JPMorgan Chase Bank, N.A. v. Terrance B. Lowell , 156 A.3d 727 ( 2017 )

MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2017 ME 32 Docket: And-16-139
Submitted
On Briefs: November 29, 2016
Decided: February 28, 2017
Panel: ALEXANDER, MEAD, JABAR, HJELM, and HUMPHREY, JJ.
JPMORGAN CHASE BANK, N.A.
v.
TERRANCE B. LOWELL et al.
HJELM, J.
[¶1] Terrance B. Lowell appeals from a judgment of foreclosure in favor
of JPMorgan Chase Bank, N.A., entered in the District Court (Lewiston, Dow, J.)
after a bench trial. Lowell argues that the court erred or abused its discretion
by admitting certain documents pursuant to the business records exception to
the hearsay rule, see M.R. Evid. 803(6), and by finding that the notice of
default issued by JPMorgan complied with statutory requirements. Although
the court properly admitted the challenged documents in evidence, we agree
that the notice of default was defective. We therefore vacate the judgment
and remand for entry of judgment for Lowell.
2
I. BACKGROUND
[¶2] In March 2015, JPMorgan filed a complaint against Lowell seeking
foreclosure on residential property located in Auburn.1 JPMorgan alleged that
Lowell had defaulted by failing to make payments due on a promissory note
executed in favor of Wachovia Mortgage Corporation; that the note was
secured by a mortgage in favor of Mortgage Electronic Registration Systems,
Inc., (MERS), as nominee for Wachovia; and that, after several transactions, all
rights created by the instruments had been assigned to JPMorgan.2 Lowell
filed an answer, which, as later amended, disputed many of the allegations in
the complaint and asserted several affirmative defenses.
[¶3] The matter proceeded to trial in March 2016. To lay the
foundation necessary for the admission of various documents as business
records, see M.R. Evid. 803(6), JPMorgan presented the testimony of employee
Frank Dean, who had worked for JPMorgan for five years and, at the time of
1 The complaint named CitiBank (South Dakota), N.A., as a party-in-interest because Citibank
allegedly holds a junior interest in the mortgaged property. See 14 M.R.S. § 6321 (2014), amended
by P.L. 2015, ch. 229, § 1 (effective October 15, 2015) (codified at 14 M.R.S. § 6321 (2016)).
CitiBank did not participate in either the trial court proceedings or this appeal.
2
Among the records admitted in evidence at trial were copies of a 2012 assignment to
JPMorgan from MERS, as nominee for Wachovia; and a separate 2014 quitclaim assignment of the
mortgage to JPMorgan from Wells Fargo, which had merged with Wachovia in 2011. As a result of
the quitclaim assignment, it appears that JPMorgan’s standing to pursue this foreclosure action is
not at issue, and Lowell does not contend otherwise. See Bank of Am., N.A. v. Greenleaf, 2014 ME 89,
¶¶ 9, 17, 96 A.3d 700 (concluding that a bank lacked standing to foreclose on the defendant’s
property when it failed to prove that it owned the mortgage that secured the defendant’s loan).
3
trial, was a “mortgage banking research officer.” Dean testified that his
responsibilities in that position included reviewing “business records
pertaining to residential mortgage loans,” and that in preparation for trial he
had “reviewed the electronic business records pertaining to [Lowell’s]
mortgage file,” including the note, mortgage, assignments of the mortgage, and
payment history. He further testified that he previously worked as a “bank
branch loan officer” for JPMorgan and had been “responsible for meeting with
bank customers, . . . developing residential mortgage applications,
. . . processing mortgage loans, closing mortgage loans, and . . . handling
customer service issues . . . such as payment applications.” He stated that
while assisting customers with loan payments he observed “how the system
was accessed” by bank tellers at the time of payment, “where the information
was entered, and how it was saved, and became a record.” He explained that,
based on this cumulative experience, he was familiar with how JPMorgan’s
business records were created, checked for accuracy, and accessed, and he
confirmed that JPMorgan followed all procedures for maintaining the
accuracy of the documents at issue in this case.
