HS FINANCIAL GROUP, LLC v. TERRI HINCHEE

Dayton, Ohio - Consumer bankruptcy lawyer represented defendant Terri Hinchee with appealing from a summary judgment rendered in favor of Plaintiff-Appellee, HS Financial Group, LLC (“HSFG”). According to Hinchee, the trial court erred in granting summary judgment because the affidavit that HSFG submitted was unauthenticated and inadmissible as evidence.

{¶ 3} On April 19, 2019, HSFG filed a complaint in the Fairborn Municipal Court,

alleging that Hinchee had failed to pay $12,113.83 on a retail installment contract. HSFG

further alleged that it had been assigned all rights from Lending Point, LLC, and attached

the Bill of Sale and Assignment to the complaint as Exhibit A. In the complaint, HSFG

asserted claims for breach of contract, for “stated account,” and for unjust enrichment.

{¶ 4} Hinchee filed an answer to the complaint on May 1, 2019, denying the

allegations in the complaint. She also asserted several defenses, including that HSFG

had not proven it owned the claim. On June 27, 2019, HSFG asked the trial court for

leave to file a motion for summary judgment, and Hinchee opposed the motion. After

being given leave to file the motion, HSFG filed it on July 2, 2019. Hinchee’s prior

memorandum was then considered as a response to the summary judgment motion.

{¶ 5} On October 9, 2019, the trial court filed a judgment entry granting HSFG’s

-3-

motion for summary judgment. Hinchee filed a timely notice of appeal.

II. Was Summary Judgment in HSFG’s Favor Appropriate?

{¶ 6} Hinchee’s sole assignment of error states that:

The Trial Court Erred by Granting Summary Judgment to Appellee

as the Affidavit Relied Upon by the Trial Court in Granting Summary

Judgment Contains Hearsay, Is Unauthenticated and Is Inadmissible as

Evidence.

{¶ 7} Hinchee contends that the affidavit of the person signing the affidavit in

support of summary judgment (Brenda Watchorn) did not indicate that she knew or was

in a position to know how Lending Point, LLC created and archived the records on which

the summary judgment motion was based. In addition, Hinchee argues that there was

no tabulation based on personal knowledge or properly authenticated business records

of the principal and interest amounts owed.

{¶ 8} In response, HSFG contends that Watchorn’s affidavit set forth that she was

employed by HSFG, that she was familiar with the facts and circumstances of the account

HSFG owned, and that the exhibits attached to the complaint were accurate copies of the

originals and were kept in the ordinary course of business. According to HSFG, the

exhibits included the account’s complete bill of sale history, which portrayed the transfer

record showing a balance transfer of $12,113.83. HSFG further asserts that Hinchee

had the burden to show genuine issues of material fact, but failed to even file an affidavit

or other supporting evidence.

{¶ 9} In rendering summary judgment in HSFG’s favor, the trial court relied on

-4-

Watchorn’s affidavit and also noted that Hinchee failed to submit any affidavit or

supporting evidence.

{¶ 10} Under settled law, “[a] trial court may grant a moving party summary

judgment pursuant to Civ.R. 56 if there are no genuine issues of material fact remaining

to be litigated, the moving party is entitled to judgment as a matter of law, and reasonable

minds can come to only one conclusion, and that conclusion is adverse to the nonmoving

party, who is entitled to have the evidence construed most strongly in his favor.” Smith

v. Five Rivers MetroParks, 134 Ohio App.3d 754, 760, 732 N.E.2d 422 (2d Dist.1999),

citing Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64, 375 N.E.2d 46 (1978).

{¶ 11} A party seeking summary judgment has the initial “ ‘burden of affirmatively

demonstrating that, with respect to every essential issue of each count in the complaint,

there is no genuine issue of fact.’ ” Mitseff v. Wheeler, 38 Ohio St.3d 112, 115, 526

N.E.2d 798 (1988), quoting Massaro v. Vernitron Corp., 559 F.Supp. 1068, 1073

(D.Mass.1983). “To accomplish this, the movant must be able to point to evidentiary

materials of the type listed in Civ.R. 56(C) that a court is to consider in rendering summary

judgment. The evidentiary materials listed in Civ.R. 56(C) include ‘the pleading,

depositions, answers to interrogatories, written admissions, affidavits, transcripts of

evidence in the pending case, and written stipulations of fact, if any.’ These evidentiary

materials must show that there is no genuine issue as to any material fact, and that the

moving party is entitled to judgment as a matter of law.” Dresher v. Burt, 75 Ohio St.3d

280, 292-293, 662 N.E.2d 264 (1996).

