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.”

Post and Beam Equity Group, LLC  v. Sunne Village Development Property Owners Association, 2015 VT 60 [Filed May 15, 2015.]

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.)

Contract damages (lost profits) not proved with “reasonable certainty.”

Madowitz v. The Woods at Killington Owners’ Association, Inc., 2014 VT 21 (28-Feb-2014)

DOOLEY, J. Amherst Realty appeals a decision of the superior court granting summary judgment to The Woods at Killington Owners’ Association on Amherst Realty’s claim of breach of contract based on the Association’s alleged interference with its development rights at The Woods at Killington. The superior court held that because Amherst Realty was a new business with no history of profits, its losses were too speculative and it could not recover lost profits. On appeal, Amherst Realty urges us to abandon or modify the way we apply the reasonable certainty rule to new businesses and argues that, even if we apply our existing law, it is not a new business and other factors should control.  We affirm.

The rule is clearly established in Vermont that breach-of-contract damages must be proved with “reasonable certainty.” Ferrisburgh Realty Investors v. Schumacher, 2010 VT 6, ¶ 22, 187 Vt. 309, 992 A.2d 1042; see Restatement (Second) of Contracts § 352 (1981) (“Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty.”). Such damages therefore cannot be based on mere “speculation and conjecture.” Pinewood Manor, Inc. v. Vt. Agency of Transp., 164 Vt. 312, 318, 668 A.2d 653, 657 (1995); see also Hedges v. Durrance, 2003 VT 63, ¶ 12, 175 Vt. 588, 834 A.2d 1 (“An injury based on speculation about uncertain future events is no injury at all.”); Bourne v. Lajoie, 149 Vt. 45, 53, 540 A.2d 359, 364 (1987) (rejecting plaintiff’s damages claim for a lost opportunity as “based only on her speculation that she would have been able to sell the property, rather than on evidence of an actual offer from a prospective purchaser which she was unable to pursue”).

Courts rely upon the reasonable certainty standard when a business is seeking damages for lost profits. See Berlin Dev. Corp. v. Vt. Structural Steel Corp., 127 Vt. 367, 372-73, 250 A.2d 189, 193 (1968); see also Restatement (Second) of Contracts § 352 (1981) (“The main impact of the requirement of certainty comes in connection with recovery for lost profits.”). We explained our rule in Berlin Development Corporation: “The general rule is that evidence of expected profits from a new business is too speculative, uncertain, and remote to be considered and does not meet the legal standard of reasonable certainty.” 127 Vt. at 372, 250 A.2d at 193. Consequently, “recovery for lost profits is not generally allowed for injury to a new business with no history of profits.” Id.

We need not address Amherst Realty’s arguments regarding the new business rule because Amherst Realty faces a more fundamental barrier to recovery of business profits, which is that any such profits are entirely speculative.

The superior court ruled that the Association could not be liable for opposing the extension of the Act 250 permit and Amherst Realty has not contested this ruling on appeal.  Thus the only damages at issue relate to construction that would have been completed by January 1, 2000 under the existing permit. One of the facts admitted by Amherst Realty was that “Plaintiff’s calculation of lost profits . . . do not include any units constructed before January 1, 2000.”  Based on the record, it is entirely speculative that Amherst Realty would have completed, or even started, any construction before the Act 250 permit expired on January 1, 2000.

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.