B & K Rentals & Sales Co. v. Universal Leaf Tobacco Co.

CHASANOW, Judge. Universal Leaf Tobacco Co. (Universal), through its subsidiary, Winstead Co., Inc., owned and operated a tobacco warehouse. B & K Rentals and Sales Co., Inc. (B & K) leased a portion of the warehouse to store equipment used in its business of renting scaffolding and seating for public gatherings. A fire broke out at the warehouse destroying most of B & K’s equipment.

Contending that the negligence of Universal and its employees caused the fire, B & K brought an action for damages against Universal in the Circuit Court for Anne Arundel County. On the day of the fire, two of Universal’s employees, Walter Johnson (Johnson) and Leonard Grimes (Grimes), were present and working within the tobacco warehouse. Johnson was killed by the fire. The parties dispute B & K’s ability to locate Grimes at the time of trial.

Consequently, they also dispute his availability as a witness. Nonetheless, B & K neither deposed nor subpoenaed Grimes. Rather, B & K called Lieutenant Kenneth J. Klasmeier (Lt. Klasmeier), a fire investigator with the Anne Arundel County Fire ¹⁵⁰ Department, as an expert witness for the purpose of testifying as to the cause of the fire.

Lt. Klasmeier had investigated the fire in progress and had received a written report from Lieutenant James Stallings (Lt. Stallings), who is also a fire investigator with the Anne Arundel Fire Department, regarding the origin and cause of the fire. Pursuant to his investigation and report, Lt.

Stallings had interviewed various people, including Grimes, at the scene of the fire. Grimes told Lt. Stallings that: 1) Johnson and he were the only two people working at the warehouse at the time of the fire; 2) Grimes had lit an acetylene torch for Johnson a couple of hours before the fire; 3) Johnson was using the torch to burn strings caught in the jack wheels of a wooden dolly; 4) Grimes heard a popping noise and saw smoke coming from the area where Johnson had just finished burning the string from the jack wheels; and 5) Grimes believed the cause of the fire was related to Johnson’s use of the acetylene torch. Based almost exclusively upon Grimes’ statements, Lt.

Stallings’ report described the events which preceded the fire. This report formed the bulk of the Fire Investigation Bureau report which was forwarded to the Division Chief of the Anne Arundel County Fire Department. Universal objected to the admission of this report, as well as a second report written by Lt. Klasmeier and forwarded to the State Fire Marshal’s Office, on the ground of hearsay, actually double-level hearsay.

Universal contended that Grimes’ statements constituted the second level of hearsay and the written report of those statements constituted the first. The intermediate appellate court noted that little or no objection was raised that the reports constituted business records. 1 While the business records hearsay exception may allow the admission of the lieutenants’ firsthand obser ¹⁵¹ vations contained within the reports, Grimes was not part of the county fire department “business” and his hearsay statements made to Lt. Stallings and contained within the reports would have to be excised unless they were admissible under some other hearsay exception. 2 The trial court excluded the reports, as well as Lt. Stallings’ in-court testimony because each was based upon Grimes’ hearsay statements, which it determined qualified neither as admissions of a party opponent nor as part of the undifferentiated res gestae.

Lt. Klasmeier, on the other hand, was permitted to testify that in his opinion “the cause and origin would have been the actions of Johnson using an acetylene torch to burn strings off of wheels inside the warehouse.” Lt. Klasmeier was permitted to so testify despite his admission that he would not have been able to formulate such an opinion absent Grimes’ statements. The case went to the jury on a res ipsa loquitur instruction, and the jury returned a verdict for B & K for $123,252.00.

Universal moved the court for judgment notwithstanding the verdict on the grounds that the expert opinion of Lt. Klasmeier was improperly admitted into evidence and that B & K had proven either too much or too little to rely upon res ipsa loquitur. The trial court granted the motion and entered judgment N.O.V. for Universal on the basis of the second ground only. B & K filed motions for a new trial and for reconsideration which were denied by the trial court.

