Opinion issued March 12, 2015




                                    In The

                             Court of Appeals
                                   For The

                         First District of Texas
                           ————————————
                             NO. 01-14-00058-CV
                          ———————————
                           JOE KENNY, Appellant
                                      V.
         PORTFOLIO RECOVERY ASSOCIATES, LLC, Appellee


              On Appeal from County Civil Court at Law No. 2
                           Harris County, Texas
                      Trial Court Case No. 1023048


                                OPINION

      Portfolio Recovery Associates, LLC sued Joe Kenny for debt owed on a

credit card account originally issued by HSBC Bank Nevada, N.A. Following a

trial, the trial court issued a judgment against Kenny and in favor of Portfolio

Recovery. In five issues on appeal, Kenny argues (1) the evidence is legally
insufficient to support the judgment, (2) certain findings of fact and conclusions of

law are unsupported by the record, (3) the trial court abused its discretion by

admitting a business-records affidavit that contained assertions beyond the

statutory requirements and that was not served in accordance with the rules, and

(4) the trial court erred by considering documents that were not offered or admitted

at trial.

        We reverse and render.

                                    Background

        Portfolio Recovery sued Kenny for debt allegedly owed on a credit card

account originally issued by HSBC Bank Nevada. Over four months before trial,

Portfolio Recovery filed a notice of filing business records. The trial consisted

only of Portfolio Recovery’s offering four exhibits into the record, Kenny’s

presenting various objections to the exhibits, and the trial court’s admitting all four

exhibits.

        All four exhibits were included in the business records filing. One of the

exhibits was the affidavit of Meryl Dreano, a custodian of records for Portfolio

Recovery. Dreano asserted in the affidavit that the other documents were kept in

the regular course of Portfolio Recovery’s business. Dreano also asserted that

Portfolio Recovery “is the assignee of HSBC Bank Nevada, N.A./GM and is the

current owner of the account of JOE KENNY (‘Defendant’), account number



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ending in 9702 (the ‘Account’).” Kenny objected to the affidavit, arguing, among

other things, that this assertion of assignment was not necessary to authenticate the

other documents as business records and was, therefore, inadmissible hearsay.

      All parties acknowledged at trial that the exhibits offered by Portfolio

Recovery did not identify any account held by Kenny being specifically assigned

to Portfolio Recovery. Instead, the exhibits only established that some accounts

had been assigned from HSBC Bank Nevada to Portfolio Recovery, without

identifying which accounts had been assigned. At trial, the trial court requested

briefing from the parties on whether the lack of a specific reference to an account

number in the documents showing an assignment would prevent recovery.

      After signing the judgment, the trial court made findings of fact and

conclusions of law. Two of its findings were

      1)     After all parties had rested and the Court ordered briefing on
      the issue of whether or not it was necessary for an assignment to
      include an account number, the Court reviewed the Clerk’s File[,] and
      Page 5 of the Notice of Filing Business Records, . . .[established] that
      the account No. –9702 was part of the Sale of Accounts from HSBC
      Bank Nevada, N.A. to Portfolio Recovery Associates, LLC, and in
      consideration of all evidence admitted in the trial, the Court concluded
      that an assignment existed, without reaching a decision on the issue of
      whether or not it was necessary for an assignment to include an
      account number.

      2)    Page 5 of the Notice of Filing of Business Records was not
      admitted into evidence before the parties rested.




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                                Legal Sufficiency

      In his fifth issue, Kenny argues the evidence is legally insufficient to

establish HSBC Bank Nevada assigned Kenny’s account to Portfolio Recovery.

A.    Standard of Review

      In an appeal from a bench trial, the trial court’s findings of fact have the

same weight as a jury verdict. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.

1994); Nguyen v. Yovan, 317 S.W.3d 261, 269–70 (Tex. App.—Houston [1st Dist.]

2009, pet. denied). We review a trial court’s findings of fact under the same legal

sufficiency of the evidence standards used when determining whether sufficient

evidence exists to support an answer to a jury question. Catalina, 881 S.W.2d at

297; Nguyen, 317 S.W.3d at 270. In a bench trial, we presume that the trial court,

“sitting as the fact finder, disregarded any improperly admitted evidence.” Sw.

