HS Fin. Group, L.L.C. v. Hinchee

[Cite as HS Fin. Group, L.L.C. v. Hinchee, 2020-Ohio-4765.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
GREENE COUNTY
HS FINANCIAL GROUP, LLC :
:
Plaintiff-Appellee : Appellate Case No. 2019-CA-67
:
v. : Trial Court Case No. CVF1900600
:
TERRI HINCHEE : (Civil Appeal from Municipal Court)
:
Defendant-Appellant :
:
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OPINION
Rendered on the 2nd day of October, 2020.
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JEFFREY L. KOBERG, Atty. Reg. No. 0047386, 25651 Detroit Road, Suite 203,
Westlake, Ohio 44145
Attorney for Plaintiff-Appellee
ANDREW J. ZEIGLER, Atty. Reg. No. 0081417, 1340 Woodman Drive, Dayton, Ohio
45432
Attorney for Defendant-Appellant
.............
WELBAUM, J.
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{¶ 1} Defendant-Appellant, Terri Hinchee, appeals from a summary judgment
rendered in favor of Plaintiff-Appellee, HS Financial Group, LLC (“HSFG”). According to
Hinchee, the trial court erred in granting summary judgment because the affidavit that
HSFG submitted was unauthenticated and inadmissible as evidence.
{¶ 2} We conclude that the trial court erred in awarding summary judgment to
HSFG. The affidavit that was submitted failed to comply with the requirements of Evid.R.
803(6), was not properly authenticated, and was inadmissible. Accordingly, the
judgment of the trial court will be reversed, and this cause will be remanded for further
proceedings.
I. Facts and Course of Proceedings
{¶ 3} On April 19, 2019, HSFG filed a complaint in the Fairborn Municipal Court,
alleging that Hinchee had failed to pay $12,113.83 on a retail installment contract. HSFG
further alleged that it had been assigned all rights from Lending Point, LLC, and attached
the Bill of Sale and Assignment to the complaint as Exhibit A. In the complaint, HSFG
asserted claims for breach of contract, for “stated account,” and for unjust enrichment.
{¶ 4} Hinchee filed an answer to the complaint on May 1, 2019, denying the
allegations in the complaint. She also asserted several defenses, including that HSFG
had not proven it owned the claim. On June 27, 2019, HSFG asked the trial court for
leave to file a motion for summary judgment, and Hinchee opposed the motion. After
being given leave to file the motion, HSFG filed it on July 2, 2019. Hinchee’s prior
memorandum was then considered as a response to the summary judgment motion.
{¶ 5} On October 9, 2019, the trial court filed a judgment entry granting HSFG’s
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motion for summary judgment. Hinchee filed a timely notice of appeal.
II. Was Summary Judgment in HSFG’s Favor Appropriate?
{¶ 6} Hinchee’s sole assignment of error states that:
The Trial Court Erred by Granting Summary Judgment to Appellee
as the Affidavit Relied Upon by the Trial Court in Granting Summary
Judgment Contains Hearsay, Is Unauthenticated and Is Inadmissible as
Evidence.
{¶ 7} Hinchee contends that the affidavit of the person signing the affidavit in
support of summary judgment (Brenda Watchorn) did not indicate that she knew or was
in a position to know how Lending Point, LLC created and archived the records on which
the summary judgment motion was based. In addition, Hinchee argues that there was
no tabulation based on personal knowledge or properly authenticated business records
of the principal and interest amounts owed.
{¶ 8} In response, HSFG contends that Watchorn’s affidavit set forth that she was
employed by HSFG, that she was familiar with the facts and circumstances of the account
HSFG owned, and that the exhibits attached to the complaint were accurate copies of the
originals and were kept in the ordinary course of business. According to HSFG, the
exhibits included the account’s complete bill of sale history, which portrayed the transfer
record showing a balance transfer of $12,113.83. HSFG further asserts that Hinchee
had the burden to show genuine issues of material fact, but failed to even file an affidavit
or other supporting evidence.
{¶ 9} In rendering summary judgment in HSFG’s favor, the trial court relied on
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Watchorn’s affidavit and also noted that Hinchee failed to submit any affidavit or
supporting evidence.
{¶ 10} Under settled law, “[a] trial court may grant a moving party summary
judgment pursuant to Civ.R. 56 if there are no genuine issues of material fact remaining
to be litigated, the moving party is entitled to judgment as a matter of law, and reasonable
minds can come to only one conclusion, and that conclusion is adverse to the nonmoving
party, who is entitled to have the evidence construed most strongly in his favor.” Smith
v. Five Rivers MetroParks, 134 Ohio App.3d 754, 760, 732 N.E.2d 422 (2d Dist.1999),
citing Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64, 375 N.E.2d 46 (1978).
