Bank of N.Y. Mellon v. Shone

• Decision Date: 22 October 2020
• Docket Number: Docket: Cum-19-48
• Citation: 239 A.3d 671
• Parties: The BANK OF NEW YORK MELLON v. Danielle SHONE et al.
• Court: Maine Supreme Court

239 A.3d 671

The BANK OF NEW YORK MELLON

v.Danielle SHONE et al.

Docket: Cum-19-48

Supreme Judicial Court of Maine.

Argued: March 2, 2020

Decided: October 22, 2020

Santo Longo, Esq., Bendett & McHugh, P.C., Portland, and William A. Fogel, Esq. (orally), San Diego, California, for appellant the Bank of New York Mellon

Mark A. Kearns, Esq. (orally), and Mark L. Randall, Esq., Portland, for appellees Michael Buck and Danielle Shone

Jeremy Kamras, Esq., Arnold & Porter Kay Scholer LLP, San Francisco, California, for amicus curiae Federal Housing Finance Agency

Andrea Bopp Stark, Esq., National Consumer Law Center, Boston, Massachusetts, for amicus curiae National Consumer Law Center

Daniel L. Cummings, Esq., and Michael T. Devine, Esq., Norman, Hanson & Detroy, LLC, Portland, for amicus curie Maine Credit Union League

Diane Cipollone, Esq., Yarmouth, for amici curiae National Association of Consumer Advocates, Marc Dann, the Dann Law Firm, James Sturdevant, the Sturdevant Law Firm, Phillip Robinson, and the Consumer Law Center LLC

Frank D'Alessandro, Esq., Augusta, for amicus curiae Maine Equal Justice

Jonathan E. Selkowitz, Esq., Pine Tree Legal Assistance, Inc., Portland, for amicus curiae Pine Tree Legal Assistance, Inc.

Catherine R. Connors, Esq., John J. Aromando, Esq., and Sara A. Murphy, Esq., Pierce Atwood LLP, Portland, for amicus curiae The Maine Bankers Association

Brett L. Messinger, Esq., and Elizabeth M. Lacombe, Esq., Portland, for amicus curiae PHH Mortgage Corporation

Kelly W. McDonald, Esq., Murray, Plumb & Murray, Portland, for amicus curiae Full Disclosure, LLC

Thomas A. Cox, Esq., Portland, for amicus curiae Maine Attorneys Saving Homes

Gerald F. Petruccelli, amicus curiae pro se

Panel: MEAD, GORMAN, JABAR, HUMPHREY, and HORTON, JJ., and HJELM and CLIFFORD, A.R.JJ.^*

Majority: MEAD, GORMAN, JABAR, HUMPHREY, and HORTON, JJ., and CLIFFORD, A.R.J.

Dissent: HJELM, A.R.J.

HORTON, J.

[¶1] In this appeal from a residential foreclosure judgment of the Superior Court (Cumberland County, Warren, J. ), we are called upon to clarify the criteria under the business record exception to the hearsay rule for admitting in evidence records that a business has obtained from another entity and integrated into its own records or operations. See M.R. Evid. 803(6). Our decisions since 1984 have endorsed two conflicting interpretations of Rule 803(6) as it relates to integrated business records, and this case affords an opportunity to resolve the conflict. We hereby reaffirm the interpretation first set forth in our 1984 decision in Northeast Bank & Trust Co. v. Soley, 481 A.2d 1123, 1127 (Me. 1984), which is consistent with the widely accepted interpretation of the identical federal rule, see U.S. Bank Tr., N.A. v. Jones , 925 F.3d 534, 537 (1st Cir. 2019). We conclude that a record that one business has received from another is admissible under Rule 803(6) without testimony about the practices of the business that created the record, provided, first, that the proponent of the evidence establishes that the receiving business has integrated the record into its own records, has verified or otherwise established the accuracy of the contents of the record, and has relied on the record in the conduct of its operations, and, second, that the opponent of admission has not shown that the record is nonetheless not sufficiently trustworthy to be admitted.

I. BACKGROUND AND PROCEDURAL HISTORY

[¶2] We draw the following brief account of this case from the procedural record and the evidence offered or referenced at trial.

[¶3] In 2015, The Bank of New York Mellon commenced this foreclosure action against Danielle Shone and Michael Buck. The Bank's complaint alleged that in 2005, Buck had taken out a loan from America's Wholesale Lender and that, to secure Buck's performance pursuant to the promissory note for that loan, Shone and Buck had executed a mortgage on a Portland property they owned. Although the original lender and mortgagee were third-party entities, the Bank alleged that it ultimately acquired the note and mortgage. The Bank also alleged that Buck had stopped making payments on the loan in 2008.

