Apa v. National Bank of Commerce

Opinion

SIXTH DIVISION June 29, 2007

1-05-2269

PATRICK APA, ) Appeal from ) the Circuit Court Plaintiff-Appellee, ) of Cook County ) ) v. ) ) ) No. 03 CH 18805 NATIONAL BANK OF COMMERCE, ) ) Defendant-Appellant, ) ) The Secretary of State, Jesse White, ) and JOHN OWENS, ) Honorable ) Bernetta D. Bush, Defendants. ) Judge Presiding

JUSTICE McNULTY delivered the opinion of the court:

Defendant John Owens used a loan from defendant National

Bank of Commerce to finance the purchase of a bus. After selling

the bus to plaintiff Patrick Apa, a charter operator who did not

know of the bank's interest, Owens defaulted on the bank loan.

The bank found the bus and seized it, Apa sued the bank for

conversion, and Apa was awarded summary judgment on the issue of

liability. The primary question presented by the instant appeal

is whether the trial court's admission of Apa's bank statements

was proper under the business exception to the hearsay rule for

the purpose of establishing the damage caused by the conversion. 1-05-2269

We hold that it was not, and reverse the judgment for Apa.

BACKGROUND

Defendant John Owens and his company purchased a 1984 bus in

February 2002, using money borrowed from defendant National Bank

of Commerce (hereinafter "NBC"). The loan gave NBC a lien

against the bus, but NBC did not record that lien. In April

2002, Owens and his company sold the bus to plaintiff Patrick

Apa, who operated a charter business. Apa obtained a new title

to the bus; however, Owens failed to disclose to Apa or to the

Secretary of State that NBC had a valid and enforceable lien

against the bus. Apa made his final payment to Owens in January

of 2003, and immediately thereafter Owens defaulted on his loan

to NBC. NBC seized the bus in April 2003. The next month, NBC

applied for a new title to the bus, and the Secretary of State

issued a new title to NBC on May 29, 2003.

On November 7, 2003, Apa filed a complaint against NBC for

conversion of the bus, against Owens for failing to disclose

NBC's lien, and against Secretary of State Jesse White, seeking

to compel the Secretary to record him as the owner of the bus.

NBC filed a third-party complaint against Owens for his failure

to disclose NBC’s interest in the bus on the certificate of

title. Owens has been in default since July 2004 for his failure

to answer or to appear in this proceeding and has not made an

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appearance in the instant appeal. Apa filed a motion for summary

judgment against NBC on the issue of liability and the court

granted Apa’s motion; as a result, NBC returned the bus to Apa

in May 2004. Apa's claims against the Secretary of State were

thus resolved, and the Secretary is not a party to this appeal.

The case proceeded to trial on the issue of damages. Apa

sought damages for loss of income from his charter business from

April 2003 to May 2004, the period during which Apa was without

the bus, and for the decline in the value of the bus during that

same period. Apa introduced into evidence a series of documents

to prove his damages, including his 2001 tax return, bills of

sale, canceled checks, his 2001 and 2002 Illinois fuel tax

returns, and calendar sheets from 2003. Apa testified that in

2001, income from his charter business was deposited into an

account in LaSalle Bank, and he sought to introduce into evidence

the front pages of monthly statements from his LaSalle account.

NBC objected to the admission of the bank statements, but the

trial court overruled the objection, commenting that Apa "could

submit these bank statements if he testifies that these are the

bank records that are kept in the ordinary course of his

business." Apa testified that he added accounts at Charter One

Bank and TCF Bank in 2002, and that he kept statements from those

banks in the ordinary course of his business; the statements were

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also admitted into evidence over NBC's objection. Apa also

introduced a summary exhibit that totaled his deposits from all

three bank statements. Apa testified that the summary exhibit

was a chart that represented the bank deposits for the years

2001, 2002, and 2003, and that the exhibit was broken down by

month. NBC objected to Apa's motion to admit the summary

exhibit into evidence. The court noted that the summary was "not

verifiable" and refused to admit the summary exhibit as proof of

Apa’s gross income. However, the court did admit the summary for

the limited purpose of showing "the total amounts of the monies

that were deposited in the bank[s]."

