business records foundation

Business Records Exception (to Hearsay Rule) When Business Takes Custody of Another’s Records

Posted by David Adelstein on October 01, 2016
Evidence / Comments Off on Business Records Exception (to Hearsay Rule) When Business Takes Custody of Another’s Records

unknown

If you have looked through the articles on this blog before, you will know that the business records exception to the hearsay rule is a very important hearsay exception in business disputes (or any dispute involving business records!). The business records exception requires a proper foundation to be laid by a witness before the records are admitted into evidence to ensure the accuracy and reliability of the records.  The proper foundation requires the witness to show that “(1) the record was made at or near the time of the event; (2) was made by or from information transmitted by a person with knowledge; (3) was kept in the ordinary course of a regularly conducted business activity; and (4) that it was a regular practice of that business to make such a record.” Ocwen Loan Servicing, LLC v. Gunderson, 41 Fla.L.Weekly D2238a (Fla. 4th DCA 2016) quoting Yisrael v. State, 993 So.2d 952, 956 (Fla. 2008).

The business records exception to the hearsay rule comes up quite a bit in the mortgage foreclosure context.   This is because the loans (notes and mortgage) get assigned or assumed by a new servicer or lender and the new servicer or lender moves to foreclosure on the mortgage. Many times the issue is laying the proper foundation with the witness being relied upon in order to admit certain documents under the business records exception to the hearsay rule.

In Ocwen Loan Servicing, LLC, the witness was trying to lay the foundation for records maintained by the original loan servicer (which was a company whose assets were purchased by the new loan servicer). He testified about the verification process of getting the original servicer’s records to the new servicer to ensure the accuracy of the records and then entering that information into the new servicer’s computer system.

The witness also tried to lay the foundation for a screenshot to show that the original promissory note was entered into the original servicer’s system / loan servicing platform. The trial judge sustained a hearsay objection and excluded this evidence because the witness did not work for the original servicer and had no personal knowledge as to its computer system / servicing platform.   The trial court also excluded the loan payment history and the default letter that was entered into the original servicer’s computer system as hearsay. As a result, the loan servicer could not support a mortgage foreclosure claim and the court entered judgment in favor of the homeowners.

The appellate court reversed finding that the documents that the trial court excluded as hearsay were admissible under the business records exception even though the new loan servicer took custody of the original servicer’s records:

Where a business takes custody of another business’s records and integrates them within its own records, the acquired records are treated as having been ‘made’ by the successor business, such that both records constitute the successor business’s singular ‘business record.’ [T]he authenticating witness need not be ‘the person who actually prepared the business records.’ As such, it is not necessary to present a witness who was employed by the prior servicer or who participated in the boarding process. Rather, the records of a prior servicer are admissible where the current note holder presents testimony that it had procedures in place to check the accuracy of the information it received from the previous note holder. The testifying witness just need[s] [to] be well enough acquainted with the activity to provide testimony. Once this predicate is laid, the burden is on the party opposing the introduction to prove the untrustworthiness of the records

Ocwen Loan Servicing, LLC, supra (internal citations and quotations omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

Tags: , , , ,

Importance of Laying the Appropriate Foundation for the Business Records Exception to the Hearsay Rule

Posted by David Adelstein on February 08, 2015
Evidence / Comments Off on Importance of Laying the Appropriate Foundation for the Business Records Exception to the Hearsay Rule

images

As you can tell from prior postings, I love the business records exception to the hearsay rule because of its importance in civil disputes, particularly business disputes. Without the business records exception, many business records that are needed to prove a claim or defense would be excluded as evidence under the hearsay rule. But, with the business records exception, these important records are admissible as long as a witness lays the appropriate foundation. The reason an appropriate foundation is required is to ensure the reliability or trustworthiness of the business records before deeming the records admissible evidence.

