Opinion
CV-062213-09/KI.
Decided June 22, 2010.
JP Morgan Chase Legal Department, New Hyde Park, New York.
Jacob Hershkovits, Defendant pro se.
Plaintiff, CHASE BANK USA, N.A. ("Chase") commenced the above action on June 10, 2009 to recover $2,837.17 sounding in breach of contract and account stated. On October 27, 2009 a default judgement was entered against the defendant. By Order dated December 9, 2009, the Hon. Kenneth P. Sherman vacated the judgment. Later that day, the defendant interposed his answer.
The defendant failed to timely respond to discovery. Therefore, plaintiff's motion to strike defendant's answer pursuant to CPLR 3126 was granted by the Hon. Pamela L. Fisher on April 30, 2010 "so far as the defendant will be precluded at from producing testimony for the allegations set forth in his answer." Thus, plaintiff's counsel's assertion that defendant's answer was stricken was a material misstatement of fact because the answer remained intact, but the defendant was precluded, in the judge's discretion, from offering evidence in favor of his defenses ( see e.g. Greene v Mullen , 70 AD3d 996 [2d Dept 2010]).
The trial of the action took place on May 10, 2010. After considering and weighing the testimony and documentary evidence, and having had the opportunity to assess the credibility and demeanor of the witnesses, the Court makes the following findings of fact and conclusions of law:
Before this Court makes any factual findings, some remarks regarding the hearsay rule and the business record exception to that rule are necessary. In credit card cases, such as the one at bar, a plaintiff's case rests solely on documents, which, if not admitted into evidence will be fatal to its claim.
"All trials proceed upon the idea that some confidence is due to human testimony, and that this confidence grows and becomes more steadfast in proportion as the witness has been subjected to a close and searching cross-examination; and this, because it is supposed that such an examination will expose any fallacy that may exist in the statement of the witness or any bias that might operate to make him conceal the truth, and trials are appreciated in proportion as they furnish the opportunities for such critical examinations" ( State v Morris, 84 NC 756, 764).
"Out-of-court statements offered for the truth of the matters they assert are hearsay and may be received in evidence only if they fall within one of the recognized exceptions to the hearsay rule, and then only if the proponent demonstrates that the evidence is reliable" ( Nucci ex rel. Nucci v Proper, 95 NY2d 597, 602 [citations and quotations omitted]; see also People v Caviness, 38 NY2d 227, 230; see also People v Kass , 59 AD3d 77 , 86 [2d Dept 2008]). Thus, it is well settled law that hearsay evidence will not be admitted into evidence ( see Reed v NY City Transit Auth., 299 AD2d 330, 332 [2d Dept 2002]) because it one of the weakest species of evidence ( see Wigmore's Principals of Judicial Proof § 188 [2d Ed 1931] [citations and quotations omitted]).
Therefore, "[t]he [l]aw does not give credit to the bare assertions of any one, however high his rank, or pure his morals" (Thomas Peake, A Compendium of the Law of Evidence [1801] pg. 7), as it would be "against natural Justice that a man should be concluded in a cause to which he never was a party" (Gilbert, the Law of Evidence pg. 47 [1754]). Without stating the basis of one's knowledge, one's testimony, i.e. hearsay, is "of no credit" (Id. at pg. 106).
"Further, in assessing reliability, a court must decide whether the declaration was [made] under circumstances which render [] it highly probable that it is truthful" ( Hochhauser v Elec. Ins. Co. , 46 AD3d 174 , 178 [2d Dept 2007] [citations and quotations omitted]).
