Kyli D. Smith v. National Collegiate Student Loan Trust (mem. dec.)

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be FILED
regarded as precedent or cited before any Jun 24 2020, 7:31 am
court except for the purpose of establishing
the defense of res judicata, collateral CLERK
Indiana Supreme Court
Court of Appeals
estoppel, or the law of the case. and Tax Court
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE
Thomas G. Bradburn Kyle D. Michael
Noblesville, Indiana Cincinnati, Ohio
IN THE
COURT OF APPEALS OF INDIANA
Kyli D. Smith, June 24, 2020
Appellant-Defendant, Court of Appeals Case No.
19A-CC-3041
v. Appeal from the DeKalb Superior
Court
National Collegiate Student The Honorable Monte L. Brown,
Loan Trust, Judge
Appellee-Plaintiff. Trial Court Cause No.
17D02-1901-CC-43
Tavitas, Judge.
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Case Summary
[1] Kyli Smith (“Smith”) appeals the grant of summary judgment in favor of
National Collegiate Student Loan Trust 2005-1 (“NCSLT”). We affirm.
Issues
[2] Smith raises two issues on appeal, which we restate as follows:
I. Whether NCSLT designated inadmissible hearsay
evidence in support of its motion for summary judgment.
II. Whether a genuine issue of material fact exists regarding
NCSLT’s ownership of and right to collect on Smith’s
educational loan account.
Facts
[3] On October 9, 2004, Smith executed a Bank One “Education One” loan
agreement (“Contract”) with Bank One, N.A. (“Bank One”). 1 Appellant’s
App. Vol. II p. 56. Bank One disbursed the loan funds to Smith on October 22,
2004.
[4] On February 23, 2005, Bank One executed a Pool Supplement Agreement,
wherein Bank One “transfer[red], s[old], set[ ] over and assign[ed]” a bundle of
educational loans to The National Collegiate Funding, LLC. See id. at 18. The
bundle of educational loans was itemized in an attachment to the Pool
1
Smith’s mother, Charmaine Smith, co-signed the educational loan.
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Supplement Agreement and was referred to in the Pool Supplement Agreement
as “the TRANSFERRED BANK ONE LOANS[.]” Id. Smith’s educational
loan was among the transferred Bank One Loans. Id. at 76 (“Each of the
following Pool Supplements was entered into [ ]: . . . Bank One, N.A., [ ] for
loans that were originated under Bank One’s [ ] EDUCATION ONE Loan
Program . . . .”) (emphasis in original). That same day, pursuant to a Deposit
and Sale Agreement, The National Collegiate Funding, LLC, sold the same
bundle of educational loans to NCSLT.
[5] It is undisputed that Smith: (1) borrowed the educational funds; (2) has not
made a payment on the loan since November 21, 2017; and (3) owes an
outstanding balance. On January 24, 2019, NCSLT filed a complaint alleging
that Smith breached the Contract and owed $6,854.75, as well as accrued and
ongoing statutory interest. On March 29, 2019, Smith filed her answer and
asserted various affirmative defenses, including that NCSLT lacked standing to
pursue its claim.
[6] NCSLT filed a motion for summary judgment, a memorandum in support, and
supporting designated materials on July 15, 2019. NCSLT’s designated
materials included the affidavit of Jacqueline Jefferis, in her capacity as the
business records custodian for Transworld Systems Inc. (“TSI”). 2 On August
15, 2019, Smith filed her response in opposition to NCSLT’s motion for
2
Loan subservicer TSI is the custodian of NCSLT’s loan documents.
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summary judgment, as well as her supporting designated materials. On
September 12, 2019, the trial court conducted a hearing 3 on the motion for
summary judgment; and on October 10, 2019, the trial court entered its order
granting NCSLT’s motion for summary judgment. Smith filed a motion to
correct error, which the trial court denied. Smith now appeals.
Analysis
[7] Smith challenges the trial court’s entry of summary judgment in favor of
NCSLT. Summary judgment is appropriate only when the moving party shows
there are no genuine issues of material fact for trial and the moving party is
entitled to judgment as a matter of law. Erie Indem. Co. for Subscribers at Erie Ins.
Exch. v. Estate of Harris by Harris, 99 N.E.3d 625, 629 (Ind. 2018), reh’g denied; see
also Ind. Trial Rule 56(C). Once that showing is made, the burden shifts to the
nonmoving party to designate appropriate evidence to demonstrate the actual
existence of a genuine issue of material fact. Schoettmer v. Wright, 992 N.E.2d
702, 705-06 (Ind. 2013). When ruling on the motion, the trial court construes
all evidence and resolves all doubts in favor of the non-moving party. Id. at
706. We review the trial court’s ruling on a motion for summary judgment de
novo, and we take “care to ensure that no party is denied his day in court.” Id.3
The hearing on the motion for summary judgment appears to have been conducted telephonically. The
record does not include a transcript.
