HOLLY M. KIRBY, JUDGE.
This appeal concerns the collection of credit card debt. The plaintiff, a subsequent purchaser of the debt, filed this collection action against the appellant debtor. On appeal, the appellant debtor argues, inter alia, that the trial court erred in admitting into evidence various documents from a previous owner of the debt, pursuant to the hearsay exception for business records under Tenn. R. Evid. Rule 803(6). We hold that two of the exhibits were not appropriately admitted into evidence under the business records exception. Without those exhibits, we find that the evidence preponderates against the trial court's judgment in favor of the creditor, and reverse.
FACTS AND PROCEEDINGS BELOW
In December 2009, Plaintiff/Appellee LVNV Funding, LLC, ("LVNV") as assignee of Sears Gold MasterCard, filed a civil warrant in the General Sessions Court of Davidson County against Kevin J. Mastaw ("Mastaw"). The warrant asserted that Mastaw owed $15,101.23 plus pre- and post-judgment interest on his MasterCard credit card. The General Sessions Court conducted a trial in June 2010 and a judgment in favor of LVNV was entered in the amount of $16,406,77.
Mastaw filed an appeal to the Circuit Court of Davidson County ("trial court"). The de novo trial was held on March 21,2011.
At the outset of the trial, Mastaw made an oral motion to bar LVNV from proceeding with the debt collection against him, arguing that LVNV is a purchaser of accounts and engaged in debt collection as defined under Section 62-20-101, et seq. As such, Mastaw contended, LVNV was required to be licensed as a collection agency before attempting to collect the alleged debt.
LVNV's first witness was Kimberly W. Parks ("Parks"), an employee of Resurgent Capital Services ("Resurgent") located in Nashville, Tennessee. Parks was the custodian of records for Resurgent. She testified that Resurgent is the attorney in fact for LVNV, and that Sherman Financial Group ("Sherman"), is the parent corporation for both Resurgent and LVNV. Parks said that Sherman purchased a number of Sears Gold MasterCard debt accounts from Citibank of South Dakota ("Citibank"). Through Parks' testimony, LVNV sought to introduce into evidence six exhibits regarding Mastaw's alleged debt. Mastaw objected to all on the basis that the records contained hearsay. The six exhibits are:
As indicated in the proffered exhibits, Parks explained that LVNV is an asset holding company, holding the Sears Gold MasterCard accounts purchased by Sherman, and Resurgent is the assignee of LVNV. Parks said that Citibank originally serviced Mastaw's Sears Gold MasterCard account, until Sherman purchased it. As of July 2, 2008, Mastaw's Sears Gold MasterCard account had an indebtedness of $15,101.23.
On cross-examination, Parks conceded that she had no knowledge of Citibank's records, how the Sears Gold MasterCard accounts were created, or what charges Mastaw made. Parks explained that LVNV purchased both the contract and the debt, but said that she did not have a copy of the original contract between Sears Gold MasterCard and Mastaw creating the account, and did not know whether Sears had accurately calculated Mastaw's indebtedness in accordance with the terms of that contract. She said that Citibank originally purchased the Sears Gold MasterCard accounts before they were transferred to Sherman. Finally, Parks testified that her employer Resurgent was licensed to collect debts in Tennessee and recited the license number. She did not have a copy of Resurgent's license.
The trial court held that Parks was "the custodian or other qualified witness" as required under Rule 803(6) of the Tennessee Rules of Evidence, commonly referred to as the "business records exception," and that all six exhibits were records of regularly conducted business activity. The trial court concluded that the source of information contained in all six exhibits and the method and circumstances of preparation showed that all six records were trustworthy. All six exhibits were admitted pursuant to Rule 803(6).
The trial court denied Mastaw's oral pretrial motion to bar LVNV from going forward because it determined that Mastaw failed to prove LVNV lacked the required license. The trial court credited Parks' testimony that Resurgent, the attorney in fact for LVNV, had a Tennessee license to operate as a collection agency, and the trial court found this sufficient for LVNV to proceed.
LVNV then called Mastaw to testify. Mastaw did not recall his Sears Gold MasterCard account number, but acknowledged that the address which appeared on the Sears Gold MasterCard statements was his former address. He admitted that he had a Sears Gold MasterCard account, but said that he had not used it since 2001 and could not recall when he last made a payment on the account or whether the account was paid off. He testified that he believed the account was "closed out" in 2005. Mastaw did not recall owing $15,101.23 on the account, and did not know whether he owed $15,101.23 to Sears. Mastaw acknowledged that he had reviewed Exhibit 6, the compilation of his MasterCard statements.
Mastaw's testimony concluded the evidence submitted by LVNV. Mastaw did not put on any evidence.
At the conclusion of the testimony, the trial court noted that, after reviewing the compilation of his credit card statements in Exhibit 6, Mastaw failed to testify either that the document was not his Sears Gold MasterCard account or that he did not owe the $15,101.23 balance on the Exhibit. In light of this, the trial court found that Exhibit 6 was Mastaw's Sears Gold MasterCard account, and the balance owed on the card was $15,101.23.
On March 31, 2011, the trial court entered an order finding that Mastaw was indebted to LVNV in the amount of $15,101.23, plus the costs and post-judgment interest at the statutory rate of 10% per annum. Mastaw now appeals.
