Sunday, March 25, 2012

Polygraph evidence is per se inadmissible under Rule 403.

Rathe Salvage, Inc. v. R. Brown & Sons, Inc., 2012 VT 18 (Burgess, J.)

Following a jury trial, defendants R. Brown & Sons, Inc., a scrap metal hauling company, and its principal, Robert Brown (both referred to as hauler), were found liable for breach of contract, common law fraud, trespass, breach of the implied covenant of good faith and fair dealing, Each of these claims stemmed from hauler’s commercial dealings with plaintiff Rathe Salvage, Inc., a scrap metal salvage yard where hauler would crush cars and transport the scrap for sale to steel mills. Hauler now appeals, arguing that the case should be remanded due to the trial court’s refusal to conduct a Daubert hearing on the admissibility of hauler’s polygraph, or lie detector, testing before excluding such evidence from trial. We affirm .

The admissibility of polygraph evidence is one of first impression in Vermont. Hauler argues that the trial court erred by refusing to admit expert testimony about the results of a polygraph examination. The court denied hauler’s motion to convene a Daubert hearing, so called, for purposes of determining the underlying reliability of polygraphy. Concerned that the point of hauler’s polygraph examiner was to tell the jury “what and who should be believed,” the court ruled that even if polygraph results could satisfy Daubert admissibility standards, it was nevertheless precluded as an impermissible infringement on the jury’s province to determine credibility. The trial court’s exclusion of the polygraph results is sustainable on per se grounds founded in Vermont Rule of Evidence 403.

We hold that polygraph examination results are redundant to, and an unnecessary influence, on a jury’s responsibility to judge witness credibility or party liability, and that any probative value is substantially outweighed by risks of confusion, delay, and time wasted on collateral issues related to variables in administration of the polygraph. In so holding, we assume, without deciding, that polygraphy is sufficiently reliable for admissibility under Daubert.

The probative value of the polygraph results, at least in theory, rests on the expert’s ability to assess physiological responses of the subject as consistent with either truthfulness or deception. If, as we assume, polygraphy is generally accepted as accurate and reliable, the polygraph cannot but usurp the jury’s lie detecting function. Polygraph results are per se intrusive upon the jury’s prerogative. Per se exclusion is also supported by our holdings against expert opinions on ultimate legal issues or credibility in litigation. See Reiss v. A.O. Smith Corp., 150 Vt. 527, 530-32, 556 A.2d 68, 70-72 (1988) (explaining that notwithstanding authority under Vermont Rule of Evidence 704 to present opinion evidence that “embraces an ultimate issue to be decided by the trier of fact,” it was error to allow testimony on ultimate questions of law equivalent to “should [defendant] lose?”).  Similarly, Rule 702 is no license for expert opinion on the truthfulness of a witness or guilt or innocence of a defendant. See State v. Gokey, 154 Vt. 129, 139-40, 574 A.2d 766, 771 (1990) (reserving those issues for the jury). The polygraph expert’s opinion in this case vouching for hauler’s denial of fraud would amount to an opinion confirming hauler’s veracity and the legal insufficiency of Rathe Salvage’s fraud claim against him. As it was error in Reiss to admit an opinion that a defendant was liable for negligence in its installation of a propane tank regulator, so it would have been error to allow a polygraph expert to testify, in effect if not explicitly, that a fraud defendant was innocent of fraud.

There was no error in the trial court’s per se exclusion of polygraph evidence under Rule 403. Because polygraphy is inadmissible under Rule 403, the trial court was not required to conduct a Daubert hearing to assess its reliability under Rule 702.

Saturday, March 24, 2012

Guaranty of securitized mortgage can be enforced by holder of note without proof of chain of assignments or proof of separate assignment of the guaranty.

Wells Fargo Bank Minnesota, N.A. v. Rouleau, 2012 VT 19 (Burgess, J.)

