Opinion
No. 2012AP2394.
2014-10-2
BANK OF AMERICA, N.A., as successor by merger to BAC Home Loans Servicing, L.P., Plaintiff–Respondent, v. Gary L. FINEOUT and Susan G. Fineout, Defendants–Appellants, Mortgage Electronic Registration Systems, Inc. and Dane County Clerk of Circuit Court, Defendants, Gary L. Fineout and Susan G. Fineout, Third–Party Plaintiffs, v. Badger Funding Corp., Third–Party Defendant.
(Quoting another source and footnotes omitted.) Applying this standard, we conclude that, even assuming that Countrywide's 2007 note refinancing the Fineouts' home loan was procedurally unconscionable, the Fineouts have failed to establish that it was substantively unconscionable.
Appeal from a judgment of the circuit court for Dane County: Maryann Sumi, Judge. Affirmed.
Before LUNDSTEN, HIGGINBOTHAM and SHERMAN, JJ. ¶ 1 HIGGINBOTHAM, J.
Gary and Susan Fineout appeal a judgment of foreclosure entered in favor of Bank of America, N.A., as successor by merger to BAC Home Loans Servicing, L.P. following a trial to the circuit court. The Fineouts contend that the circuit court erroneously exercised its discretion by admitting testimony from a Bank of America employee that the Fineouts argue constituted inadmissible hearsay and by admitting two loan documents under the exception to the hearsay rule for records of a regularly conducted activity, set forth in Wis. Stat. § 908.03(6) (2011–12).
With respect to these issues, the Fineouts fail to persuade us that the circuit court erred.
All references to the Wisconsin Statutes are to the 2011–12 version unless otherwise noted.
¶ 2 The Fineouts also argue on appeal that the circuit court erred by granting Bank of America's motion for partial summary judgment and dismissing the Fineouts' two counterclaims to the foreclosure action. The Fineouts filed counterclaims against Countrywide Home Loans, Inc., the predecessor to Bank of America, alleging that Countrywide's refinancing of the Fineouts' mortgage loan was unconscionable and that Countrywide violated Wisconsin's mortgage banker laws. We conclude that the court properly dismissed the Fineouts' unconscionability counterclaim because, even assuming that the refinancing loan agreement was procedurally unconscionable, the Fineouts have failed to establish that it was commercially unreasonable and therefore substantively unconscionable. We further conclude that the court properly dismissed the counterclaim alleging violations of Wisconsin mortgage banker laws because the Fineouts failed to allege any facts in support of that counterclaim. Accordingly, we affirm.
¶ 23 A record is admissible under the exception to the hearsay rule for records of a regularly conducted activity when it can be shown that the record was “made at or near the time by, or from information transmitted by, a person with knowledge, all in the course of a regularly conducted activity, as shown by the testimony of the custodian or other qualified witness.” Wis. Stat. § 908.03(6). As we explained in Palisades, the exception requires that “a testifying custodian ... be qualified to testify that the records (1) were made at or near the time by, or from information transmitted by, a person with knowledge; and (2) that this was done in the course of a regularly conducted activity.” Palisades, 324 Wis.2d 180, ¶ 20, 781 N.W.2d 503. To be qualified on these two points, the witness must have personal knowledge of how the account statements were prepared and that they were prepared during the course of a regularly conducted activity. See id., ¶ 21; Bank of America NA v. Neis, 2013 WI App 89, ¶ 21, 349 Wis.2d 461, 835 N.W.2d 527. A qualified witness does not need to be the original owner of the records, the author of the records, or have personal knowledge of the events recorded. Palisades, 324 Wis.2d 180, ¶¶ 20, 22, 781 N.W.2d 503. However, the witness must have personal knowledge of how the records were prepared or created. Id.
