Filbey v. Carr

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19-P-978 Appeals Court
JOAN FILBEY vs. FREDERICK S. CARR, JR.
No. 19-P-978.
Middlesex. May 11, 2020. - September 17, 2020.
Present: Massing, Shin, & Ditkoff, JJ.
Evidence, Offer of compromise, Opinion. Loan. Contract, Loan,
Performance and breach, Implied covenant of good faith and
fair dealing. Negotiable Instruments, Note. Practice,
Civil, Judgment notwithstanding verdict.
Civil action commenced in the Superior Court Department on
July 27, 2016.
The case was tried before Bruce R. Henry, J., and a motion
for judgment notwithstanding the verdict or a new trial was
considered by him.
Elizabeth E. Olien for the defendant.
Keith P. Carroll for the plaintiff.
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
2
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.
3
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 e-
mail 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]."
1 The defendant's draft promissory note also included a
release, which stated, "For good and valuable consideration
. . . [the plaintiff] covenants and agrees that the amount of
the [p]romissory [n]ote represents the sum of all obligations of
[the defendant] to [the plaintiff] and waives, discharges and
forever releases [the defendant] from any other liability or
obligation."
4
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
2 The plaintiff's complaint asserted other claims that are
not at issue here.
3 If the jury determined that the parties had not reached an
agreement as to the maturity date, the jury were asked to
determine when the loan reasonably should be repaid under the
circumstances of the transaction.
5
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 (1996); Marchand v. Murray, 27 Mass. App. Ct. 611, 615
(1989). Although the defendant argues that this prohibition
applies to communications made only after a party threatens
4 No party requested, even in the alternative, the exclusion
of the communications that were admitted in evidence.
Accordingly, we have no occasion to opine whether they too were
subject to exclusion upon request.
6
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 (2016).
Moreover, because the Federal Rules of Evidence contain an
analogous rule, we also find "Federal precedent a useful
touchstone." Id. at 278.
The Massachusetts case on which the defendant mainly relies
is Hurwitz v. Bocian, 41 Mass. App. Ct. 365 (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. 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
5 The defendant acknowledges that at least two
communications were sent after the plaintiff threatened
litigation, but he argues that those communications were not
compromise offers because they included or were phrased as
"ultimatums." The defendant provides no authority in support of
this proposition, and we have found none. "[O]ffers of
settlement are inadmissible to prove or disprove a defendant's
liability." Dahms v. Cognex Corp., 455 Mass. 190, 198-199
(2009). There is no requirement that the offeror be open to a
counteroffer, nor would such a requirement advance the policy
objective of "limiting the collateral consequences of a decision
to compromise." Global Investors Agent Corp. v. National Fire
Ins. Co. of Hartford, 76 Mass. App. Ct. 812, 821 (2010). We
reject such a requirement.
7
putting their agreement in writing. Id. at 367. 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. A month
before Hurwitz made the decision to leave, Bocian left a
telephone message on Hurwitz's answering machine. Id. at 371-
372. In that message, Bocian offered to pay Hurwitz $300,000.
Id. at 372. 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.
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. 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.
8
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
6 Nor do we think the note to § 408 helps the defendant's
argument. The note states that "[t]here can be no offer to
compromise a claim unless there is [an] indication that there is
a potential lawsuit." Mass. G. Evid. § 408 note (2020). A
potential lawsuit exists where there is an actual dispute or
difference of opinion regarding a party's liability for or the
amount of a claim. This is quite different than the threat of a
lawsuit, which may not occur until after it becomes evident that
the parties will be unable to resolve their dispute amicably.
9
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 communications] absent an abuse of discretion or
other legal error." Zucco v. Kane, 439 Mass. 503, 507 (2003).
We turn first to the excluded communications that postdated the
7 In Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co.,
561 F.2d 1365, 1373 (10th Cir. 1977), cert. dismissed, 434 U.S.
1052 (1978), the Tenth Circuit stated that the trial "court did
not commit manifest error" in admitting communications where the
dispute had not yet "crystallized to the point of threatened
litigation." We do not interpret this language as intending to
establish the threat of litigation as a threshold requirement
and reject the defendant's argument that we should establish
such a requirement.
10
e-mails regarding whether the year 2027 was a typographical
error. These excluded communications were all sent on or after
November 25, 2015.8 By that point in time, the parties had sent
each other draft promissory notes regarding how the defendant
would repay the loan he had already received. The parties'
respective drafts included very different maturity dates,
evidencing the existence of an actual dispute regarding the
defendant's current liability for and the amount of the
plaintiff's claim for repayment of that preexisting loan. The
defendant's draft even included a provision releasing him "from
any other liability or obligation." See note 1, supra. We
discern no reason the defendant would have included such a
release if no actual dispute had arisen. The trial judge acted
within his discretion in excluding these communications.
