Saturday, December 19, 2015

Commercial lease. “Punctilious compliance” with terms of lease requiring notice of breach is not required where the manner of notice actually given is at least as effective.

Panagiotidis v  Galanis, 2015 VT 134 [12/18/2015]

SKOGLUND, J. Defendant appeals from an order granting judgment to plaintiffs on their complaint for ejectment for nonpayment of rent under a nonresidential lease. We affirm.

Defendant argues plaintiffs were obligated to notify him of the breach by certified mail as stated in the lease, and that notice by personal service of the complaint was insufficient. We consider only the question of whether notice to defendant by personal service, rather than by certified mail, is sufficient to satisfy plaintiffs’ contractual obligation to provide notice and an opportunity to cure. We assume for the purposes of this case only, but do not decide, that the notice provided by the complaint can satisfy the contractual notice requirement.

When a lease expresses an agreement with regard to notice of termination, the time, mode and manner of such notice must conform to the agreement. Deschenes v. Congel, 149 Vt. 579, 583, 547 A.2d 1344, 1346 (1988); Archambault v. Casellini-Venable Corp., 115 Vt. 30, 32, 49 A.2d 557, 558 (1946).

In Vermont Small Business Development Corp. 2013 VT 7, ¶ 15, 193 Vt. 185, 67 A.3d 241 we said that “[t]here is no reason to require less ‘punctilious compliance’ with terms of a lease providing for notice in the nonresidential context.” 2013 VT 7, ¶ 15. This statement must be limited to the context in which it arose. The omissions in the notice provided in Vermont Small Business Development Corp. were substantive omissions, and not a dispute over the form in which notice was delivered. See id. ¶ 16 (landlord failed to specify occurrence giving rise to event of default, and failed to provide date on which agreement would be terminated).

We are faced with a different situation here. The lease did not require that written notices be provided exclusively by mail; it stated only that notices were effective when given in the manner specified in the lease. The purpose of the written-notice requirement -- to trigger the ten-day cure period -- was satisfied by personal service. In this nonresidential context, we hold that a form of notice that is at least as effective, and actually more certain, than that deemed acceptable in the lease is valid.

Wednesday, December 2, 2015

Rule 12(b)(6) dismissal of suit against attorney by non-client affirmed. Attorney owes no duty in contested proceeding to the adverse party. Elements of fraud not alleged with particularity.


Felis v. Downs Rachlin Martin, PLLC, 2015 VT 129 [filed October 16, 2015]

DOOLEY, J. This case arises out of a divorce proceeding between plaintiff and his former wife. DRM represented wife in the divorce proceeding. Plaintiff claims that “DRM knowingly submitted false material evidence” or “participated in the submission of false material evidence” to the court with the intent and effect of improperly influencing the outcome of the trial, causing damage and injury to plaintiff. Plaintiff appeals the court’s decision granting defendant’s motion to dismiss plaintiff’s claims of breach of fiduciary duty and fraud. We affirm

The court granted defendants’ Rule 12(b)(6) motions, concluding that: (1) DRM owed no duty to plaintiff on which he could base a claim for breach of fiduciary duty; and (2) plaintiff failed to allege the necessary elements of fraud in his complaint. With respect to the fiduciary duty claim, the court stated that a party to litigation cannot assert negligence or breach of fiduciary duty against opposing counsel. With respect to the fraud claim, the court found that the plaintiff failed to allege that DRM directed the false statements to plaintiff, rather than the court, that he was unaware the statements were false, or that he relied on any allegedly false statements.

1.
It is well established that an attorney owes no duty to an adverse party.  Hedges v. Durrance, 2003 VT 63, ¶ 6. “This privity rule ensures that ‘attorneys may in all cases zealously represent their clients without the threat of suit from third parties compromising that representation.’ ” Id. (quoting  Bovee v. Gravel,, 174 Vt. 486, 487, 811 A.2d 137, 140 (2002) (mem.)). The rationale behind this policy is particularly salient “where, as here, the third party is the client’s adversary who is also represented by her own counsel in the proceedings.” Id.

To maintain such an action against another party’s attorney, the third party must demonstrate that “the primary purpose and intent of the attorney-client relationship itself was to benefit or influence the third party.” Hedges, 2003 VT 63, ¶7. (quotation omitted).  As in Hedges, we will not review DRM’s alleged duty of care to the marital estate “independently of the larger adversarial context.” Id. We therefore affirm the judgment of the superior court that plaintiff has failed to state a claim for breach of fiduciary duty

2.

To maintain a cause of action for fraud, plaintiff must demonstrate five elements: “(1) intentional misrepresentation of a material fact; (2) that was known to be false when made; (3) that was not open to the defrauded party’s knowledge; (4) that the defrauded party act[ed] in reliance on that fact; and (5) that thereby harmed.”  Estate of Alden v. Dee 2011 VT 64, ¶ 32, 190 Vt. 401, 35 A.3d 950. Failure to prove any one of the five elements defeats the fraud claim. Id. We focus on the third and fourth elements, which were central to the superior court’s discussion. We conclude, as did the superior court, that plaintiff has failed to allege facts to support these two elements.

With respect to the third element, plaintiff’s knowledge of the alleged falsity, the statements in his complaint directly contradict the presence of this element. Drawing all reasonable inferences from these statements, plaintiff was fully aware of DRM’s discovery practices early on.

With respect to the fourth element, we find no allegation to support a claim that plaintiff relied on defendants’ alleged misrepresentations. Plaintiff acknowledges that his complaint does not explicitly allege reliance. In essence, plaintiff asks us to assume reliance, but reliance is a required element of fraud that plaintiff has the burden to plead and prove “with particularity.” V.R.C.P. 9(b).  Allegations about defendants’ intent in making the alleged misrepresentations says nothing about plaintiff’s justifiable reliance, a required element of fraud. See  Sugarline Assocs. v. Alpen Assocs.., 155 Vt. 437, 445, 586 A.2d 1115, 1120 (1990) (stating that “with any action in fraud” plaintiff is required to show “justifiable reliance upon the misrepresentation” (quotation omitted)); Restatement (Second) of Torts § 531 (1977) (requiring justifiable reliance for recovery under fraudulent misrepresentation)

In other contexts third-party reliance, without direct reliance by the plaintiff, is insufficient to satisfy the reliance requirement. Glassford v. Dufresne & Assocs.., 2015 VT 77, ¶¶ 22-23. A party cannot bring a private cause of action for tort under a theory of fraud on the court. We can find no case where a court has accepted a third-party reliance claim on the basis that the reliance was by the court and the plaintiff was a litigant who had a full opportunity to respond to the allegedly fraudulent evidence. We need not determine whether we ever would accept a third-party reliance theory in a fraud case to hold that we would not accept it on the factual situation here.

Procedure. Judgment terminates right under V.R.C.P. 15(a) to amend complaint to add new theory.

Felis v. Downs Rachlin Martin, PLLC, 2015 VT 129, ¶¶ 26-27 [filed October 16, 2015]

DOOLEY, J. Plaintiff appeals a decision granting defendant’s motion to dismiss plaintiff’s claims of fraud and breach of fiduciary duty. We affirm

On appeal plaintiff argues as am alternative that his complaint states a cause of action for prima facie tort. Under the law of several states, a harm intentionally inflicted on another without justification is prima facie actionable. See, Restatement (Second) of Torts § 870 (“One who intentionally causes injury to another is subject to liability to the other for that injury, if his conduct is generally culpable and not justifiable under the circumstances. This liability may be imposed although the actor’s conduct does not come within a traditional category of tort liability.”).

Although other state courts have adopted prima facie tort liability under § 870, this Court has yet to do so. See Fromson v. State, 2004 VT 13 29, ¶ 20, 176 Vt. 395, 848 A.2d 344 (observing that this Court has never decided whether to recognize prima facie tort liability). Plaintiff argues that we should adopt it here.

Plaintiff never argued below that defendants could be found liable on a theory of prima facie tort. He therefore waived it on appeal. Plaintiff , however, urges us to remand to allow him to add a new count to his complaint alleging prima facie tort pursuant to V.R.C.P. 15(a).