Bell Media, Inc. v. Lyles, 825 S.W.2d 488, 498 (Tex. App.—Houston [1st Dist.]

1992, writ denied); Tex. Alcoholic Beverage Comm’n v. Sanchez, 96 S.W.3d 483,

488 (Tex. App.—Austin 2002, no pet.).

      In conducting a legal sufficiency review, we credit favorable evidence if a

reasonable factfinder could and disregard contrary evidence unless a reasonable

factfinder could not. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005).

We consider the evidence in the light most favorable to the finding and indulge

every reasonable inference that would support it. Id. at 822. We will sustain a no-



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evidence point only if (1) the record reveals a complete absence of a vital fact,

(2) the court is barred by rules of law or of evidence from giving weight to the only

evidence offered to prove a vital fact, (3) the evidence offered to prove a vital fact

is no more than a mere scintilla, or (4) the evidence conclusively establishes the

opposite of the vital fact. Id. at 810; Merrell Dow Pharms., Inc. v. Havner, 953

S.W.2d 706, 711 (Tex. 1997). If more than a scintilla of evidence exists to support

the finding, the legal sufficiency challenge fails.       Haggar Clothing Co. v.

Hernandez, 164 S.W.3d 386, 388 (Tex. 2005) (citing Formosa Plastics Corp. USA

v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998)).

      An appellant may not challenge a trial court’s conclusions of law for factual

sufficiency, but we may review the legal conclusions drawn from the facts to

determine their correctness.     BMC Software Belgium, N.V. v. Marchand, 83

S.W.3d 789, 794 (Tex. 2002). In an appeal from a bench trial, we review the

conclusions of law de novo and will uphold them if the judgment can be sustained

on any legal theory supported by the evidence. Id.          “If the reviewing court

determines a conclusion of law is erroneous, but the trial court rendered the proper

judgment, the erroneous conclusion of law does not require reversal.” Id.

B.    Analysis

      Portfolio Recovery identifies the claims that it asserted against Kenny as

breach of contract, account stated, and open account. Each of these causes of



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action necessarily required Portfolio Recovery to establish that Kenny had an

obligation—in this case, the obligation to pay a debt—specifically to Portfolio

Recovery. See Winchek v. Am. Express Travel Related Services Co., Inc., 232

S.W.3d 197, 202 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (requiring, for

breach of contract claim, proof of agreement between parties to suit of terms of

contract); Busch v. Hudson & Keyse, LLC, 312 S.W.3d 294, 299 (Tex. App.—

Houston [14th Dist.] 2010, no pet.) (requiring, for account stated claim, proof of

transaction between parties to suit giving rise of indebtedness from one party to

other party); Eaves v. Unifund CCR Partners, 301 S.W.3d 402, 408 (Tex. App.—

El Paso 2009, no pet.) (requiring, for open account claim, proof of transaction

between parties to suit creating creditor-debtor relationship).

      It is undisputed that, through his use of the credit card at issue, Kenny

created an obligation to repay the debt to HSBC Bank Nevada. Kenny asserts,

however, that there is no proof in the record that this obligation to pay the debt has

been transferred to Portfolio Recovery. Based on this, Kenny argues that Portfolio

Recovery failed to establish at least one element for all of its claims and that,

accordingly, we must reverse the trial court’s judgment in Portfolio Recovery’s

favor. We agree.

      One potential source for establishing that Kenny’s account was assigned to

Portfolio Recovery is the affidavit of Dreano, a custodian of records for Portfolio



                                          6
Recovery. Dreano asserted in the affidavit that Portfolio Recovery “is the assignee

of HSBC Bank Nevada, N.A./GM and is the current owner of the account of JOE

KENNY (‘Defendant’), account number ending in 9702 (the ‘Account’).”

