HSBC Bank USA, Nat'l Ass'n v. Gill

• Decision Date: 10 July 2019
• Docket Number: NO. C-180404,C-180404
• Citation: 139 N.E.3d 1277,2019 Ohio 2814
• Parties: HSBC BANK USA, NATIONAL ASSOCIATION, Plaintiff-Appellee, v. Kulwinder GILL, and Amarjit S. Gill, Defendants-Appellants.
• Court: Ohio Court of Appeals

139 N.E.3d 1277

2019 Ohio 2814

HSBC BANK USA, NATIONAL ASSOCIATION, Plaintiff-Appellee,

v.Kulwinder GILL, and Amarjit S. Gill, Defendants-Appellants.

NO. C-180404

Court of Appeals of Ohio, First District, Hamilton County.

Date of Judgment Entry on Appeal: July 10, 2019

Buchanan Ingersoll & Rooney PC and Timothy P. Palmer, for Plaintiff-Appellee,

Gary F. Franke, Cincinnati, for Defendants-Appellants.

OPINION

Bergeron, Judge.

{¶1} While the defendants-appellants challenge sundry aspects of the damage award in this case, at bottom, their appeal turns on the question of whether the plaintiff-appellee laid a proper foundation for the evidence establishing its award. The trial court admitted the evidence in question under the business-records exception to the hearsay rule, and our review of the record confirms the propriety of this decision. We therefore affirm the judgment of the trial court.

I.

{¶2} The history of this case traces to a foreclosure action on a commercial loan for a hotel against two sets of guarantors; defendants Amarjit S. and Kulwinder Gill are one set of the guarantors. The underlying note was in the principal amount of $1,333,000 to Business Loan Center, LLC, f.k.a. Business Loan Center Inc. ("BLC"), which plaintiff-appellee HSBC Bank USA, National Association ("HSBC") eventually acquired via assignment. Upon default, HSBC received $1,090,018.28 from a short sale of the collateral property in 2007.

{¶3} HSBC then commenced a collection action against the guarantors to collect the balance owed on the loan, including interest and fees. In 2015, however, the Gills exited from this litigation after reaching a tentative settlement with HSBC pending Small Business Administration ("SBA") approval. HSBC proceeded to trial against the other guarantors, ultimately receiving a judgment in the amount of $461,477.44 plus interest against the other set of guarantors, with whom it settled for a $400,002 payment on the deficiency.

{¶4} The tentative settlement between the Gills and HSBC, however, ultimately collapsed when the SBA did not approve the deal. This prompted HSBC to sue the Gills to collect the balance of the deficiency from them, and when the dust settled from this litigation, the trial court entered a judgment against the Gills in the amount of $145,274.94.

{¶5} With no serious dispute about their liability or enforceability of their guaranty, the Gills' arguments revolve around the amount and propriety of the damages award. The Gills frame a single assignment of error challenging the damages award, with multiple separate issues for review. Ultimately, the predicate for most of these issues concerns the admissibility of the relevant evidence, so we begin our analysis there.

II.

A.

{¶6} Before undertaking the substantive analysis, we pause for a moment at the standard of review, which appears to be a bit of a quagmire. Generally, "the trial court enjoys broad discretion in admitting or excluding evidence. An appellate court will not disturb the exercise of that discretion absent a showing that the [party against whom the evidence was admitted] has suffered material prejudice." (Citations omitted.) State v. Sage , 31 Ohio St.3d 173, 182, 510 N.E.2d 343 (1987). While that proposition is familiar enough, when it comes to hearsay and its exceptions, Ohio courts have proven less-than-precise at times in terms of the standard of review, generating conflicting precedent. We see this even in our own district. Several years ago, in Meyers v. Hot Bagels Factory, Inc. , 131 Ohio App.3d 82, 100, 721 N.E.2d 1068 (1st Dist.1999), this court held that the abuse-of-discretion standard is not appropriate relative to the admissibility of hearsay in the civil context. We squarely addressed this question and determined that deferential review should not govern because the admissibility of hearsay is not optional: " ‘This rule does not provide the trial court with discretion to admit hearsay; rather, the rule mandates its exclusion unless the exceptions found at Evid.R. 803, 804, or 807 apply.’ " Id. at 100, 721 N.E.2d 1068, quoting Smith v. Seitz , 4th Dist. Vinton No. 97CA515, 1998 WL 393880, *1 (July 9, 1998). Given the distinction between hearsay and garden-variety evidentiary decisions, we accordingly held: " ‘Unlike those evidentiary rulings which relate to matters either explicitly or implicitly within the trial court's discretion, the admissibility of hearsay should be reviewed with little deference to the trial court's decision.’ " Id. , quoting Smith at *1.

