Opposition Brief — Jitner v. Commercial Financial/SPC Acquisitions, Inc.

Sapreme Court, U.8.

FILED

No. 01-1364 APR18 2002

eet ae TD ET

OFTPICE CF THE CLERK

In The pecs

Supreme Court of the United States

%

WALTER JITNER,

Petitioner,

COMMERCIAL FINANCIAL/SPC

ACQUISITIONS, INC.; FINANCIAL

COLLECTIONS, INC.,

Respondents.

on

On Petition For Writ Of Certiorari

To The U.S. Ninth Circuit Court Of Appeals

¢

OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI

¢

Davip J. WukitscH, Eso.

Counsel of Record

McNamee, LocHner, Titus &

WILLIAMS

75 State Street

Albany, NY 12201

(518) 447-3200

TEMPLETON BRIGGS

4533 MacArthur Blvd.

Suite 707

Newport Beach, CA 92660

(714) 424-6300

Attorneys for Respondents

Commercial Financtal/SPC

Acquisitions, Inc. and Financial

Collections, Inc.

COCKLE LAW BRIEF PRINTING CO, (800) 225-4464

OR CALL COLLECT (402) 342-2831

. nail

QUESTIONS PRESENTED FOR REVIEW

Answering parties Commercial Financial/SPC Acqui-

sitions, Inc. and Financial Collections, Inc. (hereinafter

collectively “Commercial”) respectfully submit that the

questions here should properly be:

1. Did the Ninth Circuit err in its application of

California and Federal law to decide that promissory

notes which were part of the assets of a failed bank taken

over by the Federal Deposit Insurance Corporation

(“FDIC”) as receiver, and thereafter sold and assigned to

Commercial in the secondary market, were admissible?

2. When the FDIC takes over a failed bank and its

assets, is any endorsement required as to notes thereby

acquired in order for the FDIC to obtain title, or does the

FDIC acquire full title pursuant to express federal law?

il

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ...........

TABLE OF CONTENTS ......:.02000cs00sseeeeee0s- ii

TABLE OF AUTHORITIES...............eeeeeeeee- iii

I. RELEVANT FACTS ...........0..ccceeeeeeeees 1

II. SUMMARY OF ARGUMENT............. ed

III. ARGUMENT.............ceccccececeeeeeeeeees 2

A. The ruling of the Court of Appeals was

based on Federal statutory law, not “federal

common MO”. .5 5 snutedebdaols Uaabeeceuses 2

B. O'Melveny & Myers v. FDIC is not applicable

to the forte BR 65 Fo oicocn es vids ee ees 5

C. The FDIC v. Houde opinion does not require

that the 9th Circuit opinion herein be accused

of creating “federal common law”........... 6

D. Jitner has misstated the application of Cali-

fornia Commercial Code § 3203 ........... 7

TV. CONCLUSION: «ccc cana caeusre erase aden cera an 9

APPENDIX . ....+s00000 eee eee een eee es ee A-1

ili

TABLE OF AUTHORITIES

Page

FEDERAL CASES

FDIC v. Houde 90 F.3d 600 (1st Cir. 1996) ............ 6

Miss. River Grain Elevator, Inc. v. Bartlett & Co.

Grain 659 F.2d 1314 (1981 CA 5 La)............... i

Munoz v. Strahm Farms, Inc. 69 F.3d 501 (Fed. Cir.

SC sire ReeW bea Ws 6 bkGdeudaseeeehnee Kxed é 3

O'Melveny & Myers v. FDIC 512 U.S. 29, 114 S.Ct

2048, 129 ee | ne a

Resolution Trust Corp. v. S & K Chevrolet Co. 923

ue me ea 2

Saks Int'l Inc. v. M/V “Export Champion”, 817 F.2d

i en ee ss Aad eas enews eae eienednacs 3

U.S. v. Childs 5 F.3d 1328 (9th Cir. 1993) ............. 4

United States v. Hathaway 798 F.2d 902 (6th Cir.

atu skr hve cv ciipecse tenn anderses

United States v. Veytia-Bravo 603 F.2d 1187 (5th Cir.

1979), cert. denied, 444 U.S. 1024, 100 S. Ct. 686,

ee ee GO CRI occ ccc ceccscdcressasanes

CALIFORNIA CASES

D’Orazi v. Bank of Canton (App. 5 Dist. 1967) 254

Caeee.2G, Gs Cal Rpt 706 ........62ccccacces

Security Pacific National Bank v. Chess (App. 2 Dist.

1976) 58 Cal.App.3d 555, 129 Cal.Rptr 852.....

White v. Moriarty (1993) 15 Cal.App.4th 1290, 19

as occ ns ab ehbss Ve eRiae ess kines

- qv

TABLE OF AUTHORITIES - Continued

Page

FEDERAL STATUTES

12 US.C. § 1820(f)....... 6.2 cee e reece eee eee e eee ee cess 3

12 U.S.C. § 1821(d)(2)(A) ...-- 6. eee eee eee eee tees 2

Federal Rules of Evidence, Rule 803(6)..........--- 3, 4

CALIFORNIA STATUTES

Commercial Code § 1201 ......... eee eee eter eee eees 8

Commercial Code § 3203 .......- eee eee ee erences ee A

Commercial Code § 3307 ......... eee cece eee t eee eeees 8, 9

Evidence Code § 635.........eeeec eect ee eeeeeeeeeees 9

i.

RELEVANT FACTS

The only facts essential to determination of this are

not in dispute. A bank that held notes reflecting a debt

owed by Petitioner Walter Jitner (“Jitner”) failed, and the

FDIC took over that bank and acquired its assets. The

FDIC thereby possessed the notes given by Jitner to the

bank. Thereafter, the FDIC assigned the notes to Com-

mercial. The notes contained allonges from the FDIC to

Commercial, and the Commercial custodian of records

testified that the notes were indeed obtained from the

FDIC.

No evidence was introduced to show any negotiation

of the notes from the failed bank to the FDIC. The Com-

mercial custodian could not testify as to how the FDIC

got the notes.