[¶4] Based on Dean’s foundational testimony, JPMorgan introduced a
number of documents in evidence, including the note and mortgage; the
4
notice of default and right to cure issued to Lowell by JPMorgan in
January 2015; and Exhibit E, which consists of “screen prints” from
JPMorgan’s computer databases that show the charges and payments made on
Lowell’s loan between June 2006—which, Dean testified, is when JPMorgan
acquired the note—and late February 2016. Dean stated that according to the
computer printouts, Lowell had not made any payments on his loan since
September 1, 2012.
[¶5] During Dean’s testimony, Lowell made a general objection to the
admission of JPMorgan’s records pursuant to Rule 803(6). The court
overruled the objection, rejecting Lowell’s argument that JPMorgan was
required to establish that Dean had knowledge about the creation of the
records particular to this case. Lowell later objected specifically to the
admission of some portions of Exhibit E that cover activity while JPMorgan
owned the note, based on his assertion that Dean lacked personal knowledge
about how various charges in the printouts were calculated and entered, and
the court also overruled that objection.3
3 Exhibit E also includes several pages that, Dean testified, JPMorgan received from Wachovia
and that show activity on Lowell’s account for the period between July 2004 and June 2006. Even
to the extent that Lowell’s objection encompassed that aspect of Exhibit E, he does not challenge the
admission of those pages on appeal, and they are not material to our analysis, see infra n.6.
5
[¶6] Following the trial, on March 16, 2016, the court entered a
judgment of foreclosure in favor of JPMorgan, finding that Lowell owed
$125,000.33 on the note and mortgage, plus attorney fees and disbursements.
Lowell timely appealed. See 14 M.R.S. § 1901 (2016); M.R. App. P. 2.
II. DISCUSSION
[¶7] To be entitled to a judgment of foreclosure, JPMorgan was
required to prove, among other things, “the amount due on the mortgage note,
including any reasonable attorney fees and court costs,” and service on Lowell
of a notice of default and right to cure that complied with statutory
requirements. Bank of Am., N.A. v. Greenleaf, 2014 ME 89, ¶ 18, 96 A.3d 700;
see also 14 M.R.S. §§ 6111(1-A), 6322 (2014).4 Lowell argues that the court
erred by admitting JPMorgan’s business records showing the amount due
pursuant to the secured obligation, and that the notice of default was
statutorily defective. We address these issues in turn.
A. Evidence of Amount Due
[¶8] As evidence of the amount due, JPMorgan introduced Exhibit E,
which consists of computer printouts from JPMorgan’s databases showing
4 Title 14 M.R.S. § 6111(1-A) has been amended since January 2015, when JPMorgan issued the
notice of default. See P.L. 2015, ch. 36, §§ 1-2 (effective October 15, 2015) (codified at 14 M.R.S.
§ 6111 (2016)). All references to section 6111 are to the version of the statute in effect when the
notice of default was issued.
6
charges and payments on Lowell’s loan between June 2006 and late
February 2016, a few weeks before trial, during which time JPMorgan owned
the note. Although Lowell’s brief does not directly cite Rule 803(6), he
appears to argue that the court erred or abused its discretion by admitting
Exhibit E as a business record. See Am. Express Bank FSB v. Deering, 2016 ME
117, ¶ 12, 145 A.3d 551 (“When admission of evidence under the business
records exception to the hearsay rule is challenged, we review a trial court’s
foundational findings to support admissibility for clear error and its ultimate
determination of admissibility for an abuse of discretion.” (quotation marks
omitted)). Lowell further asserts that the court erred by determining that
Exhibit E, together with Dean’s testimony, was sufficient to prove the amount
due on the loan—a matter we review for clear error. See Wells Fargo Bank,
N.A. v. Burek, 2013 ME 87, ¶ 17, 81 A.3d 330.
[¶9] As we have previously explained, “[b]usiness records are hearsay
and therefore inadmissible pursuant to M.R. Evid. 802 unless they meet the
requirements of the business records exception in M.R. Evid. 803(6).” Ocean
Communities Fed. Credit Union v. Roberge, 2016 ME 118, ¶ 9, 144 A.3d 1178.
