In connection with one of my recent hearings on a petition for the appointment of a receiver, the lender sought permission from the trial court to have its representative testify by telephone. The borrower and the guarantor – my clients – contested the receivership. One of our first filings was an objection to the lender’s request to allow telephonic testimony. The issue was a novel one for me.
The lender’s position. The reasoning behind the lender’s motion was understandable. The lender’s representative lived in Dallas, the lender anticipated the hearing would be less than an hour, and the defendants conceivably would not even appear. The obvious motive was to avoid time and expense, and there’s nothing wrong with that. (As an aside, a lender’s proof generally can be made through an affidavit. Depending upon the facts and circumstances, however, a lender may want one of its representatives in court to address any surprises or to provide a more compelling presentation of the lender’s position.)
The defendants’ position. For a variety of reasons, my clients instructed me to object. The theory we advanced was that, pursuant to Indiana Rule of Trial Procedure 43(A), “[i]n all trials the testimony of witnesses shall be taken orally in open court . . ..” And “a hearing [such as a receivership hearing] in which issues of fact will be determined constitutes a trial within the meaning of T.R. 43(A).” 3 William Harvey, Indiana Practice §43.7 (3rd ed. 2002). In addition, we argued that lender’s representative, testifying by phone, would hinder our and the court’s ability to “observe [the witness’s] demeanor and determine credibility.” Holman v. Holman, 472 N.E.2d 1279, 1289 (Ind. Ct. App. 1985).
The rule. The judge, at the pre-hearing attorney conference, pointed to law to which neither firm had cited: the Indiana Administrative Rules, which aren’t rules of procedure or evidentiary rules, but which deal with certain administration functions of the courts. The operative rule was 14 “Use of Telephone and Audiovisual Telecommunication,” which sanctions telephonic testimony under limited circumstances. Here are the rule's applicable subsections:
(B) Other Proceedings. In addition, in any conference, hearing or proceeding not specifically enumerated in Section (A) of this rule . . . a trial court may use telephone or audiovisual communications subject to:
(1) the written consent of all the parties, entered on the Chronological Case Summary; or
(2) upon a trial court's finding of good cause, upon its own motion or upon the motion of a party. The following factors shall be considered in determining "good cause":
(a) Whether, after due diligence, the party has been unable to procure the physical presence of the witness;
(b) Whether effective cross-examination of the witness is possible, considering the availability of documents and exhibits to counsel and the witness;
(c) The complexity of the proceedings and the importance of the offered testimony in relation to the convenience to the party and the proposed witness;
(d) The importance of presenting the testimony of the witness in open court, where the fact finder may observe the demeanor of the witness and impress upon the witness the duty to testify truthfully;
(e) Whether undue surprise or unfair prejudice would result; and
(f) Any other factors a trial court may determine to be relevant in an individual case.
Rule 14(B)(3) discusses a motion/hearing process for determining the issue. The court in our case, after weighing the “good cause” factors in Rule 14(B)(2), held that the lender’s representative had to appear live.
The device. Parties to litigation, whether plaintiffs or defendants, almost always look for ways to save time and money. Although Indiana courts are fundamentally opposed to testimony over the phone, Administrative Rule 14 provides narrow exceptions to the rule. If the two sides can agree on the issue, Rule 14(B)(1) specifically authorizes telephonic testimony. Even if there is no mutual consent, Rule 14(B)(2) outlines the standards for “good cause” to permit it. Lenders and borrowers that navigate through Indiana’s judicial foreclosure process, including any receivership proceedings, should be cognizant of the potential benefits of Administrative Rule 14.