Paper Record Still Merits Deference on Appeal of Factual Findings

Jones v. Solgen Construction, LLC, No. F085918 (D5 Feb. 26, 2024).

A shady Solar Seller claims to have sold a rooftop solar setup to an 81-year-old Lady in Fresno. Lady lives on $1,000 per month in social security, but apparently agreed to take out a $52k, 25-year loan from Lender, Solar Seller’s financing partner. Lady sued, claiming fraud and other related stuff. The loan documents included an arbitration clause. Lender and Solar Seller moved to compel arbitration.

The parties’ versions of the relevant events are, to say the least, hotly in dispute. Lady says she thought she was entering a government program that was supposed to cap her electric bills in exchange for putting some solar panels on her roof. She never would have agreed to a long term loan that would not be paid off till she was 106. Lady didn’t recall signing a contract, and certainly not a contract containing those terms. Solar Seller and Lender say that Lady DocuSigned a loan agreement and have a video where she (somewhat hesitantly and with a confused affect) acknowledges that. The details of that aren’t really super important, but it should suffice to say that there was evidence upon which the court could probably have gone either way.

One piece of that evidence is the DocuSigned contract. Solar Seller made a somewhat inscrutable hearsay objection to it. Not for the contract itself. After all, if not admitted, the lack of a contract pretty much precludes an arbitration argument. But for a stamp on the DocuSign certificate that showed Lady reviewed the 21-page contract for a whopping 38 seconds before she allegedly e-signed it. 

But Lender had put in a declaration establishing business records foundation under Evidence Code § 1271. The declaration did a good job of establishing why the DocuSign process was a reliable and trustworthy way to generate business records. That being the case, there was no error in considering the time stamps.

Solar Seller also says that the trial court erroneously refused to consider a customer service recording between Lady and a customer service rep, which it submitted in connection with its reply brief. But the record doesn’t actually substantiate that is what happened. The trial judge asked why the recording was submitted on reply. Solar Seller gave an answer. Then the discussion moved on. Nowhere does the record reflect that the court refused to consider the recording. And the fact that the court didn’t expressly refer to it in its written ruling doesn’t change that fact. The appellant bears the burden of coming forward with a record of error. Silence merits a presumption that the trial court was correct.

Finally, the big issue is whether the court correctly found by a preponderance of the evidence that there was no binding agreement to arbitrate. Again, the substance of this debate is too fact-specific to be interesting. But there is an interesting debate about the standard of review. 

A finding of fact is typically reviewed for substantial evidence. But specific to this context, the weight of the authority treats an appeal of a finding that a party failed to meet its burden of proof like an appeal of a denial of a plaintiff’s JNOV. That is, was the plaintiff’s evidence so overwhelming that any reasonable trier of fact would find in its favor, and thus that the court was required to find that it met its burden as a matter of law? If that’s the standard, the question here isn’t too hard, because the Solar Seller and Lender’s evidence isn’t that good.

But there are some cases that suggest that when the record before the trial court was entirely written—as it was here—an appellate court can re-weigh the evidence de novo. See Patterson v. ITT Consumer Financial Corp., 14 Cal. App. 4th 1659, 1663 (1993); Milazo v. Gulf Ins. Co., 224 Cal. App. 3d 1528, 1534 (1990). The theory is that, on a paper record, an appellate court is equally well situated to find the facts. 

But the Court here does a good job of unspooling that those cases are not reasoned and authority they rely upon does not actually support the stated proposition. They instead stand for the much less sweeping point that an appellate court is equally well situated to interpret the language of a contract when no parol evidence is at play. That is the kind of mistake that appellate courts sometimes make, and I have complained about it previously. So kudos to the Court here for digging in. And in any event, the Supreme Court has repeatedly held that a deferential standard of review applies to a trial court’s fact-finding, regardless of whether it is based on oral testimony or a written record.

That being the case, the evidence was no so overpowering that the existence of an agreement was established as a matter of law.

Affirmed.

Well, I Read Some Documents Once

Chambers v. Crown Asset Mgm’t, LLC, D0079074 (D4d1 Nov. 12, 2021)

This is an appeal of a denial of a motion to compel arbitration in a dispute between a Consumer and a credit card Provider. Provider claims that it mailed Consumer an arbitration policy that said if Consumer thereafter used the card, she consented to arbitration. To support this assertion, Provider put in a declaration from an employee attesting that she had reviewed Provider’s business records, and they showed Consumer had been mailed a copy of the agreement and failed to object. 

Two problems with that. 

First, the employee’s declaration didn’t put in the work to show that the records she reviewed were, in fact, within the business records exception to the hearsay rule. In particular, she didn’t attest to the way the records were created or maintained in the course of the company’s regular operations, or even to Provider’s custom and practice regarding the way such records were created.

Second, the secondary evidence* rule does not save Provider from the fact that it failed to actually attach any of the records that were the subject of the attestation. The secondary evidence rule requires that the documents that are the subject of oral testimony must be otherwise admissible. Since Provider failed to lay the necessary foundation to establish that the records, what ever they were, were subject to a hearsay exception, the testimony was just another level of unexcepted hearsay.

Affirmed.

