Earlier this month the Florida Supreme Court weighed in on an evidentiary issue involving the admissibility of a bank’s business records under an exception to the hearsay rulei. Jackson v. Household Fin. Corp. III, No. SC18-357, 2020 WL 3580036 (Fla. July 2, 2020). The Florida Supreme Court accepted jurisdiction to resolve a certified conflict between the Fourth DCAii and the Second DCA regarding what testimony a qualified witness must proffer in order to lay the foundation for admission of business records, initially identified as hearsay, in a foreclosure matter.
In Jackson, a 25-year employee of HSBCiii laid the foundation for admission of HSBC’s business records when he responded in the affirmative to each of the following questions: (1) “Do you have access to the records maintained by HSBC with respect to the [subject] mortgage…and…[a]re you familiar with the business practices of HSBC?” (2) Is it the regular business practice of HSBC to keep records and record transactions? (3) Do the persons who prepare the records have personal knowledge of the events they are recording? (4) Are the records made at the time the event occurred? (5) “Did HSBC prepare and maintain these records with respect to the subject loan?”iv These questions closely followed the requirements laid out in § 90.803(6)(a), Fla. Stat. for determining if evidence otherwise classified as hearsay under § 90.802 could be admitted as an exception to that rule. After laying the above foundation, HSBC moved for the admission of its records (the note, mortgage and payment history) into evidence.
After HSBC’s evidentiary proffer, the borrower (“Jackson”) raised a hearsay objection arguing HSBC’s witness failed to testify as to how he gained his personal knowledge of HSBC’s business records and practices thereby failing to lay the necessary predicate for admission of the records.v The lower court found the testimony sufficient, overruled Jackson’s hearsay objection and moved the documents into evidence. Aftervi the court admitted the documents Jackson’s counsel questioned the witness about “the basis for his knowledge” but failed to “press the witness for further details” after he demonstrated “a working knowledge of HSBC’s relevant record-keeping practices and system.”vii Ultimately, the lower court found HSBC’s evidence sufficient and entered judgment in Household’s favor.viii On appeal, the Second DCA affirmed and the borrower appealed the affirmance to the Florida Supreme Court.
Comparatively, in Maslak, Wells Fargo proffered very similar testimony and evidence which the trial court found sufficient to support entry of judgmentix but which the Fourth DCA found insufficient on appeal of that judgment.x There again the bank’s witness testified as “to each element required by the business records exception,” but the borrower argued that the witness simply ‘regurgitated the magic words [required by the statute],’ but was unfamiliar with, and had no knowledge of, how the records were created and kept.”xi The Fourth DCA agreed with the borrower and explained that the omission of “specific details of the bank’s ‘procedures for inputting payment information into their systems and how the payment history was produced’” rendered the witness’ testimony insufficient to lay a proper foundation for admission of the bank’s business records.xii The Fourth DCA reversed the bank’s judgments finding the bank’s payment history constituted inadmissible hearsay and the bank’s evidence was therefore insufficient to support entry of judgment. The Florida Supreme Court agreed with the Second DCA that the decision in Maslak conflicted with the Second DCA’s decision in Jackson and accepted jurisdiction to resolve the conflict.
On review the Florida Supreme Court rejected the Fourth DCA’s conclusion in Maslak that additional foundational testimony was required to authenticate business records under § 90.803(6)(a) finding the “the plain words of the statute” did not require it.xiii The Court explained that “requiring factual specificity as to how the records were compiled, maintained, or utilized” was not necessary for establishing a prima facie case pointing out the “litigant is free to contest the genuineness [or lack of trustworthiness] of the documents as business records…if he or she has a basis to do so.”xiv The Court reasoned that “a minimal testimonial foundation” was “desirable in terms of fairness and the efficient administration of justice.”xv The Court elaborated that it would be “odd if a party could not make [the] required showing with straightforward testimony that each of the criteria [of § 90.803(6)(a)] is met.”xvi
Further, noting the purpose of the hearsay rule was to prevent fraud, the Court concluded there was “no reason to prolong a trial…with irrelevant details” to prove a “collateral matter…that is almost always self-evident and true” pointing out “that every commercial lender will necessarily have a ‘regular practice’ of making a record of payments and will necessarily keep that record ‘in the ordinary course of business.’”xvii Lastly, the Court reasoned additional testimony was not warranted “in this case, as in most…” where the debtor did “not even dispute the accuracy of the payment history…” but argued for reversal “on the theory that her lender should have been required to prove additional collateral facts before it could introduce records to establish material facts that she [did] not contest.”xviii The Court affirmedxix the Second DCA’s decision in Jackson and disapproved the Fourth’s reversal of the foreclosure judgments in Maslak.
The Florida Supreme Court’s decision in Jackson settles a long disputed evidentiary issue with regard to the application of the hearsay exception to the admissibility of a bank’s business records. This decision will streamline the introduction of business records into evidence at trial and eliminate the need for burdensome collateral testimony that unnecessarily complicates and prolongs foreclosure trials and detracts from the true issues in the case.
i The hearsay rule is codified at § 90.802, Fla. Stat.
ii The Fourth DCA case was Maslak v. Wells Fargo Bank, N.A., 190 So. 3d 656, 660 (Fla. 4th DC 2016), disapproved of by Jackson v. Household Fin. Corp. III, No. SC18-357, 2020 WL 3580036 (Fla. July 2, 2020).
iii Household Finance Corp. III (“Household”) originated the Jackson’s loan; however, before originating the subject mortgage, HSBC Holdings (“HSBC” or “the Bank”) purchased Household and it became “a wholly-owned subsidiary of HSBC.” Jackson, at *1.
iv Jackson, at *2-3.
v Jackson, at *2, *4.
vi Notably, on review the Supreme Court pointed out this line of questioning was untimely as the documents had already been admitted into evidence. Jackson, at *4. The Court did not elaborate on this issue, but questions pertaining to a witness’ knowledge or competency to testify about a particular matter should be raised on voir dire prior to a ruling on an opponent’s evidentiary proffer. “Voir dire” is “a preliminary examination to determine the competency of a witness or juror.” “voir dire.” Merriam-Webster.com. Merriam-Webster, 2020. Web. 13 July 2020.
vii Jackson, at *4.
viii Jackson, at *4.
ix In Maslak, there were actually three separate foreclosure cases and three separate judgments, but the cases were consolidated for purposes of trial. Maslak, at 658. For ease of reference “judgment” is used here and refers to all three judgments.
x Maslak, at 658.
xi Maslak, at 658-9.
xii Jackson, at *5 (quoting Maslak, at 659).
xiii Jackson, at *5.
xiv Jackson, at *5, *7.
xv Jackson, at *5.
xvi Jackson, at *6.
xvii Jackson, at *6-7.
xviii Jackson, at *7.
xix Justice J. Polston wrote a lengthy dissent which comprised nearly half the written opinion. Jackson, at *6-12. Since it lacks precedential value the arguments raised in his dissent are outside the scope of this article. Justice Polston disagreed with the majority’s reasoning and ruling explaining that “general statements parroting the statutory elements of the business records exception without any identified basis of how the records were generated, what they were used for, or how they were maintained” transformed Florida’s business records exception into nothing more than a “magic-words test.” Jackson, at*7.