Westvue NPL Trust v. Kattula et al

Filing 44

FINDINGS OF FACT AND CONCLUSIONS OF LAW. Signed by District Judge Judith E. Levy. (SBur)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Wilmington Savings Fund Society,
FSB,
Case No. 16-cv-12813
Plaintiff,
Judith E. Levy
United States District Judge

v.

Maria C. Kattula, Robert Kattula, Mag. Judge Anthony P. Patti
Maria C. Kattula Living Trust
Dated 10-23-95, TAJ Graphics
Enterprises, LLC, United States of
America, and Green Lake Equities,
LLC,
Defendants.
________________________________/
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiff Wilmington Savings Fund, FSB brings this lawsuit
seeking (1) declaratory relief in the form of reinstatement of a mortgage
that was erroneously discharged, and (2) recovery of amounts due under
a promissory note and foreclosure of the mortgage. (Dkt. 1 at 19, 24.) On
May 10, 2018, the Court held a bench trial on this matter. The parties
submitted post-trial briefs (Dkts. 41, 42, 43), and the Court now issues
its decision in favor of defendants.

I.

Background
This is a dispute about a mortgage on real property situated at 4306

Brightwood Drive, Troy, Michigan 48085. Plaintiff alleges that it is the
owner of the note and mortgage on the property, the mortgage is in
default, and plaintiff is entitled to foreclose the mortgage in order to
collect the balance due. Defendant argues that the loan in question was
discharged and satisfied.
Plaintiff has the burden to demonstrate, by a preponderance of the
evidence admitted at trial, that it is entitled to the relief sought.
II.

Evidence Presented at Trial
At trial, plaintiff called a single witness – Mr. Michael Surowiec,

the corporate representative for the plaintiff – to provide testimony. (Dkt.
40 at 4, 26.) Surowiec is the Vice President of Capital Markets at
American Mortgage Investment Partners (AMIP). (Id. at 26–27.) AMIP
is the administrator for the assets of Wilmington Savings Fund Society,
FSB, d/b/a/ Christiana Trust, the named plaintiff in this case. (Id. at 28.)
Surowiec testified that his specific job duties at AMIP include:
running the transaction management for plaintiff’s sales, conducting due
diligence oversight, and appearing as the corporate witness in non-jury
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trials. (Id. at 27.) He testified that he is “familiar with all of the assets
AIMP has purchased on behalf of [plaintiff]” (Id. at 29) but that he was
not involved in the decision to purchase the loan at issue in this case (Id.
at 114), he did not perform the due diligence related to the purchase of
the loan in this case (Id.), and he does not have a decision role in
acquiring loans. (Id. at 115.)
Plaintiff relied on two types of documentation to support its claims
related to the loan – certified copies of documents filed with the Oakland
County Register of Deeds, and copies of records contained within AIMP’s
internal loan file.
Plaintiff introduced, without objection, the original promissory note
for the property at 4306 Brightwood Drive, dated January 26, 2005. (Dkt.
40 at 43.) The note indicates that the borrower – Maria Kattula –
promises to pay “U.S. $365,750.00 (this amount is called “Principal”),
plus interest, to the order of . . . Fifth Third Mortgage – MI, LLC.” (Dkt.
41-1 at 1.) The note indicates that at the time it was signed, the yearly
interest rate was 6.375%, and that the fixed interest rate “will change to
an adjustable interest rate on the first day of February, 2010, and the

