Portfolio Recovery Assocs., LLC v. Strifler, No. 420-10-10 Bncv (Wesley, J., Sept. 2, 2011)

[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
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                                                      STATE OF VERMONT

SUPERIOR COURT                                                                  CIVIL DIVISION
Bennington Unit.                                                                Docket No. 420-10-10 Bncv

PORTFOLIO RECOVERY ASSOCIATES, LLC
    Plaintiff

            v.

EVELYN STRIFLER,
    Defendant

                    FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

         This is an action on an open account in which Plaintiff Portfolio Recovery Associates
(“PRA”) seeks to recover $6,967.97 in past due credit card charges from Defendant Evelyn
Strifler. A merits hearing was held on March 31, 2011 at which PRA was represented by
attorney Gwendolyn Harris, and Defendant appeared without legal representation.

Discussion of Evidence

         The witnesses a trial were Elaine Lark, the custodian of records for PRA, and Ms.
Strifler. Based upon the evidence presented, and as further discussed below, the Court concludes
that PRA has not met its burden of proof as to either its ownership of an account identified to
Ms. Strifler, or as to the amount outstanding on any such account.

       PRA buys large amounts of distressed credit card debt from various banks after it is has
been “charged off” for tax reasons in compliance with federal law. On January 29, 2010, PRA
purchased a portfolio of delinquent credit card accounts from HSBC Card Services, Inc.
(“HSBC”). PRA alleges that one of these accounts was associated with the Defendant, and that
she now owes it money for the outstanding balance. In support of this contention plaintiff
offered the following exhibits as evidence:

           Exhibit 1.             A bill of sale indicating that HSBC sold to PRA “certain Purchased
                                  Receivables…listed on the attached Exhibit A”. This document was
                                  signed by HSBC and showed an execution date of January 29, 2010.
                                  “Exhibit A” was not attached, nor was it otherwise introduced as
                                  evidence.1

           Exhibit 2.             A spreadsheet of information purportedly describing the account of Ms.
                                  Strifler, including her name, account number, phone number, last date of
                                  payment, last purchase, her social security number, outstanding balance,

1
 Ms. Lark testified that “Exhibit A” was not produced because of confidentiality concerns. She also conceded that
nothing in Exhibit 1 establishes that the account subject to this action was sold in accordance with this Bill of Sale,
but that she was sure that “Exhibit A” listed Ms. Strifler’s account based on the dates.
                       and other information. This information was sent by HSBC to PRA in
                       connection with the bulk asset sale.

       Exhibit 3.      An affidavit of the Department Manager of Debt Sales of HSBC
                       indicating that all electronic records sent “on or about January 26, 2010”
                       were kept in the ordinary course of business.

       Exhibit 4.      A cardholder agreement from Union Plus Credit Card (“Union Plus”)
                       dated November 2005. This document is not signed by Ms. Strifler, nor
                       does it specifically reference any particular account. It does state that
                       “HSBC Card Services and/or HSBC Card Services (II) Inc. provides
                       processing services for HSBC Bank Nevada, N.A.”

       Exhibit 5-8.    Various “Postal Workers Mastercard” credit card statements from 2008 to
                       2009 indicating that Ms. Strifler failed to make payments to an entity
                       called Union Plus Credit Card.

        These exhibits were admitted based on the testimony of Ms. Lark. She stated that she is
familiar with the accounting practices and maintenance of records at PRA, and that these
documents are part of PRA’s business records. She also stated that PRA did not receive the full
history of this account—listing all purchases and payments—from HSBC.

        In response, Ms. Strifler testified that she had several credit cards in the past and
specifically remembered the Postal Workers Mastercard. She stated that she was looking at “a
totally different account number” for that card, and could not recall ever dealing with HSBC
bank regarding any credit card. She also explained that she had borrowed from family members
to pay off her credit cards and that she believed that she could have already paid the balance on
this card.

Conclusions of Law

        PRA’s case is premised entirely on the documents submitted into evidence without
objection by the self-represented Defendant. While these exhibits are now part of the record, the
Court considers their admissibility under the rules of evidence to aid in its determination of the
appropriate weight to be given to these documents.

        The eight exhibits are classic examples of hearsay. V.R.E. 801(c). These documents
were offered as PRA’s business records under V.R.E. 803(6), and the only foundation was the
testimony of Ms. Lark. Under the rules of evidence, admission of a document as a business
record requires (1) that it be “made at or near the time” of the events in question, (2) that it be
made “by, or from information transmitted by, a person with knowledge,” (3) that it was kept in
the course of regularly conducted business, and (4) that it was the regular practice of the business
to make the record. V.R.E. 803(6). This must be “shown by the testimony of the custodian or
other qualified witness.” Id. While PRA has generally met those requirements for its own
records, the HSBC data incorporated in those records is itself hearsay.



