Appleyard v. Rogers
| Decision Date | 16 May 2023 |
| Docket Number | 22-P-566 |
| Parties | JAMES APPLEYARD & another[1] v. DANA R. ROGERS & another.[2] |
| Court | Appeals Court of Massachusetts |
Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass.App.Ct. 1017 (2020) (), are primarily directed to the parties and therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass.App.Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
Defendants Dana R. Rogers and Pre Owned Auto Sales, Inc. (Rogers) operated a used car dealership funded through credit extended by the plaintiffs, James and Maureen Appleyard (Appleyards). The Appleyards filed a complaint in the Superior
Court and obtained a default against Rogers for money owed under a promissory note. A damages assessment hearing followed, and Rogers appeared in opposition to the amount claimed. During the hearing, the judge examined the promissory note as well as the parties' course of performance under the credit arrangement. A default judgment, as amended, entered in favor of the Appleyards for $93,214. Rogers challenges the damages amount on appeal. We vacate the amended default judgment and remand for recalculation of damages.
Background.
On July 12, 2013, Rogers signed a promissory note promising to pay the Appleyards $200,000, "or so much thereof as may be advanced, with interest payable in arrears on the unpaid principal balance" at an annual interest rate of twelve percent. Unspecified payments of "interest only" would commence immediately with the principal sum of $200,000 due in three months. In the event of a default under the promissory note, the Appleyards would be entitled to an interest rate of twenty-four percent as well as reasonable attorney's fees and costs. The maturity date for the promissory note passed uneventfully, but the parties continued their credit relationship over the next five years. Through that arrangement, the Appleyards deposited $200,000 into a TD Bank account, in their names, with the intended purpose that the funds would be available for use by Rogers to purchase automobiles for resale. The Appleyards authorized disbursements from the account to enable Rogers to purchase vehicles. Following each purchase, the Appleyards held the title while the vehicle remained in Rogers's inventory. On the sale of a vehicle from the inventory, Rogers notified the Appleyards, obtained the title, and replenished the TD Bank account with the principal amount originally allocated to fund the purchase. In addition to paying off the principal through the sale of each vehicle, Rogers paid monthly interest on the total amount that the Appleyards deposited into the TD Bank account. Under this arrangement, the Appleyards gradually increased the funds deposited from $200,000 to amounts that eventually reached $356,580. Through an e-mail dated August 1, 2018, the
Appleyards notified Rogers of their intent to end the credit relationship and thereby terminate access to the TD Bank account by December 31, 2018. After his access to the TD Bank account ended on December 31, Rogers continued making payments to the Appleyards as vehicles were sold from the accumulated inventory. Between January 2019 and September 2020, Rogers paid off the outstanding principal balance "to within a few hundred dollars." Despite the payments in 2019 and 2020 and the ultimate repayment of nearly the entire principal, the Appleyards sent a notice of "default" to Rogers on April 23, 2019. The Appleyards claimed that for the months of February, March, and April 2019, Rogers failed to make separate monthly interest payments as had been done for the previous five years in connection with the TD Bank account. These alleged missed payments amounted to $21,374.55 after the Appleyards invoked a twenty-four percent default rate of interest and used the maximum amount that had previously been available in the TD Bank account ($356,580) as the initial basis for the interest calculation.
On October 22, 2020, the Appleyards filed a complaint in the Superior Court. They alleged that Rogers signed a promissory note promising to pay the Appleyards $200,000, and Rogers failed to make payments as required. Rogers did not file an answer, and the Superior Court entered a default under Mass. R. Civ. P. 55 (a), 365 Mass. 822 (1974). Rogers unsuccessfully sought to vacate the default, and the Superior Court scheduled a damages assessment hearing. At that hearing, the judge reviewed the language of the promissory note, spreadsheets on payments, e-mail correspondence, affidavits, and testimony. Rogers claimed that he owed at most $3,843.28, asserted the Appleyards were "using the wrong number to apply the interest," and denied the loan was ever in default. The judge accepted the Appleyards' calculations and awarded damages of $93,214 (amount including interest, costs, and attorney's fees). On appeal, Rogers disputes the assessed damages and claims the judge erred in calculating interest, permitting a usurious rate of interest, and increasing the award of attorney's fees.
