In Harms v. Bank of New York Mellon (In re Harms), BAP No. NC-18-1284-STaB (July 9, 2019), the Ninth Circuit Bankruptcy Appellate Panel (“BAP”) held that an assignee of a beneficial interest under a deed of trust had established its standing to seek relief from the automatic stay by producing a declaration by the assignee’s agent confirming that the agent was in possession of the original promissory note. The dispute between the parties arose from a promissory note (“Note”) secured by a deed of trust which had been assigned to Bank of New York Mellon (“BONYM”). The Debtor asserted that BONYM had not presented admissible or sufficient evidence to support its claim that it possessed the original Note or otherwise was entitled to enforce the Note. The BAP reviewed a supplemental declaration filed by BONYM (“Declaration”) where the declarant (“Declarant”) identified herself as the Assistant Vice President for Bank of America, N.A. (“BofA”), the servicing agent for BONYM. In the Declaration, the Declarant stated she had reviewed the collateral file maintaining the Debtor’s loan and was able to confirm that BofA was and is in possession of the original Note. The Debtor objected that (1) Declarant had not claimed to have personally seen the Note or personally verified BONYM’s possession of the Note, and (2) Declarant’s knowledge was based on inadmissible hearsay.
In reaching its holding, the BAP cited to Veal v. Am. Home Mortgage Serv., Inc. (In re Veal), 450 B.R. 897, 914 (9th Cir. BAP 2011), which stated that the moving creditor may establish both its colorable claim and its standing by showing that it, or its agent, has possession of the original promissory note indorsed in blank. The BAP found that the bankruptcy court had not erred in relying upon the Declaration to find that BofA was servicing the loan for BONYM and that her statements regarding the records in question were not subject to the ordinary personal knowledge requirement as she was a foundation witness and competent to testify as to BofA’s ordinary course of business. Additionally, to the extent that the Debtor challenged the Declarant’s ability to qualify as a witness for BofA’s business records, the BAP found that the Declaration met the business records exception under Fed. R. Evid. 803(6) to the hearsay rule. The BAP cited to United States v. Ray, 930 F.2d 1368, 1370 (9th Cir. 1990), as amended on denial of reh’g (April 23, 1991), which demonstrated that the Ninth Circuit liberally construes what is meant to be a qualified witness for purposes of the business exception rule – the witness need not be the custodian of record, but only needs to demonstrate that s/he is familiar with, and understands, the record keeping system. In this case, the Declaration established that the Declarant was qualified to lay the foundation for BofA’s business records.