Hiram Ricker and Sons v. Students Intern. Meditation Soc., No. 73-1273

Decision Date06 June 1974
Docket NumberNo. 73-1273
Citation501 F.2d 550
PartiesHIRAM RICKER & SONS, Plaintiff-Appellee, v. STUDENTS INTERNATIONAL MEDITATION SOCIETY, Defendant-Appellant. . Heard
CourtU.S. Court of Appeals — First Circuit

George R. Halsey, Boston, Mass., with whom Robert I. Deutsch and Ruboy, Deutsch & Krasnow, Boston, Mass., were on brief, for appellant.

Enid M. Starr, with whom Bernard A. Dwork and Barron & Stadfield, Boston, Mass., were on brief, for appellee.

Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.

McENTEE, Circuit Judge.

This is a diversity action based on a contract. Plaintiff-appellee Ricker owns a 2500-acre resort complex in Poland Springs, Maine, which includes lodgings, a golf course and a beach. At the beginning of 1970, only the golf course and a single adjacent building, the Poland Springs Lodge, were actually in use and open to the public. In February 1970, representatives of the defendant-appellant Society contacted Ricker about taking over some of the unused facilities from June 28 to July 26 for a course to train new instructors of transcendental meditation. 1 After some negotiation, Ricker agreed to furnish rooms, facilities and three vegetarian meals and a snack per day for the course participants. 2 In exchange, the Society was to pay Ricker based on a specified schedule of room rates and the number of persons who would attend. The Society would be responsible for the headcount necessary to determine its final bill. The training course was held at the Poland Springs complex on the dates scheduled. The Society paid Ricker a total of $185,000 in a series of payments, some in advance and some during the course.

Ricker brought this action seeking $77,508.36 as the balance allegedly due on the contract. 3 Alternatively, Ricker sought the same amount on the theory of quantum meruit. In response, the Society counterclaimed for return of the $185,000 in payments already made. At trial, Ricker presented evidence tending to show that more persons attended the training course than were accounted for in the Society's payments. Ricker also presented evidence that the Society improperly reduced some of the agreedupon room rates as it made its calculations. The Society presented evidence to rebut these assertions. With respect to its counterclaim, it also presented evidence tending to show that the rooms and dining facilities which Ricker provided were dirty and inadequate. Finally, the Society raised the issue whether under 'Maine law Ricker could recover at all under the contract or in quantum meruit, in view of its apparent failure to obtain certain licenses required by statute. 4

The district court submitted all issues to the jury. With respect to licenses, it instructed:

'. . . if you should find from the evidence in this case that the plaintiff was not licensed under the statutes that I have just real to you . . . you would be warranted in finding for the defendant on the claim brought by the plaintiff against the defendant.' 5

The jury returned a verdict for Ricker in the amount of $65,780.00 and rejected the Society's counterclaim. The court entered judgment on the verdict, adding $9,494.16 in interest.

The Society raises a variety of issues on appeal. We will consider them in an order somewhat different from that set forth in the briefs.

Offer of Settlement-- The Society contends that the district court improperly admitted evidence of an offer to settle Ricker's claim. However, we hold that the evidence to which the Society objects was not an offer to settle within the meaning of the rule calling for exclusion.

The precise testimony was this. Saul Feldman, the president of Ricker, became increasingly dissatisfied with the size of the periodic payments the Society made to him during the one-month training course. Feldman felt that more persons had attended the course than the Society would concede. On July 26, the last day of the course, he called on Jerry Jarvis, a Society executive. At this time, pursuant to their contract, Feldman anticipated receipt of the final payment. He testified:

'(Jarvis) passed me a yellow sheet of paper saying, 'This is what we owe you. If you agree and sign a release absolving us from any and all damage and all future bills we will pay you.' It was $44,000.'

Counsel for the Society moved to strike this testimony on the ground that it was an inadmissible offer of settlement. The court refused. Whereupon the yellow sheet itself was received in evidence and read to the jury by Ricker's counsel, again over objection. Nothing on the sheet referred to an offer of settlement. It was entirely a series of calculations, which concluded that the Society owed Ricker a final bill of $44,163.25.

