The Florida District Court of Appeal, First District, recently reversed a trial court’s final judgment of foreclosure, and remanded for dismissal of the action for lack of prosecution.
In so ruling, the Court held that the successor servicer’s witness offered only general knowledge of ordinary mortgage practices to support the prior servicer’s payment history records, which was insufficient to support the admissibility of those records.
The Court also held, given a lack of record activity at all times material, combined with the mortgagee’s predecessor in interest’s failure to file a statement of good cause prior to the hearing on the borrower’s motion to dismiss for lack of prosecution, that the relevant Florida Rules of Civil Procedure mandated dismissal of the action upon remand.
A copy of this opinion is available at: https://edca.1dca.org/DCADocs/2013/2703/132703_DC13_10132014_093921_i.pdf
In this action arising from an action in foreclosure, the mortgagee’s predecessor in interest filed a complaint on March 19, 2009, alleging that it “owned and holds [the] note and mortgage.” Notably, however, the note was signed by the bank responsible for the origination of the loan. The note was subsequently endorsed to the mortgagee’s predecessor in interest prior to the filing of the foreclosure action.
However, litigation of the foreclosure became stalled, with neither party prosecuting the action. Because of this, on July 20, 2010, the borrowers’ filed their notice of inactivity pursuant to Florida Rule of Civil Procedure 1.420(e). Notably, between September 16, 2009 and October 4, 2010, no paper was filed in the action by either party or the trial court.
As you may recall, rule 1.420(e) sets forth the following procedure and grounds for the dismissal of a civil action for a lack of prosecution: “In all actions in which it appears on the face of the record that no activity by filing of pleadings, order of court, or otherwise has occurred for a period of 10 months … any interested person … may serve notice to all parties that no such activity has occurred. If no such record activity has occurred within the 10 months immediately preceding the service of such notice, and no record activity occurs within the 60 days immediately following the service of such notice … the action shall be dismissed by the court on its own motion or on the motion of any interested person … unless a party shows good cause in writing at least 5 days before the hearing on the motion why the action should remain pending.”
Following the borrowers’ notice of inactivity, and a further period of inactivity of sixty (60) days, the borrowers filed their motion to dismiss for lack of prosecution. Curiously, the mortgagee’s predecessor in interest did not file a response to the motion to dismiss, yet did file other papers on October 4, 2010 and afterward.
The hearing on the borrowers’ motion to dismiss then occurred on November 8, 2010, and again, the mortgagee’s predecessor in interest curiously failed to submit a statement of good cause at least five (5) days prior to the hearing, as is required by the subject procedural rule, or at any time. The trial court advised the parties at the hearing that the borrowers’ motion to dismiss was being “taken under advisement,” meaning that it reserved ruling on the motion.
Thereafter (during the pendency of the action) the loan appears to have again been transferred to the mortgagee, who was then substituted as party-plaintiff on January 25, 2013, and a bench trial occurred on May 13, 2013. During trial, the mortgagee put forward the testimony of its predecessor in interest’s “default proceedings officer” (the “officer”). The officer testified that she had reviewed her bank’s computer-generated loan history records in preparation for trial. The mortgagee’s counsel then asked the officer about said records, to which inquiry the borrowers’ counsel objected, asserting that there was a lack of predicate for the officer’s testimony, that the officer was not a proper record custodian for the records in question, and that the mortgagee had failed to “otherwise qualify [the officer] to authenticate the … records.” The borrowers’ counsel was granted a “standing objection” as to these arguments, and as such, ceased to raise them for the remainder of the officer’s testimony.
The officer further testified that the computer-generated loan history records were “a printout from … the system that we use,” and that her bank had “prepared and provided a printout” of the loan history records to the mortgagee’s counsel. Over borrowers’ objection, the officer read the principal balance, past due amount, and other fees and charges listed in the records. The officer also testified, on cross examination, that her “knowledge of the amounts owed came from her review of the printout and that the printout was ‘on [her bank’s] system.’” She further testified that “everyone” at her bank used the system and that “they would input any transactions, any adjustments.” The officer stated further that the “initial principal balance of the loan would have been input by someone handling the origination of the loan.”
