Opinion ID: 4529386
Heading Depth: 3
Heading Rank: 1

Heading: Lea’s Direct-Examination Testimony

Text: Kim and Foster argue that the bankruptcy court erred by relying on Lea’s testimony because “she had no personal knowledge concerning Chase obtaining possession of the original Note in 2009, Chase sending the Note to [its foreclosure counsel] in 2010, or not receiving the Note back.” Appellants’ Opening Br. 43. And Kim and Foster contend that without personal knowledge, she could not provide relevant evidence concerning Chase’s possession and loss of possession of the Note. In addition, Kim and Foster argue Lea’s testimony about Exhibits L and M (and their contents) is inadmissible, because she was merely “‘parroting’ the content of the Exhibits.” Appellants’ Reply Br. 21 (quoting United States v. Garcia, 793 F.3d 1194, 1213 (10th Cir. 2015)). But Kim and Foster’s counsel called Lea to testify on direct examination as an adverse witness. And “[g]enerally, a party introducing evidence cannot complain on appeal that the evidence was erroneously admitted.” Ohler v. United States, 529 U.S. 753, 755 (2000) (citation omitted). Discussing Ohler, we have stated that “the party introducing the evidence waives—rather than forfeits—any objection to its admission, meaning ‘we do not consider the claim at all, even under the forgiving plain-error standard.’” Vehicle Mkt. Research, Inc. v. Mitchell Int’l, Inc., 839 F.3d 16 1251, 1258 (10th Cir. 2016) (quoting Hancock v. Trammell, 798 F.3d 1002, 1011 n.3 (10th Cir. 2015)).5 This waiver rule applies in civil cases, id. at 1258 n.5 (citations omitted), and it applies when a party elicits testimony on direct examination, see id. at 1258 (applying Ohler when a party elicited testimony on direct examination). This waiver is significant because Lea’s direct-examination testimony establishes all three elements of the lost-instrument statute. When asked if she had spoken with anyone at Chase who knew which (if any) Chase employees “physically took possession of the note,” Lea testified that she knew “that the vault personnel [at Chase’s vault in Monroe, Louisiana,] physically took possession of the note.” App. vol. 7 at 1800:15–20. Further, when asked if “Chase [wa]s not in possession of the original Alexander Kim note,” Lea responded, “[c]orrect.” Id. at 1788:10–12. Lea then stated that Chase had sent the original Note to its foreclosure counsel and that Chase still, as of June 2016, had the right to enforce the Note. Starting with element one—“the person was in possession of the instrument and entitled to enforce it when loss of possession occurred”—we find that Lea’s testimony directly states that Chase physically possessed the Note. And because Kim and Foster agree that “physical possession” of a blank-indorsed note “constitutes proof of ownership and a consequent right to payment,” Appellants’ Opening Brief 5 As it affects Lea’s direct-examination testimony, Kim and Foster’s fallback argument—“that if each objection was not clearly preserved, there is no waiver of the issue if there is plain-error resulting in manifest injustice”—is therefore precluded by Vehicle Market Research. Appellants’ Reply Br. 13 (alteration, internal quotation marks, and citation omitted). 17 at 32 (citing Miller, 666 F.3d at 1262–63), her testimony also establishes that Chase had the right to enforce the Note. All that leaves for element one is timing: Chase must show it possessed and could enforce the Note “when loss of possession occurred.” But the bankruptcy court found that “[t]he original Note was removed from the vault and transferred to Chase’s prior attorney, and was thereafter lost and has not been returned,” a finding that establishes Chase both possessed the Note and could enforce it when it was lost. App. vol. 5 at 1126. And Lea’s testimony on direct examination supports that finding. She stated that Chase sent the Note to its foreclosure counsel and that the Note was lost thereafter. From this testimony, even if Lea did not provide a precise date, we conclude that the bankruptcy judge drew a reasonable inference that Chase maintained possession (and, therefore, the right to enforce the Note) when the Note was lost. See United States v. Porter, 928 F.3d 947, 962 (10th Cir. 2019) (“Under clear error review, we ‘view the evidence and inferences drawn therefrom in the light most favorable to the [bankruptcy] court’s determination.’” (quoting United States v. Brown, 314 F.3d 1216, 1222 (10th Cir. 2003))).6 Next, for element two, Chase must prove that it did not lose possession through a transfer or a lawful seizure. Colo. Rev. Stat. Ann. § 4-3-309(a). Finding for Chase