       Unless specifically permitted by statute or rule, affidavits do not constitute

evidence at trial. Ortega v. Cach, LLC, 396 S.W.3d 622, 630 (Tex. App.—

Houston [14th Dist.] 2013, no pet.). Dreano’s affidavit was offered to authenticate

business records, however. Business records can be authenticated by an affidavit

offered at trial. See TEX. R. EVID. 803(6), 902(10). “[W]hen an ex parte affidavit

presents evidence beyond the simple authentication requirements of rule 902,”

however, “the extraneous portions of the affidavit constitute inadmissible hearsay.”

Ortega, 396 S.W.3d at 630.

       Dreano’s assertions regarding assignment of Kenny’s account to Portfolio

Associates was not relevant to establishing documents as business records. See

TEX. R. EVID. 803(6), 902(10). Accordingly, this representation went beyond the

authentication requirements and constitutes hearsay.       Kenny objected to this

portion of the affidavit on the basis that it constituted hearsay. See TEX. R. EVID.

103(a) (requiring objection to inadmissible evidence before inadmissibility can be

basis for error); TEX. R. APP. P. 33.1(a) (same). Because this was a bench trial, we

presume the trial court disregarded the inadmissible portion of the business record

affidavit.   Sw. Bell Media, 825 S.W.2d at 498; Sanchez, 96 S.W.3d at 488.



                                          7
Accordingly, this portion of the affidavit cannot be a basis for finding the evidence

legally sufficient to show Kenny’s account was assigned to Portfolio Recovery.

      One of the exhibits offered and admitted into evidence was an “Assignment

and Bill of Sale” from HSBC Bank Nevada to Portfolio Recovery.                      This

assignment assigned the rights to certain accounts from HSBC Bank Nevada to

Portfolio Recovery.     The assignment does not identify which accounts were

transferred, however. Instead, the assignment identifies another document that

contains the information. That document is not a part of the record. Accordingly,

the assignment cannot be a basis for finding the evidence legally sufficient to show

Kenny’s account was assigned to Portfolio Recovery.

      Finally, in its findings of fact, the trial court asserted that it had reviewed

documents filed in that case and found a document that it believed established an

assignment from HSBC Bank Nevada to Portfolio Recovery.                 The trial court

acknowledged in another finding that the additional document had not been offered

or admitted into evidence. The trial court did not identify the authority it was

relying on to consider facts outside the evidence presented at trial, and we have

found no authority permitting the document’s consideration.

      The trial court is permitted to take judicial notice of adjudicative facts. See

TEX. R. EVID. 201(c). The facts it may judicially notice, however, are facts that are

“either (1) generally known within the territorial jurisdiction of the trial court or (2)



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capable of accurate and ready determination by resort to sources whose accuracy

cannot reasonably be questioned.” TEX. R. EVID. 201(b). It cannot be said that any

document found in the trial court’s records “cannot reasonably be questioned.”

Accordingly, while the trial court can take judicial notice of the existence of certain

documents in its records, it “may not take judicial notice of the truth of factual

statements and allegations contained in the pleadings, affidavits, or other

documents in the file.” Guyton v. Monteau, 332 S.W.3d 687, 693 (Tex. App.—

Houston [14th Dist.] 2011, no pet.).

      “When evidence is the subject of improper judicial notice, it amounts to no

evidence.” Id. Accordingly, the extrinsic document cannot be part of our review

for legal sufficiency of the evidence. See id.; City of Keller, 168 S.W.3d at 827

(holding legal sufficiency challenge sustained when trial court is barred by rules of

law or of evidence from giving weight to only evidence offered to prove vital fact).

      No other evidence in the record establishes that Kenny is obligated to pay a

debt to Portfolio Recovery. Accordingly, we sustain Kenny’s fifth issue. 1




1
      Because Kenny’s remaining issues cannot provide him greater relief, we do not
      need to reach them. See TEX. R. APP. P. 47.1.

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                                   Conclusion

      We reverse the judgment of the trial court and render a take-nothing

judgment against Portfolio Recovery.




                                             Laura Carter Higley
                                             Justice

Panel consists of Justices Jennings, Higley, and Huddle.




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