Court Opinion

ID: 9919055
Source: CourtListenerOpinion
Date Created: 2024-01-17 15:02:44.634715+00
Date Added: 2024-06-11T08:04:22.687983
License: Public Domain

DISTRICT COURT OF APPEAL OF FLORIDA
                       SECOND DISTRICT

                    JAMES DANIEL WALLACE and
                       ALICE SEDENA ALLEN,

                              Appellants,

                                   v.

                 NATIONSTAR MORTGAGE LLC d/b/a
                   MR. COOPER, SUCCESSOR BY
                    MERGER TO PACIFIC UNION
                         FINANCIAL, LLC,

                               Appellee.

                             No. 2D23-926

                           January 17, 2024

Appeal from the Circuit Court for Pinellas County; Thomas M.
Ramsberger, Judge.

Malcolm E. Harrison and Michelle Moore of Law Office of Malcolm E.
Harrison, P.A., Wellington, for Appellants.

Amber Kourofsky of Troutman Pepper Hamilton Sanders LLP, Atlanta,
Georgia; and Alec Hayes of Troutman Pepper Hamilton Sanders LLP,
Atlanta, Georgia (substituted as counsel of record) for Appellee.

MORRIS, Judge.
     James Wallace and Alice Allen (the borrowers) appeal a final
judgment of foreclosure entered against them and in favor of Nationstar
Mortgage LLC after a bench trial. We reverse the final judgment because
the trial court erred in admitting an inadmissible business record that
constituted the only evidence that Nationstar had complied with a
condition precedent to filing suit.
     The borrowers executed a note and mortgage in August 2017. The
holder of the note, Pacific Union Financial, LLC, filed a foreclosure
complaint against the borrowers in August 2018, alleging that the
borrowers had defaulted on their loan in March 2018. Pacific Union later
merged with Nationstar. After a bench trial in November 2022, the trial
court entered a judgment of foreclosure in favor of Nationstar in April
2023.
     On appeal, the borrowers raise several issues. We find merit only
in their argument that the trial court erred in admitting a record that
was inadmissible under the business records hearsay exception to show
that Nationstar fulfilled a condition precedent to foreclosure.
     In their answer to the complaint, the borrowers asserted that
Nationstar failed to comply with 24 CFR § 203.604 (2018), a condition
precedent to foreclosure of their FHA loan. That regulation provides in
relevant part:
           (b) The mortgagee must have a face-to-face interview
     with the mortgagor, or make a reasonable effort to arrange
     such a meeting, before three full monthly installments due on
     the mortgage are unpaid. If default occurs in a repayment
     plan arranged other than during a personal interview, the
     mortgagee must have a face-to-face meeting with the
     mortgagor, or make a reasonable attempt to arrange such a
     meeting within 30 days after such default and at least 30
     days before foreclosure is commenced . . . .
           (c) A face-to-face meeting is not required if:
           ....
                  (5) A reasonable effort to arrange a meeting is
                  unsuccessful.

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           (d) A reasonable effort to arrange a face-to-face meeting
     with the mortgagor shall consist at a minimum of one letter
     sent to the mortgagor certified by the Postal Service as having
     been dispatched. Such a reasonable effort to arrange a face-
     to-face meeting shall also include at least one trip to see the
     mortgagor at the mortgaged property, unless the mortgaged
     property is more than 200 miles from the mortgagee, its
     servicer, or a branch office of either, or it is known that the
     mortgagor is not residing in the mortgaged property.
24 CFR § 203.604.1 "[A] mortgagee's ability to foreclose upon an FHA-
backed loan is cabined by these federal regulations." Kuhnsman v. Wells
Fargo Bank, N.A., 311 So. 3d 980, 981-82 (Fla. 2d DCA 2020). "[T]he
face-to-face interview [is] a condition precedent to foreclosure." Id. at
984 (relying on Derouin v. Universal Am. Mortg. Co., 254 So. 3d 595 (Fla.
2d DCA 2018)). However, "a lender complies with the regulation
[requiring a face-to-face interview], despite not conducting the interview,
so long as it demonstrates its 'reasonable efforts' to do so." Id. at 985.
As laid out in § 203.604(d), a "reasonable effort" consists of one letter
sent to the mortgagor and at least one trip to see the mortgagor at the
property. See Kuhnsman, 311 So. 3d at 982 (quoting § 203.604(d)).
     The dispute in this case centers on whether a trip was made to see
the borrowers at their home. At trial, Nationstar introduced a record to

