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California Appeals Court Rules Original Creditor Must Testify to Debt Acquired by Assignee – Glass & Goldberg | Financing, Property & Bankruptcy Law
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California Appeals Court Rules Original Creditor Must Testify to Debt Acquired by Assignee

ICalifornia Appeals Court Rules Original Creditor Must Testify to Debt Acquired by AssigneeA California appeals court has ruled that when a collection agency relies on records created by a predecessor-in-interest, it needs the testimony of the original creditor’s custodian of records before those records can be admitted in court under the business records exception to the hearsay rule.

In Sierra Managed Asset Plan, LLC v. Hale, the defendant accumulated a debt of $10,128 on his Citibank credit card. Plaintiff acquired Citibank’s rights as creditor and subsequently filed suit to collect. Before the trial, Sierra filed the declaration of its authorized agent, Marc Roberts, in lieu of live testimony per Code Civ. Proc. §98.

The §98 declaration was inaccurate in that it represented that Roberts was not available for service of process at his listed address in Santa Monica, which is within 150 miles of the court. The address was a business mailbox location where Roberts was not available for service.

Roberts’ declaration included exhibits that were the defendant’s Citibank agreement and account statements that reflected the debt. The trial court accepted the declaration and exhibits into evidence as well as a declaration by Citibank’s custodian of records Lee Krege, who attested to the exhibits’ authenticity. Roberts appeared in person and was cross-examined by defendant’s counsel.

The trial court entered a judgment for Sierra for the full sum of the debt. On appeal, the Appellate Division of Ventura County Superior Court reversed, holding that the trial court erred in admitting the exhibits into evidence.

The appeals court found no error in the admission of Roberts’ declaration since he was available for cross-examination. However, the court held that the admission of the exhibits was in error per Evid. Code §1271, which requires that “the custodian or other qualified witness” testify as to the authenticity of the records.

The court said that Roberts was not qualified to testify as to the authenticity of Citibank’s records, and since Citibank did not produce a qualified witness to attest to the authenticity of its records, it did not lay the business records foundation as required by §1271. In addition, the court said the admission of Krege’s declaration was in error, deeming it inadmissible hearsay that should have been excluded.

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