again, the bankruptcy court stated that “[n]o evidence indicates, and, indeed, neither party suggests, that Chase transferred the original Note to another entity, or 6 Our conclusion that Chase maintained constructive possession also supports this finding. See discussion infra Section IV.A. 18 that the Note was lawfully seized by another entity.” App. vol. 5 at 1127. In a footnote, the bankruptcy court reasoned that Chase entrusted the Note with its attorney so that he could hold it as Chase’s agent. Lea’s testimony on direct examination also supports that finding. Again, she testified that Chase sent the Note to its foreclosure counsel and that, at the time of the hearing (June 2016), Chase still had the right to enforce the Note. But if Chase maintained the right to enforce the Note in 2016, then the bankruptcy court could have easily inferred that Chase never transferred the Note to its attorney or gave up its right of possession. Rather, Chase still possessed the Note then, and the attorney merely took custody over it through an agency relationship.7 Likewise, Lea’s testimony supports the bankruptcy court’s finding on element three: “there is no question that [the] original paper Note was lost, possibly in transmission to or from Chase’s prior counsel. Therefore, Chase cannot reasonably be expected to find and produce the original Note.” App. vol. 5 at 1128. As mentioned, Lea testified on direct examination that Chase possessed the Note, sent the Note to its foreclosure counsel, and that the Note was then lost. From this testimony, we conclude that the bankruptcy court could have reasonably inferred that Chase could not obtain the Note, because its whereabouts could not be determined.8 7 Again, our later conclusion that Chase maintained constructive possession of the Note through an agency relationship precludes any contrary argument. See discussion infra Section IV.A. 8 In addition to Lea’s testimony, the bankruptcy court could have drawn this inference from evidence that was not before the court. If Chase knew about the 19 Kim and Foster introduced this testimony themselves; therefore, under Ohler, they cannot now challenge the admissibility of this evidence on appeal. And because “we may affirm on any ground supported by the record,” Johnson v. Spencer, 950 F.3d 680, 720 (10th Cir. 2020) (citation omitted), we could stop our analysis here and conclude that through Lea’s testimony, Kim and Foster satisfied Chase’s burden for Chase.9 B. Lea’s Cross-Examination Testimony About Exhibit L Even assuming Lea’s direct-examination testimony was not enough, her cross-examination testimony about Exhibit L definitively resolves the primary dispute—whether Chase possessed the Note. On cross-examination, Lea testified about the contents of Exhibit L (a print-out of a screenshot of the Note’s scanned first blank-indorsed Note’s whereabouts, it seems a fair inference that Chase would have produced the Note, rectifying the problems—one being the possibility of sanctions— that it had created by having lost the Note. And if Chase never actually possessed the Note and some other unidentified entity did (as Kim and Foster seem to suggest), then the bankruptcy judge could have reasonably questioned why that entity never filed a proof of claim in the bankruptcy proceedings, seeking to recover what it could on the $2,000,000 debt instrument. 9 Kim and Foster argue that the bankruptcy judge violated the law of the case by exceeding the limiting instructions that it attached to Chase’s business records. But Kim and Foster forfeited their law-of-the-case argument by not raising it in the original appeal to the district court. See Foster v. Hill (In re Foster), 188 F.3d 1259, 1264 n.5 (10th Cir. 1999) (holding that a party had “forfeited the issue in [that] appeal” by not raising it on appeal to the “district court as an alternative basis to affirm”). And even if Kim and Foster had not forfeited it, we would refuse to consider it, because we can affirm the bankruptcy court’s decision that Chase satisfied the elements of the lost-instrument statute based on this direct-examination testimony alone. See Johnson, 950 F.3d at 720. 20 page) and the procedures Chase followed when scanning notes. Among other things, she explained that  Chase contemporaneously scanned notes into its system when it received the original notes, and Chase had no ability to change scan dates.  On September 17, 2009, Chase scanned the original Note into its computer system.  