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“We limit our review to the materials designated at the trial level.” Gunderson v.
State, Indiana Dep’t of Nat. Res., 90 N.E.3d 1171, 1175 (Ind. 2018).
I. Hearsay
[8] Smith argues that affiant Jefferis “[lacks] personal knowledge of Bank One’s
regularly conducted business activities and recordkeeping”; and “the documents
and evidence offered by NCSLT in support of its motion for summary
judgment are inadmissible hearsay.” Smith’s Br. pp. 11, 13. In ruling on a
motion for summary judgment, the trial court must consider only the properly
designated evidence which would be admissible at trial. Zelman v. Capital One
Bank (USA) N.A., 133 N.E.3d 244, 248 (Ind. Ct. App. 2019); see Ind. T.R. 56(E).
Such evidence does not include inadmissible hearsay contained in an affidavit.
Id. Nor does it include documents that are unsworn statements or unverified
exhibits. Id.[9] Although hearsay evidence is generally inadmissible, Indiana Evidence Rule
803(6) provides for a business records exception to the hearsay rule. To
establish admissibility under Rule 803(6), the proponent of the hearsay evidence
must show:
(A) the record was made at or near 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, organization, occupation, or calling,
whether or not for profit;
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(C) making the record was a regular 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) neither the source of information nor the method or
circumstances of preparation indicate a lack of trustworthiness.
Ind. R. Evid. 803(6).
[10] In support of her argument, Smith relies heavily on Holmes v. National Collegiate
Student Loan Trust, 94 N.E.3d 722 (Ind. Ct. App. 2017); however, Holmes is
readily distinguishable from the instant facts. In Holmes, NCSLT sued Holmes
for failure to pay a student loan debt. Holmes argued that NCSLT lacked
standing for its claim and challenged NCSLT’s designated affidavits as
inadmissible hearsay. NCSLT successfully moved for summary judgment;
however, a panel of this Court reversed on appeal.
[11] The Holmes panel found:
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. 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
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and authorized to testify regarding Holmes’s specific loan and
“the business records attached” to the affidavit. 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 from Charter One Bank to National Collegiate
Funding LLC, before then being sold and assigned to NCSLT.
Holmes, 94 N.E.3d at 724 (citations and footnote omitted). Although Jefferis’
affidavit and supporting documents were hearsay, NCSLT argued that the
affidavit and documents fell within the business records exception to the rule
against hearsay. See Evid. R. 803(6). In rejecting this argument, the panel
reasoned:
. . .[T]he 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 [v. State, 875 N.E.2d
813, 821 (Ind. Ct. App. 2007)], this Court stated that, pursuant to
Trial Rule 803(6), one business “could not lay the proper
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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).
Id. at 725-26 (footnote and citations omitted). The panel, thus, deemed “the
Jefferis affidavit insufficient to support the admission of two [ ] business records
necessary for NCSLT to establish its prima facie case” and found it was
inappropriate for the trial court to enter summary judgment in favor of NCSLT.
Id. at 726.
[12] Here, in support of its motion for summary judgment, NCSLT again tendered
an affidavit from Jefferis. The instant Jefferis affidavit provides, in part:
1. I am employed by Transworld Systems Inc. (hereinafter
“TSI”), the Subservicer for [NCSLT] regarding [ ] the
educational loan that is the subject matter of this Affidavit . . . . I
am over the age of 18 and am competent and authorized to
testify regarding this educational loan through my review of the
business records maintained by TSI as custodian of records.
These records include electronic data provided to TSI related to
the educational loan, and the business records attached to this
Affidavit.
2. My statements [ ] are based on personal knowledge of the
educational loan which I obtained through my training,
experience, investigation and review of the business records that
are kept and maintained by TSI as dedicated record custodian of
this educational loan, and also my understanding of the
structured loan program by which this educational loan was
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originated, funded, documented and sold ultimately to [NCSLT]
. . . . The records I reviewed and relied upon in giving this
Affidavit, including the business records attached [ ] (the “loan
records”), consist of electronically stored documents and
electronic data that are within TSI’s care, custody or control.
3. TSI is currently [ ] the Subservicer for [NCSLT] . . . . [ ] TSI is
custodian of the loan records, which records include loan
origiation [sic] documents [NCSLT] obtained at acquision [sic].
The loan records also includ [sic] electronic transactions
pertaining to the educational loan . . . including [ ] transactions
that occurred before TSI became the Subservicer . . . .
4. I have access to, training and experience using the system of
record utilized by American Education Services (“AES”) to
enter, maintain and access the loan records during its role as
servicer, and I am familiar with the transaction codes reflected in
those records.
