New Century Financial Services v. Oughla Msw Capital, LLC v. Zaidi
This text of New Century Financial Services v. Oughla Msw Capital, LLC v. Zaidi (New Century Financial Services v. Oughla Msw Capital, LLC v. Zaidi) is published on Counsel Stack Legal Research, covering New Jersey Superior Court Appellate Division primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-6078-11T4 A-6370-11T1
NEW CENTURY FINANCIAL APPROVED FOR PUBLICATION SERVICES, INC., September 2, 2014 Plaintiff-Respondent, APPELLATE DIVISION v.
AHLAM OUGHLA,
Defendant-Appellant. ____________________________
MSW CAPITAL, LLC,
Plaintiff-Respondent,
v.
AZEEM H. ZAIDI,
Defendant-Appellant. _______________________________________
Argued May 22, 2013 – Decided March 5, 2014
Before Judges Grall, Simonelli and Accurso.
On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Hudson County, Docket No. DC-4244-12 (A-6078-11), and Monmouth County, Docket No. DC-4774-12 (A-6370-11).
Philip D. Stern argued the cause for appellant (both appeals) (Philip D. Stern & Associates, LLC, attorneys; Mr. Stern, on the briefs). Lawrence J. McDermott, Jr., argued the cause for respondent (both appeals) (Pressler and Pressler, L.L.P., attorneys; Mr. McDermott and Steven A. Lang, on the briefs).
John Ukegbu argued the cause for amicus curiae Northeast New Jersey Legal Services, Inc. (A-6078-11) (Northeast New Jersey Legal Services, attorneys; Mr. Ukegbu, on the brief).
The opinion of the court was delivered by
ACCURSO, J.A.D.
In these two appeals, calendared back-to-back and
consolidated here, we consider the proofs necessary for
plaintiffs to prevail on summary judgment in an action to
collect an assigned debt on a closed and charged-off credit card
account. Plaintiffs are debt buyers. Debt buyers purchase
charged-off credit card debts from the card issuers or other
debt buyers and attempt to collect the debts, that is, the
amount due the card issuer when it charged-off the account, or
re-sell them to other debt buyers.1 Plaintiffs obtained summary
judgments against defendants on charged-off credit card debts
which plaintiffs claim to have purchased from sellers who,
ultimately, albeit indirectly, derived their ownership from the
1 See Federal Trade Commission, The Structure and Practices of the Debt Buying Industry 11 (2013), available at http://ftc.gov/sites/default/files/documents/reports/structure- and-practices-debt-buying-industry/debtbuyingreport.pdf [hereinafter "Debt Buying Report"].
2 A-6078-11T4 banks that issued the credit cards to defendants. Defendants
contend that the summary judgments were improper because
plaintiffs did not submit sufficient proof of their ownership of
the debts and did not offer admissible evidence of the amounts
allegedly owed.
Plaintiffs suing on assigned, charged-off credit card debts
must prove two things: ownership of the defendant's charged-off
debt and the amount due the card issuer when it charged off the
account. In considering whether plaintiffs established prima
facie proof of their claims, we hold that: lack of notice to
the debtor of the sale of the debt does not affect the validity
of the assignment; the assignment need not specifically
reference defendant's name or account number and instead may
refer to an electronic data file containing that information; a
plaintiff need not procure an affidavit from each transferor in
its chain of assignments and may instead establish prima facie
proof of ownership on the basis of business records documenting
its ownership; and that an electronic copy of the periodic
billing statement for the last billing cycle is prima facie
proof of the amount due on the account at charge off. Applying
those standards to the facts presented on the motions, we affirm
one judgment and reverse the other.
3 A-6078-11T4 The Summary Judgment Motions
Ahlam Oughla
Plaintiff New Century Financial Services, Inc. (New
Century) sued defendant Ahlam Oughla alleging that it was the
owner of Oughla's Credit One Bank, N.A., account on which
$723.82 was due at charge off. Oughla, representing herself,
answered stating "[p]laintiff provided no documentation to
support the charges alleged in the complaint, therefore
defendant denies all allegations." Although each side
propounded limited interrogatories as allowed in actions
cognizable but not pending in the Small Claims Section,
R. 6:4-3(f), neither party provided responsive answers.
New Century moved for summary judgment. In its statement
of material facts, New Century stated that its predecessor in
interest, Credit One, extended credit to Oughla on a specific
account; that as set forth in its supporting certification, New
Century had purchased that account; that the "Electronically
Transmitted Information from Seller," showed that Oughla opened
the account on October 25, 2007; made her last payment on March
2, 2008; and that Credit One charged off the account on October
5, 2008 with a balance due of $723.82, which constituted the
principal balance New Century demanded. New Century also sought
interest of $1.58 calculated at the rate specified in Rule 4:42-
4 A-6078-11T4 11(a)(ii), not at the rate charged by Credit One when the
account was active.
New Century attached what it claimed to be the bill of sale
and assignment by which it acquired Oughla's debt as well as
documents relating to several prior transfers of the account.
Specifically, New Century attached four executed assignment
documents memorializing the sale and assignment of certain
charged-off credit card account receivables, purportedly
described on computer files transferred therewith: from MHC
Receivables, L.L.C. (MHC Receivables) to Sherman Originator,
L.L.C. (Sherman Originator); from Sherman Originator to LVNV
Funding, L.L.C. (LVNV Funding); from LVNV Funding to Sherman
Acquisition, L.L.C. (Sherman Acquisition); and from Sherman
Acquisition to New Century. Only one of the assignments
referenced a portfolio number and none referenced Oughla's
account, or indeed, any individual account.
New Century also attached an electronic copy of the final
periodic account statement for "VISA Account [XXXX]" from Credit
One to Oughla with the same address she noted on her answer,
advising that the account was closed and scheduled to be charged
off with a balance of $723.82.
Oughla filed a response to the motion and consented to
disposition on the papers. She did not dispute any of the
5 A-6078-11T4 particular facts New Century asserted, but contended that there
was no admissible evidence of the formation of a contract
between her and Credit One, or of the breach of any such
contract, and no reference to her name or account number in any
of the assignments. On that evidence, the judge granted New
Century summary judgment in the sum of $725.40 plus costs
without a statement of reasons.
Oughla retained counsel who filed a motion for
reconsideration. Counsel argued that New Century did not
establish its ownership of the debt or provide a proper
foundation for the final periodic account statement.
New Century responded with additional proofs of its
ownership of the debt. Its "business development manager,"
Marko Galic, certified that he participated in the transaction
in which New Century purchased Oughla's debt and thus had
personal knowledge of the records New Century obtained in that
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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-6078-11T4 A-6370-11T1
NEW CENTURY FINANCIAL APPROVED FOR PUBLICATION SERVICES, INC., September 2, 2014 Plaintiff-Respondent, APPELLATE DIVISION v.
AHLAM OUGHLA,
Defendant-Appellant. ____________________________
MSW CAPITAL, LLC,
Plaintiff-Respondent,
v.
AZEEM H. ZAIDI,
Defendant-Appellant. _______________________________________
Argued May 22, 2013 – Decided March 5, 2014
Before Judges Grall, Simonelli and Accurso.
On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Hudson County, Docket No. DC-4244-12 (A-6078-11), and Monmouth County, Docket No. DC-4774-12 (A-6370-11).
Philip D. Stern argued the cause for appellant (both appeals) (Philip D. Stern & Associates, LLC, attorneys; Mr. Stern, on the briefs). Lawrence J. McDermott, Jr., argued the cause for respondent (both appeals) (Pressler and Pressler, L.L.P., attorneys; Mr. McDermott and Steven A. Lang, on the briefs).
John Ukegbu argued the cause for amicus curiae Northeast New Jersey Legal Services, Inc. (A-6078-11) (Northeast New Jersey Legal Services, attorneys; Mr. Ukegbu, on the brief).
The opinion of the court was delivered by
ACCURSO, J.A.D.
