interest in the property. As

part of the sale, Hale Haven and VPS entered into a security agreement, which

required VPS to maintain insurance coverage on the property. The security agreement

3
also provided that in the event of a “loss under any such policy of insurance,” Hale

Haven was authorized to apply the insurance proceeds to the mortgage debt on the

property, which was $3,000,000 at the time of the sale.

In 2011, an agent for VPS, Dennis Pack, procured insurance coverage for the

property from Auto-Owners, and asked for Hale Haven to be named as the mortgagee

on the policy. The policy application provided for both property coverage and general

liability coverage, and, on the application, Hale Haven was named as a mortgagee for

both types of coverage. An underwriter with Auto-Owners approved this application.

However, when the formal one-year insurance policy was issued, Hale Haven was

only listed as a mortgagee on the general liability section and not the property

coverage section. This same insurance policy was automatically renewed in 2012.

In 2013, VPS made a property insurance claim to Auto-Owners, stemming from

damage after a hailstorm.1 On the “proof of loss” form, Hale Haven was listed as

having an interest in the property. In November 2013, Auto-Owners issued a check

as payment on the claim to “VPS ENTERPRISES LLC AND HALE HAVEN

PROPERTIES LLC,” in the amount of $465,346.96, and Auto-Owners gave that

1
The property damage coverage part is the only coverage at issue in this case.

4
check to Pack. Auto-Owners added Hale Haven to the check because it had conducted

a title search on the property and learned that Hale Haven was a mortgagee.

On November 25, 2013, Pack formed a limited liability company named “vps

enterprises and hale haven properties llc,” and on the company’s articles of

organization, he was listed as the sole registered agent and organizer for the company.

An IRS employer identification number was assigned to the company, and the

company was also issued a certificate of organization from the State of Georgia.

The next day, Pack presented these business documents at a Regions Bank

branch and he opened a business account named “VPS ENTERPRISES AND HALE

HAVEN.” Pack deposited the insurance check into this new account, but because he

did not endorse the check, Auto-Owners requested that Regions Bank rescind the

deposit. Regions Bank complied, and Auto-Owners reissued the check in the same

amount, again making it payable to “VPS ENTERPRISES LLC AND HALE HAVEN

PROPERTIES LLC.” In depositing this new check, Pack signed his name on the

reverse and printed, “VPS ENTERPRISES LLC HALE HAVEN PROPERTIES

LLC.” Bank of America, with whom Auto-Owners had its account, was the drawee

(or payor) bank. After the funds were deposited by Bank of America into the Regions

5
Bank account Pack had opened, he wired $450,000 to an international checking

account and he appears to have later left the country.

Hale Haven only became aware that the property had been damaged when a

roofing contractor sought payment for repairs that had been performed on the

property. When Hale Haven visited and inspected the property, it found the repairs

to be incomplete and contacted Auto-Owners. Auto-Owners, however, informed Hale

Haven that it had already issued full payment on a hail damage claim made by VPS,

that Hale Haven was named on the check, and that Auto-Owners was not responsible

for any improper signature on that check. VPS ultimately defaulted on its mortgage

payments for the property, and Hale Haven repurchased it at foreclosure for

$1,200,000, and then resold it at a loss for approximately $800,000.

After receiving no payments from the insurance claim, Hale Haven filed suit

in Fulton County State Court in June 2014, alleging breach of contract against Auto-

Owners and conversion against Bank of America.2 Hale Haven dismissed this state

court case without prejudice in September 2015. Then, less than five months later,

2
This initial action included a negligence claim against Auto-Owners, but Hale
Haven later abandoned this claim in its amended complaint in the Fulton County
Superior Court. Hale Haven also sued the insurance agents, but after settling with
those parties, they were dismissed from the case.

6
Hale Haven filed a renewal action in the Fulton County Superior Court, pursuant to

OCGA § 9-2-61. In addition to its initial breach-of-contract claim against Auto-

Owners, Hale Haven requested reformation of the insurance policy, and added claims

for enforcement of the check under OCGA § 11-3-309; bad faith damages and

attorney fees under OCGA § 33-4-6 for a refusal to pay the insurance claim; and

attorney fees under OCGA § 13-6-11 for stubborn litigiousness. Hale Haven also

added Regions Bank to the lawsuit, suing them for conversion of the check. Auto-

Owners then filed a cross-claim against the Bank Appellants, arguing that they “failed

to comply with commercially reasonable and necessary steps” before approving

payment on the check.

Auto-Owners and the Bank Appellants moved for summary judgment on all the

claims filed against them. Hale Haven also filed a motion for partial summary

judgment on its conversion claim against the Bank Appellants and on its claim that

Auto-Owners was obligated to pay Hale Haven the amount of the insurance proceeds.

After a hearing, the trial court denied all the parties’ summary judgment motions, and

these appeals followed.

7
 The threshold question for each of Hale Haven’s claims against Auto-Owners

is whether they were timely under the renewal statute in conjunction with the two-

year limitation period in the insurance policy.

OCGA § 9-2-61 (a) permits a plaintiff to dismiss and recommence a suit
within the original applicable period of limitation or within six months
after the dismissal, whichever is later. If the statute of limitation has not
run, the plaintiff may add new parties and new claims to the refiled
action; however, if the statute of limitation has expired, the plaintiff is
limited to suing the same defendants under the same theories of
recovery. The new petition must be substantially the same as the original
as to the essential parties. The renewal statute may not be used to
suspend the running of the statute of limitation as to defendants different
from those originally sued.