{¶7} Since that time, a split developed amongst the appellate districts between those that view the admission of hearsay as question of law for which de novo review is appropriate, and those that treat hearsay as falling within the general abuse-of-discretion standard. Compare, e.g. , John Soliday Fin. Group, L.L.C. v. Pittenger , 190 Ohio App.3d 145, 2010-Ohio-4861, 940 N.E.2d 1035, ¶ 28 (5th Dist.) ("[W]hile the trial court has discretion to admit or exclude relevant evidence, it has no discretion to admit hearsay. * * * Thus, we review de novo the trial court's decision * * *."); Monroe v. Steen , 9th Dist. Summit No. 24342, 2009-Ohio-5163, 2009 WL 3119693, ¶ 11 ("Whether evidence is admissible because it falls within an exception to the hearsay rule is a question of law, thus, our review is de novo ."); with Abrams v. Abrams , 2017-Ohio-4319, 92 N.E.3d 368, ¶ 31 (2d Dist.) ("We review rulings regarding hearsay under an abuse-of-discretion standard."); Bishop v. Munson Transp., Inc. , 109 Ohio App.3d 573, 579, 672 N.E.2d 749 (7th Dist.1996) ("The decision to admit a business record into evidence pursuant to Evid.R. 803(6) * * * will not be disturbed on appeal absent a clear showing of an abuse of discretion.").

{¶8} In recent years, without discussion of Meyers or of this split of authority, this court began applying an abuse-of-discretion standard of review to hearsay and hearsay exception determinations by invoking this quote from State v. Issa , 93 Ohio St.3d 49, 64, 752 N.E.2d 904 (2001) : "The trial court has broad discretion in the admission of evidence, and unless it has clearly abused its discretion and the defendant has been materially prejudiced thereby, an appellate court should not disturb the decision of the trial court." See State v. Barnes , 1st Dist. Hamilton Nos. C-170355 and C-170356, 2018-Ohio-3894, ¶ 4 (citing Issa and applying to hearsay determination); State v. Beck , 2016-Ohio-8122, 75 N.E.3d 899, ¶ 27-28 (1st Dist.) (quoting Issa and applying to business-records exception). But the problem with this is that in Issa , the Supreme Court discussed the standard of review in the context of relevance and not hearsay. So we appropriated the general relevance standard for hearsay, at odds with our analysis in Meyers .

{¶9} But we appear to be in good company here, because the Supreme Court of Ohio did the exact same thing. Recently, in State v. McKelton , 148 Ohio St.3d 261, 2016-Ohio-5735, 70 N.E.3d 508, ¶ 97, the court held: "Ordinarily, we review a trial court's hearsay rulings for an abuse of discretion." The case that McKelton cited for that proposition ( State v. Hymore , 9 Ohio St.2d 122, 128, 224 N.E.2d 126 (1967) ), however, like Issa , addressed a relevance determination—suggesting that the court did not thoroughly consider the policy issues raised by the appellate district split (nor did the court acknowledge the split). See State v. Fambro , 11th Dist. Trumbull No. 2016-T-0063, 2017-Ohio-5646, 2017 WL 2831056, ¶ 74 (Cannon, J., concurring) (arguing that McKelton should not be read to apply discretionary review to hearsay since it relied on a relevance case).

{¶10} Even if McKelton stands on a shaky foundation, other Supreme Court decisions have applied the abuse-of-discretion standard of review to hearsay determinations in both the civil and criminal context. See Beard v. Meridia Huron Hosp. , 106 Ohio St.3d 237, 2005-Ohio-4787, 834 N.E.2d 323, ¶ 20-22 ; State v. Dever , 64 Ohio St.3d 401, 410, 596 N.E.2d 436 (1992). To be fair, none of these cases actually engage in an analysis between the two dueling standards of review, and that debate is one that should probably warrant some attention by the high court. Until that time, however, we consider ourselves bound to follow the extant guidance from the Supreme Court, and we clarify that hearsay determinations are reviewed for an abuse of discretion.

B.

{¶11} With the standard of review in mind, we turn to the substance of the hearsay objection at hand. Hearsay may be admissible if subject to an enumerated exception—here, the business-records exception found in Evid.R. 803(6). This excepts "Records of Regularly Conducted Activity" from the general prohibition against hearsay, which covers:

A memorandum, report, record, or data compilation, in any form, of acts, events, or conditions, 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 [such records], all as shown by the testimony of the custodian or other qualified witness * * *.

Id. Put differently, the proponent must lay a foundation "demonstrating that the [record] was prepared at or near the time of the recorded event or that it was the regular custom to make such a [record]." Meyers , 131 Ohio App.3d 82 at 101, 721 N.E.2d 1068. See Great Seneca Fin. v. Felty , 170 Ohio App.3d 737, 2006-Ohio-6618, 869 N.E.2d 30, ¶ 10 (1st Dist.) (for purposes of Evid.R. 803(6), the proponent must show that "(i) the record [was] regularly made in a regularly conducted activity; (ii) the contents * * * [were] entered or transmitted by a person with knowledge of the act, event, or condition recorded therein; and (iii) the act, event, or condition [was] recorded at or near the time of the transaction.").

{¶12} The lone witness to testify at trial was Susan Branch, and the Gills focus their...