{¶ 12} The party opposing summary judgment then has a corresponding burden.

That party “may not rest upon its pleadings, but must set forth specific facts showing that

-5-

there is a genuine issue for trial.” Todd Dev. Co. v. Morgan, 116 Ohio St.3d 461, 2008-

Ohio-87, 880 N.E.2d 88, ¶ 14, citing Civ.R. 56(E).

{¶ 13} “We review decisions granting summary judgment de novo, which means

that we apply the same standards as the trial court.” GNFH, Inc. v. W. Am. Ins. Co., 172

Ohio App.3d 127, 2007-Ohio-2722, 873 N.E.2d 345, ¶ 16 (2d Dist.). Consequently,

appellate courts do not defer to trial courts during summary judgment review. Powell v.

Rion, 2012-Ohio-2665, 972 N.E.2d 159, ¶ 6 (2d Dist.), citing Brown v. Scioto Cty. Bd. of

Commrs., 87 Ohio App.3d 704, 711, 622 N.E.2d 1153 (4th Dist.1993).

{¶ 14} In arguing that summary judgment was improper, Hinchee relies on our prior

decision in TPI Asset Mgt. v. Conrad-Eiford, 193 Ohio App.3d 38, 2011-Ohio-1405, 950

N.E.2d 1018, which allegedly contains affidavits similar to Watchorn’s. In TPI, which

involved credit card debt, we considered the “ ‘business records’ exception in Evid.R.

803(6),” which permits hearsay evidence to be admitted as an exception to the hearsay

rule. Id. at ¶ 8.

{¶ 15} “ ‘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.” Evid.R. 801(C). As a general rule, hearsay is not admissible unless specially

allowed by statute, by the Ohio or United States Constitutions, by the Ohio Rules of

Evidence, or by other rules that the Supreme Court of Ohio prescribes. Evid.R. 802. As

pertinent here, Evid.R. 803 provides that:

The following are not excluded by the hearsay rule, even though the

declarant is available as a witness:

* * *

-6-

(6) Records of Regularly Conducted Activity. A memorandum,

report, record, or data compilation, in any form, of acts, events, or

conditions, 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, and if it was the regular practice of that business activity

to make the memorandum, report, record, or data compilation, all as shown

by the testimony of the custodian or other qualified witness or as provided

by Rule 901(B)(10), unless the source of information or the method or

circumstances of preparation indicate lack of trustworthiness. The term

“business” as used in this paragraph includes business, institution,

association, profession, occupation, and calling of every kind, whether or

not conducted for profit.

{¶ 16} “ ‘To be admissible under Evid.R. 803(6), a business record must display

four essential elements: (1) it must have been kept in the regular course of business; (2)

it must stem from a source who had personal knowledge of the acts, events, or conditions;

(3) it must have been recorded at or near the time of the transaction; and (4) a foundation

must be established by the testimony of either the custodian of the record or some other

qualified person.’ ” Royse v. Dayton, 195 Ohio App.3d 81, 2011-Ohio-3509, 958 N.E.2d

994, ¶ 25 (2d. Dist.), quoting State v. Comstock, 11th Dist. Ashtabula No. 96-A-0058,

1997 WL 531304, *6 (Aug. 29, 1997).

{¶ 17} In TPI, we concluded that the evidence did not comply with authentication

requirements in Evid.R. 901 and Civ.R. 56(E). First, one affiant’s statement that he was

authorized to act on the bank’s behalf insufficiently demonstrated that he had personal

-7-

knowledge of the facts the affidavit contained. Second, his identification as a bank “team

leader” did not, standing alone, “portray a basis to find that through that position he gained

the required personal knowledge.” TPI, 193 Ohio App.3d 38, 2011-Ohio-1405, 950

N.E.2d 1018, at ¶ 22. Regarding a second affiant, we concluded that his “assertion that

from his own personal knowledge the facts contained in the affidavit were true as he ‘verily

believe[d],’ and that he was ‘competent to testify to same,’ likewise fails to portray any

basis other than [his] own assertion, that he has the required personal knowledge.” Id.

at ¶ 23.