{¶ 11} A party seeking summary judgment has the initial “ ‘burden of affirmatively
demonstrating that, with respect to every essential issue of each count in the complaint,
there is no genuine issue of fact.’ ” Mitseff v. Wheeler, 38 Ohio St.3d 112, 115, 526
N.E.2d 798 (1988), quoting Massaro v. Vernitron Corp., 559 F.Supp. 1068, 1073
(D.Mass.1983). “To accomplish this, the movant must be able to point to evidentiary
materials of the type listed in Civ.R. 56(C) that a court is to consider in rendering summary
judgment. The evidentiary materials listed in Civ.R. 56(C) include ‘the pleading,
depositions, answers to interrogatories, written admissions, affidavits, transcripts of
evidence in the pending case, and written stipulations of fact, if any.’ These evidentiary
materials must show that there is no genuine issue as to any material fact, and that the
moving party is entitled to judgment as a matter of law.” Dresher v. Burt, 75 Ohio St.3d
280, 292-293, 662 N.E.2d 264 (1996).
{¶ 12} The party opposing summary judgment then has a corresponding burden.
That party “may not rest upon its pleadings, but must set forth specific facts showing that
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there is a genuine issue for trial.” Todd Dev. Co. v. Morgan, 116 Ohio St.3d 461, 2008-
Ohio-87, 880 N.E.2d 88, ¶ 14, citing Civ.R. 56(E).
{¶ 13} “We review decisions granting summary judgment de novo, which means
that we apply the same standards as the trial court.” GNFH, Inc. v. W. Am. Ins. Co., 172
Ohio App.3d 127, 2007-Ohio-2722, 873 N.E.2d 345, ¶ 16 (2d Dist.). Consequently,
appellate courts do not defer to trial courts during summary judgment review. Powell v.
Rion, 2012-Ohio-2665, 972 N.E.2d 159, ¶ 6 (2d Dist.), citing Brown v. Scioto Cty. Bd. of
Commrs., 87 Ohio App.3d 704, 711, 622 N.E.2d 1153 (4th Dist.1993).
{¶ 14} In arguing that summary judgment was improper, Hinchee relies on our prior
decision in TPI Asset Mgt. v. Conrad-Eiford, 193 Ohio App.3d 38, 2011-Ohio-1405, 950
N.E.2d 1018, which allegedly contains affidavits similar to Watchorn’s. In TPI, which
involved credit card debt, we considered the “ ‘business records’ exception in Evid.R.
803(6),” which permits hearsay evidence to be admitted as an exception to the hearsay
rule. Id. at ¶ 8.
{¶ 15} “ ‘Hearsay’ is 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.” Evid.R. 801(C). As a general rule, hearsay is not admissible unless specially
allowed by statute, by the Ohio or United States Constitutions, by the Ohio Rules of
Evidence, or by other rules that the Supreme Court of Ohio prescribes. Evid.R. 802. As
pertinent here, Evid.R. 803 provides that:
The following are not excluded by the hearsay rule, even though the
declarant is available as a witness:
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(6) Records of Regularly Conducted Activity. A memorandum,
report, record, or data compilation, in any form, of acts, events, or
conditions, 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 the memorandum, report, record, or data compilation, all as shown
by the testimony of the custodian or other qualified witness or as provided
by Rule 901(B)(10), unless the source of information or the method or
circumstances of preparation indicate lack of trustworthiness. The term
“business” as used in this paragraph includes business, institution,
association, profession, occupation, and calling of every kind, whether or
not conducted for profit.
{¶ 16} “ ‘To be admissible under Evid.R. 803(6), a business record must display
four essential elements: (1) it must have been kept in the regular course of business; (2)
it must stem from a source who had personal knowledge of the acts, events, or conditions;
(3) it must have been recorded at or near the time of the transaction; and (4) a foundation
must be established by the testimony of either the custodian of the record or some other
qualified person.’ ” Royse v. Dayton, 195 Ohio App.3d 81, 2011-Ohio-3509, 958 N.E.2d
994, ¶ 25 (2d. Dist.), quoting State v. Comstock, 11th Dist. Ashtabula No. 96-A-0058,
1997 WL 531304, *6 (Aug. 29, 1997).
{¶ 17} In TPI, we concluded that the evidence did not comply with authentication
requirements in Evid.R. 901 and Civ.R. 56(E). First, one affiant’s statement that he was
authorized to act on the bank’s behalf insufficiently demonstrated that he had personal
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knowledge of the facts the affidavit contained. Second, his identification as a bank “team
leader” did not, standing alone, “portray a basis to find that through that position he gained
the required personal knowledge.” TPI, 193 Ohio App.3d 38, 2011-Ohio-1405, 950
N.E.2d 1018, at ¶ 22. Regarding a second affiant, we concluded that his “assertion that
from his own personal knowledge the facts contained in the affidavit were true as he ‘verily
believe[d],’ and that he was ‘competent to testify to same,’ likewise fails to portray any
basis other than [his] own assertion, that he has the required personal knowledge.” Id.
at ¶ 23.