     1 Here, the borrowers raised noncompliance with § 203.604(b) as

both a specific denial and an affirmative defense. See Derouin v.
Universal Am. Mortg. Co., 254 So. 3d 595, 600 (Fla. 2d DCA 2018)
(deciding to not weigh in on the conflict of "whether noncompliance with
the regulations must be raised as an affirmative defense or as a specific
denial in an answer" because the borrowers raised noncompliance as
both an affirmative defense and a specific denial); see also Kuhnsman v.
Wells Fargo Bank, N.A., 311 So. 3d 980, 984 (Fla. 2d DCA 2020)
("Indisputably, the [borrowers] challenged Wells Fargo's compliance with
the face-to-face interview requirement. Consequently, regardless of
whether the requirement was raised as an affirmative defense or as a
specific denial, the parties teed up the issue.").
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show that a field agent conducted a trip to the borrowers' home. The
record is a document titled "Pacific Union F2F Results." The document
notes that contact was attempted but was not made with the borrowers
at their home on April 25, 2018, at 7:22 p.m. The borrowers' counsel
objected to this document on the basis of hearsay, lack of foundation,
and lack of personal knowledge. He argued that the witness, an
employee for Nationstar, was unable to explain how the field agent notes
were verified and that the record was therefore not trustworthy. The trial
court ruled that the record was admissible based on the "onboarding
process as testified by the witness."
     "The standard of review for the admissibility of evidence is abuse of
discretion." Deutsche Bank Nat'l Tr. Co. v. Sheward, 245 So. 3d 890, 892
(Fla. 2d DCA 2018) (first citing Channell v. Deutsche Bank Nat'l Tr. Co.,
173 So. 3d 1017, 1018 (Fla. 2d DCA 2015); and then citing Bayview
Loan Servicing, LLC v. Kay, 227 So. 3d 779, 781 (Fla. 1st DCA 2017)).
But "the question of whether evidence meets the statutory definition of
hearsay is a matter of law and thus subject to de novo review." Id. (citing
Burkey v. State, 922 So. 2d 1033, 1035 (Fla. 4th DCA 2006)).
     To be admissible [as business records under section
     90.803(6)(a), Florida Statutes], the movant is required to
     establish the following:
           (1) the record was made at or near the time of the
           event; (2) was made by or from information
           transmitted by a person with knowledge; (3) was
           kept in the ordinary course of a regularly
           conducted business activity; and (4) that it was a
           regular practice of that business to make such a
           record.
     Yisreal v. State, 993 So. 2d 952, 956 (Fla. 2008) (citing
     Jackson v. State, 738 So. 2d 382, 386 (Fla. 4th DCA 1999)).
           Additionally, in those instances where a business takes
     custody of another business's records and integrates them
     within its own records, "the acquired records are treated as