Defendant Randy J. Rouleau appeals a decision holding that Wells Fargo Bank Minnesota, N.A., as Trustee for the registered holders of Credit Suisse First Boston Mortgage Security Corp., Commercial Mortgage Pass-Through Certificates, Series 2001-CF2 (Wells Fargo), is entitled to enforce defendant’s personal guaranty of a promissory note secured by mortgages on five mobile home parks. The court concluded that Wells Fargo could enforce the guaranty as the holder of the note under 9A V.S.A. § 3-301(i). Defendant argues that the court erred in ruling that Wells Fargo has standing to enforce the guaranty because Wells Fargo cannot prove the chain of assignments from the original lender to itself and therefore that Wells Fargo, and not some third party, is the assignee of the guaranty. Defendant also argues that the court erred in treating assignment of the note as sufficient to show assignment of the guaranty because the guaranty, in contrast to the note, is a separate contract that must be expressly assigned. Finally, defendant argues that because Wells Fargo lacks standing to enforce the guaranty, the court lacked jurisdiction over the enforcement action. We affirm. Under § 3-301(i), the holder of the note and mortgage can enforce the guaranty. Because the court did not err in finding that Wells Fargo was the holder of the note and mortgage, we hold that Wells Fargo can enforce the guaranty without separate proof of assignment.

The court correctly concluded that “assignment of the note and mortgage results in the assignment of the personal guaranty as a matter of law—even without an express assignment of the guaranty.” Under contract law, “an assignment agreement must clearly reflect an intent to assign the right in question.” Desrochers v. Desrochers, 173 Vt. 312, 316, 795 A.2d 1171, 1174 (2002); see also Restatement (Second) of Contracts § 324 (1981) (providing that assignment of contractual right requires obligee to “manifest an intention to transfer the right to another person”). Personal guaranties are secondary obligations, however, and because of a guaranty’s link to the principal obligation it follows that an obligee’s assignment of the principal obligation is sufficient to manifest the requisite intent to assign the guaranty. We hold that proof of the assignment of a promissory note and mortgage is sufficient as a matter of law to establish assignment of a personal guaranty. Thus whether Wells Fargo was assigned the guaranty in this case depended on whether it was assigned the note and mortgage.

We reject defendant’s main argument that Wells Fargo lacks standing because it a chain of title to show that it was assigned the note and mortgage. The applicable statute provides that a person is entitled to enforce an “instrument” if the person is “the holder of the instrument.” 9A V.S.A. § 3-301(i). “ ‘Holder’ means . . . the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” 9A V.S.A § 1-201(21)(A). To enforce a promissory note or mortgage under § 3-301(i), therefore, a person must be in possession of the instrument at the time that the enforcement action is filed and the instrument must be made payable to the person or to the order of the person. See Kimball, 2011 VT 81, ¶ 14 (outlining standing requirements in home foreclosure context); V.R.C.P. 80.1(b)(1) (plaintiff shall plead in its complaint that the originals are in the possession and control of the plaintiff). We hold that a plaintiff to whom a promissory note or mortgage was not originally issued need not prove chain of title to enforce a personal guaranty of these principal obligations. Rather, a plaintiff in an enforcement action establishes its standing if it is in possession of the original note and mortgage at the time the complaint is filed and the instruments are made payable to the plaintiff.

Defendant does not challenge that Wells Fargo is in possession of the original note and assignment of mortgage, which Wells Fargo produced at trial. The final question, therefore, is whether Wells Fargo made the requisite showing that it had been assigned the note and mortgage prior to the filing of the enforcement action. The evidence on this question came primarily from the testimony of Tommy Floyd, an employ ee of the loan’s special servicer, Berkadia. At trial, Mr. Floyd was the authority on the way the securitization process works generally and, based on his in-court examination of the loan documentshe also testified as to how the securitization process worked in this case. The record in this case supports the finding that Wells Fargo had been assigned the note and the mortgage prior to the filing of the enforcement action.

Common Benefits Clause is enforceable by private right of action for damages.

In re Town Highway No. 20 Town of Georgia, 2012 VT 17 ( Skoglund, J.) (Dooley, J., joined by Chief Justice Reiber, concurring and dissenting).

Vermont has consistently sustained its essence as one big small town by affirming and reinforcing the fundamental values that define it. This decision affirms those values. The questions presented are whether the Common Benefits Clause of the Vermont Constitution provides a self-executing private right of action, and whether damages are available for the violation, or “constitutional tort,” in the circumstances presented. We conclude Article 7 is self-executing and that damages are available unless other remedies are adequate, under a three-part test.

