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Federated Financial Corp. of America v. Markoglu


February 18, 2010


On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Morris County, Docket No. DC-10459-07.

Per curiam.


Submitted November 4, 2009

Before Judges Grall and Messano.

Defendants Ernest Markoglu and Archimedes USA Electric*fn1 appeal from a $6118.81 judgment entered in favor of plaintiff Federated Financial Corp. of America (Federated Financial) after a non-jury trial in the Special Civil Part. Defendant contends that he was denied a fair trial because the judge 1) permitted plaintiff's central witness to testify telephonically; 2) improperly admitted documents that were hearsay into evidence; and 3) should have recused himself sua sponte after he "erroneously accused the defendant of fabricating evidence."

We have considered defendant's arguments in light of the record and applicable legal standards. We reverse and remand the matter for a new trial.

This is a collection case. The complaint, which erroneously listed "Capital One Bank" as plaintiff, alleged that "[d]efendant, by request, was issued a credit card . . . ." Plaintiff alleged defendant owed a balance of $5568.81. Attached to the complaint were a "sample" "Advanta Business Card Agreement" and a credit card statement from Advanta in the defendant's name showing the balance allegedly due and owing. Defendant filed a pro se answer in which he denied "order[ing] the goods or services," and also claimed that he "reported to the creditor that [his] identity was stolen and that [he] did not make any of the[] charges."

When trial commenced, plaintiff indicated that its witness, Patrick David, was "ready by phone." Its only other witness was to be defendant. The judge noted that he did not "have a significant problem with telephonic testimony," but expressed some concern about the witness's ability to view any of the documentary evidence. Defendant advised the judge that he intended to produce no witnesses, but also told the judge, "I would like to have the opportunity to discuss this gentleman that he's going to be on the phone out of sight." The judge responded, "Absolutely. I'll hear you. Go ahead."

Defendant began a rambling statement that went to the merits of his defense. Noting this was akin to an opening statement, the judge stopped defendant, and had the clerk administer oaths to defendant and David, who was on the phone. The judge did not address the issue of permitting David to testify telephonically ever again.

Defendant contends that his right to a "fair trial" was denied by permitting plaintiff's main witness to testify telephonically. In light of the record before us, under the circumstances presented, we agree.

In Aqua Marine Prods., Inc. v. Pathe Computer Control Sys. Corp., 229 N.J. Super. 264, 274 (App. Div. 1988), we noted that while our Rules permit argument by telephone in lieu of personal appearance before the court in some circumstances, "that procedure does not extend to the routine taking of testimony." In Aqua Marine, we found the telephonic testimony was improperly admitted because there were "no special circumstance compelling the taking of telephone testimony and no circumstantial voucher of the integrity of the testimony so taken and no consent." Id. at 275.

Plaintiff argues that in this case the judge exercised his discretion to permit the telephonic testimony. It contends that David, who was in Michigan, was produced for trial on an earlier date, but the case was adjourned. Plaintiff alleges that it incurred certain expenses in this regard.

Plaintiff's appendix includes two orders, one dated March 3, 2008 that adjourned the trial from that date to March 17, and a second, dated March 31 that adjourned the trial to April 1.*fn2

At the bottom of this second order, the judge wrote, "No further adjournments and plaintiff[']s witness may testify telephonically."*fn3 In its brief, plaintiff alleges that the judge granted its request to produce its witness telephonically, and that defendant did not object. Plaintiff submits that "[i]t is conceivable that the court took [its] expenditures into consideration" when permitting the telephonic testimony.

The record fails to reveal whether plaintiff's request in this regard was made by formal motion, or whether it was raised informally on one of the adjourned trial dates. There are no transcripts from the earlier proceedings in the appellate record. Thus, we have nothing before us regarding plaintiff's application other than the uncertified statements contained in its brief.

More importantly, except for the handwriting on the March 31 order, we have nothing to indicate that the judge actually considered any request made by plaintiff. The judge failed to express his reasons for granting the application, if indeed plaintiff actually made one.

At trial, plaintiff's counsel made no reference to the prior orders or to defendant's alleged consent. The trial transcript certainly implies that defendant did not consent. In fact, the judge indicated a willingness to hear defendant's objection, but, in the ensuing dialogue, the judge failed to make any specific ruling on the issue. The judge never concluded that defendant had consented at a prior proceeding to the telephonic testimony.

Given the state of the record before us, we are unable to determine whether any of the "special circumstances" we cited in Aqua Marine as potential justifications for taking testimony by telephone existed in this case. We therefore, reverse and remand the matter for a new trial. In doing so, we hasten to add a caveat. If the sole justification for not producing plaintiff's witness was to limit the financial expenses in prosecuting its case, we doubt that reason, standing alone, could justify the taking of testimony by telephone if defendant lodged a timely objection.

Since we conclude a new trial is warranted, we need not consider defendant's other arguments for purposes of our decision. We nevertheless address them to provide guidance in the event the matter is tried again.

Defendant argues that two exhibits, P-3 and P-4, were improperly admitted into evidence pursuant to the business records exception to the hearsay rule, N.J.R.E. 803(c)(6). He argues that in both cases, "plaintiff failed to establish the proper foundation for their admission."

During his telephonic testimony, David, who was the "portfolio supervisor" in charge of plaintiff's "collection department" testified that plaintiff routinely purchased, in bulk, credit card accounts from Advanta, apparently an Atlanta-based bank. David identified a November 2005 "bill of sale" between plaintiff and Advanta for the purchase of 2500 accounts, including one in defendant's name.