Following the close of evidence, the borrowers’ counsel renewed their motion to dismiss for lack of prosecution, which had remained under advisement since 2010. The borrowers also asserted, among other things, that the officer’s testimony was “multiple hearsay” because the testimony was based, in part, on what “the [originating bank] transferred over as the account.” The mortgagee’s counsel argued that any hearsay objection had been waived because it was not raised concurrent with the subject testimony. Ultimately, the trial court entered judgment in favor of the mortgagee, with an amount due of $822,677.79
However, in its opinion reversing the judgment of foreclosure and remanding the case for dismissal, the First DCA, as a preliminary matter, opined that the subject evidentiary issue had been properly preserved for appeal, noting that the trial court granted borrowers’ counsel a “standing objection” as to their objections regarding the sufficiency of the mortgagee’s loan history records and the testimony of the officer, despite not using the “magic words” of ‘hearsay’ or citing to the subject rule of evidence relating to same.
The Appellate Court then held that the evidence regarding the principal balance and amounts owed was “inadmissible hearsay,” as it was improperly authenticated. The First DCA pointed out that the mortgagee’s counsel “never asked the witness, and she never testified, whether [the subject loan history records] were (1) made at or near the time of the event; (2) made by or from information transmitted by the person with knowledge; (3) kept in the ordinary course of a regularly conducted business activity; and (4) made as a regular practice of that business.” See Yisrael v. State, 993 So 2d. 952 (Fla. 2008).
While the First DCA noted that “[l]oan payment history printouts, if properly authenticated, are routinely admitted as a business record in foreclosures cases,” it further noted that “proper authentication by a witness requires that the witness demonstrate familiarity with the record-keeping system of [the] business that prepared the documents and knowledge of how the data was uploaded into the system.” See Cayea v. CitiMortgage, Inc. 138 So. 3d 124 (Fla. 4th DCA 2014); see also Weisenberg v. Deutsche Bank Nat’l Trust Co., 89 So 3d. 1111 Fla. 4th DCA 2012).
Here, however, in deciding that the testifying officer failed to demonstrate the requisite knowledge of the data, the court opined that the testifying officer’s “assumption that the original loan amounts would have been input by someone handling the origination of the loan was merely supposition, based upon her general knowledge of ordinary mortgage practices, not any specific knowledge about this debt or the transaction of the information between the original lender and subsequent servicers, including [her bank].”
Accordingly, the Appellate Court believed that “[s]he was thus unable to show any of the requirements for establishing a proper foundation for the amounts or the documents she relied on.” See Hunter v. Aurora Loan Services, LLC, 137 So. 3d 570 (Fla. 1st DCA 2014)(holding that, where a witness lacks knowledge about who had generated computerized records, the witness lacks the ability to establish the necessary foundation for admitting same into evidence under the business records exception to hearsay rule).
Finally, rather than remanding for further proceedings, the Appellate Court determined that the mortgagee was not entitled to another opportunity to prove its case. Noting that the mortgagee’s predecessor in interest failed to prosecute the action from September 16, 2009 through October 4, 2010, that the borrowers’ notice of lack of activity was timely filed, and that the mortgagee’s predecessor in interest further failed to put forward a showing of good cause in advance of the hearing on the borrowers’ motion to dismiss for lack of prosecution, the Fifth DCA held that rule 1.420(e) mandated dismissal of the action upon remand. See Wilson v. Salamon, 923 So. 2d 363 (Fla 2005)(noting that “the mandatory language of the rule – ‘the action shall be dismissed’ – leaves the trial court with no discretion in the matter.”)
Accordingly, the First DCA reversed the final judgment of foreclosure and remanded for dismissal for lack of prosecution.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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