Beneficial Maine Inc. v. Carter
25 A.3d 96, 2011 ME 77, 2011 Me. LEXIS 77 (2011)
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Rule of Law:
To admit a company's business records through an affidavit from an employee of a separate, but related, entity under the business records exception to the hearsay rule, the affiant must demonstrate personal knowledge of the record-keeping practices and procedures of both businesses to establish the records' reliability and trustworthiness.
Facts:
- Timothy G. and Kathleen A. Carter executed a promissory note with Beneficial Maine Inc.
- The note was secured by a mortgage on the Carters' real property in Kennebunk.
- HSBC Consumer Lending Mortgage Servicing acted as the servicer for Beneficial Maine Inc. regarding the Carters' mortgage.
- Beneficial alleged that the Carters defaulted on their payment obligations under the promissory note.
Procedural Posture:
- Beneficial Maine Inc. filed a complaint for foreclosure against Timothy G. and Kathleen A. Carter in the Maine District Court (Biddeford), the court of first instance.
- After mediation failed, Beneficial moved for summary judgment, submitting an affidavit from Shana Richmond, an employee of its servicer, HSBC, to support its claims.
- The Carters opposed the motion, arguing that Richmond's affidavit and the attached records were inadmissible hearsay for which no proper foundation had been laid.
- The District Court entered summary judgment in favor of Beneficial.
- The Carters, as appellants, appealed the summary judgment to the Maine Supreme Judicial Court, the state's highest court.
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Issue:
Does an affidavit from an employee of a mortgage servicer, which fails to explain the basis of the employee's personal knowledge of the mortgage holder's record-keeping practices, provide a sufficient foundation to admit the mortgage holder's records under the business records exception to the hearsay rule in a summary judgment proceeding?
Opinions:
Majority - Saufley, C.J.
No, an affidavit from an employee of a mortgage servicer that does not establish the affiant's personal knowledge of the mortgage holder's record-keeping practices is insufficient to admit the holder's records under the business records exception. To be a 'qualified witness' for another company's records, an affiant must show sufficient knowledge of both businesses' regular practices to demonstrate the reliability and trustworthiness of the information. Here, the affidavit from Shana Richmond of HSBC was conclusory. It failed to provide any basis for her personal knowledge of Beneficial's practices for creating and maintaining its records, how HSBC integrated those records, or how HSBC relied on them. Because the affidavit did not establish that Richmond was a 'qualified witness,' the records she sought to authenticate were inadmissible hearsay, and the court could not consider them in ruling on the summary judgment motion.
Analysis:
This decision significantly raises the evidentiary bar for lenders in foreclosure proceedings, particularly at the summary judgment stage. It clarifies that a 'qualified witness' from a third-party servicer cannot rely on boilerplate assertions but must affirmatively demonstrate specific, personal knowledge of the originating lender's record-creation and maintenance procedures. This precedent makes it more difficult for lenders using complex servicing arrangements to obtain summary judgment, requiring more detailed and robust affidavits to admit essential documents. The ruling strengthens procedural protections for homeowners by forcing lenders to provide a more rigorous and reliable foundation for the evidence used to support a foreclosure.