In these two appeals, calendared back-to-back and
consolidated here, we consider the proofs necessary for
plaintiffs to prevail on summary judgment in an action to
collect an assigned debt on a closed and charged-off credit card
account. Plaintiffs are debt buyers. Debt buyers purchase
charged-off credit card debts from the card issuers or other
debt buyers and attempt to collect the debts, that is, the
amount due the card issuer when it charged-off the account, or
re-sell them to other debt buyers.1 Plaintiffs obtained summary
judgments against defendants on charged-off credit card debts
which plaintiffs claim to have purchased from sellers who,
ultimately, albeit indirectly, derived their ownership from the
1 See Federal Trade Commission, The Structure and Practices of the Debt Buying Industry 11 (2013), available at http://ftc.gov/sites/default/files/documents/reports/structure- and-practices-debt-buying-industry/debtbuyingreport.pdf [hereinafter "Debt Buying Report"].
2 A-6078-11T4 banks that issued the credit cards to defendants. Defendants
contend that the summary judgments were improper because
plaintiffs did not submit sufficient proof of their ownership of
the debts and did not offer admissible evidence of the amounts
allegedly owed.
Plaintiffs suing on assigned, charged-off credit card debts
must prove two things: ownership of the defendant's charged-off
debt and the amount due the card issuer when it charged off the
account. In considering whether plaintiffs established prima
facie proof of their claims, we hold that: lack of notice to
the debtor of the sale of the debt does not affect the validity
of the assignment; the assignment need not specifically
reference defendant's name or account number and instead may
refer to an electronic data file containing that information; a
plaintiff need not procure an affidavit from each transferor in
its chain of assignments and may instead establish prima facie
proof of ownership on the basis of business records documenting
its ownership; and that an electronic copy of the periodic
billing statement for the last billing cycle is prima facie
proof of the amount due on the account at charge off. Applying
those standards to the facts presented on the motions, we affirm
one judgment and reverse the other.
3 A-6078-11T4 The Summary Judgment Motions
Ahlam Oughla
Plaintiff New Century Financial Services, Inc. (New
Century) sued defendant Ahlam Oughla alleging that it was the
owner of Oughla's Credit One Bank, N.A., account on which
$723.82 was due at charge off. Oughla, representing herself,
answered stating "[p]laintiff provided no documentation to
support the charges alleged in the complaint, therefore
defendant denies all allegations." Although each side
propounded limited interrogatories as allowed in actions
cognizable but not pending in the Small Claims Section,
R. 6:4-3(f), neither party provided responsive answers.
New Century moved for summary judgment. In its statement
of material facts, New Century stated that its predecessor in
interest, Credit One, extended credit to Oughla on a specific
account; that as set forth in its supporting certification, New
Century had purchased that account; that the "Electronically
Transmitted Information from Seller," showed that Oughla opened
the account on October 25, 2007; made her last payment on March
2, 2008; and that Credit One charged off the account on October
5, 2008 with a balance due of $723.82, which constituted the
principal balance New Century demanded. New Century also sought
interest of $1.58 calculated at the rate specified in Rule 4:42-
4 A-6078-11T4 11(a)(ii), not at the rate charged by Credit One when the
account was active.
New Century attached what it claimed to be the bill of sale
and assignment by which it acquired Oughla's debt as well as
documents relating to several prior transfers of the account.
Specifically, New Century attached four executed assignment
documents memorializing the sale and assignment of certain
charged-off credit card account receivables, purportedly
described on computer files transferred therewith: from MHC
Receivables, L.L.C. (MHC Receivables) to Sherman Originator,
L.L.C. (Sherman Originator); from Sherman Originator to LVNV
Funding, L.L.C. (LVNV Funding); from LVNV Funding to Sherman
Acquisition, L.L.C. (Sherman Acquisition); and from Sherman
Acquisition to New Century. Only one of the assignments
referenced a portfolio number and none referenced Oughla's
account, or indeed, any individual account.
New Century also attached an electronic copy of the final
periodic account statement for "VISA Account [XXXX]" from Credit
One to Oughla with the same address she noted on her answer,
advising that the account was closed and scheduled to be charged
off with a balance of $723.82.
Oughla filed a response to the motion and consented to
disposition on the papers. She did not dispute any of the
5 A-6078-11T4 particular facts New Century asserted, but contended that there
was no admissible evidence of the formation of a contract
between her and Credit One, or of the breach of any such
contract, and no reference to her name or account number in any
of the assignments. On that evidence, the judge granted New
Century summary judgment in the sum of $725.40 plus costs
without a statement of reasons.
Oughla retained counsel who filed a motion for
reconsideration. Counsel argued that New Century did not
establish its ownership of the debt or provide a proper
foundation for the final periodic account statement.
New Century responded with additional proofs of its
ownership of the debt. Its "business development manager,"
Marko Galic, certified that he participated in the transaction
in which New Century purchased Oughla's debt and thus had
personal knowledge of the records New Century obtained in that
sale, including the assignments, a copy of the electronically-
transmitted spreadsheet New Century acquired, redacted to show
only the information relating to Oughla's account, and the final
periodic statement Credit One issued to Oughla.
In addition, New Century provided evidence of the transfers
that preceded its acquisition, the first being from Credit One
to MHC Receivables. John Mazzoli submitted an affidavit stating
6 A-6078-11T4 that he is an authorized representative for MHC Receivables,
having personal knowledge of "the method and manner" by which
MHC "originates, services, owns and manages VISA and MasterCard
accounts." Mazzoli explained that MHC Receivables "purchases
and holds VISA and MasterCard accounts" originated by Credit
One, which Credit One thereafter continues to service on behalf
of MHC Receivables, the legal owner. According to Mazzoli,
"[t]he Agreements that transfer the accounts between Credit One
and MHC are self-executing, allow for the accounts to be
transferred immediately after origination, and comply with all
state and federal regulations," and that "[c]ardholders receive
appropriate notice of these events in accordance with all state
and federal laws." Mazzoli averred that "[t]he transfer between
MHC and any subsequent buyer [is] evidenced by a Purchase and
Sale Agreement and corresponding Bill of Sale."2
The judge denied the motion for reconsideration and
reaffirmed the entry of summary judgment. She was satisfied
2 New Century also presented a certification from its counsel Steven A. Lang, Esq., who attached credit reports from 2008 and 2009 for Oughla that counsel's firm "obtained in another matter." We do not rely on these reports because they are plainly inadmissible hearsay. See, e.g., Cruz v. MRC Receivables Corp. 563 F. Supp. 2d 1092, 1095 (N.D. Cal. 2008) (credit reports offered to prove the accounts and amounts therein are inadmissible hearsay); Konop v. Rosen, 425 N.J. Super. 391, 402 (App. Div. 2012) (noting that hearsay within hearsay requires a separate basis for admission).
7 A-6078-11T4 that New Century had established a prima facie case that it was
the owner of the account and that Oughla was in default in the
sum of $723.82 plus interest of $1.58, for a total due of
$725.40. The judge found that Oughla's only defense to the
motion was that she "was not satisfied" with New Century's
proofs, which the judge concluded was not sufficient to defeat
summary judgment.
Azeem H. Zaidi
Plaintiff MSW Capital, L.L.C. (MSW Capital) sued defendant
Azeem H. Zaidi alleging that it was the owner of Zaidi's "CHASE-
WAMU" account, on which $12,487.36 was due at charge off.
Zaidi, representing himself, filed an answer leaving plaintiff
to its proofs.
MSW Capital served Zaidi with interrogatories seeking the
factual basis for any defense Zaidi claimed, to which Zaidi
declined to provide responsive answers. MSW Capital also served
Zaidi with requests for admissions asking whether he admitted
applying for credit privileges with CHASE-WAMU; whether he made
purchases or received cash advances using the account; and
whether he received monthly statements. Zaidi responded without
admitting or denying any of the requested admissions.
MSW Capital moved for summary judgment. In its statement
of material facts, MSW Capital stated that its predecessor in
8 A-6078-11T4 interest, CHASE-WAMU, extended credit to Zaidi, and that as set
forth in the certification submitted in support of the motion,
MSW Capital was the current owner of that account on which
$12,487.36 was due at charge-off. MSW Capital attached copies
of eighteen monthly billing statements for Zaidi's CHASE-WAMU
account from August 2009 through January 2011, each addressed to
Zaidi at the address indicated on Zaidi's answer.