The case of Bank of New York v. Calloway, 2015 WL 71816 (Fla. 4th DCA 2015) is a case involving the business records exception to the hearsay rule in a mortgage foreclosure action. During the non-jury trial (as many promissory notes and mortgages contain a waiver of jury trial clause), the lender called a witness from the lender’s servicer (company that services the loan) to lay the foundation for the business records exception.

The witness testified that the servicer was not the original servicer of the loan. The prior servicer transferred the original loan documents along with business records detailing the payment history on the loan. To lay the appropriate foundation for the payment history documents, the witness testified that the payment history: 1) was a true representation of the payment history for the loan and was reviewed by the servicer before inputting the information into the servicer’s system; 2) was kept in the regular course of business activities by a person with knowledge of the event; 3) the person making the documents had a duty to accurately make the documents; and 4) it is the regular practice of the servicer to make the documents.

The borrower (or person alleged to have defaulted on the loan) objected and requested to voir dire the witness. This ultimately means that the borrower wanted to question and cross-examine the witness before the witness continued with her direct examination. In this case, the borrower wanted to immediately cross-examine the witness as to the foundation the witness laid for the business records exception in furtherance of ascertaining whether the proper foundation was laid. During questioning, the witness testified that her servicing company did not generate the payment history documents, rather it was documents transferred by the prior loan servicer. Thus, the witness was unable to answer how the prior servicer input payment information, who at the prior loan servicer input the payment information and whether this person did so with knowledge of its contents, and whether the information was entered as a regularly conducted business activity. Based on these answers, the borrower argued that the lender failed to satisfy the requirements for the business records exception to the hearsay rule; thus, the payment history constituted inadmissible hearsay. The trial court agreed and sustained the objection excluding the payment history as evidence.

On appeal, the central issue was whether the trial court properly excluded the payment history documents as hearsay or whether the lender properly laid the foundation for the business records exception. The Fourth District Court of Appeal held that the lender properly laid the foundation for the business records exception and the payment history should not have been excluded as inadmissible hearsay.

The importance of the Court’s ruling is that it articulates the ways in which a party that obtains certain records from a predecessor company/business can lay the foundation for the admissibility of business records to satisfy the business records exception to the hearsay rule:

First, the proponent [or party introducing business records] may take the traditional route, which requires that a records custodian take the stand and testify under oath to the predicate requirements. Second, the parties may stipulate to the admissibility of a document as a business record. Third and finally…the proponent has been able to establish the business-records predicate through a certification or declaration….

***

When employing this first option, it is not necessary to call the individual who prepared the document; however, the witness through whom the document is being offered must be able to show each of the requirements for establishing a proper foundation.

***

Where a business takes custody of another business’s records and integrates them within its own records, the acquired records are treated as having been made by the successor business, such that both records constitute the successor business’s singular business record. However, since records crafted by a separate business lack the hallmarks of reliability inherent in a business’s self-generated records, proponents must demonstrate not only that the other requirements of the business records exception rule are met but also that the successor business relies upon those records and the circumstances indicate the records are trustworthy. 

***

Given this trustworthiness threshold, mere reliance by the incorporating business on records created by others, although an important part of establishing trustworthiness, without more is insufficient. In most instances, a proponent will clear this hurdle by providing evidence of a business relationship or contractual obligation between the parties that ensures a substantial incentive for accuracy. In the alternative…the successor business itself may establish trustworthiness by independently confirming the accuracy of the third-party’s business records upon receipt. In any of the abovementioned circumstances, the sufficiency of the evidence is left to the trial court’s discretion.

Bank of New York, supra, at *3-5 (internal citations and quotations omitted).

Here, the lender’s witness testified that the servicer reviewed the accuracy of the payment history it received from the prior servicer before inputting that information into its system. Thus, the Court found that this established the trustworthiness of the payment history documents such that it was an abuse of discretion for the trial court to deem the documents inadmissible hearsay.