Discussion.
"The measure of damages is a question of law reviewed de novo on appeal." Twin Fires Inv., LLC v. Morgan Stanley Dean Witter & Co., 445 Mass. 411, 424 (2005). "The usual rule for damages in a breach of contract case is that the injured party should be put in the position [she] would have been in had the contract been performed." Situation Mgt. Sys., Inc. v. Malouf, Inc., 430 Mass. 875, 880 (2000). It is incumbent on the plaintiff "to establish the amount of its damages." National Grange Mut. Ins. Co. v. Walsh, 27 Mass.App.Ct. 155, 158 (1989). "[W]hen a judge awards damages after entry of default, the judge has an obligation fairly to determine that the amount of damages has a reasonable basis in fact." Jones v. Boykan, 464 Mass. 285, 294 (2013).
In the present case, the judge determined that the language of the promissory note was ambiguous as to the method of calculating interest and thus looked to parol evidence to ascertain the parties' intent. The parol evidence rule "bars the introduction of prior or contemporaneous written or oral agreements that contradict, vary, or broaden an integrated writing." Kobayashi v. Orion Ventures, Inc., 42 Mass.App.Ct. 492, 496 (1997). Before the parol evidence rule comes into operation, "the court must be sure that it has before it a written contract intended by the parties as a statement of their complete agreement." New England Factors, Inc. v. Genstil, 322 Mass. 36, 40 (1947), quoting Kesslen Shoe Co. v. Philadelphia Fire &Marine Ins. Co., 295 Mass. 123, 129 (1936). For the purpose of this preliminary determination, "the parties may present proof beyond the writing itself." Ryder v. Williams, 29 Mass.App.Ct. 146, 149 (1990). Also, the parol evidence rule does not apply to a "subsequent agreement implied by the conduct of the parties." Genstil, supra.
We agree with the judge that the promissory note, with an overdue maturity date and silence as to payment terms, clearly did not represent the entire agreement of the parties. The promissory note was the origin, but not the totality, of the parties' contract rights and obligations. While "[p]romissory notes are contracts and are analyzed as such," JPMorgan Chase & Co. v. Casarano, 81 Mass.App.Ct. 353, 356 (2012), when "an agreement involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection is given great weight in the interpretation of the agreement." Restatement (Second) of Contracts § 202(4) (1981). Because the parties clearly intended a credit relationship that would last well beyond the October 2013 maturity date of the promissory note, the judge concluded "that there was a common and mutual understanding between the parties that interest was to be paid on the total amount of the funds that were available to [Rogers] in the [TD Bank] loan account." That conclusion is supported by the evidence up until December 31, 2018, when the mutual understanding came to an end through the Appleyards' unilateral decision to terminate.
The judge erred, however, by failing to consider the legal significance of the Appleyards' termination of the credit agreement on that date. By sending an e-mail to Rogers "seeking to conclude the practice of lending on automobile titles" effective on December 31, the Appleyards terminated an open- ended credit agreement that had been functioning for five years. Where, as here, an agreement lacks any specified duration, "[t]he agreement between the parties must be construed as one that was terminable at will by either party upon reasonable notice." Phoenix Spring Beverage Co. v. Harvard Brewing Co., 312 Mass. 501, 506 (1942). This termination by the Appleyards had legal consequences that should have been considered by the judge as part of his "obligation fairly to determine that the amount of damages has a reasonable basis in fact." Jones, 464 Mass. at 294.
As of the termination date of December 31, 2018, the previous course of performance that shaped the contours of the credit arrangement for more than five years no longer controlled the obligations of the parties. From that date forward, Rogers no...
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