MSW Capital supported the motion with a certification of
its managing director, Lawrence A. Whipple, Jr., who claimed
both personal knowledge of MSW Capital's "books and business"
and authority to make the certification on its behalf. Whipple
certified that MSW Capital "is the owner by purchase of
[Zaidi's] defaulted CHASE-WAMU Account" on which there is due
the sum of $12,487.36.3
Zaidi, through counsel, opposed MSW Capital's motion and
cross-moved for summary judgment. He denied MSW Capital's
3 Whipple further certified that MSW Capital's records are maintained electronically, and he attached a "Computer Generated Report of Financial Information From 1/31/11 to 04/19/12," created by MSW Capital for Zaidi's account. We do not rely upon this report, which was apparently intended to conform to the requirements of Rule 6:6-3(a), because it cannot qualify as a business record under N.J.R.E. 803(c)(6). The case caption and docket number on the document make clear it was prepared in anticipation of litigation and thus not kept in the normal course of business. See State v. Berezansky, 386 N.J. Super. 84, 94 (App. Div. 2006), certif. granted, 191 N.J. 317 (2007), appeal dismissed, 196 N.J. 82 (2008).
9 A-6078-11T4 claims based on its "failure to provide proof that it owns the
alleged account and . . . that I am indebted to [MSW Capital] in
any amount." Zaidi certified that prior to his receipt of the
complaint he had never heard of MSW Capital and never received
notice "that an account between 'CHASE-WAMU' and me had been
transferred, sold or assigned."
MSW Capital responded with a supplemental certification
from Whipple, as well as new certifications from its attorneys.
Whipple explained, as he had not in his original certification,
that his job responsibilities required that he be familiar with
MSW Capital's "records and the manner in which those records are
recorded and maintained," and that he personally participated in
MSW Capital's acquisition of Zaidi's charged-off "CHASE-WAMU
account number [XXXX]." According to Whipple, MSW Capital
acquired Zaidi's charged-off CHASE-WAMU account on July 18, 2011
by bill of sale and assignment from Main Street Acquisition
Corp., (Main Street) a true copy of which he attached. The bill
of sale and assignment recites that:
For value received and subject to the terms and conditions of the [Purchase and Sale Agreement, dated as of April 15, 2011], the Seller [Main Street] hereby transfers, sells, assigns, conveys, grants, bargains, sets over and delivers to the Purchaser [MSW Capital, L.L.C.], and to the Purchaser's successors and assigns, all of the Seller's rights, title and interest in and to the Purchased Accounts and any claims arising
10 A-6078-11T4 out of the Purchased Accounts described in the Agreement and contained in the Sale File provided to the Purchaser on July 18, 2011.
This Assignment is executed without recourse and without representations or warranties including, without limitation, warranties as to collectability, except as otherwise provided in the Agreement.
Whipple certified that Main Street also provided MSW Capital
with a copy of the assignment by which Main Street acquired
Zaidi's charged-off account from Chase, a true copy of which he
attached.
Whipple attested to the electronic information Main Street
provided MSW Capital regarding Zaidi's charged-off CHASE-WAMU
account, including the account number, that the account was
opened on August 16, 2004, that the last payment on the account
had been made on June 7, 2010 in the amount of $300.00, that
Chase Bank charged off the account on January 31, 2011, that the
balance due at charge-off was $12,487.36, Zaidi's address in
Morganville, New Jersey, as well as Zaidi's date of birth and
social security number which Whipple did not list but
represented would be made available to the court at its request.
Finally, Whipple identified, and attached as true copies, the
eighteen periodic statements he obtained from Main Street for
Zaidi's charged-off account, each of which stated "This
Statement is a Facsimile – Not an original."
11 A-6078-11T4 MSW Capital's counsel, Steven A. Lang, submitted a
certification countering Zaidi's sworn statement that he had
never heard of MSW Capital before being served with the
complaint. Lang attached a copy of a demand letter his office
had sent to Zaidi before the complaint was filed, informing him
that his CHASE-WAMU account had been purchased by MSW Capital
and placed with the firm for collection. Lang also explained
that in September 2008, the Federal Deposit Insurance
Corporation (FDIC) seized Washington Mutual Bank (WAMU),
thereafter placing the bank into receivership and eventually
selling "substantially all" of its assets to JPMorgan Chase &
Co., the parent of Chase Bank USA, N.A., the firm's credit card
issuing bank in accordance with JPMorgan Chase & Co.'s public
filings with the Securities and Exchange Commission. Lang
attached copies of those filings to his certification.
The trial judge reviewed all of the evidence submitted by
MSW Capital and the objections to that evidence from Zaidi, and
determined that the billing statements satisfied the
requirements of Rule 6:6-3(a), and LVNV Funding, L.L.C. v.
Colvell, 421 N.J. Super. 1 (App. Div. 2011), and that Whipple's
certification constituted sufficient proof to establish that
Zaidi's charged-off credit card had been transferred to MSW
Capital. The judge noted that Zaidi had not offered anything to
12 A-6078-11T4 dispute his responsibility for the account, the accuracy of the
amount due at charge-off, or his receipt of the billing
statements. Finding no material fact in dispute and that MSW
Capital had proved its claim, the judge entered summary judgment
for MSW Capital in the amount of $12,487.36 plus costs.
Both defendants filed timely notices of appeal. This court
subsequently granted the motion of Northeast New Jersey Legal
Services, Inc. to appear as amicus curiae and to argue in
support of Oughla's appeal.
Brief Overview of the Debt Buying Industry
Because defendants and amicus rely on reports of the
Federal Trade Commission (FTC), a federal agency responsible for
enforcing the Fair Debt Collection Practices Act, 15 U.S.C.A.
§ 1692, issued after the FTC assessed the effect of debt buying
on the collection of consumer debt and its effect on consumers,
we begin with a brief background of the debt buying industry.
The FTC undertook its studies in response to the rapid
increase in debt buying over the last two decades. Although
acknowledging that debt buying reduces the losses creditors
incur in providing credit, thereby helping to keep the price of
credit low and ensuring its wide availability, the FTC was
concerned that the re-selling of debts could lead to debt buyers
having insufficient or inaccurate information about the debts
13 A-6078-11T4 they are trying to collect, resulting in debt buyers attempting
to collect from the wrong debtor or more than the debtor owes.
Federal Trade Commission, Debt Buying Report, supra, at 11, 29-
30, Federal Trade Commission, Repairing a Broken System:
Protecting Consumers in Debt Collection Litigation and
Arbitration i-ii (2010) available at
http://ftc.gov/os/2010/07/debtcollectionreport.pdf, [hereinafter
"Debt Collection Report"]; Federal Trade Commission, Collecting
Consumer Debts: The Challenges of Change, A Workshop Report
1 (2009) available at
http://ftc.gov/sites/default/files/documents/reports/collecting-
consumer-debts-challenges-change-federal-trade-commission-
workshop-report/dcwr.pdf [hereinafter "Debt Collection Workshop
Report"].
The debt buying business apparently traces its origin to
the savings and loan crisis of the late 1980s when the
Resolution Trust Corporation auctioned off billions in unpaid
loans owed to failed thrifts. Debt Buying Report, supra, at 12.
The success of such sales led other owners of delinquent debt,
most notably the banks constituting the largest credit card
issuers, to eventually follow suit. Id. at 12-13.
Federal regulations require banks issuing credit cards to
charge off, that is declare uncollectible, credit card debts by
14 A-6078-11T4 the end of the month in which they become one hundred and eighty
days past due. Final Notice of Uniform Retail Credit
Classification and Account Management Policy, 65 Fed. Reg. 36903
(June 12, 2000). Although banks are prohibited from counting
charged-off debts toward their capital requirements, the debts
remain assets which the banks can continue to try to collect or
sell for cash. Debt Buying Report, supra, at 13 n.58. The
Government Accountability Office reported in a 2009 study that
five of the six largest credit card issuers sold at least some
of their charged-off debt to debt buyers.4
The FTC found that credit card issuers typically bundle
thousands of charged-off accounts into portfolios sharing common
features, such as the amount of time that has passed since a
payment was made on the account.5 Debt Buying Report, supra, at
17. Debt buyers purchasing the portfolios from the credit card
issuers sometimes resell the original portfolios or repackage
the debts into new portfolios. Id. at 19.