John Rhodes, a resident of the Town of Georgia, petitioned his local governing body, the selectboard, to clarify several issues surrounding two roads that bordered his land. The court found that Rhodes’s request to access his land over town roads had been repeatedly and maliciously frustrated by the Town selectboard in an ongoing attempt to protect the value of a neighbor’s property, a violation of Chapter I, Article 7 of the Vermont Constitution, the Common Benefits Clause. The court concluded that Article 7 was self-executing and awarded monetary damages for the constitutional violation. We affirm the judgment of liability but reverse the damage award and remand for further proceedings.

Article 7 sets forth a clear restriction on government behavior. It provides:

That government is, or ought to be, instituted for the common benefit, protection, and security of the people, nation, or community, and not for the particular emolument or advantage of any single person, family, or set of persons, who are a part only of that community; and that the community hath an indubitable, unalienable, and indefeasible right, to reform or alter government, in such manner as shall be, by that community, judged most conducive to the public weal.

Vt. Const. ch. I, art. 7. In complementing the rights of free speech (Article 13), personal privacy (Article 11), private property (Article 2), fair elections (Article 8), and fair judicial process (Article 4), Article 7 ensures that the benefits and protections conferred by the state are for the common benefit of the community and are not for the advantage of persons who are a part only of that community. Affording citizens the right to challenge perceived partiality by a governmental entity ensures vigorous protection for the community compact that is the heart of government. Accordingly, we conclude that Article 7 is self-executing.

However, it is not sufficient for a plaintiff seeking damages simply to show that he or she lacks a remedy adequate to vindicate the interest asserted. Rather, we conclude that it is necessary and appropriate to establish stringent additional requirements to obtain monetary relief for a violation of Article 7. Three core elements comprise any potential constitutional-tort claim based on a violation of Article 7.

  • First, a plaintiff must show the denial of a common benefit. In doing so, the plaintiff must show disparate and arbitrary treatment when compared to others similarly situated.
  • Second, the plaintiff must show that the denial directly favors another particular individual or group.
  • Third, a plaintiff must demonstrate not only that that the decision was wholly irrational and arbitrary, but also that it was actuated by personal motives unrelated to the duties of the defendant’s official position, such as ill will, vindictiveness, or financial gain.

Rhodes's proof met this test. The trial court found that all the Town’s decsisions had “one motive: to favor the property rights of his neighbors.” The trial court’s unchallenged findings describe a deliberate, decades-long course of discriminatory conduct by the Town so malicious and self-serving as to deny Rhodes his fundamental rights to due process and equal treatment under the Vermont Constitution. The essence of the constitutional violation in this case was the selectboard’s repeated failure to provide fair and impartial decisionmaking, the result of a relentless bias against Rhodes and favoritism toward neighbors.

The closer question is whether, notwithstanding these findings of blatant discrimination and bias, Rhodes had a remedy adequate to redress the injury without an award of damages for the constitutional violation. Damages are an available remedy in this case because injunctive relief requiring reclassification of the Unnamed Road from a trail to a class 4 highway does not begin to compensate Rhodes for any emotional and economic injury caused by these actions. The possibility of judicial review may ultimately overturn a biased decision, but does not cure the personal harm inflicted in an exceptional case such as this, involving a lengthy pattern of invidious delay, obstruction, and discriminatory decisionmaking. Accordingly, we conclude that an award of compensatory damages in this case is necessary and proper to vindicate the harm alleged.

However the damages awarded by the trial court here were not carefully tethered to the harm actually alleged and proved. The trial court measured the harm by the difference between the value of the property with the Unnamed Road denominated as a class 4 highway that would “allow for development,” and its value as a trail, which “limits [its] development,”. Because Rhodes had no current plans to develop or market the property, we conclude that the actual harm was not the speculative loss in development value was speculative. Instead damages on this record should be limited the anguish and inconvenience resulting from years of efforts to gain reasonable access to the property frustrated by a biased selectboard, together with any additional costs for road improvements caused by the delay.

The judgment of liability against the Town of Georgia is affirmed. The damage award is reversed, and the matter is remanded for further proceedings on the issue of damages consistent with the views express herein.