B & K then appealed. The Court of Special Appeals noted that B & K’s notice of appeal referred only to the trial court’s denial of its post- ¹⁵² trial motions. The intermediate appellate court held that the sole issue preserved for appeal was whether the trial court had abused its discretion in denying the post-trial motions. B & K Rentals v. Universal Leaf, 73 Md.App. 530 , 535 A.2d 492 (1988).

Finding no abuse of discretion, the Court of Special Appeals affirmed the judgment of the trial court. This Court granted certiorari and held that the limiting language in the notice of appeal did not preclude consideration of the underlying judgment. Therefore, the Court of Special Appeals was reversed and the case remanded for further proceedings. B & K Rentals v. Universal Leaf, 319 Md. 127 , 571 A.2d 1213 (1990).

On remand,, the intermediate appellate court affirmed the underlying judgment of the trial court. B & K Rentals v. Universal Leaf, 84 Md.App. 103 , 578 A.2d 274 (1990). In addressing the admissibility of Lt. Klasmeier’s testimony, the Court of Special Appeals quite properly reasoned that “[i]f, in fact, the predominant basis for the opinion is information that the law deems unreliable, the opinion loses much, if not all, of its probative value, for it then essentially regurgitates the underlying untrustworthy information.” Id. at 121 , 578 A.2d at 283 .

By Lt. Klasmeier’s own admission, Grimes’ statements furnished the predominant basis for his opinion. Therefore, the decisive question addressed by the intermediate appellate court, and the question upon which this Court granted certiorari, was whether each of Grimes’ statements to Lt. Stallings constituted admissions by Universal.

Although it is clear that Grimes was Universal’s agent, he had no express authority to speak for Universal. B & K argued below and now urges this Court to adopt the principle embodied in Federal Rule of Evidence 801(d)(2)(D) that a statement made by an agent of a party opponent which concerns a matter within the scope of the agency or employment and is made during the existence of that relationship constitutes an admission of the party opponent. While recognizing and discussing the sound rationale behind lib ¹⁵³ eralizing the admission of an agent’s statement, the Court of Special Appeals concluded that Grimes’ statements were not admissible under existing Maryland law. We take this opportunity to re-examine the development of our case law on vicarious admissions and to join the substantial majority of states adopting the principle embodied in F.R.E. 801(d)(2)(D).

Traditionally, an agent was required to have “speaking authority” before his statement was considered an admission of the principal. See Brown v. Hebb, 167 Md. 535, 547 , 175 A. 602, 607 (1934), where we quote the Restatement of Agency, § 286 (1933): “Statements of an agent to a third person are admissible in evidence to prove the truth of facts asserted in them as though made by the principal, if the agent was authorized to make the statement or was authorized to make, on the principal’s behalf, true statements concerning the subject matter.” This test of admissibility was further defined in Feigley v. Balto. Transit Co., 211 Md. 1, 124 A.2d 822 (1956). Again, this Court looked to the Restatement of Agency for the principles that: “(1) Authority to do an act or conduct a transaction does not of itself include authority to make statements concerning the act or transaction.

(2) Authority to make statements of fact does not of itself include authority to make statements admitting liability because of such facts.” Feigley, 211 Md. at 8 , 124 A.2d at 826 (quoting Restatement of Agency, § 288). The Court in Feigley applied the above standard to exclude admissions of liability made by a Baltimore Transit Company representative and concluded that “the fact that he was employed to investigate the claim is not enough of itself to support an implied authorization to make such an admission.” 211 Md. at 8 , 124 A.2d at 826 . As in Feigley , the application of this traditional test of agency law as an evidentiary standard “frequently caused courts to exclude the agent’s highly probative statement on ¹⁵⁴ the theory that the employer had not authorized the agent to make damaging remarks about him.” 4 J. Weinstein & M. Berger, Weinstein’s Evidence, ¶ 801(d)(2)(D)[01] at 219 (1988). In order to avoid the loss of valuable and trustworthy evidence occasioned by the use of this narrow formula of admissibility, the Maryland courts resorted to the use of the “res gestae exception” to the hearsay rule.

