Rochester Mach. Corp. v. Mulach Steel Corp.
| Citation | 449 A.2d 1366,498 Pa. 545 |
| Parties | ROCHESTER MACHINE CORPORATION, Appellant, v. MULACH STEEL CORPORATION, Appellee. |
| Decision Date | 28 May 1982 |
| Court | Pennsylvania Supreme Court |
Fred C. Houston, Jr., John F. Meck, Houston, Houston & Donnelly, Pittsburgh, for appellee.
Before O'BRIEN, C. J., and ROBERTS, NIX, LARSEN, FLAHERTY, McDERMOTT and HUTCHINSON, JJ.
On January 24, 1978, Appellant Rochester Machine Corporation (Rochester) filed a complaint for confession of judgment against Appellee Mulach Steel Corporation (Mulach) pursuant to a warrant of attorney contained in a real estate and equipment lease. The basis for the confession of judgment was Mulach's alleged failure to make repairs to the leased premises and equipment as required in the lease agreement. Judgment was subsequently entered in the amount of $41,738.94, however, that judgment was opened. On January 23, 1979 a jury returned a verdict in favor of Rochester in the amount of $47,300.00. The trial court denied Mulach's motion for a new trial. A panel of the Superior Court reversed and granted Mulach a new trial on the ground that the trial court erred in admitting certain correspondence between the parties' attorneys. 287 Pa.Super.Ct. 270, 430 A.2d 280 (1981) (Opinion by Brosky, J.; Montgomery, J. dissenting). We disagree and accordingly reverse the order of the Superior Court.
The background of the case is as follows: On November 14, 1975, Mulach leased certain premises from Rochester for a period of one year. The lease was subsequently extended to November 14, 1977. On August 31, 1977 Rochester, through its attorney, sent a letter to Mulach which presented an itemized list of damages said to be caused during Mulach's occupancy. The letter demanded immediate payment of the estimated cost of repairs. On October 31, 1977, Mulach replied by way of a letter from its attorney. The letter consisted of an item by item response to each claim for damages asserted in Rochester's letter of August 31. With respect to some of the items, Mulach stated "Mulach accepts responsibility." With respect to several others, Mulach declined to accept responsibility, generally offering instead a brief explanation as to why it was not liable for the claimed item. 1
The general rule is that an offer to compromise is not admissible in evidence at trial as an admission that what is offered is rightfully due or that liability exists. Woldow v. Dever, 374 Pa. 370, 376, 97 A.2d 777, 781 (1953). Our threshold inquiry, then, is whether the correspondence between Mulach and Rochester can be fairly characterized as relating to an offer of compromise. Although this Court has not, heretofore, defined an offer to compromise, it is generally defined as the settlement of differences by mutual concessions; an adjustment of conflicting claims. Kelly v. Steinberg, 148 Cal.App.2d 211, 219, 306 P.2d 955, 960 (1957) (citing Webster's International Dictionary, (2d ed.). Under such a definition the demand by Rochester stating items of damages caused by Mulach and demanding the estimated amount for their repair cannot be construed as an offer to compromise a disputed claim. See Gallagher v. Viking Supply Corp., 3 Ariz.App. 55, 411 P.2d 814 (1966). Likewise, Mulach's response cannot be construed as a settlement offer or as a counter-settlement offer. Mulach's response, accepting "responsibility" for some items of damage while refusing "responsibility" for others, does not in any way suggest that it is an offer to compromise a disputed claim. Rather it is nothing more, or less, than what it purports to be, an admission of liability with respect to some items of damages and a disclaimer of liability with respect to others. 2 There is no suggestion in the letter of efforts to negotiate a compromise. In fact, Mulach's letter suggests an exactly opposite intent. That is to say, Mulach's letter suggests that it is unwilling to compromise or to negotiate the disputed items.
We believe that the trial court correctly relied on the opinion of the Montgomery County Court of Common Pleas in Rockledge Municipal Authority v. E. Leva & Son's, Inc., 89 Montg.L.R. 342 (1968), aff'd per curiam, 434 Pa. 554, 252 A.2d 195 (1969) in determining the correspondence in the present case was not related to an offer to compromise. No. 108-78, Slip Op. at 5 (C.P. Beaver Co., July 16, 1979). In Rockledge parties to a construction contract met to discuss alleged defects in the work performed by the defendant contractor. Defendant contractor's representative acknowledged the defects and agreed to correct them. The Rockledge court stated:
The fact that this meeting was held and Mr. Leva agreed to correct the listed defects is not contested by the defendants. It is the defendants' position, however, that this meeting and the subsequent letter was in the nature of compromise and therefore should not be admissible in the case.
