Reis Biologicals, Inc. v. Bank of Santa Fe 780 F.2d 888 (1986)
Reis sold medical supplies to Dialysis Management Systems,
but they were unable to make the payments.
Reis delivered some products on the oral guarantee from Santa Fe that they'd pay for the shipment.
Santa Fe failed to pay for the shipment, and Reis sued.
At trial, Reis attempted to admit the out of court
statements of Santa Fe's vice president saying that Santa Fe would
guarantee the payments. Santa Fe objected.
Santa Fe argued that the statements were hearsay.
The Trial Court found for Reis and awarded $27k. Santa Fe appealed.
The Appellate Court affirmed.
The Appellate Court found that the vice president's
statements were not hearsay because they fell into the category of
legally operative acts.
Legally operative acts are acts/statements that
one makes out-of-court that results in legal rights and
For example, a verbal contract. There would be no way
to establish that a contract was made if you couldn't introduce
out-of-court statements about the contract.
It doesn't matter if you were telling the truth or
lying when you made the contract, it is legally binding and evidence
about the contract is admissible even though out-of-court statements
are usually hearsay.
Basically, Reis was using the statements to establish
that Reis was told that the payments would be made (a legally binding
verbal contract). They were not attempting to use the statements as
proof of Santa Fe's actual intentions.
In order to win the case, Reis had to establish that
they acted in reliance of Santa Fe's offer.
The relevance of the statements depended not on the
credibility of the out-of-court statement, but rather on the credibility
of the testifying witness.