Hunter v. Aurora Loan Services, LLC

Citations: 137 So. 3d 570; 2014 Fla. App. LEXIS 6170; 2014 WL 1665739Docket: No. 1D12-6071

Court: District Court of Appeal of Florida; April 25, 2014; Florida; State Appellate Court

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The motion for rehearing, clarification, certification, and rehearing en banc filed by Aurora Loan Services, LLC is denied. The court withdraws its previous opinion from March 4, 2014, and substitutes a new opinion. Lewis B. Hunter, Jr. appeals a final foreclosure judgment, claiming that Aurora lacked standing, as it did not possess the original promissory note or mortgage at the time of the lawsuit. The court agrees with Hunter, finding that the trial court incorrectly admitted evidence under the business records exception to the hearsay rule.

Aurora's complaint asserted ownership of the note and mortgage but acknowledged it was not in possession of the original documents. Evidence showed the original owner was MortgagelT, which later assigned the documents to Aurora. A letter from Aurora to Hunter indicated a transfer of servicing rights effective February 1, 2007. The Corporate Assignment of Mortgage documented MortgagelT as the assignor and Aurora as the assignee.

To prove it held the right to enforce the note as of April 3, 2007, Aurora presented two computer-generated records: an Account Balance Report dated January 30, 2007, indicating the loan was sold to Lehman Brothers (Aurora’s parent) and a consolidated notes log dated July 18, 2007, suggesting the original documents were sent via UPS on April 18, 2007. However, neither document was confirmed to have originated from MortgagelT, and at trial, the records were held by Rushmore Loan Management Services, which serviced the loan for the current owner, Arch Bay Holdings.

Roger Martin, a Rushmore employee, testified regarding standard industry practices but did not have personal knowledge of the records' origins. He could not confirm the documents belonged to MortgagelT nor their generation details. Ultimately, the evidence presented was deemed insufficient to establish Aurora's standing to foreclose.

Testimony indicated that the computer program used to generate the notes log is common in the industry, with a records custodian typically entering such notes, while it is standard for a lender’s accounts payable department to produce a zero balance report upon the sale of a loan. The admissibility of evidence is evaluated for abuse of discretion under the Florida Evidence Code, which deems hearsay inadmissible unless it falls under specific exceptions. One exception pertains to business records, necessitating the establishment of a proper foundation that includes: 1) the record was created close to the time of the event, 2) it was made by someone with knowledge, 3) it was kept as part of regular business activities, and 4) it was standard practice of the business to create such records. Although a witness does not need to be the document's creator, they must demonstrate knowledge of the established criteria. In this case, Mr. Martin's testimony did not provide the necessary foundation for admitting the Account Balance Report and the consolidated notes log as business records. He lacked direct knowledge of MortgagelT's record-keeping, failing to confirm the timing of the records, the source of information, the regularity of record creation, or even ownership of the records by MortgagelT. His general statements on industry practices were insufficient, contrasting with a prior case where a bank's witness had the requisite knowledge of internal processes and record-keeping.

In Glarum v. LaSalle Bank Nat’l Ass’n, the court ruled that an affidavit from a loan servicer's employee was inadmissible as a business record because the employee was unaware of the data entry process, its accuracy, or the origins of data from a previous servicer. Conversely, in WAMCO XXVIII, Ltd. v. Integrated Electronic Environments, Inc., the court found that the business records exception was satisfied when an officer from the current loan servicer testified about his involvement with the loans and the verification of payment data. A key requirement in mortgage foreclosure cases is that the plaintiff must demonstrate standing to foreclose, which necessitates proof of ownership of the note at the time the complaint was filed. This can be established through valid assignments, proof of debt purchase, or effective transfers. In the case at hand, the court determined that the Account Balance Report and notes log presented by Aurora were improperly admitted as business records and did not sufficiently establish Aurora's standing to foreclose against Mr. Hunter. No other evidence confirmed Aurora's possession of the promissory note as of April 3, 2007. Consequently, the court reversed the final judgment of foreclosure against Mr. Hunter and remanded for further proceedings regarding his counterclaim. Judges THOMAS and MAKAR concurred.