We held in Desrochers v. Perrault, 148 Vt. 491, 494, 535 A.2d 334, 336 (1987), that Rule 15(a) did not allow “a post-judgment amendment which brings in an entirely extrinsic theory.” More recently, in Northern Security Ins. Co. v. Mitec Electronics, 2008 VT 96, ¶ 39, 184 Vt. 303, 965 A.2d 447, we held that the right of plaintiff “to amend the complaint under Rule 15 terminated when judgment was entered.”

Plaintiff’s invocation of Rule 15(a) comes too late in the process for us to give him the relief he seeks.

Wednesday, November 11, 2015

Landlord tenant. Claim of breach of statutory warranty of habitability requires proof of notice of a habitability defect. CPA claim based upon the failure of landlords to disclose code violations related to the habitability of residential premises requires proof that the landlords knew or should have known of the alleged defect in the premises.

Terry v. O’Brien,  2015 VT 132 [October 23, 2015]


REIBER, C.J. Landlords appeal a jury verdict and post-judgment order in this landlord-tenant action involving warranty-of-habitability and consumer-protection claims. We vacate the verdict and judgment, except for the jury’s award of unpaid rent, and remand the matter for further proceedings consistent with this opinion.

Landlords’ general claims of error on appeal are that: (1) the trial court’s jury instructions misled the jury on tenants’ habitability and CPA claims, resulting in prejudice to landlords; (2) the court erred by vacating the jury’s unpaid-rent award in its post-judgment order.

(1)

We agree with landlords that the challenged warranty instruction is inconsistent with Vermont law and was prejudicial to them. The language of the current statutory warranty of habitability reflects the parameters of the common-law warranty as adopted in Hilder v. St. Peter, 144 Vt. 150, 478 A.2d 202 (1984) and expanded in Willard v. Parsons Hill P'ship, 2005 VT 69, 178 Vt. 300, 882 A.2d 1213.. In Hilder, we stated that “to bring a cause of action for breach of an implied warranty of habitability, the tenant must first show that he or she notified the landlord of the deficiency or defect not known to the landlord and [allowed] a reasonable time for its correction,” id. at 161. Because there is no evidence that landlords had actual notice of a habitability defect that led to the fire, tenants’ statutory habitability claim fails as a matter of law.

We also agree that the trial court’s instruction with respect to tenants’ CPA claim was overly broad in defining what constitutes a deceptive act, and that the instruction resulted in prejudice to landlords. The instruction is overbroad in two respects—in not including the element of materiality in defining a deceptive act, and in not requiring that landlords knew or should have known of the alleged defect that they failed to disclose and that led to the 2008 fire. We hold that, in cases where tenants are basing a CPA claim upon the failure of landlords to disclose code violations related to the habitability of residential premises, the tenants must show that the landlords knew or should have known of the alleged defect in the premises. On the record before us, we cannot conclude as a matter of law whether landlords knew or should have known of the electrical splice that led to the fire. Therefore, the matter must be remanded for retrial of tenants’ CPA claim

(2)

Landlords also argue that the trial court erred in its post-judgment order by vacating the jury’s award of $20,000 in unpaid rent pursuant to their counterclaim. The trial court’s ruling must be reversed because of our vacation of the jury’s verdict in favor of tenants with respect to their statutory warranty-of-habitability claim. Absent their habitability claim, there is no basis for tenants to withhold rent. Therefore, the jury’s verdict regarding unpaid rent must stand.

The jury verdict is vacated except for the award of unpaid rent; the trial court’s postjudgment order is reversed; and the matter is remanded for proceedings consistent with this Court’s opinion.

Sunday, October 25, 2015

Jury tampering: trial court did not abuse discretion in concluding party’s assumed contact with juror during trial did not have capacity to affect verdict.


Labate v. Rutland Hospital, Inc., 2015 VT 128 [10/2/2015] 

EATON, J. This is an appeal of denial of a motion for new trial following a jury verdict in favor of defendants hospital and doctor in a case that claimed medical malpractice in connection with the birth of plaintiffs’ daughter. The jury found that the plaintiffs had failed to prove the standard of care applicable to each defendant. The motion for new trial claimed the verdict was tainted because a juror read an e-mail sent by the hospital to its employees during the trial.  On appeal, the plaintiffs assert that the court erred in concluding that the e-mail was incapable of influencing the jury’s verdict.  We affirm.

Whether an irregularity occurred is a question of fact for the trial court. “[T]he test is not whether the irregularity actually influenced the result, but whether it had the capability of prejudicing the verdict.” Bellows Falls Vill. Corp. v. State Highway Bd., 123 Vt. 408, 414, 190 A.2d 695, 699 (1963) (emphasis added).

Whether alleged juror misconduct has prejudiced the trial process is a matter for the discretion of the trial judge. In this case, the trial court suggested there was insufficient proof an irregularity had occurred and concluded that even if it had, the content of the e-mail was such that it could not have affected the verdict. Our review is, therefore, to determine whether the trial court has abused its discretion on the issue of capacity to affect the verdict.

Broadly construed, the e-mail asserted that the hospital “had done nothing wrong”—in other words, that they had met the applicable standard of care, whatever that may be. The email stated in part, “From time to time things go wrong. If we feel we are at fault, we will apologize, take corrective action and, if appropriate, reach a settlement with the other party. In this case we did not feel we did anything wrong. We did not feel the physician did anything wrong. Outside experts, our insurance company and our attorneys all concurred. In these cases we will allow the case to come to court and let a jury decide. We clearly believe in this case that something tragic happened and we feel terrible for the family. The world is not always fair. Bad things sometimes happen. It does not always mean someone is at fault.”

The trial court was correct that the e-mail was primarily a denial of any wrongdoing that did not have the capacity to affect the verdict.   The email contained no discussion of the standard of care required of either defendant. Because the e-mail contained nothing regarding the nature of the standard of care, it had no capacity to influence the jury on the questions on which they found a failure of proof, i.e., what constituted the standard of care in the first instance. Even if the irregularity had occurred, the court’s determination that it had no capacity to affect the verdict was not an abuse of discretion.

Monday, October 19, 2015

SCOVT rules as a matter of first impression that anti-SLAPP statute does not apply unless there is a“public issue.”


Felis v. Downs Rachlin Martin, PLLC, 2015 Vt. 129 [10/16/2015]

DOOLEY, J. This case arises out of a divorce proceeding. Plaintiff claims fraud and breach of fiduciary duty by GFC, who was retained on behalf of plaintiff’s former wife to prepare business valuations related to the proceeding. GFC appeals the superior court’s denial of its motion to strike pursuant to 12 V.S.A. § 1041, Vermont’s anti-SLAPP (Strategic Lawsuit Against Public Participation) law. We affirm.

This is our first opportunity to construe Vermont’s anti-SLAPP statute. The issue before us turns on whether plaintiff’s action is a SLAPP suit, as defined under § 1041. GFC contends that the plain language of § 1041(i)(1), which extends the protections of the statute to “any written or oral statements made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law,” covers its testimony in the divorce proceeding.

Section 1041(a) provides that the statute applies to actions “arising from the defendant’s exercise, in connection with a public issue,” of free speech and petitioning rights. Section 1041(i), in turn, lists four specific types of activity. We conclude that the “in connection with a public issue” requirement of 12 V.S.A. § 1041(a) must be met in any motion to strike under the anti-SLAPP statute, regardless of the type of activity.

GFC presented expert testimony on the value of one of plaintiff’s businesses in order to support Ms. Felis’ proposed property distribution in a divorce order. The testimony was not “a matter of public significance.”

We reach this result as a matter of statutory interpretation in order to implement the intent of the Legislature in adopting the anti-SLAPP remedy and keeping that remedy within the bounds of the paradigm on which it was based.

How cited.

Sunday, October 18, 2015

Expert opinion, “I think more likely than not [plaintiff] would have wound up with a better result,” is sufficient to preclude summary judgment in medical malpractice suit.

