MB FINANCIAL BANK v. LAWRENCE J. RAO, JR.
No. 921 EDA 2018
IN THE SUPERIOR COURT OF PENNSYLVANIA
DECEMBER 24, 2018
2018 PA Super 353
BEFORE: PANELLA, J., DUBOW, J., and KUNSELMAN, J.
J-A25006-18. Appeal from the Order Entered February 14, 2018 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): 150603452
OPINION BY DUBOW, J.:
FILED DECEMBER 24,
Appellant, MB Financial Bank (“MB Financial“), appeals from the February 14, 2018 Order, which denied MB Financial‘s Post-Trial Motion to remove the Judgment of Nonsuit that the trial court entered in favor of Appellee, Lawrence J. Rao, Jr., after a non-jury trial in this mortgage foreclosure action.1 After careful review, we reverse and remand for a new trial.
The relevant factual and procedural background is as follows. Mr. Rao is the record owner of a mortgaged property located at 1171 South Darien Street, Philadelphia, PA 19147. On February 9, 2006, Mr. Raо executed a promissory Note (“Note“) in favor of SunTrust Mortgage, Inc. (“SunTrust“), for $228,000. To secure the Note, Mr. Rao executed a mortgage to Mortgage Electronic Registration Systems, Inc. (“MERS“) as nominee for SunTrust. On or around April 22, 2013, SunTrust discovered that the Note was missing from their vault and David Van Aken, Vice President, executed a Lost Notе Affidavit. On May 13, 2015, MERS, as nominee for SunTrust, assigned the mortgage to MB Financial.
On June 25, 2015, MB Financial filed the instant in rem foreclosure action against Mr. Rao due to Mr. Rao‘s March 1, 2011 default on the mortgage. In addition to setting forth relevant information, including the parties and date of the mortgage, its place of record, a specific averment of default, an itеmized statement of the amount due, and a demand for judgment in rem, MB Financial also averred that MB Financial was in possession, either “directly or through an agent,” of a “Lost Note Affidavit and has the right to foreclose.” Complaint at ¶ 6.
Mr. Rao filed an Answer with New Matter challenging MB Financial‘s standing to proceed with the matter based on MB Financial‘s failure to have legal possession of the Note, and, therefore, failure to have the right to enforce the Note.
Mr. Rao did not present any evidence and made an oral Motion for a Nonsuit. After some discussion with the trial court regarding the difference between a nonsuit and a directed verdict, Mr. Rao made an oral Motion for a Directed Vеrdict. The trial court granted the Motion and made a finding in favor of Mr. Rao.
On November 13, 2017, MB Financial filed a Post-Trial Motion. On February 14, 2018, after oral argument where the court refers to the October 31, 2017 disposition as a nonsuit, the trial court denied the Post-Trial Motion and entered a Judgment of Nonsuit in favor of Mr. Rao and against MB Financiаl.
MB Financial filed a timely Notice of Appeal. Both MB Financial and the trial court complied with
MB Financial raises the following issues on appeal:
- Whether the Lost Note Affidavit constituted a business record pursuant to
42 Pa.C.S. § 6108 and the Pennsylvania Rules of Evidence and whether the [c]ourt properly ruled it and associated testimony inadmissible. - Whether [MB Financial]‘s witness at trial, Ms. Johnson, was competent to testify at trial as to matters including the Lost Note Affidavit and the other business records of SunTrust, the servicer of the loan.
- Whether [MB Financial] established at trial its right to a judgment in mortgage foreclosure as it had demonstrated (a) the existence of a mortgage in a specified amount securing a note; (b) thаt it held the Note at the time this action was commenced and/or had been assigned the Mortgage; (c) the defendant‘s default; and (d) the amount of the debt.
- Whether [Mr. Rao]‘s answer to the complaint contained only general denials of the material allegations of the complaint and, therefore, should have been construed as admissions requiring judgment in favor of [MB Financial].
- Whether the [c]ourt erroneously denied [MB Financial]‘s post-trial motion for judgment or a new trial.
- Whether [MB Financial] having been assigned the Mortgage sufficiently established standing or whether it also had to prove it held the Note.
- Whether, assuming it had to prove it held the Note, [MB Financial] was entitled to enforce the lost Note pursuant
to the Lost Note Affidavit and 13 Pa.C.S. § 3309 . - Whether the Lost Note Affidavit, executed by the loan servicer [SunTrust], complied with
13 Pa.C.S. § 3309 and entitled [MB Financial] to enforce the Note. - Whether the [c]ourt improperly sustained [Mr. Rao]‘s objection to the question at trial: “Would [MB Financial] or SunTrust on its behalf indemnify [Mr. Rao] if another entity attempted to enforce the Notе.”
Appellant‘s Brief at 5 (reordered for ease of disposition).
As an initial matter, the Rules of Civil Procedure provide, in relevant part, that a trial court “may enter a nonsuit on any and all causes of action if, at the close of the plaintiff‘s case on liability, the plaintiff has failed to establish a right to relief.”