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adjustable interest rate . . . may change on that day every 12th month
thereafter.” (Id.)
Plaintiff further introduced, without objection, a copy of the
mortgage, dated January 26, 2005, for the property at 4306 Brightwood
Drive. (Dkt. 41-2.) The mortgage indicates that the borrowers were Maria
C. Kattula and Robert Kattula as wife and husband. Surowiec testified
that the mortgage secured the repayment of the accompanying note.
(Dkt. 40 at 48.) Surowiec confirmed that there is nothing on the face of
the promissory note or the mortgage related to plaintiff Wilmington
Savings Fund. (Id. at 51.)
To prove the connection between the original mortgage and
promissory note and Wilmington Savings Fund, plaintiff introduced a
series of five documents each entitled “Assignment of Mortgage.” (Id.)
The Court inquired as to whether these documents were inadmissible
hearsay. Plaintiff responded that they fell under the business records
exception to the Federal Rules of Evidence, contending that they
qualified because they were documents contained within the file of
records purchased by AMIP in their regular course of business.
Defendants argued that the documents could not properly be admitted
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under the business records exception, but confirmed that they had no
objections to their admissibility as copies of the documents on file with
the Oakland County Register of Deeds. (Id. at 56.)
The chronological sequence of documents identifies the following
assignments: (1) On August 20, 2010, the mortgage was assigned from
Fifth Third Mortgage – MI, LLC to Fifth Third Mortgage Company (Dkt.
41-3 at 10); (2) On September 24, 2010, the mortgage was assigned from
Fifth Third Mortgage Company to DLJ Mortgage Capital, Inc. (Id. at 4);
(3) On July 1, 2015, the mortgage was assigned from DLJ Mortgage
Capital, Inc. to Westvue NPL Trust II (Id. at 5.); (4) On October 14, 2015,
the mortgage was assigned from Westvue NPL Trust II to Westvue NPL
Trust (Id. at 7); and (5) on March 20, 2018, the mortgage was assigned
from Westvue NPL Trust to Wilmington Savings Fund Society. (Id. at 1.)
Each of the Assignment of Mortgage documents identifies the
mortgage as having been executed by Maria C. Kattula and Robert
Kattula, wife and husband, bearing the date of January 26, 2005,
recorded on February 16, 2005, and in the amount of $365,750.00.
Plaintiff attempted to admit a document entitled a “Home
Affordable Modification Agreement,” again under the business records
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exception, on the basis that it was a document that was within a file
purchased and maintained by AMIP, and purchasing and maintaining
files was the regular business practice of AMIP. (Dkt. 40 at 70.)
Under Fed. R. Evid. 803(6), a record of an act, event, condition,
opinion, or diagnosis is admissible if:
“(a) the record was made at or near the time by – or from
information transmitted by – someone with knowledge; (b) the
record was kept in the course of a regularly conducted activity of a
business, organization, occupation, or calling, whether or not for
profit; (c) making the record was a regular practice of that activity;
(d) all these conditions are shown by the testimony of the custodian
or another qualified witness, or by a certification that complies with
Rule 902(11) or (12) or with a statute permitting certification; and
(e) the opponent does not show that the source of information or the
method or circumstances of preparation indicate a lack of
trustworthiness.”
Fed. R. Evid. 803(6) (emphasis added). Plaintiff’s attorney attempted to
argue that the fact it was in the best interest of AIMP for the record to
be accurate was sufficient to satisfy the purpose of the hearsay exception.
(Dkt. 40 at 72.) However, the testimony was clear that the document in
question was not created by the regular practice of purchasing and
maintaining loan files, and that no one was available to testify to the
conditions required by the rule. (Id. at 73.) The loan modification
document was admitted only for the limited purpose of indicating the
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documents on which plaintiff relied when purchasing the loan. It was not
admitted for the purpose of proving the truth of the matter stated on the
document itself. (Dkt. 40 at 73.)1
Plaintiff next attempted to admit a document entitled “Demand
Loan Payoff.” The document was not admitted into evidence as a business
record, as plaintiff’s witness was not a custodian of records for the
institution that created the document. (Id. at 81–82.) Plaintiff also
attempted to have the record admitted as documentation relied upon in
the purchase of the mortgage, but because Surowiec testified that the
document was created on May 3, 2018 – after the date that plaintiff
purchased the mortgage in question – it was not admitted for that

Plaintiff offered extensive testimony regarding the “due diligence” undertaken prior
to making a decision to purchase a loan. (Dkt. 40 at 34–36.) To the extent the Court
might otherwise be inclined to give weight to the evidence offered to demonstrate
what information plaintiff relied on before purchasing the mortgage and note in
question (based on the purported thoroughness of the due diligence process), it is not
inclined to do so here. Although Surowiec testified that the due diligence process had
uncovered the existence of the present matter (Dkt. 40 at 34), earlier communication
from plaintiff’s co-counsel to the Court indicated that plaintiff was unaware of the
present litigation prior to acquiring the loan. (Id. at 52.) Furthermore, Surowiec
testified that he does not make decisions to purchase loans, nor did he perform the
due diligence for the loan in the present case. (Id. at 114–15.) Accordingly, there is no
underlying factual information that the Court can glean from any documents that
were admitted for the limited purpose of demonstrating what information was relied
upon by plaintiff prior to purchasing the loan, as the testifying witness had no
knowledge or basis from which to testify about that reliance.
1

