hearsay

Admitting a Business Record Under the Hearsay Exception

Posted by David Adelstein on May 06, 2017
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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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Business Records Exception (to Hearsay Rule) When Business Takes Custody of Another’s Records

Posted by David Adelstein on October 01, 2016
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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.

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Improperly Admitting Hearsay can still be Harmless Error

Posted by David Adelstein on September 03, 2016
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I have discussed the hearsay rule (the evidentiary exclusionary rule and the numerous exceptions) ad nauseam and will continue to do so because it is such an important aspect of a civil trial. There will invariably be an objection under the hearsay rule during trial. The trial court will either sustain the objection or overrule the objection, perhaps under an exception to the hearsay rule.

What if a trial court makes a mistake—it happens—and overrules a hearsay objection and admits hearsay evidence? As previously mentioned, an appellate court will review the admission of evidence under an abuse of discretion standard of review, limited by Florida’s rules of evidence.

In Johnson v. State, 2016 WL 446889 (Fla. 4th DCA 2016)—yes, a criminal case—a defendant argued that the trial court erred in overruling a hearsay objection and admitting hearsay evidence / testimony. During the trial, the defendant objected when the responding police officer was asked to testify how the victim and the victim’s friend described the defendant. The trial court overruled this objection and the officer was allowed to testify. The appellate court correctly found that this testimony was hearsay as it was offered to prove the truth of the matter asserted–that the defendant was involved in the crime. There was not a hearsay exception that would otherwise allow the officer to recount the victim and the victim’s friend’s description of the defendant.

Unfortunately for the defendant, the trial court’s error was harmless. So, yes, the trial court erred by allowing the officer to offer hearsay testimony, but the error was deemed harmless error. If the error is harmless, then the appellate court will affirm the trial court. Remember, just because a trial court commits error during the course of the trial does not mean the error will result in a new trial or a reversal.

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.

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A Promissory Note is NOT Hearsay

Posted by David Adelstein on April 23, 2016
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A promissory note is NOT regarded as hearsay. This means a party introducing a promissory note does not need to lay down the foundation to a hearsay exception such as the business records exception in order to admit the note into evidence.

The Fifth District Court of Appeal in Deutsche Bank National Trust Co., Etc. v. Alaqua Property, Etc., 41 Fla.L.WeeklyD994b (Fla. 5th DCA 2016) explained that a promissory note in a foreclosure action is NOT hearsay because it is NOT being offered to prove the truth of the matter asserted; rather, the note has independent legal significance, that being “to establish the existence of the contractual relationship and the rights and obligations of the parties to the note.” Deutsche Bank National Trust Co., supra.

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.

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Agent’s Out-of-Court Statements Could Constitute Admissions by a Party Opponent

Posted by David Adelstein on March 05, 2016
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Below is an example in a criminal trial of the exception to the hearsay rule referred to as admissions against party opponents when a party’s agent makes an out-of-court statement. Check out this article and this article for more on this important hearsay exception embodied in Florida Statute s. 90.803(18).

In Osorio v. State of Florida, 41 Fla.L.WeeklyD547b (Fla. 4th DCA 2016), the police used a confidential informant to make an arrest in a drug case. The confidential informant happened to be a co-worker of the defendant (that had previously been arrested on an unrelated drug charge and turned into an informant to obtain credit in his prosecution). The defendant was relying on an entrapment defense. During the defendant’s cross-examination of a detective at trial, the court refused to allow the detective to testify about an issue that the co-worker / informant relayed to the detective. Then, when the defendant took to stand to testify, the trial court refused to allow the defendant to testify about statements his co-worker / informant made. The court precluded this testimony based on the hearsay rule since both the detective and defendant would be testifying about out-of-court statements from the co-worker / informant offered for the truth of the matter asserted.

Could the co-worker / informant, acting as an agent of the police, be classified as a party-opponent to fall within the hearsay exception known as admissions against party opponents.   The court said yes!

“[A]n agent is one who consents to act on behalf of some person, with that person’s acknowledgment, and is subject to that person’s control.” Osorio, supra, citing Goldschmidt v. Holman, 571 So.2d 422, 424, n.5 (Fla. 1990).

The court held that the co-worker / informant was serving as an agent since the police encouraged his involvement including setting up the drug-buy that led to the defendant’s arrest in furtherance of obtaining credit in his prosecution.  As an agent, the co-worker / informant’s out-of-court statements did fall within the hearsay exception known as admissions against a party opponent. The statements made by the co-worker / informant were statements by the party’s [the state / police] agent concerning a matter within the scope of his agency and made during the existence of the relationship.   See Fla. Stat. s. 90.803(18).  The court held it was error not to allow the defendant to introduce these out-of-court statements that restricted the defendant’s ability to put on his entrapment defense.

 

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Witness Laying Foundation for Business Records Exception Need Not be the Person that Prepared the Business Records

Posted by David Adelstein on February 16, 2016
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If you have visited this blog before, then you know the importance I place on the business records exception to the hearsay rule in civil business disputes. (Check out this article too.) Lately, the business records exception to the hearsay rule is a hot topic in mortgage foreclosure cases.

