This opinion, hot off the presses and straight out of the appellate courts is a GAME CHANGER in foreclosure defense.
The implications for this opinion cannot be understated. While it comes from a homeowner’s association case, the law applies across the board in all foreclosure cases….and the impact is quite amazing!
Enjoy!
The business record exception to the hearsay rule is at the focus of
this appeal. Two condominium owners [condo owners] each appeal a
final judgment of foreclosure o n the condominium association’s
[Association] liens for assessed maintenance fees. They argue the court
erred in admitting testimony concerning the amount of fees owed
because the Association could not verify the amounts due before the new
management company took over. We agree and reverse.
These cases involve the foreclosure of two liens placed on two separate
condo units by the Association for unpaid maintenance fees. The condo
owners, a husband and wife, each owned one of the units. Section 5 of
the Association’s bylaws empowered the Board of Directors with charging
and collecting assessments from condo owners to defray costs and
expenses of maintaining the condo property. Section 9 of the Declaration
of Condominium required each owner to share in the assessments and
allowed the Association to place a lien on units for unpaid assessments.
The Association’s attorney sent the husband a letter notifying him
that his account was overdue, a n d that h e owed $10,174.42 in
assessments and collection fees. A similar letter was sent to the wife
informing her of a past-due balance of $10,060.40 on her unit. Attached
to each letter was an account ledger showing the dates and amounts of
the unpaid assessments. The letters informed the condo owners that the
Association would place a lien on their units if the assessments were not
paid. The Association’s attorney later sent another letter to the condo
owners informing them that the Association had recorded a Claim of Lien.
The Association filed separate Complaints against the condo owners
to foreclose the liens. After the condo owners answered the Complaints,
the Association filed a Motion for Summary Judgment of Foreclosure and
Determination of Attorney’s Fees and Costs, a n d filed affidavits in
support in both cases. Each condo owner filed an affidavit in opposition.
The affidavits attested that the Association’s records were incorrect,
and the wife’s father had made a large advance payment for both units in
August 2008. They attested that the error in the condo’s records
occurred when it hired a new management company. That company
informed the condo owners that payments may have been misapplied
and credited to the wrong account. The condo owners requested the
previous accountant’s records from the Association, which refused to
provide them. The condo owners claimed that they attempted to pay the
incorrect amount owed to avoid litigation while the error was corrected,
but the Association would not accept the payment.
The condo owners’ affidavits claimed that the issue with their
accounts was retaliatory because they were part of a group investigating
$100,000 in missing condo funds, and because they would not accept a
bribe from one of the directors to stop the investigation. In the “bribe
conversation,” the director threatened to tamper with their accounts to
cause them to incur tremendous legal expenses.
The affidavits also attested that the director used numerous “scaretactics”
against the condo owners, including the unauthorized use of
their assigned parking spaces, making false calls to the police, having the
husband’s car towed, discarding the husband’s custom-made awning,
refusing to fix damage from a cracked water pipe, and denying them
access to the gated community. Attached to the affidavits were several
exhibits, including a complaint letter from other condo owners regarding
the actions of the Board of Directors, and evidence of investigations into
the actions of the Board of Directors.
While the court initially indicated that the hearing was on the
Association’s motion for summary judgment, evidence was admitted at
the hearing, which took the form of a bench trial. The Association
sought to admit an account ledger for the husband’s condo by laying a
foundation through a n employee of the Association’s management
company. The condo owners’ attorney objected based on the lack of
foundation for admission of the ledger as a business record.
At the close of the Association’s case, the condo owners moved for a
directed verdict on the ground that the management company’s employee
could not testify to account balances that existed prior to her employer’s
takeover in 2008. They maintained that, without competent evidence of
the account balances prior to the takeover, the Association failed to
factually refute their allegations. The Association responded that it was
not seeking any past-due balances from before the takeover. The unit
owners clarified that the issue was not whether there were past-due
amounts prior to the takeover, but rather whether a credit should have
carried over after the takeover. Th e trial court denied the directed
verdict.
The husband testified that the advance payment of $18,000 was paid
by cashier’s check in August 2008. His proof was in his condo unit, but
he no longer had access to his unit. The wife did not testify.1 The trial
court entered a Final Judgment of Foreclosure in favor of the Association
in both cases, from which the condo owners now appeal.
On appeal, the condo owners argue that the trial court abused its
discretion by admitting the management company’s account ledgers for
their units as business records. We agree with the condo owners that
the Association failed to establish a proper foundation for admission of
the account ledgers as business records.
We review a trial court’s ruling on the admissibility of evidence for an
abuse of discretion. That discretion, however, is limited by the rules of
evidence. Hayes v. Wal-Mart Stores, Inc., 933 So. 2d 124, 126 (Fla. 4th
DCA 2006).
