Arrowood Indem. Co. v. Fasching

• Decision Date: 17 June 2020
• Docket Number: A167409
• Citation: 304 Or.App. 749,469 P.3d 271
• Parties: ARROWOOD INDEMNITY COMPANY, Plaintiff-Respondent, v. Douglas Dean FASCHING, Defendant-Appellant.
• Court: Oregon Court of Appeals

304 Or.App. 749

469 P.3d 271

ARROWOOD INDEMNITY COMPANY, Plaintiff-Respondent,

v.Douglas Dean FASCHING, Defendant-Appellant.

A167409

Court of Appeals of Oregon.

Argued and submitted August 13, 2019.

June 17, 2020

Jonathan M. Radmacher argued the cause for appellant. Also on the briefs was McEwen Gisvold LLP.

Kelly F. Huedepohl, Portland, argued the cause for respondent. Also on the brief was Keating Jones Hughes, PC.

Before DeHoog, Presiding Judge, and Egan, Chief Judge, and Mooney, Judge.^*

MOONEY, J.

This appeal presents the question of whether proof-of-loss records submitted in support of an insurance claim by a lending institution to its insurer are admissible as business records under OEC 803(6). After the insurer, Arrowood Indemnity Company (Arrowood), paid an insured lending institution's (Discover Bank) insurance claim for losses it sustained when defendant defaulted on his student loans, Arrowood filed this subrogation claim against defendant. Arrowood filed a summary judgment motion supported by the signed affidavit of an employee knowledgeable about Arrowood's business practices and recordkeeping processes, and attesting to the OEC 803(6) foundational requirements for the proof-of-loss records attached to that affidavit. Defendant objected to those records as hearsay, contending that they were not admissible as Arrowood's business records because they were the records of Discover Bank and Citibank (Discover Bank's predecessor in interest). He also filed a cross-motion for summary judgment. The trial court granted Arrowood's summary judgment motion, denied defendant's cross-motion for summary judgment, and entered judgment in favor of Arrowood. Defendant appeals from that judgment. We affirm.

In an appeal arising from cross-motions for summary judgment, the granting of one motion and the denial of the other are both reviewable. Eden Gate, Inc. v. D&L Excavating & Trucking, Inc. , 178 Or. App. 610, 622, 37 P.3d 233 (2002). Defendant assigns error to the trial court's grant of Arrowood's motion and the denial of his own motion. We review each motion "in the light most favorable to the party opposing it to determine whether there is a genuine issue of material fact and, if not, whether either party is entitled to judgment as a matter of law." O'Kain v. Landress , 299 Or. App. 417, 419, 450 P.3d 508 (2019). There is no genuine issue of material fact if, based on the record, "no objectively reasonable juror could return a verdict for the adverse party on the matter that is the subject of the motion for summary judgment." ORCP 47 C. Additionally, we review for legal error the trial court's conclusions regarding the admissibility of hearsay statements under an exception to the hearsay rule. State v. Cook , 340 Or. 530, 537, 135 P.3d 260 (2006).

The record on review includes the evidence submitted in connection with both summary judgment motions. WSB Investments, LLC v. Pronghorn Devel. Co., LLC , 269 Or. App. 342, 355, 344 P.3d 548 (2015) (citing Nixon v. Cascade Health Services, Inc. , 205 Or. App. 232, 237 n. 4, 134 P.3d 1027 (2006) ). And, we remain mindful that the failure of a party to satisfy the burden on his own motion does not mean that the opposing party has satisfied the burden on his motion. McKee v. Gilbert , 62 Or. App. 310, 321, 661 P.2d 97 (1983).

The pertinent facts are undisputed. Defendant borrowed money from Citibank to attend law school. Citibank purchased an insurance policy from Arrowood insuring its portfolio of student loans, including defendant's loans. Discover Bank purchased that portfolio of loans, including defendant's student loans, from Citibank. Citibank's interest in the associated insurance policy was likewise assigned to Discover Bank. In 2013, defendant defaulted on his loans. Discover Bank filed a claim with Arrowood for the losses it sustained as a result of those defaults. In support of its claim, Discover Bank submitted proof of defendant's outstanding debts, and Arrowood paid the claim. Arrowood then filed this subrogation claim, seeking reimbursement from defendant of the amount it paid to Discover Bank.