Therefore, on September 17, 2009, Chase had possession of the original Note. We conclude that this testimony, if admissible, provided a factual basis for the bankruptcy court to find that Chase had obtained possession of (and, thus, the right to enforce) the Note. As they did in the bankruptcy court, Kim and Foster argue that this evidence should never have been introduced because it is inadmissible.10 Hearsay evidence is “an oral or written assertion by a declarant offered to prove the truth of the matter asserted.” United States v. Channon, 881 F.3d 806, 811 (10th Cir. 2018) (citing Fed. R. Evid. 801). Such evidence is generally inadmissible. 10 Chase claims that “[a]t the Evidentiary Hearing, Debtors’ counsel never objected to the admissibility of Ms. Lea’s testimony on the basis of a lack of first-hand knowledge or any other grounds,” meaning we should now apply our demanding plain-error standard of review to the business-record-exception issue. See Appellee Chase’s Answer Br. 25. But the record shows that when Chase moved to admit Exhibit L, lack of personal knowledge was one of many objections Kim and Foster raised: MS. LOWERY-GRABER: Your Honor, I’d ask for admission of Exhibit L. MR. BUECHLER: Objection, Your Honor, foundation, best evidence, double hearsay after triple hearsay, Your Honor and lack of personal knowledge. App. vol. 7 at 1832:18–22 (emphasis added). Because Kim and Foster objected to this evidence in the bankruptcy court, we do not apply plain-error review. 21 Fed. R. Evid. 802. As an exception to the rule against hearsay, business records are admissible to prove the truth of the matters asserted within those records if the party offering the business record can satisfy these elements: [B]usiness records are admissible despite their hearsay nature if the records’ custodian, or another qualified witness, testifies the records (1) were prepared in the normal course of business; (2) were made at or near the time of the events recorded; (3) were based on the personal knowledge of the entrant or of a person who had a business duty to transmit the information to the entrant; and (4) are not otherwise untrustworthy. United States v. Irvin, 682 F.3d 1254, 1261 (10th Cir. 2012) (citing United States v. Ary, 518 F.3d 775, 786 (10th Cir. 2008)); see also Fed. R. Evid. 803(6). For the following reasons, we hold that Chase has satisfied each of these elements.
Kim and Foster argue that Lea was incompetent to testify about whether Chase obtained possession of the Note. Among other things, they argue that she lacked first-hand knowledge about any of the details surrounding the Note and that she did not learn of those details from people who would have scanned the Note into Chase’s system. Federal Rule of Evidence 803(6)(D) requires testimony from the custodian of the business record or “another qualified witness.” The rule does not define the term “another qualified witness,” but most courts have “broadly interpreted [it] to require only that the witness understand the record-keeping system.” United States v. Ray, 930 F.2d 1368, 1370 (9th Cir. 1990) (citations omitted); see also Brawner v. Allstate Indem. Co., 591 F.3d 984, 987 (8th Cir. 2010) (“[W]e have established that the 22 ‘custodian or other qualified witness need not have personal knowledge regarding the creation of the document offered, or personally participate in its creation, or even know who actually recorded the information.”’ (citations omitted)); Wallace Motor Sales, Inc. v. Am. Motors Sales Corp., 780 F.2d 1049, 1061 (1st Cir. 1985) (“A qualified witness is simply one who can explain and be cross-examined concerning the manner in which the records are made and kept.” (citation omitted)). Here, Lea’s testimony demonstrated that she thoroughly understood Chase’s recordkeeping process. She testified that she reviewed Chase’s business records daily. She testified that she herself had created business records for Chase. She knew about where Chase maintained its document vault—Monroe, Louisiana—and she testified that she had inspected the vault herself. She testified that “the vault records are kept very meticulously.” App. vol. 7 at 1800:23. She testified that she “personally witnessed how [Chase employees] scan in the documents and separate the files.” Id. at 1801:15–22. She explained how Chase’s I-Vault system—where Chase electronically stored its records after they were scanned—functioned. She described which Chase personnel were authorized to enter information into the I-Vault system. She explained that, temporally, Chase employees scanned documents as they were received and immediately uploaded into the I-Vault system. Finally, she explained that she had acquired this knowledge after having served as a Chase mortgagebanking research officer for over seven years. 