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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2002
- **Citation:** 535 U.S. 1078

## Text

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.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386010_1577%3A2. Public record. Not legal advice.