¶ 24 The Fineouts argue that the circuit court erred in admitting the Account Information Statement and the Loan Payment History because Bank of America failed to present sufficient testimony to meet the requirements for admissibility of the records, under Wis. Stat. § 908.03(6). As discussed, the circuit court admitted these records into evidence, over the Fineouts' objections, based on Hosni's testimony. The Fineouts contend that Hosni was not qualified to testify under § 908.03(6) because her testimony failed to demonstrate that she had personal knowledge (1) that these records were generated contemporaneously, (2) about who transmitted the records or how the records were created, and (3) that the records were created in the ordinary course of business by Bank of America, Countrywide, and BAC Home Loans. Bank of America responds that the records were properly admitted because the records were supported by sufficient testimony from Hosni, who, the Bank asserts, was a qualified witness under Palisades. We conclude that the Fineouts have failed to present a developed argument showing that Bank of America failed to meet its initial burden to establish that Hosni was qualified to testify.
¶ 25 The Fineouts first argue that Hosni did “not demonstrate her knowledge of the Account Information Statement's or Loan Payment History's contemporaneousness.” In support, the Fineouts point to facts taken from Hosni's testimony that, at the time of her testimony, she had been employed with Bank of America for only ten months, and that she had not been employed by Countrywide or BAC Home Loans. The Fineouts also argue that Hosni's testimony does not establish she had personal knowledge of the procedures Countrywide and BAC Home Loans used to create and process the Account Information Statement or Loan Payment History. In support, the Fineouts point to Hosni's testimony that she had not received any training or observed how Bank of America's payment processing group create these records and that she “did not know what a payment processor even looks at to enter the data it receives.”
¶ 26 Assuming that the Fineouts' characterization of Hosni's testimony is supported by the record, the Fineouts fail to explain why these facts have any legal significance regarding the admissibility of these records under Wis. Stat. § 908.03(6). The Fineouts do not present a developed legal analysis and then apply that analysis to the facts here. For example, the Fineouts do not point to any settled law explaining what is necessary to show personal knowledge and why Hosni's testimony does not meet that standard. Rather, the Fineouts simply allege that Hosni's testimony is insufficient. We do not weigh in on whether Hosni's testimony is or is not sufficient. Rather, we conclude that the Fineouts' argument is not sufficiently developed and therefore we do not consider it further. See State v. Pettit, 171 Wis.2d 627, 646, 492 N.W.2d 633 (Ct.App.1992) (this court declines to address undeveloped arguments on appeal).
¶ 27 The Fineouts second argument is similarly undeveloped. The Fineouts contend that Hosni failed to establish that she had personal knowledge as to who transmitted the records or how the records were created. The Fineouts' analysis on this topic, however, consists mainly of the forfeited argument that the pertinent part of Hosni's testimony is hearsay. We acknowledge that the Fineouts also contend that “Hosni did not know which department entered the information, what information or documents were given to the person entering the information, or from where that person received the information.” But this is just more of the same: factual assertions without a legal framework supporting the proposition that the facts are insufficient. Once again, we do not weigh in on whether the testimony is sufficient, but instead reject the argument as insufficiently developed.
¶ 28 The Fineouts' third argument is also undeveloped. The Fineouts argue generally that Hosni did not demonstrate that she had personal knowledge that the records were made in the ordinary course of Bank of America's business, without any legal analysis or support from legal authority. As with the Fineouts' two previous undeveloped arguments, we see no reason to address this argument here. Accordingly, we conclude that the circuit court properly admitted into evidence records of the Fineouts' Account Information Statements and Loan Payment History. II. The Fineouts' Counterclaims
¶ 29 As we have indicated, the Fineouts brought two counterclaims against Bank of America, as the successor to Countrywide: (1) that Countrywide's refinancing of the Fineouts' loan was unconscionable; and (2) that Countrywide violated Wisconsin's mortgage banking laws. We address each topic in turn.
A. Unconscionability
¶ 30 The Fineouts contend that the circuit court erred in granting Bank of America's motion for partial summary judgment, dismissing the Fineouts' counterclaim that Countrywide's refinancing of the loan was unconscionable. We disagree.