5. It is TSI’s regularly-conducted business practice to incorporate
prior servicers’ loan records into the system of record it maintains
on [NCSLT’s] behalf . . . . I am familiar with the process by
which TSI receives access to loan records from [NCSLT’s] prior
servicers and incorporates those records into TSI’s system of
record.
6. AES[,] as the prior servicer of the educational loan, began
servicing the educational loan upon the first disbursement and
continued to service the educational loan until it was charged-off.
Upon charge-off, the loan records were transmitted to and
incorporated within the records of TSI (or its predecessor), as
part of its regularly-conducted business practice. . . .
7. I am familiar with the process by which TSI and AES, on
behalf of [NCSLT], each receives loan records from the prior
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servicer or loan originator, including loan origination documents
and data recording the electronic transactions pertaining to the
loans. . . . It is TSI’s regularly-conducted business practice to
incorporate these loan records into the system of record it
maintains on [NCSLT]’s behalf.
8. Educational loan records that are within TSI’s care, custody
and control as Subservicer for [NCSLT], including records
entered and maintained by AES . . .were created, compiled or
recorded, and kept as part of regularly conducted business
activity at or near the time of the event recorded. The loan
records were created, compiled or recorded from information
transmitted by a person with personal knowledge of such event
who had a business duty to report it, from information
transmitted by a person with personal knowledge of such event.
Such records are created, kept, maintained, accessed and relied
upon in the course of ordinary and regularly conducted business
activity.
*****
10. . . . [Smith] obtained an educational loan with [Bank One]
and funds were disbursed on 10/22/2004. [Smith’s] educational
loan was transferred, sold and assigned to National Collegiate
Funding, LLC, on 2/23/2005 for valuable consideration, along
with other educational loans (“Loan Pool . . . . Attached [ ] as
Exhibit “C” is a true and correct copy of the Pool Supplement
and a redacted excerpt of the Schedule of the Loan Pool . . .
showing that [Smith’s] loan was part of the Loan Pool.
11. On 2/23/2005, National Collegiate Funding, LLC
transferred, sold and assigned the Loan Pool, including [Smith’s]
educational loan [ ] to [NCSLT] for valuable consideration . . . .
Appellant’s App. Vol. II pp. 47-50 (citations omitted).
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[13] Unlike the deficient affidavit that NCSLT tendered in Holmes, the instant
affidavit demonstrated, from a source and circumstances that did not indicate a
lack of trustworthiness, that: (1) the business records were made at, near the
time, or from information transmitted by a person with knowledge; (2) the
business records were kept in the course of regularly conducted activities of
Bank One and/or NCSLT; and (3) the making of the business records was a
regular practice of the business activities of Bank One, NCSLT, and their loan
servicers and subservicers. See Ind. R. Evid. 803(6). NCSLT’s designated
materials also established the manner in which Smith’s Bank One educational
loan was transferred to NCSLT; and that Jefferis was familiar with the regular
business practices or recordkeeping of NCSLT’s subservicer, TSI, as well as
Bank One’s servicer, AES, regarding the transfer of pooled loans and, therefore,
could testify as to the reliability and authenticity of those documents.
[14] For the foregoing reasons, the instant affidavit and attached documentation
satisfied the requirements of Evidence Rule 803(6) and were properly admitted
as business records.
II. Ownership and Right to Collect
[15] Smith also argues that the existence of a genuine issue of material fact
precluded entry of summary judgment in NCSLT’s favor because “NCSLT
failed to prove that it is the owner of Smith’s old Bank One account[.]” Smith’s
Br. p. 13. We cannot agree. NCSLT designated materials that demonstrate
that: (1) Bank One transferred, assigned, or sold a bundle of educational loans
to The National Collegiate Funding, LLC, pursuant to the Pool Supplement
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agreement; (2) the bundle of educational loans incorporated loans that
originated under Bank One’s Education One program, which included Smith’s
Bank One educational loan; and (3) The National Collegiate Funding, LLC
sold the same bundle of educational loans to NCSLT, pursuant to the Deposit
and Sale Agreement. Accordingly, the trial court properly found that no
genuine issue of material fact existed regarding NCSLT’s ownership of and
right to collect regarding Smith’s defaulted educational loan; and that NCSLT
was entitled to judgment as a matter of law.
Conclusion
[16] The trial court properly admitted NCSLT’s designated materials. No genuine
issue of material fact existed regarding NCSLT’s ownership of and right to
collect regarding Smith’s defaulted educational loan; thus, the trial court
properly entered summary judgment in NCSLT’s favor, and NCSLT is entitled
to judgment as a matter of law.
[17] Affirmed.
Riley, J., and Mathias, J., concur.
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