April 18, 2018

You Can’t Support Summary Judgment with Inadmissible Hearsay; Holmes v. National Collegiate Student Loan Trust

Category: Indiana Law Review | Author: | Share:

Summary judgment is an important step in the litigation process, and parties would be well-advised to make sure that they know the ins and outs of summary judgment procedure. But some rules are pretty basic—you need to make sure that the evidence you rely upon is admissible.

Holmes cosigned an educational loan on behalf of his son. The bank had a pool of loans (which may contain Holmes’s loan), and that pool eventually ended up with the National Collegiate Student Loan Trust. The Trust filed a complaint against Holmes, alleging that it was owed over $16,000. Holmes argued that the Trust did not have standing to bring its claim.

The Trust moved for summary judgment, designating an affidavit by the custodian of records of the loan servicing company, TSI. She stated that she was “familiar with the process by which TSI received prior account records,” that it was “TSI’s regularly conducted business practice to incorporate prior loan records … into TSI’s business records,” and therefore she was competent and authorized to testify regarding Holmes’s specific loan and “the business records attached” to the affidavit. Holmes argued (1) the Trust failed to prove it owned the loan, and (2) that much of the Trust’s evidence was inadmissible. The trial court entered judgment for the Trust, and Holmes appealed.

On appeal, the Court said that the requirement that evidence designated in summary judgment proceedings be admissible is “mandatory,” and that a court “should disregard” inadmissible evidence. The Trust argued that it met this test, for though the affidavit was hearsay, it fell within the business records exception to the rule against hearsay. But the Court wasn’t buying.

Here, the Jefferis affidavit provided no testimony to support the admission of the contract between Holmes and Charter One Bank or the schedule of pooled loans sold and assigned to National Collegiate Funding, LLC, and then to NCSLT, as business records pursuant to Evidence Rule 803(6). There was no testimony to indicate that Jefferis was familiar with or had personal knowledge of the regular business practices or record keeping of Charter One Bank, the loan originator, or that of NCSLT regarding the transfer of pooled loans, such that she could testify as to the reliability and authenticity of those documents. Indeed, Jefferis offered no evidence to indicate that those records were made at or near the time of the business activities in question by someone with knowledge, that the records were kept in the course of the regularly conducted activities of either Charter One or NCSLT, and that making the records was part of the regularly conducted business activities of those third-party businesses.

In other words, a record isn’t an admissible business record just because it is a record of a business. And litigants who want to rely on business records in summary judgment proceedings need to make sure that all of those records meet the requirements of the hearsay exception.

Lessons:

  1. If evidence presented at summary judgment is not admissible, it must be disregarded by the court.
  2. The fact that a document is a record of a business is not sufficient to establish that it is admissible under the business records exception to the hearsay rule.