(Citations and punctuation omitted.) Ward v. Dodson, 256 Ga. App. 660, 661 (569

SE2d 554) (2002). The insurance policy provides: “No one may bring a legal action

against us under this [Commercial Property] Coverage part unless . . . [t]he action is

brought within 2 years after the date on which the direct physical loss or damage

occurred.”

Here, Hale Haven’s original action was timely filed in state court in June 2014,

well within the two-year limitation period provided in the insurance policy. Because

this instant case was filed within six months after Hale Haven dismissed its initial

8
lawsuit — the time frame in the renewal statute — the limitation period in the

insurance policy does not provide a time-bar to any claims properly brought in the

renewal action. Blue Ridge Ins. Co. v. Maddox, 185 Ga. App. 153 (1) (363 SE2d 595)

(1987).3 The timeliness of each claim against Auto-Owners under the renewal statute

will be discussed in turn.

Case No. A18A0132

1. Auto-Owners argues that the trial court erred in denying its summary

judgment motion against Hale Haven because (1) Hale Haven’s renewal action was

untimely filed after the two-year limitation period in the insurance policy; and (2)

Hale Haven’s claims for breach of contract, reformation, enforcement of the check,

bad faith, and attorney fees all fail as a matter of law. Although we conclude that the

reformation claim was properly brought in the renewal action, and genuine issues of

material fact remain as to this claim, the trial court erred in its denial of summary

judgment as to all of Hale Haven’s remaining claims against Auto-Owners.

3
The trial court properly recognized that because Auto-Owners was a
defendant in the first lawsuit, it cannot challenge the renewal action on the basis that
the parties in Hale Haven’s second lawsuit varied from those in the first. See Dodson,
supra, 256 Ga. App. at 661 (“The renewal statute may not be used to suspend the
running of the statute of limitation as to defendants different from those originally
sued.”) (citation omitted; emphasis supplied).

9
 (a) Breach of the Insurance Policy

Auto-Owners contends that it did not breach the insurance policy as written and

that Hale Haven is not entitled to reformation of the insurance policy as a matter of

law. Although we determine that Hale Haven cannot demonstrate that Auto-Owners

committed a breach on the insurance policy as written, there are genuine issues of

material fact regarding whether the policy should be reformed to name Hale Haven

as an additional insured mortgagee on the property coverage part of the insurance

policy.

(i) Breach of contract on the policy as written

At the outset, we note that this claim is substantially the same as the breach-of-

contract claim asserted in the original state court complaint, and no timeliness issue

arises here under the renewal statute. Soley v. Dodson, 256 Ga. App. 770, 772 (569

SE2d 870) (2002) (“To suspend the running of the statute of limitation in a renewal

action, the cause of action must be substantially the same as in the original action.”)

(citation and footnote omitted).

“Construction of an insurance policy is governed by the ordinary rules of

contract construction, and when the terms of a written contract are clear and

unambiguous, the court is to look to the contract alone to find the parties’ intent.”

10
(Citation omitted; emphasis supplied.) Ins. Co. of Pennsylvania v. APAC-Southeast,

Inc., 297 Ga. App. 553, 557 (677 SE2d 734) (2009); Infinity Gen. Ins. Co. v. Litton,

308 Ga. App. 497, 500 (2) (707 SE2d 885) (2011). “Where the contractual language

is explicit and unambiguous, the court’s job is simply to apply the terms of the

contract as written, regardless of whether doing so benefits the carrier or the insured.”

(Citations omitted.) Georgia Farm Bureau Mut. Ins. Co. v. Smith, 298 Ga. 716, 719

(784 SE2d 422) (2016). “The proper construction of a contract, and whether the

contract is ambiguous, are questions of law for the court to decide.” (Citation

omitted.) APAC-Southeast, supra, 297 Ga. App. at 557.

The text of the insurance policy is neither unclear nor ambiguous. The property

coverage section provides, “SECURED INTERESTED PARTIES: None.” Indeed,

Hale Haven is not named anywhere in this section of the policy. Hale Haven’s

reliance on the testimony of the insurance agent and an underwriter regarding their

interpretation of the policy is unavailing; when we are presented with clear and

unambiguous contract terms, “we enforce [those] terms as written and do not look

elsewhere to assist in the contract’s interpretation.” (Citation omitted.) Donchi, Inc.

v. Robdol, LLC, 283 Ga. App. 161, 166 (2) (640 SE2d 719) (2007). Therefore, as a

11
matter of law, Hale Haven does not show that Auto-Owners breached a contractual

obligation with regard to the property loss at issue, based on the policy as written.4

(ii) Reformation

First, under our Supreme Court precedent, the reformation claim was timely.

In Birmingham Fire Ins. Co. of Pa. v. Commercial Transp., Inc. 224 Ga. 203 (160

SE2d 898) (1968), the insured sued its carrier on the insurance policy within the

policy’s 12-month limitation period, dismissed the action, and then brought a renewal

action for reformation less than six-months later. Noting that the appellee “was

seeking to recover for the same loss under the same policy,” id. at 204 (1), the Court

deemed the renewal action timely under the renewal statute, even though the 12-

month limitation period in the policy had since elapsed. Id. Therefore, we similarly

4
Hale Haven argues that because Auto-Owners did not assert that Hale Haven
was not insured under the policy when it denied Hale Haven’s request for payment,
Auto-Owners cannot do so now. Hale Haven relies on World Harvest Church, Inc.
v. GuideOne Mut. Ins. Co., 287 Ga. 149 (695 SE2d 6) (2010), in which an insurer
defended the insured in the underlying lawsuit, and failed to reserve the right to later
assert that its insured was not covered under the policy. Id. at 156 (2). Hale Haven’s
reliance on this case is misplaced because Auto-Owners did not undertake any such
defense in this case. R&G Investments & Holdings, LLC v. Am. Family Ins. Co., 337
Ga. App. 588, 599 (4) (b) (787 SE2d 765) (2016), cert. denied (Feb. 27, 2017)
(“reservation of rights is a term of art applicable in the specific context where an
insurer undertakes a defense of its insured.”) (citation omitted).

