Opinion issued December 16, 2010
In The
Court of Appeals
For The
First District of Texas
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NO. 01-09-00320-CV
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Citibank (South Dakota), N.A., Appellant
V.
Michael A. Tate, Appellee
On Appeal from the County Court at Law No. 4
Fort Bend County, Texas
Trial Court Case No. 05-CCV-026232
MEMORANDUM OPINION
Citibank (South Dakota), N.A. appeals a directed verdict in favor of Michael A. Tate in its suit for unpaid credit card debt. Citibank contends that the trial court erroneously excluded the billing statements and notices informing Tate of changes in his credit card agreement. Because Citibank properly established the applicability of the business-records exception, we reverse and remand for further proceedings.
I. Background
Citibank (South Dakota), N.A. sued Michael A. Tate to recover unpaid debt on a credit card account. During trial, Citibank sought to introduce the billing statements from Tate’s account through the testimony of Rhonda Hedges, an employee of Citicorp Credit Services, Inc. Hedges testified without objection that Citicorp Credit Services and Citibank were both wholly owned subsidiaries of Citigroup and that pursuant to a contract, Citicorp Credit Services provided administrative services for Citibank’s credit card accounts. These services included collections, customer service, litigation support, and issuance of credit cards and billing statements.
Hedges identified exhibits 2–9 as notices regarding changes in Tate’s credit card agreement and testified, without objection, that she had located these documents in Citibank’s files. Citibank offered these exhibits into evidence, and Tate’s lawyer objected to the lack of a proper predicate for lack of a showing that these notices were timely sent to Tate in accordance with the credit card agreement. Although the trial court initially observed that this objection went to the weight of the evidence, not its admissibility, the trial court admitted exhibits 2-9 for the limited purpose of being examples of Citibank’s records, subject to Citibank laying a proper predicate. See Tex. R. Evid. 104(b).
The following day, outside the presence of the jury, Tate’s lawyer raised a discovery issue. During discovery, Tate sought production of “[t]he contract that [Citibank has] with Citi Credit Services (USA), Inc., related to the collection or handling of [Tate’s] Account.” Citibank objected to the request on several grounds including materiality, relevance, vagueness, and confidentiality. Tate never moved to compel production, nor did he otherwise seek a ruling on Citibank’s objections. Nevertheless, based on Citibank’s failure to produce its contract with Citicorp Credit Services, Tate objected that all of Hedges’s testimony from the prior day was hearsay. After hearing argument from both sides, the trial court stated that the Citicorp Credit Services contract was inadmissible, and it ruled that exhibits 2 through 9 were also inadmissible. Citibank offered the contract for admission into evidence later that same day, and the trial court again ruled that it was inadmissible.
After the trial court’s exclusion of exhibits 2-9, Hedges testified that she had been employed by Citicorp Credit Services for nearly seven years. She identified exhibit 10, which was comprised of monthly billing statements for Tate’s account from January 1998 through December 2004. She testified that Citicorp Credit Services generates similar billing statements and maintains the records for all of Citibank’s credit card accounts. She also testified without objection that (1) exhibit 10 was made at or near the time of the information recorded therein, (2) exhibit 10 was made by a person or persons with knowledge of the information recorded therein, (3) it is in the regular course of Citicorp Credit Services’s business to make such records, and (4) it is in the regular course of Citicorp Credit Services’s business to keep such records.
Tate’s lawyer objected to exhibit 10 because the contract between Citibank and Citicorp Credit Services was not produced during discovery, and the trial court sustained the objection, saying:
It was not shown what right she has to have any access to Citibank records. The fact they are in possession of Citicorp or whatever this other entity is does not tie this to any right to testify as to anything regarding this particular case where the Plaintiff is Citibank.
Citibank argued that Hedges’s testimony satisfied the requirements of the business records exception to the hearsay rule. The trial court observed that Hedges never testified that she was the custodian of the records of Citibank, that the only way she could be a custodian of the records would be pursuant to a contract, and that any such contract was inadmissible because it was not produced during discovery.
Citibank made an offer of proof, wherein Hedges testified unequivocally that she had been the custodian of Citibank’s records since 2002. In response to counsel’s questions, she again testified to all of the requirements of the business records exception regarding exhibit 10. Exhibits 2–10 were attached to the record as part of Citibank’s offer of proof. Citibank rested, and the trial court granted Tate’s motion for directed verdict.
II. Standard of review
We review a trial court’s decision to admit or exclude evidence for an abuse of discretion. Bay Area Healthcare Grp., Ltd. v. McShane, 239 S.W.3d 231, 234 (Tex. 2007); Allstar Nat’l. Ins. Agency v. Johnson, No. 01-09-00322-CV, 2010 WL 2991058, at *3 (Tex. App.—Houston [1st Dist.] July 29, 2010, no pet.). A trial court abuses its discretion when it acts without reference to any guiding rules or principles. Garcia v. Martinez, 988 S.W.2d 219, 222 (Tex. 1999). However, a trial court has no discretion in determining what the law is or applying the law to the facts. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135 (Tex. 2004); Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992). A clear failure to analyze or apply the law correctly constitutes an abuse of discretion. Walker, 827 S.W.2d at 840.