Dooley, J., joined by Chief Justice Reiber, wholly concur that Article 7 is a self-executing provision, that a plaintiff disparately treated by a government official motivated by personal ill will may recover monetary damages for a violation of Article 7 under certain circumstances, and that in this case selectboard members discriminated against Rhodes in preference for his neighbors; but dissent from the majority’s decision to remand this case for an assessment of damages. A damages action is not appropriate in this case because there was an alternative avenue of relief available to cure the constitutional violation. If the superior court had issued an injunction against the classification of the Unnamed Road as a trail in 2010, this case would have been over, and Rhodes could have developed his property if he desired. Rhodes did not plead, or present evidence of, emotional harm and not is entitled to a remand for damages.

Court restructuring fails to create a unified superior court. Cracks in the system. After a person turns 18, neither the family nor criminal division had jurisdiction to prosecute felonies committed before the person turned 14.


In re D.K., Juvenile

2012 VT 23 (Johnson, J.) (Dooley,  J. concurring) (Skoglund, J., joined by Chief Justice Reiber, dissenting)

The issue in this case is whether the State may prosecute an adult defendant for sexual assaults alleged to have occurred when he was a child between the ages of eleven and thirteen. The prosecution was delayed because the alleged victims did not come forward until defendant was eighteen years of age. The State filed the information in the criminal division. The criminal division transferred the case to the family division. The family division dismissed because defendant had reached age eighteen. We affirm.

Given the applicable law and the circumstances of this case, neither the family nor criminal division had jurisdiction to prosecute adults who committed delinquent acts as children under the age of fourteen. It is impossible to know whether this was a legislative oversight during the judicial restructuring, or an intentional policy decision. We will not create jurisdiction where it did not exist to cover this perceived “gap,” which has since been addressed by the Legislature. Accordingly, the family division acted properly in dismissing the charges.

Dooley, J. concurs fully in the Court’s decision and writes to urge the Legislature to revisit the recent judicial branch restructuring legislation. It is hard to read the decision in this case without concluding that we have invented a case processing machine so complicated that we cannot easily control its operating rules. Restructuring created the opportunity to eliminate this complication. Since the family court and district court were merged into the superior court, it should have become possible to avoid transferring cases between courts and to get to the heart of the matter in one proceeding. Unfortunately, that did not happen because the jurisdictional walls between the components of the new superior court continued and cases must, accordingly, be transferred between divisions of the superior court by the same formal process that existed in the past, even though, as we move to electronic records, the symbolic physical transfer of the case disappears.

Cases continue to fall through the cracks just as they did before. We have perpetuated a system that is ruled by what hat the judge is wearing, and nothing more. If the judge fails to change hats properly, or no hat is available for the action sought, as here, the purposes of the statutory scheme are frustrated.

We can solve this problem by allowing any case to be filed in any division or no division of the superior court, and then treating the filing point as a doorway into a proceeding that will evaluate the circumstances and determine how best to handle it with all relevant options available. In other words, we could have judges wearing no hats with the ability to conduct the proceeding as if he or she was wearing all possible hats.

I urge the Legislature to review the remaining jurisdictional walls between the components of the superior court and remove them not only for cases like this, but in all cases filed in superior court, in order to allow the most expeditious route to a just result.

Skoglund, J. joined by Chief Justice Reiber, agree that the family division lacked jurisdiction and properly dismissed the charges, but would hold that a case could be brought in the criminal division of the superior court, to which the Legislature has granted jurisdiction “to try, render judgment, and pass sentence in prosecutions for felonies and misdemeanors.” 4 V.S.A. § 32(a).

Friday, March 23, 2012

Municipalities are immune from punitive damage awards.


In 1995, John Rhodes, a resident of the Town of Georgia, petitioned his local governing body, the selectboard, to clarify several issues surrounding two roads that bordered his land.  While this case began as a suit over the existence and use of two ancient roads, it grew over time into a test of constitutional guarantees and a saga about abuse of power. After almost fifteen years of litigation, the court found that Rhodes’s request to access his land over town roads had been repeatedly and maliciously frustrated by the Town selectboard in an ongoing attempt to protect the value of a neighbor’s property, a violation of Chapter I, Article 7 of the Vermont Constitution, the Common Benefits Clause.  The court concluded that Article 7 was self-executing and, although it awarded monetary damages for the constitutional violation, it denied punitive damages.    Rhodes claims that the trial court erred in denying his claim for punitive damages given the court’s finding that the selectboard acted in bad faith and with malice, arguing that the Town should be treated like any other corporate entity.  We disagree.