12
conclude that Hale Haven’s reformation claim was properly brought in its renewal

action.5

Having found the claim timely, we now determine whether a jury issue exists

as to reformation that would have precluded summary judgment to Auto-Owners.6

5
We note that had Hale Haven been an insured under the property coverage
part, it may have been entitled to all the insurance proceeds, to the exclusion of VPS,
insofar as the mortgage debt at the time of the loss exceeded the insurance proceeds.
The policy contains clauses providing that Auto-Owners will pay for a covered loss
“to each mortgage holder shown in the Declarations in their order of precedence, as
interests may appear,” and “may pay to the mortgage holder the whole principal on
the mortgage.” The policy also contains a standard mortgage clause, which “creates
a separate and distinct contract on the mortgagee’s interest which protects the
mortgagee’s interest independent of the status of the insured.” (Citation omitted.)
American Central Ins. Co. v. Lee, 273 Ga. 880, 881 (1) (548 SE2d 338) (2001); see
also Balboa Life & Cas., LLC v. Home Builders Finance, Inc., 304 Ga. App. 478, 480
(1) (697 SE2d 240) (2010) (as against the insurer, mortgagee established basis for
award of all the insurance proceeds); Pearlman v. Security Bank & Trust Co. of
Albany, 261 Ga. App. 270, 271 (582 SE2d 219) (2003) (“Where the evidence
demonstrates that the amount of debt is in excess of the insurance proceeds, a debtor
has no interest in the policy proceeds.”) (citation omitted).
6
Auto-Owners posits, without any citation to authority, that the reformation
claim was not properly brought in the renewal action because it could not have been
filed in the original action, given that the state court lacks jurisdiction over equitable
remedies. This argument is unpersuasive because “the mere fact that a recovery may
not have been authorized will not constitute such an action void where the trial court
had jurisdiction of the cause of action.” (Citation omitted.) Birmingham Fire Ins. Co.
of Pa., supra, 224 Ga. at 204 (1). Although the state court may not have been
authorized to reform the contract, it had jurisdiction over the original breach-of-
contract claim. Thus, the original action was not void so as to bar the reformation
claim in the renewal action. Id.

13
 A petition for reformation of a written contract will lie where by
mistake of the scrivener and by oversight of the parties, the writing does
not embody or fully express the real contract of the parties. The cause
of the defect is immaterial so long as the mistake is common to both
parties to the transaction.

(Citation omitted.) E A Technical Svcs., Inc., supra, 270 Ga. App. at 885 (1).

In the insurance application, Hale Haven was explicitly named as a mortgagee

for purposes of property coverage. One of the underwriters noted on the application,

“O.K. to issue per App[lication],” and Auto-Owners approved the application. A

“processor” in the underwriting department transcribed the information from the

application into Auto-Owners’ system. On the “Evidence of Commercial Property

Insurance” document issued by the insurance agent, Hale Haven was listed as the

mortgagee under the property coverage portion of the policy, and there is no evidence

that Auto-Owners later determined that Hale Haven was not to be named on both

sections of the policy. Further, the insurance agent testified that the issued policy is

required to conform with the application. Both the insurance agent and an

underwriter with Auto-Owners explained that a party named as a mortgagee under the

general liability section of the policy would also have to be listed as a mortgagee on

14
the property coverage section. Lastly, no party contends that the coverage terms had

changed for the year that the hail damage occurred.7

Viewing this evidence in the light most favorable to Hale Haven as the non-

movant, we discern genuine issues of material fact as to whether the policy should be

reformed.

Auto-Owners claims that Hale Haven is not entitled to reformation of the

policy as a matter of law because Hale Haven was negligent in failing to read the

policy, resulting in prejudice to Auto-Owners.8 Similarly, Auto-Owners posits that

Hale Haven’s security deed required VPS to submit proof of insurance, and Hale

Haven negligently failed to insist on receiving a copy of the policy from VPS despite

7
Auto-Owners maintains that Hale Haven did not suffer a loss because it did
not pay for the roof repairs. Even after the roof repairs, however, which would have
presumably improved the building’s value from the value prior to the repairs, Hale
Haven nonetheless suffered a “net loss” after the resale of the property. This net loss
could give the mortgagee the right to insurance proceeds. Georgia Farm Bureau Mut.
Ins. Co. v. Brewer, 202 Ga. App. 127, 128-129 (413 SE2d 770) (1991); Balboa Life
& Cas., supra, 304 Ga. App. 478 at 480 (1). The record shows that Hale Haven
repurchased the property at foreclosure for $1,200,000, but then resold it at a loss for
approximately $800,000. Therefore, if it is determined that Hale Haven had a right
to the insurance proceeds, the record does not show that that right has been
extinguished solely because Hale Haven did not pay for roof repairs.
8
See OCGA § 23-2-32 (b) (equitable relief “may be granted even in cases of
negligence by the complainant if it appears that the other party has not been
prejudiced thereby.”).

15
its knowledge of VPS’s failure to comply with other requirements of the security

deed. We are not persuaded that this entitles Auto-Owners to summary judgment.