{¶ 18} In the case before us, HSFG attached several documents to the complaint.
Exhibit B was a May 24, 2016 consumer loan agreement between Lending Point, LLC
d/b/a Lending Point, and Terri Hinchee. The loan number was mostly blackened out, but
the last three digits were “264.” The loan amount was for $15,000, it provided for an
annual percentage rate of 25.4206%, and it specified that 36 monthly payments of
$602.28 would be made beginning on 7/1/2016. Ex. B, p. 2.
{¶ 19} Ex. C to the Complaint contained a list of transactions beginning on June
30, 2016 for a loan named “XXXX5689.” The beginning loan balance was $15,034.04
and the ending balance on May 31, 2017, was $11,544.51. A “pre charge off int” of
$569.32 was added to that balance for a total “charge off bal” of $12,113.83.
{¶ 20} Exhibit A to the complaint contained four pages. In reverse order, the last
two pages consisted of a “Bill of Sale” and a document with no title. The Bill of Sale
stated that:
For value received and in further consideration of the mutual
covenants and conditions set forth in the Forward Flow Account Purchase
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Agreement (“the Agreement”) dated June 28, 2017, by and between
Lending Point LLC (“Seller”) and Argent Holdings, LLC (“Buyer”), Seller
hereby transfers, sells, conveys, grants, and delivers to Buyer, its
successors and assigns, without recourse except as set forth in the
Agreement, to the extent of its ownership, the Accounts as set forth in the
Account Schedule attached hereto as Exhibit I delivered by Seller to Buyer
on each Closing date, and as further described in the Agreement.
Lot Number:
Aggregate Unpaid Balance:
Number of Accounts:
Dated October 27, 2017.
Ex. A, p. 3.
{¶ 21} As noted, the Seller was listed as Lending Tree, LLC. The name of the
individual who signed on behalf of Lending Tree was undecipherable (other than the first
name of “Greg”), and the title given (“C.L.O.”) was unexplained. Furthermore, the
document located behind this Bill of Sale was not labeled Exhibit I; instead, it had no title.
The document lists an “acct id” as XXX8148, a “CLTREF” of “XXXXXXX5989,” and a first
and last name of Terri Hinchee. Ex. A at p. 4.
{¶ 22} The next page of Ex. A was labeled “Exhibit II Bill of Sale.” This document
stated that:
For value received and in further consideration of the mutual
covenants and conditions set forth in the Account Purchase Agreement
(“the Agreement”) dated May 11, 2018, by and between Argent Holdings,
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LLC (“Seller”) and Security Credit Services, LLC (“Buyer”), Seller hereby
transfers, sells, conveys, grants, and delivers to Buyer, its successors and
assigns, without recourse except as set forth in the Agreement, to the extent
of its ownership, the Accounts as set forth in the Account Schedule attached
hereto as Exhibit I delivered by Seller to Buyer on each Closing Date, and
as further described in the Agreement.
Exhibit A at p. 2.
{¶ 23} On this bill of sale, the Lot Number, Aggregate Unpaid Balance, and
Number of Accounts were blackened out. In addition, no “Exhibit I” or any account
schedule was attached. The name of the signer was Mark Hedge, “President.” Id.
{¶ 24} The final document in Exhibit A was an “Assignment and Bill of Sale, SCS-
HSF LNP 1MM 9.25.2018.” Id. at p. 1. This document stated as follows:
Security Credit Services, LLC (“Seller”) has entered into an Accounts
Purchase Agreement, dated September 25, 2018 (“Agreement”) for the sale
of Accounts described in Agreement thereof to HS Financial Group, LLC
(“Purchaser”), upon terms and conditions set forth in that Agreement.
NOW, THEREFORE, for good and valuable consideration, Seller hereby
sells, assigns, and transfers to Purchaser all of Seller’s rights, title, and
interest in each and every one of the Accounts described in the Agreement,
provided however such transfer is made without any representations,
warranties, or recourse.
