Hussain v. Salin Bank & Trust Co.

Decision Date28 February 2020
Docket NumberCourt of Appeals Case No. 19A-MF-1786
Citation143 N.E.3d 322
Parties Ashfaq HUSSAIN and Azra Hussain, Appellants-Defendants, v. SALIN BANK & TRUST COMPANY, Appellee-Plaintiff, and Indiana Department of Revenue, Defendant.
CourtIndiana Appellate Court

Attorney for Appellants: Robert E. Duff, Fishers, Indiana

Attorney for Appellee: Liberty L. Roberts, Noblesville, Indiana

Altice, Judge.

Case Summary

[1] Ashfaq and Azra Hussain (the Hussains) appeal the trial court's grant of summary judgment in favor of Salin Bank and Trust Company (Salin), claiming that genuine issues of material fact remain because an affidavit that Salin submitted as designated evidence was hearsay, and the trial court ignored an affidavit that they had offered in response to Salin's motion for summary judgment. The Hussains further contend that the damage award for Salin was error because the trial court based its decision on inadmissible hearsay evidence.

[2] We affirm.

Facts and Procedural History

[3] On September 12, 2008, the Hussains borrowed $221,937.26 from Salin, signed a note, and obtained a mortgage on certain real property in Noblesville to secure the loan. The agreement required the Hussains to repay Salin the original amount loaned with a regular interest rate of 7.75% and a default rate of 12.75%, along with late fees and attorneys' fees in accordance with the terms and conditions of the note. The Hussains were required to make 180 payments of $2,104.42 each month, with the first payment due on October 16, 2008. All subsequent payments were due on the 15th of the month, with a final payment due on September 15, 2023.

[4] At the loan closing, the Hussains tendered a check to Salin in the amount of $565 that represented the fees associated with securing the loan. The account had insufficient funds to cover the check and the check was returned to Salin. In response, Salin charged the Hussains a $20 non-sufficient funds (NSF) fee that it applied to the principal of the loan.

[5] When the first payment of $2,104.42 became due in October, the Hussains paid only $1,500. Salin charged the Hussains a late fee and another NSF fee connected to that payment. Over the course of the next several years, the Hussains made only partial payments and incurred late fees.

[6] On March 16, 2012, Salin filed a complaint on the note and to foreclose on the mortgage, seeking judgment against the Hussains for the unpaid principal balance due on the note with accrued interest, late charges, default-related expenses, attorneys' fees, costs, and other expenses incurred in the foreclosure action.1 The Hussains answered the complaint, admitting that they executed the note but denied that Salin could foreclose on the mortgage.

[7] In December 2012, the Hussains filed for Chapter 13 Bankruptcy protection.2 An arrearage account was created for the Hussains' payments to the trustee as part of the Bankruptcy plan. The plan provided for payments to the trustee and directly to Salin for the estimated arrearage of $32,700. An amended plan was created in December 2013 that provided for payment to the trustee and directly to Salin for an estimated arrearage of $29,803 on the note.

[8] The Hussains continued to make full or partial payments directly to Salin in addition to the payments made on the arrearage account through the Bankruptcy trustee until May 6, 2015. They stopped making direct payments to Salin on November 27, 2015.

[9] On June 28, 2016, the Hussains' Chapter 13 Bankruptcy was dismissed. Litigation in this case resumed, and on August 4, 2016, Salin filed a motion for summary judgment, claiming that the undisputed facts established that it was entitled to judgment as a matter of law, and the property should be sold. In support of its motion, Salin relied upon the note, mortgage, and an assignment of rents that the Hussains had executed, the complaint and answer to the complaint, a notice of default, a title search, an affidavit of attorneys' fees and the affidavit of John Frieburg as its designated evidence.

[10] The Hussains filed their response to the motion for summary judgment, admitting that they executed the note and mortgage and had made payments on the note. They argued, however, that Salin was not entitled to foreclosure because the designated evidence showed that Salin had materially breached the terms of the note before the Hussains had committed any breach. The Hussains also alleged that Salin miscalculated the amount due on the note.

