Filbey v. Carr

98 Mass.App.Ct. 455

153 N.E.3d 1286

Joan FILBEY

v.Frederick S. CARR, Jr.

No. 19-P-978

Appeals Court of Massachusetts, Middlesex..

Argued May 11, 2020.

Decided September 17, 2020.

Elizabeth E. Olien, Boston, for the defendant.

Keith P. Carroll, Boston, for the plaintiff.

Present: Massing, Shin, & Ditkoff, JJ.

DITKOFF, J.

The defendant, Frederick S. Carr, Jr., appeals from a judgment for the plaintiff, Joan Filbey, following a jury trial. The primary issue on appeal is whether the trial judge erred in excluding certain communications as inadmissible compromise offers. We conclude that there was no error because communications may constitute inadmissible compromise offers any time after an actual dispute or difference of opinion arises regarding a party's liability for or the amount of a claim, regardless whether one of the parties has explicitly threatened litigation. Further concluding that there was sufficient evidence to support the jury's verdict, we affirm.

1. Background. This case concerns a loan that the plaintiff made to the defendant, while the two were dating, to repair the defendant's house. The plaintiff testified that the defendant's "house was in severe deterioration." When the plaintiff learned that the defendant could not afford to repair his house, she offered to loan him some money to do so. According to the plaintiff, the parties "discussed that, probably, repairs and renovations on the house would take one to two years, possibly three years, and the end point ... of this loan for repairs and renovation[s] was to maximize the selling price of the house." Once the house was sold, the defendant would repay the loan and the two would buy a new house together. Those conversations took place in August 2013, and the plaintiff started loaning money to the defendant in September 2013. Work commenced on the defendant's house in late 2013 and continued into early 2015. During that time, the plaintiff loaned the defendant $332,000.

In 2015, however, "it became very evident that the work had slowed down almost to a halt." The plaintiff began to have "grave doubts" about the state of her relationship with the defendant. In September, over Labor Day weekend, those doubts culminated in an "epiphany" that the defendant was not following through with the parties' plan and that the two would not be buying a new house together. Shortly thereafter, the parties stopped communicating verbally and began communicating via email regarding the loan. They decided to put the terms of the loan in a promissory note, and, on November 20, 2015, the defendant sent the plaintiff a draft promissory note that included a maturity date of December 31, 2027.¹ The plaintiff was "horrified" upon seeing the year 2027, as she thought the parties had agreed to a short-term repayment plan, and she believed it had to be a typographical error. On November 21, 2015, she responded that she was "correcting the typo[graphical] error." On November 23, 2015, the defendant responded, stating that "[t]he date I used was not a typo[graphical error]."

When it became apparent that the parties would be unable to resolve their dispute as to when the defendant would pay back the plaintiff, the plaintiff filed a complaint against the defendant alleging claims of breach of contract and breach of the implied covenant of good faith and fair dealing, which were ultimately tried to a jury.² The jury were asked to resolve whether, at the time the loan was made, the parties reached an agreement as to the loan's maturity date.³ The jury concluded that the parties had reached such an agreement, and the jury further concluded that the parties agreed on a maturity date of September 30, 2016. Accordingly, the judgment awarded the plaintiff $332,000, with prejudgment interest calculated from September 30, 2016.

2. Compromise offers. The primary issue on appeal is whether the trial judge erred in excluding certain communications, made once the parties decided to put the terms of the loan in a promissory note, as compromise offers. The first excluded communication was a draft promissory note that the plaintiff sent to the defendant on November 4, 2015. The plaintiff's draft promissory note included a maturity date of "30 days following the ... sale" of the defendant's house "or no later than December 31, 2017, whichever is first." This excluded communication predated the communications discussed above (the defendant's draft promissory note and the parties' resulting e-mails regarding whether the defendant's offer to repay the loan by the end of 2027 was a typographical error), all of which were admitted in evidence.⁴ The other excluded communications, however, occurred after the e-mails regarding whether the year 2027 was a typographical error. They began with an offer, sent by the plaintiff on November 25, 2015, to extend the loan's maturity date to December 2018, and included additional offers by the plaintiff to extend the loan's maturity date by increasing amounts, ultimately to December 31, 2024.

