The Missouri Supreme Court recently held that a debt collector failed to present competent evidence that it had standing to sue on a credit card debt, where the creditor failed to present competent business records evidence showing the chain of assignment of the rights to collect on the non-negotiable-instrument credit agreement.
A copy of the opinion is available at:
http://www.courts.mo.gov/file.jsp?id=51954.
http://www.courts.mo.gov/file.jsp?id=51954.
Plaintiff debt collector filed suit to collect on an alleged outstanding credit card debt. Plaintiff's complaint alleged that the consumer opened a credit card account that was transferred multiple times to various subsequent assignee-creditors, and which was ultimately assigned to Plaintiff for collection. As the owner of the credit card account, Plaintiff sought payment through direct contact with consumer's wife, who made a partial payment on the debt.
The consumer allegedly later sent a letter to Plaintiff disputing the debt and seeking proof of Plaintiff's authority to collect payments. In his answer to Plaintiff's complaint, the consumer asserted that Plaintiff lacked standing to sue, because Plaintiff could not prove that it had been assigned the rights to the debt.
At trial, Plaintiff sought to introduce various business records purportedly proving that the assignment of the debt to Plaintiff was proper and valid and that all previous assignments of the debt were similarly proper and valid. Among the records presented was a "Bill of Sale" exhibit reflecting a valid assignment of the debt to a previous assignee.
In support of his assertion that Plaintiff lacked standing to sue, the consumer argued that the Plaintiff's business records constituted inadmissible hearsay, and that Plaintiff was unable to lay a proper foundation for admitting the records into evidence as an exception to the hearsay rule. Specifically, the consumer argued that Plaintiff's sole witness, an employee of Plaintiff's parent company, lacked personal knowledge of the contents of the records, including the purported Bill of Sale.
Rejecting the consumer's assertions, the trial court admitted the business records as an exception to the hearsay rule, and, based on these records, ruled that Plaintiff had demonstrated that it had been properly assigned the rights to collect on the debt and thus had standing to sue. The trial court accordingly granted judgment in favor of Plaintiff. The consumer appealed, challenging the admissibility of the records based on improper foundation. The Supreme Court of Missouri reversed, ruling that the evidence presented by Plaintiff lacked a proper foundation and therefore failed to demonstrate that Plaintiff had standing to sue to collect payment of the debt.
The Missouri Supreme Court noted that where, as here, multiple assignments are involved, there must be proof of the validity of each separate assignment in order to demonstrate that the last assignee in the "chain of assignment" has standing to sue.
Rejecting Plaintiff's argument that consumer had waived his right to challenge standing because of the prior payment made on the account, the Court focused on whether the Bill of Sale exhibit satisfied the business records exception to the hearsay rule. The Court noted that the exception requires a records "custodian" or "other qualified witness" to testify based on personal knowledge to the identity of the records, the mode of their preparation, and whether the records were prepared in the ordinary course of the business seeking to introduce the records. See RSMo § 490.680.
The Missouri Supreme Court noted among other things that Plaintiff's sole witness, the records custodian for Plaintiff's parent company, lacked any personal knowledge of the records Plaintiff sought to admit into evidence and was unable to testify to the mode of preparation of the records. The Court accordingly ruled that Plaintiff's witness was not a "qualified witness" to lay the foundation for the Bill of Sale exhibit, that the Bill of Sale had thus been erroneously admitted into evidence, and that Plaintiff therefore failed to present competent evidence of the validity of each individual assignment of the debt in the chain of assignment.
Accordingly, the Court ruled that Plaintiff failed to prove that it had standing to sue.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
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Email: RWutscher@mtwllp.com
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