Contract – Loan Modification – Mutual Mistake Allegation – Failure to Read

Where the plaintiff-lender’s principal failed to read the loan modification documents before signing them, plaintiff has failed to show a mutual mistake of fact that would justify reforming the modification agreements.

We affirm judgment for the defendant-borrower and the award of attorney’s fees to defendant.

In its complaint, plaintiff alleges that the mutual mistake was caused because plaintiff mistakenly believed that defendant, who drafted the Modification & Assumption Agreement, had made a $575,000 principal payment on 2 January 2019. Defendant acknowledges, in their response, that no payment was made on 2 January 2019. At one point, defendant asserted that the modification in the principal amount was due to a principal payment on 2 January 2019, but defendant later asserted that the reduction was “due to errors in the original calculations regarding the loans.”

Plaintiff’s principal, Dr. Huang, filed an affidavit in which he stated that at the time he executed the Modification & Assumption Agreement, he “mistakenly believed the loan balance stated therein to be correct.” During the bench trial, Dr. Huang testified, contrary to his affidavit, that he did not read the Modification & Assumption Agreement when he signed the document. Additionally, he testified that even if defendant had made a payment, he would not have known about the payment because it would have gone to plaintiff’s trustee. However, that trustee also signed the Modification & Assumption Agreement, which included the reduced loan balance.

The trial court made findings of fact that plaintiff had validly executed two documents, the Assumption & Modification Agreement, and a Note Modification & Extension Agreement; both documents included the reduced loan amount of $6,000,000. The trial court also found that plaintiff’s representative did not read the Assumption & Modification Agreement prior to signing. Based upon these findings, the trial court concluded that plaintiff had “failed to establish that it was under any mistake of fact at the time it executed the Assumption & Modification Agreement or the Note Modification and Extension Agreement.”

The trial court’s finding that plaintiff was not operating under a mistake when it signed the Assumption & Modification Agreement or the Note Modification & Extension Agreement is sufficient to establish the lack of a mutual mistake. Therefore, we hold that the trial court’s conclusions of law are supported by its findings of fact.

At the time of the pleading, plaintiff knew or should have known that it did not have a justiciable issue because it had failed to read the Modification & Assumption Agreement. Further, when Dr. Huang tendered his affidavit on behalf of plaintiff, he made, at best, misleading statements or, at worst, false statements to further plaintiff’s claim. Because the court found this affidavit to be false and that plaintiff’s actions were based upon false statements, we concur that plaintiff persisted in litigating the case after it reasonably should have been aware that there were no justiciable issues. Therefore, we affirm the order of attorney’s fees to defendant.

Affirmed.

Oakridge 58 Investors v. Durhill LLC (Lawyers Weekly No. 012-076-23, 12 pp.) (Allison Riggs, J.) Appealed from Durham County Superior Court (Orlando Hudson, J.) William Riley for plaintiff; Nathaniel Smith for defendant. North Carolina Court of Appeals (unpublished)