Fla 4th DCA Provides Short Lesson on Business Records Exception to Hearsay Rule

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It is interesting that the ruling comes from a condo lien case rather than the hot topic of securitized mortgages. But the rules are the same and in this opinion the Court gives the reader a lesson on hearsay, objections, preservation of issues for appeal, and exceptions to hearsay. As a prelude, evidence is properly admitted into the record if it is unopposed. So you must object if you don’t want it in. If you don’t object, you are cooked.

When an objection is properly AND TIMELY raised it specifies what exactly you are challenging and why. Trustworthiness, Credibility and authenticity are at the heart of all evidence questions. The court will tend to allow the evidence if it determines that it has some “probative value” which is to say it might be concluded that a fact is true based on this evidence. But since courts are composed of human beings there are some boundaries to issues of hearsay and exceptions that have been set by both common law and statutes so that the litigator knows what he is entitled to expect from the court as to rulings on his own evidence or that of his opponent.

Business records are hearsay and therefore excluded from evidence if an objection is made. If an objection is made and properly framed, then the burden shifts to the other side (the proponent of the “information” being tendered as evidence) to explain why the records are not hearsay (that is impossible with business records) or why there is an applicable exception.

The guiding principle behind the rules are that evidence should be admitted if it is trustworthy. If the records come from an independent third party who could care less who wins the lawsuit, the chances are that the judge will be liberal in applying the rules. If the the records come from one of the parties in litigation then the possibility or probability of it being self serving and potentially prepared for litigation rise and the judge is supposed to apply the rules very strictly.

In this case the judge did what judges are doing across the country. The Judge erred. He applied a lenient standard to records that were clearly coming from a party with a stake in the outcome and which could have been fabricated for the purposes of litigation and which relied on the work of other parties without any knowledge of the timing of the entries that were made, the knowledge of the person making the entries, and the documents or events upon which the the outside person relied. Therefore it was unlikely that the business records could be admitted without a very tight foundation from a credible witness.

The Judge admitted the records after extremely dubious testimony and obvious evidence that there was a personal fight going on as well as a bribery or theft claim between a group of unit owners and the association’s board. The appellate court reversed. That means the unit owners win the case even though judgment was entered for the association against the unit owners by the trial court. By the way, the defense, as I have suggested in foreclosure defense cases, was payment.

 

The unit owners had made a large prepayment that had not been carried forward. The receipt was acknowledged but somehow, like the foreclosure cases go, the judge felt it was OK to foreclose the association’s lien even though there was unrefuted evidence that the association had indeed received a huge amount of money for no other purpose than to offset the amount of monthly dues and special assessments.

Note on page 4 the Court says “Because the condo owners’ attorney did not object to the ledgers on the ground that they were untrustworthy, this issue is not preserved. The lack of foundation, however, was argued and preserved.” In my seminars and books I have always stressed that objections must be timely, precise and well-focused preferably with back up in case law. And I generally refer people to Trial Objections by Dombroff, a small book that is worth its weight in gold.

Note that in this condo case the association’s attorney was at least smart enough to put the records custodian on the witness stand. Getting business records into evidence without the records custodian ought to be very difficult. In the lone arena of foreclosure litigation, the courts have veered out of bounds because they think they know how the case should end.

“Magic words” do not suffice. The witness must know that the records are trustworthy and how and why they are trustworthy.

Now in foreclosure litigation it gets even crazier. The party on the stand has some title that more or less clearly shows that the title was invented to have him or her testify in court. Strike one. Like the case reported here, the party lacked personal knowledge that is a prerequisite for any witness to testify about anything — it is called competence of the witness. Strike two.

And after the witness has committed to saying she saw all of the records, ask her about he payments that went out, not the payments that were received. After all, she represents the servicer who collects and then forwards the money, right? Who did the servicer forward the money to? Where are the records of that? Has she seen them? Why not? So she has not seen all the records of the servicer, has she? And what did she do to corroborate that the creditors’ books show the same figures in the account receivable or if extraneous third party transactions have resulted in a reduction or increase of the account receivable as it relates to the subject loan? So she doesn’t know if the balance due on the servicer’s books is actually the same balance due shown on the creditor’s books?

That is the part the opposing side doesn’t want to see. By opening the door to payments out to the creditor, you are now tracing the money trail. By showing that there was deception on the part of the servicer, the records are untrustworthy.  Strike 3.

http://www.4dca.org/opinions/August%202013/08-28-13/4D12-3363.12-3364.op.pdf

GLARUM CASE: COURTS NOW WANT EVIDENCE — NOT REPRESENTATIONS OF COUNSEL

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If you want to save your home, you’ve got to get a good lawyer who knows how to take a deposition—no exceptions.”

COMPETENT EVIDENCE REQUIRED — FOR BOTH SIDES

EDITOR’S NOTE: Be careful before you celebrate over this. Yes, it is now more difficult for the banks to lie their way through foreclosure. The word is “difficult” not “impossible.”

They can still lie their way through foreclosure if you don’t know how to challenge or object to affidavits, business records, testimony that is not from a COMPETENT (that has a technical definition) witness, etc. And you must also satisfy the same requirements if YOU want to put evidence in the record and have the Judge hear it. Getting it in the record is not usually half as hard as having the Judge actually consider it — that is a matter of ease of presentation and style.

