To start with; remember that the GM is:
- (Usually) not adversarial
- The arbiter of all-the-things; including house-rules, rulings, etc.
- Essentially a story-teller that you are helping craft a story for (and that can't really know the entirety of the story since the dice and player actions will dictate it to some degree
What he probably means
Given that he's decided that he wants to run the game like this, it sounds like the "auto-fail" is that you're essentially not "making a check" against another player.
If you wish to convince another player of some lie and normally you would use a Deception check; he's saying you'll "auto-fail" the check because you're not making one. In his rule-set; he's thusly saying "The other player will choose to believe you or not; regardless of your "check"; because it automatically failed."
He may even decide that the player calls your bluff; but that seems vindictive IMO.
Similarly, if you wanted to convince another player to do a thing; you would be convincing the player and the GM would "auto-fail" your diplomacy check; meaning you "can't convince the character" so to speak; and have to convince the player.
This sounds like the work of a newer DM (I remember doing this when both I and the players were new) and didn't know what to do; "there's rules for bluffing so er.. Jimmy.. roll a deception check against John?" Or they enjoyed the dynamic and kept it around.
Disclaimer: Because these are essentially house rules I have to guess on based on the information provided; the above seems like the most reasonable and charitable interpretation of the GM's dialog with you.
In general, no
While the GM is the "storyteller" they don't typically "take over" your character; however you have probably had cases where they have:
- fear effects
And you've probably had some campaigns where it happens for the sake of intrigue, monologues, or moving the story along:
- Monologue - The players are "frozen in time" artificially while the BBEG rants about stuff
- Moving the story - The GM "teleports" you between sessions to another area, and then tells you what happened along the way
- Intrigue - The GM says you were slipped a note and that the person who did it slipped away in the crowd; despite not rolling any kind of check
So in some sense, you're used to this happening already. Personally, for "fun" types of checks where there is inter-character drama of an entertaining kind; I may have a player roll a bluff check on something inconsequential in order for me to "help tell the story"; and it can be light-hearted fun in the moment.
What does this all mean?
First, see what the others in the group think. You probably don't want to go on a crusade by yourself, and they may have reasonable perspectives (it could've even been their idea!)
Second, consider how much these checks matter. If the GM is just facilitating "lol yeah you totally believe Grognard the Barbarian that he has slain a dragon single-handedly" to entertain the group; keep in mind that that's literally the purpose of the GM at the table. If you're not entertained; see the above point (as the others may be.)
Third, it would make more sense to ask for clarification from the GM what they meant given that it seems to be house-rules.
Lastly, remember the rest of this post as you've likely allowed the GM to control your character in non-rule situations; it's part of the contract. As a player you put your fate in their hands, as a GM they put themselves out there and try to make an entertaining game.
Short answer -> The social contract of the GM is to basically control everything; so "yes" they can control your character. "No", in that usually that's not fun for players and thusly the players won't typically agree to that.