Beneficial Me. Inc. v. Carter

• Decision Date: 07 July 2011
• Docket Number: Docket No. Yor–10–568.
• Citation: 2011 ME 77,25 A.3d 96
• Parties: BENEFICIAL MAINE INC.v.Timothy G. CARTER et al.
• Court: Maine Supreme Court

25 A.3d 96

2011 ME 77

BENEFICIAL MAINE INC.

v.Timothy G. CARTER et al.

Docket No. Yor–10–568.

Supreme Judicial Court of Maine.

Submitted on Briefs: April 27, 2011.Decided: July 7, 2011.

S. James Levis, Jr., Esq., Levis & Ingraham, PA, Saco, ME, for Timothy G. and Kathleen A. Carter.William B. Jordan, Esq., Shapiro & Morley, LLC, South Portland, ME, for Beneficial Maine, Inc.Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and JABAR, JJ.SAUFLEY, C.J.

[¶ 1] Timothy G. and Kathleen A. Carter appeal from a summary judgment entered in the District Court (Biddeford, Foster, J.) in favor of Beneficial Maine Inc. on its foreclosure complaint. The Carters challenge the foundation presented by Beneficial to support the admissibility of its mortgage records pursuant to the business records exception to the hearsay rule. See M.R. Evid. 803(6). Beneficial relied on the affidavit of an employee of a separate business to support its motion for summary judgment. Because that affidavit was inadequate to establish the admissibility of the purported business records, we vacate the summary judgment and remand the matter for further proceedings.

I. BACKGROUND

[¶ 2] On November 4, 2009, Beneficial filed a complaint for foreclosure against the Carters in the District Court. See 14 M.R.S. § 6321 (2010). Beneficial alleged that the Carters had defaulted in payment on their promissory note to Beneficial, which was secured by a mortgage on certain real property in Kennebunk owned by the Carters.¹

[¶ 3] After the parties were unable to resolve the case through mediation, ² Beneficial moved for summary judgment and submitted a statement of material facts. See M.R. Civ. P. 56(h)(1). In support of its statement of material facts, Beneficial referred to two affidavits—one from Beneficial's attorney, which clarified the priority of the Carters' creditors, and one from Shana Richmond, Vice President of Administrative Services for HSBC Consumer Lending Mortgage Servicing, described in the affidavit as Beneficial's “servicer.” Beneficial cited to Richmond's affidavit, with its attached exhibits, as the sole evidentiary support for its allegations of its ownership of the note and mortgage, the Carters' obligation on the note, the Carters' default, and the amount that the Carters owed. Richmond's affidavit states the following as the foundation for her factual assertions:

The Bank [Beneficial] is the holder of the note and mortgage.... I have access to the records relating to the mortgage transactions with respect to said note and mortgage. My knowledge as to the facts set forth in this affidavit is derived from my personal knowledge of this account and of the records of this account, which are kept in the ordinary course of business by the Bank and which were made at or near the time of the transactions by, or from information transmitted by, a person with knowledge of the facts set forth in said records. These records are kept in the ordinary course of business, pursuant to the company's regular practice of making such records. The exhibits attached hereto are true copies of the original documents.

[¶ 4] The Carters objected to the admissibility of the Richmond affidavit and the attached exhibits on the grounds that they constituted hearsay and that Beneficial had not established a foundation for application of the business records exception. The court entered summary judgment in the bank's favor on its foreclosure complaint. The Carters appealed. See 14 M.R.S. § 1901(1) (2010); M.R.App. P. 2.

II. DISCUSSION

[¶ 5] We recently addressed the foundational elements that must be established for a court to consider a business record on summary judgment in a foreclosure proceeding. See HSBC Mortg. Servs., Inc. v. Murphy, 2011 ME 59, 19 A.3d 815. Here, we consider whether those foundational elements were properly presented on summary judgment by an employee of the mortgage holder's “servicer.”

A. Summary Judgment in Foreclosure Proceedings

[¶ 6] We review a court's entry of summary judgment de novo, viewing the facts in the light most favorable to the party against whom summary judgment was entered. See Murphy, 2011 ME 59, ¶ 8, 19 A.3d at 819. To obtain a summary judgment of foreclosure, a mortgage holder must establish that there are no disputes of facts that are material to the elements required for foreclosure ³ and that the mortgage holder is entitled to judgment as a matter of law. See M.R. Civ. P. 56(c). The facts offered in support of summary judgment must be properly presented for a court to enter summary judgment for the mortgage holder: “Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.” M.R. Civ. P. 56(e). The record references must refer “to evidence that is of a quality that would be admissible at trial.” Murphy, 2011 ME 59, ¶ 9, 19 A.3d at 819.