Il.

SUMMARY OF ARGUMENT

The Ninth Circuit did not create or rely on any “fed-

eral common law”, and correctly relied on Federal statu-

tory law and on California statutory law in reaching its

decision.

The statutory and case law relied on by Jitner is

inapplicable and incorrectly applied to his arguments.

The case herein is easily distinguishable from O'Melveny

& Myers v. FDIC 512 U.S. 29, 114 S.Ct 2048, 129 L.Ed.2d 67

(1994) cited by Jitner and discussed herein, and Califor-

nia’s Commercial Code § 3203 is irrelevant to the facts

herein.

No evidence of negotiation to the FDIC is required to

establish the FDIC’s title to, and right to assign, the notes.

Ill.

ARGUMENT

A. The ruling of the Court of Appeals was based

on Federal statutory law, not “federal common

law”.

12 U.S.C. § 1821(d)(2)(A) states in pertinent part:

The Corporation shall, as conservator or

receiver, and by operation of law, succeed to -

(ii) title to the books, records and assets of

any previous conservator or other legal cus-

todian of such institution. Id.

The-court, in Resolution Trust Corp. v. S & K Chevrolet

Co. 923 F.Supp. 135 (C.D.II] 1996), held that the transfer of

assets from a failed savings and loan to the Resolution

Trust Corporation was accomplished by operation of federal

law, and thus the RTC was receiving the assets under the

express federal statute, not by assignment under state

contract law.

In the case herein, clearly federal law provides that

no endorsement is required for the FDIC to own the

subject Jitner notes without the endorsement required by

California Commercial Code § 3203. The Court of Appeals

did not create “federal common law” to ignore California

state law, it utilized federal statutory law which pre-

empted the state law.

12 U.S.C. § 1820(f) states in pertinent part:

Such . . . copies [of bank records] shall be

deemed the original for all purposes, including

introduction as evidence in all state and federal

courts or administrative agencies and shall be

admissible to prove any act, transaction, occur-

rence, or event therein recorded. Id.

It is not required of Commercial that it produce the

original notes in order to pursue collection litigation, or

produce “sworn or certified copies” as Jitner argues.

Even in non-FDIC cases, federal evidentiary law gives

wide latitude as to introduction of records prepared by

another. In Miss. River Grain Elevator, Inc. v. Bartlett & Co.

Grain, 659 F.2d 1314 (1981 CA 5 La), the court stated at

page 1319 the following principle, which also has been set

forth in almost every other federal district:

[Federal Evidence] Rule 803(6) does not (sic)

require that the records be prepared by the busi-

ness that has custody of them. Where circum-

stances indicate that the records are trustworthy,

the party seeking to introduce them does not

have to present the testimony of the party who

kept the record or supervised its preparation.

The issue of admissibility under Rule 803(6) is

chiefly a matter of trustworthiness. In this

inquiry the trial court is given great latitude.

See also United States v. Veytia-Bravo 603 F.2d 1187 (5th

Cir. 1979), cert. denied, 444 U.S. 1024 (1980); United States

v. Hathaway 798 F.2d 902 (6th Cir. 1986); Saks Int’l Inc. v.

M/V “Export Champion” 817 F.2d 1011, 1013 (2nd Cir.

1987) (documents may properly be admitted under this

Rule as business records even though they are the records

of a business entity other than one of the parties”); Munoz

v. Strahm Farms, Inc. 69 F.3d 501, 503 (Fed. Cir. 1995) (“it is

of no consequence that the records are created by another

entity, as long as the other requirements of Rule 803(6)

are met”).

The 9th Circuit, in U.S. v. Childs 5 F.3d 1328 (9th Cir.

1993), discussed a number of situations where a party

who was the present custodian, but who was not present

when the documents were initially prepared or part of

the organization that prepared them, could still offer

admissible exhibits. The Childs court set forth the rule

that: “Under Federal Rules of Evidence, documents may

provide their own authentication or the necessary foun-

dation may be established by extrinsic evidence.” Id. at

1336.

The Commercial custodians of record testified that

the two notes which were assigned to Commercial, were

received from the FDIC. THe FDIC put its allonge on the

two Notes. These declarations meet the requirements of

Rule 803(6) and the interpretation thereof.

When the above principles are applied to an FDIC-

related case, they only reinforce the Congressional intent

that the bank documents taken over by the FDIC speak

for themselves as to authenticity and admissibility (cer-

tainly Congress intended the presumption that the FDIC

would not tamper with them). Therefore it seems clear

that no further foundation is necessary other than a dec-

laration from the custodian of records of the assignee of

the FDIC, that the records were received in a packet from

the FDIC. ;

B. O'Melveny & Myers v. FDIC is not applicable to

the facts herein.

Jitner’s reliance on the case of O'Melveny & Myers v.

FDIC 512 U.S. 29, 114 S.Ct 2048, 129 L.Ed.2d 67 (1994), for

the proposition that there is no Federal law covering the

case herein, is misplaced. Justice Scalia, in his opinion in

O'Melveny, sets forth as the issue therein whether Federal

(FDIC) law or a state rule of decision governs the tort

liability of attorneys who provided services to a failed

bank.

The O'Melveny opinion discussed the fact that there

was no federal common law as to the tort involved, and

that 12 U.S.C. §§ 1821 and 1823 (“FIRREA”) did not

expressly provide any law on this subject. Therefore, the

opinion held California tort law controlled, and a federal

court could not provide its own “common law” rule.

However, nowhere in the O’Melveny opinion did the

Supreme Court limit the role of a federal court in inter-

preting federal statutes or the intent of Ccigress in rela-

tion thereto. In other words, where the federal statute

covers the subject, the federal courts do not go out of

business as to the necessary role of interpreting and

applying the statute. Id. at 84.

Furthermore, the O’Melveny opinion specifically

noted areas of law wherein FIRREA expressly preempted

state law and therefore specifically controlled: the six

year statute of limitations and the barring of claims and

defenses against the FDIC based on alleged unrecorded

agreements by the failed bank. Id. at 86.

