SCOVT affirms punitive damage award against landlord; reverses and remands compensatory award for further findings

Soon K. Kwon v. Eric Edson and Dina Well, 2019 VT 59 [filed 8/23/2019]

CARROLL, J. In this landlord-tenant dispute, following a bench trial, the court granted tenant Edson damages to compensate him for work he performed on landlord’s properties and tenant Well compensatory and punitive damages for breach of the implied warranty of habitability and illegal eviction.

Landlord appeals, arguing that the court erred in (1) finding that there was an oral rental agreement between the parties and that defendants were tenants; (2) awarding rent for only a portion of the period tenants occupied the property; (3) awarding tenant Edson damages because the claim was not properly pled; and (4) awarding tenant Well punitive damages.

Tenants cross appeal, arguing that the court abused its discretion in finding there was an agreement to pay rent once the building was compliant with the housing code and erred in awarding landlord back rent based on a theory of unjust enrichment. We affirm in part and reverse and remand in part.

  Unjust enrichment is “based on an implied promise to pay when a party receives a benefit and the retention of the benefit 10 would be inequitable.”  DJ Painting, Inc. v. Baraw Enters., Inc., 172 Vt. 239, 242 (2001).  Recovery under this theory depends on “whether, in light of the totality of circumstances, it is against equity and good conscience to allow defendant to retain what is sought to be recovered.”  Id. at 243 (quotation omitted).  The existence of a contract does not preclude recovery pursuant to an unjust-enrichment claim, but the existence of a contract and the terms of that contract are “highly relevant in determining whether denying further payment . . . is unjust.”  Id.

  

We conclude that the evidence supports the court’s finding that the parties entered an oral agreement allowing tenants to stay in landlord’s apartment rent-free for some portion of time. However, because the court’s findings as to the terms of the contract are not supported by the evidence, we cannot determine if a remedy for unjust enrichment would be appropriate in this case. Therefore, the award of back rent and electricity to landlord is reversed and the matter is remanded for the court to make new findings based on the evidence presented at trial as to the terms of the parties’ agreement. Based on these findings, the court can determine if damages are appropriate either pursuant to an oral contract or as an equitable remedy for unjust enrichment.

  

We affirm the court’s award of damages to tenant Edson for the work he performed for landlord, concluding that the issue was tried by implied consent. Under the circumstances, the breach-of-contract claim was tried by “implied consent of the parties” and therefore should be treated as if it “had been raised in the pleadings.”  V.R.C.P. 15(b)

Finally, we conclude that an award of punitive damages was allowable as damages for breach of the warranty of habitability and affirm the award of punitive damages to tenant Well. There was sufficient evidence of willful and wanton conduct for the court to make an award of punitive damages.

• The trial court found that after being notified about habitability issues in the apartment, landlord took far more than a reasonable time to address those issues. See 9 V.S.A. § 4458(a) (allowing tenant to recover damages where landlord fails to make repairs “within a reasonable time”).
•  Landlord took seven days to fix the heat issue when a reasonable amount of time was two days.
• Landlord took nine days to address the lack of water when a reasonable time was twenty-four hours.
• Moreover, landlord did not offer to pay for tenant Well to stay in a hotel room while the apartment was not habitable until he was told by code enforcement that he had to do so.
• Landlord also used propane heaters in the basement of the apartment, which posed a serious fire hazard and a risk of carbon-monoxide poisoning.
• Landlord fraudulently represented to the city that the apartment was not occupied so he could avoid providing tenant with lead-paint notices.
•  Finally, landlord resorted to self-help by having Well’s car towed on two occasions to force her out of the premises without a court eviction order while the eviction proceedings were pending.

These facts are sufficient to show willful and wanton conduct and support an award for punitive damages

How cited

Pre-eviction notice is required under mobile home parks act.

Shires Housing, Inc. v. Brown,2017 VT 60 [filed 7/21/2017]

EATON, J. This interlocutory appeal arises out of a mobile home park eviction in which landlord, Shires Housing, Inc., failed to provide tenant, Carolyn Brown, with written notice of tenancy termination before filing for eviction under the Mobile Home Parks Act. The trial court denied defendant’s Vermont Rule of Civil Procedure 12(b)(6) motion to dismiss, ruling that 10 V.S.A. § 6237(a)(3) contains an exception to the notice requirement. Because we conclude that the relevant provision of the Mobile Home Parks Act is ambiguous and because the available tools of statutory interpretation all indicate that the Act requires pre-eviction notice, we reverse.

SKOGLUND, J., dissenting. A co-tenant engaged in drug activity in tenant’s mobile home; this illegal activity substantially violated the lease for the lot where tenant’s mobile home is located. Subsequently, and without providing tenant with written notice of the intent to initiate eviction proceedings, landlord commenced eviction proceedings by filing a complaint against tenant in superior court. Landlord’s action was supported by 10 V.S.A. § 6237(a), which  demonstrates a plain legislative intent to dispense with notice when a leaseholder commits a substantial violation of the lease terms. I dissent

Landlord/ tenant. SCOVT affirms no-pet policy. Although tenant was entitled to an emotional assistance animal, reasonable accommodations did not extend to the specific animal .