Evidence qualifies for the business records exception if the necessary
foundation is established by a witness who is a “custodian or another qualified
7
witness.” M.R. Evid. 803(6)(D).5 “A qualified witness is one who was
intimately involved in the daily operation of the business and whose
testimony showed the firsthand nature of his knowledge.” Roberge, 2016 ME
118, ¶ 10, 144 A.3d 1178 (quotation marks omitted).
[¶10] Here, Dean testified in detail about JPMorgan’s procedures for
producing and retaining loan payment records, and he described his direct
experience interacting with the departments that entered loan payments into
the system. Based on this testimony, the court did not err by determining that
Dean was qualified to establish the foundation for the admission of Exhibit E
and that the testimony established the foundational requirements for the
5 Maine Rule of Evidence 803(6) provides in full:
(6) Records of a regularly conducted activity. A record of an act, event,
condition, opinion, or diagnosis [is not excluded by the rule against hearsay]
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), Rule 902(12) or with a statute permitting
certification; and
(E) Neither the source of information nor the method or circumstances
of preparation indicate a lack of trustworthiness.
8
admission of that exhibit. Id. ¶ 11 (stating that “[o]nce the qualifications of the
witness are established, the moving party must lay the necessary foundation
for the admission of the documents as business records”). Further, the court
did not err by determining, based in part on that exhibit, that JPMorgan had
satisfied its burden to prove the amount due on the loan.6
[¶11] On appeal, Lowell also makes a brief reference to an argument
that was developed more extensively at trial, namely, that Dean was not
qualified to establish the foundation for the admission of Exhibit E because he
lacked firsthand information about the specific transactions at issue here. To
the extent that it is preserved, Lowell’s challenge to the admission of Exhibit E
based on Dean’s lack of personal knowledge is not persuasive. If Dean had
personal knowledge about the facts recorded in Exhibit E, JPMorgan would
not have needed to invoke Rule 803(6) because Dean could have testified to
the facts directly and without resort to documentation. Instead, the very
purpose of Rule 803(6) is to allow the proponent to prove the contents of
6
Additionally, we are unpersuaded by Lowell’s argument that JPMorgan was required to
present evidence of Wells Fargo’s business records to prove the charges accruing pursuant to the
mortgage between Lowell’s default in September 2012 and the November 2014 assignment of the
mortgage to JPMorgan from Wells Fargo. Exhibit E encompasses records that date back to
June 2006, which, Dean testified, is when the note was first deposited in JPMorgan’s vault. Those
records show charges and payments related to both the note and the mortgage. Accordingly, all of
the transactions relevant to determining the amount due on the loan were maintained in
JPMorgan’s records, not Wells Fargo’s.
9
properly established business records through those records themselves,
without the need for the foundation witness to have personal knowledge of
the events or transactions described in those records. See Beneficial Maine
Inc. v. Carter, 2011 ME 77, ¶ 12, 25 A.3d 96 (stating that the purpose of
Rule 803(6) is “to allow the consideration of a business record, without
requiring firsthand testimony regarding the recorded facts, by supplying a
witness whose knowledge of [the business’s recordkeeping] practices . . . is
sufficient to ensure the reliability and trustworthiness of the record”); see also
State v. Abdi, 2015 ME 23, ¶ 17, 112 A.3d 360 (“The fact that the witness did
not prepare or supervise the preparation of the record does not preclude the
witness from providing the foundation for admissibility.”). The court did not
err in admitting Exhibit E over this objection.
B. Notice of Default and Right to Cure
[¶12] Lowell next argues that the court erred by finding that the notice
of default issued by JPMorgan strictly complies with the requirements
established in 14 M.R.S. § 6111. “We review a trial court’s factual findings
underlying a judgment of foreclosure for clear error . . . .” Wells Fargo Bank,
N.A., 2013 ME 87, ¶ 17, 81 A.3d 330.
