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


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 which maybe held on a Cloud ERP 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. This why when dealing with third party suppliers or vendors some businesses use third party risk management software so they are able to keep a record of any outsourced dealings.

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 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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