Sound Tech. v. Hoffman

• Decision Date: 18 January 2000
• Docket Number: P-1316
• Court: Appeals Court of Massachusetts
• Parties: (Mass.App.Ct. 2000) SOUND TECHNIQUES, INC. vs. BARRY D. HOFFMAN, trustee. <A HREF="#fr1-1" name="fn1-1">1 98- Suffolk County Argued:

737 N.E.2d 920 (Mass.App.Ct. 2000)

SOUND TECHNIQUES, INC. vs. BARRY D. HOFFMAN, trustee.¹

98-P-1316.

Massachusetts Court Of Appeals

Suffolk County

Argued: January 18, 2000

Decided: November 3, 2000.

Contract, Lease of real estate, Merger, Misrepresentation. Evidence, Parol evidence. Negligence, Contractual limitation of liability.

Civil action commenced in the Superior Court Department on August 5, 1992.

The case was tried before Peter M. Lauriat, J.

Charles K. Mone (Leonard B. Zide, with him) for the defendant.

Evan Slavitt for the plaintiff.

Perretta, Kass, & Lenk, JJ

.PERRETTA, J

In Bates v. Southgate, 308 Mass. 170, 182 (1941), the court held that "contracts or clauses attempting to protect a party against the consequences of his own fraud are against public policy and void where fraud inducing the contract is shown . . . ." This appeal brings before us the question whether Bates applies with equal force when a party enters into a contract containing such a clause, commonly referred to as a merger clause, an integration clause, or an exculpatory clause, in reliance upon a negligent rather than deliberate misrepresentation. In this case, the lessee, Sound Techniques, Inc. (Sound), brought an action against the lessor, Barry Hoffman, alleging that, prior to the execution of the lease, Hoffman (through his real estate agent) made certain false representations concerning the expected noise level at the leased premises. The jury rejected Sound's claims for breach of contract and deceit but awarded damages on the count for negligent misrepresentation. On Hoffman's appeal, we conclude that the merger clause set out in the lease was enforceable and precluded Sound from recovering damages on the basis of its allegations of a negligent misrepresentation.

We reverse the judgment.

1. The facts. There was evidence to show that in 1989, Sound, the operator of a professional sound recording studio, was seeking to lease commercial space in Boston. Michael McGloin, an employee of Hoffman's leasing agent, showed James Anderson, Sound's president, vacant space on the second floor of a building owned by Hoffman and located at 1260 Boylston Street. The first floor of the building was occupied by Boston Ramrod (Ramrod), a bar owned by Saturday Afternoon, Inc.² McGloin showed the premises to Anderson several times. On all these occasions, Anderson made it clear that Sound was seeking space for purposes of building a state-of-the-art recording studio. Noticing that Ramrod was doing expansion work, Anderson asked McGloin about the extent of the planned expansion. McGloin told Anderson that he need not worry and that Ramrod was expanding its dining area in which only background music would be provided. He assured Anderson that the space in question would accommodate Sound's needs.

At the time of the signing of the lease, October 10, 1989, Sound was represented by counsel who had assisted in the lease negotiations and had reviewed the terms of the lease prior to its execution. The lease was conditioned upon Sound successfully completing an acoustical inspection of the premises before October 13, 1989. Prior to the signing of the lease, no one from Sound had walked through Ramrod on a weekend night to determine the noise level. Sound's acoustical engineer conducted a brief visual inspection of Ramrod during a weekday afternoon and concluded that the second-floor space was suitable for Sound's purposes. Although Sound's studio operates around the clock, seven days a week, the engineer did not visit the Ramrod late at night or during the weekend, did not measure the ambient sound level, and did not talk with anyone at Ramrod about the operation of its sound system.

Soon after relocating to the premises in issue, Sound began to experience problems with noise coming from Ramrod, and Sound discovered that, contrary to McGloin's representations, Ramrod's expansion went beyond providing background music in the dining area. Rather, Ramrod had upgraded its sound system and had expanded its premises to include a dance floor. There were times, Sound claimed, when the whole building throbbed; sessions in its recording studio were disrupted and Sound was losing business. Sound then brought an action against Hoffman, claiming breach of contract, deceit, and negligent misrepresentation and alleging that McGloin's statements to Anderson regarding the limited nature of Ramrod's expansion plans induced it to enter into the lease.³ Although the jury found in Hoffman's favor on Sound's claims of breach of contract and deceit, they found in Sound's favor on its claim for negligent misrepresentation.