"The underpinning for the rule excluding hearsay is that the purported utterer of the quoted statement cannot be subjected to cross-examination for purposes of casting full light on the information contained therein" ( Vincent v Thompson, 50 AD2d 211, 224 [2d Dept 1975] [citations omitted]), and "the adversary of the party offering the proof is afforded no opportunity to cross-examine the declarant or impeach his credibility" ( People v Settles, 46 NY2d 154, 166 [citations omitted]). "Because these traditional guarantees are absent when out-of-court declarations . . .are offered, such evidence is admitted cautiously and only after reliability is firmly established" ( People v Brensic, 70 NY2d 9, 14 [citations omitted]; People v Raife, 250 AD2d 864 [2d Dept 1998]). Therefore, New York does not have a "residual exception" to the hearsay rule as Federal Courts do ( People v Wlasiuk , 32 AD3d 674 , 680 n4 [3d Dept 2006] [citations omitted]).
As one commentator explained, because the trier of fact lacks information as to the testimonial status of the declarant, "we cannot afford to give it credit; we must reject it entirely" (Wigmore's Principals of Judicial Proof § 187 [2d Ed 1931]), "and, permit me here to add, that no one thing, in the administration of public justice, concerns more seriously the security of life, liberty, and property, than a firm disposition in the courts to adhere to the established rules of evidence" ( Coleman v Southwick, 9 Johns 45, 50 [Sup Ct of Judicature 1912, Kent, C.J.]). "It is this general principle which gives rationality, coherence and justification to our system of evidence and we may neglect it only at the risk of turning that system into a trackless morass of arbitrary and artificial rules" ( Ando v Woodberry, 8 NY2d 165, 167).
"[S]o far as quantity is concerned, hearsay bulks larger in all human affairs, and in any individual's inferences of daily life, than does testimony based on sense-perceptions of the probandum" (Wigmore's Principals of Judicial Proof § 187). Therefore, sometimes "such evidence is necessary for proper resolution of a particular matter and of necessity a number of exceptions to the general rule have emerged," but one must meet the strict criteria for their admission before the trier of fact is to receive such circumscribed evidence ( People v Settles, 46 NY2d at 166 — 67).
Thus, "from the necessity of the case, and the consideration that the party debited is shown to have reposed confidence, by dealing with, and being intrusted by, the other party, they are evidence for the consideration of a jury" ( Vosburgh v Thayer, 12 Johns 461 [Sup CT of Judicature 1815]). "The reason for receiving statements in entries made in the course of business, as an exception to the rule, is that they were made as a part of the regular work of one's livelihood, or profession, and that 'the entry must have been of a fact within the personal knowledge of the declarant.' See Prof. Wigmore's (16th Ed.) edition of Greenleaf on Evidence, vol. 1, sec. 120a" ( Leask v Hoagland, 205 NY 171, 176 [1912]; see also Rogers v Trs. of NY Brooklyn Bridge, 11 AD 141 [2d Dept 1896]; see also Reiss v Roadhouse Rest. , 70 AD3d 1021 [2d Dept 2010]). Accordingly, "[a]s with other hearsay exceptions, the business records exception grew out of considerations of necessity and trustworthiness-the necessity for alternatives to permit large and small businesses to prove debts by their records of account, and the unusual degree of trustworthiness and reliability of such records owing to the fact that they were kept regularly, systematically, routinely and contemporaneously" ( People v Kennedy, 68 NY2d 569, 579 [citations omitted]).
Therefore, CPLR 4518(a) was enacted, and in pertinent part states that "[a]ny writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible in evidence in proof of that act, transaction, occurrence or event, if the judge finds that it was made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter ([emphasis added]). Thus, merely satisfying the statutes foundational elements does not automatically guarantee admissibility ( Afridi v Glen Oaks Vill. Owners, Inc. , 49 AD3d 571 [2d Dept 2008]).