‘liana aan

The O'Melveny opinion pointed out that whenever

there was conflict between the federal statute and state

law, the former prevailed. Id. at 86. It is only where the

statute is completely silent on the subject that state law is

used rather than a federal court “filling the void” with

federal “common law”. Id. at 87.

Jitner has ignored the fact that express portions of the

Federal statutes cover the issues herein, and no “common

law” is required to fill any gap in Federal statutory law.

C. The FDIC v. Houde opinion does not require

‘ that the 9th Circuit opinion herein be accused

of creating “federal common law”.

FDIC v. Houde 90 F.3d 600 (1st Cir. 1996), dealt with

whether the FDIC became a holder in due course upon

taking over the assets of a failed bank, and held that

under Maine law, the mere acquisition by the FDIC of

notes from a failed bank did not qualify as a negotiation

because there was no endorsement. Id. at 605.

Commercial herein has never argued (nor did the

District Court or 9th Circuit opine) that there was a

negotiation of the Jitner notes from the failed bank to the

FDIC, or that the FDIC was a holder in due course. The

FDIC merely took title pursuant to federal statute, and then

transferred this title to Commercial by assignment.

The Houde court apparently pounced on a Code com-

ment as requiring “proof of the ‘transaction’ as to how

the transferee acquired a note”, to require the FDIC to

_prove there was a transaction by which it got the Houde

note (there is no such requirement in the California stat-

ute itself).

Of course there is no transaction when the FDIC

takes over a failed bank. By the express wording of 12

U.S.C. § 1821(d)(2)(A) the FDIC succeeds to the rights,

titles and powers of a failed bank. Therefore the FDIC

becomes one and the same as the failed bank, and auto-

matically becomes the owner of assets such as the Jitner

notes without any transaction or transfer.

The federal court sitting in Maine would apparently

assume that 12 U.S.C. § 1821(d)(2)(A) does not mean what

it says. For the California district court and the 9th Cir-

cuit to logically interpret the express wording in that

statute to clearly mean that the FDIC obtained lawful title

to the Jitner notes as part of the assets it automatically

acquired from the failed bank, is not creating federal com-

mon law, nor does it contradict California law as is dis-

cussed below.

D. Jitner has misstated the application of Califor-

nia Commercial Code § 3203.

Jitner mistates the import of the California Commer-

cial Code § 3203. This code section merely sets apart the

rights of a holder in due course on commercial paper

from those of an assignee of a debt such as evidenced by

a note.

California Commercial Code § 3203(b), cited by Jitner

on page A-13 of his Appendix, states in pertinent part

that “Transfer of an instrument, whether or not the trans-

fer is a negotiation, vests in the transferee any right of the

”

transferor to enforce the instrument... .

California courts have held “ .. . that section [that

endorsement must be an endorsement of the entire

instrument] relates solely [emphasis in original] to nego-

tiation of commercial paper [citation omitted] and not to

an assignment of an interest in a note.” D’Orazi v. Bank of

Canton (App. 5 Dist. 1967) 254 Cal.App.2d 901, 904, 62

Cal.Rptr 704.

!

Furthermore, it is unquestioned that “” . . . a bank

which takes an item for collection . . . need not establish

that it took the item by negotiation in order to satisfy [the

provisions of the commercial code] . . . transfer of an

instrument vests in the transferee all the rights of the

transferor.” Security Pacific National Bank v. Chess (App. 2

Dist 1976) 58 Cal.App.3d 555, 565, 129 Cal.Rptr. 852.

In White v. Moriarty (1993) 15 Cal.App.4th 1290, 19

Cal.Rptr.2d 200, the Court held, in a case wherein the

California Court specifically replaced state law as to the

statute of limitations with Federal law, that proof was not

even required that the holder of a note establish that he

received it from the FDIC. In response to the claim of the

debtor, Moriarty, that there was no evidence that White

acquired the subject note from the FDIC, the Court stated

in Footnote 2:

A person in possession of an instrument

endorsed to him is the holder of the instrument.

(Cal. Com. Code § 1201, subd. (20).) Signatures

are presumed genuine in the absence of contrary

evidence. (Cal. Com. Code, former § 3307, subd.

(1)(b).). Furthermore, an obligation possessed by

a creditor is presumed unpaid. (Evid. Code

§ 635; Cal. Comm. Code, former § 3307, subd.

(2).) In the absence of any contrary evidence, the

endorsements on the promissory note constitu-

ted substantial evidence of White’s status as

holder of the note. Id. at 1296.

12 U.S.C. § 1821(d)(2)(A) specifically created the

FDIC’s ownership of the Jitner notes without any transac-

tion or transfer from the failed bank to the FDIC. The

FDIC then had the right to enforce the Jitner notes pur-

suant to the California statute. The evidence is clear that

the FDIC transferred the notes to Commercial.

The decision upholding Commercial’s right to

enforce the notes against Jitner is fully covered by the

appropriate state and federal statutory law, and neither

the district court nor the 9th Circuit created any federal

common law.

IV.

CONCLUSION

For the above reasons, Commercial respectfully sub-

mits that Jitner’s argument that the O'Melveny case has

been ignored by the Ninth Circuit is unfounded. The

Ninth Circuit opinion herein was not based on any “fed-

eral common law”, but rather was soundly based on the

federal statute to the extent it superseded state law, and

otherwise on state law.

10

Jitner’s Petition for the writ should be denied.

Respectfully submitted,

Davip J. WukITSCH

TEMPLETON BRIGGS

Attorneys for Respondents

Commercial Financial/SPC

Acquisitions, Inc. and

Financial Collections, Inc.

. APPENDIX

12 U.S.C. § 1820(f); subsection excerpted........... A-1

12 U.S.C. § 1821(d)(2)(A); subsection excerpted..... A-2

Federal Rules of Evidence, Rule 803(6)............. A-3

California Commercial Code § 1201(20).............. A-4

California Commercial Code § 3308(b)............... A-5

Catitosmia Evidence Code § 635 «26.626 cc ckaciencess A-6

Miss. River Grain Elevator, Inc. v. Bartlett & Co.