During cross-examination of Apa, NBC introduced as an

exhibit the complete LaSalle bank statements, revealing Apa's

individual deposits. NBC used the statements to question Apa

regarding his prior testimony about his LaSalle account, but did

not use the LaSalle statements in its own case-in-chief. NBC did

not use any of the Charter One or TCF bank statements at any

point.

The trial court, explaining that the LaSalle bank statements

were "the best evidence to determine what may have been the value

of this business before this bus was taken," entered a judgment

in favor of Apa for $30,346.52. NBC appeals.

ANALYSIS

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NBC contends that Apa did not produce evidence sufficient to

allow the trial court to determine his damages. We disagree.

Lost profits may be recovered when there are any criteria by

which the probable profits may be estimated with reasonable

certainty, and a plaintiff may satisfy the reasonable certainty

requirement by presenting evidence of past profits in an

established business. Tri-G, Inc. v. Burke, Bosselman & Weaver,

222 Ill. 2d 218, 248 (2006). Apa presented such evidence in the

form of his bank records and his testimony that those records

demonstrated the income from his charter business during the

period prior to the loss of the bus. Although NBC identifies

areas in which Apa's evidence is incomplete or inconsistent, such

evidentiary shortcomings do not provide a basis for reversal of

the trial court's judgment: we may reverse the court's assessment

of damages only upon a showing that it was manifestly erroneous.

Schatz v. Abbott Laboratories, Inc., 51 Ill. 2d 143, 148-49

(1972). No such showing has been made in the instant case.

NBC next contends that the trial court erred in denying its

motion to bar Apa from presenting evidence of his business income

for 2002 and 2003 as a sanction for his failure to produce tax

returns from those years in response to its discovery requests.

We disagree. A trial court has the discretion to impose

sanctions for a deliberate or unreasonable failure to comply with

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discovery, but when that failure is not shown to be deliberate or

unreasonable, the court's refusal to impose a sanction is neither

an abuse of discretion nor a basis for reversal. Peterson v. Ress

Enterprises, Inc., 292 Ill. App. 3d 566, 579-80 (1997). In the

instant case, NBC requested Apa's 2002 and 2003 tax returns, and

Apa's explanation of his failure to produce those returns was

that as of the eve of trial in 2005 he had not yet prepared or

filed them. This explanation, which remains unrebutted in the

record presented to this court, did not constitute the deliberate

or unreasonable discovery noncompliance which would have

justified the imposition of sanctions at the time of trial. We

therefore reject NBC's assertion that the trial court's refusal

to sanction Apa by barring him from presenting evidence requires

reversal of the judgment against it.

NBC further contends that the trial court improperly allowed

Apa's bank statements into evidence under the business records

exception to the hearsay rule. In objecting to the admission of

the statements, counsel for NBC argued that someone from the

banks was required to testify that the statements were kept in

the regular course of the banks' business. The trial court

responded that the statements were admissible if Apa testified

that he kept them in the regular course of his business. Apa

offered that testimony for the statements from Charter One Bank

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and TCF Bank, and the statements from those banks and from

LaSalle Bank were admitted over NBC's objections.

The bank statements were hearsay evidence, and their

admission is governed by Supreme Court Rule 236, which provides

in relevant part:

"Any writing or record, whether in the form of any

entry in a book or otherwise, made as a memorandum or

record of any act, transaction, occurrence, or event,

shall be admissible as evidence of the act,

transaction, occurrence, or event, if made in the

regular course of any business, and if it was the

regular course of the business to make such a

memorandum or record at the time of such an act,

transaction, occurrence, or event or within a

reasonable time thereafter. All other circumstances of

the making of the writing or record, including lack of

personal knowledge by the entrant or maker, may be

shown to affect its weight, but shall not affect its

admissibility. The term 'business,' as used in this

rule, includes business, profession, occupation, and

calling of every kind." 145 Ill. 2d R. 236(a).