Based on the statute itself and case law, the trial judge must make the initial finding that the three statutory factors are established prior to a documents admission into evidence because the document should be made under circumstances that would render it highly probable that the contents of the records are reliable, as "[r]eliability is the sum of the circumstances surrounding the making of the statement that render the declarant worthy of belief" ( People v Bierenbaum, 301 AD2d 119, 145 [1st Dept 2002]; see also Hochhauser v Elec. Ins. Co., 46 AD3d at 178; see also Fleury v Edwards, 14 NY2d 334, 339 [1964] see also Ed Guth Realty, Inc. v Gingold, 34 NY2d 440, 451 [1974]). However, "[d]ocuments prepared for litigation lack the indicia of reliability necessary to invoke the business records exception to the hearsay rule" ( People v Rogers , 8 AD3d 888 , 891 [3d Dept 2004]).
With respect to the foundation testimony, the maker of the record need not testify for a business record to be admitted into evidence, someone with personal knowledge of the business's record making practices and procedures must lay the requisite foundation ( Reiss v Roadhouse Rest. , 70 AD3d 1021 , 1025 [2d Dept 2010]; Lodato v Greyhawk N. Am., LLC , 39 AD3d 494 , 495 [2d Dept 2007]; Vento v City of New York , 25 AD3d 329 , 330 [1st Dept 2006]). In other words, "[u]nder the business record exception, a party need only call one witness, who can testify . . . how such records are made, used and kept, to secure its admissibility over a hearsay objection"
(5 Fishman, Jones on Evidence § 33:2, at 101 [7th ed.]; Palisades Collection, LLC v Kedik , 67 AD3d 1329 [4th Dept 2009]). Stated otherwise, personal knowledge is shown when the witness is competent, in the classic sense, to testify about the records.
However, the sponsoring witness should display some familiarity with the record at issue before the item is admitted into evidence ( United States v Humphrey, 279 F3d 372, 378 [6th Cir 2002]).
The statute requires that three foundational requirements must be met. First, that the record be made in the regular course of business, which reflects a routine, regularly conducted business activity, and that it be needed and relied on in the performance of functions of the business ( People v Kennedy, 68 NY2d 569, 579) Second, that it be the regular course of such business to make the record (a double requirement of regularity), which means that the record be made pursuant to established procedures for the routine, habitual, systematic making of such a record ( People v Kennedy, 68 NY2d at 580). Third, that the record be made at or about the time of the event being recorded, which requires that the recollection be fairly accurate and the habit or routine of making the entries assured" ( Id. at 580).
With respect to the first two foundational requirements, the difference between them is largely academic. However, the regularity required by these requirements are satisfied when a business makes a record that is part of its operation, i.e. the record is needed for a legitimate business purpose, and that it is the policy that the record be regularly made pursuant to the established procedures that would tend to guarantee trustworthiness ( see Trotti v Buchanan, 272 AD2d 660 [3d Dept 2000]; 5 Fishman, Jones on Evidence § 33:12 at 132-33; Taft v NY City Transit Auth., 193 AD2d 503 [1st Dept 1993]).
"The statutory requirement that the business record be prepared within a reasonable time after the occurrence, i.e., while the memory of the event was still fresh enough to be fairly reliable, should not be too rigidly applied" ( Toll v State, 32 AD2d 47, 50 [3d Dept 1969]). Here, no specific evidence was presented as to how much time elapsed between the event recorded and the happening of the event, leaving this Court only to presume that the statements were "not made at the time of the event or within a reasonable time thereafter" ( Standard Textile Co. v Nat'l Equip. Rental, Ltd., 80 AD2d 911 [2d dept 1981] [citations omitted]).