Grain 659 F.2d 1314 (1981 CA 5 La) (relevant

NE OE ie ees ahs waa candy oe earns A-7

Munoz v. Strahm Farms, Inc. 69 F.3d 501 (Fed. Cir.

eM | a A-8

O'Melveny & Myers v. FDIC 512 U.S. 29, 114 S.Ct

2048, 129 L.Ed.2d 67 (1994) (pages excerpted) ...A-10

Resolution Trust Corp. v. S & K Chevrolet Co. 923

F.Supp 135 (C.D.IIl. 1996) (pages excerpted)..... A-13

Saks Int'l Inc. v. M/V “Export Champion” 817 F.2d

1011 (2nd Cir. 1987) (pages excerpted)..... cisaserks

U.S. v. Childs 5 F.3d 1328 (9th Cir. 1993) (pages

ga a ROO ee ee, Can ee Er ee TTT A-17

U.S. v. Hathaway 798 F.2d 902 (6th Cir. 1986)

ey I ck no haa ae choca nk oAA Aue eS A-18

U.S. v. Veytia-Bravo 603 F.2d 1187 (5th Cir. 1979),

cert. denied, 444 U.S. 1024, 100 S. Ct 686, 62

L.Ed.2d 658 (1980) (pages excerpted)............ A-21

D’Orazi v. Bank of Canton (App. 5 Dist. 1967) 254

Cal.App.2d, 62 Cal.Rptr 704 (pages excerpted) ..A-23

il

APPENDIX - Continued

Page

Security Pacific National Bank v. Chess (App. 2 Dist.

1976) 58 Cal.App.3d 555, 129 Cal.Rptr 852

(pages excerpted).........cceeee cece eens eee eenes A-25

White v. Moriarty (1993) 15 Cal.App.4th 1290, 19

Cal.Rptr.2d 200 (pages excerpted)............... A-27

A-1

12 U.S.C. § 1820

(f) Preservation of records by photography; admis-

sibility as evidence

The Corporation may cause any and all records,

papers, or documents kept by it or in its possession or

custody to be photographed or microphotographed or

otherwise reproduced upon film, which photographic

film shall comply with the minimum standards of quality

approved for permanent photographic records by the

National Institute of Standards and Technology. Such

photographs, microphotographs, or photographic film or

copies thereof shall be deemed to be an original record

for all purposes, including introduction in evidence in all

State and Federal courts or administrative agencies and

shall be admissible to prove any act, transaction, occur-

rence, or event therein recorded. Such photographs,

microphotographs, or reproduction shall be preserved in

such manner as the Board of Directors of the Corporation

shall prescribe and the original records, papers, or docu-

ments may be destroyed or otherwise disposed of as the

Board shall direct.

A-2

12 U.S.C. § 1821

(d) Powers and duties of Corporation as conservator or

receiver

* * *

(2) General powers

(A) Successor to institution

The Corporation shall, as conservator or

receiver, and by operation of law, succeed to -

(i) all rights, titles, powers, and privi-

leges of the insured depository institution,

and of any stockholder, member, account-

holder, depositor, officer, or director of such

institution with respect to the institution

and the assets of the institution; and

(ii) title to the books, records, and

assets of any previous conservator or other

legal custodian of such institution.

* * *

A-3

USCS Fed Rules Evid R 803 (2002)

Rule 803. Hearsay Exceptions;

Availability of Declarant Immaterial

* * *

(6) Records of regularly conducted activity. A mem-

orandum, report, record, or data compilation, in any

form, of acts, events, conditions, opinions, or diagnoses,

made at or near the time by, or from information trans-

mitted 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 quali-

fied witness, or by certification that complies with Rule

902(11), Rule 902(12), or a statute permitting certification,

unless the source of information or the method or circum-

_ stances of preparation indicate lack of trustworthiness.

The term “business” as used in this paragraph includes

business, institution, association, profession, occupation,

and calling of every kind, whether or not conducted for

profit.

A-4

California Commercial Code § 1201

* ” *

(20) “Holder,” with respect to a negotiable instru-

ment, means the person in possession if the instrument is

payable to bearer or, in the case of an instrument payable

to an identified person, if the identified person is in

possession. “Holder,” with respect to a document of title,

means the person in possession if the goods are deliver-

able to bearer or to the order of the person in possession.

* * *

A-5

California Commercial Code § 3308. Signatures; val-

idity; presumptions and proof

* » s

(b) If the validity of signatures is admitted or

proved and there is compliance with subdivision (a), a

plaintiff producing the instrument is entitled to payment

if the plaintiff proves entitlement to enforce the instru--

ment under Section 3301, unless the defendant proves a

defense or claim in recoupment. If a defense or claim in

recoupment is proved, the right to payment of the plain-

tiff is subject to the defense or claim, except to the extent

the plaintiff proves that the plaintiff has rights of a holder

in due course which are not subject to the defense or

claim.

A-6

California Evidence Code § 635. Obligation possessed

by creditor

An obligation possessed by the creditor is presumed

not to have been paid.

A-7

659 F.2d 1314, *; 1981 U.S. App. LEXIS 16598, **;

9 Fed. R. Evid. Serv. (Callaghan) 336;

} 32 Fed. R. Serv. 2d (Callaghan) 1095

MISSISSIPPI RIVER GRAIN ELEVATOR, INC. and Inter

Financing Exchange, S.A., Plaintiffs-Appellants

Cross Appellees, Ferruzzi, S.P.A., Counter

Defendant-Appellant, Cross Appellee, v. BARTLETT &

COMPANY, GRAIN, Defendant-Counter Plaintiff-

Appellee Cross Appellant.

No. 80-3344

UNITED STATES COURT OF APPEALS,

FIFTH CIRCUIT. N*

* FORMER FIFTH CIRCUIT CASE, SECTION 9(1)

OF PUBLIC LAW 96-452 OCTOBER 14, 1980.