{¶ 18} In the case before us, HSFG attached several documents to the complaint.

Exhibit B was a May 24, 2016 consumer loan agreement between Lending Point, LLC

d/b/a Lending Point, and Terri Hinchee. The loan number was mostly blackened out, but

the last three digits were “264.” The loan amount was for $15,000, it provided for an

annual percentage rate of 25.4206%, and it specified that 36 monthly payments of

$602.28 would be made beginning on 7/1/2016. Ex. B, p. 2.

{¶ 19} Ex. C to the Complaint contained a list of transactions beginning on June

30, 2016 for a loan named “XXXX5689.” The beginning loan balance was $15,034.04

and the ending balance on May 31, 2017, was $11,544.51. A “pre charge off int” of

$569.32 was added to that balance for a total “charge off bal” of $12,113.83.

{¶ 20} Exhibit A to the complaint contained four pages. In reverse order, the last

two pages consisted of a “Bill of Sale” and a document with no title. The Bill of Sale

stated that:

For value received and in further consideration of the mutual

covenants and conditions set forth in the Forward Flow Account Purchase

-8-

Agreement (“the Agreement”) dated June 28, 2017, by and between

Lending Point LLC (“Seller”) and Argent Holdings, LLC (“Buyer”), Seller

hereby transfers, sells, conveys, grants, and delivers to Buyer, its

successors and assigns, without recourse except as set forth in the

Agreement, to the extent of its ownership, the Accounts as set forth in the

Account Schedule attached hereto as Exhibit I delivered by Seller to Buyer

on each Closing date, and as further described in the Agreement.

Lot Number:

Aggregate Unpaid Balance:

Number of Accounts:

Dated October 27, 2017.

Ex. A, p. 3.

{¶ 21} As noted, the Seller was listed as Lending Tree, LLC. The name of the

individual who signed on behalf of Lending Tree was undecipherable (other than the first

name of “Greg”), and the title given (“C.L.O.”) was unexplained. Furthermore, the

document located behind this Bill of Sale was not labeled Exhibit I; instead, it had no title.

The document lists an “acct id” as XXX8148, a “CLTREF” of “XXXXXXX5989,” and a first

and last name of Terri Hinchee. Ex. A at p. 4.

{¶ 22} The next page of Ex. A was labeled “Exhibit II Bill of Sale.” This document

stated that:

For value received and in further consideration of the mutual

covenants and conditions set forth in the Account Purchase Agreement

(“the Agreement”) dated May 11, 2018, by and between Argent Holdings,

-9-

LLC (“Seller”) and Security Credit Services, LLC (“Buyer”), Seller hereby

transfers, sells, conveys, grants, and delivers to Buyer, its successors and

assigns, without recourse except as set forth in the Agreement, to the extent

of its ownership, the Accounts as set forth in the Account Schedule attached

hereto as Exhibit I delivered by Seller to Buyer on each Closing Date, and

as further described in the Agreement.

Exhibit A at p. 2.

{¶ 23} On this bill of sale, the Lot Number, Aggregate Unpaid Balance, and

Number of Accounts were blackened out. In addition, no “Exhibit I” or any account

schedule was attached. The name of the signer was Mark Hedge, “President.” Id.

{¶ 24} The final document in Exhibit A was an “Assignment and Bill of Sale, SCSHSF LNP 1MM 9.25.2018.” Id. at p. 1. This document stated as follows:

Security Credit Services, LLC (“Seller”) has entered into an Accounts

Purchase Agreement, dated September 25, 2018 (“Agreement”) for the sale

of Accounts described in Agreement thereof to HS Financial Group, LLC

(“Purchaser”), upon terms and conditions set forth in that Agreement.

NOW, THEREFORE, for good and valuable consideration, Seller hereby

sells, assigns, and transfers to Purchaser all of Seller’s rights, title, and

interest in each and every one of the Accounts described in the Agreement,

provided however such transfer is made without any representations,

warranties, or recourse.

IN WITNESS WHEREOF, Seller has signed and delivered this

instrument on the 26th day of September, 2018.

-10-

Ex. A at p. 1.

{¶ 25} The signature on this document was illegible, but the designation of the

individual signing was “President.” Id. No copy of the “Agreement” was attached, nor

were any accounts attached or described other than by the general reference above to

“Accounts.”