“The negligence of the complaining party, preventing relief in equity, is that

want of reasonable prudence, the absence of which would be a violation of legal

duty.” OCGA § 23-2-32 (a). However, “[t]he failure of a party to read a contract

which is not signed by that party, such as a policy of insurance, does not bar

reformation as a matter of law.” (Citation omitted.) Georgia Farm Bureau Mut. Ins.

Co. v. Wall, 242 Ga. 176, 179 (2) (249 SE2d 588) (1978); Assaf v. Cincinnati Ins.

Co., 327 Ga. App. 475, 481 (1) (c) (759 SE2d 557) (2014); Hearn v. Great Southwest

Surplus Lines Ins. Co., 193 Ga. App. 31 (386 SE2d 859) (1989). Compare Virginia

Mut. Ins. Co. v. Price, 132 Ga. App. 445, 448 (208 SE2d 314) (1974) (mortgagee’s

failure to read the policy precluded recovery on the policy as written).

Although Auto-Owners has conceivably been prejudiced, having already paid

on the insurance claim, the deposition testimony on which Auto-Owners relies does

not demonstrate that Hale Haven was negligent as a matter of law in failing to read

the policy. Rather, the record evinces a fact question as to precisely what insurance

documents Hale Haven possessed. Hale Haven testified that it did not receive “the

16
policy itself”9 until it filed suit. Rather, it received an “Evidence of Commercial

Property Insurance” document which explicitly named Hale Haven as a mortgagee

for purposes of property coverage.

Not only are there fact issues regarding which documents were delivered to

Hale Haven, there is evidence tending to show that Hale Haven possessed a form

expressly reflecting its mortgagee status for purposes of property coverage. And

although Auto-Owners claims that Hale Haven made no effort to get a copy of the

policy, “questions of negligence or of diligence are ordinarily questions for the jury.”

Bender v. Randall Bros., 189 Ga. 197, 199 (1) (5 SE2d 889) (1939); Gulf Life Ins. Co.

v. Folsom, 256 Ga. 400, 404 (349 SE2d 368) (1986) (jury issue existed as to whether

insurer was negligent in relying on its computer (and not the policy file) to determine

value of appellee’s insurance policies, after computer error resulted in insurer

overpaying on the policies). On this record, it is for the jury to determine whether

Hale Haven was negligent in failing to ascertain the contents of the property coverage

9
Auto-Owners argues that Hale Haven admitted to receiving “declarations
pages” for the policy, and Auto-Owners refers to Hale Haven’s testimony that it
received a “certificate or declaration page.” We note, however, that there are separate
declaration pages for each coverage part of the policy, and Hale Haven never
specifically admitted to receiving a declaration page for the property coverage part,
which would have indicated the absence of a mortgagee identified in the policy.

17
portion of the policy, and thus, the trial court correctly denied summary judgment to

Auto-Owners as to the reformation claim.

(b) Enforcement of lost, destroyed, or stolen check

Auto-Owners contends that Hale Haven’s claim to enforce the check fails as

a matter of law because it was not asserted in the original lawsuit and is not a proper

claim in the renewal action. We agree.

Under OCGA § 11-3-309 (a),

[a] person not in possession of an instrument is entitled to enforce the
instrument if (i) the person was in possession of the instrument and
entitled to enforce it when loss of possession occurred; (ii) the loss of
possession was not the result of a transfer by the person or a lawful
seizure; and (iii) the person cannot reasonably obtain possession of the
instrument because the instrument was destroyed, its whereabouts
cannot be determined, or it is in the wrongful possession of an unknown
person or a person that cannot be found or is not amenable to service of
process.

The statutory limitation period for this claim is three years. OCGA § 11-3-118

(g). However, “[i]n Georgia, regardless of the form of the action, if the source of the

right claimed has evolved from the written contract of insurance, the limitations

contained in it supersede any other general statutory limitations.” (Citations omitted.)

18
East Tennessee Mtg. Co. v. U.S. Fidelity & Guar. Co., 268 Ga. 536, 538 (491 SE2d

333) (1997).

The source of Hale Haven’s right to possess the check would have evolved

from the written insurance policy because Auto-Owners issued the check based on

the existence of the policy. Thus, the two-year limitation period in the policy applies

to this claim, and Hale Haven must have asserted this claim within two years for it to

be timely. See East Tennessee Mtg., supra, 268 Ga. at 538.

Further, the renewal statute is inapplicable to save this claim from being time-

barred. As compared to Hale Haven’s breach-of-contract claim in its original lawsuit,

the claim to enforce the check as a lost, destroyed or stolen instrument is “a new

cause of action based on a new theory of recovery.” Safi-Rafiq v. Balasubramaniam,

298 Ga. App. 274, 276 (679 SE2d 822) (2009). To illustrate, this claim has different

elements and it is premised on different factual allegations, including the assertion

that Hale Haven is unable to locate Pack. Thus, it is not substantially the same as the

breach-of-contract claim. See Burns v. Dees, 252 Ga. App. 598, 607-608 (1) (d) (557

SE2d 32) (2001) (unjust enrichment and quantum meruit claims not substantially the

same as breach-of-contract claim).

19
 Given that Hale Haven filed its renewal action in February 2016, more than two

years after Pack wrongfully cashed the check, this claim is untimely.