October 26, 1981

* * *

Fed.R.Evid. 803(6) provides that the following is not

excluded by the hearsay rule:

A...report...of...events... 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 . . . unless the source of the

information or the method or circumstances of prepara-

| tion indicate lack of trustworthiness.

+ * *

A-8

69 F.3d 501, *; 1995 U.S. App. LEXIS 29840, **;

36 U.S.P.Q.2D (BNA) 1499; 43 Fed. R. Evid. Serv.

(Callaghan) 221

MIGUEL A. MUNOZ, Plaintiff-Appellant, v. STRAHM

FARMS, INC., FERNANDO FLORES, E. SCHAFFNER

PACKAGING CO., SCHAFFNER FARMS, JIMMY

CASTRO, SAMCO PACKING & EQUIPMENT, INC.

and VALLEY HARVESTING & PACKING, INC.,

Defendants-Appellees.

95-1036

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

October 24, 1995, Decided

Reliability is the basis for admitting evidence under the

business records exception. See Saks Int'l, Inc. v. M/V

“Export Champion”, 817 F.2d 1011, 1013 (2d Cir. 1987). It

was not unreasonable for the district court to conclude

that Mayberry’s testimony provided sufficient indicia of

reliability. In addition to having a regular practice of

sending film to Kodak for processing and checking the

dates of the developed slides, he testified that he had

several thousand slides and had never known Kodak to

place an incorrect date on a slide. It is of no consequence

that Mayberry himself did not develop the slides or place

the dates on the slide frames, since a “custodian” under

the business records exception need not be the person

who created the records. See United States v. Basey, 613

F.2d 198, 201 n.1 (9th Cir. 1979) (“It is unimportant under

Fed. R. Evid. 803(6) that the custodian did not herself

record the information or know who recorded the infor-

mation.”), cert. denied, 446 U.S. 919, 100 S. Ct. 1854, 64 Ra

Ed. 2d 274 (1980); see also Saks Int'l, 817 F.2d at 1013 (a

A-9

regular practice of receiving information from another

person obviates the need to identify that person). There-

fore, we conclude that the district court did not abuse its

discretion in admitting into evidence Mayberry’s testi-

mony and dated slide frames. |

Even assuming that the district court erred in admitting

the challenged evidence, such error would have been

harmless. The correction of an error must yield a different

result in order for that error to have been harmful and

thus prejudice a substantial right of a party. See Cable Elec.

Prods., Inc. v. Genmark, Inc., 770 F.2d 1015, 1021, 226

U.S.P.Q. (BNA) 881, 884 (Fed. Cir. 1985).

* * *

A-10

S02 tS. 73, *: 1145. ct. 2066, “;

129 L. Ed. 2d 67, ***; 1994 U.S. LEXIS 4446

O’MELVENEY & MYERS, PETITIONER v. FEDERAL

DEPOSIT INSURANCE CORPORATION AS RECEIVER

FOR AMERICAN DIVERSIFIED SAVINGS BANK ET AL.

No. 93-489

SUPREME COURT OF THE UNITED STATES

March 21, 1994, Argued

June 13, 1994, Decided

* * *

[***HR5A] Ed. 2d 442, 108 S. Ct. 2510 (1988).

In answering the central question of displacement of

California law, we of course would not contradict an

explicit federal statutory provision. Nor would we adopt

a court-made rule to supplement federal statutory regula-

tion that is comprehensive and detailed; matters left

unaddressed in such a scheme are presumably left subject

to the disposition provided by state law. See Northwest

Airlines, Inc. v. Transport Workers, 451 U.S. 77, 97, 67 L. Ed.

2d 750, 101 S. Ct. 1571 (1981); Milwaukee v. Illinois, 451

U.S. 304, 319, 68 L. Ed. 2d 114, 101 S. Ct. 1784 (1981).

Petitioner asserts that both these principles apply in the

present case, by reason of 12 U.S.C. § 1821(d)(2)(A)(1)

(1988 ed., Supp. IV), and the comprehensive legislation of

which it is a part, the Financial Institutions Reform,

Recovery, and Enforcement Act of 1989 (FIRREA), Pub. L.

101-73, 103 Stat. 183.

Section 1821(d)(2)(A)(i), which is part of a title captioned

“Powers and duties of [the FDIC] as . . . receiver,” states

that “the [FDIC] shall, .. . by operation of law, succeed to

- all rights, titles, powers, and privileges of the insured

depository institution....” 412 U.S.C. § 1821(d)(2)(A)(i)

A-11

(1988 ed., Supp. IV). This language appears to indicate

that the FDIC as receiver “steps into the shoes” of the

failed S&L, cf. Coit Independent Joint Venture v. FSLIC, 489

U.S. 561, 585, 103 L. Ed. 2d 602, 109 S. Ct. 1361 (1989),

obtaining the rights “of the insured depository institu-

tion” that existed prior to receivership. Thereafter, in

litigation by the FDIC asserting the claims of the S&L - in

this case California tort claims potentially defeasible by a

showing that the S&L’s officers had knowledge -

““any defense good against the original party is good

against the receiver.’ ” 969 F.2d at 751 (quoting Allen v.

Ramsay, 179 Cal. App. 2d 843, 854, 4 Cal. Rptr. 575, 583

(1960)).

Respondent argues that § 1821(d}(2)(A)(i) should be read

as a nonexclusive grant of rights to the FDIC receiver,

which can be supplemented or modified by federal com-

mon law; and that FIRREA as a whole, by demonstrating

the high federal interest in this area, confirms the courts’

authority to promulgate such common law. This argu-

ment is demolished by those provisions of FIRREA which

specifically create special federal rules of decision regard-

ing claims by, and defenses against, the FDIC as receiver.