{¶ 26} As indicated, HSFG provided the affidavit of Brenda Watchorn in support of

its summary judgment motion. Her affidavit provided, in pertinent part, that:

1. That I, Brenda Watchorn, Affiant, am an employee of HS

Financial Group, LLC (“HSF”), the Plaintiff herein, and am competent to

testify to the matters stated herein:

2. That I have reviewed the facts and circumstances regarding

Defendant’s account that is the subject matter of this Complaint.

3. That there is justly an amount due and owing by the Defendant

to HSF, the sum of money amounting to $12,113.83, representing the

charged off amount and interest, less payments received, if any.

4. That the said indebtedness represents the amount due and

originating on an account of which HSF is the assignee of Lending Point,

LLC, and that HSF, the within Plaintiff, having purchased said account from

said assignor, is the owner and the proper party to bring this action.

5. That the Exhibits attached to the Motion for Summary Judgment

are true and accurate copies of the originals which are kept in the ordinary

course of the Plaintiff’s business and under Affiant’s control and

supervision, that the records have not been altered, and Affiant is the

-11-

custodian of these records.

Plaintiff’s Motion for Summary Judgment Instanter, Ex. 1, p. 1.

{¶ 27} On review, we agree that the affidavit and documents were insufficient.

While TIP is relevant, we are also unable to distinguish the evidence here from what was

submitted in support of summary judgment in Ohio Receivables, L.L.C. v. Williams, 2d

Dist. Montgomery No. 25427, 2013-Ohio-960. Although some slight differences exist,

both Williams and the case before us involve plaintiffs who were not the original creditor,

but who purportedly were the last assignee in a chain of assignments. Williams involved

two assignments, while this case involves three. Id. at ¶ 3. Furthermore, both cases

also involve an attempt by the last assignee (here, HSFG) to authenticate documents of

the original creditor.

{¶ 28} In considering this issue, we commented in Williams that “[t]he business

records exception has an authentication requirement which must be met before [Evid.R.

803(6)] applies. * * * ‘[T]he testifying witness must possess a working knowledge of the

specific record-keeping system that produced the document * * * [and] “be able to vouch

from personal knowledge of the record-keeping system that such records were kept in

the regular course of business.” ’ ” Id. at ¶ 14, quoting State v. Davis, 62 Ohio St.3d 326,

343, 581 N.E.2d 1362 (1991). We further observed that “[g]enerally, the business record

exception requires that some person testify as to the regularity and reliability of the

business activity involved in the creation of the record.” Id., citing State v. Hirtzinger, 124

Ohio App.3d 40, 49, 705 N.E.2d 395 (2d Dist.1997).

{¶ 29} Based on the above authority, Williams rejected the documents attached to

the plaintiff’s affidavits because the affidavits were not properly authenticated and, “as

-12-

business records of a separate entity,” were not properly considered in support of the

plaintiff’s motion for summary judgment. Id. at ¶ 15. In this vein, we stressed that:

Although employees of [the plaintiff] were permitted to state, via

affidavit or otherwise, that they had obtained these records in the course of

the purchase, they could not attest to the facts that the contract documents

between Williams [the debtor] and Chase [the original creditor] reflected the

terms of the credit card agreement, that the documents were made at or

near the time that the account was opened by someone with knowledge of

that transaction, or that the billing statements and spreadsheets were

generated in the regular practice of Chase's business activity.

It was not necessary that an employee or agent of Ohio Receivables

possess personal knowledge of these facts, but it was necessary for Ohio

Receivables to prove, by some means, that the documents on which Ohio

Receivables sought to rely as its business records were first business

records created and maintained by Chase in the course of its (Chase's)

regularly conducted business.

Id. at ¶ 18-19.

{¶ 30} The same defects exist in the case before us. Although Watchorn could

have testified that HSFG obtained the documents in the course of a purchase (although

that purchase would not have been from Lending Point, as implied by her affidavit), she

could not have attested to Lending Point’s business activities in connection with the

account.

{¶ 31} Furthermore, additional defects exist with regard to the documents attached

-13-

to the complaint. For example, the alleged assignment from Security Credit Services to

HSFG refers only generally to accounts described in an agreement and has no evident

connection with Hinchee’s account. The bill of sale from Argent Holdings also refers to

accounts listed in “Exhibit I,” but contains no such exhibit identifying any accounts.