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.” § 90.801, Fla. Stat. (2012). Hearsay is
inadmissible unless it falls within a recognized exception. See § 90.802,
Fla. Stat. (2012).
“Florida’s business-records exception appears in section 90.803(6)(a),
Florida Statutes.” Yisrael v. State, 993 So. 2d 952, 956 (Fla. 2008).
Section 90.803(6)(a) defines “business record:”
A 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 a n d if it was the
regular practice of that business activity to make such
memorandum, report, record, or data compilation, all as
shown by the testimony of the custodian or other qualified
witness, or as shown by a certification or declaration that
complies with paragraph (c) and s. 90.902(11), unless the
sources of information or other circumstances show lack of
trustworthiness. Th e term “business” as used in this
paragraph includes a business, institution, association,
profession, occupation, and calling of every kind, whether or
not conducted for profit.
§ 90.803(6)(a), Fla. Stat. (2012).
The Association’s witness testified that, “[w]hen the accounting
records came to u s from the prior company, they had listed Frank
[Romeo] Senior and Lena as the owners. Until recently, it did not come
to light that the actual certificate of title was Frank Romeo [Junior].”
When asked whether “[s]ome of the records you received . . . were
incorrect?” She responded: “But we had no way of knowing that.” The
husband testified that the records were incorrect as to the amount of the
balance.
Here, the condo owners objected only o n th e grounds of lack of
foundation and authenticity. There was no objection to trustworthiness
or accuracy. It is well-settled in Florida that an objection must specify
the legal ground upon which a claim is based, and a claim different than
that cannot be heard on appeal. Chamberlain v. State, 881 So. 2d 1087,
1100 (Fla. 2004). Because the condo owners’ attorney did not object to
the ledgers on the ground that they were untrustworthy, this issue is not
preserved. The lack of foundation, however, was argued and preserved.
To secure admissibility under this [business records]
exception, the proponent must show that (1) the record was
made at or near the time of the event; (2) was made by or
from information transmitted by a person with knowledge;
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(3) was kept in the ordinary course of a regularly conducted
business activity; and (4) that it was a regular practice of
that business to make such a record.
Yisrael, 993 So. 2d at 956. Here, the Association chose to establish the
foundation though a records custodian.
As to the management company’s records, the witness employed all of
the “magic words.” She testified that the ledger entries were made at or
near the time the charges were incurred, by a person with knowledge of
the information, and were kept in the course of business as part of the
Association’s business practice. On cross-examination, however, the
witness testified that the records prior to the 2008 takeover were
maintained by the prior accountant, that she started with an account
balance from outside records, that she did not know the prior
accountant’s practice and procedure, and that she never worked for that
accountant. She could not testify as to the accuracy of the starting
balances.
We find this issue similar to the one we encountered in Glarum v.
LaSalle Bank National Association, 83 So. 3d 780 (Fla. 4th DCA 2011).
There, a bank brought a foreclosure action against a borrower. To prove
the amount due and owing o n the mortgage, the bank offered the
affidavit of a “specialist” who worked at the loan servicer. Id. at 782. In
opposition to the bank’s motion for summary judgment, the borrower
presented the deposition of the same “specialist.” Id. In his deposition,
the specialist stated that he determined the amount due and owing from
the loan servicer’s computer database. Id. However, the specialist
admitted that he “did not know who entered the data into the computer,
and he could not verify that the entries were correct at the time they were
made.” Id.
We explained that the specialist’s affidavit was inadmissible hearsay
because “[h]e relied on data supplied by [the loan servicer], with whose
procedures he was even less familiar. [He] could state that the data in
the affidavit was accurate only insofar as it replicated the numbers
derived from the company’s computer system.” Id. at 783. We therefore
held that the bank failed to present competent substantial evidence of
the amount owed under the mortgage. Id.
Here, the management company’s employee indicated that she could
not testify as to the starting balance. She never worked with the prior
accountant, and was unfamiliar with how the records were kept. She
could not confirm that the prior accountant used acceptable accounting
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practices, and she was unable to authenticate the data obtained from the
prior accountant as accurate. She could not testify that the condo’s lien
was valid and the husband’s claim of having pre-paid the assessments
prior to the takeover was untrue.
In short, the Association failed to lay the proper foundation for
admitting the ledgers into evidence. And, without the ledgers, the
Association failed to prove that the husband and wife owed $29,282.89
and $42,909.45, respectively. We therefore reverse the trial court’s final
judgments of foreclosure and remand for entry of a directed verdict in
favor of the condo owners.
Reversed and Remanded.