III. Business records hearsay exception
Citibank contends that the trial court abused its discretion by excluding exhibit 10, the billing statements, because Hedges’s testimony proved the application of the business records exception to the hearsay rule. “‘Hearsay’ is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” Tex. R. Evid. 801(d). Hearsay is not admissible except as provided by statute or rule. Tex. R. Evid. 802. The proponent of hearsay has the burden of showing that the evidence fits within an exception to the general rule prohibiting the admission of hearsay evidence. Volkswagen of Am., Inc. v. Ramirez, 159 S.W.3d 897, 908 n.5 (Tex. 2004); Simien v. Unifund CCR Partners, 321 S.W.3d 235, 240 (Tex. App.—Houston [1st Dist.] 2010, no pet.).
Rule 803(6) of the Texas Rules of Evidence provides the following exception to the hearsay rule for business records:
A . . . record . . . 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 memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, or by affidavit that complies with Rule 902(10), unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness.
Tex. R. Evid. 803(6); Simien, 321 S.W.3d at 240; see In re E.A.K., 192 S.W.3d 133, 141 (Tex. App.—Houston [14th Dist.] 2006, pet. denied). Documents created by one entity may be admissible as business records of another entity if: (a) the documents are compiled and kept in the course of the testifying witness’s business; (b) that business typically relies upon the accuracy of the contents of the documents; and (c) the circumstances otherwise indicate the trustworthiness of the documents. Simien, 321 S.W.3d at 240–41.
Hedges testified that she had worked for Citicorp Credit Services for nearly seven years, that Citicorp Credit Services provided support for Citibank credit card accounts, that her job responsibilities gave her the right to access the kind of information included in exhibit 10, and that she was the custodian of these records. She testified that the statements in exhibit 10 were made at or near the time of the information recorded therein by a person with knowledge. She testified that exhibit 10 and other billing statements like it were made and kept in the regular course of Citicorp Credit Services’s business.
In its ruling, the trial court implied that Hedges’s testimony alone was insufficient and that a document was required to establish that she was the custodian of these records. However, Rule of Evidence 803(6) expressly provides that the business records predicate may be established by the testimony of the custodian of the records or another qualified witness. Tex. R. Evid. 803(6).
On appeal, Tate argues that Citibank’s only witness was not its employee, but that fact does not render exhibit 10 inadmissible. The billing records could qualify for the business records hearsay exception even if they were business records of a third party to the lawsuit. Hedges testified that the records were kept in the course of Citicorp Credit Services’s business, that Citicorp Credit Services issued billing statements and provided collections and litigation support, and that she had no indication of any lack of trustworthiness in the way these documents were handled, generated, or kept. See Simien, 321 S.W.3d at 240–41.
We conclude that Citibank showed that the billing records satisfied the business records exception to the general rule prohibiting the admission of hearsay evidence. See Tex. R. Evid. 803(6); Ramirez, 159 S.W.3d at 908 n.5; Simien, 321 S.W.3d at 240. We hold that the trial court abused its discretion by incorrectly applying the law and excluding the billing records. See Walker, 827 S.W.2d at 840.
“To obtain reversal of a judgment based on error in the admission or exclusion of evidence, an appellant must show that the trial court’s ruling was erroneous and that the error was calculated to cause, and probably did cause, ‘rendition of an improper judgment.’” Benavides v. Cushman, Inc., 189 S.W.3d 875, 79 (Tex. App.—Houston [1st Dist.] 2006, no pet.) (quoting Tex. R. App. P. 44.1(a)(1); Owens-Corning Fiberglas Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998)). In conducting this harm analysis, we review the entire record. Tex. Dep’t of Transp. v. Able, 35 S.W.3d 608, 617 (Tex. 2000); Benavides, 189 S.W.3d at 879.
Evidentiary rulings do not usually cause reversible error unless an appellant can demonstrate that the judgment turns on the particular evidence that was admitted or excluded. City of Brownsville v. Alvarado, 897 S.W.2d 750, 753–54 (Tex. 1995); Benavides, 189 S.W.3d at 879. An error in the exclusion of evidence requires reversal if it is both controlling on a material issue and not cumulative. Mentis v. Barnard, 870 S.W.2d 14, 16 (Tex. 1994).
It is apparent from the record that Citibank rested its case because the trial court excluded its evidence of the unpaid balance on Tate’s credit card account and that the trial court granted Tate’s motion for directed verdict because Citibank presented no evidence on this material issue. See City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex. 2005) (holding that standard of review for legal sufficiency challenge applies to review of directed verdict); Prudential Ins. Co. of Am. v. Fin. Rev. Servs. Inc., 29 S.W.3d 74, 77 (Tex. 2000) (holding that directed verdict is proper when plaintiff does not present evidence raising fact issue essential to his right of recovery). The billing records were both controlling on a material issue and not cumulative. We conclude that the trial court’s exclusion of the billing records probably caused the rendition of an improper judgment. We sustain Citibank’s first issue in part, and we reverse and remand for further proceedings. Because of this disposition, we need not address Citibank’s remaining issue on appeal.
Conclusion
We reverse the judgment of the trial court and remand for further proceedings.
Michael Massengale
Justice
Panel consists of Chief Justice Radack and Justices Bland and Massengale.