23 Thus, we conclude that Lea was a qualified witness. As a result, contrary to Kim and Foster’s argument, Lea did not need to have personal knowledge about Exhibit L’s contents to testify about Exhibit L. 2. Exhibit L was prepared in the normal course of business. When asked if Exhibit L was “kept and maintained in the ordinary course of its business,” Lea testified, “[y]es.” Id. at 1831:16–18. Even so, Kim and Foster argue that Exhibit L was not maintained in the ordinary course of business, because it is a print-out of data that was stored in Chase’s recordkeeping system and Chase created the document in preparation for this litigation. Specifically, Kim and Foster assert that “[p]reparing a document for litigation is not the regular course of business, preventing trustworthiness.” Appellants’ Reply. Br. 16 (citations omitted). But our circuit rejected that argument thirty years ago: “so long as the original computer data compilation was prepared pursuant to a business duty in accordance with regular business practice, the fact that the hard copy offered as evidence was printed for purposes of litigation does not affect its admissibility.” United States v. Hernandez, 913 F.2d 1506, 1512–13 (10th Cir. 1990); see also Channon, 881 F.3d at 811 (“As we have previously held, business records in one form may be presented in another for trial.” (citing Hernandez, 913 F.2d at 1512–13)). The original electronic scan is what matters here, and just because Chase presented that business record in a different form does not make it inadmissible if the other elements of the businessrecord exception are satisfied. 24 3. The original scan was made near the time of the events at issue. Lea testified that Exhibit L’s scan date was entered in both a timely and trustworthy fashion. She testified that the original Note was scanned on September 17, 2009. She also testified that the records were kept “very meticulously” and that the “scan date cannot be changed.” App. vol. 7 at 1800:23, 1803:21–22. Kim and Foster’s only argument to the contrary is based on Expert Byrnes’s testimony that because he had not reviewed the original scanned file, he could not confirm that Chase scanned the document into its system in 2009 or created the original scan at that time. Byrnes testified that the electronic copies he had received had been created or modified in 2015. Thus, Byrnes testified that he did not have “any opinion as to whether the PDF[] accurately reflect[ed] Chase’s computer-stored records.” Id. at 1782:17–20. Relying on Lea’s testimony, the bankruptcy judge chose to credit her account over Byrnes’s hesitancies about Exhibit L. He noted that Byrnes had not claimed that “the scan of the original Note had been fraudulently altered.” App. vol. 5 at 1127. And he noted that Lea had testified that “when she creates an image of a scanned document from Chase’s electronic files, she has no ability to change any of the scan information.” Id. Kim and Foster’s argument that Exhibit L is unreliable because it was created “in 2015, not contemporaneously with events allegedly occurring in 2009-2011,” Appellants’ Reply Br. 17, asks us to make a credibility determination—crediting Byrnes’s concerns about his inability to verify that the original scan was created in 2009 over Lea’s 25 testimony that the original scan must have been made in 2009 because the scan date could not be changed and was contemporaneously generated as it was inputted into Chase’s system. But on a clearly erroneous standard of review, we leave that credibility determination for the bankruptcy judge. See Mason v. Young (In re Young), 237 F.3d 1168, 1176 (10th Cir. 2001) (“However, that is a credibility determination that is properly the province of the trier of fact—in this case the bankruptcy court—, and we may not disturb that trier of fact’s credibility determinations on appeal.” (citing Anderson v. City of Bessemer City, 470 U.S. 564, 575 (1985))). In Anderson, the Court instructed that “the court of appeals may not reverse [a district court] even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the factfinder’s choice between them cannot be clearly erroneous.” 470 U.S. at 574 (citing United States v. Yellow Cab Co., 338 U.S. 338, 342 (1949)). Lea’s account was permissible—indeed, it was more persuasive— hence we conclude that the bankruptcy court did not clearly err by concluding that the original scan was created at or near the time of the 2009 events at issue. And because Exhibit L is just a print-out of a screenshot of the scanned Note, it is admissible. See 2 Kenneth S. Broun et al., McCormick On Evidence § 294 (Robert P. Mosteller ed., 8th Fed. Jan. 2020 update) (“The question as to the timeliness of the creation of the record is answered by observing that the time requirement refers to when the entry into the data bank was originally made, not the time the printout was produced.” (collecting cases)). 