Tillson v. Lane, 2015 VT 121 [10/09/2015]

REIBER, C.J. Plaintiffs appeal from a decision granting defendants’ motion for summary judgment in a medical malpractice suit. The court based its decision on its determination that plaintiff’s expert testimony amounted to “loss-of-chance” evidence insufficient to prove that plaintiff’s injury was caused by defendants’ departure from the standard of care. We reverse and remand.

Defendant performed an elective procedure to remove a cataract in plaintiff’s left eye. Plaintiff alleged that within twenty-four hours of surgery, his left eye showed signs of infection. Within forty-eight hours of surgery, plaintiff was permanently blind in his left eye. Plaintiff alleged that Defendant should have consulted with a retinologist. Plaintiff’s expert testified at deposition that if plaintiff had undergone a vitrectomy and received antibiotics, “[h]e would have had a real chance versus no real chance of saving the sight in that eye.” In response to a clarifying question from plaintiff’s counsel, the expert stated, “I think more likely than not [plaintiff] would have wound up with a better result.”

In Smith v. Parrott, 2003 VT 64 we rejected the loss-of-chance doctrine as “fundamentally at odds with the settled common law standard . . . for establishing a causal link between the plaintiff’s injury and the defendant’s tortious conduct.” Id. ¶ 12 The elements of a medical malpractice action, “have traditionally included a requirement that the plaintiff adduce evidence of a reasonable probability or reasonable degree of medical certainty that the defendant’s conduct caused the injury.” Smith, 2003 VT 64, ¶ 11 (quotations omitted).

In Smith the patient relied upon statements from an expert witness who testified at deposition that an earlier consultation with a neurosurgeon might have yielded a “fifty-fifty chance of some recovery.” Unlike the expert in Smith, plaintiff’s expert ultimately testified that “more likely than not [plaintiff] would have wound up with a better result.” Reading the testimony in its entirety, plaintiff’s expert rendered the expert opinion that there was at least a fifty-one percent chance that plaintiff would have had some meaningful degree of vision in his left eye if he had received a timely referral to a retinologist. Although conflicting evidence exists, this is not a Smith opinion.

In other words, a factual assertion exists in the case that but for Defendant’s departure from the standard of care exercised by a reasonably skillful ophtalmologist, plaintiff would not have suffered an injury. Thus, the deposition testimony is sufficient evidence to withstand a motion for summary judgment.

Foreclosure. Duress does not void mortgage unless it was signed under immediate threat of imminent physical harm, but mortgage may be voidable if, as a result of improper threat, signor had “no reasonable alternative.” Defense is available against assignee of mortgagge with constructive notice.


EverBank v. Marini, 2015 VT 131 [filed 10/16/2015]

EATON, J. This is an appeal from an order granting summary judgment in favor of defendant Caroline Marini on plaintiff EverBank’s complaint for foreclosure on grounds Caroline signed mortgage under the threat of physical violence. On appeal, EverBank argues the trial court erred in concluding that the mortgage was void as to Caroline because she was not physically compelled to sign the mortgage documentation, and that the trial court erred in concluding that the bona fide purchaser doctrine was not available to EverBank. We reverse on the issue of whether the mortgage is void, and direct the trial court to enter judgment for EverBank on that issue. We remand for trial the issues of whether the mortgage is voidable and, if so, whether it is enforceable because it was ratified by Caroline, but affirm the trial court’s decision that the bona fide purchaser doctrine is not available to EverBank. 

There are two forms of duress —duress by physical compulsion, which renders an agreement void, and duress by improper threat, which results in an agreement that is voidable by the victim. Under Vermont law, improper conduct sufficient to render a contract void, as opposed to voidable, must consist of either the actual application of physical force that is sufficient to, and does, cause a victim to appear to assent to the execution of a document, or the threat of immediate application of physical force sufficient to place a person in the position of the signer in actual, reasonable, and imminent fear of death or serious personal injury.

On the evening prior to Caroline signing the mortgage paperwork, Gary removed a pair of large scissors from the knife drawer and waved them back and forth. This scared Caroline and, in an attempt to protect her children, she told Gary that she would sign the mortgage documents if he would leave the children alone, which she did the following day in front of a notary public. When the notary asked Caroline if her signature was her free act and deed, she replied, “it is what it is.”

Nothing in the record reveals any evidence of a threat of imminent physical violence upon Caroline such that she reasonably feared loss of life or serious physical injury at the time she signed the document in front of an independent person. Accordingly,we reverse the trial court’s decision that the mortgage was void. 

To constitute improper conduct such that an agreement can be held voidable, there must be both an inducement by an “improper threat” and the victim must have no “reasonable alternative” but to succumb. Construing the record in favor of EverBank as we must we also conclude that the undisputed facts do not establish as a matter of law that Caroline was without a reasonable alternative.  We therefore remand the matter of whether the mortgage is voidable to the trial court.

The trial court also concluded that EverBank was not a bona fide purchaser. We agree. It is undisputed that EverBank acquired its interest in the mortgage seven months after Caroline raised the duress claim in her answer. EverBank cannot now argue that was a bona fide purchaser when it had constructive, if not actual, notice of this defect. See 9A V.S.A. § 3- 305(a)(1) (holder of a negotiable instrument is not “holder in due course” where holder took instrument with notice that party had duress defense). We affirm the trial court’s conclusion and he that the bona-fide-purchaser doctrine is not available to EverBank should Caroline prove her duress claim. 

Wednesday, September 9, 2015

Traffic stop. Police questioning can constitute a detention requiring some level of objective justification under Terry. Divided SCOVT suppresses evidence where “pointed questions” about criminal activity amounted to detention requiring reasonable suspicion, which was lacking in this case.

State v. Winters, 2015 VT 116 (filed 9/4/2015)

EATON, J. The trial court denied the defendant’s motion to suppress because the fact defendant was operating a motor vehicle with his license suspended fully justified stopping him. In the course of that stop, the troopers developed information that defendant was in possession of hypodermic needles and he had a prior drug conviction, which the trial court held sufficient to justify an escalation of the investigation. We reverse.

In the early morning hours of June 27, 2012, at the Vermont Welcome Center rest area just off I-91 in Guilford, a trooper observed defendant, a male, asleep in the driver’s seat of a vehicle. The trooper learned defendant’s identity and that his license was suspended, and spoke to defendant. After warning defendant not to drive and telling defendant to go back to sleep the trooper learned defendant had been arrested several times, with his most recent drug arrest in 2005. 

The trooper came back with another trooper and knocked on defendant’s window, rousing defendant from sleep. The trooper said that he had learned that defendant had been arrested for “some drug stuff in the past” and asked defendant if he was still involved in the drug trade. Defendant replied “no,” The trooper then asked, “Do you have anything that you’re not supposed to have on you? Do you have anything in the car you shouldn’t possess?” Defendant responded that he had needles but that they were old. 

The trooper then asked defendant if he would give consent to search his person or the vehicle. Defendant replied that he just wanted to go back to sleep. Defendant reached for a knife. The trooper pulled out his gun, and defendant put down the knife. After exiting the vehicle the Defendant eventually consented to search of his person and signed a consent form authorizing the troopers to search the vehicle. 

On appeal, defendant argues he was seized in violation of the Fourth Amendment to the United States Constitution and Chapter I, Article 11 of the Vermont Constitution. Specifically, defendant asserts that the driving-with-a-suspended-license (DLS) investigation had concluded, and that the trooper needed, and lacked, reasonable suspicion to conduct a drug investigation. We agree.

Reasonable suspicion of a traffic violation can form the basis for a valid stop, but the detention must be temporary and last no longer than necessary to effectuate the purpose of the stop. We reject the notion that there was an “ongoing” DLS violation that authorized the trooper to continue to approach the car again and again, as long as defendant sat behind the wheel.

If, during the course of an investigative stop, an officer gathers additional information providing reasonable suspicion that some other criminal activity is afoot, the officer may extend the detention to investigate that activity. However there is a point at which questioning constitutes “a detention requiring some level of objective justification.” State v. Pitts, 2009 VT 51, ¶ 8, 186 Vt. 71, 978 A.2d 14.