Likewise, the bill of sale from Lending Point refers to accounts set forth in Exhibit I, but

lacks such an exhibit.

{¶ 32} In Williams, we also rejected the plaintiff’s contention that the original

creditor’s records were admissible as business records because the plaintiff had

incorporated those records and relied on them in its own business dealings. Williams,

2d Dist. Montgomery No. 25427, 2013-Ohio-960, at ¶ 28-29. We stressed that “although

Ohio Receivables argues that it has incorporated and relied on Chase's and Global

Credit's documents in its business endeavors, its business endeavor is merely to collect

on the debt, not to receive or process payments, send bills, record charges, and the like.

In other words, it does not appear that Ohio Receivables does, in fact, rely on these

records in its business, except to the extent that it uses them as a basis for this and other

lawsuits.” Id. at ¶ 29.

{¶ 33} As in Williams, HSFG has presented no evidence that it is anything other

than a debt collector. Moreover, Watchorn’s affidavit did not even attempt to indicate

that it relied on the documents from other entities in its own business dealings.

{¶ 34} In a subsequent case, we distinguished Williams, stating that:

The rule for admitting adopted business records that we applied in

Williams does not apply here. This is also a mortgage-foreclosure case

not a debt-collection case. And in mortgage-foreclosure cases, we have

-14-

applied a different rule: “a court may admit a document as a business record

even when the proffering party is not the maker of the document, if the other

requirements of Evid.R. 803(6) are met and the circumstances suggest that

the record is trustworthy.”

Ocwen Loan Servicing, LLC v. Malish, 2018-Ohio-1056, 109 N.E.3d 659, ¶ 23 (2d Dist.).

{¶ 35} Unlike Malish, the case before us is a debt-collection case, and there is no

basis for distinguishing Williams. Even if this were otherwise, the evidence presented

was deficient for the reasons we mentioned and was untrustworthy.

{¶ 36} The trial court did not address this issue, even though Hinchee raised it in

responding to summary judgment. Instead, the court summarily relied on Watchorn’s

affidavit, while noting that Hinchee did not file an affidavit or documentation under Civ.R.

56(C). Judgment, p. 2. However, “there is no requirement in Civ.R. 56 that any party

submit affidavits to support a motion for summary judgment.” (Emphasis sic.) Dresher,

75 Ohio St.3d at 298, 662 N.E.2d 264. See also Smith v. Bauknecht, 6th Dist. Lucas No.

L-10-1286, 2011-Ohio-4046, ¶ 25 (“Civ.R. 56(E) does not require the parties to submit

affidavits in support of their summary judgment motions. Rather, Civ.R. 56(E) provides

guidelines for the submission of affidavits should affidavits be submitted in support of a

summary judgment motion.”)

{¶ 37} Civ.R. 56(E) provides that “[w]hen a motion for summary judgment is made

and supported as provided in this rule, an adverse party may not rest upon the mere

allegations or denials of the party's pleadings, but the party's response, by affidavit or as

otherwise provided in this rule, must set forth specific facts showing that there is a genuine

issue for trial.” (Emphasis added.) A movant’s failure to provide admissible evidence is

-15-

certainly an appropriate basis on which the nonmovant can oppose summary judgment.

{¶ 38} Courts have also held that “”[e]ven if the nonmoving party fails completely

to respond to the motion, summary judgment will only be proper where reasonable minds

can come to only one conclusion and that conclusion is adverse to the nonmoving party.”

Swedlow, Butler, Inman, Levine & Lewis Co. v. Gabelman, 10th Dist. Franklin No.

97APG12-1578, 1998 WL 400743, *3 (July 14, 1998), citing Toledo's Great E. Shoppers

City, Inc. v. Abde's Black Angus Steak House No. III, Inc., 24 Ohio St.3d 198, 202, 494

N.E.2d 1101 (1986). Accord State ex rel. Dayton Legal News, Inc. v. Drubert, 2d Dist.

Montgomery No. 24825, 2012-Ohio-564, ¶ 7. Here, based on the lack of admissible

evidence, HSFG was not entitled to summary judgment.

{¶ 39} Accordingly, Hinchee’s sole assignment of error is sustained.

Hinchee’s assignment of error having been sustained, the judgment of the trial court is reversed, and this cause is remanded for further proceedings consistent with this opinion