10
[¶13] By statute, a mortgagee may not accelerate or enforce a mortgage
until at least thirty-five days have passed after giving written notice of the
mortgagor’s right to cure the default. 14 M.R.S. § 6111(1). The written notice
must include, among other things, “[a]n itemization of all past due amounts
causing the loan to be in default,” and “[a]n itemization of any other charges
that must be paid in order to cure the default.” Id. § 6111(1-A)(B)-(C). We
have previously explained that section 6111 “freezes” any amounts that may
come due during the cure period, and that “the amount due as stated in the
notice of default is the precise amount that the mortgagor has thirty-five days
to pay in order to cure the default” and is not “open to any further accrual
during [the cure] period.” Greenleaf, 2014 ME 89, ¶¶ 29, 31, 96 A.3d 700 (emphasis added) (holding that a notice of default that instructed the
mortgagor to contact the loan servicer “to obtain an up to date figure before
sending payment” did not comply with section 6111(1-A)). This requirement
is strictly enforced. See id. ¶¶ 18, 31.
[¶14] Here, the court made a general finding that a “proper notice of
default was sent” to Lowell. The notice of default states as follows:
2. As of 01/16/2015, total monthly payments (including
principal, interest, and escrow if applicable), late fees,
insufficient funds (NSF) fees, and other fees and advances
due under the terms of your loan documents in the total
11
amount of $27,879.86 are past due. This past-due amount
is itemized below. If applicable, your account may have
additional escrow amounts that have been paid out and
are due on the Loan. If you have any questions about the
amounts detailed below, please contact us as soon as
possible at 800-848-9380.
Total Monthly Payments $25,612.86
Late Fees $0.00
NSF Fees $0.00
Other Fees* $0.00
Advances* $2,267.00
Amount Held in Suspense $0.00
*Other Fees and Advances include those amounts
assessed in accordance with your loan documents,
and/or permitted by applicable law, or that were
authorized for services rendered. If you need additional
information regarding any of these amounts, please
contact us at the number provided below.
You may be responsible for paying late fees, inspection fees,
and Broker’s Price Opinion (BPO) fees that become due
from the date of this letter through the expiration date set
forth in Paragraph 3 below. If your next scheduled payment
is made after its due date, you may incur an additional late
fee of 36.48. However, this amount will not change the
amount needed to cure the default pursuant to this letter.
3. You have the right to cure the default. Action required to
cure the default: You must pay the Total Monthly
Payments listed in Paragraph 2 within 35 days from the
date you are given this notice in order to cure this
default. All late fees, NSF fees, and other fees and advances
are still valid and will need to be repaid under the terms of
your loan documents. . . .
12
(Boldface added.)
[¶15] Lowell argues that the notice does not strictly comply with the
requirement that it include “[a]n itemization of any other charges that must be
paid in order to cure the default,” 14 M.R.S. § 6111(1-A)(C), because the notice
does not state a sum certain that the borrower must pay in order to cure the
default. We agree for the following two reasons.
[¶16] First, Paragraph 3 of the notice states that to cure the default,
Lowell “must pay the [t]otal [m]onthly [p]ayments listed in Paragraph 2.”
Paragraph 2 lists—among other itemized past-due amounts—“[t]otal
[m]onthly [p]ayments” in the amount of $25,612.86. Earlier in Paragraph 2,
however, the notice defines the phrase “total monthly payments” to mean
“principal, interest, and escrow if applicable.” (Emphasis added.) Paragraph 2
goes on to state, “If applicable, your account may have additional escrow
amounts that have been paid out and are due on the Loan.” (Emphasis added.)
[¶17] Pursuant to the mortgage, Lowell was required to include with
each monthly payment an amount for “escrow items” including “taxes and
special assessments,” “leasehold payments or grounds rents,” and “premiums
for insurance.” The escrow component of the term “total monthly payments”
as defined in the notice therefore specifically applies to Lowell’s account.
13
[¶18] The computer printouts in Exhibit E show that beginning in 2012,
when Lowell stopped making payments, JPMorgan paid expenses that would
have been covered by the escrow portion of Lowell’s monthly payments.