We recognize, as Hale Haven argues, that “[a]n insurance company may waive

the contractual limitation provision where the company leads the insured by its

actions to rely on its promise to pay, express or implied.” See Auto-Owners Ins. Co.

v. Ogden, 275 Ga. 565, 566 (2) (569 SE2d 833) (2002). Here, however, the record

contains no discussions, negotiations, or any interactions whatsoever that would have

lulled Hale Haven into believing that it would not be required to file suit against

Auto-Owners. See id. In fact, Hale Haven admits that from the outset, Auto-Owners

informed Hale Haven that it had already paid the claim. Auto-Owners maintained this

position in May 2014, in response to Hale Haven’s demand letter for payment. It is

clear, therefore, that Auto-Owners did not waive the two-year limitation period in the

policy through its conduct with Hale Haven. Modern Carpet Indus., Inc. v. Factory

Ins. Assn., 125 Ga. App. 150, 151 (186 SE2d 586) (1971) (insurer did not waive 12-

month contractual limitation period where it made a “final denial” within the

limitation period and there was “no evidence that the conduct of the company lulled

or prevented plaintiff [from] bringing the action within the stipulated time”).

20
 Thus, we conclude that the trial court erred in its denial of summary judgment

to Auto-Owners on this claim.

(c) Bad faith damages and attorney fees

Auto-Owners argues that the trial court erred in denying summary judgment

on Hale Haven’s claims for bad faith damages and attorney fees under OCGA § 33-4-

6 for a refusal to pay on the claim, as well as attorney fees under OCGA § 13-6-11

for stubborn litigiousness. We agree. Pretermitting whether these claims were

substantially the same as Hale Haven’s original breach-of-contract action, so as to be

considered properly brought in Hale Haven’s renewal lawsuit, the trial court erred in

determining that they present genuine issues of material fact.

(i) Bad faith damages and attorney fees under OCGA § 33-4-6

Even assuming for purposes of this argument that the contract should be

reformed so as to establish Hale Haven as an insured under the property coverage

section of the policy, Hale Haven does not demonstrate that Auto-Owners refused to

pay the claim in bad faith.

To prevail on a claim for an insurer’s bad faith under OCGA § 33-
4-6, the insured must prove: (1) that the claim is covered under the
policy, (2) that a demand for payment was made against the insurer
within 60 days prior to filing suit, and (3) that the insurer’s failure to pay

21
 was motivated by bad faith. Penalties for bad faith are not authorized,
however, where the insurance company has any reasonable ground to
contest the claim and where there is a disputed question of fact. Bad
faith is shown by evidence that under the terms of the policy under
which the demand is made and under the facts surrounding the response
to that demand, the insurer had no good cause for resisting and delaying
payment.

(Citations and punctuation omitted; emphases supplied.) Lawyers Title Ins. Corp. v.

Griffin, 302 Ga. App. 726, 730-731 (2) (b) (691 SE2d 633) (2010). “An insurer thus

having any reasonable factual or legal ground for contesting a claim is entitled to

summary judgment under . . . OCGA § 33-4-6.” (Citations omitted.) Amica Mut. Ins.

Co. v. Sanders, 335 Ga. App. 245, 250 (779 SE2d 459) (2015).

When Hale Haven made its demand for payment, Auto-Owners refused

because it had already received a claim from VPS for the same property damage, and

had paid on that claim in the full amount of the repair estimate. The evidence shows

that VPS was the only named insured on the property coverage section of the

insurance policy, that Auto-Owners named Hale Haven as a co-payee, and that Pack,

VPS’s agent, cashed the check. It is therefore clear that even if Auto-Owners

ultimately is liable to Hale Haven, it had a reasonable basis to refuse Hale Haven’s

demand for payment when made. See, e.g., Griffin, supra, 302 Ga. App. at 731 (2) (b)

22
(insurer had a reasonable basis for nonpayment where it contended that the insured

did not have a covered loss under the insurance policy). Therefore, Auto-Owners was

entitled to summary judgment on this claim.

(ii) Attorney fees under OCGA § 13-6-11

Again, even presuming that Hale Haven is deemed an insured under the policy

for purposes of property coverage, this claim fails as a matter of law. “[Hale Haven’s]

claim for . . . attorney fees[] under OCGA § 13-6-11 was not authorized because the

penalties contained in OCGA § 33-4-6 are the exclusive remedies for an insurer’s bad

faith refusal to pay insurance proceeds.” (Citation and punctuation omitted.) Balboa

Life & Cas., supra, 304 Ga. App. at 483 (3). Hale Haven, therefore, would not have

been entitled to recover attorney fees under this statute. Accordingly, the trial court

erred in denying Auto-Owners’ motion for summary judgment seeking dismissal of

Hale Haven’s claim for attorney fees under OCGA § 13-6-11. Id.

In summary, in Case No. A18A0132, we affirm the denial of summary

judgment to Auto-Owners as to the reformation claim. We reverse the trial court’s

denial of summary judgment to Auto-Owners on Hale Haven’s claims for breach-of-

contract on the written policy, enforcement of the check, bad faith damages and

attorney fees under OCGA § 33-4-6, and attorney fees under OCGA § 13-6-11.

23
 Case No. A18A0134

2. Hale Haven cross-appeals from the trial court’s denial of its motion for

partial summary judgment against Auto-Owners. Given our determinations in

Divisions 1 (a) (i) and (b), we address Hale Haven’s remaining arguments in its

appeal.

(a) Reformation

Hale Haven argues that it was entitled to summary judgment on its reformation

claim. We disagree.