It is true that offers of compromise are not admissable evidence, yet this letter is an acknowledgment of defects, rather than an offer to compromise anything. We clearly believe that the letter is admissable and is some evidence that E. Leva & Sons, Inc., admitted that the defects were a result of work that was done by it under the contract.
....
We hold that this meeting and the letter that followed it are proper matters to be inquired into, and are in the nature of an admission of responsibility rather than an offer to compromise.
Even if the letter of October 31, 1977 is viewed as an offer of compromise, those portions of the letter constituting distinct admissions are, in fact, admissible. It is well settled that this Commonwealth adheres to the Common Law Rule that:
While an offer to pay a sum of money to compromise a dispute is not admissable in evidence to prove that the sum offered was admitted to be due, the distinct admission of a fact is not be excluded because it was accompanied by an offer to compromise the suit.
Mannella v. City of Pittsburgh, 334 Pa. 396, 403, 6 A.2d 70, 73 (1939) (emphasis added) (citing Rabinowitz v. Silverman, 223 Pa. 139, 72 A. 378 (1909); Bascom v. Danville Stove & Manufacturing Co., 182 Pa. 427, 38 A. 510 (1897); Arthur v. James, 28 Pa. 236 (1857); Sailor v. Hertzogg, 2 Pa. 182 (1845)). 3
The specific acceptance of responsibility for specific items of damages is fairly construed as a distinct admission. 4
Our rule permitting the introduction of distinct admissions made in the course of settlement negotiations has been subject to some criticism. Moreover, under the Federal Rules of Evidence such admissions, made in the course of settlement negotiations, are inadmissible. 5 Hence, we take this opportunity to reexamine the validity of our rule.
According to Wigmore on Evidence § 1061 (Chadbourn rev. ed. 1972), there are three alternative theories which account for the exclusion of evidence related to settlement negotiations. The theory which a particular court adopts will determine the scope of the exclusion. The first theory is grounded in a privilege protecting as confidential all overtures of settlement made to the opposing party. The privilege is based on the belief that expeditious and extrajudicial settlements are to be encouraged and that privacy of communication is necessary in order to encourage them. Under this view, all statements made in the course of settlement negotiations must be excluded. Indeed such a position is ratified by Rule 408 of the Federal Rules of Evidence. See Weinstein's Evidence p 408(03). 6
On the other hand, Professor Wigmore, the leading academic proponent of the relevancy theory states The true reason for excluding an offer of compromise is that it does not ordinarily proceed from and imply a specific belief that the adversary's claim is well founded, but rather a belief that the further prosecution of that claim, whether well founded or not, would in any event cause such annoyance as is preferably avoided by the payment of the sum offered. In short, the offer implies merely a desire for peace, not a concession of wrong done:
....
By this theory, the offer is excluded because, as matter of interpretation or inference, it does not signify an admission at all. There is no concession of claim to be found in it, expressly or by implication. Conversely, if an express admission is in terms made, it is receivable, even though it forms part of an offer to compromise:
Wigmore on Evidence, supra at § 1061, pp. 36-37 (emphasis in original) (footnotes omitted).
The third view, adopted by the courts of England and almost universally rejected by scholars and by courts in the United States is described by Professor Wigmore as follows:
Another theory, resting apparently on some notion of contract, is that an express reservation of secrecy (e.g., by the words "without prejudice ") assimilates the offer to a contractual offer, so that if the terms are not accepted the offer is null and can have no evidential effect.
Wigmore on Evidence, supra at § 1061, p. 35 (emphasis in original).
Our Court, while recognizing the public policy behind expeditious extrajudicial settlements, has adopted the relevancy view.
It is never the intendment of the law to shut out the truth, but to repel any inference which may arise from a proposition made, not with the design to admit the existence of a fact, but merely to buy one's peace. If, however, an admission is made because it is a fact, the evidence to prove it is competent, whatever motive may have prompted the declaration. If A. offers to B. ten pounds in satisfaction of his claim of a hundred pounds, merely to prevent a suit, or purchase tranquillity, this implies no admission that any sum is due and therefore the testimony to prove the fact must be rejected, because it evinces nothing concerning the merits of the...
To continue reading
Request your trial
- Rochester Mach. Corp. v. Mulach Steel Corp.
-
Matter of FRG, Inc.
...See also Rochester Mach. Corp. v. Mulach Steel Corp., 287 Pa.Super. 270, 283, 430 A.2d 280 (1981), rev'd on other grounds, 498 Pa. 545, 449 A.2d 1366 (1982). 2 As appellees point out, Souders also held that, in ensuring itself that a creditor is secured before granting relief from the stay,......