Gill Terrace Retirement Apartments, Inc. v. Johnson, 2017 VT 88 [filed 10/6/2017] 

SKOGLUND, J. Tenant Marie Johnson appeals the trial court’s conclusion that she violated two material terms of her residential rental agreement: a “no-smoking” policy and a “no pets” policy. We affirm based on the no-pets violation. The court did not err in concluding that tenant was not entitled to a reasonable accommodation for a specific emotional support animal. Given our holding, we find it unnecessary to address whether the court erred in finding that tenant violated the no-smoking policy

We acknowledge tenant’s attachment to Dutchess and her need for an emotional support animal, but the court properly weighed the evidence regarding Dutchess’s aggressive behavior against landlord’s concerns for the safety and wellbeing of the other residents. As a result, we conclude that the court did not err in affirming landlord’s denial of tenant’s reasonable accommodation request because the evidence established that Dutchess posed a threat to others and that Dutchess would cause substantial physical damages to the property.. We affirm the court's conclusion that, although tenant was entitled to an emotional assistance animal, reasonable accommodations did not extend to the specific animal Dutchess.

 Affirmed.

Landlord tenant. Termination of long-term ground lease for waste. Trial court cannot balance the equities and award damages in lieu of writ of possession.

Mongeon Bay Properties, LLC v. Mallets Bay Homeowner's Association, 2016 VT 64  (filed June 10, 2016)

ROBINSON, J. This case calls upon us to determine whether, and under what circumstances, a court may decline on equitable grounds to enforce a provision in a long-term ground lease giving the lessor the right to terminate the lease and reenter the premises in the event of a default. Plaintiff MBP sued defendant Association seeking to void a multi-year ground lease for property abutting Lake Champlain on account of alleged breaches of the covenants in that agreement.  After a bench trial, the trial court concluded that the Association had violated its obligations under the lease by failing to reasonably maintain the embankments abutting Lake Champlain to protect them from erosion. However, the court declined to enforce the forfeiture clause in the lease against the Association, and awarded MBP damages to enable it to undertake the necessary restoration and bank protection. MBP appeals the trial court's award of damages in lieu of forfeiture. We reverse the court’s refusals to declare termination of the lease and to issue a writ of possession to MBP, and remand for reconsideration of MBP's remedy.

The trial court explained that the primary interest of the lessor under a long-term ground lease is return of the land itself at the end of the lease in substantially the same condition as when the lease was initiated, absent "normal wear and tear" that would reasonably be expected over the forty-year lease term. The trial court concluded that the Association's failure to adequately address lakeside erosion, causing substantial injury to the leased property, amounted to "waste."  Despite its ruling in MBP's favor the court concluded "lease forfeiture here would be especially inequitable, and a sanction entirely out of proportion to the lease violations." Concluding that an award of damages for remediation would afford adequate relief, the court awarded MBP a judgment for $135,000—the expected cost of remediation and restoration of the bank.

MBP contends that the trial court lacked the authority to conduct the kind of equitable balancing that it undertook in this case and that the trial court should have enforced the terms of the lease. The ground lease provided, "in the event that an Event of Default shall have occurred, [and] upon issuance of a writ of possession, the rights of the Lessee . . . shall immediately cease and become void." It further stated, "[i]f any Event of Default shall have occurred and be continuing, whether or not the term of this lease shall have been terminated pursuant to the Lease, the Lessor may enter upon and repossess the Land or any part thereof pursuant to Vermont law."

Although the law disfavors forfeiture clauses, this Court has never declined to enforce a contractual forfeiture provision when the landlord timely invoked the forfeiture right. This is a case of first impression insofar as the Association urges us to rely on our general policy disfavoring forfeitures to authorize the trial court to invoke general equitable considerations in declining to enforce a contractual agreement providing for forfeiture in the event of default, even though the lessor timely invoked the clause and elected termination.  We decline to do so for several reasons.

 First, our precedent does not support setting aside clearly applicable, contracted-for remedies. Second, the Restatement provides that termination by the landlord is an available remedy for waste as long as landlord gives tenant opportunity to restore leased property to its former condition before terminating lease. See Restatement (Second) of Property: Landlord & Tenant § 12.2(2).  Finally, our statutes contemplate the ejectment of tenants on the basis of a breach of a stipulation contained in a lease. 12 V.S.A. § 485.

For these reasons, we conclude on the basis of the trial court's findings that MBP was entitled to terminate the ground lease as a matter of law, and is entitled to a writ of possession.

Reversed and remanded for determination of a remedy in light of the above.

SCOVT NOTE. For the case after remand see Mongeon Bay Properties v. Mallets Bay, 2017 VT 27(Reversed for failure to exercise discretion. Trial court had discretion to stay writ of possession for at least a short period notwithstanding termination of lease and Court’s earlier mandate directing change of possession.)

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.

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.

Commercial lease. Defective eviction notice means “wrongful eviction” and forfeiture of right to rent or liquidated damages.

