The Florida Second District Court of Appeal recently affirmed a trial court’s order granting a new trial on the issue of damages in a mortgage foreclosure action, holding that a payment history authenticated by the successor loan servicer was admissible under the business records exception to the hearsay rule because the successor servicer independently verified the accuracy of the payment history received from the prior servicer and explained the procedures used to verify the prior servicer’s loan records.

A copy of the opinion is available at:  Link to Opinion.

This was the second appeal in the same foreclosure action. In the first appeal, the Second District Court of Appeal affirmed the final judgment of foreclosure in the mortgagee’s favor, but reversed and remanded the case for further proceedings to determine the amount owed, because the trial court erred in admitting the testimony of the mortgagee’s records custodian regarding the contents of the records without admitting into evidence any of the business records relied upon.

On remand, the trial court held an evidentiary hearing on the issue of damages, at which the mortgagee’s records custodian, a “foreclosure litigation corporate officer” employed by the loan servicer, testified that he was familiar with the servicer’s record-keeping practices and with the mortgagee’s record-keeping requirements for its loan servicers, that the prior servicer was bound by the same requirements, and that the servicer’s “loan boarding” department reviewed the prior servicer’s records for errors and found none.

The witness also testified that, when the loan was transferred to the new servicer, the payment history was updated by persons with knowledge of the servicer’s receipt of payments and amounts disbursed, and that it was part of the servicer’s regular course of business to maintain such records.

The borrower objected to the admission of the custodian’s testimony as to the amount owed, arguing that the mortgagee failed to lay the proper foundation to admit the payment history under the business records exception to the hearsay rule, codified in section 90.803(6) of the Florida Evidence Code, because he had no personal knowledge of the prior servicer’s record-keeping practices.

The trial court agreed and dismissed the case, ruling that the mortgagee could not prove the amount owed on the loan.

The mortgagee moved for a new hearing on the issue of damages, arguing that the trial court should have admitted the payment history pursuant to the Second District Court of Appeal’s prior ruling in WAMCO XXVIII, Ltd. v. Integrated Electronic Environments, Inc., 903 So. 2d 230 (Fla. 2d DCA 2005). The trial court agreed and granted a new evidentiary hearing only on the issue of damages.

In WAMCO, the Second District Court of Appeal held that a prior servicer’s loan payment history is admissible under section 90.803(6) when the successor servicer relies on it, independently verifies its accuracy, and the successor servicer’s verification procedures show the records are trustworthy.

On appeal in this case, the Second District Court of Appeal held that the trial court correctly applied WAMCO and did not abuse its discretion in granting a new evidentiary hearing as to damages, because the successor servicer’s records custodian laid the proper predicate to admit the payment history into evidence.

The Court stressed that “[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.”

The Second District Court of Appeal distinguished rulings relied upon by the borrower from the First and Fourth District Courts of Appeal on the facts, reasoning that in those cases, the records custodian did not testify that the successor servicer independently verified the accuracy of the payment history received from the prior servicer, nor did the successor servicer in the other cases explain the procedures used to verify the prior servicer’s loan records