To support an award of punitive damages for a defendant’s intentionally wrongful conduct, a plaintiff must show that the defendant acted with actual malice: that the defendant’s wrongdoing has been intentional and deliberate, and has the character of outrage frequently associated with crime.  Regardless of whether the Town’s actions meet this standard, we hold that, absent a clear legislative directive to the contrary, municipalities are immune from punitive damage awards.

This result is in line with our precedent and that of many of other jurisdictions.  See Willett v. Village of St. Albans, 69 Vt. 330, 38 A. 72 (1897).  The U.S.Supreme Court in  City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 266-67 (1981) vacated  an award of punitive damages against a city in a federal § 1983 suit because the history and policy behind § 1983 suits did not “support exposing a municipality to punitive damages for the bad-faith actions of its officials.”  Id. at 271. The same policy rationale for limiting punitive damages is persuasive here.   

By their very nature, punitive damages are not meant to reward the injured, but to punish and deter the wrongdoer. The twin aims behind punitive damages—punishment and deterrence—would not be met if they were levied against a municipal corporation for the malicious and wrongful acts of its officers.  Rather than exclusively targeting the wrongdoers, such an award would punish all of the town’s taxpayers. Facing no direct financial hardship, deterrence of individual officials is wanting.   Because the twin aims of punishment and deterrence are not served when punitive damages are levied against a population for the acts of its elected officials, municipal corporations cannot be held liable for punitive damages.

Friday, March 2, 2012

Public record request cannot be denied on the pleadings

Bain v. Clark, 2012 VT 14 (Johnson, J.)
In this appeal, we are asked to consider whether “radio dispatch and unit logs” generated by police are exempt from disclosure under the Vermont Access to Public Records Act. The trial court found the records exempt from disclosure under 1 V.S.A. § 317(c)(5) as “records dealing with the detection and investigation of crime,” and dismissed the complaint for failure to state a claim on which relief could be granted. We reverse and remand.

In reviewing such rulings, we employ the same standard as the trial court: “A motion for failure to state a claim may not be granted unless it is beyond doubt that there exist no facts or circumstances that would entitle the plaintiff to relief.” Kaplan v. Morgan Stanley & Co., 2009 VT 78, ¶ 7, 186 Vt. 605, 987 A.2d 258 (mem.) (quotations omitted). “We assume that all factual allegations pleaded in the complaint are true, accept as true all reasonable inferences that may be derived from plaintiff’s pleadings, and assume that all contravening assertions in defendant’s pleadings are false.” Mahoney v. Tara, LLC, 2011 VT 3, ¶ 7, __ Vt. __, 15 A.3d 122 (mem.) (quotation, brackets, and ellipses omitted).

Applying this standard, we must reverse and remand. Section 317(c)(5) exempts records: “dealing with the detection and investigation of crime, including those maintained on any individual or compiled in the course of a criminal or disciplinary investigation by any police or professional licensing agency; provided, however, records relating to management and direction of a law enforcement agency and records reflecting the initial arrest of a person and the charge shall be public. “ Bain sought the production of “any and all computer, telephone or otherwise generated radio dispatch unit log[s] of [his] arrest and the bona fide activities of law enforcement for the days of May 22 and 23, 2003.” Assuming these radio dispatch and unit logs do exist, we cannot discern from the record precisely what information they might contain. We cannot assume, consistent with the purpose of the PRA, that simply because the records at issue were generated by a law enforcement agency, they necessarily are records “dealing with the detection and investigation of crime.”

Because the evidence in this case has not yet been fully developed, we cannot discern if police radio and dispatch unit logs are the type of records that the Legislature intended to shield from view under § 317(c)(5). On remand, the court’s evaluation of whether these logs are “records dealing with the detection and investigation of crime” should be guided by the purposes underlying the statutory exemption and the factors discussed in Walton, where we concluded that neither arrest records nor criminal citations were “records dealing with the detection and investigation of crime” under 1 V.S.A. § 317(b)(5). Caledonian Record Publ’g Co. v. Walton, 154 Vt. 15, 21, 573 A.2d 296, 299 (1990) (explaining that this nation’s founding fathers “thought secrecy in government one of the instruments of Old World tyranny and committed itself to the principle that a democracy cannot function unless the people are permitted to know what their government is up to” (citation omitted)).