IN WITNESS WHEREOF, Seller has signed and delivered this
instrument on the 26th day of September, 2018.
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Ex. A at p. 1.
{¶ 25} The signature on this document was illegible, but the designation of the
individual signing was “President.” Id. No copy of the “Agreement” was attached, nor
were any accounts attached or described other than by the general reference above to
“Accounts.”
{¶ 26} As indicated, HSFG provided the affidavit of Brenda Watchorn in support of
its summary judgment motion. Her affidavit provided, in pertinent part, that:
1. That I, Brenda Watchorn, Affiant, am an employee of HS
Financial Group, LLC (“HSF”), the Plaintiff herein, and am competent to
testify to the matters stated herein:
2. That I have reviewed the facts and circumstances regarding
Defendant’s account that is the subject matter of this Complaint.
3. That there is justly an amount due and owing by the Defendant
to HSF, the sum of money amounting to $12,113.83, representing the
charged off amount and interest, less payments received, if any.
4. That the said indebtedness represents the amount due and
originating on an account of which HSF is the assignee of Lending Point,
LLC, and that HSF, the within Plaintiff, having purchased said account from
said assignor, is the owner and the proper party to bring this action.
5. That the Exhibits attached to the Motion for Summary Judgment
are true and accurate copies of the originals which are kept in the ordinary
course of the Plaintiff’s business and under Affiant’s control and
supervision, that the records have not been altered, and Affiant is the
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custodian of these records.
Plaintiff’s Motion for Summary Judgment Instanter, Ex. 1, p. 1.
{¶ 27} On review, we agree that the affidavit and documents were insufficient.
While TIP is relevant, we are also unable to distinguish the evidence here from what was
submitted in support of summary judgment in Ohio Receivables, L.L.C. v. Williams, 2d
Dist. Montgomery No. 25427, 2013-Ohio-960. Although some slight differences exist,
both Williams and the case before us involve plaintiffs who were not the original creditor,
but who purportedly were the last assignee in a chain of assignments. Williams involved
two assignments, while this case involves three. Id. at ¶ 3. Furthermore, both cases
also involve an attempt by the last assignee (here, HSFG) to authenticate documents of
the original creditor.
{¶ 28} In considering this issue, we commented in Williams that “[t]he business
records exception has an authentication requirement which must be met before [Evid.R.
803(6)] applies. * * * ‘[T]he testifying witness must possess a working knowledge of the
specific record-keeping system that produced the document * * * [and] “be able to vouch
from personal knowledge of the record-keeping system that such records were kept in
the regular course of business.” ’ ” Id. at ¶ 14, quoting State v. Davis, 62 Ohio St.3d 326,
343, 581 N.E.2d 1362 (1991). We further observed that “[g]enerally, the business record
exception requires that some person testify as to the regularity and reliability of the
business activity involved in the creation of the record.” Id., citing State v. Hirtzinger, 124
Ohio App.3d 40, 49, 705 N.E.2d 395 (2d Dist.1997).
{¶ 29} Based on the above authority, Williams rejected the documents attached to
the plaintiff’s affidavits because the affidavits were not properly authenticated and, “as
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business records of a separate entity,” were not properly considered in support of the
plaintiff’s motion for summary judgment. Id. at ¶ 15. In this vein, we stressed that:
Although employees of [the plaintiff] were permitted to state, via
affidavit or otherwise, that they had obtained these records in the course of
the purchase, they could not attest to the facts that the contract documents
between Williams [the debtor] and Chase [the original creditor] reflected the
terms of the credit card agreement, that the documents were made at or
near the time that the account was opened by someone with knowledge of
that transaction, or that the billing statements and spreadsheets were
generated in the regular practice of Chase's business activity.
It was not necessary that an employee or agent of Ohio Receivables
possess personal knowledge of these facts, but it was necessary for Ohio
Receivables to prove, by some means, that the documents on which Ohio
Receivables sought to rely as its business records were first business
records created and maintained by Chase in the course of its (Chase's)
regularly conducted business.
Id. at ¶ 18-19.
{¶ 30} The same defects exist in the case before us. Although Watchorn could
have testified that HSFG obtained the documents in the course of a purchase (although
that purchase would not have been from Lending Point, as implied by her affidavit), she
could not have attested to Lending Point’s business activities in connection with the
account.
{¶ 31} Furthermore, additional defects exist with regard to the documents attached
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to the complaint. For example, the alleged assignment from Security Credit Services to
HSFG refers only generally to accounts described in an agreement and has no evident
connection with Hinchee’s account. The bill of sale from Argent Holdings also refers to
accounts listed in “Exhibit I,” but contains no such exhibit identifying any accounts.