David testified that whenever plaintiff purchased accounts from Advanta, Federated Financial would "also receive the first statement and the last 11 statements of the credit card account[]." Plaintiff would also receive the "application" for the account from Advanta. David identified P-3 as a "signed and dated application for an Advanta Platinum business card, signed by [defendant] for his business . . . ." The date of the application was October 3, 2002; it was in the name "Ernest Markoglou," on behalf of Archimedes USA Electric. As later testimony revealed, the application bore defendant's social security number and his business address. Defendant objected to the authenticity of the document, claiming he never completed an application for the credit card.

The judge asked David "how do these . . . applications work?" He responded, "I'm not in [Advanta's] marketing department, but . . . it's been applied for and then they send out invitations. That's usually how it works . . . ." The judge then asked, "And is this . . . [a] document that's kept in the normal course of business at your . . . office?" David replied in the affirmative. The judge admitted P-3 into evidence, but observed that he "ha[d] some significant issues with whether this is . . . a document that may bind [defendant] or not."

P-4 was a series of monthly credit card statements allegedly associated with the account beginning in November 2002. Each one of them, however, listed an account number that differed from the one contained on the "bill of sale" and in the complaint. David was asked, "[I]s it your understanding that those statements were produced in the normal course of business by Advanta and mailed to defendant by Advanta in the normal course of their business?" He answered, "Yes." When cross-examined, David explained the difference in account numbers by reading verbatim an e-mail he received from one of Advanta's corporate officers as a result of David's inquiry on the issue.

N.J.R.E. 803(c)(6) provides

A statement contained in a writing or other record of acts, events, conditions, and, subject to Rule 808, opinions or diagnoses, made at or near the time of observation by a person with actual knowledge or from information supplied by such a person, if the writing or other record was made in the regular course of business and it was the regular practice of that business to make it, unless the sources of information or the method, purpose or circumstances of preparation indicate that it is not trustworthy.

"The purpose of the business records exception is to 'broaden the area of admissibility of relevant evidence where there is necessity and sufficient guarantee of trustworthiness.'" Liptak v. Rite Aid, Inc., 289 N.J. Super. 199, 219 (App. Div. 1996) (quoting State v. Hudes, 128 N.J. Super. 589, 599 (Cty. Ct. 1974)).

In order to qualify under the business record exception to the hearsay rule, the proponent must satisfy three conditions: "First, the writing must be made in the regular course of business. Second, it must be prepared within a short time of the act, condition or event being described. Finally, the source of the information and the method and circumstances of the preparation of the writing must justify allowing it into evidence." [State v. Sweet, 195 N.J. 357, 370 (2008) (quoting State v. Matulewicz, 101 N.J. 27, 29 (1985) (footnote omitted)).]

The foundation witness need not "have personal knowledge of the facts contained in the record." Hahnemann Univ. Hosp. v. Dudnick, 292 N.J. Super. 11, 17-18 (App. Div. 1996).

However, "[i]t is . . . essential that the party offering business records show the business necessity for the information recorded, how the information contained in the records was obtained and the method used to prepare the records." Biunno, Current N.J. Rules of Evidence, comment 2 on N.J.R.E. 803(c)(6) (2009) (citation omitted). In this case, David's testimony certainly failed to supply any of this crucial information with regard to P-3. When asked how the credit card application process worked, David initially qualified his answer by indicating he was "not in [Advanta's] marketing department," but that usually someone would request an application. The judge attempted to supplement the answer by asking David if the application was "kept in the normal course of business at your . . . office?" But clearly, to be admissible, David needed to qualify the application as a record routinely kept in the normal course of Advanta's business, and otherwise possessing the indicia of reliability under N.J.R.E. 803(c)(6). In our opinion, the foundation for admission of P-3 as a business record excepted from the hearsay rule was lacking.

With respect to P-4, David answered affirmatively counsel's leading question, "[I]s it your understanding that those statements were produced in the normal course of business by Advanta and mailed to defendant by Advanta in the normal course of their business?" While we might otherwise overlook the lack of detail regarding "how the information contained in the records was obtained and the method used to prepare the records," Biunno, supra, it is clear that David could not explain the different account number that appeared on the statements without resorting to hearsay statements furnished by an Advanta officer. In short, there was an inadequate foundation to support the admissibility of P-4 as a business record.

We have no doubt that both exhibits, properly qualified, would be admissible as exceptions to the hearsay rule. We also note there was substantial circumstantial evidence that defendant's claim that some unknown person had applied for the card in his name was specious. We only hold that the record developed at trial was inadequate to permit the admissibility of either P-3 or P-4 pursuant to N.J.R.E. 803(c)(6). We specifically express no opinion whether David possesses sufficient knowledge to provide an adequate foundation to render them admissible.

We view defendant's last argument, i.e., that the judge should have recused himself sua sponte, to be of insufficient merit to warrant any further discussion in this opinion. See R. 2:11-3(e)(1)(E). Our review of the record makes it clear that the judge reassessed his assertion that defendant may have altered an exhibit, and apologized for reaching that conclusion. There was never any request made by defendant to have the judge recuse himself, and the judge's decision in no way exhibited any underlying prejudice or bias toward defendant. See D.G. ex rel. J.G. v. N. Plainfield Bd. of Educ., 400 N.J. Super. 1, 26 (App. Div.), ("Alleged misconduct by a trial judge must be reviewed within the context of the entire record in order to determine whether it had prejudicial impact."), certif. denied, 196 N.J. 346 (2008), cert. denied, ___ U.S. ___, 129 S.Ct. 776, 172 L.Ed. 2d 756 (2008).

Reversed and remanded; we do not retain jurisdiction.

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