As is well established, evidence of a compromise offer is inadmissible to prove or disprove the validity or amount of a disputed claim. See Morea v. Cosco, Inc., 422 Mass. 601, 603-604, 664 N.E.2d 822 (1996) ; Marchand v. Murray, 27 Mass. App. Ct. 611, 615, 541 N.E.2d 371 (1989). Although the defendant argues that this prohibition applies to communications made only after a party threatens litigation, we do not agree.⁵ Rather, the prohibition applies to communications made after an actual dispute arises. In reaching this conclusion, we look to Massachusetts case law. See Commonwealth v. Wood, 90 Mass. App. Ct. 271, 277, 58 N.E.3d 1056 (2016). Moreover, because the Federal Rules of Evidence contain an analogous rule, we also find "Federal precedent a useful touchstone." Id. at 278, 58 N.E.3d 1056.

The Massachusetts case on which the defendant mainly relies is Hurwitz v. Bocian, 41 Mass. App. Ct. 365, 670 N.E.2d 408 (1996). Hurwitz worked for a company that Bocian owned, and during the course of Hurwitz's employment, the two became romantically involved. Id. at 366, 670 N.E.2d 408. When the company began to have financial difficulties, Bocian promised Hurwitz that, "if she were patient and saw the company through its difficulties, she would be an equal partner in the business."

Id. Hurwitz did see the company through its difficulties, and Hurwitz and Bocian then began to discuss putting their agreement in writing. Id. at 367, 670 N.E.2d 408. Shortly thereafter, Hurwitz decided to leave Bocian and the company, at which point a dispute arose as to how much Bocian would pay Hurwitz for her interest in the company. Id. at 368, 670 N.E.2d 408. A month before Hurwitz made the decision to leave, Bocian left a telephone message on Hurwitz's answering machine. Id. at 371-372, 670 N.E.2d 408. In that message, Bocian offered to pay Hurwitz $300,000. Id. at 372, 670 N.E.2d 408. The telephone message was properly admitted in evidence because "[t]here was nothing to show that prior to Bocian's message, Hurwitz had made any suggestion to Bocian that she intended to sue him or that Bocian offered Hurwitz $300,000 to settle any claim." Id. at 373, 670 N.E.2d 408.

The defendant focusses on the fact that Hurwitz had not yet threatened to sue Bocian at the time of the telephone message. Hurwitz, 41 Mass. App. Ct. at 373, 670 N.E.2d 408. That fact, however, was not critical to our analysis. As we explained, Hurwitz was still contentedly working for the company at the time of the telephone message. Id. Because the dispute, and thus Hurwitz's claim, did not arise until after Hurwitz left the company, there was nothing to show that "Bocian offered Hurwitz $300,000 to settle any claim." Id. Hurwitz thus supports our conclusion that the appropriate threshold is the point in time at which an actual dispute arises.

Section 408(a) of the Massachusetts Guide to Evidence (2020) also supports our conclusion. It provides the following:

"(a) Prohibited Uses. Evidence of the following is not admissible -- on behalf of any party -- either to prove or disprove the validity or amount of a disputed claim: (1) furnishing, promising, or offering -- or accepting, promising to accept, or offering to accept -- a valuable consideration in compromising or attempting to compromise the claim or any other claim, and (2) conduct or a statement made during compromise negotiations about the claim."

This section requires the existence of a "disputed claim"; it does not, as the defendant suggests, require a party to threaten litigation before the provision regarding prohibited uses applies. Id.⁶

Lastly, several United States Courts of Appeals have held that, under the analogous Federal rule, "a dispute need not ‘crystalize to the point of threatened litigation’ for the ... exclusion rule to apply." Weems v. Tyson Foods, Inc., 665 F.3d 958, 965 (8th Cir. 2011), quoting Affiliated Mfrs., Inc. v. Aluminum Co. of Am., 56 F.3d 521, 527 (3d Cir. 1995). Rather, the exclusion rule applies "so long as there is ‘an actual dispute or difference of opinion’ regarding a party's liability for or the amount of the claim." Weems, supra, quoting Affiliated Mfrs., Inc., supra. Accord Affiliated Mfrs., Inc., supra at 526 (exclusion rule applies if there is "an actual dispute, or at least an apparent difference of view between the parties concerning the validity or amount of a claim"); Dallis v. Aetna Life Ins. Co., 768 F.2d 1303, 1307 (11th Cir. 1985) (same). This approach is consistent with "[t]he policy behind [the rule of] encourag[ing] freedom of discussion with regard to compromise," Affiliated Mfrs., Inc., supra, whereas requiring a party to threaten litigation in order for the rule to apply would poison settlement discussions from the start.⁷

We thus examine whether the excluded communications here involved compromise offers made after an actual dispute arose, and we will "not disturb [the trial] judge's decision to [exclude those...