REAL ESTATE: MORTGAGE FORECLOSURE: EVIDENCE: HEARSAY: BUSINESS RECORDS: LOAN PAYMENT HISTORY: CURRENT LOAN SERVICER’S BUSINESS RECORDS, WHICH INCLUDED BUSINESS RECORDS RECEIVED FROM PRIOR LOAN SERVICER, WERE ADMISSIBLE BECAUSE THE CIRCUMSTANCES SURROUNDING THE TRANSFER ESTABLISHED TRUSTWORTHINESS AND THE RECORDS CUSTODIAN ESTABLISHED THE FOUR REQUIREMENTS FOR APPLICATION OF THE BUSINESS RECORDS EXCEPTION TO THE HEARSAY RULE

Bank of New York v. Calloway, ___ So. 3d ___, 40 Fla. L. Weekly D173 (Fla. 4th DCA January 7, 2015)

The appellate court reversed an order of involuntary dismissal in a mortgage foreclosure following the exclusion of the borrower’s loan payment history as inadmissible hearsay. At trial, the bank called a litigation specialist for the current (fourth) loan servicer, which assumed responsibility for servicing the loan five years after it went into default. The witness explained that the prior (third) loan servicer transferred the original loan documents and its business records, which included the entire loan payment history, to the current (fourth) loan servicer, and that the current loan servicer “reviewed the documents for accuracy before scanning them and inputting the payment information into its records system.”   “[The witness] testified that: (1) the proffered document was ‘a true and accurate representation of the payment history for th[e] loan,’ (2) it was ‘kept during the regular course of regularly-conducted activities by a person with knowledge of the event or activity,’ (3) the ‘person making the record ha[d] a duty [to compile accurately the] information for th[e] record,’ and (4) it is ‘the regular practice of the servicer to make such record.’” The borrower testified that the records failed to account for payments that he had made before the loan went into default. The trial court ruled that the records were inadmissible because of the witness’s lack of familiarity with the prior servicer’s practices and procedures, her inability to testify about the accuracy of the prior servicer’s business records, and her lack of knowledge about “who, how, or when the data entries were made into the prior servicer’s business records.” The appellate court reversed. Section 90.803(6), Florida Statutes, establishes a four prong test to qualify for the business records exception to the hearsay rule but, even if all four elements have been satisfied, the trial court may still exclude the records based upon “lack of trustworthiness.” “In most instances, a proponent [of integrated business records] will clear [the trustworthiness] hurdle by providing evidence of a business relationship or contractual obligation between the parties that ensures a substantial incentive for accuracy. . . . In the alternative . . . the successor business itself may establish trustworthiness by independently confirming the accuracy of the third-party business records upon receipt.” “In the case at bar, [the witness] confirmed the trustworthiness of the relied-upon third-party business records by testifying that [the current servicer] ‘reviewed’ [its predecessor’s] supplied payment histories ‘for accuracy’ before integrating them into its own records.” The court held that even without this testimony, “the circumstances of the loan transfer itself would have been sufficient to establish trustworthiness given the business relationships and common practices inherent among lending institutions acquiring and selling loans.” The borrower’s testimony that some of his payments were not reflected in the records did not justify their exclusion because “the trial court has broad discretion to reconcile any discrepancies, if warranted, based on the evidence presented. Minor discrepancies in calculations, given the volumes of records transferred from one business entity to another, should not render business records of a successor servicer untrustworthy for purposes of laying a foundation for the business records exception given that the trustworthiness of the records has been established.” The court emphasized that its opinion “should not be construed as a ‘green light’ for lenders to present a ‘robo’ witness to establish the business records exception. . . .[A]dmission of a business record is predicated on the proponent demonstrating (1) that the record was made at or near the time of the event, (2) that it was made by or from information transmitted by a person with knowledge, (3) that it was kept in the ordinary course of a regularly conducted business activity, and (4) that it was a regular practice of that business to make such a record. . . . The requirements of reliance and trustworthiness do not supplant this rule’s provisions; ‘rather, [the court] view[ed] them as necessary in these circumstances to satisfy the rule’s requirements that the records were made in the course of a regularly conducted activity of the incorporating entity.” “In the circumstances present, as long as a business entity’s records obtained from prior servicers establish trustworthiness – i.e., that the records are what they purport to be and were subject to the business’ internal practices and procedures to ensure accuracy of the records – the records are cleared for admission and satisfy the business record exception to hearsay.”

To read more briefs in the Real Estate: Mortgage Foreclosure category of the Kashi Law Letter, please click here, http://www.kashilawletter.com/category/real-estate-law/mortgage-foreclosure/.

To read more briefs in the Evidence: Hearsay category of the Kashi Law Letter, please click here, http://www.kashilawletter.com/category/evidence/hearsay/.

To read more briefs in the Florida Statutes category of the Kashi Law Letter, please click here, http://www.kashilawletter.com/category/florida-statutes/.