On July 2, 2020, the Florida Supreme Court issued its written opinion[i] in Jackson v. Household Finance Corporation, III, 236 So. 3d 1170 (Fla. 2d DCA 2016) to resolve a conflict with a case decided by the Fourth District Court of Appeal (Maslak v. Wells Fargo Bank, N.A., 190 So. 3d 656 (Fla. 4th DCA 2016). Specifically, the issue concerned whether the predicates were met for admissions of records into evidence under the business records exception to the hearsay rule during the course of a bench trial in a residential foreclosure case. The Florida Supreme Court held that the proper predicate for admission can be laid by a qualified witness testifying to the foundation elements of the exception set forth in Section 90.803(6) of the Florida Evidence Code.

Background

On June 23, 2014, the originating lender, Household Finance Corporation III (“HFC”), filed a foreclosure complaint alleging a default under the note and mortgage. Before the loan was originated, HFC was purchased by HSBC Holdings (“HSBC”) and became a wholly-owned subsidiary of HSBC. The borrower did not challenge the default, but opted to challenge whether the lender could establish its case in chief at trial.

At trial, HFC called an assistant vice president at HSBC, with 25 years’ experience at the company, to establish the foundation for admission of records under the business records exception to the hearsay rule. The borrower objected to the witnesses’ testimony on hearsay grounds and the original note, mortgage, and payment history were received into evidence over the borrower’s objections. The borrower elected not to introduce any evidence of her own and the trial court entered final judgment of foreclosure. The borrower appealed to the Second District Court of Appeal, which affirmed the final judgment of foreclosure.

The Jackson case conflicted with the Maslak decision from the Fourth District Court of Appeal, which reached the opposite conclusion regarding the sufficiency of the bank witness’ testimony. In Maslak, despite the bank employee’s testimony describing her job duties and familiarity with the bank’s loan servicing practices, the court held that the witness was not qualified to lay a foundation for the admission of the loan servicing documents that were offered into evidence at that trial. As a direct conflict of two intermediate appellate court decisions on the same issue of law, the Florida Supreme Court had jurisdiction to resolve the issue.

Florida Supreme Court’s Decision

In examining the business records exception to the hearsay rule, the Florida Supreme Court noted that a party has three options to lay the foundation to meet that exception: (1) offering testimony of a records custodian, (2) presenting a certification that or declaration that the elements have been established, or (3) obtaining a stipulation of admissibility. If the party elects to present testimony, the applicable case law explains that it does not need to be the person who created the business records. The witness may be any qualified person with knowledge of each of the elements.

Patterned closely after the federal rule, Section 90.803 of the Florida Evidence Code[ii] lists the following foundational elements of the business records exception: (1) that the record was made at or near the time of the event, (2) that it was made by or from information transmitted by a person with knowledge, (3) that it 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.

Turning to the testimony of the HFC trial witness, the majority opinion determined that the foundational elements were met and that no additional foundation was required by the business records exception language of the Section 90.803(6). The majority rejected the notion that the witness was required to detail the basis for his or her familiarity with the relevant business practices of the company, or give additional details about those practices in order to lay the foundation for the admission of those records. Since no such requirements were in the statute, any requirement imposed by the trial court or the appellate court would be inconsistent with the plain language of the statute. The majority explained that once the proponent lays the predicate for admission, the burden shifts to the opposing party to prove that the records were untrustworthy or should not be admitted for some other reason. According to the majority, the Jackson borrower failed to do that in this case and only waited until after the documents were received into evidence to question the witness about the basis for his knowledge.

The dissenting opinion posited that the majority’s ruling “[took away] the proponent’s burden to lay a proper foundation for admission” and focused on whether the proper foundation was met in the Jackson case. The dissent argued that the testimony at the Jackson trial was merely “general statements” that recited the elements of the statute but did not explain how the business records at issue were generated, what they were used for, or how they were maintained. For that reason, the dissenting judges maintained that the burden never shifted to the borrower to prove the untrustworthiness of those records, and concluded that the majority’s treatment of the business records exception as a “magic words” test would only increase the likelihood of inadmissible documents being admitted into evidence.

Conclusion

Compliance with the business records exception to the hearsay rule will almost always be a hotly contested issue at a foreclosure non-jury trial in Florida. The Jackson opinion, and the arguments raised in the dissenting opinion, will remind the trial courts to pay careful attention to the foundational requirements of the business records exception to the hearsay rule when timely objections are made to the evidence on those grounds. Despite competing opinions on the issue, the Florida Supreme Court agrees that the proponent’s witness should demonstrate personal knowledge and establish that the offered exhibits are reliable business records. To remove all doubt, a witness’ testimony should demonstrate a working knowledge of the company’s business record practices and systems. As a result of the Jackson opinion, it is important to effectively prepare the business records custodian witness to withstand any increased scrutiny as to the foundation requirements of the business records exception to the he

[i] The Florida Supreme Court decided the case by a 4 to 2 margin. Newly appointed justice, Renatha Francis, did not participate in the opinion. This decision is not final until the disposition of a timely-filed rehearing motion.

[ii] This section was last revised in 2003, adding language that a certification or declaration is an acceptable means of authenticating a business record under the business records exception to the hearsay rule. See ch. 2003–259, § 2, at 1299, Laws of Fla.; see also Fla. Stat. § 90.803(6) (2003) (providing for admission of business records upon testimony of the custodian of the records, “or as shown by a certification or declaration that complies with paragraph (c) and s. 90.902(11)”).