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Food and Beverage Law
 

■ Jazayeri v. Mao, No. B195083

FOOD & BEVERAGES LAW
Food and Beverage Law  Case Summaries

INTRODUCTION

          In this action brought by appellants for breach of contract and fraud, the trial court excluded the bulk of appellants’ documentary evidence on grounds of lack of authentication and hearsay.  Concluding that appellants had failed to meet their burden of proof, the court then entered judgment for respondents. We conclude that the blanket exclusion was error, and that much of the evidence offered was adequately authenticated and was not subject to any legitimate hearsay objection.  As set forth in greater detail below, certain documents qualified for admission as official records under Evidence Code section 1280, others as business records under Evidence Code section 1271, and still others as admissions under Evidence Code section 1220 or adoptive admissions under Evidence Code section 1221.[1]

FACTUAL AND PROCEDURAL BACKGROUND

          A.  Claims Presented

          Appellants Mahshid Jazayeri and her husband David Rashidian, doing business as R&A Ranch, brought suit against respondents Susan Mao, her sons Dennis and Eric Mao, and their company, Mao Foods, Inc.  The complaint alleged that appellants were in the business of raising chickens for sale and that they and respondents entered into an agreement under which appellants were to deliver a certain number of “live healthy” chickens weighing between five and six pounds,  and respondents were to pay 50 cents per pound for the live healthy chickens delivered.  According to the complaint, the overall weight of the chickens delivered was to be determined by weighing the delivery trucks and cages before and after the chickens were loaded.  The complaint further alleged that the parties understood that some chickens would be dead on arrival (DOA) or otherwise unusable as food.  The number of dead or unusable chickens was recorded on poultry condemnation certificates (PCCs) issued by food safety inspectors working for the United States Department of Agriculture (USDA).  Appellants alleged that the parties’ contract permitted Mao Foods to deduct from the calculated weight of the delivered chickens the estimated weight of the DOA or otherwise unusable chickens.  However, Mao Foods allegedly altered PCCs to show more dead or unusable chickens than were found by the USDA inspectors and, using the altered PCCs to justify their actions, deducted excessive amounts. 

          As separate claims, the complaint alleged that:  (1) respondents had at times unilaterally paid appellant less per pound for the chickens delivered than called for by the parties’ agreement; and (2) after the weight of the live healthy chickens had been calculated in accordance with the procedures described above, respondents arbitrarily reduced it by deducting a percentage before calculating the payment due appellants.  Appellants sought damages for both breach of contract and fraud.[2] 

          Shortly before trial, appellants filed an amended complaint clarifying that the parties’ agreement was formalized in a series of written contracts covering the period between 2001 and 2004, the first signed in July 2001 and the last signed in April 2004.  The amended complaint further stated that respondents wrongfully refused to accept additional deliveries after September 20, 2004, resulting in a further loss to appellants of approximately $100,000 because appellants were unable to sell thousands of chickens they had purchased and fed in reliance on the agreement. 

          At trial, counsel for appellants represented to the court that appellants suffered five categories of losses, all essentially arising from respondents’ alleged failure to pay the agreed price per pound for the chickens R&A Ranch delivered to Mao Foods between 2001 and 2004.  First, appellants claimed damages based on the use of forged or altered PCCs to calculate the payments due.  Second, appellants claimed damages based on the difference between the DOA count made by Mao Foods and R&A Ranch employees when the chickens were delivered and the count used by Mao Foods to calculate deductions.[3]  Third, appellants sought damages based on Mao Foods’ alleged unilateral decision to deduct a percentage from the weight of the chickens delivered before computing the amount due.  Fourth, appellants contended that Mao Foods sometimes unilaterally reduced the price per pound it paid R&A Ranch from the agreed price to a lesser price.  Fifth, appellants sought damages based on deliveries made for which no payments whatsoever were received.[4]  Totaling the claims in all these categories, appellants estimated their economic damages at $67,879.74.[5] 