The remaining excluded communication -- the plaintiff's
first draft promissory note, sent on November 4, 2015 --
8 We are not persuaded by the defendant's argument that no
actual dispute could have arisen until September 30, 2016, the
date that the jury concluded was the loan's maturity date,
because the defendant had no legal obligation to pay the loan
until then. There is no logical reason the parties could not
have had an actual dispute about the maturity date of a loan
before that loan came due. In any event, the admissibility of
exhibits cannot turn on what a jury later finds and is instead a
question for the trial judge. See Marchand, 27 Mass. App. Ct.
at 615. Here, where it was the plaintiff's position that the
parties had agreed to a repayment plan as short as one year,
making the loan due sometime in September 2014, the trial judge
acted within his discretion in deciding that an actual dispute
had arisen by November 2015.
11
presents a closer question. Nonetheless, when the plaintiff
sent that draft promissory note to the defendant, she knew he
was not following through with their original plan to repair his
house for sale. The parties' relationship had deteriorated such
that they were no longer communicating verbally and such that
the plaintiff felt the need to memorialize the terms of the
preexisting loan in writing, something she previously had not
considered necessary. Contrast Hurwitz, 41 Mass. App. Ct. at
373 (no actual dispute where plaintiff was still working for
defendant). On these facts, we cannot say that the trial judge
abused his discretion in deciding that an actual dispute
regarding the defendant's current liability for and the amount
of the plaintiff's claim for repayment of the loan had arisen by
the time the plaintiff sent her first draft promissory note to
the defendant.
The defendant alternatively argues that the excluded
communications were admissible for other purposes. "[E]vidence
regarding the settlement may be admissible if it 'is relevant
for some other purpose'" than proving or disproving the amount
or validity of a claim. Dahms v. Cognex Corp., 455 Mass. 190,
198-199 (2009), quoting Morea, 422 Mass. at 603. The
defendant's theory of the case was that there were no loan terms
until after the parties separated in 2015 and that only then did
they begin to negotiate what those terms should be. He argues
12
that the excluded communications were thus admissible (1) to
prove the plaintiff's state of mind regarding when the parties
reached an agreement, and (2) to impeach the plaintiff's
testimony that she never would have agreed to a long-term
repayment plan, when she ultimately was willing to agree to one
that extended into 2024. The defendant, however, never sought
to introduce the excluded communications for either of these
alternative purposes, and the issue is therefore waived. See
Halstrom v. Dube, 481 Mass. 480, 483 n.8 (2019).9
3. Sufficiency of the evidence. Separately, the defendant
argues that the trial judge erred in denying his motion for a
directed verdict and declining to set aside the verdict and
grant a new trial because the jury could not have found a
precise maturity date from the plaintiff's testimony that the
loan was to be repaid in anywhere from one to three years. We
disagree. In reaching this conclusion, we are mindful that a
jury verdict shall be sustained if "anywhere in the evidence,
from whatever source derived, any combination of circumstances
could be found from which a reasonable inference could be made
in favor of the [nonmovant]." O'Brien v. Pearson, 449 Mass.
9 Because we conclude that there was no error in the trial
judge's exclusion of these communications, we need not address
the defendant's argument that their exclusion requires a new
trial.
13
377, 383 (2007), quoting Turnpike Motors, Inc. v. Newbury Group,
Inc., 413 Mass. 119, 121 (1992).
The plaintiff testified that she started loaning money to
the defendant in September 2013 and that the intent was for the
loan to be repaid after the defendant repaired and sold his
house. As she explained, the loan's short-term repayment plan
was the reason she did not charge interest or have the defendant
sign loan documents. The plaintiff testified, repeatedly, that
she thought this process would take one to two, maybe three,
years, and she also testified regarding the extent of the
repairs that needed to be completed, which included gutting
rooms and replacing the electrical and plumbing systems. Based
on a combination of this evidence, the jury had a sufficient
basis to find that the defendant agreed to complete the repairs,
sell his house, and repay the loan by September 30, 2016.10
4. Conclusion. The judgment is affirmed, as is the order
denying the motion for judgment notwithstanding the verdict or
for a new trial.
So ordered.
10The plaintiff makes a request for appellate attorney's
fees, which is denied. "Although the . . . appeal is
unsuccessful, it is not frivolous." Gianareles v. Zegarowski,
467 Mass. 1012, 1015 n.4 (2014).