Vermont Small Business Development Corp. v. Fifth Son Corp., 2013 VT 7 (Dooley, J.)
Landlord appeals a partial summary judgment order concluding that his eviction of tenant from a property was wrongful, as well as the trial court’s ruling on a post-trial motion that tenant was not liable to landlord for rent that accrued post-eviction. Because landlord’s notice of default was defective, and because a wrongful eviction releases a tenant from liability for rent accrued post-eviction, we affirm.

Our law is clear on the necessity of strict compliance with terms in a lease in order to effectuate an eviction: The time, mode and manner of notice of termination must conform to the agreement. With respect residential leases, we require “punctilious compliance with all statutory eviction procedures, including notice provisions. There is no reason to require less “punctilious compliance” with terms of a lease providing for notice in the nonresidential context.

The notice of default was defective in two ways. First, although the terms of the restaurant lease clearly require lessor to “specify[] the occurrence giving rise to [the] Event of Default,” it failed to do so. Second, although the restaurant lease provides that the notice must “stat[e] that this Agreement and terms hereby demised shall expire and terminate on the date specified in such notice,” lessor did not specify any such date. (Emphasis added.) The lease states that the date of termination must be “at least twenty (20) days after the giving of such notice.” (Emphasis added.) We cannot read that language as setting the date of termination at twenty days after the date of the notice.

Because the notice of termination of the restaurant lease was defective, we affirm the trial court’s finding on summary judgment that lessor’s eviction of lessee from the restaurant was wrongful.

Because lessor did not properly terminate the tenancy, we uphold the trial court decision that lessor cannot collect post-eviction rent, whether labeled as such or as liquidated damages.

SCOVT NOTE: In Panagiotidis v  Galanis, 2015 VT 134 the Court refused to extend the requirement of punctiolous compliance to the manner of notice, as opposed to the contents, where the manner of notice given is actually more certain.

How cited

Torts: implied warranty of habitability does not protect tenant’s automobile from falling ice and snow.

Weiler v. Hooshiari,  2011 VT 16 (Burgess, J.)

 Landlord appeals from a judgment in favor of his former tenant finding that landlord violated the implied warranty of habitability when heavy snow and ice fell from the roof of tenant’s residence onto her parking place, destroying her car.  We hold that the implied warranty of habitability does not protect tenant’s automobile and therefore reverse.

The warranty of habitability promises that the landlord “will deliver over and maintain, throughout the period of the tenancy, premises that are safe, clean and fit for human habitation.”  9 V.S.A. § 4457 (a); Hilder, 144 Vt. at 159, 478 A.2d at 208.. No jurisdiction extends the warranty of habitability beyond essential sanitation and tenant safety. The warranty does not extend to loss of personal property.

In Favreau v. Miller, we declined to extend the implied warranty of habitability to personal injuries.  156 Vt. 222, 591 A.2d 68 (1991).  Favreau recognized that remedies at law already exist for personal injuries and that “the concepts of tort and negligence law provide the more straightforward way to describe the respective duties and liabilities of the parties.”  Id. at 229, 591 A.2d at 73.  We specifically declined to “do away” with the principles of tort-based claims for bodily injury in favor of recovery of all damages stemming from a breach of lease regardless of fault.  Id. at 230, 591 A.2d at 73.  

The precepts of Favreau are applicable here. Claims for personal injury or property damage sound in tort, typically in an action for negligent breach of a duty of care, and depend on comparative degrees of fault.  The Restatement confirms that, in addition to a breach of the implied warranty of habitability, a tenant must show the landlord “failed to exercise reasonable care to repair the condition,” a negligence standard.  Restatement (Second) of Property: Landlord and Tenant § 17.6.  

Plaintiff did not plead negligence.

Attorney’s fees awarded to both landlord and tenant, although net amount of judgment was against tenant and tenant did not recover on one of two counterclaims

Kwon v. Eaton, et al. (2009-367) (06-Aug-2010) 2010 VT 73 (mem.)

Landlords appeal the Superior Court’s decision to award attorney’s fees to tenants who established a habitability violation. Landlords contend that because they recovered a net judgment of $8,071.50 and tenants did not recover any net sum, landlords alone should be entitled to receive attorney’s fees. We affirm

The plain language of 9 V.S.A. § 4458(a) does not require a tenant to establish that it was “the prevailing party.” Rather, it grants attorney’s fees to a tenant when “the landlord fails to comply with the landlord’s obligations for habitability.” The attorney’s fee award to tenant is supported by the jury’s verdict that landlords violated the warranty of habitability, even though tenant did not recover damages on their consumer fraud claim. The two theories pursued by tenants involved essentially the same operative facts and were overlapping. See Elec. Man, Inc. v. Charos, 2006 VT 16, ¶ 10, 179 Vt. 351, 895 A.2d 193 (attorney’s fee award should not be apportioned based on recovery on each claim when claims at issue share common core of facts); L’Esperance, 2003 VT 43, ¶ 24 (affirming attorney’s fee award for consumer-fraud claim, including time spent on alternative claims, when alternative claims arose out of same transaction).