Pointed questions about drug possession or other illegal activity in circumstances indicating that the individual is the subject of a particularized investigation may convert a consensual encounter into a Terry stop requiring objective and articulable suspicion under the Fourth Amendment.” Id. ¶ 9; Terry v. Ohio,, 392 U.S. 1, 27-29 (1968).

The officer’s actions here—approaching and waking defendant, concluding the first interaction, and then returning with a second trooper, waking defendant again, and asking him pointed questions about criminal activity—is not the type of “mere questioning” that is not a seizure.

A reasonable person would have felt he was the subject of a particularized inquiry, and would not have felt “at liberty to ignore the police presence and go about his business.” It is significant that this encounter occurred after the first had conclusively ended. The officer had left the scene, telling defendant to “rack out.” Given this instruction to defendant, the officer’s subsequent return with another trooper would make a reasonable person less likely to believe that he could voluntarily terminate the encounter. We conclude that the officer’s field inquiry was converted into a Terry stop at the outset of the second encounter when the officer asked pointed questions of defendant.

At that point, the officer did not have reasonable suspicion of criminal activity. He had not gleaned any information on his first approach to indicate that defendant had any contraband, and defendant’s stale arrest record did not provide the officer with reasonable suspicion. The officer was acting solely upon his hunch of current drug possession based primarily upon stale information. This hunch did not amount to reasonable articulable suspicion. Because defendant was illegally seized, his subsequent “consents” to the search of his person and car, which occurred very shortly thereafter, were tainted.

The motion to suppress should have been granted. Reversed and remanded.

DOOLEY, J., dissenting. The majority essentially creates a “per se” rule that asking “pointed questions” about possible criminal activity transforms a consensual encounter between a police officer and a citizen into a seizure under the Fourth Amendment to the United States Constitution. In doing so, it ostensibly relies on our decision in State v. Pitts, 2009 VT 51, 186 Vt. 71, 978 A.2d 14, and certain decisions from other jurisdictions that support Pitts. But the majority’s per se rule goes well beyond Pitts and beyond the decisions in any other jurisdiction, except one. Further, its reliance on the term “pointed questions” creates a vague standard, one that no other jurisdiction adopts in defining a Fourth Amendment seizure. For these reasons, I dissent.

I would affirm the trial court’s decision that the trooper had reasonable suspicion of criminal activity and that the necessary information was assembled before the encounter escalated into a seizure. I would not adopt a per se rule that “pointed questions” create a seizure and dissent from the majority’s adoption of such a rule. I would not join the mandate even if I agreed with the majority’s position that there was a seizure before reasonable suspicion was present because defendant waived his right to appeal the voluntariness of his consent to search.

I am authorized to state that Chief Justice Reiber joins this dissent
.


Tuesday, September 8, 2015

Use of abusive or obscene language is not disorderly conduct unless likely to cause an imminent violent response in the average listener.

State v. Tracy, 2015 VT 111  (filed 8/28/2015)

ROBINSON, J. Defendant David Tracy was convicted of disorderly conduct following a heated exchange with his daughter’s basketball coach. The trial court, in a bench trial, concluded that defendant’s language was not protected by the First Amendment to the United States Constitution because it constituted “fighting words,” and found defendant guilty of an “abusive or obscene language” charge under 13 V.S.A. § 1026(a)(3) (“A person is guilty of disorderly conduct if he or she, with intent to cause public inconvenience or annoyance, or recklessly creates a risk thereof . . . in a public place, uses abusive or obscene language”)

 On appeal, defendant argues that the speech for which he was convicted is constitutionally protected. After saying that “he just wanted to know why [the coach] wouldn’t put his daughter in a game,” defendant used profanity repeating, “Why can’t you put her in a game for one f’ing minute?” He called the coach “a bitch,” and said, “You are not the fucking NBA,” and “This is fucking unbelievable.”  We agree that the speech for which defendant was convicted is beyond the reach of the abusive-language prong of the disorderly-conduct statute, and reverse the conviction.

This Court has construed § 1026(a)(3) as reaching only “fighting words,” a category of speech that is not synonymous with threats or tumult. “Fighting words” must be understood in light of the US. Supreme Court’s evolving case law concerning the Constitution’s commitment to protecting even vile, offensive, hurtful, and exceptionally insulting speech. There are no “per se” fighting words. The use of foul language and vulgar insults is insufficient. A likelihood of arousing animosity or inflaming anger is insufficient. The likelihood that the listener will feel an impulse to respond angrily or even forcefully is insufficient. Courts must assess all the relevant circumstances to determine whether the words were likely to result in an imminent violent response.

The provision only reaches speech that, in the context in which it is uttered, is so inflammatory that it is akin to dropping a match into a pool of gasoline. Defendant’s expression here does not fall in this exceedingly narrow category of statements that are reasonably expected to cause the average listener to respond with violence.

Reversed.

Jury trial. Outcome of bench trial on claims for equitable relief reversed because jury trial on legal claims should have come first. Defense of equitable estoppel requires jury trial.


LeBlanc v. Snelgrove, 2015 VT 112 (filed 8/28/2015)


ROBINSON, J. This case arises from a landowner’s replacement of a boathouse on his property . The case includes claims for declaratory and injunctive relief, as well as damages on account of the landowner’s alleged trespass. Plaintiff neighbors challenge the trial court’s conclusions that the landowner was entitled to build the encroaching structure by virtue of a deeded easement and that they cannot prevail in a claim for trespass on account of consent or estoppel. Because the court improperly addressed the issues of consent and estoppel in derogation of the neighbors’ request for a jury trial, we reverse.

At a pretrial conference the day before the jury trial the court indicated that it would first try the boundary issues as a bench trial before having the parties present their other claims to the jury. Three days before the jury portion of the trial, the court orally issued its findings and conclusions from the bench trial as to the location of the boundary line. The court concluded that equitable estoppel prevents the Plaintiffs from now complaining about the design and location of the retaining walls or from arguing that the boathouse easement did not encompass the right to extend the boathouse and its associated retaining walls when necessary to repair or replace the boathouse. The Plaintiffs filed a timely motion for a new trial arguing that the court’s decision from the bench trial exceeded its permissible scope and deprived them of a jury trial. The court denied the Plaintiffs’ motion, reasoning that the Plaintiffs had sought injunctive relief in their complaint and that all of the issues before the court required application of the law, and were thus mixed questions of fact and law properly decided by the court.

On appeal the Plaintiffs renew their argument that the trial court’s approach deprived them of the right to a jury trial in connection with their claims for unlawful mischief, ejectment, trespass, and conversion, in which they sought legal damages as well as injunctive relief. The Plaintiffs argue that the court erred when it decided these issues in a bench trial since both parties demanded a jury trial on all issues triable by a jury, and neither party stipulated to a bench trial on these issues.

This Court has held that entitlement to a jury trial is dependent upon the relief requested. If the relief requested is equitable, no right to a jury trial exists. If the relief requested is legal, then the right to a jury trial attaches. The right to trial by jury attaches to claims traditionally tried in a court of law. In this case, the Plaintiffs have made a claim for damages based on causes of action for ejectment, unlawful mischief, and trespass. Actions for recovery of possession of real property and for damage to property were historically actions at law. Accordingly, the Plaintiffs were entitled to trial by jury on these legal claims.

The Plaintiffs ‘right to a jury trial also includes a right to trial by jury on the factual issues underlying the defense of equitable estoppel. See, e.g., Mellin v. Flood Brook Union School Dist., 173 Vt. 202, 222-23, 790 A.2d 408, 425-46 (2001) (jury entitled to decide facts underlying equitable-estoppel defense); see also Jamison, Money, Farmer & Co., P.C. v. Standeffer, 678 So. 2d 1061, 1067 (Ala. 1996) (holding that because evidence concerning defense of equitable estoppel was in dispute, issue was properly presented to jury); Ala. Power Co. v. Gielle, 373 So. 2d 851, 853 (Ala. Civ. App. 1979) (holding that question of whether plaintiffs’ predecessor had knowledge of utility pole located on subject property was question for jury in resolving defense of equitable estoppel in action for trespass and ejectment); Hunstein v. Fiksman, 615 S.E.2d 526, 528 (Ga. 2005) (“Estoppel is usually an issue of fact to be decided by the jury.” (quotation omitted)); Creech v. Melnick, 495 S.E.2d 907, 913 (N.C. 1998) (“[W]here the evidence raises a permissible inference that the elements of equitable estoppel are present, but where other inferences may be drawn from contrary evidence, estoppel is a question of fact for the jury, upon proper instructions from the trial court.”).

