November 30, 2016 Practice Points

Evidentiary Objections in Bankruptcy Court: Part 1

The first part in this series on evidentiary objections of particular note in bench trials will focus on hearsay.

By Manish Borde

The Federal Rules of Evidence apply in cases under the Bankruptcy Code.  As the majority of Bankruptcy Court trials (and evidentiary hearings) take place before a judge (rather than a jury), this series will focus on evidentiary objections of particular note in bench trials.  Lawyers involved in adversary proceedings, contested matters and other evidentiary hearings should be mindful of these evidentiary objections.  The focus of this first piece is hearsay.

What is hearsay?    

  • Hearsay is a statement that:  (i) a declarant does not make while testifying at the current trial or hearing and (ii) a party offers in evidence to prove the truth of the matter asserted in the statement. 
  • A “statement” refers to an oral assertion, written assertion, or even nonverbal conduct if the person intended it as an assertion.  A “declarant” refers to the person who made the “statement.”

What isn’t hearsay?

  • Prior Inconsistent Statements
    • Evidence is not deserving of a hearsay objection when the evidence consists of a witness’ prior inconsistent statement.
  • Certain Prior Consistent Statements
    • Evidence is also not deserving of a hearsay objection when a witness’ prior statement is consistent with the statement offered at trial but is offered to:  (i) rebut a contention that the witness recently changed her statement or (ii) rehabilitate the witness’ credibility.
  • An Opposing Party’s Statement
    • Statements made by the opposing party in an individual capacity.
    • Statements made by the opposing party in a representative capacity.
    • A statement manifested by the opposing party and adopted or believed to be true.     

What are common exceptions to the hearsay rule?

  • The Business Records Exception
    • Documents/records made at or near the time by (or from information transmitted by) a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the document/record, as shown by the testimony of the custodian or other qualified witness (or by certification that complies with Rule 902, or a statute permitting certification, unless the source of information or the circumstances of preparation indicate lack of trustworthiness).  Fed. R. Evid. 803(6).   
    • Records of a bankrupt debtor offered by a bankruptcy trustee, without more foundation, do not come within the business records exception. In re Bay Vista of Va., Inc., 428 B.R. 197 (Bankr. E.D. Va. 2010).
  • The “Affecting an Interest in Property” Exception
    • The record of a document purporting to establish or affect an interest in property, as proof of the content of the original recorded document and its execution and delivery by each person by whom it purports to have been executed, if the record is a record of a public office and an applicable statute authorizes the recording of documents of that kind in that office.
  • The “Statements in Documents Affecting an Interest in Property” Exception
    • A statement contained in a document purporting to establish or affect an interest in property if the matter stated was relevant to the purpose of the document, unless dealings with the property since the document was made have been inconsistent with the truth of the statement or the purport of the document.  Fed. R. Evid. 803(15).
    • Examples:  Documents detailing property interests in stock; warranty deeds; cancellation of indebtedness; documents affecting interests in real estate; statements regarding a patent assignment.

A document containing statements regarding the purported payoff amounts of certain notes did not meet the “Statements in Documents Affecting an Interest in Property” exceptionSee In re Bay Vista of Va., Inc., 428 B.R. 197, 219 (Bankr. E.D. Va. 2010) (where the document was offered by a bankruptcy trustee).

Manish Borde – November 30, 2016