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COURT OF APPEALS
NOTICE
DECISION
DATED AND FILED                                                                      This opinion is subject to further editing.   If
published, the official version will appear in
the bound volume of the Official Reports.
September 29, 2011
A party may file with the Supreme Court a
A. John Voelker                                                                                                                          petition to review an adverse decision by the
Acting Clerk of Court of Appeals                                                                                                         Court of Appeals.   See WIS. STAT. § 808.10
                                                                                                                                         and RULE 809.62.
                                                                                                                                         Cir. Ct. No.   2009CV749
Appeal No.                                                                           2010AP2334
STATE OF WISCONSIN                                                                                                                       IN COURT OF APPEALS
                                                                                                                                         DISTRICT IV
BAC HOME LOAN SERVICING, L.P. F/K/A COUNTRYWIDE
HOME LOANS SERVICING L.P.,
PLAINTIFF-RESPONDENT,
V.
MICHAEL J. WILLIAMS AND NICOLE J. WILLIAMS,
DEFENDANTS-APPELLANTS.
APPEAL from a judgment of the circuit court for Sauk County:
JAMES EVENSON, Judge.  Reversed and cause remanded.
Before Lundsten, P.J., Sherman and Blanchard, JJ.
¶1                                                                                   PER  CURIAM.       Michael  and  Nicole  Williams   (collectively,
Williams)  appeal  a  summary  judgment  order  that  granted  BAC  Home  Loan
Servicing (BAC) a judgment of foreclosure against them.   Williams raises multiple




No.   2010AP2334
arguments  challenging  the  judgment  of  foreclosure,  and  further  contends  the
circuit court erred in denying the counterclaims by an earlier order.   We conclude
that the circuit court properly dismissed the counterclaims, but that the summary
judgment materials were insufficient to establish that BAC was the holder of the
note  upon  which  the  foreclosure  was  based.    Accordingly,  we  reverse  the
judgment of foreclosure and remand for further proceedings.
BACKGROUND
¶2                                                                                        On January 25, 2008, Williams executed a promissory note in favor
of  One  Choice  Mortgage,  LLC,  secured by a  mortgage  on certain residential
property in Sauk County.   On August 7, 2009, BAC filed this action, seeking to
foreclose on the property without deficiency, pursuant to WIS. STAT. § 846.101
(2009-10).1
¶3                                                                                        BAC alleged in its complaint that it was the current holder of the
note and mortgage, and that Williams had failed to make contractually required
payments.    Williams  filed  an  answer,  subsequently  amended,  admitting  that
Williams had failed to make payments, but raising a series of affirmative defenses.
Williams   also set forth a series of counterclaims seeking damages for the alleged
failure of BAC (and/or its predecessors in interest) to comply with several federal
administrative  code  provisions  and  for  negligence,  product  liability,  lender
liability, and strict liability.   BAC moved to dismiss the counterclaims and further
sought summary judgment on the foreclosure.
1  All references to the Wisconsin Statutes are to the 2009-10 version unless otherwise
noted.
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No.   2010AP2334
¶4                                                                                    The summary judgment materials included certified copies of the
original note and mortgage, which were both issued to One Choice Mortgage
through  its  nominee  Mortgage  Electronic  Registration  Systems,  Inc.,  and  an
uncertified photocopy of an “Assignment of Mortgage” form.   This form stated
that  Mortgage  Electronic  Registration  Systems,  Inc.                              “assigns  to  BAC  …  the
mortgage executed by  [Williams] to Mortgage Electronic Registration Systems
Inc., as mortgagee on the  25th of January,  2008, together with the previously
transferred note secured thereby ….”   The assignment form was accompanied by
an  affidavit  from  a  BAC  employee.    The  employee  averred  that  she  was  a
custodian of BAC’s business records, having
possession,  control  and  responsibility for  the  accounting
and other mortgage loan records relating to the defendants’
mortgage loan which are created and kept and maintained
in the ordinary course of business as a regular business
practice  and  are  prepared  at  or  near  the  time  of  the
transaction or event by a person with knowledge.
The affidavit further stated that the employee had personally inspected the records
relating to Williams, and had personal knowledge of how such records generally
were created and kept and maintained.
¶5                                                                                    The circuit court dismissed the counterclaims and granted summary
judgment on the foreclosure, and Williams appeals.
STANDARD OF REVIEW
¶6                                                                                    This court reviews summary judgment decisions de novo, applying
the  same  methodology  and  legal  standard  employed  by  the  circuit  court.
Brownelli v. McCaughtry, 182 Wis. 2d 367, 372, 514 N.W.2d 48 (Ct. App. 1994).
We first examine the complaint to determine whether it
states a claim, and then we review the answer to determine
whether it joins a material issue of fact or law.… [Next,]
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No.   2010AP2334
we  examine  the  moving  party’s  affidavits  to  determine
whether  they  establish  a  prima  facie  case  for  summary
judgment.    If  they do,  we look to  the opposing party’s
affidavits to determine whether there are any material facts
in dispute that entitle the opposing party to a trial.
