2016 VT 33
By Thomas M. Kester
This case concerns debt buying, and debt buying is like horse buying except with paper trails longer than horse tails. The present fact pattern happens every so often and, when it does happen, it is the perfect legal storm to learn how the cavalcade of contracts, business records, unjust enrichment, and standing can plummet like Dorthy’s house onto a creditor.
Unifund, who purchased Defendant’s credit card debt, buys debt at a reduced rate and goes after debtors to collect the debt (“buy low, sue high, and take a minimum ¢ on the $ to settle” philosophy). In this case, Defendant owed a balance of $2,453.22 and statutory pre-judgment interest to Citibank. Citibank assigned the debt to Pilot Receivables Management, LLC (“Pilot”), Pilot assigned to Unifund CCR LLC (“UCL”), and UCL assigned to Unifund. The Pilot ---> UCL ---> Unifund transactions all occurred on the same day.
The first barrier Unifund met was standing and business records. I have delved into standing before, but in this case Unifund had issues asserting that it had properly been assigned the debt as to have standing to sue Defendant. At the trial court, it offered testimony of two witnesses who had “[in]sufficient association with the transaction[s],” and that brought about the trial court’s conclusion that neither witness was “qualified to authenticate the documents as business records.” Not to mention there were “significant inconsistencies” in the assignment between UCL to Unifund, as the documents had different signatories—the document included with the complaint was signed by two people, whereas the document produced at trial was (apparently) signed by two other people. One of the proffered reasons for the inconsistent last name was that one individual “had recently been married.” The big issue, of course, is that the document was signed the same day.
So what is a business record? Under the VT Rules of Evidence, it is a record “(1) . . . ‘kept in the course of regularly conducted business activity,’ (2) that was ‘made at or near the time by, or from information transmitted by, a person with knowledge,’ and (3) it ‘was the regular practice of that business activity to make’ the record.” To determine whether 1-3 are met, a “custodian” or someone else who has knowledge testifies and the business record is meant to “permit the admission of a reliable and accurate record.” However, where the trustworthiness of those documents are called into question, the trial court has discretion to exclude those documents from being entered into evidence. Upon review, because of “significant inconsistencies between the copy of the assignment from UCL to Unifund attached to the complaint and the one produced at trial, and Unifund’s witnesses’ inability to reconcile the discrepancy," the SCOV holds that "the trial court was clearly within its discretion in concluding that the documents . . . were sufficiently unreliable to be admitted under the business records exception.”
As for standing, the trial court found that Unifund only had an assignment and not title, due to what was given to Unifund from Pilot and UCL. Specifically, there was an express reservation of title and ownership in Citibank, and without this title/ownership, Unifund didn’t have standing. However, because the SCOV resolved the business record issue first, it didn’t reach the question of standing.
Next up: unjust enrichment. Its elements are “(1) a benefit was conferred on defendant; (2) defendant accepted that benefit; and (3) it would be inequitable for defendant not to compensate Unifund for its value.” The SCOV’s analysis starts by saying that Unifund (because it didn’t have the title/ownership) was unable to assert this argument. Whether Citibank or someone else in the chain of assignments could have brought this isn’t answered by the SCOV either. What the SCOV tells us is that Unifund, based “on this evidence…was a stranger” to everything involved and cannot recover.