Jack Nelson Jones Professional Association

January 30 - February 5, 2017

Jones v. John B. Dozier Land Trust, 2017 Ark. App. 23 (January 18, 2017)

This appeal comes from the Lee County Circuit Court, honorable Richard Lee Proctor presiding. This case concerns the admissibility of hearsay evidence under the Business Records exception.

The John B. Dozier Trust (Dozier Trust), of which John Dozier was the sole trustee, owned farmland in Lee County. Dozier, as trustee, leased a portion of the farmland to his stepson Barry Jones beginning in 2007. The leased premises contained a shop building. In January of 2011, Dozier, after separating from Jones’ mother, decided he did not want to continue leasing the farmland to Jones. On January 24, 2011, Dozier’s attorney sent Jones a letter terminating Jones’s lease of the farmland after the 2011 crop season.

A few months after Jones had vacated the property, Dozier inspected it and discovered, among other things, a significant oil spill on the ground just outside the shop building. The Dozier Trust filed an action for breach of contract, negligence, intentional tort, and unjust enrichment against Jones. Generally, the Dozier Trust alleged that Jones was responsible for damages for, among other things, failing to keep the shop clean by permitting an oil spill. Jones answered and denied the allegations.

At trial, Dozier testified that one of the lease provisions required Jones to keep the shop clean and organized to the best of his ability. He also testified that a thousand-gallon tank was located outside the shop building for proper disposal of any oil “because [the Environmental Protection Agency] was cracking down on spilling oil on the ground, and we had a company that would come pump it out and take it off.” At the time of the trial in September 2015, Dozier stated that he had not had the oil spill cleaned up but had procured an estimate from The Southern Company of North Little Rock (The Southern Company) in the amount of $28,200 for the cleanup costs. The Dozier Trust attempted to introduce the estimate into evidence to prove damages. However, Jones objected to the estimate being admitted into evidence on the basis that it was hearsay. The Dozier Trust responded that the estimate met the business record exception and that it had attached an affidavit from the company that prepared the estimate. At that time, the trial court received the document for the limited purposes of putting it in the record.

At the conclusion of the trial, the trial court found that Jones was responsible for damages and awarded the Dozier Trust $28,200 for the oil spill, as well as additional relief. However, the trial court found that Jones was entitled to a setoff in the amount of $7,214.79 for payments made to Woodruff Electric Cooperative. After the trial court orally stated its ruling from the bench, Jones told the court that he could get the oil cleaned up cheaper. The court stated that it did not see any evidence of anything cheaper and kept the award at $28,200 for remediation of the oil spill. Jones responded that he objected to the cost during trial. Judgment was entered in favor of Dozier Trust and Jones appealed.

On appeal, Jones argued that the repair estimate was inadmissible hearsay and should have been excluded. He argued that Dozier failed to present testimony establishing that the seven requirements under the business-record exception to hearsay had been met and that the document was trustworthy. He further contended that because the repair estimate was the only basis for the amount of the trial court’s award of damages, which should have been excluded, the trial court’s judgment should be reversed as to the damages relating to the oil spill cleanup.

The Court explained that “hearsay” is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted. Clearly, the repair estimate from The Southern Company was hearsay. Dozier introduced the estimate to prove the truth of the matter asserted therein, namely, the $28,200 in remediation costs. Hence, it was incumbent on Dozier to prove the existence of an appropriate exception to the hearsay rule. According to the Court, Arkansas Rule of Evidence 803(6) provides that records of a regularly conducted business activity are not excluded from evidence by the hearsay rule. To be admissible under the business-record exception, the Court explained that the offering party must meet seven requirements. The evidence must be (1) a record or other compilation, (2) of acts or events, (3) made at or near the time the act or event occurred, (4) by a person with knowledge, or from information transmitted by a person with knowledge, (5) kept in the course of a regularly conducted business, (6) which has a regular practice of recording such information, (7) as shown by the testimony of the custodian or other qualified witness.

Although there was no prohibition against one company integrating records made by another into its own business records, the party offering the record must still establish by a competent witness that its content is worthy of belief. Only those documents meeting the seven requirements and which are also found to be trustworthy are admissible under Rule 803(6). The Court pointed out that, here, Dozier failed to present any admissible testimony whatsoever from the custodian or other qualified witness of the record as to whether the business-record requirements were met. Among other things, there was no admissible evidence that the estimate was made at or near the time of the occurrence, that it was made by a person with knowledge, and whether it was, in fact, a document kept in the regular course of The Southern Company’s business. The Court noted that the record was completely void of the safeguards required by the business-record-exception rules. Although Dozier attached an affidavit from an employee of the company that made the repair estimate, the affidavit itself was inadmissible hearsay. Therefore, because appellee failed to establish that the repair estimate met the seven requirements and that it was trustworthy to be admissible under Rule 803(6), the Court concluded that the trial court abused its discretion in admitting the repair estimate into evidence. Reversed and remanded.