As previously mentioned, it is important to lay the appropriate foundation for business records.  If the appropriate foundation is not laid at trial, it could result in a key document being deemed inadmissible thereby preventing you from proving your claim or defense at trial. 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

Tags: , , ,

Introducing Business Records — An Exception To Hearsay

Posted by David Adelstein on December 15, 2014
Evidence / Comments Off on Introducing Business Records — An Exception To Hearsay

 

 

Business Records Exception

 

Business records are oftentimes introduced during trial. But, just because the record is called a “business record” does not automatically mean the record is admissible during trial. The business record still needs to be properly introduced (the foundation for the record properly laid) at trial; otherwise, the record constitutes hearsay: an out-of-court statement (written or oral) introduced to prove the truth of the matter asserted in the out-of-court statement. Thus, a business record would constitute hearsay evidence since it would most likely be introduced at trial to prove the truth of the matter asserted in the record.

Florida’s Evidence Code contains a hearsay exception for records of regularly conducted business activities (see below statutory reference). Fla. Stat. s. 90.803(6). This exception allows a business’s record custodian to lay the foundation for the introduction of business records to avoid the exclusion of such records under a hearsay objection.

The key to laying the foundation and satisfying the hearsay exception is that the records MUST BE:

  • made at or near the time of the event / activity – the event should be recorded when it is fresh in someone’s mind to ensure the accuracy and reliability of the record;
  • made from information transmitted by a person with personal knowledge – the person recording the event does not need personal knowledge, but they do need to have obtained the information by a person within the business with personal knowledge acting within their scope;
  • kept in the regular course by the business; and
  • a regular practice of the business to make a record whenever that activity occurs.

See Fla. Stat. s. 90.803(6); United Auto Ins. Co. v. Affiliated Healthcare Centers, Inc., 43 So.3d 127, 130 (Fla. 3d DCA 2010).

A business’s record custodian or other qualified witness that knows how the record was made is called to lay the foundation for this hearsay exception and, thus, introduction of the business records. This is important so that the business records can be published or presented to the jury.

As explained by the Third District:

“[I]n order to lay a foundation for the business records exception to the hearsay rule, it is not necessary to call the person who actually prepared the document. The records custodian or any person who has the requisite knowledge to testify as to how the record was made can lay the necessary foundation.”

Affiliated Healthcare, 43 So.3d at 130 (internal citations and quotations omitted).

Under certain circumstances, an affidavit can be used instead of live testimony to lay the foundation for a business record. Fla. Stat. s. 90.803(6)(c).

Finally, parties relying on business records to support a summary judgment motion should likewise lay the appropriate foundation for the record in an affidavit.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

Florida Statute s. 90.803

(6) Records of regularly conducted business activity.–

(a) A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinion, or diagnosis, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity and if it was the regular practice of that business activity to make such memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, or as shown by a certification or declaration that complies with paragraph (c) and s. 90.902(11), unless the sources of information or other circumstances show lack of trustworthiness. The term “business” as used in this paragraph includes a business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.

(b) Evidence in the form of an opinion or diagnosis is inadmissible under paragraph (a) unless such opinion or diagnosis would be admissible under ss. 90.701-90.705 if the person whose opinion is recorded were to testify to the opinion directly.

(c) A party intending to offer evidence under paragraph (a) by means of a certification or declaration shall serve reasonable written notice of that intention upon every other party and shall make the evidence available for inspection sufficiently in advance of its offer in evidence to provide to any other party a fair opportunity to challenge the admissibility of the evidence. If the evidence is maintained in a foreign country, the party intending to offer the evidence must provide written notice of that intention at the arraignment or as soon after the arraignment as is practicable or, in a civil case, 60 days before the trial. A motion opposing the admissibility of such evidence must be made by the opposing party and determined by the court before trial. A party’s failure to file such a motion before trial constitutes a waiver of objection to the evidence, but the court for good cause shown may grant relief from the waiver.

 

Tags: , , , ,

Contact Me Now

Prove YOUR Case!

Contact:

David Adelstein ♦

(954) 361-4720 ♦

dadelstein@gmail.com