An additional requirement to the statute is that the declarant must have been under a business duty to make the statement ( see e.g. City of New York v Second Ave. R. Co., 57 Sickels [ 102 NY] 572, 581 [1886]; People v Mingo , 12 NY3d 563 , 574). A business duty is nothing more than an obligation to a superior to make the statement, i.e. a duty to do the thing recorded and to otherwise record or report it (Greenleaf on Evidence [16th Ed.] vol. 1, § 120a, p. 205 [citations omitted]; People v Dyer, 128 AD2d 719 [2d Dept 1987]; Dawn VV. v State , 47 AD3d 1048 , 1049 [3d Dept 2008]). Thus, business records, to be admissible, may be received in evidence "provided the record was made as a part of the duty of the person making it, or on information imparted by persons who were under a duty to impart such information" ( Johnson v Lutz, 253 NY 124, 128 [1930]; 5 Fishman, Jones on Evidence § 33:9, at 125 [7th ed.]). With respect to credit card statements, "the cardholders-outsiders to the companies that generated the documents-were the sources of the information contained in the records" ( United States v Ismoila, 100 F3d 380, 392 [5th Cir 1996]). "So although Fed.R.Evid. 803(6) provides an exception for one level of hearsay-that of the documents themselves created by the employee who recorded the cardholder statements-the sources of the information contained in the records were the cardholders, and their statements must fall within another hearsay exception to be admissible" ( United States v Ismoila, 100 F3d at 392; see also 5 Fishman, Jones on Evidence § 33:20, at 153 [7th ed.] [citations omitted]). However, where the person supplying the information is employed by another entity which has an obligation to supply the information making the record, the business duty requirement is satisfied ( see e.g. Buckley v J.A. Jones/GMO , 38 AD3d 461 , 462 — 63 [1st Dept 2007] [citations omitted]; see also see also Corsi v Town of Bedford , 58 AD3d 225 [2d Dept 2008]; 5 Fishman, Jones on Evidence § 33:9, at 128 [7th ed.]).
Once the foundational factors have been established, the document is admissible, and the trial court need not analyze the entity's procedures used to make the record ( Meegan v Progressive Ins. Co. , 43 AD3d 182 , 187 [2d Dept 2007] [citations omitted]). However, the proponent of the evidence should elicit that the business relies on such records and should indicate the procedures followed in making the record because such issues go to the weight the records are accorded by the trier of fact ( see e.g. Halycon Ins. Co. v Fox , 44 AD3d 662 , 663 — 64 2d Dept 2007]). In sum, a document, while admissible, may be found not credible ( People v Kennedy, 68 NY2d at 576 ["other circumstances of the making of the records may go to weight once the threshold requirements for admissibility are met"]).
Where the central issue at the trial is the very transactions recorded in the business record, pro forma testimony will not suffice (5 Fishman, Jones on Evidence § 33:15, at 141 [7th ed.]; United States v Petrie, 302 F3d 1280, 1288 [11th Cir 2002]). Such testimony impairs the credibility of the document, especially where the maker of the record has a strong motive to falsify ( Corsi v Town of Bedford, 58 AD3d at 231).
Plaintiff quoted Judge Hand's decision in Mass. Bonding Ins. Co. v. Norwich Pharmacal Co. ( 18 F2d 934, 937 [2d Cir 1927]), for the proposition that necessity dictates the business records admission. However, that case was decided decades before the Federal Rules of Evidence were enacted into law and at the time of the passing of New York's Civil Practice Act 374-a ( see Johnson v Lutz, 253 NY 124, 127 [1930]). Thus, counsel's concern regarding necessity of admitting business records is eighty years too late.
Counsel's contention that the items in the Notice to Admit were deemed admitted because defendant failed to respond is without merit ( Tolchin v Glaser , 47 AD3d 922, 923 [2d Dept 2008]). Moreover, plaintiff was afforded relief by virtue of defendant's preclusion (CPLR 3126; see also Hawthorne Group, LLC v RRE Ventures , 7 AD3d 320 , 324 [1st Dept 2004]).
Plaintiff called Alexis Quirk, an employee of the plaintiff, as its first witness. Ms. Quirk stated that she is a custodian of records and is currently enrolled within Chase's marketing services.
