Hsbc Mortgage Serv. Inc. v. Murphy

• Decision Date: 19 May 2011
• Docket Number: Docket No. And–10–90.
• Citation: 19 A.3d 815,2011 ME 59
• Parties: HSBC MORTGAGE SERVICES, INC.v.Dana S. MURPHY et al.
• Court: Maine Supreme Court

19 A.3d 815

2011 ME 59

HSBC MORTGAGE SERVICES, INC.

v.Dana S. MURPHY et al.

Docket No. And–10–90.

Supreme Judicial Court of Maine.

Argued: Sept. 15, 2010.Decided: May 19, 2011.

John D. Clifford, IV, Esq. (orally), Joshua Klein–Golden, Esq., Clifford & Golden, PA, Lisbon Falls, ME, Thomas A. Cox, Esq., Portland, ME, for Dana S. and Robin L. Murphy.John A. Doonan, Esq. (orally), Doonan, Graves & Longoria, LLC, Beverly, MA, for HSBC Mortgage Services, Inc.Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and JABAR, JJ.LEVY, J.

[¶ 1] Dana S. Murphy and Robin L. Murphy appeal from the entry of a summary judgment in the District Court (Lewiston, Beliveau, J.) in favor of HSBC Mortgage Services, Inc., on HSBC's complaint for foreclosure and sale pursuant to 14 M.R.S. §§ 6321–6325 (2010). The Murphys contend that the court erred in granting a summary judgment to HSBC because genuine issues of material fact exist with regard to whether (1) Mortgage Electronic Registration Systems, Inc. (MERS), the mortgagee of record as “nominee” for the original lender, Calusa Investments, Inc., effectuated a valid assignment of the mortgage to HSBC; (2) HSBC owns the note originally executed by the Murphys in favor of Calusa Investments; and (3) HSBC gave the Murphys notice of default and the right to cure in compliance with the terms of the mortgage. They also challenge the trustworthiness of the affidavits that support HSBC's statement of material facts. Because we determine that the affidavits submitted by HSBC are inherently untrustworthy and, therefore, do not establish the foundation for admission of the attached documents as business records pursuant to M.R. Evid. 803(6), we vacate the judgment without reaching the substantive issues raised.

I. BACKGROUND

[¶ 2] On March 15, 2005, the Murphys executed and delivered a promissory note in the principal sum of $149,000 to Calusa Investments, a Virginia corporation. ¹ As security for the note, the Murphys executed a mortgage on their residence in Auburn. The mortgage document signed by the Murphys identified Calusa as the “Lender,” and MERS “as a nominee for Lender and Lender's successors and assigns.” There is no mention of MERS in the promissory note that the Murphys executed in favor of Calusa. The language pertaining to MERS in the mortgage document is identical to the language we reviewed in Mortgage Electronic Registration Systems, Inc. v. Saunders, 2010 ME 79, ¶ 9, 2 A.3d 289, 294. On December 11, 2006, MERS executed a document purporting to assign the mortgage to HSBC. On August 24, 2009, MERS executed a document purporting to confirm the assignment of the note and mortgage to HSBC.

[¶ 3] In September 2008, after the Murphys failed to make certain payments on the note, HSBC filed a complaint for foreclosure in the District Court. ² Several months later, HSBC moved for summary judgment. HSBC's statement of material facts was supported by record references to an affidavit of John Gonzalez, who was identified in the affidavit as a Foreclosure Manager at HSBC. In its statement of material facts, HSBC asserted that it was the “holder of the Note and Mortgage” by virtue of the assignment from MERS and through “endorsement and delivery of the aforesaid Note from Calusa.” However, there was no endorsement on the face of, or appended to, the copy of the note attached to the Gonzalez affidavit or the complaint.

[¶ 4] Following a hearing, the court ( French, J.) denied HSBC's motion. Although the court considered the MERS assignment sufficient to establish HSBC's ownership of the mortgage, the court found no record evidence that HSBC had been assigned the note. The court also refused to accept HSBC's statement of material fact that the Murphys had received proper notice of default and the right to cure, see 14 M.R.S. § 6111 (2009),³ because the statement was not supported by a record reference to a sworn statement establishing that the purported notice was in fact sent to the Murphys. Thus, it did not comply with M.R. Civ. P. 56(e). The court ordered that the case be “set for pretrial after 45 days” in the event HSBC did not file a second motion for summary judgment.

[¶ 5] Seeking to address these shortcomings, HSBC filed a second motion for summary judgment together with a new statement of material facts. To establish that it held the Murphys' note, HSBC attached a copy of the note along with an allonge purporting to contain an endorsement to HSBC dated March 15, 2005, signed by an individual identified as Calusa's “Director of Operations.” To establish notice, HSBC provided a letter from counsel mailed to the Murphys that purports to satisfy the notice requirements of 14 M.R.S. § 6111. The statement of material facts was supported by record references to an affidavit signed by Maria Vadney, described in the affidavit as Vice President of HSBC. In response to the Murphys' opposition to the motion, HSBC subsequently filed a supplemental statement of material facts supported by a second affidavit also signed by Maria Vadney.

