Court failed to ‘sift’ through witness adverse testimony

Court failed to ‘sift’ through witness adverse testimony
Court failed to ‘sift’ through witness adverse testimony

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A circuit court erred when it bound a party to the testimony of an adverse witness it called, even though the witness’ testimony was found to be inherently incredible, the Court of Appeals of Virginia has held.

Under the adverse witness rule, a party who calls an adverse witness is usually bound by their testimony if it is uncontradicted and not inherently improbable.

Judge Daniel E. Ortiz reminded the circuit court that his review of witness adverse testimony should differ from the way it weighs the sufficiency of ordinary evidence.

“Because the circuit court failed to sift through [the witness’] testimony and declared [the witness’] testimony binding on [the plaintiff] Despite finding it all to be incredible, we reverse the judgment and remain consistent with the instructions set forth in this opinion,” the judge wrote.

Chief Judge Marla Graff Decker and Judge Junius P. Fulton III joined Ortiz in reversing J&R Enterprises, et al. v. Ware Creek Real Estate Corp., et al. (VLW 024-7-126).

Binding testimony

Plaintiffs in this case are J&R Enterprises and Thomas L. White, as executor and trustee for John R. Filichko.

The defendants are Ware Creek Real Estate Corp., or WCRE, Ware Creek Building Corp., or WCBC and W. Walker Ware IV.

The plaintiffs sought to enforce a judgment against the defendants for piercing WCRE’s corporate veil and reverse piercing WCBC’s corporate veil.

At the bench trial, J&R presented corporate credit card statements, loans, canceled checks and financial records to demonstrate Ware’s use of WCRE and WCBC to pay for alleged personal expenses. J&R also called Ware as its only witness.

As the sole owner and shareholder of WCRE and WCBC, the circuit court declared Ware to be an adverse witness. WCRE and WCBC had not earned profits since 2017 and 2018 respectively, had no other employees, and had not performed work for any customers at the time. Ware insisted that any and all expenses were business related and not personal.

At the conclusion of J&R’s evidence, WCRE moved to strike. The circuit court sustained the motion. Ware’s testimony was inherently incredible, but the documents submitted into evidence failed to prove that the expenses paid were for improper business purposes.

Although the financial statements may raise questions regarding the legitimacy of WCRE’s and WCBC’s expenses, the circuit court concluded that the adverse witness rule precluded the court from inferring anything from those statements.

The circuit court granted summary judgment in favor of WCRE and dismissed J&R’s complaint. J&R appealed.

Adverse witness rule

“When a party has called an adverse witness, their testimony is usually ‘binding’ on the calling party,” Ortiz explained, looking to the Supreme Court of Virginia’s opinion in Queues v. Tyree.

The judge said the rule appears to be grounded in the notion that “'[b]and calling the witness … a party represents him to the court as worthy of credit.’”

But in Economopoulos v. Kolaitisthe Supreme Court held that the testimony is binding only if it is uncontradicted and not inherently improbable.

“A court reviews adverse witness testimony differently from the way it weighs the sufficiency of ordinary evidence,” Ortiz pointed out, adding that a court must “’sift what is uncontradicted from what is contradicted (or inherently incredible).’ If testimony es contradicted or inherently incredible, the plaintiff is not bound by it. On the other hand, if the testimony is ‘clear, logical, reasonable, and not in conflict with plaintiff’s evidence,’ it is binding.”

Inconsistent method

J&R called Ware to testify, but Ortiz said his testimony is binding on J&R, “but only insofar as it is uncontradicted on a given factual point, it is ‘clear, reasonable, logical,’ and not incredible.”

Here, based on his opinion that Ware’s testimony was inherently incredible, the circuit court held that J&R was bound by the testimony and could not infer or speculate about the business purpose of each expense from the financial records — the only other evidence submitted by J&R .

“But a finding of inherent incredibility is a recognized exception to the adverse witness rule,” Ortiz pointed out.

Thus, the circuit court’s finding of incredibility couldn’t support applying the adverse witness rule.

“Furthermore, the method the court determined Ware’s incredibility was inconsistent with the test, as the court should not ‘look to the witness’s credibility globally,’like it did here,” the judge wrote.

Instead, the court should have examined the testimony to decide what was credible or uncontradicted.

“If Ware’s testimony is not inherently incredible on a specific factual point“J&R is bound by it,” Ortiz held. “The opposite is also true — if Ware’s testimony es inherently incredible on a particular factual point, J&R is not bound by it and the court can draw any reasonable inferences from the evidence.”

The court might find Ware’s testimony about the status of WCRE and WCBC, as well as his admissions that he made certain purchases, to be credible.

“But the court might also disregard other parts of his testimony, such as his assessment of an expense’s business purpose, for being incredible,” the judge wrote.

Ortiz reversed and remanded the case for reconsideration consistent with Queues and the adverse witness rule.

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