Plaintiff offered as its exhibit 5 a copy of a the credit application. However, plaintiff failed to establish that the item was signed by the defendant (CPLR 4536). Noticeably absent from the document was a date when the application was signed. Further, "[e]vidence of the receipt of a letter purporting to have been written by a person and mailed at his place of residence, is not sufficient to authorize its introduction in evidence against the alleged writer; there must be proof that he either wrote it or authorized it to be written or sent" ( Nichols v Kingdom Iron-Ore Co., 11 Sickels [ 56 NY] 618). Moreover, no credible evidence was adduced at trial to establish "the manner and method by which tampering or degradation of the reproduction" was prevented (CPLR 4539 [b]; Allstate Ins. Co. v Spadaccini, 52 AD2d 813 [1st Dept 1976] [citations omitted]).
Plaintiff sought to enter a copy of the card member agreement as its exhibit 6. Ms. Quirk stated, in a conclusory manner, that the exhibit was a duplicate of the card member agreement "that went out on Mr. Herskovits' account when it was opened." Simply put, defendant's objection was sustained because, among other issues, no testimony was presented that would establish that the agreement was mailed to the defendant ( see e.g. Nyack Hosp. v Metro. Prop. Cas. Ins. Co. , 16 AD3d 564 [2d Dept 2005]).
Next, plaintiff sought to enter a later card member agreement that was never shown to be sent to the defendant ( Nyack Hosp. v Metro. Prop. Cas. Ins. Co., 16 AD3d at 564). Moreover, Ms. Quirk stated that the letter was sent out to inform Chase customers that it was changing its name. However, pargraph one of the "new agreement" states that it was between Chase Manhattan Bank USA, N.A. and the defendant. Thus, contrary to Ms. Quirk's testimony was contradicted by the documents she produced. In any event, the agreement was inadmissible, illegible, and too small of a print, requiring that defendant's objection be sustained, among other reasons.
Account statements printed on January 15, 2010, while litigation was pending, was offered into evidence as plaintiff's exhibit 8. Plaintiff stated that the statements covered the period of the account's opening in September of 2003 until its closing in 2009. However, Ms. Quirk stated previously that the account was opened in 1998. Given Ms. Quirk's demeanor, this Court cannot give weight or credit her testimony, especially in light of her inconsistent testimony ( Tsigler v Kasymova, 73 AD3d 1159 [2d Dept 2010]). Further, plaintiff failed to establish that either the merchant or the cardholder were acting under a business duty when recording the transaction ( see United States v David, 96 F3d 1477, 1481 [DC Cir 1996]; see also Corsi v Town of Bedford , 58 AD3d 225 , 229 [2d Dept 2008]; 5 Fishman, Jones on Evidence § 33:9, at 128 [7th ed.]). Moreover, plaintiff failed to establish that "the invoices at issue had indeed been mailed or delivered to the defendant" ( Simplex Grinnell, LP v Manor , 59 AD3d 610 , 611 2d Dept 2009]).
In any event, the foundation testimony was neither worthy of weight or credit based on the witness's demeanor ( Tsigler v Kasymova, 73 AD3d 1159). Ms. Quirk testified that her "personal knowledge" was based on the very hearsay that was offered through her testimony. Such circular reasoning is insufficient under CPLR 4518. Accordingly, she impermissibly referred to documents not in evidence ( see e.g. Hypo Holdings, Inc. v Feuer , 68 AD3d 722 , 723 [2d Dept 2009]; cf. D'Amato v Access Mfg., Inc., 305 AD2d 447, 449 [2d Dept 2003]).
A balance transfer check was offered into evidence as plaintiff's exhibit 9. However, Ms. Quirck testimony was insufficient for the checks admission into evidence (CPLR 4536; cf. Ouziel v Baram, 305 AD2d 564 [2d Dept 2003]). Moreover, plaintiff failed to overcome defendant's best evidence (CPLR 4539[b]) and hearsay objection (CPLR 4518; Corsi v Town of Bedford, 58 AD3d at 229; Dawn VV. v State , 47 AD3d 1048 , 1049 [3d Dept 2008]).