                                        4
     having been 'made' by the successor business, such that both
     records constitute the successor business's singular 'business
     record.' " Bank of N.Y. v. Calloway, 157 So. 3d 1064, 1071
     (Fla. 4th DCA 2015) (quoting United States v. Adefehinti, 510
     F.3d 319, 326 (D.C. Cir. 2007)). "[A] witness can lay the
     foundation for business records of another company,"
     Bayview Loan Servicing, 227 So. 3d at 781, and "[t]here is no
     requirement that the records custodian have personal
     knowledge of the manner in which the prior servicer
     maintained and created its business records." Sas v. Fed.
     Nat'l Mortg. Ass'n, 165 So. 3d 849, 851 (Fla. 2d DCA 2015)
     (citing WAMCO XXVIII, Ltd. v. Integrated Elec. Env'ts, Inc., 903
     So. 2d 230, 233 (Fla. 2d DCA 2005)). What is required,
     however, is independent verification of the loan payment
     history. WAMCO XXVIII, 903 So. 2d at 233; Holt v. Calchas,
     LLC, 155 So. 3d 499, 504 (Fla. 4th DCA 2015). A successor
     business may establish the trustworthiness of records "by
     independently confirming the accuracy of the third-party's
     business records upon receipt." Bank of N.Y., 157 So. 3d at
     1072.
Id. at 893 (second and third alterations in original) (holding that
witness's "testimony set forth the procedures utilized by [servicer] to
independently verify the accuracy of the payment history records from
the prior loan servicer" and that trial court therefore erred in excluding
payment history).
     A record does not constitute an admissible business record if "the
sources of information or other circumstances show lack of
trustworthiness." § 90.803(6)(a), Fla. Stat. (2022).
            Given this trustworthiness threshold, mere
     " 'reliance by the [incorporating business] on records created
     by others, although an important part of establishing
     trustworthiness, without more is' " insufficient. State v.
     Fitzwater, 122 Hawai'i 354, 227 P.3d 520, 532 (2010)
     (quoting 2 Kenneth S. Broun et al., McCormick on Evidence §
     292, at 318 (6th ed. 2006)). In most instances, a proponent
     will clear this hurdle by providing evidence of a business
     relationship or contractual obligation between the parties that
     ensures a substantial incentive for accuracy. See, e.g., Matter
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     of Ollag Constr. Equip. Corp., 665 F.2d 43, 46 (2d Cir. 1981)
     ("[B]usiness records are admissible if witnesses testify that
     the records are integrated into a company's records and relied
     upon in its day-to-day operations." (citations omitted)); White
     Indus., Inc. v. Cessna Aircraft Co., 611 F. Supp. 1049, 1061
     (W.D. Mo. 1985) (finding the "indicia of trustworthiness"
     apparent "where the reporting duty arises by way of a
     continuing business relationship between two independent
     business entities"). In the alternative—as tacitly applied in
     WAMCO—the successor business itself may establish
     trustworthiness by independently confirming the accuracy of
     the third-party's business records upon receipt. See, e.g.,
     Simien v. Unifund CCR Partners, 321 S.W.3d 235, 243 (Tex.
     App.-Houston [1 Dist.] 2010) ("[A] document created by one
     business may become the records of a second business if the
     second business 'determines the accuracy of the information
     generated by the first business.' " (quoting Martinez v.
     Midland Credit Mgmt., Inc., 250 S.W.3d 481, 485 (Tex.App.-El
     Paso 2008, no pet.))).
Calloway, 157 So. 3d at 1071-72 (alterations in original).
     Courts have held that records from a prior servicer or bank are
admissible as business records when the witness for the current servicer
or bank specifically testifies regarding the current servicer's or bank's
process of verifying the information from the prior servicer or bank. See,
e.g., WAMCO XXVIII, 903 So. 2d at 233 (holding that the loan payment
histories of a prior servicer are admissible under section 90.803(6) when
they are relied on by a successor servicer who establishes that it
independently verified the accuracy of the payment histories and its
verification procedures demonstrate that the records are trustworthy);
Azran Miami 2 LLC v. Deutsche Bank Nat'l Tr. Co., 282 So. 3d 924, 927
(Fla. 3d DCA 2019) ("The Bank's witness, the records custodian from
Select Portfolio Servicing, testified that as his company was the
subsequent servicer of the mortgage, that he was familiar with the
Bank's boarding process, and that the records were verified and boarded

