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Bank of America, N. A. v. Carlson

Court of Appeals of Oregon

July 17, 2019

BANK OF AMERICA, N. A., its successors and/or assigns, Plaintiff-Respondent,
v.
Martin D. CARLSON and Janet L. Carlson, Defendants-Appellants.

          Argued and submitted August 29, 2017

          Clackamas County Circuit Court CV13070941 Michael C. Wetzel, Judge.

          Ridgway K. Foley, Jr., argued the cause for appellants. Also on the briefs were Charles R. Markley and Williams Kastner Greene & Markley.

          Sia Rezvani argued the cause for respondent. Also on the brief was Warren Allen, LLP.

          Before DeHoog, Presiding Judge, and Egan, Chief Judge, and Aoyagi, Judge.

         Case Summary: In this judicial foreclosure action, defendants appeal from the trial court's grant of summary judgment to plaintiff, Bank of America. Defendants argue that plaintiff was not entitled to judgment as a matter of law, because plaintiff failed to produce admissible evidence to establish that it is entitled to enforce defendants' promissory note.

         Held: The trial court erred in granting summary judgment to plaintiff, because plaintiff relied on inadmissible hearsay to establish its standing to enforce the note. Plaintiff's employees' declarations are not business records under OEC 803(6), and the summary judgment record therefore does not contain any admissible evidence that plaintiff was entitled to enforce the note.

         [298 Or.App. 506] DEHOOG, P. J.

         In U.S. Bank National Assn. v. McCoy, 290 Or.App. 525, 527, 415 P.3d 1116 (2018), a judicial foreclosure action like this one, we held that a statement in a bank employee's declaration, attesting that the bank's business records showed that the defendant's promissory note had been in the plaintiffs possession at the time it commenced foreclosure proceedings, was inadmissible to establish the plaintiffs standing to enforce the note. We concluded that, even though the bank records themselves were admissible under the hearsay exception for business records, the statement as to what those records reflected was inadmissible hearsay. Id. at 534-35. Although we did not issue McCoy until after this case had been taken under advisement, defendants' opening brief squarely raises the same issue as the one decided in that case. Further, we conclude that, as in McCoy, plaintiff improperly relied on inadmissible hearsay in its declarations to establish its standing to enforce defendants' promissory note. Accordingly, the trial court erred in granting plaintiff summary judgment on the basis of those declarations, and we therefore reverse and remand.[1]

         The relevant facts are procedural and undisputed. Defendants' appeal arises out of summary judgment proceedings in which the trial court determined that there were no disputed issues of material fact and that plaintiff, Bank of America, was entitled to prevail as a matter of law. In response to plaintiffs motion for summary judgment, defendants had argued, among other things, that plaintiffs declarations in support of summary judgment contained inadmissible hearsay. The trial court rejected that argument, which defendants reprise on appeal. Plaintiff does not directly respond, choosing instead to focus on defendants' other arguments, including their contention that plaintiffs witnesses were not competent to testify regarding plaintiffs business records. Because it is dispositive, we limit our discussion to defendants' hearsay argument.

         [298 Or.App. 507] We begin by briefly summarizing the relevant law governing judicial foreclosure and the applicable legal standards. To prevail in a judicial foreclosure action, a plaintiff "must show that the trust deed securing defendant's promissory note authorizes the remedy of foreclosure upon default; that defendant is in default under the terms of the loan; and that defendant failed to cure the default despite having had an opportunity to do so." McCoy, 290 Or.App. at 528 (citing Churchill v. Meade, 88 Or. 120, 124, 171 P 565 (1918)). The plaintiff "must also show that it is a party entitled to enforce the note," which, as relevant here, the plaintiff can establish "through proof that it possessed the note when it filed for foreclosure." Id.; see ORS 73.0301 (the "holder of the instrument" may enforce it); ORS 71.2010 (2)(u)(A) (a "[h]older" is a "person in possession of a negotiable instrument").

         In turn, summary judgment is warranted when "the pleadings, depositions, affidavits, declarations and admissions on file show that there is no genuine issue as to any material fact and that the moving party is entitled to prevail as a matter of law." ORCP 47 C. As the party with the burden of proof at trial, the plaintiff "bears the burden of producing evidence to establish [its claim] as a matter of law at the summary judgment stage." U.S. Bank National Assn. v. Vettrus, 285 Or.App. 629, 636, 379 P.3d 68 (2017) (internal quotation marks omitted). In determining whether there is a material factual dispute, we-like the trial court-view the summary judgment record in the light most favorable to defendants, the nonmoving parties. As noted, however, in this case there are no factual disputes relevant to our disposition; accordingly, we review for legal error the trial court's ultimate determination that plaintiff was entitled to judgment as a matter of law.

         The alleged error here concerns plaintiffs status as a party entitled to enforce defendants' promissory note. As evidence that it was entitled to enforce the note, plaintiff submitted two declarations purporting to be from "Assistant Vice President[s]" of Bank of America, N.A. ("BANA"). Each declaration asserts that plaintiff was in possession of defendants' note when it filed this foreclosure action and that [298 Or.App. 508] plaintiff has remained in possession since that time.[2] Each declarant attached a certified true copy of the note to her declaration; neither copy, however, indicates when the note came into plaintiffs possession or when plaintiff might otherwise have acquired grounds to enforce the note. Rather, the note is "indorsed in blank" (rendering it payable to the party possessing it), without showing a transaction date or any other date or event potentially relevant to plaintiffs status as a party entitled to enforce the note. Nor do the declarations themselves provide admissible evidence as to any such date or event. Rather, in support of its factual assertions, each declaration merely states that the "information in this declaration is taken from BANA's business records." That is, neither declarant claimed to have had personal knowledge regarding plaintiffs possessory or other interest in the note, but only to have had sufficient knowledge of plaintiffs records to satisfy the requirements of the hearsay exception for business records, OEC 803(6).

         We addressed that hearsay exception under substantially the same circumstances in McCoy, 290 Or.App. at 533-34. In that case, the plaintiff attempted to establish its standing to enforce a promissory note by submitting the declaration of an employee of the loan servicer, Wells Fargo Bank. In her declaration, the employee stated that she was "competent to testify to the [information in the declaration] based upon [her] personal knowledge of the facts and [her] review of the business records herein." Id. at 529 (alterations in McCo ...


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