A variety of checks with different signatures and drawn from different accounts were offered into evidence as plaintiff's 10. As counsel failed to elicit the requisite foundational testimony, this Court sustained defendant's objection based on authentication ( see e.g. CPLR 4536), best evidence rule ( see e.g. CPLR 4539[b]), and hearsay (CPLR 4518; Turner v Spaide, 108 AD2d 1025, 1026 [3d Dept 1985]).
Thus, plaintiff's action for breach of contract fails ( see e.g. JP Morgan Chase v J.H. Elec. of NY , Inc., 69 AD3d 802 [2d Dept 2010]; Clearmont Prop., LLC v Eisner, 58 AD3d 1052, 1055 [3d Dept 2009]; see also Commissioners of State Ins. Fund v Munkacs Car Service Ltd. , 11 Misc 3d 802 , 805 [Civ Ct, Kings County 2006])
Moreover, regarding plaintiff's causes of action sounding in account stated, it failed to establish its prima facie case ( see e.g. Curry v Mackenzie, 239 NY 267, 272-273 [1925]; see also Epstein v Turecamo, 258 AD2d 502, 503 [2d Dept 1999]). In this regard, plaintiff failed to establish that "the parties had come together and agreed upon a balance of indebtedness" ( Portfolio Recovery Associates, LLC v Ginn, 2009 NY Slip Op 51576[U] [App Term, 2d, 11th 13th Jud Dists], citing Interman Indus. Prods. v R.M.S. Electron Power, 37 NY2d 151, 153-154; PRA III, LLC v Gonzalez , 54 AD3d 917 ). "An account stated assumes the existence of some indebtedness between the parties, or an express agreement to treat the statement as an account stated. It cannot be used to create liability where none otherwise exists" ( M. Paladino, Inc. v J. Lucchese Son Contracting Corp., 247 AD2d 515, 516 [2d Dept 1998]). "Further, an account stated cannot be made an instrument to create liability when none otherwise exists but assumes the existence of some indebtedness between the parties or an express agreement to treat the statement in question as an account stated'" ( Enviroclean Services, LLC v Cem, Inc., 12 AD3d 1042, 1043 [4th Dept 2004] [citations omitted]).
Ms. Quirck stated in a conclusory manner ( see e.g. Arkin v Resnick , 68 AD3d 692 , 694-695 [2d Dept 2009]) that bills were mailed. However, given the insufficient foundation testimony, plaintiff failed to establish by a preponderance of the credible evidence that any of the invoices were properly addressed and mailed to the defendant ( see Morrison Cohen Singer Weinstein, LLP v Brophy , 19 AD3d 161 , 161-162 [1st Dept 2005]; see also Curry v Mackenzie, 239 NY at 272-273; see also Epstein v Turecamo, 258 AD2d 502, 503 [2d Dept 1999]; Portfolio Recovery Associates, LLC v Ginn, 2009 NY Slip Op 51576(U) [App Term, 2d, 11th 13th Jud Dists], citing Interman Indus. Prods. v R.M.S. Electron Power, 37 NY2d 151, 153-154; see also M. Paladino, Inc. v J. Lucchese Son Contracting Corp., 247 AD2d 515, 516 [2d Dept 1998]). Accordingly, plaintiff's account stated claim must fail ( see Prince, Richardson on Evidence § 8-225 [Farrell 11th ed]).
Accordingly plaintiff failed to establish its prima facie case by a preponderance of the credible evidence ( see e.g. see also Lucks v Lakeside Mfg., Inc. , 37 AD3d 666 , 668 [2d Dept 2007]; Proper v State Farm Mut. Auto. Ins. Co. , 63 AD3d 1486 [3d Dept 2009]).
Based on the above, it is hereby
ORDERED that judgment be entered in favor of defendant JACOB HERSHKOVITS and against plaintiff CHASE BANK USA, N.A. and that plaintiff's complaint be DISMISSED with prejudice on the merits.
The foregoing constitutes the Decision and Order of the Court.