Deutsche Bank v. Olson (WI)

Summary: In a foreclosure action, current employee of mortgage loan servicer was qualified to testify as to loan records, thus records were properly admitted as business records.


Go to full opinion.


Deutsche Bank Nat. Trust Co. v. Olson, 366 Wis. 2d 720, 875 N.W.2d 649 (Wis. App. 2015).


Facts: On December 8, 2004, Patricia and Philip Olson signed a note for $144,000 that was secured by a mortgage on their home. The original lender was New Century Mortgage Corporation, and the note was later transferred to Deutsche Bank. Various loan mortgage servicers serviced the Olsons' loan. A complaint was filed seeking a judgment of foreclosure and at the time of filing, Bank of America was the servicer for the Olsons' loan. On September 1, 2012, the loan servicing was transferred to Select Portfolio Servicing (SPS), who was the mortgage loan servicer for the Olsons' loan at the time of the court trial.

Deutsche Bank moved for and was denied summary judgment, with the trial court finding there was a genuine issue of material fact as to the authenticity and date of the endorsement on the note and that Deutsche Bank had failed to establish a prima facie case for default and the amount due on the loan.

At trial, the parties signed a stipulation where the Olsons agreed that they had signed the note and mortgage at issue. Ms. Olson testified that she believed they began to fall behind on the loan payments in 2007, and confirmed they had not made any payments on the loan from 2009-2014.

An employee of SPS, Suzanne Johnstone, testified towards two pieces of evidence, marked at trial as exhibits 6 and 7. Exhibit 6 contained documents that were screen print-outs of the pay-off fees for the Olsons' loan. Exhibit 7 contained the payment history of the Olsons' loan, which was created using SPS’s proprietary system. Johnstone was able to testify that based on the documents, the principal on the loan, the date the loan was paid through, the interest rate at the time payments stopped, and the accumulated interested at the time of trial. She also confirmed that the Olsons had made no payments on the loan after March 2008.

The court admitted Exhibits 6 and 7 and later granted an order of foreclosure in favor of Deutsche Bank. Since Exhibits 6 and 7 were admissible, it established that $140,346.63 was due and owing on the principal balance of the Olsons' loan and that the accrued interested due and owing was $68,953.21, for a total amount of $209,317.84.

The Olsons appealed, arguing that the trial court erred in admitting Exhibits 6 and 7 under the business records exemption to the rule against hearsay. The Olsons claim this was the only evidence admitted in support of Deutsche Bank’s claim that the Olsons were in default and as to the amount owed. The Olsons argued that Johnstone, as an employee of SPS, was unable to testify to the underlying data because that data was created by Bank of America, not SPS.


Holding: Affirmed. The trial court did not err in admitting Exhibits 6 and 7 under the hearsay exception for records of regularly conducted activity.

The court rejected the Olsons' argument that because the data incorporated into SPS’s records were primarily comprised of data received from a third party, Johnstone was not qualified to testify to the amounts due and owing on the Olsons' loan because she does not have personal knowledge of Bank of America’s record keeping process. The court stated that Johnstone was qualified to testify because the records were created by SPS and Johnstone was able to testify to SPS’s quality control and boarding process in integrating the Bank of America data into SPS’s own records.

The court found the concept of integration essential when discussing the admissibility of third-party documents in the context of a business records exemption. Relying on language from an Eighth Circuit decision in Brawner v. Allstate Indemnity Co., the court agreed that where the elements of the business records exception are otherwise met, third-party records can fall within the business records exception where the party offering the records for admission into evidence establishes that the third-party's records are integrated into that party's business records and that that party relies upon those records. Brawner v. Allstate Indemnity Co., 591 F.3d 984 (8th Cir.2010).

The distinction here is that the records Johnstone testified towards were created by SPS. Johnstone’s testimony established that these were records that were regularly created in the course of SPS’s business. This is not a scenario where a custodian from one entity testified to records created by another entity. Thus, the court found it proper to admit the testimony as long as the documents were integrated properly.

Opinion Year: 
By: ATG Underwriting Department | Posted on: Tue, 10/04/2016 - 3:32pm