If you have perused this blog, then you know if there is a new case discussing the business records exception to the hearsay rule, I am writing about it. The reason being is that it comes up in many business disputes. Lately, there has been a trend where this business records exception comes up in mortgage foreclosure cases where the borrower argues that the lender failed to properly introduce key evidence (such as payment histories) under the business records exception. As a result, the evidence was inadmissible hearsay warranting a reversal of a foreclosure judgment.
The recent opinion in Evans v. HSBC Bank, USA, 42 Fla. L. Weekly D1033a (Fla. 2d DCA 2017) is but another example of the business records exception coming up in a mortgage foreclosure case. At trial, the lender offered the testimony of an employee of a loan subservicer to introduce the borrower’s payment history from different servicers. Her knowledge came from reviewing records. However, she confirmed during examination that (i) she really did not create the payment history of the borrower, (ii) another servicer created most of the payment history, (iii) the payment history was transferred over to her company, (iv) she did not know who created most of the entries on the payment history, and (v) she did not know the procedures used to incorporate other payment servicer’s records into her company’s records. Notwithstanding, the trial court admitted the payment history into evidence over the borrower’s objection that the payment history was inadmissible hearsay not satisfying the business records exception to the hearsay rule.
As you know from prior articles, hearsay is an out of court statement (written or oral) offered for the truth of the matter asserted. Thus the payment history (a written out of court statement) is hearsay. But, there are exceptions to the hearsay rule to introduce certain hearsay evidence. One applicable exception is the business records exception.
To admit a business record under the exception, a party must lay the right foundation that:
- the business record was made at or near the time of the event;
- the business record was made by or from information transmitted by an individual with knowledge;
- the business record was kept in the ordinary course of business; and
- it was a regular practice of the business to make such a record.
Of course, there is more to this with many cases discussing these foundational requirements. In this case, the witness could not properly lay the foundation since she did not know the procedures of prior loan servicers or even the procedure to incorporate their business records into her company’s business records. There was no testimony establishing the reliability of such records that is the hallmark to admitting evidence under a business records exception to the hearsay rule. Based on this lack of reliability, the appellate court reversed the trial court’s ruling.
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