Because there were escrow amounts that had come due and which Lowell was
required to pay as of the date when JPMorgan issued the notice of default, the
notice meant that for Lowell to cure the default, he would be required to pay
the “total monthly payments” due, which—as the notice itself defines that
term—would include any additional escrow amounts that are not itemized in
the notice.7 The notice therefore does not strictly comply with the
requirement that it include “an itemization of any other charges that must be
paid in order to cure the default.” 14 M.R.S. § 6111(1-A)(C) (emphasis added).
Rather, to determine whether any additional escrow amounts were due,
Lowell would have had no choice but to contact JPMorgan, as the notice
explicitly invited him to do. Accordingly, regardless of whether there were in
fact additional amounts due, the notice is not sufficient because it fails to state
7 We are not persuaded by Lowell’s related argument that the notice of default and right to cure
is defective because it refers to other amounts that Lowell may be obligated to pay pursuant to the
note or mortgage, including late fees, inspection fees, “[b]roker’s [p]rice [o]pinion” fees, and other
unspecified charges. The notice makes clear that the amount that Lowell was required to pay to
avoid foreclosure did not include those ancillary charges—unlike escrow charges, which would
change the amount of the payment needed to cure the default. Any uncertainty regarding those
ancillary charges therefore did not take the notice out of compliance with section 6111(1-A)(C) as
interpreted in Greenleaf.
14
the “precise amount that the mortgagor has thirty-five days to pay in order to
cure the default,” Greenleaf, 2014 ME 89, ¶ 31, 96 A.3d 700, and, at best for
JPMorgan, requires Lowell to obtain information from other sources to
determine the amount he was required to pay to cure the default.
[¶19] Second, the itemized list of past-due amounts in Paragraph 2
includes an entry for “[a]dvances” of $2,267. The notice makes clear that the
sum listed for “[a]dvances” is not a component of the $25,612.86 figure for
“[t]otal [m]onthly [p]ayments.” See id. During his testimony, however, Dean
agreed that it is “possible” that the “[a]dvances” listed in the notice did
encompass charges for taxes and insurance, which are identified as “escrow
items” in Lowell’s mortgage. If the “possibility” acknowledged by Dean is
true—i.e., that all or part of the past-due “[a]dvances” are for escrow items—
then Lowell would have been required to pay some or all of those advances in
addition to the “[t]otal [m]onthly [p]ayments” of $25,612.86 to cure the
default.
[¶20] Indeed, JPMorgan itself appears to be uncertain whether Lowell
was required to pay the past-due “[a]dvances” to cure the default. In
JPMorgan’s closing argument at trial, it asserted, “The notice of default in this
case is perfectly clear. It complies with the statute; it identifies exactly what’s
15
required to cure the default, $27,879.86” (emphasis added)—that is, the sum
of the “[t]otal [m]onthly [p]ayments” and “[a]dvances” itemized in the notice.
In its brief on appeal, however, JPMorgan insists that “[t]he Notice plainly
informed Lowell—or any other reader—that the Total Monthly Payments
($25,612.86) was the amount required to cure the default.” (Emphasis
added.) That JPMorgan itself has not maintained a consistent interpretation
of the notice is a further indication that the notice fails to precisely state the
amount required to cure the default.
[¶21] For these reasons, the notice fails to specify the sum certain
required to cure the default. The court therefore erred by finding that
JPMorgan satisfied its burden to prove that the notice strictly complied with
the requirement established in section 6111(1-A)(C), which is a required
element of foreclosure. We vacate the judgment on that basis and remand for
entry of judgment for Lowell.
The entry is:
Judgment vacated. Remanded to the District
Court for entry of judgment for Lowell.
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Joshua Klein-Golden, Esq., Clifford & Golden, PA, Lisbon Falls, for appellant
Terrance B. Lowell
Adam J. Shub, Esq., Preti Flaherty Beliveau & Pachios, LLP, Portland, for
appellee JPMorgan Chase Bank, N.A.
Lewiston District Court docket number RE-2015-11
FOR CLERK REFERENCE ONLY