Where a case involves both legal and equitable claims, the jury verdict must come first, after which the court may issue findings on the equitable claims that must be consistent with the jury verdict. See V.R.C.P. 39(d). Reporter’s Notes—1985 Amendment, V.R.C.P. 39(d); Retrovest Assocs., Inc. v. Bryant, 153 Vt. 493, 495 n.1, 573 A.2d 281, 282 n.1 (1990). The trial court’s approach flipped this process.

The court should have first allowed the jury to decide the factual questions that underlay both the legal and equitable claims. In addressing the parties’ equitable claims for relief, the court should have then ensured that its own findings were consistent with the jury’s. Accordingly, the court was not authorized to determine in the first instance that the retaining wall did not constitute a trespass by virtue of any agreement of the parties. Likewise we cannot uphold the trial court’s determination that there was no trespass to the extent that it rests on the court’s application of the principles of equitable estoppel. Therefore we reverse the court’s determination that no trespass occurred.

The trial court’s rulings on the Plaintiffs’ claims for trespass, ejectment, and unlawful mischief are reversed, and those matters are remanded for a new trial consistent with this opinion.

Monday, August 3, 2015

Accident reconstruction. Findings that reject both sides’ experts. Court can take judicial notice of Pythagorean Theorem, but findings based on the theorem are clearly erroneous where underlying diagram was not to scale and there was no evidence of a right angle.

  State v. Wisowaty, 2015 VT 97 [filed 7/24/2015]
SKOGLUND, J. Defendant appeals the decision denying his motions for judgment of acquittal and new trial and the judgment finding him guilty of excessive speed and negligent operation of a vehicle. Both the State and defendant presented their own accident reconstructionist, each of whom used different formulas and inputs for determining defendant’s maximum speed. The judge found defendant guilty but did not rely entirely on either of the experts’ formulas or their inputs. After the judge explained his methodologies from the bench, defendant filed motions for judgment of acquittal and, alternatively, a new trial. The court denied both motions, and this appeal followed.
Defendant argues that the judge relied upon evidence not introduced at trial and that the evidence presented was insufficient to sustain a conviction. We agree that the evidence was insufficient and therefore reverse the trial court’s denial of defendant’s motion for acquittal.

The unusual record before us lays out three distinct configurations of the evidence: that of the prosecution, that of defendant, and that of the trial judge. The judge took pieces of each expert’s data and formulas, and supplemented them with his own estimates and calculations based on the Pythagorean Theorem, ultimately determining that defendant’s top speed was between seventy-five and eighty-four miles per hour.

We first agree with the judge that both experts failed in their proffered attempts at calculating defendant’s speed; thus, defendant’s convictions could not be supported by substantial evidence on the basis of either of those theories.

Findings by a judge-as-factfinder on issues other than the ultimate question of guilt are subject to the “clearly erroneous” standard of review. The trial judge’s calculation of defendant’s speed is a factual conclusion. A factfinder “may draw rational inferences to determine whether disputed ultimate facts occurred,” but those inferences “must add up to more than mere suspicion,” and “the [factfinder] cannot bridge evidentiary gaps with speculation.”

Other courts have condoned a factfinder’s use of the Pythagorean Theorem, but only where there existed reliable evidence of a right angle and the measurements of the two shorter sides of the triangle were sufficiently reliable and precise, based on admitted evidence. We conclude that the judge impermissibly “bridge[d] evidentiary gaps with speculation,” rendering his calculation of defendant’s speed unsound.  

PROOF:
 
The judge attempted to determine the time defendant took to travel 316. 8 feet by first calculating the distance Mr. Yee traveled at 12 miles per hour during that same time.  The judge calculated this distance by applying the Pythagorean Theorem to nearby points labeled on the State’s diagram of the intersection.  But the diagram was not to scale. There was no evidence of a right angle.  The judge’s measurement of at least one of the shorter sides of the triangle was thus conjecture.

Even though he used an accepted mathematical formula, the judge relied upon unfounded assumptions about the lengths and orientations of the two shorter sides of his purported right triangle, and therefore arrived at a clearly erroneous conclusion as to the length of the third side, the judge’s conclusions as to speed were therefore clearly erroneous.


Reversed and remanded for entry of a judgment of acquittal on the charges of excessive speed and negligent operation.

Wednesday, July 22, 2015

Public use of Ancient Road insufficient to prove it to be a public highway.

Kirkland v. Kolodziej, 2015 VT 90 [filed July 17, 2015]

DOOLEY, J. Defendants appeal a decision  granting declaratory judgment in favor of plaintiffs on plaintiffs’ action to quiet title in a road traversing defendants’ land and providing access to plaintiffs’ land. Following a bench trial, the court found that the road had been established formally as a public highway. We conclude that plaintiffs failed to demonstrate that the disputed western segment of Petty Road is a public highway, and reverse.

Petty Road, as laid out in 1821, was described as extending from “the road that leads from Stephen Dutton’s to Solomon Petty’s” to the Springfield town line. The dispute here centers on the western segment of Petty Road . The court acknowledged that “neither party has located a survey, or other recording of proceedings to lay out the road” but found “it likely that the western portion of the disputed road was laid out prior to 1821, and that the records of such official action were either never filed, misplaced, or lost. The trial court therefore concluded that Petty Road is a public highway and granted plaintiffs’ request for injunction requiring defendants to restore the road to its prior condition and refrain from impeding any public passage in the future.

We have identified three possible methods for establishing a public road in Vermont: (1) statutory condemnation; (2) dedication and acceptance; and (3) prescriptive easement. We conclude that Petty Road was not established as a public highway by statutory condemnation or common-law dedication and acceptance, and that as a matter of law it could not be established by prescriptive easement.

Statutory Condemnation. The law in effect when the eastern segment of Petty Road was laid out provided three legal requirements for the creation of a road: (1) an official survey to be recorded in the town clerk’s office; (2) a formal act by the selectboard; and (3) a certificate of opening. We consistently have required proof of such records when considering whether the town undertook the proper statutory formalities in laying out a road. Circumstantial proof, based on public use of the road, that “quite conceivably” the records were lost, is insufficient. Statutory compliance cannot be proved unless the proponent introduces the necessary records as filed in the town office or proves that the records once existed and complied with the statute.

Dedication and Acceptance. Plaintiffs’ case fails the acceptance requirement. Public use alone, no matter how long, is insufficient to create a valid dedication and acceptance. Our case law consistently has required some evidence that the town has assumed the responsibility of maintenance and repair of the highway or otherwise has exercised control over the highway.There was no evidence that the town, as opposed to private landowners abutting the road, provided any improvements, maintenance, or repair. The evidence does not prove unequivocal intent to accept.

Prescriptive Easement. We conclude that the state of our law is that a nonpublic road cannot become public through a prescriptive easement, and we therefore cannot uphold the trial court’s decision based on the theory of prescriptive easement.

Tuesday, July 14, 2015

Indemnity. Dismissal of third party claim as “moot” affirmed, despite loss later sustained by appeal and settlement of primary claim.

The Stratton Corporation v. Engelberth Construction, Inc., 2015 VT75 [Filed May 29, 2015.]
SKOGLUND, J.,This appeal arises from dismissal of third-party claims in a construction contract dispute. Owner sued Engelberth Construction, Inc., the project's general contractor. Engelberth filed third-party complaints for indemnification against its subcontractors. The trial court granted summary judgment to Engelberth on Owner’s claims, finding the claims barred by the statute of limitations. Given its summary judgment ruling, and without objection, the court dismissed Engelberth's third-party claims as moot.