When considering a motion for a nonsuit, “issues of credibility and the weight to be assigned to the evidence are not to be resolved by the trial judge, but must be left for the finder of fact to resolve at the close of the evidence.” Tong-Summerford v. Abington Mem‘l Hosp., 190 A.3d 631, 643 (Pa. Super. 2018) (citation omitted). Ultimately, “[a] motion for a non-suit may be granted оnly where it is clear that no other conclusion could be reached under the evidence presented.” Id.
In its first two issues on appeal, MB Financial avers that the Lost Note Affidavit constitutes a business record, pursuant to
We review challenges to the trial court‘s evidentiary rulings for an abuse of discretion. U.S. Bank, N.A. v. Pautenis, 118 A.3d 386, 391–92 (Pa. Super. 2015). “[D]ecisions on admissibility are within the sound discretion of the trial court and will not be overturned absent an abuse of discretion or misapplication of law. In addition, for a ruling on evidence to constitute reversible error, it must havе been harmful or prejudicial to the complaining party.” Id. (citation omitted).
The Pennsylvania Rules of Evidence define “hearsay” as an out of court statement offered in court for the truth of the matter asserted.
(A) the record was made at or nеar the time by--or from information transmitted by--someone with knowledge;
(B) the record was kept in the course of a regularly conducted activity of a “business“, which term includes business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit;
(C) making the record was a rеgular practice of that activity;
(D) all these conditions are shown by the testimony of the custodian or another qualified witness, or by a certification that complies with
Rule 902(11) or (12) or with a statute permitting certification; and(E) the opponent does not show that the source of information or other circumstances indicate a lack of trustworthiness.
Further, the Uniform Business Records as Evidence Act states, in relevant part:
A record of an act, condition or event shall, insofar as relevant, be competent evidence if the custodian or other qualified witness testifies to its identity and the mode of its preparation, and if it was made in the regular course of business at or near the timе of the act, condition or event, and if, in the opinion of the tribunal, the sources of information, method and time of preparation were such as to justify its admission
This Court has explained: ”
As stated above, during its case-in-chief, MB Financial identified and introduced a Lost Note Affidavit into evidence, which the trial court precluded despite MB Financial‘s argument that the trial court should admit the document as a business record. MB Financial presented testimony from Ms. Johnson, who testified that she was an Assistant Vice President and a Default Proceedings Officer for SunTrust and that she has worked at SunTrust for approximately twenty-six years in varying capacities. N.T. Trial, 10/31/17, at 14. Ms. Johnson explained her job duties and identified herself as a custоdian of records. See id. at 14, 20, 42. Ms. Johnson testified that SunTrust was the original lender and current servicer of the loan in question. Id. at 15. When MB Financial asked Ms. Johnson about the Lost Note Affidavit, she testified that it was made at or near the time of the events depicted therein, was
Our review of the record indicates that MB Financial presented testimony from an authenticating witness that SunTrust created the Lost Note Affidavit at or near the time that SunTrust discovered that the Note was lost, SunTrust maintained the Lost Note Affidavit in the course of regularly conducted activity, and creating a Lost Note Affidavit was a regular practice upon discovery of a lost note. Aсcordingly, it qualifies as a business record. See
Moreover, the opponent, Mr. Rao, did not show a “lack of trustworthiness.” See
Hаving found that the Lost Note Affidavit qualifies as a business record, and an exception to the rule against hearsay, we must next determine whether its preclusion constitutes reversible error, that is, was it harmful or prejudicial to MB Financial. See Pautenis, supra at 391-92. We conclude that it was.
A person foreclosing on a mortgage must own or hold the note. CitiMortgage, Inc. v. Barbezat, 131 A.3d 65, 68 (Pa. Super. 2016). The Pennsylvania Uniform Commercial Code (PUCC),
§ 3309. Enforcement of lost, destroyed or stolen instrument
(a) Enforcement.--A person not in possession of an instrument is entitled to enforce the instrument if:
(1) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred;
(2) the loss of possession was not the result of a transfer by the person or a lawful seizure; and
(3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
(b) Proof.--A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person‘s right to enforce the instrument. If that proof is made, section 3308 (relating to proof of signatures and status as holder in due course) applies to the case as if the person seeking enforcement had prоduced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument.
Adequate protection may be provided by any reasonable means.
In this case, MB Financial was not in possession of the Note. The PUCC provides that an entity or person not in possession of the instrument, or note, is entitled to enforce the note if the entity or person meets the requirements of Section 3309. MB Financial identified and introduced the Lost Note Affidavit under Section 3309 to prove that it was entitled to enforce the Note, a prerequisite to foreclose on the Mortgage. Accordingly, when the trial court precluded the Lost Note Affidavit, MB Financial could no longer prove a prima facie case for mortgage foreclosure. Thus, the trial court‘s preclusion of the Lost Note Affidavit was undoubtedly harmful and prejudicial to MB Financial.
In conclusion, we find that MB Financial established that the Lost Note Affidavit qualified as a business record, and therefore was admissible under an exception to the rule against hearsay, as provided in
Order reversed. Case remanded for a new trial. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 12/24/18