Dec. 22, 2015 – A state appeals recently upheld a home foreclosure judgment, concluding that the circuit court properly admitted certain documents evidencing amounts due and owing under the business records exception to the hearsay rule.
In 2004, Phillip and Patricia Olson signed a promissory note for $144,000 secured by a mortgage on their home. The note was transferred to Deutsche Bank National Trust Company, which pursued a foreclosure judgment in 2013. The matter was set for trial.
Deutsche Bank claimed the Olsons owed $140,364 on the principal balance, and close to $69,000 in interest. To prove the amount due and owing, Deutsche Bank called a witness, Suzanne Johnstone, an officer at Select Portfolio Servicing (SPS), which began servicing the Olsons’ loan in 2012 upon transfer from servicer Bank of America.
Johnstone described how the loan information kept by Bank of America was integrated into the SPS proprietary system when the servicing duties were transferred. She also testified about the creation of documents evidencing principal and interest balances.
The trial court admitted the documents and later granted a foreclosure judgment. The trial court ruled that the SPS documents could be admitted under Wis. Stat. section 908.03(6), an exception to the hearsay rule. It says “records of regularly conducted activity” are admissible if a custodian or qualified witness testifies to support them.
The court ruled that Johnstone “had the requisite personal knowledge to meet the requirements of Wis. Stat. § 908.03(6),” also known as the business records exception.
On appeal, the Olsons argued that the trial court erred when it admitted the SPS records because Johnstone was not qualified to testify about the underlying data. That data, the Olsons argued, was created by the prior loan servicer, Bank of America.
In Deutsche Bank National Trust Co. v. Olson, 2015AP192 (Dec. 22, 2015), a three-judge panel for the District I Court of Appeals affirmed, concluding that the trial court properly admitted the SPS documents used to prove the amount due and owing.
Along the way, the panel clarified the appropriate standard of review to be applied in determining whether the business records exception applied to the subject documents.
The panel applied de novo review to conclude that Johnstone could testify on the underlying data in the documents, even if the data originated with Bank of America.
“Johnstone was qualified to testify as to Exhibits 6 and 7 because those records were created by SPS, and because Johnstone provided extensive testimony as to SPS’s quality control checks and boarding process in integrating the Bank of America data into SPS’s own records,” wrote Judge Patricia Curley for the three-judge panel.
The panel noted the case as “particularly unique” since SPS relied on information transferred from Bank of America to create the loan information about the Olsons. Previous cases relied on by the parties were distinguishable on those facts.
“It is the integration of Bank of America records into SPS’s records, and SPS’s reliance on the Bank of America records, that lies at the center of our discussion,” Curley noted.
In reaching its conclusion, the panel found persuasive a federal case from the Eighth Circuit, Brawner v. Allstate Indemnity Co., 591 F.3d 984 (8th Cir. 2010), which applied the business records exception to allow documents with integrated, third-party data.
“[T]hird-party records can fall within the business records exception where the third party’s records are relied upon and integrated into the latter’s business records, and Johnstone provided ample testimony that such is the case here,” Judge Curley wrote.
The panel noted that Johnstone provided “extensive” and “in-depth” testimony about SPS procedures for integrating third-party data into its own business records.