Attempts to use the business records exception to introduce

hearsay documents not created by their proponent have frequently

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been rejected by Illinois courts. See Pell v. Victor J. Andrew

High School, 123 Ill. App. 3d 423, 433 (1984); Benford v. Chicago

Transit Authority, 9 Ill. App. 3d 875, 877-78 (1973). "Illinois

courts in similar circumstances have concluded that a document

produced by one party that is retained in the records of a second

party does not qualify as a business record of the second party."

International Harvester Credit Corp. v. Helland, 151 Ill. App. 3d

848, 853 (1986) (citing Pell, 123 Ill. App. 3d at 433-34;

Benford, 9 Ill. App. 3d at 877-78; Smith v. Williams, 34 Ill.

App. 3d 677, 680 (1975)). "A number of Illinois cases have held

that documents produced by third parties were inadmissible as

business records." Argueta v. Baltimore & Ohio Chicago Terminal

R.R. Co., 224 Ill. App. 3d 11, 20 (1991) (citing International

Harvester, Pell and Benford).

The language of the rule, however, does not indicate that

its application is limited to cases in which the record in

question was created by its proponent, and this court's more

recent jurisprudence has recognized that admissibility under the

business records exception is not determined by the identity of

the proponent of the document. In Kimble v. Earle M. Jorgenson

Co., 358 Ill. App. 3d 400 (2005), this court explained that Rule

236 "requires only that the party tendering the record satisfy

the foundational requirements that (1) the record was made in the

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regular course of business and (2) at or near the time of the

event or occurrence." 358 Ill. App. 3d at 414, citing In re

Estate of Weiland, 338 Ill. App. 3d 585, 600 (2003). The Kimble

court thus observed, "it makes no difference whether the records

are those of a party or of a third person authorized by the

business to generate the record on the business's behalf." 358

Ill. App. 3d at 414.

We believe that the Kimble court's focus on the foundational

evidence surrounding the making of the purported business record

properly reflects the language and purpose of Rule 236, and that

International Harvester, Pell and Benford do not compel a

contrary approach. Although each held that documents not made by

their proponent did not qualify for the business records

exception, none found that the party offering the document had

met the foundational requirements of Rule 236, and none held that

the document's creation by a third party outweighed those

requirements in determining admissibility under the rule. In our

view, International Harvester, Pell and Benford establish that in

the absence of evidence regarding the circumstances of a

document's creation, the business records exception is not

justified merely by evidence regarding the practice of the

document's retention. See Benford, 9 Ill. App. 3d at 877-78.

Although his bank statements could have been admitted under

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the business records exception to the hearsay rule despite their

preparation by an entity other than their proponent, Apa did not

present any evidence of the circumstances of their creation. For

two of the accounts, he testified only that he kept the records

in the regular course of his business, and for the third, he did

not offer even that level of foundation testimony. "'Without

proper authentication and identification of the document, the

proponent of the evidence has not provided a proper foundation

and the document cannot be admitted into evidence.'" Kimble, 358

Ill. App. 3d at 416, quoting Anderson v. Human Rights Comm'n, 314

Ill. App. 3d 35, 42 (2000). The admission of the bank statements

was thus improper.

Apa argues that NBC waived any objection to the admission of

the statements by making use of them after they were admitted,

and emphasizes that while he merely introduced the first page of

each statement, NBC introduced the entire statements. NBC used

the statements only in its cross-examination of Apa, however.

After its objection to the admission of evidence has been

overruled, a party does not waive that objection by using that

evidence to cross-examine an opponent (Morrison v. Community Unit

School District No. 1, Payson, 44 Ill. App. 3d 315, 318-19

(1976)) or by introducing additional evidence of the "same class"

(Department of Transportation v. Quincy Coach House, Inc., 64

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Ill. 2d 350, 359 (1976)). NBC did not waive its hearsay

objections.

CONCLUSION

The trial court found that Apa's bank statements were the

best evidence of the damages he suffered from NBC's conversion of

his bus. Those statements were improperly admitted into

evidence, and because of their acknowledged significance, the

admission cannot be considered harmless. For the foregoing

reasons, the judgment of the circuit court of Cook County must be

reversed, and the instant cause is remanded for a new trial.

Reversed and remanded.

FITZGERALD SMITH, P.J., and O'MALLEY, J., concur.