But for Anderson's testimony relating McGloin's statements concerning Ramrod's expansion plans, Sound could not have sustained its burden of proof on its claim for negligent misrepresentation. The question before us is whether Anderson's testimony was inadmissible by reason of the clause in the lease entitled "Waiver by landlord; representations," which, in pertinent part, reads:

"Tenant acknowledges that Tenant has not been influenced to enter into this transaction nor has Tenant relied upon any warranties or representations not set forth in this instrument".

2. Hoffman's right to appellate review. Sound claims that, because Hoffman failed to preserve his right to appellate review on the question whether the merger clause in the lease precluded Sound from recovering damages on account of McGloin's negligent misrepresentation, we need not consider the issue and, instead, should simply affirm the judgment.

At trial, Sound attempted to introduce evidence through Anderson of McGloin's statements concerning Ramrod's expansion plans. Hoffman objected to the proffered testimony on the basis of the lease's merger clause and the parol evidence rule. Sound claims that Hoffman withdrew his original objection to Anderson's testimony and, thereafter, failed to object properly to that evidence. To support its claim, Sound refers to various snippets of the trial transcript as well as to the judge's memorandum of decision on the parties' postjudgment motions.

The transcript shows that, when Anderson was first asked about McGloin's statements, Hoffman objected on the ground that the merger clause precluded evidence about whether Sound was induced to enter into the lease by any representations other than those recited in the lease. After the objection was sustained, Sound submitted a memorandum of law, and Hoffman withdrew his objection to the testimony as it pertained to Sound's claim of deceit. However, he maintained his objection to the admissibility of the testimony to the extent it purported to bear on the claim for negligent misrepresentation.⁴ When Anderson was asked to relate McGloin's statements, Hoffman again objected and requested a limiting instruction. The judge denied the requested instruction but stated that Hoffman could renew his request for a limiting instruction at the end of the case.⁵ Based upon the merger clause set out in the lease, Hoffman requested a directed verdict at the close of Sound's evidence and, again, at the close of the evidence. After the judge's final instructions, Hoffman again asked that the jury be instructed that extrinsic evidence could not be considered on Sound's claim for negligent misrepresentation.

When the jury found in Sound's favor on its claim for negligent misrepresentation, Hoffman filed a motion for judgment notwithstanding the verdict. In his memorandum of decision on that motion, the judge wrote that it was his recollection that Hoffman had withdrawn his objection to McGloin's testimony concerning Ramrod's expansion plans. Consequently, he denied Hoffman's motion without reaching the question whether McGloin's testimony was admissible on Sound's negligent misrepresentation claim.

We think Hoffman did all that he could to protect his right to appellate review of the questions whether Anderson's testimony concerning McGloin's statements was inadmissible under the parol evidence rule and whether Sound's claim for negligent misrepresentation was barred by the merger clause set out in the lease. See Frick Co. v. New England Insulation Co., 347 Mass. 461, 467 (1964). Cf. Abraham v. Woburn, 383 Mass. 724, 727 n.1 (1981) ("The purpose of requiring an objection is to afford the trial judge an opportunity to act promptly to remove from the jury's consideration evidence which has no place in the trial").

3. The parol evidence rule. "The rule that written agreements may not be varied or added to by parol evidence of antecedent or contemporaneous negotiations is not one merely of evidence, but is a rule of substantive law. Goldenberg v. Taglino, 218 Mass. 357, 359 [1914]. Goldband v. Commissioner of Banks, 245 Mass. 143, 150 [1923]. Before that rule comes into operation, however, the court must be sure that it has before it a written contract intended by the parties as a statement of their complete agreement. Welch v. Bombardieri, 252 Mass. 84, 87 [1925]." Kesslen Shoe Co. v. Philadelphia Fire & Marine Ins. Co., 295 Mass. 123, 129 (1936). See also Scirpo v. McMillan, 355 Mass. 657, 661 (1969). Sound does not contend that the merger clause is ambiguous in its terms or that it was itself obtained by fraud. Moreover, there is nothing in the record appendix that suggests that the lease was other than a fully integrated contract. See Gregory v. Raytheon Serv. Co., 27 Mass. App. Ct. 1170, 1171 (1989).

4. Enforceability of the merger clause. Whether we refer to the clause in question as a merger clause, an integration clause, or an exculpatory clause, the settled rule of law is that a contracting party cannot rely upon such a clause as protection against claims based upon fraud or deceit. See Bates v. Southgate, 308 Mass. at 182-183; McEvoy Travel Bureau, Inc. v. Norton Co., 408 Mass. 704, 712-713 (1990); Sheehy v. Lipton Indus., 24 Mass. App. Ct. 188, 193 (1987). This established rule is an exception to...