Business Records Exception to Hearsay: Calloway Court Stakes Out the Issue of "Trustworthiness"

Jun 11, 2015

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see http://www.4dca.org/opinions/Jan%202015/01-07-15/4D13-2224.op.pdf

The drill is always the same. Leading the witness, the bank’s attorney asks his robo-witness questions about the “records” the lawyer wants to put in evidence. And the records are admitted despite numerous objections from the Defendant. And the 4th DCA Florida has affirmed this exception to the hearsay rule, citing the trustworthiness of business records because the business has an interest in keeping accurate and truthful records. Of course there is the question of whether the printout presented in court is really a “record” at all. But the biggest question is normally not raised at all: whose record is it? If it isn’t the creditor’s records, then why is being admitted?

Servicers typically will say they are in charge of dealing with the borrower; but they never say that they act on behalf of the creditors who are receiving their monthly or quarterly payment. That would require disclosure of the creditor(s) (a basic right for all debtors) and evidence that the creditor did not get paid. Or, as is most often the case, whether the creditor DID get paid even though it wasn’t from the borrower. Servicer advances and other payments are often received by the creditors (investors, who get paid directly — not through the inactive, empty trust).

On the creditor’s books they have been paid, hence there is no default. THAT means that whoever paid them is the real party in interest seeking to recover from the borrower — but that right to recover is NOT secured by a mortgage. The idea of bringing a foreclosure action in the name of an empty non-operating trust, where the investors are getting paid directly by the servicer or investment bank is absurd — but ti is and has been working. Challenge that, and you might find comfort int eh Calloway decision.

But that would only be true if the servicer had no interest in the outcome of the case or the outcome of the collection process except to do its bookkeeping job of recording payments from borrowers, allocating them properly and then paying the creditor(s). If the servicer wants the borrower to lose, then the incentive would be to present records that show a default even if there wasn’t any. I have had several such cases all decided for the borrower. Note the following approving quote the Calloway Court uses from the Florida Supreme Court decision of Carriage Hills Condo Assn v JBH Roofing 109 So 2d 329, 334 [Fla 4th DCA], 130 So 3d 692 (Fla. 2013) using the Federal Rules of Evidence as the basis for the 4th DCA decision:

(6) Records of a Regularly Conducted Activity. A record of an act, event, condition, opinion, or diagnosis if:

(A) the record was made at or near the time by–or from information transmitted by–someone with knowledge;

(B) the record was kept in the course of a regularly conducted activity of a business, organization, occupation, or calling, whether or not for profit;

(C) making the record was a regular practice of that activity;

(D) all these conditions are shown by the testimony of the custodian or another qualified witness, or by a certification that complies with Rule 902(11) or (12) or with a statute permitting certification; and

(E) the opponent does not show that the source of information or the method or circumstances of preparation indicate a lack of trustworthiness. (e.s.) [For example a doctor sued for malpractice would not enjoy the benefits of a presumption of trustworthiness in his business records for that patient.]

The whole point here is that when you drill down on these robo-witnesses several things emerge: First among them is that the witness did NOT have access to all of the business records regarding the subject loan and in particular no knowledge as to the initial loan closing, no records of the initial loan closing, no knowledge of any transaction in which the loan was purchased or sold, no access or knowledge as to what the books and records of the actual creditor report. And then there is the main point: the servicers are the only ones who have an interest in the outcome of the foreclosure because they are receiving fees and recovery of servicer advances ONLY if the foreclosure goes forward.

Add to that the misbehavior of the servicer in connection with the modifications and the “loss” of documents on a regular basis and the elements of trustworthiness go up in flames.

The final element that draws in the notion of trustworthiness is liberally construed in favor of the the objector because the remedy for the servicer is to simply show the actual transactions and the proof of payment from or on behalf of the borrower and the proof of payments made on or on behalf of the servicer to the creditor. The robo-witness does not know the identity of the creditor, and does not know who was paid and how much. Since the “default” belongs the party who “owns” the loan, the proof should be not just from the servicer’s records, which would corroborate the proffer, but start with proof of the creditor’s records that shows that they have not received the payments they were entitled to receive.

Whether you do it on voir dire or cross examination, you should have sufficient information from discovery to challenge the witness on whether ALL of the data they are trying to proffer is trustworthy. In most cases now, the “servicer” services nothing. They have never received a payment nor made an allocation of a payment nor made a payment to the creditor. They are a “successor” servicer whose only purpose is to foreclose. In short, they are another layer to distract the court from the fact that neither the witness nor the company he or she represents knows anything about the transaction. They have had contact with neither the borrower nor the creditor, They have in most cases had no contact with the prior alleged “servicers” who lack status as a servicer of the subject loan because the loan never made it into the Trust — and the rights to service emanate from the Trust.

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