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M&T Bank v. Plaisted

Supreme Court of Maine

August 16, 2018


          Submitted On Briefs: May 31, 2018

          Patrick E. Hunt, Esq., Patrick E. Hunt, P.A., Island Falls, for appellant Lawrence F. Plaisted

          Andrew J. Schaefer, Esq., Bendett & McHugh, P.C., Portland, for appellee M&T Bank Bangor District Court docket number RE-2016-71 For Clerk Reference Only


          ALEXANDER, J.

         [¶1] In Homeward Residential, Inc. v. Gregor, 2015 ME 108, 122 A.3d 947, a residential mortgage foreclosure case, we addressed issues, also presented in this appeal, of gaps in evidence regarding elements essential to prove the financial institution's claim. There we observed: "The financial services industry, through the practice of securitization, spawning a byzantine mass of assignments, transfers, and documentation, has made it difficult for subsequent assignees to demonstrate that they have standing to bring foreclosure claims and prove the elements necessary to prevail in a foreclosure action in a manner compliant with the laws governing foreclosure." Id. ¶ 13 (footnote omitted) (citation omitted). We further observed that reliance on multiple entities that create, assign, process, and service a mortgage loan makes it "difficult or impossible to acquire necessary records that qualify for admission under the business records exception to the hearsay rule, M.R. Evid. 803(6), in order to prove ownership of the mortgage, proper notice of defaults, and sums due and paid." Gregor, 2015 ME 108, ¶ 13, 122 A.3d 947.

         [¶2] Here, where the record indicates that multiple entities were involved in servicing the loan at issue, M&T Bank presented insufficiently authenticated and conflicting evidence as to the sums due and owing on the mortgage loan. In Gregor, we stated: "The law, the rules of evidence, and court processes have not become more complicated in these matters. Applying established law, however, has become more problematic as courts address the problems the financial services industry has created for itself." Id. ¶ 14 (citing Bank of Am., N.A. v. Greenleaf, 2014 ME 89, ¶¶ 8-17, 24-27, 96 A.3d 700).

         [¶3] This appeal does not involve a residential mortgage, but the problems of evidence quality, accuracy, and authentication it presents are similar to problems observed in other foreclosure appeals coming before us. To assist the parties and the courts in assessment of the evidence quality, accuracy, and authentication in this and future cases, we use this opinion to suggest some standards that evidence should meet to sufficiently support a claim in a foreclosure action where several entities have been involved in servicing the loan.

         [¶4] Lawrence F. Plaisted appeals from a judgment of foreclosure entered by the District Court (Bangor, Mallonee, /.) in favor of M&T Bank following a nonjury trial on M&T Bank's complaint. Plaisted challenges the court's determinations that (1) M&T Bank laid a proper foundation for admitting loan servicing records pursuant to the business records exception to the hearsay rule, M.R. Evid. 803(6) (Tower 2017), [1] and (2) M&T Bank proved the amount owed on the note. We agree with Plaisted's arguments, vacate the judgment, and remand for entry of a judgment in favor of Plaisted.

         I. CASE HISTORY

         [¶5] The following facts are either undisputed or taken from the judgment, viewed in the light most favorable to M&T Bank, the prevailing party in the trial court. See Deutsche Bank Nat'l Tr. Co. v. Eddins, 2018 ME 47, ¶ 2, 182 A.3d 1241. On February 8, 2007, Plaisted executed a promissory note in favor of InterBay Funding, LLC, in the principal amount of $478, 500. To secure payment on the note, Plaisted executed a mortgage, also in favor of InterBay Funding, on real property in Hampden to be used for business purposes. InterBay Funding executed a document purporting to assign an interest in the mortgage to Bayview Loan Servicing, LLC, and Bayview Loan Servicing executed a document purporting to assign its interest in the mortgage to M&T Bank.

         [¶6] In May 2016, M&T Bank filed a complaint for foreclosure alleging that Plaisted had defaulted by failing to make payments on the note beginning on November 1, 2013.[2] Plaisted timely answered, and, after mediation proved unsuccessful, the parties proceeded to trial in July 2017.

         [¶7] At trial, the only witness was a litigation manager for Bayview Loan Servicing who testified that Plaisted's loan had two servicers: Bayview Loan Servicing and M&T Bank.

         [¶8] The witness testified about his training and job responsibilities as a litigation manager for Bayview. He testified that he had been employed by Bayview for four and a half years and that his responsibilities included reviewing the business records for a loan-including the note, mortgage, payment history, and default notices-and attending court proceedings. The litigation manager testified that during his training he "[sat] down with each and every department within Bayview," including the payment processing department, to observe their operations. He described the training as both "classroom" and "hands on." He also testified that he participates in ongoing training to stay current with industry practices.

         [¶9] The litigation manager testified about Bayview's recordkeeping system and security practices. He stated that Bayview's electronic servicing platform stores all of the data related to a loan, including digital images of documents and payment information. He testified that payments and disbursements are entered into the system at or near the time of the event and that Bayview relies on these records in its day-to-day operations. He further testified that Bayview's servicing platform is an encrypted recordkeeping system that requires a log-in and password.

         [¶10] The litigation manager testified that Bayview has been servicing Plaisted's loan since its origination and claimed that, at some point after Plaisted defaulted, M&T Bank began "subservicing" the loan on behalf of Bayview. He described the relationship between Bayview and M&T Bank as a "component relationship" and a "working relationship." He explained that M&T Bank handles "the front end of the loan," which includes payment processing, while Bayview handles "the back end of the loan," which includes loss mitigation and foreclosure.

         [¶11] He testified that M&T Bank uses Bayview's servicing platform. He explained that, on the live platform, Bayview is "able to see .. . when an M&T employee is in the system, updating the system We can physically interact with an M&T employee through the same system. It's almost as if we work together We're just not in the same location." He added, however, that M&T Bank does not use Bayview's imaging system for storing loan documents.

         [¶12] The Bayview litigation manager claimed to be a custodian of M&T Bank's records but testified that he is not employed by M&T Bank, has never spoken with anyone from M&T Bank, and did not know where M&T Bank is located.[3]

         [¶13] The court admitted several exhibits offered by M&T Bank, including a copy of the original promissory note, a copy of the recorded mortgage and the subsequent assignments, and a copy of the notice of default and right to cure. The court also admitted Exhibit E, which consisted of many screenshots of Bayview's servicing platform, purporting to show the payment history and the amount owed on the loan. Apparently, no single printout or digital record demonstrating the payment history and amounts owed on the loan-the equivalent of a ledger sheet from the days of paper records-was available. The litigation manager testified that, based on his review of Exhibit E, the loan remained in default and that "the amounts set forth in [M&T Bank's] proposed judgment are fully substantiated by Bayview's system of record."

         [¶14] The litigation manager was unable to explain certain discrepancies in amounts claimed to be due. For example, a notice of default sent to Plaisted in July 2014 indicated that the loan payoff amount was $509, 906.69. A subsequent notice of default sent in September 2015 indicated that the loan payoff amount was $632, 618.71. No document, ledger, or digital exhibit tracked the changes in the sums due or the reasons for the changes between July 2014 and September 2015.

         [¶15] When asked to explain the $122, 712.02 increase over that time, the litigation manager, after engaging in extensive mathematical calculations, was unable to account for $94, 627.59 of the increase with any degree of certainty. He stated that it "could have been" for attorney fees and other costs and that "[i]t's all kind of lumped ...

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