Under OCGA § 23-2-32 (b), equitable relief, such as reformation of a contract,

“may be granted even in cases of negligence by the complainant if it appears that the

other party has not been prejudiced thereby.” (emphasis supplied); see Eaton Yale

& Towne, Inc. v. Strickland, 228 Ga. 430, 435 (2) (a) (185 SE2d 923) (1971)

(acknowledging this legal principle in a case involving an insurance contract);

Occidental Fire & Cas. of North Carolina v. Goodman, 339 Ga. App. 427, 429 (1)

(793 SE2d 606) (2016) (same). Under this rule, the general question is “whether the

circumstances have so changed that it would be inequitable to require full restitution.”

(Citation omitted.) Gulf Life Ins. Co. v. Folsom, 256 Ga. 400, 405 (349 SE2d 368)

(1986). Also, the rule “is subject to a weighing of the equities between the parties by

24
the trier of fact.” (Citation omitted.) Haugabook v. Crisler, 297 Ga. App. 428, 434

(677 SE2d 355) (2009).

As discussed in Division 1, fact issues exist regarding what policy documents

Hale Haven received and whether Hale Haven was negligent in its alleged failure to

obtain and read the insurance policy. Additionally, Auto-Owners shows that it will

be prejudiced under a reformed policy because it has already paid the repair estimate

for the property damage, in the amount of $465,346.96. Compare Goodman, supra,

339 Ga. App. at 430 (2) (no prejudice to the insurer under reformed policy because,

absent reformation, insurer would have received a “windfall not bargained for.”).

Thus, we cannot say that Hale Haven was entitled to reformation of the insurance

policy as a matter of law, and the trial court did not err in its denial of summary

judgment as to this claim.

(b) Rights under the standard mortgage clause

Hale Haven posits that, under the policy as written, it is entitled to payment

from Auto-Owners pursuant to the standard mortgage clause.10 We disagree.

10
Relevantly, the insurance policy provided:

If we pay the mortgage holder for any loss or damage and deny payment
to you because of your acts or because you have failed to comply with

25
 [I]t is well established that a mortgagee possesses an insurable interest
in the property covered by the mortgage, OCGA § 33-34-4, and that the
standard or union mortgage clause, such as the one in issue here, creates
a separate and distinct contract on the mortgagee’s interest which
protects the mortgagee’s interest independent of the status of the
insured.

(Citation omitted.) American Central Ins. Co., supra, 273 Ga. at 881 (1).

Crucially, however, the standard mortgage clause in the policy here appears in

the property coverage form, and not the general liability coverage form. Thus, unless

it is determined that Hale Haven is entitled to reformation so as to name Hale Haven

as a mortgage holder under the property coverage section of the policy, Hale Haven

cannot rely on the standard mortgage clause in the policy as currently written.

the terms of this Coverage Part: (1) [t]he mortgage holder’s rights under
the mortgage will be transferred to us to the extent of the amount we
pay; and (2) [t]he mortgage holder’s right to recover the full amount of
the mortgage holder’s claim will not be impaired. At our option, we may
pay to the mortgage holder the whole principal on the mortgage plus any
accrued interest. In this event, your mortgage and note will be
transferred to us and you will pay your remaining mortgage debt to us.

26
 Therefore, in Case No. A18A0134, we affirm the trial court’s denial of Hale

Haven’s motion for partial summary judgment against Auto-Owners.

Case No. A18A0133

3. In this case, the Bank Appellants appeal from the trial court’s denial of their

summary judgment motion both as to Auto-Owners’ cross-claim for a failure to

adhere to commercially reasonable standards11 and Hale Haven’s conversion claim.

We vacate the denial of summary judgment as to Auto-Owners’ cross-claim and

remand for the trial court to consider whether it was time-barred, but we conclude that

the trial court correctly denied summary judgment as to Hale Haven’s conversion

claim because a jury issue exists regarding the Bank Appellants’ commercial

reasonableness.

(a) Auto-Owners’ cross-claim

The Bank Appellants argue that Auto-Owners’ cross-claim is time-barred by

OCGA § 11-4-406, as well as Auto-Owners’ deposit agreement with Bank of

America.

OCGA § 11-4-406 (f) provides:

11
Auto-Owners initially included a conversion claim in its cross-claim, but
then abandoned that claim.

27
 Without regard to care or lack of care of either the customer or the bank,
a customer who does not within one year after the statement or items are
made available to the customer . . . discover and report the customer’s
unauthorized signature on or any alteration on the item is precluded
from asserting against the bank the unauthorized signature or alteration.

“Under OCGA § 11-4-103 (a), a bank and its customer may vary the provisions

of Article 4 by contract.” (Citation omitted.) Sec. State Bank v. Visiting Nurses Assn.

of Telfair County, Inc., 256 Ga. App. 374, 376 (3) (568 SE2d 491) (2002). “An

account agreement is controlling unless it is manifestly unreasonable.” (Citation and

footnote omitted.) Vadde v. Bank of America, 301 Ga. App. 475, 481 (2) (687 SE2d

880) (2009). The deposit agreement between Bank of America and Auto-Owners

reads,

if you fail to notify us in writing of suspected problems or unauthorized
transactions within 60 days after we make your statement . . . available
to you, you agree that: you may not make a claim against us relating to
the unreported problems or unauthorized transactions, regardless of the
care or lack of care we may have exercised in handling your account;
and you may not bring any legal proceedings or action against us to
recover any amount alleged to have been improperly paid out of your
account.