A.  Copies of Altered PCCs Obtained From Susan Mao

          Documents not offered for the truth of the matter asserted are, by definition, not hearsay.  Hearsay is defined in section 1200 as “evidence of a statement that was made other than by a witness while testifying at the hearing and that is offered to prove the truth of the matter stated.”  Where “‘the very fact in controversy is whether certain things were said or done and not . . . whether these things were true or false, . . . in these cases the words or acts are admissible not as hearsay[,] but as original evidence.’”  (1 Witkin, Cal. Evidence (4th ed. 2000) Hearsay, § 31, p. 714, quoting People v. Henry (1948) 86 Cal.App.2d 785, 789.)  For example, documents containing operative facts, such as the words forming an agreement, are not hearsay.  (People v. Jimenez (1995) 38 Cal.App.4th 795, 802; People v. Dell (1991) 232 Cal.App.3d 248, 261-262.)  The operative facts rule also applies in an action for fraud.  (1 Witkin, supra, Hearsay, § 33, p. 715 [“In an action for . . . deceit, the words spoken, written, or printed may be proved”]; see People v. Dell, supra, 232 Cal.App.3d at p. 258 [words spoken by defendant to solicit prostitution are operative facts or “‘verbal acts’”].)

          Appellants offered the altered PCCs given them by Susan Mao not for the truth of the matter asserted -- that the inscribed number of chickens were DOA or condemned by the USDA inspectors -- but as direct evidence of the fraudulent statements made to appellants by respondents.  The evidence supported that respondents used the altered PCCs to induce appellants to believe that a greater number of chickens delivered by R&A Ranch to Mao Foods were DOA or condemned than was actually the case, and to accept payments of less than the amount due.  “[T]his is a typical example of the nonhearsay use of an extrajudicial statement ‘to prove, as relevant to a disputed fact in an action, that the . . . hearer . . . obtained certain information by hearing . . . the statement and, believing such information to be true, acted in conformity with such belief.’  [Citation.]”  (Holland v. Union Pacific Railroad Co. (2007) 154 Cal.App.4th 940, 947, quoting 1 Jefferson, Cal. Evidence Benchbook (2d ed. 1982) Hearsay & Nonhearsay, § 1.4, p. 57, italics omitted.)  Here, appellants accepted inadequate payment for the chickens sold to Mao Foods in reliance on the allegedly false representations of Susan Mao.

          B.  Copies of PCCs Obtained From the USDA

                   1.  Admissibility As Official Record under Section 1280

          Section 1280 makes admissible a writing that records an act, condition, or event if “(a) The writing was made by and within the scope of duty of a public employee[;] (b) The writing was made at or near the time of the act, condition, or event[;] and (c) The sources of information and method and time of preparation were such as to indicate its trustworthiness.”  This exception to the hearsay rule is based on the presumption that public officers properly perform their official duties.  As the court explained in Fisk v. Department of Motor Vehicles (1981) 127 Cal.App.3d 72:  “‘When it is a part of the duty of a public officer to make a statement as to a fact coming within his official cognizance, the great probability is that he does his duty and makes a correct statement . . . . The fundamental circumstance is that an official duty exists to make an accurate statement, and that this special and weighty duty will usually suffice as a motive to incite the officer to its fulfillment . . . .  It is the influence of the official duty, broadly considered, which is taken as the sufficient element of trustworthiness, justifying the acceptance of the hearsay statement.’  [Citation.]”  (Id. at pp. 78-79, quoting 5 Wigmore, Evidence (Chadbourne rev. ed. 1974) § 1632, p. 618, italics omitted.) 

          “The object of [the section 1280] hearsay exception ‘is to eliminate the calling of each witness involved in preparation of the record and substitute the record of the transaction instead.  [Citations.]’”  (Gananian v. Zolin (1995) 33 Cal.App.4th 634, 639, quoting County of Sonoma v. Grant W. (1986) 187 Cal. App.3d 1439, 1451.)  “Accordingly, for the exception to apply, ‘[i]t is not necessary that the person making the entry have personal knowledge of the transaction.  [Citations.]’”  (Gananian, supra, 33 Cal.App.4th at pp. 639-640, quoting Loper v. Morrison (1944) 23 Cal.2d 600, 609.)  “Assuming satisfaction of the exception’s other requirements, ‘[t]he trustworthiness requirement . . . is established by a showing that the written report is based upon the observations of public employees who have a duty to observe the facts and report and record them correctly.’”  (Gananian, supra, 33 Cal.App.4th at p. 640, quoting People v. Baeske (1976) 58 Cal.App.3d 775, 780, original italics.)

