Alexander Holmes v. National Collegiate Student Loan Trust

FILED
Feb 27 2018, 10:08 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Thomas G. Bradburn Seth Row
Bradburn Law Firm Daniel Bogatz
Noblesville, Indiana Javitch Block LLC
Cleveland, Ohio
IN THE
COURT OF APPEALS OF INDIANA
Alexander Holmes, February 27, 2018
Appellant-Defendant, Court of Appeals Case No.
87A05-1711-CC-2517
v. Appeal from the Warrick Superior
Court
National Collegiate Student The Honorable Robert R.
Loan Trust, Aylsworth, Judge
Appellee-Plaintiff Trial Court Cause No.
87D02-1608-CC-987
Crone, Judge.
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Case Summary
[1] Alexander Holmes appeals the trial court’s entry of summary judgment in favor
of National Collegiate Student Loan Trust (“NCSLT”). Concluding that
Holmes has met his burden to persuade us that the grant of summary judgment
was erroneous, we reverse and remand.
Facts and Procedural History
[2] On November 30, 2006, Holmes cosigned a Loan Request/Credit Agreement
with Charter One Bank on behalf of his son, Nicholas Holmes. The loan was
an education loan for Nicholas to attend the University of Southern Indiana
from August 2006 through May 2007. In March 2007, Charter One Bank sold
a pool of student loans to National Collegiate Funding LLC, which in turn sold
the loans to NCSLT. This pool of loans allegedly contained Holmes’s specific
loan account.
[3] On August 15, 2016, NCSLT filed a complaint against Holmes alleging that it
was the owner of Holmes’s account and that Holmes owed $16,578.60 plus
accrued interest. Holmes filed his answer and affirmative defenses, including
the defense that NCSLT lacked standing to bring its claim.
[4] On March 22, 2017, NCSLT filed a motion for summary judgment and
designation of evidence. In response, Holmes asserted that NCSLT failed to
prove that it owned his account and further that much of NCSLT’s designated
evidence was inadmissible pursuant to Indiana Trial Rule 56(E). Following a
hearing, the trial court entered summary judgment in favor of NCSLT. The
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court ordered Holmes to pay NCSLT $18,183.26 plus interest and costs.
Holmes filed a motion to correct error, which the trial court denied. This appeal
ensued.
Discussion and Decision
[5] Holmes appeals the trial court’s entry of summary judgment in favor of
NCSLT. Summary judgment is appropriate only when there is no genuine
issue of material fact and the moving party is entitled to judgment as a matter of
law. Wagner v. Yates, 912 N.E.2d 805, 808 (Ind. 2009). “The party moving for
summary judgment has the burden of making a prima facie showing that there
is no genuine issue of material fact and that the moving party is entitled to
judgment as a matter of law.” Goodwin v. Yeakle’s Sports Bar & Grill, Inc., 62
N.E.3d 384, 386 (Ind. 2016). Once that showing is made, the burden shifts to
the nonmovant to come forward with contrary evidence showing the existence
of an issue for the trier of fact. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind.
2014). In determining whether the moving party is entitled to summary
judgment, “[w]e consider only those materials properly designated pursuant to
Trial Rule 56 and construe all factual inferences and resolve all doubts ... in
favor of the non-moving party.” Young v. Hood’s Gardens, Inc., 24 N.E.3d 421,
424 (Ind. 2015).
[6] Holmes contends that NCSLT has failed to establish the absence of a genuine
issue of material fact. Particularly, Holmes argues that much of NCSLT’s
designated evidence is inadmissible hearsay, and thus the evidence presented is
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insufficient to make a prima facie showing that NCSLT is entitled to summary
judgment on its claim against Holmes. We agree.
[7] To make its prima facie case in support of summary judgment, NCSLT was
required to show that Holmes executed a contract for the student loan with
Charter One Bank, that NCSLT was the assignee and is now the owner of that
debt, and that Holmes owed the original lender, Charter One Bank, the amount
alleged. See Seth v. Midland Funding, LLC, 997 N.E.2d 1139, 1140 (Ind. Ct.
App. 2013) (discussing designated evidence necessary to make prima facie case
in support of summary judgment in favor of creditor claiming breach of credit
card contract). In support of summary judgment, NCSLT designated the
affidavit of Jacqueline Jefferis, an employee of Transworld Systems, Inc.