Owner’s appeal was also dismissed pursuant to the parties' stipulation. After notification that Owner and Engelberth had settled on appeal, the court issued an entry order on dismissing all claims of whatever sort asserted by any party in this matter. Engelberth sought to amend the dismissal order to provide that the third-party claims were dismissed without prejudice. The court denied its request, and Engelberth appeals. We affirm.

Engelberth maintains that its settlement with Owner after Owner appealed the summary judgment constituted a cognizable loss for which the third-party defendants were contractually responsible. We disagree.

 It is clear that Engelberth's claims were derivative of Owner’s claims against Engelberth. As we have stated, "[i]f the third-party plaintiff prevails against the principal plaintiff and incurs no liability, the third-party defendant in turn incurs no liability to the third-party plaintiff." Riblet Tramway Co. v. Marathon Elecs.-Avtek Drive Div., 159 Vt. 503, 506, 621 A.2d 1274, 1275 (1993). The trial court determined that Engelberth had no liability to Owner on the statute of limitations. At that point, the court reasonably concluded that Engelberth's third-party claims were moot and should be dismissed.

Rule 41(b)(3) expressly provides that: unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision operates as an adjudication upon the merits. We do not address Engelberth's assertion, raised for the first time on appeal, that a dismissal on mootness grounds is not an adjudication on the merits under Rule 41. Engelberth sought to amend the dismissal order to be "without prejudice," but not for any of the reasons it now advances on appeal, Engelberth raised no timely objection to the dismissal of its claims. "[H]aving slept on its rights," we will not now do for Engelberth "what by orderly procedure it could have done for itself." U.S. v. Munsingwear, Inc., 340 U.S. 36, 41 (1950).

Given the absence of any appeal or any other modification of the underlying decision, it is the law of the case that Engelberth has no liability to Owner, and thus, Engelberth has no basis upon which to assert any third-party claims.


SCOVT note:

May a party who incurs attorney’s fees and defense costs who is not liable to the principal plaintiff recover against a third party on a theory of implied indemnity after prevailing against the plaintiff?

Insurers expressly agree to indemnify against groundless claims. Does the obligation of implied indemnity ever extend this far?

The opinion in Stratton v Engelberth suggests the answer is "no." It quotes Riblet Tramway Co. for a general rule that "If the third-party plaintiff prevails against the principal plaintiff and incurs no liability, the third-party defendant in turn incurs no liability to the third-party plaintiff.” Riblet Tramway Co. v. Marathon Elecs.-Avtek Drive Div., 159 Vt. at 506.

The actual holding of Riblet is based on res judicata.

In Riblet the third party plaintiff’s failure to appeal the court's dismissal of its third party claim became a final adjudication of the claim. The case is very similar factually to Stratton v Engelberth in that the defendant/ third party plaintiff prevailed against the plaintiff on grounds of statute of limitations, and then the court dismissed the third party claim. The Riblet Court said defendant should have opposed the dismissal and, if unsuccessful, appealed.

 The Riblet Court expressly said it had no views as to whether dismissal of the main claim mandated dismissal of the third party claim. 159 Vt. at __ n. 1.

Stratton v Engelberth, likewise, should not be viewed as merits ruling that a defending party who incurs no liability cannot recover fees and costs on a theory of implied indemnity. The ruling is grounded in the failure of Engelberth to raise timely objection to the dismissal of its claims and its failure to appeal.  See also Knappmiller v. Bove, 2012 VT 038 (mem.) (party exonerated on main claim who requested  indemnification for attorney’s fees did not preserve issue because it did not object to in instruction that jury was to reach indemnity claim only if plaintiff prevailed).

Monday, June 29, 2015

Claim preclusion; subject matter jurisdiction. Gravel-extraction activities violated an Act 250 permit. Court had jurisdiction to enforce expired permit

Natural Resources Board Land Use Panel v. Dorr, 2015 VT 1(09-Jan-2015)

MORSE, J. (Ret.), Specially Assigned.  This is an appeal from a judgment of the Superior Court, Environmental Division affirming an administrative finding of the Natural Resources Board that respondents’ gravel-extraction activities violated an Act 250 residential-subdivision permit. Respondents contend the enforcement action and trial court judgment were based on an expired Act 250 permit, and therefore invalid. We affirm.

The claim that Act 250 permit had expired either by its terms or by operation of law—was one that could and should have been raised in earlier administrative and judicial proceedings between the parties. Accordingly, we conclude that the claim is barred.by principles of res judicata.

Respondents further assert that—res judicata notwithstanding—if the permit had expired then the courts were without subject matter jurisdiction over this Act 250 enforcement action, “Subject matter jurisdiction” refers to the fundamental “power of a court to hear and determine a general class or category of cases.” It is a concept easy to confuse with the simple authority to act, and we have, accordingly, been careful to limit the concept in Act 250 and other administrative contexts, where the agency generally exercises limited powers and “virtually any disagreement with its actions can be phrased in jurisdictional terms.” This is not a case where the parties fundamentally “failed to adjudicate the case in the proper statutorily designated administrative tribunal before proceeding to the superior court.” Brace v. Vergennes Auto, Inc., 2009 VT 49, ¶ 16, 186 Vt. 542, 978 A.2d 441 (mem.). Accordingly, we find no reason to exempt respondents’ claim from the general claim-preclusion rules, and affirm the judgment on this basis.


How cited. 

Land use permit upheld. Findings as to as to Criteria 1(D), “Floodways” and 8, “Aesthetics” were not clearly erroneous.

In re Zaremba Group Act 250 Permit, 2015 VT 88 (26-Jun-2015)

SKOGLUND, J.   Neighbors of a plot of land in Chester appeal the environmental division’s decision to grant an Act 250 permit amendment to build a Dollar General store (“the Project”) on that plot.  We affirm.

Neighbors challenge the “Aesthetics”conclusion, based on claimed violation of  “a clear, written community standard intended to preserve the aesthetics” of the area.  A criterion of the Chester Zoning Regulations states that. that all construction of new buildings should adhere harmoniously to the “over-all New England architectural appearance which gives the center of Chester its distinct regional character and appeal.”

The criterion refers to the “center of Chester”—a vague description that we will assume means the historic village center—but the Project is not located in the pedestrian-oriented village center; it is more than a half-mile away in a vehicle-oriented part of the town.  We need not decide whether the reference to “over-all New England architectural appearance” in this provision would provide clear guidance if this project were in the historic village center.  The Project’s immediate surroundings—including a flat-roofed structure containing a gas station, mini market, and liquor store—and the entirety of diverse architecture in the area cannot be said to conform to a discernible “New England architectural appearance.”  These conflicting architectural styles are evidence that the zoning criterion is not a clear community standard intended to preserve aesthetics, at least as applied to the area surrounding the Project.

Wednesday, June 24, 2015

Lost profits not proved by evidence of lost revenue. Blocking access was sufficiently unreasonable and substantial to be a nuisance. Threat to drive up litigation costs was sufficient “malice” to support punitive damages, even if there was no “ill will.”