4 U.S. Gov't Accountability Office, GAO-09-748, Credit Cards: Fair Debt Collection Practice Act Could Better Reflect the Evolving Debt Collection Marketplace and Use of Technology 25 (2009), available at http://www.gao.gov/assets/300/295588.pdf [hereinafter "GAO Report"]. 5 Zaidi's account appears to have been included in a portfolio of 8,842 charged-off accounts that Chase assigned to Main Street.
15 A-6078-11T4 All of the information the debt buyers receive about the
charged-off accounts within a purchased portfolio is transmitted
electronically. Debt collection is no longer based on paper
transactions. The FTC notes that technological innovations over
the past thirty years, such as document imaging and electronic
database management systems, have dramatically enhanced the
ability of creditors and debt collectors to obtain, store, and
transfer data about account holders and their debts. Debt
Collection Workshop Report, supra, at 17.
Upon purchase of a portfolio, the debt buyer receives a
"data file," typically one or more electronic spreadsheets
containing information such as the name, street address, home
telephone number, date of birth, and social security number for
each debtor, along with the credit card account number, the
amount due at charge-off, the date the debtor opened the
account, the date of last payment, and the date of charge-off.
Debt Buying Report, supra, at 20, 34-35. Both plaintiffs in
these cases represented that the information they acquired on
defendants' charged-off debts was through the transfer of
electronic data files. In addition to the data file, buyers of
charged-off accounts also sometimes acquire electronic
documentation or "media," typically account statements, at the
time of sale or the right to request such from the seller for a
16 A-6078-11T4 limited period of time, and often for a fee.6 Id. at 26-28, 39-
40.
The debts within these portfolios are sometimes sold
multiple times pursuant to separate purchase and sale agreements
in which sellers generally disclaim all representations and
warranties regarding the accuracy of the information about the
individual debts. Id. at 25. Defendants and amicus contend
that because plaintiffs are suing on purchased debt of which
they have no personal knowledge, the absence of a warranty
leaves plaintiffs unable to prove that they have sued the right
defendant for the correct amount. The FTC acknowledges,
however, that its study did not permit any conclusions as to the
prevalence of errors or inaccuracies in the information about
the debts transferred in these portfolios.7 Ibid.
Against this backdrop, we turn to consider the matters
before us.
6 Significantly, the FTC found that original sellers typically had no obligation to provide copies of documents to purchasers of resold debt; instead, those purchasers had to channel their requests upstream to the original purchaser for transmission to the issuer. Debt Buying Report, supra, at 27-28. This was the manner in which MSW acquired Zaidi's Chase account statements. 7 The FTC speculates that one reason debt sellers may not warrant the account information on the debts they sell is the cost to a seller in assessing a warranty claim, that is in trying to determine if the information it supplied to a buyer about a debt was inaccurate or whether the debt simply proved uncollectible for the buyer. Debt Buying Report, supra, at 25, n.108.
17 A-6078-11T4 Standing
We first dispose of defendants' arguments that plaintiffs
failed to establish standing in the trial court. Defendants
assert that "the chain of assignment must be addressed before
deciding other substantive issues" because "[w]hen there is
insufficient proof of assignment, the action is not
justiciable."
We need not engage in an extended discussion on this point.
We agree with defendants that plaintiffs must prove that they
own the charged-off credit card debts on which they sue, whether
one characterizes it as standing to sue or an essential element
of proof on an assigned claim. See Sullivan v. Visconti, 68
N.J.L. 543, 550 (Sup. Ct. 1902), aff'd, 69 N.J.L. 452 (E. & A.
1903); Triffin v. Somerset Valley Bank, 343 N.J. Super. 73, 79-
82 (App. Div. 2001); Wells Fargo Bank, N.A. v. Ford, 418 N.J.
Super. 592, 599-600 (App. Div. 2011). We disagree that, in
these Special Civil Part actions, the parties must first
litigate ownership of the debt before any other matter can be
addressed. Such matters are left to the sound discretion of the
trial judge to be exercised in light of any motions filed by the
parties.
As we noted at the outset of this opinion, plaintiffs suing
on assigned credit card debts must prove that they own the debt
18 A-6078-11T4 and the amount due. The proofs on these issues are generally
straightforward and proceed in tandem. Requiring them to be
addressed separately would seem to confound the purposes of the
Special Civil Part Rules, which are designed to control costs
and promote the expeditious resolution of claims under $15,000.
Lettenmaier v. Lube Connection, Inc., 162 N.J. 134, 143-44
(1999).
The issue is only important here because defendants have
taken the position that plaintiffs must prove they own the debt
before defendants can be required to participate in discovery.
Both defendants refused to answer basic discovery on the basis
that plaintiffs had not proved that they owned the debts sued
upon. We think it obvious that defendants have the same
obligations as all other litigants in our courts to answer
discovery fully and forthrightly. Dewalt v. Dow Chem. Co., 237
N.J. Super. 54, 60 (App. Div. 1989).
Although information as to ownership of the debt would
almost certainly be confined to plaintiffs, defendants likely
possess relevant information about the credit card account. Our
rules allow litigants in civil litigation to prove claims and
defenses through discovery and admissions obtained from adverse
parties. See Seiden v. Allen, 135 N.J. Super. 253, 255-56 (Ch.
Div. 1975). Defendants cannot shield themselves from legitimate
19 A-6078-11T4 discovery in these collection matters by asserting plaintiffs'
lack of standing.
Proof of Assignments
The parties and amicus agree that the assigned credit card
debts on which plaintiffs sue constitute choses in action
arising on contract, which are assignable pursuant to N.J.S.A.
2A:25-1. Our law does not dictate any precise formula for such
assignments. Sullivan, supra, 68 N.J.L. at 550. All that is
required is evidence of the intent to transfer one's rights and
a description of the intangible right being assigned sufficient
to make it readily identifiable. K. Woodmere Assocs., L.P. v.
Menk Corp., 316 N.J. Super. 306, 314 (App. Div. 1998) (citing
3 Williston on Contracts § 404 (Jaeger ed. 1957); Transcon Lines
v. Lipo Chem., Inc., 193 N.J. Super. 456 (Cty. Dist. Ct. 1983)).
Although an assignee will ordinarily notify a debtor
promptly of the assignment, as the debtor is discharged to the
extent of his payments to the assignor prior to notice, the lack
of notice to the debtor does not affect the validity of the
assignment.8 Moorestown Trust Co. v. Buzby, 109 N.J. Eq. 409,
8 We do not view Tirgan v. Mega Life & Health Ins., 304 N.J. Super. 385 (Law Div. 1997), on which defendants rely, to be to the contrary. Notice was not at issue in that case, which involved a patient's assignment of his rights under an insurance contract to his physician. Id. at 391. The Law Division's statement that "[t]o be effective, . . . the assignment must be (continued)
20 A-6078-11T4 411 (Ch. 1932) (creditors may dispose of a debt as they choose
including by assigning it to another, notice of any assignment
to the debtor "adds nothing to the right or title transferred").
Notice simply charges the debtor with the duty to pay the
assignee. Russel v. Fred G. Pohl Co., 7 N.J. 32, 40 (1951);
Spilka v. S. Am. Managers, Inc., 54 N.J. 452, 462 (1969);
N.J.S.A. 12A:9-406(a).
Accordingly, we reject defendants' arguments that lack of
notice of the assignments to the account holders is fatal to
plaintiffs' claims. Because it does not involve a dispute over
a material fact, we likewise reject Zaidi's argument that the
factual dispute about his notice of the assignment precluded
entry of summary judgment against him.