It is, of course, true that evidence of settlement negotiations is generally inadmissible. On the other hand, there is a 'well-recognized exception regarding admissions of fact as distinguished from hypothetical or provisional concessions conditioned upon the settlement's completion.' NLRB v. Gotham Indus., Inc., 406 F.2d 1306, 1313 (1st Cir. 1969). See generally 4 Wigmore, Evidence 1061 (Chadbourn rev. 1972). In the instant case, the yellow sheet handed to Feldman on the final day of the course represented the Society's 'unconditional assertion' of what it thought it actually owed Ricker based on the contract. See 4 Wigmore, supra, at 34. It was not a hypothetical or conditional sum intended only to forestall the additional costs of litigation. Indeed, although Ricker was unhappy about the size of the early payments, until it received the Society's final payment offer of $44,000, it could not determine whether it had an actual controversy with the Society. The rule excluding offers of settlement is designed to encourage settlement negotiations after a controversy has actually arisen. It also prevents admission of evidence that does not represent either party's true belief as to the facts. Neither policy would have been served by excluding Feldman's testimony about the Society's final payment offer, or the yellow sheet on which that offer was calculated.

Hearsay Objections-- As indicated earlier, Ricker did not handle the registration of course participants. Instead, it was to rely upon the Society's headcount in determining the final bill under the contract. During the course, however, Feldman became suspicious of the Society's tally because he seemed to be serving far more meals than warranted. Therefore, on three occasions he asked several of his maintenance employees to go around from building to building, counting the number of persons occupying each room. According to Feldman, they reported their findings to him in note form, indicating more guests than the Society asserted. 6 Feldman said the notes were destroyed and that later, from memory, he compiled tables of upward 'adjustments' to the figures the Society had submitted to him. These adjustments were admitted into evidence over objection.

As both parties agree, the tables of adjustments compiled by Feldman were hearsay. 7 They were based on reports to him by maintenance employees who themselves were not present in court to testify. Ricker asserts that the evidence was nonetheless admissible under the business-records exception to the hearsay rule. 28 U.S.C. 1732 (1970). We disagree. A crucial aspect of the business-records exception is that entries be prepared as a regular part of the business. 'The entry offered must of course be a part of a series of entries or reports, not a casual or isolated one.' 5 Wigmore, Evidence 1525 (3d ed. 1940). See Palmer v. Hoffman, 318 U.S. 109, 63 S.Ct. 477, 87 L.Ed. 645 (1943). Otherwise, there is no basis for the presumption of reliability which is at the heart of the exception. The room-check here by Ricker's maintenance employees was hardly the kind of regular, systematic business activity which is encompassed by the exception. The method they employed, see note 6 supra, hardly warranted a presumption of reliability. Moreover, another requirement of the exception is that entries be made contemporaneously with the transaction. 5 Wigmore, supra, 1526. Here, Feldman made the entries, from memory, at least a week after the maintenance employees last reported to him. For this reason also, there is no basis for a presumption of reliability. Therefore, the exhibits were improperly admitted. Instead Ricker should have called the maintenance employees as witnesses.

Ricker alternatively contends that even if there was error it was harmless. Again, we disagree. The documentary listing of purported 'short' counts by the Society was likely to have a profound effect on the jury's factfinding. This was the strongest evidence supporting Ricker's contention that the Society cheated in counting the number of course participants. A new trial is therefore warranted.

Licenses-- Although the preceding holding requires at least a new trial, we also must consider the licensing issue raised by the Society because this could preclude a judgment for Ricker in any event. As we indicated earlier, the court submitted to the jury the question of whether Ricker possessed certain licenses required by Maine statutes at the time the training course was held. Specifically these were the 'victualer's' license, Me.Rev.Stats.Ann. tit. 30, 2751 (1973 Supp.), 8 and the sanitation license, Me.Rev.Stats.Ann. tit. 22, 2482 (1965). 9 Moreover, by using the phrase 'you would be warranted' the court's instruction allowed the jury to find for Ricker even if it was not properly licensed at the time of the course.

The Society contends that this was an error in two respects. First, it asserts that the evidence conclusively established that Ricker did not have either type of license during the course, with one exception. 10 Therefore, it claims that the question was improperly submitted to the jury. Second, the Society contends that under Maine law the absence of the licenses...

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    • James Publishing Practical Law Books Trial Evidence Foundations Other Evidence Rules
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    ...between a plaintiff and a third party were also inadmissible under the rule. Hiram Ricker & Sons v. Students Int’I Meditation Society , 501 F.2d 550 (1st Cir. 1974). An exception to the rule against admissibility of settlement negotiations exists where the evidence relates to admissions of ......
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    ...between a plainti൵ and a third party were also inadmissible under the rule. Hiram Ricker & Sons v. Students Int’I Meditation Society , 501 F.2d 550 (1st Cir. 1974). An exception to the rule against admissibility of settlement negotiations exists where the evidence relates to admissions of f......
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