[11] In their response, the Hussains offered the following designated evidence to the trial court: the affidavit of Marie McDonnell with supporting exhibits including deposition testimony, payment history records, NSF fee information, and an analysis of the Hussains' payment history. McDonnell had been retained as the Hussains' mortgage fraud and forensic analyst, who averred, among other things, that Salin improperly administered the loan, that Salin's accounting of the Hussains' payments was incorrect, and that its servicing of the loan involved "unsound and unsafe" banking practices. Appendix Vol. III at 20-21. McDonnell also stated that "on October 1, 2008, Bank One returned the check for insufficient funds, and Salin charged Mr. Hussain a $20.00 NSF fee. On October 2, 2008, Salin increased the principal balance by $20.00 for this nonsufficient funds fee.... This increase in the principal balance amounts to a unilateral, unauthorized alteration in the terms of the Note by Salin Bank." Id. at 16. Thus, the Hussains claimed that McDonnell's affidavit raised a genuine issue of material fact as to whether Salin initially breached the contract that would extinguish the Hussains' liability.

[12] The trial court rejected the Hussains' first material breach argument and found that they were liable on the note and mortgage. The trial court granted summary judgment in Salin's favor on the issue of liability but determined that there were material facts in dispute as to the proper measure of damages.

[13] At the damages hearing that commenced on July 29, 2019, Ken Blough testified for Salin. Blough is the vice president and a commercial loan officer who heads the loan department at Horizon Bank (Horizon). Blough explained that Horizon and Salin had merged and that Horizon is Salin's successor. Blough further testified that his job duties included handling commercial loans that were struggling or in default, that he had personally handled the Hussains' loan, reviewed the note, mortgage, payment schedule, and payment records after the merger, and "ran an independent calculation of the amortization of the note based on the payments made and the dates made." Transcript Vol. II at 48. Blough also explained that Salin's documents became the documents of Horizon and the Hussains' loan was integrated into Horizon's software systems after the merger.

[14] Blough testified as to the summary of the damages that the bank sought under the default terms of the loan and mortgage as set forth in one of Salin's exhibits. He also testified how Salin created a separate arrearage account as part of the Hussains' bankruptcy, and that payments from the trustee were applied to that account. Blough explained that the principal balance remained under the original account that had been set up for the Hussains to make payments.

[15] A different exhibit contained the amortization schedule that had previously been provided and offered into evidence by the Hussains that revealed a difference of approximately $2,800 from what was reflected in Salin's records. The exhibit also showed the interest that was due and had accrued since the last payment, along with Salin's costs in pursuing the foreclosure action.

[16] The Hussains objected to the exhibit on the basis of hearsay, arguing that Blough was precluded from authenticating the records because he was employed by Horizon rather than Salin. Salin responded that the business records exception to the hearsay rule applied and pointed out that notwithstanding its exhibits, the Hussains had already submitted the necessary records into evidence for the calculation of damages, including the request for attorneys' fees, the documents regarding summary judgment, and the records relating to the collection of the loan.

[17] The trial court overruled the Hussains' objections, finding that the documents fell within the business records exception to the hearsay rule and were properly authenticated. The Hussains presented no witnesses at the damages hearing. After considering the evidence, the trial court entered damages for Salin in the amount of $242,718.47. The Hussains now appeal.

Discussion and Decision
I. Standard of Review

[18] In an appeal from a grant of summary judgment, we stand in the shoes of the trial court and apply a de novo standard of review. Poiry v. City of New Haven , 113 N.E.3d 1236, 1239 (Ind. Ct. App. 2018). Summary judgment is appropriate where the designated evidence establishes that there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Row v. Holt , 864 N.E.2d 1011, 1013 (Ind. 2007). We consider only those materials properly designated pursuant to Ind. Trial Rule 56 and construe all factual inferences and resolve all doubts in favor of the non-moving party. Young v. Hood's Gardens, Inc. , 24 N.E.3d 421, 424 (Ind. 2015). A trial court's grant of summary judgment is clothed with a presumption of validity, and the party who lost in the trial court has the burden of demonstrating that the grant of summary judgment was erroneous. Id. This court will affirm upon any theory or basis supported by the designated evidence. Poiry , 113 N.E.3d at 1239-40.

II. Mortgage Loan Defaults Generally

[19] We initially observe that the elements of a prima facie case for the foreclosure of a mortgage are: (1) the existence of a demand note and the mortgage, and (2) the mortgagor's default. McEntee v. Wells Fargo Bank, N.A., 970 N.E.2d 178, 182 (Ind. Ct. App. 2012). Ind....

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