ROBINSON, J.   This case involves a dispute concerning access to property over a subdivision roadway.  Defendant property owners’ association  appeals a judgment for compensatory and punitive damages and for attorney’s fees awarded for a nuisance affecting the Plaintiff P&B’s restaurant.  We affirm the judgment for P&B on its nuisance claim; uphold the award of punitive damages and attorney's fees; but reverse the award of compensatory damages because of the lack of evidence to support the award.
Nuisance. A private nuisance is a nontrespassory invasion of another's interest in the private use and enjoyment of land. To prove a nuisance, plaintiffs must demonstrate an interference with the use and enjoyment of another's property that is both unreasonable and substantial. An intentional invasion of another's interest in the use and enjoyment of land is “unreasonable” if the gravity of the harm outweighs the utility of the actor's conduct. The standard for determining whether a particular type of interference is “substantial” is that of definite offensiveness, inconvenience or annoyance to the normal person in the community.
The Association installed a guardrail that prevented access to P&B's property from Sunne Village Lane. The Association also put up numerous "Private Lane—Residents Only" signs. Ample evidence supports the court's findings that the blockade caused difficulties for vehicles (especially those towing trailers with snowmobiles), leading to complaints by patrons and lost business and revenue. The erection of the guardrails occurred without warning and just prior to the ski season, which was the busiest time of year for the restaurants. Given these facts, we have no difficulty in upholding the trial court's determination that the level of the Association's interference with P&B's use and enjoyment of its land was sufficiently unreasonable and substantial to be a nuisance.
Punitive damages. The requisite degree of actual malice to support punitive damages may be shown by conduct manifesting personal ill will or carried out under circumstances evidencing insult or oppression, or even by conduct showing a reckless or wanton disregard of one's rights. The trial court concluded that the Association’s board engaged in intentional, unreasonable, bad-faith, and malicious behavior, supporting an award of punitive damages in the amount of $5000. This behavior included insinuating that the Association would drive up litigation costs if P&B did not agree to meet various demands  
The Association argues here that the findings of malice are not supported by the evidence and  that there was no "evidence of personal animus."   Even if the POA lacked any "personal animus" toward P&B, this would not preclude an award of punitive damages, because conduct that is not based upon personal hatred or dislike may nevertheless be malicious—it may be insulting or oppressive, or carried out with reckless or wanton disregard of another's rights.  The findings were sufficient to support the conclusion that the Association’s actions in this case evidenced insult or oppression or were carried out in reckless or wanton disregard of P&B's rights.


Attorney’s fees. The court made this award under 27A V.S.A. § 4-117(a), the fee-shifting provision of the VCIOA, which provides that "[a] declarant, association, unit owner, or any other person subject to this title may bring an action to enforce a right granted or obligation imposed by this title, the declaration, or the bylaws. The court may award reasonable attorney fees and costs."  The Association challenged the claimed attorney's fees, arguing that any legal fees incurred on common-law claims were distinct from the VCIOA claims to which the fee-shifting statute applies. On appeal the Association argues that P&B's VCIOA claims do not revolve around a common core of facts with the common-law claims. We acknowledge that this is a close case, but conclude that the trial court did not abuse its discretion in determining that most of the evidence presented was relevant to all claims.
Compensatory damages. We agree with the Association that the evidence of lost revenues relied upon by the trial court cannot support its finding concerning lost profits.  The trial court here compared P&B's patronage after the Association placed the guardrail across the entrance with P&B's patronage during a comparable period the prior year. But without evidence of the impact of the reduction in patronage on P&B's costs, the court could not reliably quantify the lost profits. We simply do not know what costs, if any, P&B was able to avoid as a result of the drop in covers. On this record, any leap from lost revenues to lost profits is necessarily speculative.  P&B's evidence need not have established its fixed and avoidable costs with "mathematical exactness," but P&B was required to present sufficient evidence to support a reasonable determination of its lost profits. In this case, P&B did not present even generalized evidence that its costs remained stable during the period in question.
Note: It is puzzling, probably because of a failure of advocacy, that the Court did not cite or apply the new punitive damage standards regarding reprehensibility and recklessness announced in Fly Fish Vermont v. Chapin Hill Estates, 2010 VT 33 (Burgess, J.)

Tuesday, June 23, 2015

Action on a judgment not barred by 8-year statute of limitations, because statute was tolled by acknowledgment and partial payment of the debt.

Flex-A-Seal, Inc. v. Safford, 2015 VT 40 (27-Feb-2015)


REIBER, C.J. Plaintiff appeals from the dismissal of its complaint to renew a judgment.. The trial court found the complaint barred by the statute of limitations, 12 V.S.A. § 506. On appeal, Plaintiff argues that:the statute of limitations was tolled by by Defendant’s acknowledgment and partial payment of her debt. We reverse the trial court’s decision.

The statute as amended in 2010, now provides that “[a]ctions on judgments and actions for the renewal or revival of judgments shall be brought by filing a new and independent action on the judgment within eight years after the rendition of the judgment, and not after.” 12 V.S.A. § 506.

In October 2002, the court issued a stipulated judgment order pursuant to the parties’ agreement, granting judgment to Plaintiff against Defendant in the amount of $230,000. After plaintiff later filed a motion for trustee process against earnings, the court in November 2004 issued a stipulated order stating the original judgment amount, the judgment amount with interest as of October 28, 2004, and providing for the suspension of post-judgment interest.

In April 2012, Plainiff filed this action to renew its judgment..The court sua sponte questioned if the action was timely filed. The court ultimately rejected Plaintiff's argument that the relevant final judgment for purposes of 12 V.S.A. § 506 was the 2004 stipulated order rather than the 2002 judgment. The court cited Ayer v. Hemingway, 2013 VT 37, 193 Vt. 610, 73 A.3d 673, where we held a stipulated payment plan was not a new “final judgment” from which a new eight-year statute-of-limitations period began to run. Id. ¶ 18

In light of Ayer v. Hemingway, and Nelson v. Russo, 2008 VT 66, 184 Vt. 550, 956 A.2d 1117 (mem.), the trial court concluded that the common law rule that an acknowledgment of the existence of a debt “has the effect of starting the statute of limitations running anew” no longer applies to judgments. In Nelson, this Court clarified that under 12 V.S.A. § 506, a plaintiff must file a new and independent action to renew a judgment and cannot do so by motion. 2008 VT 66, ¶ 9. The Court reiterated this principle in Ayer, 2013 VT 37, ¶ 15.

Our case law holds that the same tolling rule applicable to contract actions applies to actions on judgment debts,  Olcott v. Scales, 3 Vt. 173, 178 (1831), like the instant case, involved a plaintiff’s attempt to collect a judgment debt. The Olcott court expressly held that in such cases, the acknowledgement of a debt, in terms that admit it to be due, removes the effect of the statute of limitations. 3 Vt. at 178. In Gailer v. Grinnel, 2 Aik. 349, 1828 WL 1161 (1828), the Court similarly held that, in actions of debt on judgment, an acknowledgment of the debt within the statute-of-limitations period removed the statutory bar. Id. at 354 The Court held that:
The defendant’s liability was fixed by the judgment, and as the statute goes upon the presumption of payment after the lapse of eight years, the acknowledgment of the debt within eight years shows that it has not been paid, and thus, by removing the presumption, takes the case out of the statute. The acknowledgment . . . revives the debt ab initio, and the plaintiff recovers, not on the ground of having a new right of action, but that the statute, by reason of the acknowledgment, does not apply to bar the old one.
Id. at 353

Defendant has neither argued nor briefed the question of whether we should overrule Gailer and Olcott in light of the holdings and rationales of Ayer and Nelson. While we note some possible tension among those decisions, we leave to another day, following complete briefing, any consideration of that issue.

As our case law holds that the same tolling rule applicable to contract actions applies to actions on judgment debts, we reverse the court’s decision to dismiss and we remand for further proceedings.

Negligent misrepresentation, economic loss rule, consumer protection. Certifying engineer not liable for failed septic system.

Glassford v. Dufresne & Associates, P.C., 2015 VT 77 (12-Jun-2015)

DOOLEY, J. Plaintiffs appeal a decision denying summary judgment to plaintiffs and granting summary judgment to defendant Dufresne & Associates, P.C. on plaintiffs’ claims of negligent misrepresentation and violation of the Vermont Consumer Protection Act (CPA). The superior court held that plaintiffs’ negligent misrepresentation claim failed because plaintiffs did not see defendant’s certification until the proceedings in this case and therefore did not rely on the alleged misrepresentation. With respect to the CPA claim, the court held that the claim failed because the parties did not contract for a sale of goods or services as required under the CPA. Plaintiffs appealed. We affirm.

