Deutsch Bank v. Alaqua

IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FIFTH DISTRICT
NOT FINAL UNTIL TIME EXPIRES TO
FILE MOTION FOR REHEARING AND
DISPOSITION THEREOF IF FILED
DEUTSCHE BANK NATIONAL
TRUST COMPANY, ETC.,
Appellant,
v. Case No. 5D14-4326
ALAQUA PROPERTY, ETC., ET AL.,
Appellees.
________________________________/
Opinion filed April 22, 2016
Appeal from the Circuit Court
for Seminole County,
Robert J. Pleus, Jr., Senior Judge.
Michael W. Smith, of Baker, Donelson,
Bearman, Caldwell & Berkowitz, P.C.,
Orlando, for Appellant.
John H. Bill, Michael S. Kraynick, and
Janet M. Lower, of Godbold, Downing, Bill
& Rentz, P.A., Winter Park, for Appellee,
Jared F. Martinez.
No Appearance for Appellee, Susan
Freeman-Martinez.
No Appearance for Appellee, Alaqua
Property Owners Association, Inc.
LAMBERT, J.
The issue that we address in this mortgage foreclosure appeal is whether a party
seeking to admit a promissory note into evidence at trial must establish that the note is
a business record under the business records exception to the hearsay rule. Because
we conclude that the promissory note is not hearsay, our answer to this question is no.
Accordingly, we reverse the final judgment on appeal.
Appellant, Deutsche Bank National Trust Company Americas, as Trustee for
Residential Accredit Loans, Inc., Mortgage Asset-Backed Pass-Through Certificates,
Series 20061A7 (“Bank”), sued Jared Martinez, Susan Freeman-Martinez, and Alaqua
Property Owners Association, Inc., (“Appellees”) to foreclose on the note and mortgage
executed by Mr. and Mrs. Martinez and attached to its complaint a copy of both
documents.1 Bank was not the original lender; however, the copy of the note attached
to the complaint contained three indorsements, including one reflecting that the note
was specifically indorsed to Bank. Sometime thereafter, Bank filed the original note with
the Clerk of the Circuit Court. The original note had the same indorsements as the copy
of the note attached to the complaint. At this point, absent conflicting evidence at trial,
Bank had established standing to file suit and its entitlement to enforce the note. See §
673.3011(1), Fla. Stat. (2014) (stating a person entitled to enforce an instrument
includes the holder of the instrument). The definition of the term “holder” of an
instrument includes the “person in possession of a negotiable instrument that is payable
either to bearer or to an identified person that is the person in possession . . .”
§ 671.201(21)(a), Fla. Stat. (2014); see also Deutsche Bank Nat’l Trust Co. v. Clarke,
87 So. 3d 58, 61 (Fla. 4th DCA 2012) (“[P]ossession of the original note is a significant
1
Two of the Appellees, Susan Freeman-Martinez and Alaqua Property, have not
filed an appearance in this appeal.
2
fact in deciding whether the possessor is entitled to enforce its terms.” (citing Riggs v.
Aurora Loan Servs., LLC., 36 So. 3d 932, 933 (Fla. 4th DCA 2010))).
Two years later, the case proceeded to trial. Bank called one witness at trial, a
senior loan analyst employed by the current servicer of the loan. Bank, as it was
obligated to do, sought to admit the note into evidence. See Boumarate v. HSBC Bank
USA, N.A., 172 So. 3d 535, 536 (Fla. 5th DCA 2015) (“A plaintiff seeking to foreclose a
mortgage must tender the original promissory note to the trial court . . . .”). Appellees
objected, arguing that the note was hearsay and could be admitted into evidence only if
Bank could establish that the note was a business record under the business records
exception to the hearsay rule.2 The trial court agreed and provided Bank’s trial counsel
with the opportunity to establish that the note was a business record of the original
lender. Counsel attempted to comply with the court’s ruling and, after failing to do so,
argued that the note should be admitted into evidence, notwithstanding the business
records exception. The court sustained Appellees’ hearsay objection, which precluded
the note from being entered into evidence. After Bank had rested its case, the court
2
The rule commonly known as the business records exception allows parties to
admit into evidence records of regularly conducted business activity, including any
“memorandum, report, record, or data compilation, in any form, of acts, events,
conditions, opinion, or diagnosis, made at or near the time by, or from information
transmitted by, a person with knowledge, if kept in the course of a regularly conducted
business activity and if it was the regular practice of that business activity to make such
memorandum, report, record, or data compilation . . . .” § 90.803(6)(a), Fla. Stat.
(2014).
In specific response to the trial court’s inquiry, Appellees’ trial counsel suggested
that Bank needed to call the records custodian of the original lender as a witness to
admit the note.
