Bank’s Business Records and Supporting Affidavit Satisfy Evidence Rules – IL 2nd Dist.

Because they’re so integral to commercial litigation, business records and the myriad evidentiary concerns intertwined with them, are a perennial favorite topic of this blog.

In earlier posts (here and here, I’ve featured US Bank, NA v. Avdic, 2014 IL App (1st) 121759 and Bank of America v. Land, 2013 IL App (5th) 120283, two cases that examine the foundation and authenticity requirements for admitting business records in evidence and probe the interplay between Illinois Supreme Court Rule 236 and Illinois Evidence Rule 803(6).

We now can add Bayview Loan Servicing, LLC v. Szpara, 2015 IL App (2d) 140331 to the Illinois business records cannon.  Harmonized, Avdic, Land and Bayview form a trilogy of key business records cases that are useful (if not required) reading for any commercial litigator.

Bayview’s facts parallel those of so many other business records cases: a mortgage foreclosing plaintiff tries to offer business records into evidence at trial or as support for a summary judgment motion and the defendant opposes the records’ admission.

Bayview’s bank plaintiff tried to get damages in evidence via a prove-up affidavit signed by a bank Vice President who didn’t actually create the records in the first place.  The defendant moved to strike the affidavit as lacking foundation.

Affirming summary judgment for the bank, the First District provides a cogent summary of the governing standards for summary judgment affidavits that are employed to get business records into evidence.

First, the court affirmed dismissal of the defendant’s fraud in the inducement affirmative defense – premised on the claim that a mortgage broker allied with the plaintiff made false statements concerning the defendant’s creditworthiness and value of the underlying property.

Fraud in the inducement is a species of common law fraud.  A fraud plaintiff in Illinois must show (1) a false statement of material fact, (2) knowledge or belief that the statement is false, (3) intent to induce the plaintiff to act or refrain from acting on the statement, (4) the plaintiff reasonably relied on the false statement, and (5) damage to the plaintiff resulting from the reliance.  A colorable fraud claim must be specific with the plaintiff establishing the who, what, and when of the challenged statement.

The Court agreed with the trial court that the defendant’s fraud in the inducement defense was too vague and lacked the heightened specificity required under the law.  The defendant failed to sufficiently plead the misrepresentation and didn’t allege facts showing when the misstatement was made.  As a result, the defense was properly stricken on the bank’s motion. (¶¶ 34-35)

The court then found that the plaintiff’s business records – appended to a bank employee’s affidavit in support of the bank’s summary judgment motion –  were properly admitted into evidence and affirmed summary judgment for the bank.

Illinois Supreme Court Rule 236 and Illinois Evidence Rule 803(6)(“Records of Regularly Conducted Activity”) provide that a business record can be admitted into evidence as an exception to the hearsay rule if (1) the record was made in the regular course of business and (2) was made at or near the time of the events documented in the records.

In  the context of a prove-up affidavit based on business records, the affiant doesn’t have to be the one who personally prepared the record; it’s enough that the affiant has basic familiarity with the records and the business processes used by the party relying on them.

Under Evidence Rule 803(6), the lack of personal knowledge of someone signing an affidavit does not affect the admissibility of a given document, although it could affect the (evidentiary) weight given to that document.   (¶42).

The bank’s Vice President in Bayview testified in her prove-up affidavit that she had access to the business records relating to defendant’s loan, that she reviewed the records, had personal knowledge of how the plaintiff kept and prepared them and that the plaintiff’s regular practice was to keep loan records like the ones attached to the affidavit.

The court rejected the defendant’s argument that the affidavit was deficient since the bank agent wasn’t who created the attached loan records.  Citing to Avdic and Land, the Court found that, in the aggregate, the bank agent affidavit testimony sufficiently met the foundation and authenticity requirements to get the business records in evidence. (¶¶ 41-46)

Afterwords:

This case contains salutary discussion and rulings for plaintiff creditors as it streamlines the process of getting business records into evidence at the summary judgment stage and later, at trial.

Bayview reaffirms the key holdings from Avdic, Land and business records cases like them that an agent who had nothing to do with preparing underlying business records can still attest to the records’ validity and authenticity provided she can vouch for their validity and is familiar with the mode of the records’ creation.

The Statute of Frauds ‘One-Year Rule’ (IL Law Basics)

SOFThe Statute of Frauds (SOF) requires certain contracts to be in writing to be enforceable.  (See earlier post here).  740 ILCS 80/1; 810 ILCS 5/2-201 (UCC analog).

The SOF’s “one-year rule” posits that any contract that can’t possibly be performed within the span of one year from the date of making must be in writing.  The purpose of the one-year rule is to protect against stale memories and evidence.

Typical settings for the one-year rule defense include multi-year leases and “lifetime” employment contracts (i.e., plaintiff sues an employer claiming breach of a promise to employ the plaintiff for life).

In Chiappe-Kay v. Barthel, 2013 IL App (2d) 120975-U, the plaintiff sued the defendant after the defendant failed to transfer a Personal Seat License that allowed the defendant (and would now allow the plaintiff) to buy Chicago Bears season tickets for life.

The plaintiff sued for specific performance and defendant moved for summary judgment based on the one-year rule: the oral football tickets agreement was defeated because  it couldn’t be performed within the space of a year.

Siding with the defendant, the Court described the one-year rule’s purpose as barring actions “based upon nothing more than loose verbal statements.”  It held that the parties’ agreement couldn’t be performed within the space of a year since the agreement was that the plaintiff would receive season tickets for life based on defendant’s PSL. (¶ 16).

The Court also found that the one-year rule barred plaintiff’s claim because the Bears instituted a one-year ban on the transfer of PSLs when the Bears first issued the PSL to the defendant.  As a result, there was no way for the defendant to perform – by transferring the PSL – to the plaintiff within a one-year time span.  (¶¶ 19-21).

Farmers and Merchants v. Hulett, 2012 IL App (3d) 120022-U, involves an oral agreement between a former land trustee and the beneficiary for that beneficiary to rent a house (owned by the land trust) for the beneficiary’s lifetime.

When the successor trustee assumed control of the trust, it sent a notice terminating the tenancy and sued to evict the beneficiary tenant.  The tenant opposed the eviction suit and argued that he was allowed to live in the house for his lifetime.  The Court entered summary judgment for the successor trustee and found that the defendant’s claim to a lifetime tenancy was unenforceable since it wasn’t in writing.

The Court noted that the written land trust agreement was silent on the defendant’s right to occupy the house.  Because of this, the tenant had, at most, an oral lease agreement with the prior trustee.

In Illinois, an oral lease for a period exceeding a year – such as a lifetime lease – is treated as a year-to-year lease.  A year-to-year lease can be terminated on a landlord’s sixty-day written notice.  735 ILCS 5/9-205 (year-to-year lease is terminable on 60 days’ notice).

The Court found the successor timely terminated the oral lease under the Illinois forcible detainer statute.

Hulett also provides good reading on the topics of promissory estoppel (which usually is not an exception to the SOF) and equitable estoppel (which is). (¶¶ 14-15).

Promissory estoppel applies where someone takes action in reliance on a verbal promise by the defendant.  Equitable estoppel involves some element of calculated misconduct or deception by the defendant.