Consumer Protection Act does not apply to sale of a business because Act requires a transaction “in commerce,” i.e. the consumer marketplace. Restitution of consideration is an alternate to lost profits as measure of damage for breach of noncompetition agreement

Foti Fuels, Inc. v. Kurrle Corporation, 2013 VT 111 (13-Dec-2013)

REIBER, C.J. Plaintiff Robert Foti sold most of his fuels business to defendant James Kurrle and agreed to sell gasoline to defendant through his retained wholesale distributorship. When their business relationship soured after several years, plaintiff sued defendant for one month’s nonpayment of gasoline and other claims. Defendant counterclaimed for breach of contract, breach of the covenant of good faith and fair dealing, and violation of the Vermont Consumer Fraud Act (CFA), all arising from his original purchase of plaintiff’s business. Defendant now appeals the court’s judgments as a matter of law on these counterclaims in favor of plaintiff. The trial court held that there was no sufficient evidentiary basis for the jury to find that the transaction occurred “in commerce,” as defined by the CFA. It also held that failure to establish lost profits is fatal to a breach of contract claim based upon an alleged violation of a non-competition agreement. We affirm in part and reverse in part.

We conclude, as the trial court did, that the CFA does not apply to this transaction as a matter of law. The CFA does not define “in commerce,” and our case law interpreting the term is limited. We hold that the “in commerce” requirement narrows the CFA’s application to prohibit only unfair or deceptive acts or practices that occur in the consumer marketplace. To be considered “in commerce,” the transaction must take place “in the context of [an] ongoing business in which the defendant holds himself out to the public.” Further, the practice must have a potential harmful effect on the consuming public, and thus constitute a breach of a duty owed to consumers in general. In purely private transactions, remedies available through well-established principles of contract, tort, and property law are adequate to redress wrongs.

Here, the parties’ transaction does not constitute a transaction “in commerce” for CFA purposes because it did not occur in the consumer marketplace. First, plaintiff held his offer out to defendant only, not to the public at large. Second, the transaction did not involve products, goods or services purchased or sold for general consumption, as those terms are generally understood, but rather the sale of an entire business from one party to another.

Consequential damages are merely one way to determine a remedy in a breach of contract action. In this case, we agree with the trial court that defendant failed to establish consequential damages with the type of specificity that would permit a fact finder to make an appropriate and rational award. Restitution may be the most appropriate where consequential damages, such as lost profits, are speculative and thus difficult to establish. We hold that defendant is entitled to claim the return of the consideration as an alternative form of contractual relief if the jury concludes that plaintiff breached the terms of the non-competition agreement. In light of the potential remedy of the consideration refund, we hold that the trial court erred in granting plaintiff’s motion for judgment as a matter of law on defendant’s claims arising from the non-competition agreement and therefore reverse and remand on this issue.

Affirmed as to defendant’s counterclaim under the Vermont Consumer Fraud Act; reversed and remanded with respect to the trial court’s grant of judgment as a matter of law on defendant’s counterclaims for breach of contract and breach of the covenant of good faith and fair dealing.

Restitution for Mutual mistake. Neither negligence nor imputed knowledge on part of plaintiff is a defense if there is an actual mistake and circumstances show unjust enrichment.

 Dover Corp. v. First Wisconsin Mortg. Trust, 139 Vt. 217, 425 A. 2d 97 (1980).

Plaintiff requested restitution based on a mutual mistake of fact relating to tax pro-rations at a closing. The trial court concluded that defendants had been unjustly enriched, and awarded $19,620.58 plus interest, reflecting the credits given defendants because of the mutual mistake as to the taxable year. Defendants appeal. We affirm.

Plaintiff, Dover Corporation, purchased the Mt. Snow ski area from defendants for a specific amount, subject to certain closing adjustments. The parties agreed to prorate the sewage taxes for the taxable year 1977 as of the date of closing. At the closing August 10, 1977,  defendants' agent represented that the sewage taxes had been paid in full for the fiscal year April 1, 1977, to March 31, 1978. Based on this understanding, the sewage taxes were prorated so that defendants received a credit for those taxes paid by them for the period from the date of closing to March 31, 1978.  However in fact the tax year was from January 1, 1977 to December 31, 1977, and the taxes were paid only through June 30, 1977.

Defendants challenge the court's conclusion that plaintiff was mistaken as to the proper taxable year, because  Plaintiff had received a title certificate from a local attorney noting, correctly, that the taxable year for sewage assessments ran from January 1, 1977, to December 31, 1977. Defendants argue that the knowledge of plaintiff corporation controls the issue of mistake and that the court's finding that plaintiff had received the correct facts before the closing adjustment precludes a claim of mistake.

"[A] mistake is an unintentional act or omission arising from ignorance, surprise, imposition or misplaced confidence, and it exists when a person under some erroneous conviction of law or fact does or omits to do some act which, but for the erroneous conviction, he would not have done or omitted." Ward v. Lyman, 108 Vt. 464, 472, 188 A. 892, 896 (1937). See also Restatement of Restitution § 6 (1937). The knowledge which may have been imputed to plaintiff from plaintiff's attorney is not the issue. Certainly here we have an example of misplaced confidence in the mistaken opinion of defendants' agent. We find no error.

Defendants further argue that the trial court abused its discretion in granting relief despite plaintiff's lack of care and vigilance. But negligence of the party injured should not prevent a court from correcting a mutual mistake of fact. Ward v. Lyman, supra. See also Restatement of Restitution § 59 (1937). Whether a mistake is to be corrected depends upon the circumstances of the case. Here defendants were found to be unjustly enriched and plaintiff alone would suffer injury if relief were not granted. We think the case affords a solid ground for relief.

Judgment affirmed.