The intermediate appellate court felt bound to a line of Maryland cases that adopted the standard of admissibility, most succinctly stated in Burkowske v. Church Hosp. Corp., 50 Md.App. 515 , 439 A.2d 40 , cert. denied, 293 Md. 331 (1982), “in order to bind the principal (and thus constitute an admission by it), the agent’s statement not only must concern matters within the scope of his own agency authority but must also be part of the res gestae, i.e., made contemporaneously with the transaction to which it relates." (Emphasis added). Id. at 520, 439 A.2d at 44 . This Court first fully expounded this standard for admissibility of an agent’s statement in Franklin Bk. v. Steam Nav.

Co., 11 G. & J. 28 (1839): “So whatever is said by an agent, either in the making a contract for his principal, or at the time, and accompanying the performance of any act, within the scope of his authority, having relation to, and connected with, and in the course of the particular contract or transaction in which he is then engaged, is in legal effect, said by his principal, and admissible in evidence; not merely because it is the declaration or admission of an agent; but on the ground, that being made at the time of, and accompanying the contract or transaction, it is treated as the declaration or admission of the principal, constituting a part of the res gestae, a part of the contract or transaction, and as binding upon him as if in fact made by himself.” Id. at 33-34 . We begin by acknowledging that the phrase “res gestae ” is condemned in academic circles as “a substitute for rea ¹⁵⁵ soning” and resulting in “the confusion of thought inevitably accompanying the use of inaccurate terminology.” Morgan, A Suggested Classification of Utterances Admissible as Res Gestae, 31 Yale L.Rev. 229, 229 (1923). We agree with Morgan’s conclusion that “this troublesome expression owes its existence and persistence in our law of evidence to an inclination of judges and lawyers to avoid the toilsome exertion of exact analysis and precise thinking.” Id. See United States v. Matot, 146 F.2d 197, 198 (2d Cir.1944) (“[A]s for ‘res gestae ’ ... if it means anything but an unwillingness to think at all, what it covers cannot be put in less intelligible terms.”) (L. Hand, J.); 6 Wigmore, Evidence, § 1767 at 255 (Chadbourn rev.1976) (“The phrase ‘res gestae ’ has long been not only entirely useless, but even positively harmful.”); Booth v. State, 306 Md. 313 , 317 n. 3, 508 A.2d 976 , 978 n. 3 (1986) quoting the above authorities.

See also Cassidy v. State, 74 Md.App. 1, 12-14 , 536 A.2d 666, 671-73 , cert. denied, 312 Md. 602 , 541 A.2d 965 (1988) for an unbundling of the undifferentiated “res gestae” phrase. Despite the censure of the “res gestae ” phrase, we also acknowledge that the term came into usage at a time when the theory of hearsay was not well developed and the various exceptions not clearly defined. The rationale in Franklin supports McCormick’s observation that “[t]he early texts and cases used as analogies the doctrine of the master’s substantive responsibility for the acts of the agent and the notion then prevalent in evidence law that words accompanying a relevant act are admissible as part of the res gestae.” McCormick on Evidence, § 267 at 787 (E. Cleary 3d ed. 1984). Under this formulation, a principal was responsible for its agent’s acts within the scope of authority or employment, but only responsible for its agent’s statements concerning those acts if the statements were made under the “immediate spur” of the action.

See, e.g., Herbert v. Ziegler, 216 Md. 212, 217 , 139 A.2d 699, 702 (1958). ¹⁵⁶ The Court applied this contemporaneity requirement to assure reliability; the close nexus in time between the statement and the event recounted presumably precluded the agent’s ability to fabricate. While contemporaneity may be a meaningful component of the hearsay exceptions for excited utterances and present sense impressions, we find it unnecessary in the case of vicarious admissions. The admissions exception is grounded on the adversary theory of litigation. See McCormick on Evidence, § 262 at 774-75; L. McLain, Maryland Evidence, § 801(4).l (1987).

The rationale behind the admissibility of an admission is that “[a] party can hardly object that he had no opportunity to cross-examine himself or that he is unworthy of credence save when speaking under sanction of an oath.” M. Martin, Basic Problems of Evidence, § 13.04(a)(1) (6th ed. 1988). Further, the trustworthiness of an agent’s statement is