[¶ 7] Beneficial attempted to support its statement of material facts with the affidavit of Shana Richmond, an individual who was not Beneficial's employee. The cursory reference in Richmond's affidavit to her knowledge of the critical issues—how Beneficial created, maintained, and produced the records—prompts us to clarify the foundation of knowledge that a nonemployee must possess to be a “qualified witness” to lay the foundation for a business record, M.R. Evid. 803(6), in an affidavit to support summary judgment in a foreclosure action, M.R. Civ. P. 56(j).

[¶ 8] In reviewing the adequacy of the affidavit presented in this case, we (A) discuss our standard of review for the challenged ruling, (B) summarize the foundational elements and knowledge required for an affiant to establish the admissibility of a business record, and (C) review the adequacy of the affidavit presented by Beneficial to determine whether summary judgment was appropriate in this case.

B. Standard of Review on Summary Judgment

[¶ 9] In the past, we have reviewed courts' consideration of business records on summary judgment for an abuse of discretion. See Estate of Davis, 2001 ME 106, ¶ 10, 775 A.2d 1127, 1130–31; United Air Lines, Inc. v. Hewins Travel Consultants, Inc., 622 A.2d 1163, 1167–69 (Me.1993). Since these cases were decided, however, we have clarified that, when we review a trial ruling regarding the admissibility of a business record, we review foundational findings for clear error and the ultimate determination of the record's admissibility for abuse of discretion. See Bank of Am., N.A. v. Barr, 2010 ME 124, ¶ 17, 9 A.3d 816, 820.

[¶ 10] Because we review the summary judgment record de novo in the light most favorable to the nonprevailing party, and because the evidence relied on at summary judgment must be of a quality that would be admissible at trial, we follow our bifurcated standard of review from Barr to determine (1) whether competent undisputed evidence, properly referenced in the statements of material facts, supports the foundational facts required for admissibility of the asserted business records; and (2) if those facts are supported, whether the court abused its discretion in considering the evidence. See id.; see also M.R. Civ. P. 56(e); M.R. Evid. 803(6). If necessary foundational elements for admission of a business record are not supported by competent undisputed evidence in the summary judgment record, that business record may not be considered on summary judgment. See M.R. Civ. P. 56(e); see also Smith v. Burlington N. & Santa Fe Ry. Co., 344 Mont. 278, 187 P.3d 639, 649–50 (2008) (rejecting the application of a pure abuse-of-discretion standard of review when reviewing a ruling on the foundation for admissibility on summary judgment).

[¶ 11] If we conclude that specific documents presented in support of summary judgment lacked the necessary foundation to be admissible as business records or that the court abused its discretion in considering them, we review de novo whether, in the absence of those records, there are sufficient undisputed facts to entitle the moving party to judgment as a matter of law. See Murphy, 2011 ME 59, ¶ 8, 19 A.3d at 819; M.R. Civ. P. 56(c). Beneficial's records, offered through the affidavit of HSBC's employee, constitute the only evidence in the summary judgment record concerning the contract and the breach. If those records cannot be considered, Beneficial will have failed to meet its burden on summary judgment to provide undisputed facts upon which it is entitled to judgment as a matter of law. See M.R. Civ. P. 56(c). Accordingly, the outcome of this appeal turns on the admissibility of the business records.

C. Business Records Exception to the Hearsay Rule

[¶ 12] Hearsay, defined as “a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted,” M.R. Evid. 801(c), is inadmissible except as provided by law ⁴ or by the Maine Rules of Evidence, see M.R. Evid. 802. Pursuant to the Maine Rules of Evidence, a business's record of acts or events is admissible as an exception to the hearsay rule if the necessary foundation is established “by the testimony of the custodian or other qualified witness.” M.R. Evid. 803(6); ⁵ see Murphy, 2011 ME 59, ¶ 10, 19 A.3d at 820. This requirement is tied to the purpose underlying the business records exception to the hearsay rule: to allow the consideration of a business record, without requiring firsthand testimony regarding the recorded facts, by supplying a witness whose knowledge of business practices for production and retention of the record is sufficient to ensure the reliability and trustworthiness of the record. See Murphy, 2011 ME 59, ¶¶ 10–17, 19 A.3d at 822; State v. Radley, 2002 ME 150, ¶¶ 13–16, 804 A.2d 1127, 1131–32; State v. Tomah, 1999 ME 109, ¶ 9, 736 A.2d 1047, 1050–51.

[¶ 13] The affiant whose...