See 12 U.S.C. § 1821(d)(14) (1988 ed., Supp. IV) (extending

statute of limitations beyond period that might exist

under state law); §§ 1821(e)(1), (3) (precluding state-law

claims against the FDIC under certain contracts it is

authorized to repudiate); § 1821(k) (permitting claims

against directors and officers for gross negligence,

regardless of whether state law would require greater

culpability); § 1821(d)(9) (excluding certain state-law

claims against FDIC based on oral agreements by the

S&L). Inclusio unius, exclusio alterius. It is hard to avoid

A-12

the conclusion that § 1821(d)(2)(A)(i) places the FDIC in

the shoes of the insolvent S&L, to work out its claims

under state law, except where some provision in the

extensive framework of FIRREA provides otherwise. To

create additional “federal common-law” exceptions is not

to “supplement” this scheme, but to alter it.

~ * »

A-13

923 F. Supp. 135, *; 1996 U.S. Dist. LEXIS 5597, *"

RESOLUTION TRUST CORPORATION, as Receiver for

Security Federal Savings and Loan Association, Plaintiff,

v.S & K CHEVROLET COMPANY; DAVID ANGEVINE.

a/k/a David Alex; DUANE ANGEVINE; CAL COLLINS,

TONY CONSTIBLE; RAY COUNTS; WALT DURDLE;

ART ENTURO, Jr.; BERNIE ESCAMILLA; JIM HAINES,

AL HETH; AL HUNT, WILLIAM KALLISTER; KEVIN

KALLISTER, MATT MATTHEWS; GARY PARKINSON;

MONTY RAYMOND; RANDY REIMAN; BOB RHINES;

THOMAS SMITH, Sr.; DAVE STANFEL; HAROLD

STAFFORD; and DAN STEWART, Defendants.

Case No. 93-1308

UNITED STATES DISTRICT COURT FOR THE CENTRAL

DISTRICT OF ILLINOIS, PEORIA DIVISION

* * *

Reiman now wishes to clarify that he did not mean to

imply that Security or Security Federal were dissolved

corporations at the time of receivership. Reiman avers

that he has no idea whether they were dissolved or not,

and the Complaint does not make this clear. Based on

these new facts, the Court hereby vacates that portion of

its earlier opinion which dismissed Plaintiff’s punitive

damages claim in Count I. Upon reconsideration, the

Court finds that that issue is best resolved by a motion

for summary judgment where additional facts beyond

those of the Complaint can be proffered. Only if Security

or Security Federal was dissolved prior to RTC’s receiver-

ship can Reiman claim that Illinois law on punitive dam-

ages controls.

To the extent that Reiman is arguing that Illinois law

should control regardless of whether Security or Security

Federal were dissolved prior to RTC’s receivership, the

A-14

Court rejects this argument. As the district court held in

Resolution Trust Corp. v. Liebert, 871 F. Supp. 370, 373 (C.D.

Cal. 1994), the mere prohibition of an assignment under

state law does not affect RTC’s rights to receivership

under FIRREA § 1821(d)(2)(A)(i). RTC is receiving the

corporation by operation of federal law, not having it

assigned under state contract law. See FTC v. S& K

Chevrolet, 868 F. Supp. 1047, 1053 (C.D. Ill. 1994) (“Con-

trary to Reiman’s argument, it is clear that transfer of

assets from Security to Security Federal and from Secu-

rity Federal to the FTC were accomplished by operation

of law.”). Reiman’s argument concerning contractual

assignment of claims continues to ring hollow.

~ * *

A-15

817 F.2d 1011, *; 1987 U.S. App. LEXIS 5984,

1987 AMC 1899

Saks International, Inc., Plaintiff-Appellee, v. M/V

“Export Champion,” her engines, boilers, etc., and

Farrell Lines, Inc., Defendants, Third-Party Plaintiffs-

Appellees, Cross-Appellants, Maher Terminals, Inc.,

Third Party Defendant-Appellant, Cross-Appellee

Nos. 86-7998, 86-9034

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

» > *

The principal precondition to admission of documents as

business records pursuant to Fed. R. Evid. 803(6) is that

the records have sufficient indicia of trustworthiness to

be considered reliable. See United States v. Mendel, 746

F.2d 155, 166 (2d Cir. 1984), cert. denied, 469 U.S. 1213, 84

L. Ed. 2d 331, 105 S. Ct. 1184 (1985); United States v. Lavin,

480 F.2d 657, 662 (2d Cir. 1973). Documents may properly

be admitted under this Rule as business records even

though they are the records of a business entity other

than one of the parties, see United States v. Consolidated

Edison Co., 580 F.2d 1122, 1131 n.18 (2d Cir. 1978), and

even though the foundation for the receipt is laid by a

witness who is not an employee of the entity that owns

and prepared them, see United States v. Mendel, 746 F2d at

166; United States v. Hathaway, 798 F.2d 902, 906 (6th Cir.

1986). Further, there is no requirement that the person

whose first-hand knowledge was the basis of the entry be

identified, so long as it was the business entity’s regular

practice to get information from such a person. See United

States v. Atchley, 699 F.2d 1055, 1059 (11th Cir. 1983);

United States v. Basey, 613 F.2d 198, 201 n.1 (9th Cir. 1979),

cert. denied, 446 U.S. 919, 100 S. Ct. 1854, 64 L. Ed. 2d 274

A-16

(1980). The determination of whether, in all the circum-

stances, the records have sufficient reliability to warrant

their receipt in evidence is left to the sound discretion of

the trial judge. United States v. Lavin, 480 F.2d at 662.

> ” »

A-17

5 F.3d 1328, *; 1993 U.S. App. LEXIS 24742, **;

37 Fed. R. Evid. Serv. (Callaghan) 1344;

93 Cal. Daily Op. Service 7242

UNITED STATES OF AMERICA, Plaintiff-Appellee, v.

CRAIG LEE CHILDS, Defendant-Appellant.

No. 92-10645

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

July 12, 1993, Argued, Submitted,

San Francisco, California

September 28, 1993, Filed

~ * *

A memorandum, report, record, or data compilation, in

any form, of acts, events, conditions, opinions, or diag-

noses, 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, unless the source of information or the

method or circumstances of preparation indicate lack of

trustworthiness. The term “business” as used in this

paragraph includes business, institution, association, pro-

fession, occupation, and calling of every kind, whether or

not conducted for profit.