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purpose either. (Dkt. 40 at 79.) Finally, plaintiff attempted to introduce
the information contained within the document as Surowiec’s personal
knowledge, based on his review of AMIP’s proprietary record-keeping
software. This attempt, too, was unsuccessful. Despite plaintiff’s
repeated invocation of the business records exception, the mere fact that
the data existed within a records system accessible by plaintiff was
insufficient to satisfy the requirement that a custodian or qualified
witness be able to testify regarding the making of the record. See Fed. R.
Evid. 803(6).
Next, plaintiff attempted to admit into evidence a pay history
statement on the loan. (Dkt. 40 at 94.) Surowiec testified that the
document came into AMIP’s loan file from a prior servicer, but he did not
know which one. (Id. at 94–95.) He further testified that there was
nothing on the document itself that identified it as being related to the
loan at issue in the case. (Id. at 95.) For the same reasons as have been
described above, the document was not admitted into evidence under
Fed. R. Evid. 803(6), but was admitted for the limited purpose of
demonstrating what information plaintiff received, and what they relied
upon, when making the purchase of the loan in this case. And for the
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reasons set forth in n.1, supra, the Court finds no factual information
from the limited purposes for which the document was admitted.
With no objections, plaintiff introduced a document entitled
Discharge of Mortgage. According to the document, the January 26, 2005
mortgage issued to Maria C. Kattula and Robert Kattula was discharged
on July 1, 2014, and the discharge was recorded at the Oakland County
Register of Deeds on July 2, 2014. This document was among the
documents in the loan file that accompanied AMIP’s purchase of the
mortgage in this case. According to Surowiec’s testimony, the existence
of this discharge of mortgage statement within AMIP’s loan purchase file
would create a review of why the discharge was in the record. (Dkt. 40 at
105.) Surowiec testified that other documents within the file led AMIP to
conclude that the discharge of mortgage was recorded in error. (Id.)
Finally, plaintiff offered two additional documents certified as
copies of information recorded at the Oakland County Register of Deeds.
The first was a document entitled “Claim of Interest,” which was filed at
the Register of Deeds on October 29, 2014. The document was prepared
by Theresa Woodbridge, the attorney and agent for Selene Finance, LP,
the servicing agent for DLJ Mortgage Capital, Inc. The claim of interest
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refers to the January 26, 2005 mortgage of Maria C. Kattula and Robert
Kattula, and states “[u]pon information and belief, the Mortgage has not
been

satisfied

and

there

remains

an

outstanding

balance

of

approximately $380,422.58.” (Dkt. 41-8 at 1.) The second was a document
entitled Affidavit of Erroneous Discharge of Mortgage. This affidavit was
prepared and signed by Randy Jones, the Vice President of Fifth Third
Mortgage Company. (Dkt. 49-1 at 1.) In the affidavit, Randy Jones
affirms that the January 26, 2005 mortgage of Maria C. Kattula and
Robert Kattula was assigned from Fifth Third to DLJ Mortgage Capital
on or about November 1, 2010. He further affirms that the discharge of
mortgage executed on July 1, 2014, and recorded on July 2, 2014, was
“erroneous.” (Id. at 2.) Finally, he affirms that on the date Fifth Third
assigned the mortgage to DLJ Mortgage Capital, “the amount due and
owing on the Mortgage” was $370.025.80. (Id.)
III. Legal Standard
Under Michigan law, the record-holder of a mortgage owns “a
security lien on the properties, the continued existence of which was
contingent upon the satisfaction of the indebtedness.” Residential
Funding Co. v. Saurman, 490 Mich. 909, 909 (2011). “Before receiving a
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judgment of foreclosure, the mortgagee must prove that the debt exists
and the amount of the debt.” 31800 Wick Rd. Holdings, LLC v. Future
Lodging-Airport, Inc., 848 F. Supp. 2d 757, 763 (E.D. Mich. 2012).
Additionally, the mortgagee must make a “showing that the debt was in
default.” Select Commercial Assets, LLC. V. Carrothers, No. 326968, 2016
WL 3419018, at *3 (Mich. Ct. App. June 21, 2016), appeal denied, 500
Mich. 960 (2017).
Accordingly,

plaintiff

has

the

burden

of

proving,

by

a

preponderance of the evidence, that (1) a debt exists; (2) the amount of
the debt; and (3) the debt is in default.
IV.

