1st Circuit Court of Appeals Rules Loan Transaction Summary Admissible Under FRE 803(b) Business Record Exemption to Hearsay Rule

The U.S. Court of Appeals for the First Circuit recently ruled that a document summarizing the history of a borrower’s account and related loan transactions did not violate the hearsay rule, FRE 803, when it was admitted in evidence by the trial court, below, to prove a lender’s claims for breach of contract and breach of promissory note.

The borrower argued that admission of the document did not meet the requirements of the business records exception, Rule 803(6), which authorizes the admission of certain documents as an exception to the usual prohibition against the admission of hearsay statements made out-of-court and offered in evidence to prove the truth of the matter asserted.

Because the loan was serviced by several later servicers other than the original lender, the borrower claimed the summary of the loan transactions should not have been admitted into evidence unless it was supported by testimony of a custodian or qualified witness with personal knowledge of the record-keeping of the prior servicers.

The court noted there is no categorical rule barring the admission of a so-called “integrated business record” simply because a representative from a successor business testifies about the record.  Rather, the admissibility of such evidence was found to be fact-dependent: business records containing third-party entries without third party testimony are admissible where the entries are “intimately integrated” into the business records, or where there is routine reliance by the party producing the document in their business.   

The court found that the witness who testified about the document established that the servicer relied on the accuracy of the mortgage history and took measures to verify it.  And even though it was a third-party witness who testified about the document, the third-party servicer had a self-interest in assuring the accuracy of the information in the business record because that accuracy was relied upon by the underlying lender.  To testify unreliably or without accuracy would have damaged the third-party servicer’s own business interests.  Given those indicia of trustworthiness, the business record in this case was, in the opinion of the court, reliable enough to be found admissible.

As to the borrower’s other arguments under FREs 901, 1001, and 1002, regarding the admissibility of the document based upon its authenticity and the requirements for original records, the court again looked to the trial testimony of the witness who personally reviewed the underlying loan history records and found them to be accurate.  The court found that testimony supported the authenticity of the business record, and that it was an accurate reflection of the underlying loan history information.