A-18

798 F.2d 902, *; 1986 U.S. App. LEXIS 28835, **;

21 Fed. R. Evid. Serv. (Callaghan) 436

UNITED STATES OF AMERICA, Plaintiff-Appellee, v.

JAMES HARRISON HATHAWAY, Defendant-Appellant

No. 85-1520

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

* * °

1. Admissibility Under Rule 803(6)

Defendant's attack on the district court’s conclusion is

twofold. First, defendant points out that in order to lay

the requisite foundation for the evidence to be admissible

under Rule 803(6), the government relied in part on the

testimony of an FBI agent. Defendant asserts that the use

of this testimony was impermissible because the agent

was “not... the proper custodian of the record as

contemplated by Rule 803(6).” To support his argument,

defendant relies heavily on Calhoun v. Baylor, 646 F.2d

1158 (6th Cir. 1981), where, in affirming the district

court’s exclusion of evidence, we stated: “Rule 803(6) is

inapplicable because the witness . . . played no role in the

creation of compilation of the records and was therefore

in no position to attest to their reliability.” 646 F.2d at

1162. From that, defendant argues that in this circuit only

those individuals who play a role in the creation or

compilation of records can be used to lay the requisite

foundation under Rule 803(6). While this argument is not

without some appeal, we are unable to accept it.

To accept defendant's interpretation of the passing state-

ment in Calhoun would put this circuit at odds with every

other circuit and commentator known by this court to

have addressed the issue. Similarly, for us to have held in

A-19

Calhoun that only those who play a role in the creation or

compilation of records can testify to lay the foundation

would have required us to overrule our earlier holding in

United States v. Reese, 568 F.2d 1246 (6th Cir. 1977}. In

Reese, the authenticating witness did not have control

over or a personal knowledge of the evidence contained

in the record at issue. Nevertheless, we held that the

records in question were admissible since the employee

had “knowledge of the [business’] regular practices.” 568

F.2d at 1252. See also United States v. Wables, 731 F.2d 440,

449 (7th Cir. 1984) (citing Reese to support the holding

that “the witness [used to lay the foundation] need only

have knowledge of the procedures under which the

records were created.”).

Thus, contrary to defendant's argument, there is no rea-

son why a proper foundation for application of Rule

803(6) cannot be laid, in part or in whole, by the testi-

mony of a government agent or other person outside the

organization whose records are sought to be admitted.

When a witness is used to lay the foundation for admit-

ting records under Rule 803(6), all that is required is that

the witness be familiar with the record keeping system.

See Wallace Motor Sales, Inc. v. American Motors Sales Corp.,

780 F.2d 1049, 1061 (1st Cir. 1985); Wables, 731 F.2d at 449;

NLRB v. First Termite Control Co., 646 F.2d 424, 427 (9th

Cir. 1981); Elizarraras v. Bank of El Paso, 631 F.2d 366 (5th

Cir. 1980); Reese, 568 F.2d at 1252; 4 J. Weinstein & M.

Berger, Weinstein’s Evidence, para. 803(6)(02], at 803-178

(1985) (“The phrase ‘other qualified witness’ should be

given the broadest interpretation; he need not be an

employee of the entity so long as he understands the

system.”).

A-20

In urging that the district court erred, defendant’s second

argument is that the records should not have been admit-

ted because they were untrustworthy and inaccurate.

Rule 803(6) expressly provides that evidence otherwise

admissible under Rule 803(6) is to be excluded if “the

source of information or the method or circumstances of

preparation indicate lack of trustworthiness.” On the

issue of trustworthiness, as with other evidentiary hold-

ings, “the trial court is given great latitude.” Mississippi

River Grain Elevator, Inc. v. Bartlett & Co., Grain, 659 F.2d

1314, 1319 (5th Cir. 1981). Thus, on review, we will

reverse the district court’s decision only if we find a clear

abuse of discretion. See, e.g., State Office Systems, Inc. v.

Olivetti Corp., 762 F.2d 843, 845 (10th Cir. 1985); Guest v.

Bailes, 448 F.2d 433, 437 (6th Cir. 1971).

* » *

A-21

603 F.2d 1187, *; 1979 U.S. App. LEXIS 11368, **

UNITED STATES of America, Plaintiff-Appellee, v.

Luis Esteban VEYTIA-BRAVO, Defendant-Appellant.

Nos. 78-5742, 78-5743

UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT

October 5, 1979

» * *

Fed. R. Evid. 803(6)(a) excludes from the application of

the hearsay rule: memorandum, report, record, or data

compilation, in any form, of acts, events, conditions,

opinions, or diagnoses, made at or near the time by, or

from information transmitted by, a person with knowl-

edge, if kept in the course of a regularly conducted busi-

ness 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 testi-

mony of the custodian or other qualified witness, unless

the source of information or the method or circumstances

of preparation indicate lack of trustworthiness. The term

“business” as used in this paragraph includes business,

institution, association, profession, occupation, and call-

ing of every kind, whether or not conducted for profit.

Fed. R. Evid. 803(6) does not require that records be

prepared by a business that has custody of them. If

circumstances indicate that the records are trustworthy,

the party seeking to introduce them does not have to

present the testimony of the party who kept the record or

supervised its preparation. Testimony by the custodian of

the record or other qualified witness that the record is

A-22

authentic and was made and kept in the regular course of

business suffices to support is admission.

* + *

A-23

254 Cal. App. 2d 901, *; 1967 Cal. App. LEXIS 1471, **;

62 Cal. Rptr. 704, * * *

VIOLET B. D’ORAZI, as Administratrix, etc., et al.,

Plaintiffs and Appellants, v. BANK OF CANTON,

Defendant and Respondent

Civ. No. 777

Court of Appeal of California,

Fifth Appellate District

October 3, 1967 2

* + +

However, that section relates solely to negotiation of com-

mercial paper (Wright v. Shoenhair, 100 Cal. App. 163 [280

P. 174]), and not to an assignment of an interest in a note.

It is unquestionably true that as to negotiation: “An

endorsement is effective for negotiation only when it

conveys the entire instrument or any unpaid residue. If it

purports to be of less it operates only as a partial assign-

ment.” (Cal. Com. Code, § 3202, subd. (3).)