In support of its motion for summary judgment, Arrowood submitted an affidavit of its program director, McGough, providing foundational testimony to support the admission of five attached exhibits under OEC 803(6) : (1) Bill of Sale, Assignment, and Assumption Agreement showing Discover Bank's acquisition of certain Citibank assets including defendant's student loans; (2) loan application #1 dated and signed June 22, 1999, disclosure/terms of loan, payment record and transfer of ownership document from Discover Bank to Arrowood; (3) loan application #2 dated and signed April 23, 2000, disclosure/terms of loan, payment record, and transfer of ownership document from Discover Bank to Arrowood; (4) loan application #3 dated and signed April 19, 2001, disclosure/terms of loan, payment record, and transfer of ownership document from Discover Bank to Arrowood; and (5) copies of checks from Arrowood to Discover Bank representing payment of the claim related to defendant's default.

In her affidavit, the program director, McGough, testified that she had personal knowledge of the business records maintained by Arrowood in the course of its regular business functions and that she is trained and authorized in the use of those records. She testified further that Arrowood is an insurance company that insures consumer loans, including defendant's student loans, and that the lender in this case (Discover Bank) sought coverage from Arrowood when defendant stopped making his loan payments. She further testified:

"[I] regularly review these proofs of claims as a part of my ordinary job function at [Arrowood]. When a claim is deemed valid upon review of the proof, [Arrowood] issues payment to the Lender, then seeks reimbursement from the consumer Defendant. All documents attached hereto are either produced and maintained directly by [Arrowood] or are documents from the Lender's proof of claim which are adopted by [Arrowood] and relied upon in the ordinary course of [Arrowood's] business. These records were made at or near the time of the occurrence or transaction recorded by a person with knowledge, and as [Arrowood's] qualified custodian of records I affirm that the attachments are true and correct copies of documents maintained by and relied upon by [Arrowood] in the ordinary course of its regular business functions."

Arrowood argued that the program director's affidavit was sufficient to establish that the records attached to the affidavit were excepted from the hearsay rule as Arrowood's business records under OEC 803(6).

The thrust of defendant's argument is that the records do not qualify as business records under OEC 803(6) because they were created and maintained by Arrowood's insured lending institution rather than by Arrowood and because Arrowood did not provide affidavits or other sworn testimony from that lending institution to lay the proper foundation under OEC 803(6). Defendant acknowledges on appeal that the "cross summary judgment motions" raise a single issue—whether the loan records submitted to Arrowood in support of Discover Bank's insurance claim were admissible as Arrowood's business records under OEC 803(6). As we explain below, the trial court did not err in concluding that those records were admissible under OEC 803(6).

Hearsay is an out-of-court statement offered to prove the truth of the matter asserted in the statement. OEC 801(3). Such statements are generally not admissible unless excepted or excluded from the hearsay rule. See id. (defining hearsay); OEC 802 (stating that hearsay is generally inadmissible); OEC 803 and OEC 804 (providing hearsay exceptions); OEC 801(4) (providing exclusions to hearsay). The reason hearsay is generally not admitted as evidence is because it is thought to lack the reliability of a statement made in court, under oath, and subject to cross-examination. OEC 802 ; see also Christopher B. Mueller and Laird C. Kirkpatrick, Federal Evidence § 8:64 (4th ed. 2019) (explaining the purpose of the hearsay rule).

There are exceptions to the hearsay rule. We regard certain out-of-court statements as inherently reliable, and we permit those statements to be admitted into evidence despite the hearsay rule of exclusion. Legislative Commentary to OEC 803, reprinted in Laird C. Kirkpatrick, Oregon Evidence § 803.01[1], 777 (6th ed. 2013). Business records have long been considered "inherently reliable," and an exception to the hearsay rule has long been carved out for such records:

"The following are not excluded by [ OEC 802 ], even though the declarant is available as a witness:

"* * * * *

"(6) A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the source of information or the method of circumstances of preparation indicate lack of trustworthiness."

OEC 803(6).

The business records exception exists because, "despite being hearsay, documents prepared routinely to record a business's ordinary commercial activities carry a presumption of ‘unusual reliability’ incidental to carrying out the business's needs and obligations." Morgan v. Valley Property and Casualty Ins. Co. , 289 Or. App. 454, 460, 410 P.3d 327 (2017), adh'd to on recons. , 290 Or. App. 595, 415 P.3d 1165, rev. den. , 363 Or. 390, 434 P.3d 31 (2018) ; Legislative Commentary to OEC 803, reprinted in Kirkpatrick, Oregon Evidence § 803.06[2], 806; Lepire v. MVD , 47 Or. App. 67, 74, 613 P.2d 1084 (1980). The "unusual reliability of business records, which makes them...