Frost v. Whitbeck,  2001 WI App  289,  ¶6,  249 Wis.  2d  206,  638 N.W.2d 325
(citations omitted), aff’d, 2002 WI 129, 257 Wis. 2d 80, 654 N.W.2d 225.
DISCUSSION
Summary Judgment on the Foreclosure
¶7                                                                                    Although Williams raises multiple arguments, we conclude that one
issue is dispositive as to whether summary judgment was properly granted on
BAC’s foreclosure action.   Specifically, we agree with Williams that BAC failed
to make a prima facie case that it was in fact the current holder of the promissory
note.
¶8                                                                                    We first question whether the form assigning the mortgage to BAC,
and making reference to a “previously transferred note” was actually the effective
instrument transferring the promissory note to BAC.   If the note had in fact been
previously transferred, it would seem that the prior document would be necessary
to establish that transfer, and should have been included in the summary judgment
materials.   In any event, as discussed below, even assuming that the document
assigning  the  mortgage  to  BAC  also  assigned  the  promissory  note  or  could
properly be used to document the assignment by reference, we conclude that the
assignment  document  was  insufficiently  authenticated  to  satisfy  the  summary
judgment standard.
¶9                                                                                    Affidavits  in  support  or  in  opposition  to  a  motion  for  summary
judgment                                                                              “shall  be  made  on  personal  knowledge  and  shall  set  forth  such
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No.   2010AP2334
evidentiary facts as would be admissible in evidence.”   WIS. STAT. § 802.08(3).   In
order  to  be  admissible  in  evidence,  a  document  must  be  authenticated  by
“evidence sufficient to support a finding that the matter in question is what its
proponent  claims.”    WIS.  STAT.                                                        § 909.01.    Certain  documents  may  be  self-
authenticating,  including  certified  copies  of  public  records  such  as  recorded
instruments, and certified domestic records of regularly conducted activity.   WIS.
STAT.  § 909.02(4)  and  (12).    The  rule  on  self-authentication  for  records  of
regularly  conducted  activity  parallels  the  hearsay  exception  for  such  records,
allowing admission of
a memorandum, report, record, or data compilation, in any
form,  of  acts  events,  conditions,  opinions,  or diagnoses,
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.
Cf. WIS. STAT. §§ 908.03(6) and 909.02(12).
¶10    A  records  custodian  seeking  to  authenticate  a  record  must  be
qualified  to  testify both  that the  record at  issue  was  made  by a  person  with
knowledge or from information transmitted by a person with knowledge, and that
this was done in the course of a regularly conducted activity.   Palisades Collection
LLC v. Kalal, 2010 WI App 38, ¶20, 324 Wis. 2d 180, 781 N.W.2d 503.   Being
qualified means that the custodian possesses sufficient personal knowledge to
testify about such things as who recorded or transmitted the information and the
contemporaneousness  of  the  record  in  relation  to  the  events  it  purports  to
document.   See id., ¶16.
¶11    We  first  note  that  the  copy  of  the  mortgage  assignment  form
included in the summary judgment materials here was not certified, and therefore
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No.   2010AP2334
would not be admissible as a self-authenticated public record, even if it were
recorded.   Next, we question whether a form assigning a mortgage or promissory
note  from  one  party  to  another  based  upon  consideration,  constitutes            “a
memorandum, report, record, or data compilation” so as to qualify as a record of
regularly conducted activity, subject to the self-authentication rule.
¶12    Even assuming for the sake of argument only that such a signed,
notarized, and recorded instrument could be considered a  “record” of regularly
conducted  activity,  we  are  not  persuaded  that  the  BAC  employee’s  affidavit
established that she was qualified to authenticate the assignment form here.   The
employee’s affidavit makes conclusory assertions parroting the statutory language
that she has personal knowledge that the records in her custody are prepared in the
ordinary course of business at or near the time of the transaction or event by a
person with knowledge of  the underlying transactions.    However,  it does not
include any specific assertions to explain where the copy of the assignment form
attached to her affidavit came from—for instance, whether it was made from the
original, and if so, by whom.   The fact that the employee may have been in a
position to know how BAC prepared its account statements, which we would
agree  qualify as  ordinary business  records,  does  not  mean  that  she  was  in  a
position to authenticate an uncertified copy of an instrument that she did not see
executed.
¶13    Because the copy of the document purportedly assigning to BAC
Williams’ mortgage—and by reference, the promissory note—was not properly
authenticated, it did not meet the standard of admissible evidence required for
summary judgment materials under  WIS.  STAT.  § 802.08(3).    Therefore, BAC
failed to make a prima facie case that it had standing to foreclose based upon
Williams’ failure to pay according to the terms of the promissory note.   In light of
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No.   2010AP2334
BAC’s failure, we do not need to address whether any of the affirmative defenses
asserted in Williams’ answer would also have created material disputes for the
circuit court.    Accordingly,  we  reverse  the  circuit  court’s  summary judgment
decision and remand with directions that the matter proceed with discovery2 and
trial on BAC’s foreclosure claim.