Plaintiffs insist that because our law has not historically
required documentary evidence to prove ownership, ownership of
the assigned claims may be proved by testimony alone. That
assertion seems to us beside the point, as plaintiffs in these
cases moved for summary judgments relying on written
assignments.9 Accordingly, our review is of the certifications
submitted on the motions in support of their claims. See Ford,
(continued) noticed to the obligor," plainly refers only to the obligor's duty to pay the assignee upon proper notice. Id. at 390. 9 The exception in Oughla's case regarding the first link in MSW Capital's chain of ownership is discussed infra.
21 A-6078-11T4 supra, 418 N.J. Super. at 599-600. We review the grant of
summary judgment using the same standard as the motion judge.
Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010).
Thus, we must determine "whether the competent evidential
materials presented, when viewed in the light most favorable to
the non-moving party, are sufficient to permit a rational
factfinder to resolve the alleged disputed issue in favor of the
non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142
N.J. 520, 540 (1995).
Where a motion for summary judgment is based on facts
either not of record or not judicially noticeable, Rule 1:6-6
allows the court to "hear it on affidavits made on personal
knowledge, setting forth only facts which are admissible in
evidence to which the affiant is competent to testify and which
may have annexed thereto certified copies of all papers or parts
thereof referred to therein." Hearsay may only be considered if
admissible pursuant to an exception to the hearsay rule. Jeter
v. Stevenson, 284 N.J. Super. 229, 233-34 (App. Div. 1995). In
evaluating a summary judgment record involving a challenge to
the competency of affidavits on which the trial court relied, we
review the evidentiary question for abuse of discretion and the
court's legal determination de novo. Estate of Hanges v. Metro.
Prop. & Cas. Ins. Co., 202 N.J. 369, 383-84 (2010).
22 A-6078-11T4 The central question presented with regard to the
assignments is whether plaintiffs have submitted competent
evidence demonstrating "the full chain of the assignment of the
claim[s]." R. 6:6-3(a); Colvell, supra, 421 N.J. Super. at 6
(noting agreement that Rule 6:6-3(a) provides a guide to the
proofs necessary for summary judgment in credit card collection
cases). We reviewed the requirements for affidavits purporting
to establish a party's ownership of an assigned mortgage debt in
Ford, supra, 418 N.J. Super. at 597-98. Those principles apply
equally here. An affiant must aver that the facts presented are
on personal knowledge, identify the source of such knowledge,
and must properly authenticate any certified copies of documents
referred to therein and attached to the affidavit or
certification. Id. at 599-600. We are satisfied that MSW's
proofs on its motion were sufficient to establish its ownership
of Zaidi's debt. New Century's proofs, however, could not
support summary judgment in Oughla's case.
In Oughla's case, New Century submitted two certifications
from its business developer manager, Marko Galic. Galic
certified that he was familiar "with the business and records"
of New Century, was authorized to make the certifications on its
behalf and did so of his own personal knowledge. Galic
explained that he had personally participated in the transaction
23 A-6078-11T4 in which New Century purchased Oughla's account from Sherman
Acquisition and he attached "true copies" of the bill of sale
and assignment and the information electronically provided to
New Century regarding Oughla's account at the time of sale.
The attached bill of sale and assignment identified Sherman
Acquisition as the assignor and New Century as the assignee and
states that the assignor conveys all of its interest in certain
charged-off receivables described in an attached appendix and
referred to as "Charged-off Accounts" in a purchase and sale
agreement between assignor and assignee of the same date. The
document is signed on behalf of Sherman Acquisition by John
Mazzoli, Director, and witnessed by another officer. Also
attached to Galic's certification are five pages of a
spreadsheet with information relating to Oughla's account with
Credit One and a periodic statement from Credit One to Oughla
noting that the account is closed and scheduled to be charged
off.
Finally, Galic attaches true copies of the remaining three
assignments transferring Oughla's Credit One account from MHC
Receivables to Sherman Originator, from Sherman Originator to
LVNV Funding, and from LVNV Funding to Sherman Acquisition, from
whence it was transferred to New Century.
24 A-6078-11T4 The Galic certifications plainly do not suffer from the
inadequacies of the certifications presented in Ford. Galic
identifies his position with New Century and describes the basis
of his knowledge; he personally participated in the transaction
in which New Century acquired Oughla's Credit One account.
Galic certified that the attached assignments were true copies
of the ones provided to New Century by its assignor Sherman
Acquisition. Nothing further was required to authenticate them
under N.J.R.E. 901. See Celino v. Gen. Accident Ins., 211 N.J.
Super. 538, 544 (App. Div. 1986). Although defendants assert
that the assignments are not admissible because they refer to
agreements and appendices not attached, they cite no case for
that proposition and fail to explain how such documents are
relevant to the issues in dispute.
Defendants note that none of the assignments refers
specifically to Oughla's Credit One account. The point is
undisputed. Galic certifies, however, that Oughla's account was
among the charged-off accounts included in the assignments and
acquired by New Century in the transaction, as evidenced by the
electronic spreadsheet information transferred to New Century,
which he attached to his certification.
As an assignment needs no particular form and requires only
so much of a description of the intangible assigned to make it
25 A-6078-11T4 readily identifiable, K. Woodmere Assocs., supra, 316 N.J.
Super. at 314, we agree with the trial judge that the
assignments need not specify each account transferred to
effectively transfer accounts included in an accompanying
electronic file. The key is the intent of the assignor to
transfer specific accounts. Ibid. That intent is gleaned from
the documents themselves and surrounding circumstances. Id. at
315-16; see also Sullivan, supra, 68 N.J.L. at 546-47
(acknowledging appropriate use of parol evidence to confirm
identity of the thing assigned). Accordingly, we conclude that
New Century's certifications properly authenticate the
assignment documents and electronically-transmitted information
evincing a proper chain of assignments of Oughla's Credit One
account from MHC Receivables through to New Century.
There is, however, no document evidencing the first link in
New Century's assignment chain, the transfer of Oughla's account
from the card issuer, Credit One, to MHC Receivables. New
Century asserts that "[t]here are no documents from Credit One
in the chain because the account was not owned by Credit One."
New Century further explains with reference to Mazzoli's
certification, that the "accounts are originated by Credit One
and then sold, while live, to MHC Receivables, Inc.[,] Credit
One Bank acted thereafter only as the account servicer."
26 A-6078-11T4 We cannot agree that because the credit card accounts are
originated by Credit One and assigned to MHC Receivables while
the accounts are still active, that no proof of assignment is
necessary.10 New Century's assertion that Credit One did not own
the account appears at direct odds with Mazzoli's certification
that MHC Receivables "purchases and holds" Visa and MasterCard
accounts "originated by Credit One."
Further, we note that Mazzoli's affidavit discussing MHC
Receivables is markedly less clear than the Galic
certifications. Instead of explaining his position with MHC
Receivables and describing the source of his knowledge, Mazzoli
says only that as "authorized representative" for that entity,
he has "personal knowledge" of how it "originates, services,
owns and manages Visa and MasterCard accounts." The affidavit
neither reveals his position, if any, with MHC Receivables, nor
the source of his knowledge of this aspect of its operations.
See Ford, supra, 418 N.J. Super. at 599-600. The Mazzoli
affidavit on behalf of MHC Receivables raises more questions
than it answers and thus does not provide sufficient proof of
10 This situation is different from a scenario in which a successor bank has acquired active credit card accounts through acquisition of another bank. See Garden State Bank v. Graef, 341 N.J. Super. 241, 245-46 (App. Div. 2001), and our discussion of this point, infra at 33.
27 A-6078-11T4 Credit One's transfer of Oughla's account to MHC Receivables,
the first link in New Century's chain of assignments. Ibid.
Accordingly, the summary judgment against Oughla must be
reversed because New Century did not establish the full chain of
ownership of its claim. While Mazzoli's affidavit is not
sufficient to establish the transfer of Oughla's charged-off
Credit One account to MHC Receivables, we note that he asserts
that Credit One cardholders are noticed of the transfer of their
accounts, thereby suggesting that proof of MHC Receivables'
ownership of Oughla's account may be established in ways other
than production of an assignment. We express no opinion on the
method by which New Century may prove MHC Receivables' ownership
of Oughla's account on remand. It suffices to say that it must
be established by admissible evidence presented by affidavit of
a witness competent to testify. Ford, supra, 418 N.J. Super. at
599-600.
