When Customers Do Not Pay: Ensuring That Your Business Has What it Takes to Prevail in Court
Collecting from your clients for failing to pay is now tougher than ever. Florida courts require businesses to produce their business records in order to prevail in collection suits. While in the past many courts would allow oral testimony in lieu of the production of business records, since 2006, businesses must present more extensive evidence before securing a judgment.
After the housing market crashed in 2006, financial institutions filed thousands of foreclosure lawsuits in Florida and attempted to apply the standards and practices in other states in order to obtain foreclosure judgments. Many Florida judges, faced with increased dockets and pressure to move cases forward, entered these judgments on the creditors’ behalf. Consumers appealed these foreclosure judgments and new Florida law was created.
In order to receive a collections judgment, a business has to allege that a debtor has an unpaid balance. If the balance is based on any computation of credits and debits, the balance is considered hearsay and the business must produce business records, which can be an account ledger, an itemized statement, an invoice, estimate, etc., showing that the debtor owes the alleged balance.
However, in order to admit the business records, courts require that a person who has specialized knowledge as to the creation of the business records, commonly referred to as a records custodian, testify regarding the accuracy of the business records. Under Section 90.803(6)(a), of the Florida Statutes, the records custodian must testify be able to testify that:
The record was made at or near the time of the event;
The record was made by or from information transmitted by a person with knowledge;
The record was kept in the ordinary course of a regularly conducted business activity; and
It was the regular practice of that business to make such a record.
Glarum v. Lasalle Bank, N.A., 83 So. 3d 780, 782 (Fla. 4th DCA 2011)(quoting Yisrael v. State, 993 So. 2d 952, 956 (Fla. 2008)).
There are many recent Florida cases where judgments were overturned because business records were not properly produced. In Sas v. Fannie Mae, 112 So. 3d 778 (Fla. 2d DCA 2013), the appellate court reversed a decision on the amount of debt owed in a foreclosure judgment and found that the trial court abused its discretion in allowing Fannie Mae’s records custodian to testify about the contents of its business records without first admitting the business records into evidence. Id. at 779.
In Peuguero v. Bank of Am., N.A., 169 So. 3d 1198 (Fla. 4th DCA 2015), the appellate court partially reversed the trial court’s ruling on the issue of damages after the bank’s records custodian could not account and produce business records showing the accrual of $200,000.00 in pre-judgment interest the bank sought in its judgment. Id. at 1203-1204. Businesses must keep and maintain business records if they intend on successfully recovering outstanding amounts due to them from customers.
While it can be time consuming to create and maintain a records keeping system, it is critical for small businesses to take the necessary steps to do so. It is also imperative to proceed carefully and with experienced support behind you.
Gill Law Firm has been in business for almost (20) years and focuses primarily on commercial debt recovery, small business and nonprofit startups. To find out how Gill Law Firm may help your business collect its receivables, please contact us via email at firstname.lastname@example.org or by phone at (561) 454-0301.
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