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       As explained by the recent Vermont Superior Court case of Unifund CCR Partners v.
Bonfigli, No. S1295-08 CnC (Vt. Sup. Ct. May 5, 2010)(Toor, J.):

         Generally, the business records exception to the hearsay rule requires that the
         record “be made at or near the time by, or from information transmitted by, a
         person within the business with firsthand knowledge.” M. Graham, Vol. 3B
         Federal Practice and Procedure: Evidence § 7047 (Interim Edition, 200)
         (emphasis added). Thus, “[i]f the supplier of the information does not act in the
         regular course, an essential link is broken; the assurance of accuracy [which
         underlies the business records exception] does not extend to the information
         itself…” Id.
                                              * * *
         In other words, the handoff of a collection of data from Party A to Party B,
         without any foundation as to its admissibility while the records of Party A, does
         not make it somehow admissible as the records of Party B merely because it is
         now in Party B’s business files.

        Records adopted by a business, though created by another business, may become the
business records of the second entity. However, there must be some assurances that that the
underlying records were reliable to begin with. See Bell v. State, 176 S.W.3d 90, 92 (Tex. App.
2004) (requiring, in addition to incorporation and reliance, that “the circumstances otherwise
indicate the trustworthiness of the document”); Cockrell v. Republic Mortgage Ins. Co., 817
S.W.2d 106, 112 (Tex. App. – Dallas, 1991) (“A document can comprise the records of another
business if the second business determines the accuracy of the information generated by the first
business.”).

        Here, PRA has made no showing that the documents sent by HSBC are trustworthy or
otherwise reliable. The lone document which could potentially support this contention is a letter
signed by Stuart Austin, the “custodian of the creditor’s books and records” of HSBC (Exhibit
3).2 This letter states that Mr. Austin is “aware of the process of the sale and assignment of
electronically stored business records” and:

         On or about January 26, 2010, [HSBC] sold a pool of charged-off accounts by a
         Purchase Sale Agreement and Bill of Sale to [PRA]. As part of the sale of the
         Accounts, electronic records and other records were transferred on individual
         accounts to the debt buyer. These records were kept in the ordinary course of
         business of [HSBC]. I am not aware of any errors in these accounts. The above
         statements are true to the best of my knowledge.

         This letter does not establish that the records transmitted by HSBC to PRA are reliable.
It is broad and fails to explain Mr. Austin’s relationship to the records generally, to say nothing
of the records at issue in this case, particularly as regards any attestation that the records were

2
 The Court notes that this letter is itself hearsay, V.R.E. 801(c), and does not meet the test of a certificate for self-
authentication established by V.R.E.902(11). See, Asset Acceptance LLC v. Godfrey, Doc. No. 343-6-09 Wmcv
(Opinion & Order, 7/15/2011)(Wesley, J.)

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made at or near the time of the occurrence of the matters set forth by, or from information
transmitted by, a person with knowledge of those matters. In addition, Mr. Austin’s letter refers
to documents transferred in connection with a sale occurring “on or about January 26, 2010.”
The Bill of Sale admitted as evidence in this case shows a sale date of January 29, 2010. This
discrepancy in the date underscores the questionable reliability of the underlying documents.

        Even taking at face value the information contained in Plaintiff’s exhibits, the inferences
which must be made to establish PRA’s ownership of the account are exceedingly large. First,
PRA asks the court to infer that the Union Plus Agreement is related to Ms. Strifler’s account.
This agreement does not reference Ms. Strifler’s account and is dated three years prior to the
statements admitted into evidence. Notwithstanding these inconsistencies, PRA insists that this
is the card holder agreement which would have been issued to Ms. Strifler for the Postal Workers
Mastercard.

        PRA then asks the Court to infer from the Union Plus Agreement that HSBC—
presumably as either holder, assignee, agent or successor, though the evidence fails to establish
which—may transfer delinquent accounts apparently owned by Union Plus. Yet, the agreement
only references HSBC in passing, and delineates no explicit relationship between the two.3
Finally, PRA asks the Court to infer that HSBC did in fact transfer Ms. Stifler’s Union Plus
account to PRA pursuant to the January 29, 2010 Bill of Sale (Exhibit 1). However, because
PRA has not entered in evidence a list of accounts transferred pursuant to the purported Bill of
Sale, there is no way for the Court to objectively verify that this account was actually sold.

       Finally, in light of the incomplete transaction records included in the bulk purchase
transmission, and the absence of any authentication by a person within HSBC with first-hand
knowledge, the Court is unable to credit that the amount claimed due at write-off is the accurate
balance owed on the account.

        In sum, the evidence in this case is of questionable reliability and the proof of ownership
of the debt relies on unsupported inferences. Under these circumstances, any holding that PRA
owns this debt would be mere guess or conjecture, as would PRA’s claim as to the outstanding
balance, reached only by piling inference upon inference to build a smoke ladder into the skies of
irresponsible speculation.

         Based on the foregoing, it is hereby ORDERED:

         Judgment is GRANTED to Defendant, and the complaint is DISMISSED.

         DATED                                , at Bennington, Vermont,

                                              ______________________
                                              John Wesley
                                              Superior Court Judge

3
  PRA also explains that HSBC would not have acquired or transmitted Ms. Strifler’s account data unless it had the
ability to transfer the underlying debt; this proposition represents an elegant piece of logic, but it cannot suffice to
cure the many uncertainties afflicting Plaintiff’s burden of proof as discussed above.

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