We also acknowledge that the Oughla matter was within the
cognizance of the Small Claims Section of the Special Civil Part
where the rules of evidence may be relaxed. R. 6:1-2(a)2, 6:11;
N.J.R.E. 101(a)(2)(A), see also Penbara v. Straczynski, 347 N.J.
Super. 155, 158 n.1, 162-63 (App. Div. 2002); Blaisdell Lumber
Co. v. Horton, 242 N.J. Super. 98, 101 (App. Div. 1990). While
we are of the view that critical facts must be proved and not
28 A-6078-11T4 merely assumed, notwithstanding the lack of formality in the
Small Claims Section, Triffin v. Quality Urban Hous. Partners,
352 N.J. Super. 538, 543 (App. Div. 2002), we express no view of
the form those proofs may take and whether relaxation of the
rules of evidence might be appropriate under the circumstances.11
In Zaidi's case, MSW Capital proved its chain of
assignments of Zaidi's charged-off account through the Whipple
and Lang certifications. Whipple's certifications suffice to
establish his knowledge of MSW's records and authenticate the
assignment from Main Street to MSW Capital transferring Zaidi's
charged-off account. See Ford, supra, 418 N.J. Super at 599-
600. Whipple certifies that he is the managing director of MSW
Capital and that his job responsibilities require his
familiarity with "MSW's records and the manner in which those
records are recorded and maintained." Further, Whipple
certifies that he personally participated in MSW Capital's
acquisition of Zaidi's charged-off account which MSW Capital
acquired by way of bill of sale and assignment, a true copy of
which he attached to his certification. The bill of sale and
assignment provides that Main Street assigns to MSW Capital all
11 We reject defendants' contention that New Century may not avail itself of the relaxation rule because it is intended to assist self-represented parties. By its terms, the rule applies to all parties in matters within the cognizance of the Small Claims Section. See N.J.R.E. 101(a)(2)(A).
29 A-6078-11T4 of Main Street's rights to the "purchased accounts" described in
a certain purchase and sale agreement and "contained in the sale
file" provided to MSW Capital.
Whipple also attached a true copy of the bill of sale MSW
Capital was provided by Main Street evidencing Main Street's
assignment of the account from Chase. That document references
the transfer of 8,842 accounts from Chase Bank to Main Street
"described in the Final Data File, entitled (Account's Primary
File Name) attached hereto and made part hereof for all
purposes" pursuant to the credit card account purchase agreement
between Chase Bank and Main Street.
In addition to raising objections to the failure to attach
the referenced purchase agreements to the assignments and the
lack of any specific mention of Zaidi's account which we have
already rejected, Zaidi maintains that MSW Capital had to
produce an affidavit from each of its predecessors
authenticating the assignment each provided to its transferee
for the entire assignment chain. We disagree.
We reject the claim that a separate affidavit is required
from each transferor authenticating each assignment in the
chain. Third-party documents evidencing ownership, such as
those represented by these assignments, are examples of business
records of one business transferred on sale and incorporated in
30 A-6078-11T4 the purchaser's records to document proof of ownership of the
thing transferred. See, e.g., Stott v. Greengos, 95 N.J. Super.
96, 99-100 (App. Div. 1967) (stock sale confirmation sheets);
State v. Mazowski, 337 N.J. Super. 275, 292 (App. Div. 2001)
(pawnshop receipts); K & K Enters. Inc. v. Stemcor USA Inc., 954
N.Y.S.2d 512, 513 (App. Div. 2012) (bills of lading). So long
as the proponent of the documents can satisfactorily attest to
the circumstances under which it acquired the documents on which
it relies, the documents should be admissible as business
records under N.J.R.E. 803(c)(6). See Hahnemann Univ. Hosp. v.
Dudnick, 292 N.J. Super. 11, 17-19 (App. Div. 1996).
Finally, Zaidi contends that even assuming that the
assignments included in the summary judgment record were
properly admissible, MSW Capital, like New Century, cannot prove
the first link of the assignment chain, here the transfer of
Zaidi's account from WAMU to Chase. We are satisfied that the
trial judge did not abuse his discretion in concluding
otherwise. Estate of Hanges, supra, 202 N.J. at 383-84.
MSW Capital offered the certification of its counsel Lang
to prove that the FDIC had taken over WAMU and subsequently sold
all of its assets to Chase. Lang attached publicly available
documents of Chase's filings with the Securities and Exchange
Commission and the FDIC noting the FDIC's receivership of WAMU
31 A-6078-11T4 and sale of its assets to Chase. While Zaidi contends that
those filings are not the proper subject of judicial notice
under N.J.R.E. 201(a) because the documents are not "findings"
of those agencies, the FDIC's takeover of WAMU and sale of its
assets to Chase would appear a proper subject of judicial notice
under N.J.R.E. 201(a) or (b) as evidenced by the many state and
federal courts that have taken judicial notice of those very
facts. See, e.g., Carswell v. JPMorgan Chase Bank, N.A., 500
Fed. App'x. 580, 583 (9th Cir. 2012); Arguenta v. J.P. Morgan
Chase, 787 F. Supp. 2d 1099, 1101-04 (E.D. Cal. 2011); Shirk v.
JPMorgan Chase Bank, N.A. (In re Shirk), 437 B.R. 592, 596 n.1
(Bankr. S.D. Ohio 2010); Stewart v. JPMorgan Chase Bank, N.A.
(In re Stewart), 473 B.R. 612, 618 n.2 (Bankr. W.D. Pa. 2012),
aff'd, 2013 U.S. Dist. LEXIS 111516;); Scott v. JPMorgan Chase
Bank, N.A., 154 Cal. Rptr. 3d 394, 401-09 (Ct. App. 2013),
modified 2013 Cal. App. LEXIS 280, rev. denied, 2013 Cal. LEXIS
4861.
Although we think the trial court could have taken judicial
notice of the FDIC's transfer of WAMU's assets to Chase, thus
establishing the first link in MSW Capital's chain of
assignments, it was not necessary for the court to have done so.
While Zaidi's account may have originated with WAMU, the
periodic account statements included in the summary judgment
32 A-6078-11T4 record document credit card transactions between Zaidi and
Chase. Accordingly, if those account statements are properly
admissible then no further proof of Chase's assumption of
Zaidi's account was necessary. The account statements would
establish a direct contractual relationship between Zaidi and
Chase. See Novack v. Cities Serv. Oil Co., 149 N.J. Super. 542,
548 (Law Div. 1977) (noting use of a credit card constitutes
acceptance of the offer of credit in accordance with its terms),
aff'd, 159 N.J. Super. 400 (App. Div.), certif. denied, 78 N.J.
396 (1978). We turn to those periodic account statements now.
Admissibility of the Account Statements
Defendants contend that even if plaintiffs could prove that
they owned the debts on which they sued, their proofs on the
motions for summary judgment were insufficient to establish the
original creditors' contract claims. Specifically, they contend
that the account statements on which plaintiffs relied to
establish the amounts due and owing were hearsay statements
without foundation and thus not competent evidence.12 We
disagree.
12 We reject defendants' contention that plaintiffs needed to present the cardholder agreements in order to prove the contracts giving rise to the debts on which they sued. While production of the cardholder agreement would be required in a suit in which the terms of the agreement were in dispute, no such dispute exists in these cases. Plaintiffs' claims are for (continued)
33 A-6078-11T4 Plaintiffs offered the monthly credit card statements as
business records under N.J.R.E. 803(c)(6). That rule operates
to except from the hearsay rule
A statement contained in a writing or other record of acts, events, conditions, and, subject to Rule 808, opinions or diagnoses, made at or near the time of observation by a person with actual knowledge or from information supplied by such a person, if the writing or other record was made in the regular course of business and it was the regular practice of that business to make it, unless the sources of information or the method, purpose or circumstances of preparation indicate that it is not trustworthy.
