Federal National Mortgage Ass'n v. Bostwick
414 S.W.3d 521
Mo. Ct. App.2013Background
- Fannie Mae sued A & B Properties, LLC and Barbara Bostwick for breach of contract and judicial foreclosure on a 2007 multifamily loan originally made by Trans Lending.
- The loan was evidenced by a signed Note, a Mortgage, and a personal Guaranty executed by Bostwick; Fannie Mae alleged assignments from Trans Lending to LaSalle and then to Fannie Mae.
- At trial, the Note, Mortgage, and Guaranty were admitted without objection; Fannie Mae also offered business-record affidavits and a servicer payoff statement (marked as a draft) from Bank of America.
- The trial court initially sustained objections to several exhibits but later, in a post-trial memorandum, concluded the records should have been admitted under the business-records exception and entered judgment for Fannie Mae for $435,178.43 plus foreclosure.
- On appeal, A & B challenged admission of assignment and servicing documents and argued Fannie Mae failed to prove default or the amount due; the appellate court reviewed evidentiary rulings for abuse of discretion and legal questions de novo.
Issues
| Issue | Plaintiff's Argument (Fannie Mae) | Defendant's Argument (A & B) | Held |
|---|---|---|---|
| Whether Fannie Mae proved it was entitled to enforce the Note (assignment/holder status) | Endorsed allonges and possession make Fannie Mae the holder entitled to enforce under UCC §400.3-301 | Assignments must be proven link-by-link; some assignment evidence was objected to as hearsay | Held: Fannie Mae proved valid assignment and was a holder entitled to enforce the Note |
| Whether Mortgage and Guaranty followed the Note | Assignment of the Note carries the mortgage and guaranty as incidents of the debt | Opposed admission of assignment proof as hearsay; contended lack of admissible chain defeats enforcement of security | Held: Mortgage and Guaranty follow the validly assigned Note; Fannie Mae is assignee of both |
| Whether Fannie Mae proved A & B was in default | Testimony and servicer records (Bank of America affidavit/payoff) established default | Testimony about default was hearsay (came from servicer); payoff letter was a draft and not a proper business record | Held: Fannie Mae failed to prove default because testimony was hearsay and the draft payoff did not qualify as a business record |
| Whether Fannie Mae proved amount due / costs of collection | Servicer affidavit and attached payoff statement established balance and collection costs | Payoff statement was a litigation-prepared draft, unsigned, unreliable and hearsay within hearsay; lacked foundation and authenticity | Held: Amount awarded not proven to reasonable certainty; payoff draft inadmissible, so damages and collection-cost award reversed and remanded |
Key Cases Cited
- CACH, LLC v. Askew, 358 S.W.3d 58 (Mo. banc 2012) (plaintiff must prove each link in chain of assignment to collect debt)
- Wells Fargo Bank, N.A. v. Smith, 392 S.W.3d 446 (Mo. banc 2013) (assignee of secured note becomes beneficiary of security instrument)
- Affiliated Acceptance Corp. v. Boggs, 917 S.W.2d 652 (Mo. App. W.D. 1996) (requirements for proving balance due on promissory note)
- Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619 (Mo. App. E.D. 2009) (assignment of note carries related security interest)
- American First Federal, Inc. v. Battlefield Center, L.P., 282 S.W.3d 1 (Mo. App. E.D. 2009) (personal guaranty follows assignment of note)