Likewise, the bill of sale from Lending Point refers to accounts set forth in Exhibit I, but
lacks such an exhibit.
{¶ 32} In Williams, we also rejected the plaintiff’s contention that the original
creditor’s records were admissible as business records because the plaintiff had
incorporated those records and relied on them in its own business dealings. Williams,
2d Dist. Montgomery No. 25427, 2013-Ohio-960, at ¶ 28-29. We stressed that “although
Ohio Receivables argues that it has incorporated and relied on Chase's and Global
Credit's documents in its business endeavors, its business endeavor is merely to collect
on the debt, not to receive or process payments, send bills, record charges, and the like.
In other words, it does not appear that Ohio Receivables does, in fact, rely on these
records in its business, except to the extent that it uses them as a basis for this and other
lawsuits.” Id. at ¶ 29.
{¶ 33} As in Williams, HSFG has presented no evidence that it is anything other
than a debt collector. Moreover, Watchorn’s affidavit did not even attempt to indicate
that it relied on the documents from other entities in its own business dealings.
{¶ 34} In a subsequent case, we distinguished Williams, stating that:
The rule for admitting adopted business records that we applied in
Williams does not apply here. This is also a mortgage-foreclosure case
not a debt-collection case. And in mortgage-foreclosure cases, we have
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applied a different rule: “a court may admit a document as a business record
even when the proffering party is not the maker of the document, if the other
requirements of Evid.R. 803(6) are met and the circumstances suggest that
the record is trustworthy.”
Ocwen Loan Servicing, LLC v. Malish, 2018-Ohio-1056, 109 N.E.3d 659, ¶ 23 (2d Dist.).
{¶ 35} Unlike Malish, the case before us is a debt-collection case, and there is no
basis for distinguishing Williams. Even if this were otherwise, the evidence presented
was deficient for the reasons we mentioned and was untrustworthy.
{¶ 36} The trial court did not address this issue, even though Hinchee raised it in
responding to summary judgment. Instead, the court summarily relied on Watchorn’s
affidavit, while noting that Hinchee did not file an affidavit or documentation under Civ.R.
56(C). Judgment, p. 2. However, “there is no requirement in Civ.R. 56 that any party
submit affidavits to support a motion for summary judgment.” (Emphasis sic.) Dresher,
75 Ohio St.3d at 298, 662 N.E.2d 264. See also Smith v. Bauknecht, 6th Dist. Lucas No.
L-10-1286, 2011-Ohio-4046, ¶ 25 (“Civ.R. 56(E) does not require the parties to submit
affidavits in support of their summary judgment motions. Rather, Civ.R. 56(E) provides
guidelines for the submission of affidavits should affidavits be submitted in support of a
summary judgment motion.”)
{¶ 37} Civ.R. 56(E) provides that “[w]hen a motion for summary judgment is made
and supported as provided in this rule, an adverse party may not rest upon the mere
allegations or denials of the party's pleadings, but the party's response, by affidavit or as
otherwise provided in this rule, must set forth specific facts showing that there is a genuine
issue for trial.” (Emphasis added.) A movant’s failure to provide admissible evidence is
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certainly an appropriate basis on which the nonmovant can oppose summary judgment.
{¶ 38} Courts have also held that “”[e]ven if the nonmoving party fails completely
to respond to the motion, summary judgment will only be proper where reasonable minds
can come to only one conclusion and that conclusion is adverse to the nonmoving party.”
Swedlow, Butler, Inman, Levine & Lewis Co. v. Gabelman, 10th Dist. Franklin No.
97APG12-1578, 1998 WL 400743, *3 (July 14, 1998), citing Toledo's Great E. Shoppers
City, Inc. v. Abde's Black Angus Steak House No. III, Inc., 24 Ohio St.3d 198, 202, 494
N.E.2d 1101 (1986). Accord State ex rel. Dayton Legal News, Inc. v. Drubert, 2d Dist.
Montgomery No. 24825, 2012-Ohio-564, ¶ 7. Here, based on the lack of admissible
evidence, HSFG was not entitled to summary judgment.
{¶ 39} Accordingly, Hinchee’s sole assignment of error is sustained.
III. Conclusion
{¶ 40} Hinchee’s assignment of error having been sustained, the judgment of the
trial court is reversed, and this cause is remanded for further proceedings consistent with
this opinion.
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TUCKER, P.J. and HALL, J., concur.
Copies sent to:
Jeffrey L. Koberg
Andrew J. Zeigler
Hon. Beth W. Cappelli