Editor's note: This story originally appeared in the January edition of DS News.
On October 22, 2020, in The Bank of New York Mellon v. Danielle Shone, et al., 2020 ME 122, the Maine Supreme Judicial Court sitting as the Law Court, the highest court in Maine, significantly clarified its prior rulings regarding the witness testimony needed to have an incorporated business record admitted into evidence in a Maine foreclosure action. Previously, the Law Court had issued a string of decisions dating back to 2011 that progressively raised the evidentiary standard for admitting a record from the current servicer that incorporated a prior servicer’s records. Specifically, the Law Court ruled that the admission of a prior servicer’s records required more than integration into the current servicer’s records and reliance by the current servicer on the integrated records. In addition, to lay a proper foundation for admission of integrated records, the current servicer’s witness was required to have sufficient knowledge
of the prior servicer’s business practices to demonstrate the reliability and trustworthiness of the information. Beneficial Maine, Inc. v. Carter, 2011 ME 77.
In December 2017, the Law Court raised the bar again, ruling that to authenticate the loan records of a prior servicer, direct testimony about
the “regular business practices” of the prior servicer was required. KeyBank National Association v. Estate of Eula W. Quint, 2017 ME 237.
As a result of the Quint decision, in recent years foreclosure plaintiffs in Maine have had to call multiple witnesses at trial to ensure that at least one witness with significant personal knowledge regarding each prior servicer’s practices was present. This heightened evidentiary standard not only placed a logistical
burden on foreclosing parties, but it also presented proof problems in cases where a witness with sufficient knowledge of a prior servicer’s practices was not available.
In fact, a substantial and growing number of properties that have been abandoned by non-performing borrowers have sat vacant, the servicers and
investors unwilling or unable to proceed to foreclosure for fear that the trial court will rule their witness testimony inadequate. Under Maine law, such a ruling will not only cause the foreclosure action to fail but will also render
the mortgage and note unenforceable, which effectively means the loss of the asset.
After Quint, the Supreme Judicial Court amended Maine’s Rules of Evidence
concerning the admission of business records to align with the Federal Rules of Evidence. This change became effective on August 1, 2018.
Thereafter, on May 30, 2019, the 1st Circuit Court of Appeals released its decision in U.S. Bank Trust, N.A. v Jones, 925 F.3rd 534 (1st Cir. 2019) which upheld a federal district court decision entering judgment for the foreclosing plaintiff in a Maine case, holding that the witness need not have personal knowledge of the record-keeping practices of a prior servicer whose records had been integrated into the current servicer’s records.
Fortunately for foreclosing parties, in Shone, the Law Court has now reversed
course and has established a less burdensome evidentiary standard that is more in line with the approach taken in other jurisdictions as well as by the federal courts.
Specifically, the court clarified that going forward it is not required that the current servicer’s witness has personal knowledge of the business practices
of a prior servicer whose records have been integrated into the current servicer’s records for the integrated records to be admitted into evidence. Further, the Law Court publicly distanced itself from its own decisions in Carter, Quint, and other recent foreclosure cases, noting that these more recent decisions had
diverged from, but did not expressly overrule, precedent in several other Law Court decisions dating back to 1984. See Northeast Bank & Trust Co. v. Soley, 481 A.2d 1123 (Me. 1984).
Under the Law Court’s decision in Shone, the witness still must have personal
knowledge of the current servicer’s recordkeeping practices, as well as how the current servicer integrated the records of any prior servicers into its records, including how those integrated records were verified and relied upon by the current servicer to show that they are trustworthy. The court also noted that a
record may still be rejected if the opponent can demonstrate “that the source of the information or the method or circumstances of preparation indicate a lack of trustworthiness.”
This is a significant victory for foreclosing parties, who will ordinarily no longer be required to present a string of witnesses in order to have a chain of business records from prior servicers admitted into evidence in Maine foreclosure actions. While Maine remains a “one and done” state, this decision has eliminated a very large hurdle for foreclosing plaintiffs in Maine.