          That PCCs fall within the official records exception to the hearsay rule is beyond dispute.  Similar documents were at issue in Imperial Cattle Co. v. Imperial Irrigation Dist. (1985) 167 Cal.App.3d 263, disapproved in part on other grounds in Bunch v. Coachella Valley Water Dist. (1997) 15 Cal.4th 432 where the plaintiff introduced into evidence USDA cattle condemnation certificates to establish the number of its cattle that had contracted disease as the result of the defendant’s negligence.  On appeal, the court rejected the defendant’s contention that the certificates were inadmissible hearsay:  “The condemnation certificates appear to fall clearly within the ‘official records’ exception to the hearsay rule. . . .  The record demonstrates that condemnation certificates are prepared by veterinarians employed by the federal government following an inspection of each cattle carcass if the veterinarian determines that the meat is infected with measles.  Such evidence not only satisfies the first two predicates to the invocation of section 1280 but also indicates the basic trustworthiness of the documents.”  (Imperial Cattle Co. v. Imperial Irrigation Dist., supra, 167 Cal.App.3d at p. 272.)

          Here, too, the record establishes that Dr. Millare and his staff prepared the PCCs after inspection of each chicken delivered.  The inspectors gathered the information as the chickens were being processed, kept a total for each category on their tally sheets, and transferred the final numbers to the PCCs before the end of the day.  Dr. Millare testified that he and the USDA inspectors he supervised prepared the forms in order to gather disease information on the chickens, and that the information from the PCCs is kept on computer files for USDA’s records.  The fact that one of the relevant numbers on the PCCs -- the DOA number -- was obtained and filled in by Mao Foods employees does not render the remainder of the information any less an official record.[25]

          The court’s basis for rejecting the PCCs Jazayeri offered into evidence as true and correct copies of the the USDA originals in order to establish the true number of DOA and condemned chickens is not entirely clear.  The court appeared to agree with respondents’ counsel that appellants had not proven the documents were official records because Dr. Millare, who testified as to the manner of their preparation, was not their custodian.  However, Dr. Millare was the custodian of the PCCs generated at the Mao Foods plant.  He testified that he kept all the USDA originals in a locked cabinet in his office.  With respect to the particular PCCs involved here, Dr. Millare was directed to mail them to the USDA’s Washington, D.C. FOIA office so that a response to appellants’ FOIA request could be prepared.  The FOIA office faxed back to him copies of the documents he had provided.  Moreover, unlike the business records exception, the official records exception does not require “the custodian or other qualified witness” to testify in order to establish admissibility as an official record.  (Cf. § 1280, with § 1271.)[26]  Dr. Millare’s testimony established his personal knowledge that the PCCs were made “by and within the scope of duty of a public employee . . . at or near the time of the act, condition, or event,” and that the “sources of information and method and time of preparation were such as to indicate [their] trustworthiness.”  That is all that section 1280 requires.

          The general rule with respect to documents offered under an exception to the hearsay rule is that the party offering the documents bears the burden of establishing the foundational requirement of trustworthiness.  (People v. Hovarter (2008) 44 Cal.4th 983, 1011.)  The trial court has “broad discretion in determining whether a sufficient foundation has been laid” and “we will reverse a trial court’s ruling on such a foundational question only if the court clearly abused its discretion.”  (Ibid.)  Here, it does not appear that the trial court concluded the foundational requirements of section 1280 had not been met; it appears rather that the court misunderstood what those foundational requirements were.  Accordingly, we review the ruling excluding the PCCs de novo.  Under that standard, the court’s ruling was error.
Jazayeri v. Mao -B195083- 5/27/09 CA2/4
Jazayeri v. Mao -B195083- 5/27/09 CA2/4

■ HELD:

In a breach of contract and fraud action, trial court's exclusion of plaintiff's documentary evidence and judgment in favor of defendant is reversed where: 1) altered poultry condemnation certificates were authenticated and were not hearsay as they were introduced as the operative documents establishing the fraud perpetrated on plaintiff; 2) the unaltered certificates obtained from the USDA were properly authenticated and admissible as official records; 3) the purchase orders were properly authenticated and admissible as business records; 4) calculation sheets were admissible as admissions by a party opponent; and 5) weight slips were admissible as adoptive admissions.

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