In 80 American Law Reports at page 414, the following

general rule is stated with respect to the right to enforce

in equity a partial assignment when all of the parties to

the debt are joined in a single action such as we have

here: “Notwithstanding many broad statements seem-

ingly to the contrary met with in courts of law or else-

where, the rule overwhelmingly supported by the cases

wherein the point has been involved or squarely consid-

ered is that the assignment of part of a debt, although

unassented to by the debtor, is enforceable against him in

equity. The reasons, and apparently the only reason,

obtaining at law for refusing to enforce such an assign-

ment, that if given effect the debtor would be deprived of

A-24

the right to pay his debt in solido and might be subjected

to many actions, embarrassments, and responsibilities not

contemplated in his original contract, does not apply in

equity, whose procedure contemplates that all persons at

interest be made parties and have their rights determined

by a single decree; consequently, in equity, the rule deny-

ing validity to such assignments ought not to, and gener-

ally does not, obtain.”

California cases cited in support of that law note recog-

nize, or clearly intimate, the existence of the rule, as

follows: Pierce v. Robinson, 13 Cal. 116; Pope v. Huth, 14

Cal. 403; Grain v. Aldrich, 38 Cal. 514 [99 Am.Dec. 423];

Goldman v. Murray, 164 Cal. 419 [129 P. 462]. (See also Kent

v. Kent, 6 Cal.App.2d 488 [44 P.2d 445]; 5 Cal.Jur.2d Rev.,

Assignments, § 44, pp. 431-433, § 68, p. 476; 8 Cal.Jur.2d,

Bills and Notes, § 51, pp. 382-383; 6 Am.Jur.2d, Assign-

ments, § 76, pp. 257-259, § 77, pp. 259-261; Rest., Con-

tracts, § 156.)

A-25

58 Cal. App. 3d 555, *; 1976 Cal. App. LEXIS 1540, **;

- 129 Cal. Rptr. 852, * * * ;

19 U.C.C. Rep. Serv. (Callaghan) 544

SECURITY PACIFIC NATIONAL BANK et al.,

Plaintiffs and Respondents, v.

J. THOMAS CHESS et al., Defendants and Appellants

Civ. No. 46439

Court of Appeal of California,

Second Appellate District, Division Four

May 20, 1976

* * *

The only court decision which plaintiff cites for its inter-

pretation of section 3201 is Bowling Green Inc. v. State

Street Bank and Trust Co. (1st Cir. 1970) 425 F.2d 81. In that

case Bowling Green negotiated a government check to

-Bowl-Mor, who deposited the check in State Street Bank.

The bank immediately credited a portion of the check

against an overdraft in Bowl-Mor’s account, and shortly

afterwards applied the balance in that account against

debts which Bowl-Mor owed the bank. There was no

evidence that Bowl-Mor had indorsed the check. The

ground of the Court of Appeals decision, as stated in its

opinion, is as follows: ” .. . We therefore hold that a bank

which takes an item for collection from a customer who

was himself a holder need not establish that it took the

item by negotiation in order to satisfy § 4-209 [of the

Uniform Com. Code, corresponding to California Uni-

form Com. Code. § 4209].” (Id., at p. 84.)

In the course of its discussion the court said: ” ... The re

issue, however, is not whether the Bank bears the burden

of proof, but whether it must establish that it took the

item in question by endorsement in order to meet its

burden. We think not. The evidence in this case indicates

A-26

that the Bank’s transferor, Bowl-Mor, was a holder. Under

Mass.Gen.Laws Ann. c. 106, § 3-201 (a), transfer of an

instrument vests in the transferee all the rights of the

transferor. As the Official Comment to § 3-201(a), transfer

of an instrument vests in the transferee all the rights of

the transferor. As the Official Comment to § 3-201 indi- '

cates, one who is not a holder must first establish the 7

transaction by which he acquired the instrument before 3

enforcing it, but the Bank has met this burden here.” (Id.,

at p. 83-84.)

A-27

15 Cal. App. 4th, 1290, *; 1993 Cal. App. LEXIS 525, **; 19 Cal.

Rptr. 2d 200, * * * ; 93 Cal. Daily Op. Service 3599

PETER K. WHITE, as Trustee, etc.,

Plaintiff and Appellant, v. MICHAEL JAMES MORIARTY,

Defendant and Appellant.

No. A055618

COURT OF APPEAL OF CALIFORNIA,

FIRST APPELLATE DISTRICT, DIVISION ONE

May 14, 1993, Decided

* * *

Because there was substantial evidence that Moriarty

expressly ratified prior acts in connection with the purchase

and financing of the camera, there is no need to discuss

White’s argument regarding the alternative theory of ratifica-

tion by acceptance of benefits. Regarding Moriarty’s conten-

tion that he never assumed personal liability for the

corporate debt, we observe that the note was signed only in

the individual capacities of Anderson and Moriarty. The only

mention of the corporation was that the debt was secured by

the camera and the equipment lease from Nisus Video. There

is no issue of alter ego liability.

* * *

2 Without citation of authority, Moriarty argues that there

was no substantial evidence that White actually acquired the

note from the FDIC. However, the note bears the endorsement

of FDIC to GFS and from GFS to White. A person in possession

of an instrument endorsed to him is the holder of the

instrument. (Cal. U. Com. Code, § 1201, subd. (20).) Signatures

are presumed genuine in the absence of contrary evidence. (Cal.

U. Com. Code, former § 3307, subd. (1)(b).) Furthermore, an

obligation possessed by a creditor is presumed unpaid. (Evid.

Code, § 635; Cal. U. Com. Code, former § 3307, subd. (2).) In the

absence of any contrary evidence, the endorsements on the

promissory note constituted substantial evidence of White’s

status as holder of the note.