[N.J.R.E. 803(c)(6).]
The purpose of the business records exception is to broaden
admissibility of relevant evidence based on principles of
necessity and trustworthiness. Liptak v. Rite Aid, Inc., 289
N.J. Super. 199, 219 (App. Div. 1996). As the Supreme Court
explained in describing the rule's evolution:
It took a long time for the courts to recognize that business conditions and methods demanded relaxation of the strict rules of evidence which banned a merchant's books from lawsuits as self-serving hearsay.
(continued) a sum certain, the balance due on the periodic statement for the last billing cycle; they do not seek interest or attorneys fees at the contract rates. See Chase Bank U.S., N.A. v Staffenberg, 419 N.J. Super. 386, 388 n.1 (App. Div. 2011) (production of cardholder agreement unnecessary where counsel fees awarded as taxed costs pursuant to N.J.S.A. 22A:2-42).
34 A-6078-11T4 Adoption of the shopbook rule stemmed from a realization that mercantile and industrial life is essentially practical, that what is the final basis of calculation, reliance, investment, and general confidence in every business enterprise may ordinarily be resorted to in proof of the main fact, and that what the common experience of man relies upon ought not to be summarily discredited.
[Mahoney v. Minsky, 39 N.J. 208, 217 (1963).]
The Court quoted Professor Wigmore
The merchant and the manufacturer must not be turned away remediless because methods in which the entire community places a just confidence are a little difficult to reconcile with technical judicial scruples . . . . In short, Courts must here cease to be pedantic and endeavor to be practical. 5 Wigmore, Evidence (3d ed. 1940), § 1530, p. 379.
[Ibid.]
The requirements for admitting evidence pursuant to
N.J.R.E. 803(c)(6) are now well-established.
In order to qualify under the business record exception to the hearsay rule, the proponent must satisfy three conditions: "First, the writing must be made in the regular course of business. Second, it must be prepared within a short time of the act, condition or event being described. Finally, the source of the information and the method and circumstances of the preparation of the
35 A-6078-11T4 writing must justify allowing it into evidence."
[State v. Sweet, 195 N.J. 357, 370 (2008) (quoting State v. Matulewicz, 101 N.J. 27, 29 (1985)), cert. denied, 557 U.S. 934, 129 S. Ct. 2858, 174 L. Ed. 2d 601 (2009).]
There is no requirement that the foundation witness possess any
personal knowledge of the act or event recorded. State v.
Martorelli, 136 N.J. Super. 449, 453 (App. Div. 1975), certif.
denied, 69 N.J. 445 (1976). Further, N.J.R.E. 803(c)(6) follows
its federal counterpart, Fed. R. Evid. 803(6), such that
documents may properly be admitted "as business records even though they are the records of a business entity other than one of the parties, and even though the foundation for their receipt is laid by a witness who is not an employee of the entity that owns and prepared them."
[Hahnemann, supra, 292 N.J. Super. at 17 (quoting Saks Int'l, Inc. v. M/V "Export Champion", 817 F.2d 1011, 1013 (2d Cir. 1987) (citation omitted)).]
Acknowledging in Hahnemann that computers had "become part of
everyday life," now "universally used and accepted," we
specifically disapproved "the application of special evidentiary
requirements for computer-generated business records." Id. at
15-16. Instead, we held that:
A witness is competent to lay the foundation for systematically prepared computer records if the witness (1) can demonstrate that the computer record is what the proponent claims and (2) is sufficiently familiar with the
36 A-6078-11T4 record system used and (3) can establish that it was the regular practice of that business to make the record. If a party offers a computer printout into evidence after satisfying the foregoing requirements, the record is admissible "unless the sources of information or the method, purpose or circumstances of preparation indicate that it is not trustworthy."
[Id. at 18 (citation omitted) (quoting N.J.R.E. 803(c)(6)).]
Applying those principles in Garden State Bank v. Graef,
supra, 341 N.J. Super. at 245, we held that an employee of a
successor bank could certify on summary judgment to the loan
history printouts of transactions of its predecessor because the
employee's position rendered him sufficiently familiar with the
record system used to allow him to establish that it was the
regular practice of the predecessor bank to make the record.
Acknowledging "the practicality of bank acquisitions, as a
result of which older records may be lost or destroyed," we held
that the records were sufficient to satisfy the successor bank's
prima facie showing of what it claimed was due on the
outstanding loan, notwithstanding that the records did not
itemize all payments made since the inception of the obligation.
Id. at 246. We reasoned that "[t]he printouts are admissible
because they 'appear[] perfectly regular on [their] face and as
having been issued in the regular course of business prior to
37 A-6078-11T4 the inception of any controversy between the parties.'" Ibid.
(quoting Mahoney, supra, 39 N.J. at 213).
The same is true of the credit card statements included in
the summary judgment record here. Plaintiffs submitted
certifications by employees having personal knowledge of the
books and records of plaintiffs and the transactions whereby
plaintiffs acquired the charged-off debts on which they sued.
The employees certified that they acquired the account
statements attached to their certifications as part of the
purchase of the charged-off debts. The employees certified that
the account statements were true copies and reflected amounts
due their predecessors as of the final billing cycle.
Although defendants assert that there was no explanation of
the transactions and credits reflected on the account
statements, the process is familiar to anyone who has ever paid
a credit card bill. See State v. Swed, 255 N.J. Super. 228, 239
(App. Div. 1992) (noting widespread familiarity with the process
whereby meter readers enter readings into hand-held computers
resulting in the monthly statements received by customers of
PSE&G). These account statements are the types of documents our
courts have long accepted as business records excepted from the
hearsay rule under N.J.R.E. 803(c)(6). See Sears, Roebuck & Co.
v. Merla, 142 N.J. Super. 205, 207-08 (App. Div. 1976)
38 A-6078-11T4 (discussing admissibility of such records under prior Evid. R.
63(13)); Biunno, Weissbard & Zegas, Current N.J. Rules of
Evidence, comment 2 on N.J.R.E. 803(c)(6) (2013).
Even more important in the context of these actions, Rule
6:6-3(a) provides that "if the plaintiff's records are
maintained electronically and the claim is founded on an open-
end credit plan," as defined in 15 U.S.C.A. § 1602(i), the Truth
in Lending Act, and 12 C.F.R. § 226.2(a)(20) (2013), Regulation
Z, as these claims are, "a copy of the periodic statement for
the last billing cycle, as prescribed by 15 U.S.C. § 1637(b) and
12 C.F.R. § 226.7 . . . if attached to the affidavit, shall be
sufficient to support the entry of judgment."
The 1992 Report of the Special Civil Practice Committee
explains the reason for the Rule.
New Jersey law (N.J.S.A. 17:16c- 34.1(b)) brings the kind of credit accounts at issue here within the ambit of the Truth in Lending Act. The credit accounts, such as a Sears charge or Master Card, are defined as "open end credit plans" by the Act and by the implementing regulations, commonly known as Regulation Z, adopted by the Board of Governors of the Federal Reserve System. See 15 U.S.C.A. §1602(i) and 12 C.F.R. §226.2(a)(20). The Act and Regulation Z require the creditor to furnish the consumer with a periodic statement for each billing cycle. 15 U.S.C.A. §1637(b) and 12 C.F.R. §226.7. In reviewing 12 C.F.R. §226.7 the Committee noted the extent of the information required and that subsection (k) requires that the address for
39 A-6078-11T4 notice of billing errors be placed either on the periodic statement or on a summary statement of the consumer's billing rights included with the periodic statement.
The consumer's rights to assert claims and defenses against the issuer of the credit card and to contest billing errors are set forth in detail in 12 C.F.R. §226.12(c) and §226.13, respectively. When the credit account is established the creditor is required by 12 C.F.R. §226.6(d) to furnish the consumer with a detailed statement of those rights, in the form set forth in the appendix to Regulation Z. The creditor is also required by 12 C.F.R. §226.9 to furnish a similar statement of rights to the consumer either annually or with each periodic billing statement. The consumer is advised in these statements that he or she has 60 days from the receipt of a periodic statement containing a billing error to give the creditor notice of the error. The statements and 12 C.F.R. §226.13 set forth the detailed procedures to be followed in resolving the alleged billing error.