In yet another foreclosure case, Wells Fargo Bank, N.A., as Trustee, on Behalf of the Harborview Mortgage Loan Trust Mortgage Loan Pass-Through Certificates, Series 2007-1 v. Balkisson, 41 Fla.L.Weekly D308a (Fla. 4th DCA 2016), the trial court entered an involuntary dismissal in favor of the borrower and against the lender after sustaining the borrower’s objection to hearsay based on the lender not properly laying the foundation for the business records exception to the hearsay rule. (An involuntary dismissal is essentially the same thing as a directed verdict in a non-jury bench trial. Similar to a directed verdict, the standard of appellate review for a motion for involuntary dismissal is de novo. See Wells Fargo Bank, supra.) The trial court sustained the hearsay objection because the loan servicer’s records custodian witness was unable to describe the specialized computer programs utilized to generate the payment history and default notice. The trial court’s ruling in sustaining the objection precluded the lender from presenting the payment history and the default notice into evidence meaning the lender could not prove its case at trial. The Fourth District Court of Appeal reversed.

The Fourth District explained that a testifying witness establishing the business records exception to the hearsay rule “need not be the person who actually prepared the business records. Instead, the witness just need be well enough acquainted with the [record keeping] activity to provide testimony.” Wells Fargo Bank, supra (internal quotations and citation omitted).

While the witness was not familiar with how data was entered into the computer system, there is no requirement that the witness have such knowledge to satisfy the business records exception to the hearsay rule. The witness was sufficiently familiar with the loan servicer’s practices and procedures in generating the payment history and notice of default to lay the foundation for the business records exception.

 

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.

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Excited Utterance Hearsay Exception

Posted by David Adelstein on January 23, 2016
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I have discussed that hearsay is inadmissible evidence. Again, hearsay “is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” Fla.Stat. 90.801(1)(c).

While hearsay is inadmissible, there are exceptions that allow hearsay to be admissible at trial.

One hearsay exception is known as an “excited utterance.” Typically, this hearsay exception is more applicable in criminal trials than civil trials. An excited utterance is a “statement or excited utterance relating to a startling event or condition made while the declarant was under the stress of excitement caused by the event or condition.” Fla.Stat. 90.803(2). An excited utterance is admissible even though the declarant of the statement does not testify to making the statement at trial.

“There are three requirements for a statement to qualify as an excited utterance: (1) there must have been an event startling enough to cause nervous excitement; (2) the statement must have been made before there was time to contrive or misrepresent; and (3) the statement must have been made while the person was under the stress of excitement caused by the startling event.”

Smith v. Florida, 2016 WL 64341, *4 (4th DCA 2016) (internal quotation omitted).

For example, Smith was a murder trial. At trial, the murder victim’s daughter testified she called 911 and told the 911 operator that her aunt, the criminal defendant’s sister, told her that he seriously hurt the victim. The aunt then called 911 telling the operator that she saw blood and pleading with the operator to send help. In response to the 911 calls, the police discovered the victim stabbed to death.

At trial, the aunt denied making the statement to the victim’s daughter that the defendant told her that he seriously hurt the victim. The aunt, of course, was not the most credible since the defendant was her brother. The issue was whether the daughter could testify what the aunt told her (that the defendant told the aunt that he seriously hurt the vicim) since the statement constitutes hearsay.

The appellate court affirmed that the daughter could testify what the aunt told her since the aunt’s statement was an excited utterance: a) the startling event that caused the aunt’s nervous excitement was the thought that the victim was seriously hurt or dead; b) the aunt made the statement to the victim’s daughter immediately after she heard from her brother; and c) the statement was made before the aunt even called 911 so it was clearly made while the aunt was under the stress of the event and before there was time to make any misrepresentation. Further, the startling event the aunt experienced was supported by the aunt’s independent 911 call.

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.

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Hearsay can Only be Admitted for Another Purpose if Such Purpose is a Material Issue

Posted by David Adelstein on January 10, 2016
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Sometimes, a party will try to introduce hearsay by arguing that that the document/testimony is not being offered to prove the truth of the matter asserted (hearsay), but instead, is being offered for another purpose. This is an avenue to admit evidence that would otherwise be excluded under the hearsay exclusion.  This was the situation in the employment litigation case, Mootry v. Bethune-Cookman University, Inc., 41 Fla. L. Weekly D146a (Fla. 5th DCA 2015).

In this case, the University terminated a tenured professor for cause and the professor sued. At trial, the University offered into evidence a report prepared by an investigator that summarized an investigation into findings of sexual harassment committed by the professor by victims not named in the report. The professor argued that the report contains numerous hearsay statements, particularly, the sexual harassment allegations by the unnamed victims. The University, however, stated that the report was not being offered for the truth of the matter asserted, but was offered to establish the reasonableness of the University’s actions in terminating the professor’s employment.

The appellate court held that it was harmful error for the trial court to admit the report with the hearsay statements into evidence. The court held, “when an out-of-court statement is being ‘offered for a purpose other than proving the truth of its contents[, it] is admissible only when the purpose for which the statement is being offered is a material issue in the case.” Mootry, supra, quoting King v. State, 684 So.2d 1388, 1389-90 (Fla. 1st DCA 1996).