3
granted Appellees’ motion for involuntary dismissal and entered final judgment in favor
of Appellees. This appeal followed.
“The standard of review of a trial court’s decision on the admissibility of evidence
is generally an abuse of discretion standard. However, the question of whether
evidence falls within the statutory definition of hearsay is a matter of law, subject to de
novo review.” Burkey v. State, 922 So. 2d 1033, 1035 (Fla. 4th DCA 2006) (citing K.V.
v. State, 832 So. 2d 264, 265–66 (Fla. 4th DCA 2002)).
Hearsay is defined as “a statement, other than one made by the declarant while
testifying at the trial or hearing, offered in evidence to prove the truth of the matter
asserted.” § 90.801(1)(c), Fla. Stat. (2014). Thus, if the promissory note is a statement
that is not being offered in evidence to prove the truth of the matter asserted, it would
not be hearsay. Interestingly, it does not appear that any appellate court in Florida has
directly addressed the issue, here, of whether a promissory note is a nonhearsay
document. However, a number of other courts, as well as commentators, have
concluded that a promissory note is not hearsay. See, e.g., Kepner-Tregoe, Inc. v.
Leadership Software, Inc., 12 F.3d 527, 540 (5th Cir. 1994) (“Signed instruments such
as wills, contracts, and promissory notes are writings that have independent legal
significance, and are nonhearsay.” (quoting Thomas A. Mauet, Fundamentals of Trial
Techniques 180 (2d ed. 1988))); In re Vargas, 396 B.R. 511, 519 (Bankr. C.D. Cal.
2008) (stating a promissory “note itself is not hearsay, and thus is not subject to the
hearsay rule”); Remington Invs., Inc. v. Hamedani, 64 Cal. Rptr. 2d 376, 382 (Cal. Ct.
App. 1997) (“The Promissory Note document itself is not a business record as that term
is used in the law of hearsay, but rather is an operative contractual document
4
admissible merely upon adequate evidence of authenticity.”); Cadle Co. v. Errato, 802
A.2d 887, 894 (Conn. App. Ct. 2002) (“The business record exception to the hearsay
rule does not apply to the introduction into evidence of a promissory note being sued on
. . . .” (citation omitted)); Rockwall Commons Assocs., Ltd. v. MRC Mortg. Grantor Tr. I,
331 S.W.3d 500, 511 (Tex. App. 2010) (admitting mortgage note because, as a
contract, it has “legal effect independent of the truth of any statements contained therein
and is not hearsay” (citations omitted)); Bank of Am. NA v. Neis, 835 N.W.2d 527, 541
(Wis. Ct. App. 2013) (finding promissory notes “are not hearsay when they are offered
only for their legal effect, not ‘to prove the truth of the matter asserted’”); 4 Christopher
B. Mueller & Laird C. Kirkpatrick, Federal Evidence § 8:18 (4th ed. 2015) (“When [the
words of a contract] are offered to prove a . . . transaction, the concerns underlying the
hearsay doctrine are thought to disappear. The words are ‘verbal acts’ in the sense that
they have legal significance independent of their assertive quality . . . .”); David F.
Binder, Hearsay Handbook § 2:6 (4th ed. 2015) (“A written contract has independent
legal significance. It defines the rights and obligations of the parties thereto, regardless
of the truth of any assertions made in the document. Therefore, it is not hearsay.”
(citations omitted)); 2 Robert P. Mosteller et al., McCormick on Evidence § 249
(Kenneth S. Broun ed., 7th ed. 2013) (“When a suit is brought for breach of a written
contract, no one would think to object that a writing offered as evidence of the contract
is hearsay.” (footnote omitted)).
We agree with these authorities. We, therefore, hold that the promissory note is
not hearsay and is admissible for its independent legal significance—to establish the
existence of the contractual relationship and the rights and obligations of the parties to
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the note, regardless of the truth of any assertions made in the document.3 Accordingly,
Bank was not obligated to establish that the note qualified as a business record under
the business records exception to the hearsay rule, and the trial court erred when it
sustained Appellees’ hearsay objection and did not admit the note into evidence. Thus,
we reverse the final judgment and remand for a new trial. See § 90.104(1), Fla. Stat.
(2014) (“[A] court may . . . set aside or reverse a judgment, or grant a new trial on the
basis of admitted or excluded evidence when a substantial right of the party is adversely
affected . . . .”).
REVERSED and REMANDED for a new trial.
SAWAYA and COHEN, JJ., concur.
3
We have considered and rejected Appellee, Jared Martinez’s, argument that
Bank has not preserved this issue for appellate review.
6