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).