                                     6
accordingly. . . . The circumstances of the loan transfer itself would have
been sufficient to establish trustworthiness given the business
relationships and common practices inherent among lending institutions
acquiring and selling loans." (citing Calloway, 157 So. 3d at 1073)); Le v.
U.S. Bank, 165 So. 3d 776, 778 (Fla. 5th DCA 2015) ("Although there was
no testimony that [the witness] worked for the prior servicer, she testified
that she was familiar with industry standards in recording and
maintaining the records and that the records received from the prior
servicer were tested for accuracy and compliance with industry
standards via a boarding process before the information was input into
SLS's system. She was able to testify regarding the specifics of SLS's
verification process. This was sufficient evidence of the records'
trustworthiness.").
     Here, the witness testified that he was familiar with the system
used by Nationstar to service its loans, including the instant loan. He
also testified regarding the onboarding process used when Nationstar
acquires a loan from another servicer. Those records are relied upon by
Nationstar, and those records are checked for accuracy and to confirm
that they conform to industry standards. As for the instant loan,
Nationstar "went through the onboarding process and . . . did not see
any issues, and so there was no remedial process engaged in because no
issues were found."
     However, the witness admitted that the field call notes were not
created by Nationstar or its predecessor, Pacific Union. Rather, the field
call notes came from one of Pacific Union's vendors, JM Adjustment
Services (JMA). The witness had never worked for JMA, had never been
trained by JMA, and was not familiar with the recordkeeping or policies
and procedures of JMA. The witness agreed that when Nationstar

                                     7
onboards loan histories from prior servicers, it verifies the accuracy of
the loan histories, normally checking the figures mathematically. He
agreed that the field call notes could not be verified mathematically:
"[T]he information that we receive from prior servicers is not always
mathematical information. We do review their business practices about
record creation and maintenance and relationships with vendors and
servicing of the loans that they have, in addition to reviewing the
information that we received from them." The witness could not point to
any records demonstrating that Nationstar independently verified the
information in the field call notes. He went on:
     I do know that our boarding process requires communication
     with prior servicers and we search our due diligence about
     their business practices, which would have included this type
     of information. But as far as whether someone picked up the
     phone or sent an email to JMA, I could not attest to that.
     This case is distinguishable from those cases that generally allow
the admission of records of a prior servicer based on witness testimony
from the successor servicer regarding the onboarding process of the loan
records. Here, Nationstar relied on business records of Pacific Union, a
third party, which include a record of a fourth party. And this record
was not being relied upon to show a figure verifiable through the prior
servicer's records, such as amount due on the loan or payment history.
Rather, this record purportedly documented an event that was offered to
prove compliance with a condition precedent. The witness was unable to
testify regarding Pacific Union's relationship with the vendor, JMA, that
would ensure the accuracy of the record, and the witness did not
establish that Nationstar verified the accuracy of this document when it
obtained the loan records from Pacific Union. Further, the witness's
testimony regarding the general onboarding process of Pacific Union's
records was not sufficient to prove that the record created by JMA was
                                     8
admissible under the business records exception. Accordingly, the trial
court erred in finding that the "onboarding process as testified by the
witness" was sufficient to satisfy the business records exception to
hearsay.
     Without the record introduced by Nationstar, Nationstar was
unable to show compliance with § 203.604, a condition precedent to
foreclosure. Accordingly, we reverse the final judgment entered in
Nationstar's favor and remand for the trial court to enter judgment in
favor of the borrowers. See Mace v. M&T Bank, 292 So. 3d 1215, 1224
n.3 (Fla. 2d DCA 2020) ("In nonjury cases where a party has not moved
for involuntary dismissal but nonetheless shows on appeal that the
evidence is insufficient to support the judgment, see Fla. R. Civ. P.
1.530(e), the correct instruction would be to enter a judgment in favor of
the appellant, see Winchel v. PennyMac Corp., 222 So. 3d 639, 646 n.5
(Fla. 2d DCA 2017)."). 2
     Reversed and remanded.

NORTHCUTT and SMITH, JJ., Concur.

Opinion subject to revision prior to official publication.

     2 The borrowers argue on appeal that a final judgment should be

entered in their favor. At the bench trial, they argued that Nationstar
was not entitled to a foreclosure judgment; they did not move for an
involuntary dismissal.
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