Background
Nora Masoud bought her San Diego home in October 2000 with a loan from Washington Mutual Bank, F.A., secured by a deed of trust, and refinanced with WaMu in 2005. That year WaMu securitized some loans by selling them into trusts under pooling and servicing agreements, including the WaMu Mortgage Pass-Through Certificates Series 2005–AR14 trust. The trust documents initially named WaMu as servicer and LaSalle Bank as trustee; U.S. Bank National Association later became trustee. Chase and U.S. Bank maintained that WaMu transferred Masoud's loan to the AR14 trust, though no assignment was contemporaneously recorded.
WaMu failed in September 2008, and the FDIC as receiver sold substantially all its assets to Chase, which claimed WaMu's servicer role. In February 2011 the banks executed a limited power of attorney letting Chase foreclose as the trustee's agent. Chase initiated foreclosure in September 2011 after Masoud fell behind, recording an assignment of beneficial interests to U.S. Bank as trustee and a notice of default. Her property was sold at a trustee's sale in October 2018.
Masoud sued in October 2015; after the trial court sustained the banks' demurrer without leave to amend, the Court of Appeal reversed and remanded for a wrongful foreclosure claim alleging the loan was never transferred to the AR14 trust, so neither bank had authority to foreclose. The banks moved for summary judgment based on declarations by Dorothy Washington, a Chase authorized signer who never worked at WaMu and relied solely on Chase records, including a one-page 'legal loan listing' printout for the AR14 trust. The trial court overruled Masoud's objections to Washington's declaration, sustained the defendants' objections to Masoud's evidence that her loan was transferred to a different trust, and granted summary judgment.
The Court’s Holding
The Court of Appeal reversed, holding the trial court erred in finding Washington satisfied Evidence Code section 1271's foundation requirements for the AR14 loan listing. The document bore no markings showing it was an exhibit to the pooling and servicing agreement or identifying who created the data or how, and Washington did not explain why she believed it was the PSA's mortgage loan schedule or how it was created, even though section 1271 requires a qualified witness to testify to the mode of preparation in every instance.
The court rejected the argument that Washington could lay foundation merely because Chase now owned the document, citing California authority that a successor creditor's employee cannot lay foundation for the original creditor's records. It declined out-of-state decisions applying rules without the identity-and-mode-of-preparation requirement and found unpersuasive the banks' speculation that no former WaMu employee could be found. Because Washington's testimony that the loan was transferred to the AR14 trust rested solely on an inadmissible document, the trial court also erred in crediting it.
The 2011 assignment, power of attorney, and testimony that the trust held the original note were likewise insufficient even if admissible: without Washington's testimony they showed only that Chase assumed ownership in 2011 and attempted a transfer that year, not a 2005 transfer, and the banks did not explain the note's relevance absent any endorsement to the trust or in blank. With no admissible evidence of the 2005 transfer, reversal was required because a different result would have been probable absent the erroneous rulings; the court expressed no opinion whether the banks could cure the deficiencies later.
Key Takeaways
- A successor bank's employee cannot lay business records foundation for a predecessor's documents merely through current ownership; the witness must know the predecessor's procedures and the mode of preparation.
- Evidence Code section 1271 requires a qualified witness to testify to a record's identity and mode of preparation in every instance.
- A lay witness lacks personal knowledge when testimony rests solely on inadmissible hearsay, and a wrongful foreclosure movant must present admissible evidence of authority to foreclose.
- Courts will not relax established evidentiary standards because a party claims difficulty locating witnesses familiar with a predecessor's records.
Why It Matters
The decision reinforces that California's business records exception demands strict compliance with section 1271's foundational requirements; successor entities cannot bootstrap admissibility of predecessor records through employees unfamiliar with the predecessor's procedures.
It also confirms that summary judgment in wrongful foreclosure cases requires admissible evidence of the foreclosing party's authority, and testimony derived entirely from inadmissible documents will not be credited.
Read the full opinion (PDF) · Court docket