LAWYERS: I RECOMMEND YOU ALWAYS HAVE A  COPY OF THE FEDERAL AND STATE RULES OF EVIDENCE IN YOUR POSSESSION — ESPECIALLY THE PARTS ON HEARSAY AND COMPETENCY OF WITNESS. I ALSO STRONGLY RECOMMEND THAT YOU CARRY WITH YOU TRIAL OBJECTIONS 2D BY MARK A DOMBROFF.

http://floridaforeclosurefraud.com/2011/09/oh-no-we-have-to-actually-prove-our-cases-bank-lawyers-respond-to-the-glarum-case/

Oh, no, we have to actually prove our cases!” Bank lawyers respond to the Glarum case
by Mike Wasylik Esq. on September 16, 2011

Glarum has the banks running scared.
The biggest challenge banks face in today’s foreclosure crisis is that they still haven’t come to grips with the need to tell the truth when they testify. The recent case of Glarum v. LaSalle [PDF] http://floridaforeclosurefraud.com/wp-content/uploads/2011/09/4D10-1372.op_.pdf has put even more pressure on the banks to tell the truth in foreclosure court, and now the banks and their lawyers are in a blind panic.

Banks have to provide admissible evidence in foreclosure cases

In the Glarum case, the trial judge had granted a summary judgment in favor of the bank, and ordered the Glarum home to be sold at auction. In support of its motion for that summary judgment, the bank offered the sworn affidavit of Ralph Orsini, who swore that the Glarums had defaulted on their loan and that they owed the bank a particular amount of money. Unfortunately, Orsini didn’t know these things were true, so he relied on the computer database to tell him these things. And according to the appellate court, that’s where the problem began:

Orsini did not know who, how, or when the data entries were made into Home Loan Services’s computer system. He could not state if the records were made in the regular course of business. He relied on data supplied by Litton Loan Servicing, with whose procedures he was even less familiar. Orsini could state that the data in the affidavit was accurate only insofar as it replicated the numbers derived from the company’s computer system. Despite Orsini’s intimate knowledge of how his company’s computer system works, he had no knowledge of how that data was produced, and he was not competent to authenticate that data.

(Emphasis mine.) The appellate court threw out the affidavit, and the resulting judgment, because Orsini’s statements were mere hearsay. They didn’t prove anything.

Applying long-held evidentiary principles to foreclosure cases

Bank lawyers, instead of recognizing this case as reaffirming long-understood principles of basic evidence, have sounded the alarm. Here’s what one “client alert” from Greenberg Traurig had to say:
http://www.gtlaw.com/NewsEvents/Publications/Alerts?find=152634

The Fourth District Court of Appeals has sent a strong statement that more generic affidavits currently utilized in some cases will no longer be sufficient where they do not include specific and detailed factual information regarding the compilation of the loan and payment data into a computer system. In doing so, the appellate court may have achieved the unintended result of dramatically changing the foreclosure landscape in Florida.

Again, emphasis mine. Changing the landscape? Hardly. Here are some of the things that Greenberg Traurig recommends banks will need to do in future foreclosure cases:

  • The affiant should be familiar with and have a specific understanding as to how the records are kept by the company and about the company’s recordkeeping practices in general.
  • The affidavit may need to include factual information establishing that the records relied upon were kept in the ordinary course of the company’s regularly conducted business activity, with specific reference to each record that is relied upon.
  • …the affidavit may need to contain language addressing the procedures that the company takes to ensure that the information input into its computer system is accurate.
  • …the information included in the affidavit will need to be sufficient to show that the records were made by or from information transmitted by a person with knowledge.
  • The courts may even require the affidavit to provide information regarding the procedures used by the prior loan servicer to ensure that the information is kept within the normal course of its business…
  • Particular care should be given to who the company selects as the affiant…

None of this is revolutionary, or even surprising, to anyone who’s ever litigated a commercial case before—it’s “Business Records 101.” Business records are never admissible, because they are hearsay, unless you do all those things. Why? Because business records are hearsay, so you have to lay the groundwork to get them admitted.

Pursuant to section 90.803(6)(a), Florida Statutes, documentary evidence
may be admitted into evidence as business records if the proponent of
the evidence demonstrates the following through a record’s custodian:

(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.

That’s always been the law in every case, and the Glarum court has now ruled that the same law that applies to everyone else now applies to banks, too. And that’s just fair.

If you want to save your home, you’ve got to take depositions.
What lessons can be learned from Glarum? first, that banks are terrified of having their affiants’ depositions taken, and will fight even harder to prevent that from happening. They are terrified of what “borrower’s counsel” like us can do when we have the opportunity to ask them questions under oath. And when we do get the chance to ask those questions, we can blow a foreclosure case right out of the water, just like in Glarum.

Finally, borrowers, homeowners, and other foreclosure defendants should know this: taking depositions in your foreclosure case is a critical step in protecting your home—one that our law firm has long viewed as essential in almost every foreclosure case. And it’s a step that almost no foreclosure defendant is competent to handle on their own. If you want to save your home, you’ve got to get a good lawyer who knows how to take a deposition—no exceptions.

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