28
 Bank of America issued an account statement to Auto-Owners, dated December

31, 2013, covering the period during which Pack cashed the check. The Bank

Appellants argue that Auto-Owners did not, thereafter, submit any claim, fraud

statement, or reimbursement request until its cross-claim in November 2016, after

both the 60-day period in the deposit agreement and one-year period in OCGA § 11-

4-406 had elapsed. Auto-Owners, on the other hand, contends that the deposit

agreement is manifestly unreasonable as to the specific facts of this case and that

Bank of America was notified of the issue with the check within the one-year time

frame enunciated in OCGA § 11-4-406. Although both parties’ timeliness arguments

were raised in the trial court, the record does not show that the trial court addressed

them.

“Thus, if we were to conclude that the trial court erred, it would be on account

of an issue never ruled on below.” Nebo Ventures, LLC v. NovaPro Risk Solutions,

L.P., 324 Ga. App. 836, 848 (4) (752 SE2d 18) (2013).

[W]hen this Court reviews a decision of a trial court on a motion for
summary judgment, it sits as a court for the correction of errors of law.
An error of law has as its basis a specific ruling made by the trial court.
And although in certain instances an appellate court can review a record
and determine that a summary judgment ruling was right for some

29
 reason other than that given by the trial court, an appellate court should
not consider whether the trial court was “wrong for any reason.”

(Citation omitted.) Piedmont Hosp., Inc. v. D.M., 335 Ga. App. 442, 448-449 (3) (779

SE2d 36) (2015). These timeliness arguments are therefore beyond our proper scope

of review. Id. at 449 (3); Terry v. Catherall, 337 Ga. App. 902, 906 (2) (789 SE2d

218) (2016); Strength v. Lovett, 311 Ga. App. 35, 45 (2) (b) (714 SE2d 723) (2011).

Accordingly, we vacate the trial court’s denial of the Bank Appellants’ summary

judgment motion as to Auto-Owners’ cross-claim and remand for the trial court to

consider in the first instance whether the cross-claim is time-barred. Id. (vacating the

order denying summary judgment and remanding for the trial court to address the

appellant’s issue raised below); Nebo Ventures, LLC, supra, 324 Ga. App. at 849 (4).

(b) Hale Haven’s conversion claim

The Bank Appellants argue that the trial court erred in denying their summary

judgment motion against Hale Haven on its conversion claim because they “acted

reasonably in accordance with standard banking practice” in accepting and paying the

check. We discern no error.

“An instrument is . . . converted if it is taken by transfer, other than a

negotiation, from a person not entitled to enforce the instrument or a bank makes or

30
obtains payment with respect to the instrument for a person not entitled to enforce the

instrument or receive payment.” OCGA § 11-3-420 (a).12 As is explained in the

Official Comments to the UCC, when an instrument is payable to joint payees,

“neither payee acting without the consent of the other, is a person entitled to enforce

the instrument.” OCGA § 11-3-420, Official Comment 1.13 Regardless of whether

Auto-Owners was obligated to pay Hale Haven as a result of the insurance claim, the

sole fact that Auto-Owners included Hale Haven as a payee on the check gave Hale

Haven a right to possession of the check. Trust Co. of Columbus v. Refrigeration

Supplies, Inc., 241 Ga. 406, 409 (246 SE2d 282) (1978). Further, insofar as the Bank

Appellants assert the reasonableness of their actions as a defense, “[w]hether

reasonable commercial standards have been met is a question of fact to be resolved

by the jury.” (Citation omitted.) Tifton Bank & Trust Co. v. Knight’s Furniture Co.,

Inc., 215 Ga. App. 471, 474 (1) (b) (452 SE2d 219) (1994); Gerber & Gerber, P.C.

12
See OCGA § 11-3-110 (d) (“If an instrument is payable to two or more
persons not alternatively, it is payable to all of them and may be negotiated,
discharged, or enforced only by all of them.”) (emphasis supplied); Peavy v. Bank
South, N.A., 222 Ga. App. 501, 504 (1) (474 SE2d 690) (1996).
13
“In order to determine the meaning and purpose behind the enactment of a
Georgia Commercial Code provision that is taken verbatim from the UCC, we turn
to the UCC Official Comments for assistance.” Metzger v. Americredit Financial
Svcs., Inc., 273 Ga. App. 453, 457 n. 3 (615 SE2d 120) (2005).

31
v. Regions Bank, 266 Ga. App. 8, 12 (2) (596 SE2d 174) (2004) (under former version

of OCGA § 11-3-103 (a) (4), whether a party’s conduct meets reasonable commercial

standards of fair dealing is ordinarily a question that must be resolved by the

factfinder).

The record shows that the check stated, “[t]his document must be endorsed by

the payee as described herein, and if payable to more than one person or firm, must

be separately endorsed by each of the payees.” (emphasis supplied.) Although the

check is expressly made out to two distinct limited liability companies, VPS

ENTERPRISES LLC AND HALE HAVEN LLC, Regions Bank accepted the check

for deposit into a “single-party” account, and accepted Pack’s single signature as a

proper endorsement without inquiring as to whether he was authorized to endorse the

check for each limited liability company named on the check. Regions Bank testified

that there was no specific bank policy that allows it to accept a check payable to a

corporate payee when there is “a reasonable match” between the payee and the bank

account holder. Further, although the Bank Appellants claim that Auto-Owners had

informed Regions Bank that Pack properly possessed the check, this is distinct from

whether he was authorized to endorse it for both payees. See e.g. Thornton & Co. v.