¶ 31 We review a grant of summary judgment de novo, applying the same methodology as the circuit court. State v. Bobby G., 2007 WI 77, ¶ 36, 301 Wis.2d 531, 734 N.W.2d 81. Summary judgment is appropriate when the affidavits and other submissions show that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2).
¶ 32 Our supreme court explained in Wisconsin Auto Title Loans, Inc. v. Jones, 2006 WI 53, ¶¶ 29, 33–36, 290 Wis.2d 514, 714 N.W.2d 155, the requirements a party must prove in order to prevail on a claim of unconscionability:
For a contract or a contract provision to be declared invalid as unconscionable, the contract or contract provision must be determined to be both procedurally and substantively unconscionable.
....
A determination of unconscionability requires a mixture of both procedural and substantive unconscionability that is analyzed on a case-by-case basis....
Determining whether procedural unconscionability exists requires examining factors that bear upon the formation of the contract, that is, whether there was a “real and voluntary meeting of the minds” of the contracting parties. The factors to be considered include, but are not limited to, age, education, intelligence, business acumen and experience, relative bargaining power, who drafted the contract, whether the terms were explained to the weaker party, whether alterations in the printed terms would have been permitted by the drafting party, and whether there were alternative providers of the subject matter of the contract.
Substantive unconscionability addresses the fairness and reasonableness of the contract provision subject to challenge. Wisconsin courts determine whether a contract provision is substantively unconscionable on a case-by-case basis.
No single, precise definition of substantive unconscionability can be articulated. Substantive unconscionability refers to whether the terms of a contract are unreasonably favorable to the more powerful party. The analysis of substantive unconscionability requires looking at the contract terms and determining whether the terms are “commercially reasonable,” that is, whether the terms lie outside the limits of what is reasonable or acceptable. The issue of unconscionability is considered “in the light of the general commercial background and the commercial needs.”
(Quoting another source and footnotes omitted.) Applying this standard, we conclude that, even assuming that Countrywide's 2007 note refinancing the Fineouts' home loan was procedurally unconscionable, the Fineouts have failed to establish that it was substantively unconscionable.
¶ 33 The Fineouts contend that the 2007 note was substantively unconscionable on three grounds: (1) the refinancing resulted in a $13,000 increase in the principal amount of the loan; (2) “Countrywide's incentive [for refinancing] was to increase the principal rather than work on a more reasonable modification”; and (3) Countrywide “falsified their documents and advised the Fineouts to enter into a loan based on nonexistent, fraudulent income,” which the Fineouts had no opportunity to review until the date of the closing. According to the Fineouts, Countrywide did not take steps to verify that the Fineouts could afford the increase in principal, and therefore the refinancing was commercially unreasonable. There is no merit to the Fineouts' arguments.
¶ 34 The primary flaw in the Fineouts' arguments is that they fail to point to any terms of the loan refinancing note in support of their position that the note is substantively unconscionable. See id., ¶ 36 (substantive unconscionability is determined by looking at whether the terms of a contract are “commercially unreasonable”). This is true of all three arguments, but in particular to the Fineouts' second and third contentions. To the extent the Fineouts argue that the provision increasing the principal of the loan by $13,000 is unfair, they do not present a developed argument explaining how the relatively small increase in the loan's principal was problematic nor do they show that the refinanced interest rate fell outside the prevailing rates of the day or that the terms governing payment were otherwise commercially unreasonable.
¶ 35 The Fineouts also fail to explain how their ultimate inability to repay the refinanced loan affects the reasonableness of any provision of the note. If the Fineouts mean to suggest that Countrywide should not have agreed to refinance the Fineouts' loan because it should have been obvious to Countrywide that the Fineouts would be unable to make the monthly payments, they do not support that argument with a factual discussion showing that Bank of America should have known that the Fineouts could not afford the repayment schedule.