*FWIW, the secondary evidence rule, California’s version of the best evidence rule, is fundamentally indeterminate and arbitrary. Unlike the federal rule, which presumes that, absent specified reasons, oral testimony about the contents of documents does not come in, see Fed. R. Evid. 1002, 1003, 1004, the California rule presumes that oral testimony is admissible. See Evid. Code § 1521. The testimony is inadmissible only if there is a dispute about the contents and “justice requires the exclusion” or if admitting it would be “unfair.” Those are hardly bright line standards that can be uniformly applied. And practically, it seems like, in an age where most records are electronically created or stored, you should need to come up with a good reason why you can’t attach a document before someone can just attest to it in a declaration. Otherwise, the standard is in the eye of the beholder.

K and Stuff Testimony Flummoxes Hearsay Ruling

Hart v. Keenan Props., Inc., No. A152692 (D1d5 Nov. 19, 2018)

The trial in this asbestos case presented a classic product ID question: Was the Defendant the distributor of asbestos-containing pipe product that Plaintiff used on jobs where he worked as a pipe layer? The evidence was thin. Plaintiff knew the pipes were asbestos cement pipes made by a particular manufacturer. But he didn’t know the distributor. And there were no records from the time to show that Defendant was, in fact, the distributor.

Seven Service Options, None Good, Doesn't Cut It Under CCP § 98.

Midland Funding, Inc. v. Romero, No. JAD16-06 (Orange Cnty. Super. App. Div. Sept. 6, 2016)

Code of Civil Procedure § 98 permits, under certain conditions, a party in a limited civil case to offer a declaration in lieu of a witness’s direct testimony. Plaintiff—some kind a debt collector—offered such a declaration by one of its officers, purporting to attest to its acquisition of Defendant’s account and to lay give foundation that certain documents were admissible business records. The declaration agreed to accept service of a trial subpoena at any one of seven locations, several of which were more that 150 miles from the courthouse and others of which were “c/o” addresses, presumably acceptable for substitute but not personal service. The trial court let the docs in over Defendant’s objection and Defendant appealed to OC Superior’s App Div.

Turtles All the Way Down

Unifund v. Dear, No. APP1400181 (Riverside App. Div. Dec. 21, 2015)

So this is one of those collections cases like they talked about on a pretty interesting This American Life where a debt collector buys a debt to enforce it needs to prove that it is a rightful assignee and that the debt records are real. As Ira and crew explained, the collectors in these cases are often unprepared to come up with the goods when the evidence is put to the test. But not in this case, or so says the court. But this one seems to whiff of a hearsay issue.

An Object Lesson on the Epistemic Limits of Debt Collectors

Sierra Managed Asset Plan, LLC v. Hale, No. 06-2013-00443856-CL-CC-VTA (Venura App. Div. Aug. 20, 2015) 

In trials in limited civil cases, the parties can submit declarations in lieu of live direct testimony under Code of Civil Procedure § 98. In order to do that, the declarant has to represent that he is available for service of process at an address within 150 miles of the courthouse, so he can be subpoenaed for cross-examination if the other party is so inclined. In this case, the address given by the declarant in this case was a PO box in a store, so the declaration was false and deficient in that respect. The declarant, however, was present at trial and actually cross-examined by the defendant. So the purpose of § 98, if not its letter was met, and there was no prejudice. Under the circumstances, the trial court didn’t err in accepting the declaration.

But the declaration attached various bank documents as business records. The declarant, however, was not an employee of the bank, but of the plaintiff, a collections agent that had taken the matter under an assignment. The declarant thus was unqualified to say anything other than that he had received the documents from the bank. That isn’t enough to lay business records foundation because it doesn’t establish that “[t]he sources of information and method and time of preparation [of the records] were such as to indicate [their] trustworthiness.” See Cal. Evid. Code § 1271. So the documents and related testimony were hearsay that should have been excluded. And since they were the only evidence that the defendant actually owed the debt at issue, their admission was prejudicial.

Reversed.

Kinda reminds me of something I once heard on the radio.

Voluminous Hearsay . . .

Golden State Coring & Pipe Jacking Inc. v. E. Muni. Water Dist., No E054618 (D4d2 July 23, 2104)

This is an appeal of an order granting summary judgment in a construction dispute. It turns on whether there were stoppages of work. In support of its motion, defendants provided a declaration from their attorney, who purported to summarize voluminous records produced in discovery, to the effect that such stoppages did, in fact, occur. The court here finds that sufficient because Evidence Code § 1523(d) permits oral testimony of the contents of writings if “the writing consists of numerous accounts for other writings that cannot be examined in court without great loss of time, and the evidence sought from them is only the general result of the whole.” Further, because the plaintiff did not actually contest that the stoppages happened, even if it was error to admit this evidence, there was no prejudice meriting reversal.

Justice King dissents. He makes the point—well borne out in the case law—that while § 1523(d) might provide a vehicle for secondary proof of the contents of voluminous records, it does not permit an end run around the hearsay rule. If records being summarized are inadmissible hearsay, they are not rendered admissible by summarizing them. So if a party wants to prove the truth of contents of documents that are being summarized, it must also lay foundation that the records themselves are not hearsay or subject to an exception. The most common exception is business records. Because the declaration in this case did not lay that foundation, and because the defendant didn’t otherwise provide foundational evidence that the exception applied—such as a custodian of records declaration under § 1561—the summaries weren’t admissible even if they satisfied the secondary evidence rule. 
 
Affirmed.