ISSUES ON APPEAL AND STANDARD OF REVIEW
On appeal, Mastaw argues that the trial court erred in admitting Exhibits 2-6 into evidence, because (1) Parks is not a custodian or other qualified witness as required by Rule 803(6) of the Tennessee Rules of Evidence ("Rule 803(6)"), and (2) Exhibits 2-6 were not records of regularly conducted activity as required under Rule 803(6).
In a non-jury case such as this one, we review the trial court's factual findings de novo with a presumption of correctness, unless the evidence preponderates to the contrary. Tenn. R. App. P. 13(d) (2011);
"The determination of whether a hearsay statement is admissible through an exception to the hearsay rule is left to the sound discretion of the trial judge."
Admissibility of Documents
We consider first Mastaw's argument that the trial court erred in admitting into evidence Exhibits 2-6 on his alleged indebtedness. Mastaw contends that the trial court erred in finding that Parks was a custodian of the records at issue or was otherwise qualified under Tenn. R. Evid. 803(6). Mastaw also argued that Exhibits 2-6 all contained hearsay not subject to the business records exception in Rule 803(6). We find that the appeal may be determined based on the admissibility of the documents. We focus on the admissibility of Exhibits 4 and 5, both affidavits by Tobie Griffin.
Mastaw argues that both documents contain inadmissible hearsay. He contends that Exhibit 4 "was prepared by a business entity removed from the witness [Parks]," and that Exhibit 5 "was prepared by a business entity two entities removed from the witness [Parks] . . . ." Mastaw insists that both documents were created by a business entity other than Resurgent, Parks' employer, and are not admissible under the business records exception to the hearsay rule. Tenn. R. Evid. 803(6).
In response, LVNV argues that a debt purchaser may submit into evidence documents prepared by predecessor entities if the debt purchaser integrated the documents into its own record, citing
In an action to collect a debt, the plaintiff creditor bears the burden of proving the existence of the debt and that the debtor is indebted to the creditor in a certain amount.
The Statement of the Evidence indicates that LVNV's primary witness, Parks, is employed by LVNV's attorney in fact, Resurgent, and testified as the custodian of records for Resurgent. As such, Parks testified from the exhibits about the various transactions that resulted in LVNV purportedly owning Mastaw's debt, as well as Mastaw's credit card charges, payments, and the amount of the alleged remaining debt. Parks' testimony on direct and on cross-examination indicates no personal knowledge of the matters contained in the disputed exhibits, but rather that she was relating in her testimony the information in the exhibits. Consequently, we focus on the admissibility of the exhibits on which Parks relied.
It is undisputed on appeal that the exhibits at issue in this appeal all contained hearsay.
The following are not excluded by the hearsay rule:
Tenn. R. Evid. 803(6) (2011). The rationale underlying the business records exception is that "records regularly kept in the normal course of business are inherently trustworthy and reliable."
As noted above, both Exhibit 4 and Exhibit 5 are affidavits by Tobie Griffin. In Exhibit 4, Griffin describes herself as an "authorized representative for LVNV." She does not otherwise describe her relationship with LVNV. The affidavit refers generally to LVNV's "normal business records, including computer records of its accounts receivables." However, the affidavit does not identify the particular records to which it refers, and none are attached to it. Griffin's affidavit states that the information in the unspecified records "was regularly and contemporaneously maintained during the course of [LVNV's] business."
After listing an account number, Griffin's affidavit asserts that the number is for Mastaw's account with Sears, based again on the unidentified records. It notes that "[s]aid business records" indicate that Mastaw's account later came to be owned by Citibank, and that Citibank later assigned a numbered "Portfolio" to LVNV's "assignor," again unidentified, and that the "Portfolio" included Mastaw's account. Griffin's affidavit then asserts that the ownership rights were assigned to LVNV, and states a balance of $15,101.23, plus interest. The affidavit concludes by asserting that this amount "is justly and duly owed" by Mastaw to LVNV.
In Exhibit 5, Griffin represents herself to be an "[a]uthorized [r]epresentative of [Sherman]." She does not explain her relationship with Sherman, or how she came to be an "authorized representative" of both LVNV and Sherman. In this affidavit, Griffin lists an account number that is purportedly Mastaw's account, says that it is owned by LVNV, and explains that LVNV acquired the account from Sherman.
This interpretation of Rule 803(6) is not new. Documents prepared specifically for the subject litigation are "properly excluded because of motivational concerns arising from the fact that they were generated for litigation purposes," as opposed to records generated for business purposes. 2 Kenneth S. Broun, McCormick on Evidence § 288 (6th ed. 2009). The United States Supreme Court addressed this issue in the seminal case of
The Court in
In the case at bar, the affidavits executed by Griffin were clearly prepared specifically for the instant litigation, to trace the assignments of Mastaw's debt, establish LVNV's ownership of the debt and the amount due from Mastaw. They do not incorporate by reference or otherwise summarize or interpret documents that are prepared in the normal course of regularly conducted business activity. We must conclude that Exhibits 4 and 5 do not properly fit within Rule 803(6), the business records exception to the hearsay rule, and that the trial court erred in admitting them into evidence pursuant to this exception.
Having concluded that Exhibits 4 and 5 were erroneously admitted into evidence under Rule 803(6), we find the remaining evidence in the record insufficient to establish that Mastaw is indebted to LVNV and the amount of that debt.
The decision of the trial court is reversed. Costs on appeal are assessed against Appellee LVNV Funding, LLC, for which execution may issue if necessary.
Tenn. R. Evid. 902 (11) (2011). In this case, the trial court relied only on Rule 803(6), with Parks as the custodian, so we do not address Rule 902(11).