Williams’ Counterclaims
                                                                                                        ¶14    Williams  filed  counterclaims  alleging  violations  of                                                                               12  U.S.C.
§§ 2605(b),  2605(c),                                                                                   2605(e),                                                                              2605(e)(3),  negligence,  product  liability,  lender
                                                                                                        liability, and strict liability for alleged violations of the Truth in Lending Act.
¶15    Williams first argues that the circuit court violated due process by
dismissing all counterclaims without providing an adequate opportunity to submit
additional evidence.   Williams correctly points out that when matters outside the
pleadings are presented on a motion to dismiss, the motion shall be treated as one
for summary judgment.   WIS. STAT. § 802.06(2)(b).   However, as we explained
above,  the  first  step  in  summary  judgment  methodology  is  to  examine  the
sufficiency of the pleadings.   If the pleadings do not state a claim upon which
relief can be granted, there is no need for further analysis.   Therefore, any error the
circuit  court  may  have  committed  in  refusing  to  allow  Williams  to  submit
additional  materials  in  response  to  BAC’s  motion  to  dismiss  was  rendered
harmless once the court determined that Williams’ pleadings in fact failed to state
2  Williams complains that the circuit court ignored discovery requests, but does not
specify  what  specific  materials  were  sought.    We  therefore  do  not  address  any  particular
discovery matter in this appeal.
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No.   2010AP2334
a claim, and the circuit court did not violate Williams’ due process rights by
dismissing the counterclaims based on the pleadings alone.
¶16    Williams  next  contends  that  the  circuit  court  applied  the  wrong
standard in considering whether to dismiss the counterclaims because it did not
mention the oft-cited language that a claim should be dismissed only if it is “quite
clear” that under no circumstances could the plaintiff prevail.   Instead, the circuit
court cited Doe v. Archdiocese of Milwaukee, 2007 WI 95, ¶12, 303 Wis. 2d 34,
734 N.W.2d 827, for the proposition that “[d]ismissal of a claim is improper if
there are any conditions under which the [pleading party] could recover.”   The
minor difference in language is a distinction without a difference.   In short, we are
satisfied the circuit court properly understood that it was to liberally construe the
pleadings when testing their sufficiency.
¶17    Turning  to  the  merits,  Williams  challenges  the  circuit  court’s
conclusion  that  the  counterclaims  of  negligence,  product  liability,  and  strict
liability were barred by the economic loss doctrine.   Williams complains that the
circuit court did not adequately explain why the economic loss doctrine applied to
these claims, and why Williams did not qualify for an exception.   The economic
loss  doctrine                                                                            “preclud[es]  contracting  parties  from  pursuing  tort  recovery  for
purely economic or commercial losses associated with the contract relationship.”
Kaloti Enterprises, Inc. v. Kellogg Sales Co., 2005 WI 111, ¶27, 283 Wis. 2d 555,
699 N.W.2d 205 (citations omitted).   Contrary to Williams’ assertions, neither the
status of being a consumer nor a lack of knowledge about the economic loss
doctrine relieves a party from its constraints.   Williams correctly points out that
there is a limited exception to the economic loss doctrine when a contract was
induced by fraud.   See Digicorp, Inc. v. Ameritech Corp., 2003 WI 54, ¶¶51-52,
262 Wis. 2d 32, 662 N.W.2d 652.   That exception does not apply here, however,
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No.   2010AP2334
because the instances of fraud Williams alleges in the complaint—namely, an
erroneous real estate appraisal and a misrepresentation about whether a damages
clause should apply to the APR rate—were allegedly committed by persons who
were not employees of BAC or otherwise parties to the action.3   In sum, Williams’
claims of negligence, product liability, and strict liability clearly lie in tort, and
were plainly associated with contractual relationships arising out of a series of
mortgages.   The court did not need to say more to dispose of counterclaims six,
seven and nine.
¶18    Williams presents no argument that the circuit court erred in the
dismissal of the other counterclaims.
¶19    Finally, Williams contends the circuit court should have imposed
sanctions on BAC based upon what Williams views as inaccurate statements in
BAC’s filings to the court.   However, the challenged statements appear simply to
be legal propositions or characterizations that Williams disagrees with.   The circuit
court was well within its discretion to determine that there had been no ethical
violation warranting sanctions.
By the Court.—Judgment reversed and cause remanded.
                                                                                                         This  opinion  will  not  be  published.     See  WIS.  STAT.  RULE
809.23(1)                                                                                                (b)5.
3  Williams also contends that the circuit court should have granted Williams’ motion to
add the appraiser and real estate broker to the action.   As BAC points out, however, that motion
was  not  filed  until  after  the  counterclaims  had  already  been  dismissed,  and  the  alleged
misconduct  related  to  prior,  satisfied  mortgages  that  were  not  the  subject  of  the  current
foreclosure action.
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