Findings of Fact

In making a determination that plaintiff failed to satisfy its burden
of proof regarding each element required in order to receive a judgment
of foreclosure, the Court considers all admissible exhibits and the
credible testimony of all witnesses at trial. Quite simply, plaintiff failed
to present any admissible evidence related to the amount of the debt, and
therefore, judgment in favor of defendants is required.
a. A debt exists.

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Undisputed evidence in the record demonstrates that Maria C.
Kattula and Robert Kattula borrowed money from Fifth Third Mortgage
– MI, LLC, represented by a promissory note, dated January 26, 2005.
(Dkt. 41-1, 41-2). Undisputed evidence further demonstrates that the
mortgage was assigned – in a chain of five assignments – from Fifth Third
Mortgage – MI, LLC to Fifth Third Mortgage Company, and then to DLJ
Mortgage Capital, Inc., and then to WestVue NPL Trust II, and then to
WestVue NPL Trust, and finally to Wilmington Savings Fund Society,
FSB – the plaintiff in this case. (Dkt. 41-3.)
The parties offered conflicting testimony regarding whether the
mortgage had been satisfied, but on the whole, the Court finds Randy
Jones’ affidavit, recorded at the Oakland County Register of Deeds, to be
credible evidence that the discharge of mortgage – dated July 1, 2014 and
recorded on July 2, 2014 (Dkt. 41-7) – was erroneous. Accordingly, the
Court finds that a debt exists between Maria C. Kattula and Robert
Kattula and plaintiff.
b. No admissible evidence was presented to allow the
court to determine the amount of the debt.
Plaintiff’s attorney attempted, in a frustratingly persistent fashion,
to introduce evidence regarding the outstanding amount owed on the
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debt using what he stubbornly insisted were plaintiff’s “business records”
not subject to exclusion under the hearsay rule.2 For all of the reasons
that were explained numerous times on the record, and clarified further
above, plaintiff did not provide any admissible evidence from which the
Court could determine the current amount owed on the debt in question.
The relevant records – almost certainly available through a subpoena to
Fifth Third Bank – were not requested by either party. (Dkt. 40 at 235.)
Accordingly, plaintiff failed to meet its burden of proof regarding the
amount owed on the debt.
c. No admissible evidence was presented to allow the
court to determine if the debt is in default.
For the same reasons as set forth above, plaintiff introduced no
admissible evidence regarding the current status of the loan in question.
The Court finds, based on Randy Jones’s May 21, 2015 affidavit, that
there was an amount owing on the loan of $370,025.80 as of
approximately November 1, 2010. (Dkt. 41-9 at 2.) However, no further

Despite the Court’s numerous attempts to clarify the proper use of Fed. R. Evid.
803(6), plaintiff’s attorney appears still not to understand. This is evidenced by the
fact that his updated findings of fact and conclusions of law (post-trial brief) cite to
facts from exhibits that were explicitly excluded from admission. (See, e.g. Dkt. 41 at
8.) Plaintiff’s attorney’s obstinance regarding the admissibility of the AIMP loan file
borders on frivolous and resulted in a substantial waste of judicial resources.

2

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admissible evidence was presented to allow the Court to determine the
current status of the loan in question. Plaintiff failed to meet its burden
of proof regarding a showing that the loan is in default.
V.

Conclusions of Law
For the reasons set forth above, the Court finds that plaintiff failed

to meet its burden of proof in order to obtain a judicial foreclosure.
Accordingly, plaintiff’s request for a recovery of the amounts due under
the promissory note are DENIED. Judgment is granted in favor of
defendants, and the case is DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.
Dated: July 27, 2018
Ann Arbor, Michigan

s/Judith E. Levy
JUDITH E. LEVY
United States District Judge

CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served
upon counsel of record and any unrepresented parties via the Court’s
ECF System to their respective email or First Class U.S. mail addresses
disclosed on the Notice of Electronic Filing on July 27, 2018.
s/Shawna Burns
SHAWNA BURNS
Case Manager

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