[¶4] The court held a bench trial on the complaint in October 2018. There, the Bank offered an exhibit containing a notice of default and right to cure purportedly sent to Shone and Buck by the law firm retained by Bayview Loan Servicing, which serviced the note and mortgage for the Bank, along with a purported U.S. Postal Service certificate of mailing. The Bank first attempted to qualify the exhibit for admission in evidence by calling an employee of the law firm to testify about that office's procedures for creating and mailing notices of default, but the court barred that testimony because the Bank's witness list had not properly identified the prospective witness by name or capacity. The Bank next attempted to submit an affidavit from a law firm employee as a mechanism for admitting the notice itself pursuant to M.R. Evid. 902(11). The court did not allow the Bank to use that procedure because it had not, as required by the rule, provided Shone and Buck with reasonable advance notice that it would seek to do so.¹

[¶5] The Bank then attempted to present a testimonial foundation for the exhibit through James D'Orlando, a litigation manager employed by Bayview. After D'Orlando testified, the court excluded the notice from evidence because the Bank failed to present evidence that D'Orlando had personal knowledge about the law firm's practices relating to the creation and mailing of notices of default and right to cure. Because the Bank was therefore unable to prove that it had satisfied the notice requirements imposed by 14 M.R.S. § 6111 (2018),² the court entered judgment for Shone and Buck.³ After the court denied the Bank's motion to alter or amend the judgment or for a new trial, the Bank appealed to us. See 14 M.R.S. § 1851 (2020) ; M.R. App. P. 2A.

[¶6] After this case was initially briefed on appeal, we invited the parties and any amici to file additional briefs on the question of whether we should "consider adjusting application of ... [Maine Rule of Evidence] 803(6), to track application of [Federal Rule of Evidence] 803(6) as addressed in U.S. Bank Trust, N.A. v. Jones , 925 F.3d 534 (1st Cir. 2019)." In addition to briefs filed by the parties, we received amici curiae briefs filed by the Federal Housing Finance Agency; Full Disclosure, LLC; Gerald F. Petruccelli, Esq.; Maine Attorneys Saving Homes; the Maine Bankers Association; the Maine Credit Union League; Maine Equal Justice; the National Association of Consumer Advocates et al.; the National Consumer Law Center; PHH Mortgage Corporation; and Pine Tree Legal Assistance, Inc.

II. DISCUSSION

[¶7] The pivotal issue here centers on the foundational showing that must be made to admit an integrated business record—that is, a record created by one entity and later integrated into the records of a second, separate entity.

[¶8] The traditional method of admitting business records in evidence pursuant to Rule 803(6) is through the testimony of a witness with personal knowledge of the practices of the business or other entity that created the record. The integrated records method is a different method that applies when the record has, in effect, become a business record of a business other than the business that created the record.⁴ See MRT Constr. v. Hardrives, Inc. , 158 F.3d 478, 483 (9th Cir. 1998) ("[R]ecords a business receives from others are admissible under Federal Rule of Evidence 803(6) when those records are kept in the regular course of that business, relied upon by that business, and where that business has a substantial interest in the accuracy of the records."). Thus, the integrated records approach eliminates the need for testimony about the practices of the entity that created the record and shifts the focus to the record's status within the receiving entity.

[¶9] Evidence of the receiving entity's reliance on the record in the regular course of its business is important because a business's reliance on information in a record it did not create helps demonstrate the trustworthiness of the record. Compare MRT , 158 F.3d at 483 (holding that invoices incorporated into a company's records were admissible under Rule 803(6) to establish amounts paid because the company relied upon the amounts shown in the invoices), with N.L.R.B. v. First Termite Control Co. , 646 F.2d 424, 429-30 (9th Cir. 1981) (concluding that third-party records were not admissible under Rule 803(6) to prove the origin of lumber because the recipient business did not rely on the records to determine that origin).

[¶10] On the other hand, "mere possession or ‘custody’ of records ... does not qualify employees of the possessing party to lay the requisite foundation, and reliance by the organization on records created by others, although an important part of establishing trustworthiness, without more is not sufficient." 2 Kenneth S. Broun et al., McCormick on Evidence § 292, at 476-77 (Robert P. Mosteller ed., 8th ed. 2020) (footnote omitted). When "the business offering the records of another has made an independent check of the records, has integrated them into their own business operation in a way that establishes trustworthiness or contains other assurances of trustworthiness, or can establish accuracy by other means, the necessary foundation may be established." Id. at 477-48 (footnotes omitted); see also United States v. Sokolow , 91 F.3d 396, 403 (3d Cir. 1996) (stating that the business records exception may apply to records obtained from others if the receiving business obtains "adequate verification or other assurance of accuracy" (quotation marks omitted)).

[¶11] The verification element of the integrated records approach requires simply that the business receiving a record establish or confirm the accuracy of the record in some way. See McCormick on Evidence § 292, at 477-78. For example, the...