¶ 36 Finally, the Fineouts have failed to explain why it was unfair for Countrywide to increase the loan principal in the refinancing. Although the Fineouts complain about Countrywide's refinancing, they do not present developed argument with a discussion about the facts demonstrating that increasing the loan principal in the refinancing was unfair.
¶ 37 For all of the above reasons, we conclude that the Fineouts have failed to demonstrate that the terms of the 2007 note refinancing the Fineouts' home loan with Countryside was commercially unreasonable, and thus substantively unconscionable. Accordingly, we conclude that the circuit court properly granted partial summary judgment to Bank of America, dismissing the Fineouts' unconscionability counterclaim.
B. Wisconsin's Mortgage Banker Laws
¶ 38 The Fineouts contend that the circuit court erred in dismissing the Fineouts' counterclaim at the summary judgment stage, where they argued that Countrywide violated Wisconsin's mortgage banker laws. The circuit court dismissed the counterclaim on the ground that the Fineouts had not presented any facts to show that they were “aggrieved” by Countrywide's refinancing, and therefore, the Fineouts lacked standing to bring a private cause of action under the mortgage banker statute. The Fineouts argued in the circuit court that they were aggrieved because “Countrywide had prepared deceptive documents that led to a larger loan [that] they could not afford” and “led them to believe this new set of loans would resolve their complaints when in reality they achieved very little on the monthly payment.”
¶ 39 In determining whether Bank of America was entitled to partial summary judgment dismissing the Fineouts' mortgage banker counterclaim, we first examine the pleadings “to determine whether claims have been stated and material factual issues [are] presented.” Tews v. NHI, LLC, 2010 WI 137, ¶ 4, 330 Wis.2d 389, 793 N.W.2d 860. “Whether a complaint is sufficient to entitle a party to relief on a particular claim presents a question of law, which we review de novo.” Town of Brockway v. City of Black River Falls, 2005 WI App 174, ¶ 12, 285 Wis.2d 708, 702 N.W.2d 418.
¶ 40 We conclude that the circuit court properly granted Bank of America's motion for partial summary judgment on the Fineouts' mortgage banker counterclaim because the Fineouts' complaint fails to plead any facts to support that claim. The Fineouts alleged generally in their counterclaim that Countrywide “engaged in improper, fraudulent, or dishonest dealings,” in violation of Wis. Stat. § 224.77(1)(m), and “demonstrated incompetency to act as a mortgage broker,” in violation of § 224.77(1)(L), (i). However, the Fineouts did not plead any facts in support of this counterclaim. Although Wisconsin is a notice pleading state, see Wolnak v. Cardiovascular & Thoracic Surgeons of Cent. Wisconsin, S.C., 2005 WI App 217, ¶ 47, 287 Wis.2d 560, 706 N.W.2d 667; Wis. Stat. § 802.02, even in a notice pleading state, a pleading “cannot be completely devoid of factual allegations.” Doe v. Archdiocese of Milwaukee, 2005 WI 123, ¶¶ 35, 36, 284 Wis.2d 307, 700 N.W.2d 180. Rather, a pleading must contain a statement of the general facts supporting the claim presented. See Town of Brockway, 285 Wis.2d 708, ¶ 14, 702 N.W.2d 418. Here, the Fineouts' counterclaim alleging violations of certain mortgage banker laws is devoid of any supporting facts.
¶ 41 We conclude that, because the Fineouts do not allege sufficient facts in support of their counterclaim that Countrywide violated Wisconsin's mortgage banker laws, the circuit court properly granted partial summary judgment to Bank of America, dismissing that counterclaim.
CONCLUSION
¶ 42 In sum, we conclude that the circuit court reasonably exercised its discretion by admitting into evidence the challenged testimony from Hosni and the challenged documents. We also conclude that the court properly granted Bank of America partial summary judgment, dismissing the Fineouts' two counterclaims. Accordingly, we affirm.
Judgment affirmed.
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