[¶ 6] After hearing arguments on the motion, the court ( Beliveau, J.) granted a summary judgment in HSBC's favor and entered a judgment of foreclosure and order for sale. Although it noted that HSBC could have discharged its summary judgment burden “with greater efficiency and clarity,” the court determined that HSBC had satisfied the minimum foreclosure requirements set forth in Chase Home Finance LLC v. Higgins, 2009 ME 136, 985 A.2d 508, and that it was entitled to judgment as a matter of law.

[¶ 7] On appeal, the Murphys assert numerous errors that primarily concern HSBC's evidence of its ownership of the note and the mortgage, see 14 M.R.S. § 6321 (2009),⁴ and evidence of whether it properly served notice of default and the right to cure.⁵ They also contend that the affidavits filed by HSBC in support of the motion for summary judgment are inherently untrustworthy and do not establish the foundational requirements for admission of the attached documents under the business records exception to the hearsay rule, M.R. Evid. 803(6).

II. DISCUSSION

[¶ 8] We review the grant of a summary judgment de novo, “viewing the evidence in the light most favorable to the party against whom judgment has been entered to decide whether the parties' statements of material facts and the referenced record evidence reveal a genuine issue of material fact.” Salem Capital Grp., LLC v. Litchfield, 2010 ME 49, ¶ 4, 997 A.2d 720, 721 (quotation marks omitted). In making this determination, we “consider only the portions of the record referred to, and the material facts set forth, in the [M.R. Civ. P. 56(h) ] statements.” Id. (quotation marks omitted).

[¶ 9] In residential mortgage foreclosure actions, certain minimum facts must be included in a mortgage holder's statement of material facts on summary judgment.⁶ See Higgins, 2009 ME 136, ¶ 11, 985 A.2d at 510–11. We have repeatedly emphasized “the importance of applying summary judgment rules strictly in the context of residential mortgage foreclosures.” Camden Nat'l Bank v. Peterson, 2008 ME 85, ¶ 29, 948 A.2d 1251, 1259. We have also repeatedly emphasized that a party's assertion of material facts must be supported by record references to evidence that is of a quality that would be admissible at trial. See Higgins, 2009 ME 136, ¶ 11, 985 A.2d at 510; Levine v. R.B.K. Caly Corp., 2001 ME 77, ¶ 6, 770 A.2d 653, 656; see also M.R. Civ. P. 56(e). This qualitative requirement is particularly important in connection with mortgage foreclosures where the affidavits submitted in support of summary judgment are commonly signed by individuals who claim to be custodians of the lender's business records. Thus, the information supplied by the affidavits is largely derivative because it is drawn from a business's records, and not from the affiant's personal observation of events.

[¶ 10] It is, perhaps, stating the obvious that an affidavit of a custodian of business records must demonstrate that the affiant meets the requirements of M.R. Evid. 803(6) ⁷ governing the admission of records of regularly conducted business. A business's records kept in the course of its regularly conducted business may be admissible notwithstanding the hearsay rule if the necessary foundation is established “by the testimony of the custodian or other qualified witness.” M.R. Evid. 803(6). “A qualified witness is one who was intimately involved in the daily operation of the [business] and whose testimony showed the firsthand nature of his knowledge.” Bank of Am., N.A. v. Barr, 2010 ME 124, ¶ 19, 9 A.3d 816, 821 (quotation marks omitted) (alteration in original). The foundation that the custodian or qualified witness must establish is four-fold:

(1) the record was made at or near the time of the events reflected in the record by, or from information transmitted by, a person with personal knowledge of the events recorded therein;

(2) the record was kept in the course of a regularly conducted business;

(3) it was the regular practice of the business to make records of the type involved; and

(4) no lack of trustworthiness is indicated from the source of information from which the record was made or the method or circumstances under which the record was prepared.

Id. ¶ 18, 9 A.3d at 820–821 (quoting State v. Nelson, 2010 ME 40, ¶ 9, 994 A.2d 808, 813).

[¶ 11] In evaluating trustworthiness for purposes of Rule 803(6), courts consider factors such as the existence of any motive or opportunity to create an inaccurate record, any delays in preparation of the record, the nature of the recorded information, “the systematic checking, regularity and continuity in maintaining the records[,] and the business'[s] reliance on them.” E.N. Nason, Inc. v. Land–Ho Dev. Corp., 403 A.2d 1173, 1179 (Me.1979). In the setting of summary judgment practice, any substantial errors or defects in the affidavit itself submitted in conjunction with the moving party...