The appellate court found that the reasonableness of the University’s actions was not a material issue in the dispute because the professor could only be properly terminated for cause if he breached his faculty agreement. The reasonableness of the University’s decision to terminate the professor had no bearing on whether the professor actually breached his faculty agreement. For this reason, the court held that the report was hearsay because it was actually being offered to prove the truth of the matter asserted that the professor sexually harassed students.

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.

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Witness Laying the Foundation for the Admission of Business Records

Posted by David Adelstein on December 09, 2015
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More on the business records exception to the hearsay rule and the importance of laying the proper foundation to introduce business records under this exception. This is a must-know hearsay exception to any business-related dispute; and, it is imperative to understand the required testimony of the witness utilized to lay the foundation for the business records exception.

In Sanchez v. Suntrust Bank, 4D14-2457 (Fla. 4th DCA 2015) – yes, a mortgage foreclosure case—the lender introduced a screenshot of its record keeping system, the payment history with the borrower, default letters, and a payoff calculation. The lender introduced this documentation through the testimony of a loan servicer.

In introducing this documentation, however, the proper foundation for these business records was not laid.

To introduce documents under the business records exception, the introducing party must show through a witness:

(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.

Sanchez, supra (citation omitted).

In this case, the witness was never asked whether the documents were made at or near the time of the event. And, as it related to the screenshot of the record keeping system, the witness did not know how the screenshot was created.

When it comes to the witness laying the foundation for the business records exception, the Fourth District explained:

To lay a foundation for the admission of a business record, it is not necessary for the proponent of the evidence to call the person who actually prepared the business records. The records custodian or any qualified witness who has the necessary knowledge to testify as to how the record was made can lay the necessary foundation. Stated another way, the witness just need be well enough acquainted with the activity to provide testimony. To the extent the individual making the record does not have personal knowledge of the information contained therein, the second prong of the predicate requires the information to have been supplied by an individual who does have personal knowledge of the information and who was acting in the course of a regularly conducted business activity.

Sanchez, supra (internal quotations and citations 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.

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State of Mind Hearsay Exception

Posted by David Adelstein on November 01, 2015
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Sometimes hearsay statements are introduced at trial not to show the truth of the matter asserted by the out-of-court statement, but to prove a certain state of mind of the person that heard the out-of-court statement. In this situation, the out-of-court statement would be admissible and not considered hearsay.

Florida Statute 90.803(3)(a) provides the following hearsay exception:

(a) A statement of the declarant’s then-existing state of mind, emotion, or physical sensation, including a statement of intent, plan, motive, design, mental feeling, pain, or bodily health, [is an exception to hearsay] when such evidence is offered to:

  1. Prove the declarant’s state of mind, emotion, or physical sensation at that time or at any other time when such state is an issue in the action.
  2. Prove or explain acts of subsequent conduct of the declarant.

For example, in a medical malpractice action, a CT Scan interpreted by a radiologist revealed an aortic tear (Type I dissection) that needed to be repaired. A test was conducted by a cardiologist to determine the extent and precise location of the tear and the patient died during or immediately after the test. The plaintiff (estate) argued that the test performed caused another tear and this tear caused the patient’s death. During trial, and over the objection of the plaintiff, the cardiologist testified that he was told by the radiologist (the declarant) that read the CT Scan of the aortic tear (Type I dissection). The plaintiff argued that this constituted hearsay since what the radiologist told the cardiologist was an out-of-court statement. The appellate court held that this did not constitute inadmissible hearsay because the out-of-court statement was not offered to prove the truth of the matter asserted, but simply to prove that the cardiologist had notice of the aortic tear (Type I dissection).   See Dorsey v. Reddy, 931 So.2d 259 (Fla. 5th DCA 2006).

In a civil action involving the termination of a county employee, the terminated employee sued a third party for intentionally interfering with the employee’s employment causing the county to terminate the employee. The third party wanted a report introduced at trial. The report was prepared by another county employee that depicted various wrongdoings of the terminated employee. The trial court ruled that this report constituted hearsay. The appellate, however, found that the exclusion of the report was reversible error since the report was not offered to prove the truth of the matter asserted, but to prove the fact that the county had knowledge (notice) of the terminated employee’s alleged wrongdoings prior to terminating the employee. See Spatz v. Kirby, 705 So.2d 657 (Fla. 2d DCA 1998).

Finally, in a criminal action involving grand theft of a van, the defendant was arrested with a passenger in the van. The defendant’s defense was that he had the good faith belief that the van was owned by the passenger. At trial, the defendant called a witness. The witness testified that the day before the arrest, the defendant was driven to his house by the passenger.   The trial court, however, excluded the witness from testifying that the passenger told the witness in front of the defendant that the passenger owned the van. The appellate court held that this testimony was not hearsay because it was offered to prove the defendant’s state of mind–that the defendant had a good faith belief that the passenger actually owned the van. See Alfaro v. State, 837 So.2d 429 (Fla. 4th DCA 2002).

 

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.

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