Gwinnett Bank & Co., 151 Ga. App. 641, 647 (4) (260 SE2d 765) (1979) (questions

32
of fact existed as to whether bank complied with reasonable commercial standards of

due care where it made payments on checks with forged endorsements).14

Likewise, Bank of America paid on this same check that had not been

separately endorsed by each of the limited liability companies indicated on the payee

line. We recognize the general principle that the first bank in the collection chain has

the best opportunity to verify the endorsement and a corresponding duty to ensure the

validity of that endorsement. See First Nat. Bank of St. Paul v. Trust Co. of Cobb

County, 510 F. Supp. 651, 655 (N.D. Ga. 1981). Our Supreme Court, however, has

held that both the collecting and drawee banks may be liable on a conversion claim

involving the missing endorsement of a joint payee. Trust Co. of Columbus, supra,

241 Ga. at 409. And in a case such as this, where explicit directives regarding proper

endorsement were printed on the Bank of America check itself, and Bank of America

would conceivably be aware of these instructions, the reasonableness of Bank of

America’s conduct in paying on the check in contravention of its own directives

should also be decided by a jury.

14
Because we recognized in Division (1) (a) (ii) that insurance proceeds may
be used by a mortgagee to cover a “net loss” after foreclosure, we reject the Bank
Appellants’ argument that Hale Haven presented no evidence of actual damages.

33
 Viewing the evidence in the light most favorable to Hale Haven as the non-

movant, we conclude that there are genuine issues of material fact on this issue, and

the trial court correctly denied the Bank Appellants’ summary judgment motion on

Hale Haven’s conversion claim.

Case No. A18A0147

4. Finally, Hale Haven challenges the trial court’s denial of its summary

judgment motion against the Bank Appellants on the conversion claim. The crux of

Hale Haven’s argument in this appeal is that, as a matter of law, the Bank Appellants

waived any defense that they acted in a commercially reasonable manner. Hale

Haven’s position is that the endorsement was “indisputably irregular on its face” and

the Bank Appellants failed in their duty to make a further inquiry. Again, however,

we affirm the trial court’s decision.

As discussed above in Division 3 (b), the question of commercial

reasonableness is generally reserved for the jury. Here, we must construe the evidence

and inferences in a manner most favorable to the Bank Appellants as the non-

movants.

Regions Bank’s retail operations manager, who manages operations in 15

Regions Bank branches, found that the endorsement was reasonable. She explained

34
that because commercial business accounts receive deposits from varying sources,

there is “a little latitude” allowed with regard to the named payee and the manner of

endorsement. She also testified that there was a reasonable match between the payees

on the check and the name of the bank account holder, “VPS ENTERPRISES AND

HALE HAVEN,” and that given the “single-party” bank account that Pack had

opened, Regions Bank accepted the check as a “single-party” check. Additionally, she

identified the documents Pack had presented to open the account, namely, the IRS

employer identification number and the certificate of organization from the State of

Georgia. Regions Bank also presented an affidavit from its Branch Services Leader,

indicating that it had confirmed with the Georgia Secretary of State that Pack was the

registered agent for the business he had formed. See First Rome Bank v. Reese Oil

Co., Inc., 206 Ga. App. 667, 669 (2) (426 SE2d 384) (1992) (“opinion evidence by

the opponent of summary judgment, such as the bank president’s affidavit . . . , can

alone be sufficient to preclude summary judgment.”) (citations omitted).

We also note that Pack’s printed endorsement on the reverse of the check

included the names of both limited liability companies. Therefore, a jury may

determine that Bank of America, when presented with the check, would not have

discovered an endorsement that was irregular enough to cause Bank of America to

35
question its validity. We determine that the endorsement “may not be so irregular on

its face as to prevent [the Bank Appellants’] assertion of the [commercial

reasonableness] defense.” Thornton & Co., supra, 151 Ga. App. at 647 (4) (addressing

reasonable commercial standards of due care with regard to check issued to a

corporate payee); Peavy v. Bank South, N.A., 222 Ga. App. 501, 505 (3) (474 SE2d

690) (1996) (where endorsement of a co-payee was missing, jury issue existed as to

the bank’s commercial reasonableness in accepting and paying on the check); Stolle

Corp. v. McMahon, 195 Ga. App. 270, 272 (1) (393 SE2d 52) (1990) (hand printed

corporate endorsement with misspelled name of appellant’s employee may not have

been sufficiently irregular).

“In short, under the facts of this case it cannot be said as a matter of law that

the Bank [Appellants] did or did not act in a commercially reasonable manner. This

issue can be resolved only by the tri[e]r of facts.” Thornton & Co., supra, 151 Ga.

App. at 647 (4). Accordingly, we affirm the trial court’s denial of Hale Haven’s

summary judgment motion in this case.

To summarize, in Case No. A18A0132, we affirm the trial court’s denial of

summary judgment to Auto-Owners on Hale Haven’s reformation claim, and reverse

the trial court’s denial of summary judgment to Auto-Owners as to Hale Haven’s

36
remaining claims. In Case No. A18A0134, we affirm the trial court’s denial of Hale

Haven’s summary judgment motion on its reformation claim against Auto-Owners.

In Case No. A18A0133, we vacate the trial court’s denial of summary judgment to

the Bank Appellants as to Auto-Owners’ cross-claim and remand for consideration

of whether that cross-claim was time-barred. We also affirm the trial court’s denial

of summary judgment to the Bank Appellants on Hale Haven’s conversion claim.

Lastly, in Case No. A18A0147, we affirm the trial court’s denial of summary

judgment to Hale Haven against the Bank Appellants as to its conversion claim.

Judgments affirmed in Case Nos. A18A0134 and A18A0147, judgment affirmed

in part and reversed in part in Case No. A18A0132, judgment affirmed in part,

vacated in part, and case remanded with direction in Case No. A18A0133. Andrews

and Brown, JJ., concur.

37