(“TSI”), the loan subservicer for U.S. Bank, National Association, the “Special
Servicer” of NCSLT. Appellant’s App. Vol. 2 at 14. Jefferis stated that she was
the “designated custodian of records” for TSI. She stated that she was “familiar
with the process by which TSI received prior account records,” that it was
“TSI’s regularly-conducted business practice to incorporate prior loan records
… into TSI’s business records,” and therefore she was competent and
authorized to testify regarding Holmes’s specific loan and “the business records
attached” to the affidavit. Id. The purpose of the Jefferis affidavit was to
authenticate and lay the foundation for the admissibility of several attached
documents, the most relevant for our review being the loan contract between
Holmes and Charter One Bank, and the schedule of pooled loans transferred
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from Charter One Bank to National Collegiate Funding LLC, before then being
sold and assigned to NCSLT.1
[8] Indiana Trial Rule 56(E) provides that supporting and opposing affidavits on
summary judgment “shall be made on personal knowledge, shall set forth such
facts as would be admissible in evidence, and shall show affirmatively that the
affiant is competent to testify to the matters stated therein.” The requirements
of Trial Rule 56(E) are mandatory, and a court considering a motion for
summary judgment should disregard inadmissible information contained in
supporting or opposing affidavits. Seth, 997 N.E.2d at 1143. Inadmissible
hearsay contained in an affidavit may not be considered in ruling on a motion
for summary judgment. Breining v. Harkness, 872 N.E.2d 155, 158 (Ind. Ct.
App. 2007), trans. denied (2008).
[9] NCSLT admits that the Jefferis affidavit and supporting documents are
hearsay.2 However, NCSLT argues that the material offered is admissible
because it falls within the business records exception to the hearsay rule.
Specifically, Indiana Evidence Rule 803(6) provides that records of a regularly
conducted business activity are not excluded by the rule against hearsay if: the
record was made at or near the time by—or from information transmitted by—
1
The additional attached documents included computer printouts of the loan financial activity, a
deferment/forbearance summary, the loan repayment schedule, and the loan payment history report.
2
Hearsay is an out of court assertion offered in court to prove the truth of the matter asserted. Ind. Evidence
Rule 801(c). Absent an exception to the rule, hearsay is inadmissible as evidence. In re E.T., 808 N.E.2d 639,
641 (Ind. 2004); Ind. Evidence Rule 802.
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someone with knowledge; the record was kept in the course of a regularly
conducted activity of a business; making the record was a regular practice of
that activity; all these conditions are shown by the testimony of the custodian or
another qualified witness; and neither the source of information nor the method
or circumstances of preparation indicate a lack of trustworthiness. To ensure
reliability, the proponent of a business record must authenticate it, and
Evidence Rule 803(6) permits authentication by affidavit. Speybroeck v. State,
875 N.E.2d 813, 819 (Ind. Ct. App. 2007). As an exception to the hearsay rule,
the business record exception must be strictly construed. Id.
[10] Here, the Jefferis affidavit provided no testimony to support the admission of
the contract between Holmes and Charter One Bank or the schedule of pooled
loans sold and assigned to National Collegiate Funding, LLC, and then to
NCSLT, as business records pursuant to Evidence Rule 803(6). There was no
testimony to indicate that Jefferis was familiar with or had personal knowledge
of the regular business practices or record keeping of Charter One Bank, the
loan originator, or that of NCSLT regarding the transfer of pooled loans, such
that she could testify as to the reliability and authenticity of those documents.
Indeed, Jefferis offered no evidence to indicate that those records were made at
or near the time of the business activities in question by someone with
knowledge, that the records were kept in the course of the regularly conducted
activities of either Charter One or NCSLT, and that making the records was
part of the regularly conducted business activities of those third-party
businesses. In Speybroeck, this Court stated that, pursuant to Trial Rule 803(6),
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one business “could not lay the proper foundation to admit the records of
another business because the requesting business lacked the personal knowledge
required to ensure reliability.” Id. at 821; accord Williams v. Unifund CCR, LLC,
70 N.E.3d 375, 379 (Ind. Ct. App. 2017) (affiant from one business who did not
have personal knowledge of another business’s regularly conducted business
activities could not lay foundation for admission of exhibit).3 Because the
Jefferis affidavit is insufficient to support the admission of two of the business
records necessary for NCSLT to establish its prima facie case, summary
judgment is inappropriate.
[11] Under the circumstances, we conclude that NCSLT has failed to make a prima
facie case in support of summary judgment. Accordingly, we reverse and
remand for further proceedings.
[12] Reversed and remanded.
Robb, J., and Bradford, J., concur.
3
NCSLT argues that some federal circuit courts have allowed authentication of third-party business records
pursuant to Federal Rule of Evidence 803(6), but Indiana courts have not applied Indiana Evidence Rule
803(6) in the same way. This would not be the only point regarding hearsay evidence upon which we diverge
from our federal counterparts. Indiana has also never adopted a residual exception like Federal Rule of
Evidence 807, which allows trial judges to exercise discretion to admit certain hearsay evidence. VanPatten v.
State, 986 N.E.2d 255, 269 (Ind. 2013) (Massa, J., concurring in result).
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