26 4. Exhibit L was based on the personal knowledge of the entrant or of a person who had a business duty to transmit the information to the entrant. Kim and Foster do not address whether the vault personnel who entered into Chase’s system the information contained in Exhibit L had personal knowledge of the information or a business duty to transmit the information. But Lea did: she testified that “I-Vault personnel” at Chase’s Monroe, Louisiana vault contemporaneously entered information as they were scanning the document into Chase’s system. App. vol. 7 at 1829:6–25. She also testified that once the scan date was entered, “that scan date cannot be changed.” Id. at 1803:21–22. Accordingly, we conclude that Exhibit L was based on the personal knowledge of a Chase employee who was working in the Monroe, Louisiana vault and who contemporaneously entered the information as it was scanned. 5. Exhibit L was created through and from trustworthy methods, sources, and circumstances. Because Exhibit L meets the four elements just discussed, it is admissible under the business-record exception unless Kim and Foster “show that the source of information or the method or circumstances of preparation indicate a lack of trustworthiness.” Fed. R. Evid. 803(6)(E). Kim and Foster’s burden is heavy, because “bank records are particularly suitable for admission under Rule 803(6) in light of the fastidious nature of record keeping in financial institutions, which is often required by governmental regulation.” United States v. Johnson, 971 F.2d 562, 571 (10th Cir. 1992). 27 Attempting to satisfy that heavy burden, Kim and Foster retrace arguments that we have already rejected. They reassert that Exhibit L is inadmissible because it contains “multiple hearsay,”11 that the print-out was “prepared in 2015” rather than in 2009 when the Note was originally scanned, that “Ms. Lea admitted [it was] prepared to defend this legal dispute,” and that Lea did not count as a “qualified witness.” Appellants’ Opening Br. 39. We need not reconsider these arguments. C. Summary Lea’s direct-examination testimony establishes that Chase has satisfied all three elements of the lost-instrument statute. Because Kim and Foster elicited this testimony themselves, they have waived any appellate challenge to the admissibility of Lea’s direct-examination testimony. And even if this evidence were not enough, Lea’s cross-examination testimony about Exhibit L, an admissible business record, resolves the central dispute: whether 11 Kim and Foster assert that Exhibit L contains “multiple hearsay” because “unidentified Chase employees” imputed the “underlying information” into Exhibit L. Appellants’ Opening Br. 39. But “[d]ouble hearsay in the context of a business record exists when the record is prepared by an employee with information supplied by another person.” Wilson v. Zapata Off-Shore Co., 939 F.2d 260, 271 (5th Cir. 1991). We have noted that “[i]f the source of the information is an outsider . . . Rule 803(6) does not, by itself, permit the admission of the business record. The outsider’s statement must fall within another hearsay exception to be admissible because it does not have the presumption of accuracy that statements made during the regular course of business have.” TK-7 Corp. v. Estate of Barbouti, 993 F.2d 722, 729 n.5 (10th Cir. 1993) (omission in original) (internal quotation marks omitted) (quoting Wilson, 939 F.2d at 271). Here, we have already concluded that Exhibit L was created in the regular course of business, and no evidence shows that an outsider conveyed Exhibit L’s information—when Chase’s vault personnel scanned the Note—to Chase’s vault personnel. 28 Chase ever possessed the original Note. Her testimony on that issue shows that Chase scanned the Note into its electronic system in September 2009. This testimony thus proves that Chase had possession of the Note and the right to enforce it. Accordingly, we conclude that the bankruptcy court relied on admissible evidence and that its factual findings were not clearly erroneous. We have no “grave doubt as to whether” the bankruptcy judge made an incorrect evidentiary ruling that had “a substantial influence on the outcome.” Collins, 575 F.3d at 1073 (internal quotation marks and citation omitted). Next, we turn to Kim and Foster’s arguments addressing whether, as a matter of law, Chase satisfied the elements of the lostinstrument statute.12