Plaintiffs claim only economic losses, which usually are precluded in a tort action. Plaintiffs argued below that their case fits into an exception to the economic loss rule where a special relationship exists between the parties, particularly in the context of professional malpractice. According to plaintiffs, that special relationship was created by defendant’s statutory duty to file a certificate with the Agency. The superior court found the proper framework for plaintiffs’ claim under the common law tort of negligent misrepresentation, as defined in Restatement (Second) of Torts § 552 (1977), which provides a cause of action for “information negligently supplied for the guidance of others.” We previously have adopted this section of the Restatement for claims of negligent misrepresentation, and do so here. We conclude Restatement § 552 governs the claims of negligent misrepresentation and that plaintiffs do not have a valid claim under § 552. The superior court properly granted summary judgment for defendant and properly denied summary judgment for plaintiffs.

Liability for negligent representation under § 552 (2) attaches “only to those persons for whose benefit and guidance it is supplied.” Restatement § 552 cmt. h. Plaintiffs are homeowners who purchased their home direct from the builder. The builder hired defendant to certify that the on-site mound sewage disposal system constructed for the home satisfied state permitting requirements. Plaintiffs were not the intended recipient of the certificate. The certificate was provided to the Agency for determining compliance with the permitted design and was not intended for use by homebuyers in deciding whether or not to affect a purchase. That homebuyers, like plaintiffs, may at some point obtain the information is merely incidental and does not create a cause of action under subsection (2).

Liability for negligent representation under § 552 (3) attaches to “one who is under a public duty to give the information” and extends to loss suffered by any of the class of persons for whose benefit the duty is created.” Plaintiffs’ claim fails under subsection (3), because plaintiffs demonstrated no actual, or direct, reliance on the certificate.

A negligent misrepresentation claim requires a plaintiff to rely directly on the defendant’s misrepresentations and not on a third party’s reliance on such information. Plaintiffs never saw the certificate until after the sewage disposal system failed. The broadened liability under the public duty exception does not eliminate this need for direct reliance.

It is true the plaintiffs’ attorney viewed the certificate and prepared the title report, and plaintiffs relied on the marketability of the title in their decision to close on the transfer of title to their home. But the closing attorney’s interest in defendant’s certificate was based entirely on his opinion that the existence of defendant’s certificate was a requirement of good title under Bianchi v. Lorenz. If the attorney’s reliance on the certificate could be imputed to plaintiffs, it would only be reliance that plaintiffs obtained good title, not reliance sufficient to satisfy § 552. Actual reliance, as required under § 552, is a subjective state of mind, focusing on what a plaintiff “considered to be important in deciding to enter into the transaction in which the misrepresentation occurred,”

Under the CPA a plaintiff may recover damages only from the “seller, solicitor, or other violator.” § 2461(b). Relying on State v. Stedman, 149 Vt. 594, 547 A.2d 1333 (1988), as well as decisions from other jurisdictions, we have held that a person cannot be liable as an “other violator” unless he or she directly was involved in the transaction that gave rise to liability. Knutsen v. Dion, 2013 VT 106, ¶¶ 19-20 195 Vt. 512, 90 A.3d 866,. In Knutsen, we rejected plaintiffs contention that the Vermont Association of Realtors was an “other violator” because it placed a form which contained unfair provisions on its website.

Here there is no allegation that defendant had any interaction with plaintiffs. Defendant did not supply the permit to plaintiffs or any other prospective purchaser. The law required that the certificate be sent only to the government agency that issued the permit. There is no allegation that the seller used the certificate as part of its sales pitch, and no allegation that defendant had any part in the sales. The certificate was unrelated to the sale. The Knutsen standard for CPA liability requires that a person be directly involved in the transaction that gives rise to the claimed liability. That standard is not met.

ROBINSON, J., dissenting. Because I believe that the majority draws an artificial distinction between the significance of the certifications for marketable title and their significance in verifying that the wastewater system has been inspected and was constructed as designed, and because I do not believe the majority has afforded plaintiffs the benefit of favorable inferences from this summary-judgment record, I respectfully dissent.

If the lawyer had known the statements were inaccurate, and for purposes of this summary-judgment motion we assume that they were, a factfinder could most certainly infer that the lawyer would not have advised the plaintiffs to proceed without taking further steps to ensure that the wastewater system was properly constructed. By inferring as a matter of law that the truth of the statements in the certificate was of no consequence to plaintiffs’ lawyer—who had a fiduciary duty to them in connection with this transaction—the majority has failed to draw reasonable inferences in favor of the nonmoving party.







A Note on recovery for economic loss based on fraudulent or negligent misrepresentation.

Section 552 of the Restatement permits recovery for “pecuniary loss” caused by justifiable reliance upon false information negligently supplied for the guidance of others in their business transactions by one acting in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest.

On its face the Restatement allows recovery against both professsionals and non-professionals for certain negligently caused economic loss. Fraud is another tort that permits recovery for economic loss, without physical injury.

Some have argued that the economic loss rule trumps both Section 552 and fraud cases generally. R.C. Anzivino, The Fraud in the Inducement Exception to the Economic Loss Doctrine, 90 Marq. L. Rev. 921, 931-34 (2007).

Without controlling Vermont precedent the local federal court has allowed fraud in the inducement and constructive fraud claims to proceed. Sherman v. Ben & Jerry's Franchising, Inc., No. 1: 08-CV-207 (D. Vt. Aug. 10, 2009); Mount Snow, Ltd. v. Alli, No. 2: 12-cv-022-wks (D. Vt. May 30, 2012).
The local federal court, in contrast, on three occasions has applied the economic loss doctrine to bar negligent misrepresentation claims involving only economic loss, Hunt Constr. Group, 2008 U.S. Dist. LEXIS 93754, at *15-16; Vt. Country Foods, Inc. v. So-Pak-Co, Inc., No.1 :02-CV-83 (D. Vt. Jul. 28, 2004) (unpublished order), aff’d, Vt. Country Foods, Inc. v. So-Pak-Co., No. 05-3429, 170 Fed. Appx. 756 (2d Cir. 2006) (summary order); City of Burlington v. Zurn Indus., 135 F. Supp. 2d 454,461-62 (D. Vt. 2001).

The Second Circuit certified this issue to the Vermont Supreme Court but the case settled without a ruling. Hunt Construction Group, Inc., v. Brennan Beer Gorman / Architects, P.C..  607 F.3d 10 (2d Cir 2010) ( certifying the question, "Does the economic loss doctrine apply to claims of negligent misrepresentation?")  

Today, the Glassford Court implicitly holds the economic loss rule does not preclude a negligent misrepresentation claim. 

The Court mentions the economic loss rule and its professional services exception, and then analyzes and strictly confines the potential liability of the defendant engineer to the bounds of the Restatement § 552. It refuses to examine the potentially broader tort liability for breach of professional duty (malpractice). 

This is a consistent pattern. The Court has never expressly applied the "professional services" exception to the economic loss rule to allow recovery in tort for economic loss. See Hunt Const. v. Brennan Beer Gorman/Architects, 607 F.3d 10 ( 2nd Cir 2010)(“we know of no case in which the Vermont Supreme Court has actually found the exception to apply”); see, e.g., Walsh v. Cluba, 2015 Vt 2, ¶ 30 (refusing to apply exception to allow owner to recover from occupant where no professional relationship such as as doctor-patient or attorney-client exists); EBWS, LLC v. Britly Corp., 2007 VT 37, ¶¶ 31–32, 181 Vt. 513, 524–25, 928 A.2d 497, 508 (design build contractor not liable for economic loss due to negligent design because it did not provide specialized professional services); Long Trail House Condo. Ass’n v. Engelberth Constr., Inc., 2012 VT 80, ¶ 22, 192 Vt. 322, 59 A.3d 752 (general contractor not liable in tort for economic loss because it was hired to perform the services of a contractor, not that of an engineer, architect or other professional); Wentworth v. Crawford & Co., 174 Vt. 118, 127 (2002) (provider of vocational rehabilitation services hired by employer not within exception because plaintiff failed to "identify any professional standards to which entities like [the defendant] must adhere"); Springfield Hydroelectric Co. v. Copp, 172 Vt. 311, 316, 779 A.2d 67, 71 (2001 ) (employees of the power exchange "did not hold themselves out as providers of any licensed professional servic.").