In this rather elaborate regulatory context, a logical inference can be drawn from a consumer's failure to assert a billing error that the new balance set forth in the periodic statement is true and correct. Accordingly, the Committee believes that it should be sufficient proof for entry of default judgment, in suits on credit accounts subject to the Truth in Lending Act, if the plaintiff attaches to the affidavit a copy of the periodic statement for the last billing cycle or a computer-generated report setting forth the financial information required to be in that statement.
[1992 Report of the Supreme Court Committee on Special Civil Practice at 33-35.]
40 A-6078-11T4 We have held that Rule 6:6-3(a) provides a guide to the
proofs necessary for the entry of summary judgment in a suit on
a credit card.13 Colvell, supra, 421 N.J. Super. at 6. As the
1992 Report of the Civil Practice Committee makes clear, the
elaborate regulatory requirements for the issuance of credit
cards, including the duty of card issuers to provide detailed
periodic account statements, imbues such statements with
"sufficient indicia of trustworthiness and reliability normally
found in business records" admitted under the Rule. Feldman v.
Lederle Labs., 132 N.J. 339, 354 (1993).
The account statements meet all the foundation requirements
of N.J.R.E. 803(c)(6). Although the certifications submitted by
plaintiffs could have been more specific as to plaintiffs'
acquisition of the account statements in connection with their
purchase of defendants' charged-off credit card debts, we reject
defendants' contention that more was required from plaintiffs'
employees to authenticate the account statements under N.J.R.E.
901 and Hahnemann.
Defendants express significant concern over admitting
electronically-transmitted credit card account statements for
13 As the account statements were before the trial courts in both cases, the concerns we raised in Colvell where such statements were not admitted are not present here. Colvell, supra, 421 N.J. Super. at 6-8.
41 A-6078-11T4 accounts that have been assigned several times, but they have
not pointed to anything in the record to suggest that the
statements proffered by plaintiffs are not trustworthy.14
Carmona v. Resorts Int'l Hotel, Inc., 189 N.J. 354, 380 (2007)
("[t]here is no reason to believe that a computerized business
record is not trustworthy unless the opposing party comes
forward with some evidence to question its reliability.
Hahnemann[, supra, 292 N.J. Super at 18]."). It is not lost on
us that plaintiffs filed their complaints and summary judgment
motions electronically in the Special Civil Part, and that the
judges entered their orders granting the motions in the
Judiciary Electronic Filing and Imaging System (JEFIS), where
they are maintained in electronic case jackets. See Notice to
the Bar: Mandatory Electronic Filing in the Special Civil Part
of the Law Division of the New Jersey Superior Court – Phase Two
1-2 (2010), available at http://www.judiciary.state.nj.us/
14 Zaidi contends that the legend "This Statement is a Facsimile – Not an Original," on the account statements, provides yet another reason for not admitting them, relying on Am. Express Travel Related Servs. v. Vinhee (In re Vee Vinhee), 336 B.R. 437 (B.A.P 9th Cir. 2005) (upholding trial court decision to require foundational evidence of reliability of American Express's computer hardware and software because statements proffered bore term "duplicate copy" as a result of being maintained electronically). In re Vee Vinhee is not in accord with New Jersey case law. See Carmona, supra, 189 N.J. at 380, Biunno, Weissbard & Zegas, supra comment 2 on N.J.R.E. 803(c)(6) (2013).
42 A-6078-11T4 notices/2010/n100722.pdf. Like the litigants that appear in our
courts, our courts are increasingly reliant on electronically
filed and transmitted information.
Finally, defendants contend that the express disclaimers of
representations and warranties in the transfer of these accounts
raise sufficient reliability concerns to bar the admission of
the account statements under N.J.R.E. 803(c)(6). As noted by
the FTC in the reports on which defendants rely, commercial debt
sellers may choose not to warrant account information for
reasons other than the unreliability of that information. The
disclaimers, standing alone, are simply not enough to raise
serious doubt about the dependability of account statements that
appear regular on their face. See Matulewicz, supra, 101 N.J.
at 30. Accordingly, we conclude that the account statements
submitted by plaintiffs are admissible as business records under
N.J.R.E. 803(c)(6), and provide prima facie proof of the amount
due on the debts. See New Century Fin. Servs., Inc. v.
Dennegar, 394 N.J. Super. 595, 599 (App. Div. 2007) (concluding
that the trial judge acted within his discretion in admitting
monthly credit card statements on assigned claim).
The admission of the chain of assignments and account
statements in Zaidi's case did not, of course, assure the entry
of summary judgment. They provided only prima facie proof that
43 A-6078-11T4 MSW Capital is the owner by assignment of Zaidi's Chase-WAMU
charged-off credit card account on which $12,487.36 is due.
Sullivan, supra, 68 N.J.L. at 546-47. But in order to stave off
summary judgment, Zaidi had to come forward with evidence
sufficient to create a genuine issue as to those material facts
on which MSW's prima facie claim was based. Brill, supra, 142
N.J. at 529.
Zaidi failed to come forward with any evidence raising a
genuine dispute as to either the assignments or the account
statements. The trial court found that Zaidi had not offered
anything to dispute his responsibility for the account, the
accuracy of the amount due at charge-off, or his receipt of the
billing statements. Accordingly, we affirm the trial court's
entry of summary judgment in favor of MSW Capital.
We appreciate that the sums in these cases are often modest
and defendants commonly self-represented, but that seems all the
more reason to require that the plaintiffs' proofs be presented
in a clear and straightforward fashion. See Quality Urban Hous.
Partners, supra, 352 N.J. Super. at 543. Plaintiffs' summary
judgment filings were a morass of certifications and exhibits,
with multiple certifications submitted by the same person, often
with exhibits consisting of certifications by other persons.
44 A-6078-11T4 The assignments presented did not consistently identify the
accounts and electronic files by the same names.
In Oughla's case, New Century submitted additional proofs
in opposition to a motion for reconsideration which asserted its
original proofs were inadequate. In Zaidi's case, MSW Capital
submitted additional certifications in response to Zaidi's
cross-motion for summary judgment. We reject defendants'
contention that the judges erred in considering those additional
certifications, such matters are left to the sound discretion of
the trial judge. Capital Fin. Co. of Del. Valley v. Asterbadi,
398 N.J. Super. 299, 310-11 (App. Div.), certif. denied, 195
N.J. 521 (2008). We cannot fail to note, however, that
plaintiffs' presentation of their proofs needlessly complicated
these cases.
The requirements for affidavits in support of summary
judgment on assigned claims are clear. R. 1:6-6; Ford, supra,
418 N.J. Super. at 599-600. Affidavits in which the affiant
fails to identify specifically his position, or explain the
source of his personal knowledge of the facts to which he
attests, or attempts to authenticate attached documents without
explaining precisely what each is and how it came into the
affiant's hands should be rejected. Graef, supra, 341 N.J.
Super. at 245-46. Likewise, trial courts are free to reject any
45 A-6078-11T4 document for which there exists a genuine question of
authenticity. Triffin v. Johnston, 359 N.J. Super. 543, 550-51
(App. Div. 2003). Documents appended to a brief or statement of
material facts, not authenticated in a certification must be
rejected. Celino, supra, 211 N.J. Super. at 544; see also
Pressler & Verniero, Current N.J. Court Rules, comment on R.
1:6-6 (2014).
Although the parties raise various other points in support
of their respective positions, none is of sufficient merit to
warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
We reverse the judgment in A-6078-11, New Century v.
Oughla, and remand for further proceedings. We affirm the
judgment in A-6370-11, MSW Capital v. Zaidi. We do not retain
jurisdiction.
46 A-6078-11T4
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Cite This Page — Counsel Stack
New Century Financial Services v. Oughla Msw Capital, LLC v. Zaidi, Counsel Stack Legal Research, https://law.counselstack.com/opinion/new-century-financial-services-v-oughla-msw-capita-njsuperctappdiv-2014.