Economic-loss rule applies to bar tort claims for injury to property that is the subject of a contract between the parties.

Walsh v. Cluba, 2015 VT 2 [Filed February 13, 2015]


SKOGLUND, J. This case concerns a dispute over damage to a leased commercial space. The jury awarded plaintiff, landlord David Walsh, just under $11,000 in damages attributable to defendant, tenant Frank Cluba, but the court dismissed landlord's contract and tort claims against defendant Good Stuff, Inc., a business formed by Cluba and his partner that had possession of the subject property. We affirm.

The trial court granted Good Stuff summary judgment on contract claims, ruling that Good Stuff had not signed the lease and that Walsh had failed to point to any post-lease writing or action that could have bound Good Stuff to the lease. The court stated that the successor liability doctrine was inapplicable to this case, and that Walsh had abandoned his ratification theory by neither raising it nor offering facts to support it in his response to defendants' summary judgment motion. Accordingly, the court concluded that "[a]ll contractual claims against Good Stuff must be dismissed.”

At trial the court granted Good Stuff's Rule 50 motion, ruling that the economic-loss rule precluded the tort claim because the dispute was completely covered by Walsh's and Cluba's contractual relations and because the parties' duties were defined by the contract, which required the tenant to leave the premises in the condition in which he took them.

Walsh first argues that the trial court erred by dismissing his contractual claims against Good Stuff. We decline to consider the argument. The court declined to consider the ratification argument on the basis that it had neither been briefed nor supported by evidentiary material in Walsh's response to defendants' motion for summary judgment, in which defendants asserted that Walsh knew he was contracting solely with Cluba, made no attempt to bind Good Stuff to the lease agreement. Walsh made the tactical decision to abandon his contractual claims and instead rely on a negligence claim of liability and pointedly did not challenge the trial court's ruling below in his motion to clarify.

Walsh next argues that the court erred in barring his negligence claim against Good Stuff because he was claiming property damage as the result of Good Stuff's actions. Walsh alleged that "[i]n the process of vacating the premises, the Defendants negligently damaged them quite extensively which inhibited the Plaintiff from reletting the premises for some time, while repairs were made." Walsh sought a judgment that "the Defendants are liable for the cost of repairing the damages to the Lease Premises negligently inflicted by them, the loss of rentals during the period of repair, and other consequential damages resulting therefrom."

The economic-loss rule "maintain[s] a distinction between contract and tort law" by "prohibit[ing] recovery in tort for purely economic losses.” Negligence actions are generally limited to unanticipated physical injury, while contract law allows parties to protect themselves through bargaining.

Injury to the product or property that is the subject of a contract is generally considered a disappointed economic expectation for which relief lies in contract rather than tort law. Thus, the economic-loss rule generally applies to bar tort claims when the alleged damage is to property that is the subject of a contract between the parties. The determining factor in deciding whether to apply the economic-loss rule is not whether privity exists but rather whether there is "a duty separate and apart from a contractual duty.”

Walsh sought damages to his commercial property that was the subject of the lease agreement between him and his tenant, Cluba. Good Stuff occupied the property as the result of Cluba being its president and director and having signed the lease with Walsh. Thus, although Walsh and Good Stuff were legal strangers, any duty Good Stuff had concerning the subject property was established by virtue of the lease agreement. Here, the alleged tort duty was plainly interwoven with the subject contract—indeed, the contract was the source of the duty. Under these circumstances, the trial court did not err in dismissing Walsh's negligence claim based on the economic-loss rule.

Given the unique circumstances of this case, the trial court did not err in dismissing Walsh's negligence claim against Good Stuff under the economic-loss rule.


ROBINSON, J., concurring and dissenting. The majority expands the so-called economic-loss rule by applying it to claims resting on physical damage to property and by implying a presumptive prospective waiver of tort claims whenever parties assume corresponding contractual duties. In so doing, it misapprehends the rationale for and scope of the rule, further muddying an already confused area of law.

This Court has long recognized that the "economic losses" to which the economic-loss rule applies are intangible economic losses, and do not include losses accompanying physical harm to persons or property. Restatement (Third) of Torts: Liab. for Econ. Harm § 2 ("`[E]conomic loss' is pecuniary damage not arising from injury to the plaintiff's person or from physical harm to the plaintiff's property.”). This simply isn't an "economic-loss" case, in which a plaintiff is seeking a tort remedy for a purely economic loss. He does not seek damages for "economic loss without physical injury," or "absent some accompanying physical harm."

The majority shifts from a rule that recognizes that a contractual duty does not give birth to a tort duty to avoid purely economic losses to a rule that presumes that a contractual duty negates any pre-existing, independent tort duty concerning the same subject matter. This approach turns the analysis on its head and bypasses the proper threshold question—"Is there a duty here independent of the contract?" Wholly apart from any lease agreement, defendants here had a well-established duty not to unreasonably damage Walsh's premises.

Untimely appeal. Appeal period, tolled once by a motion for new trial, cannot be tolled again by a motion to “reconsider” under Rule 59(e).

Fagnant v. Foss, 2013 VT 16A (mem.) (August 30, 2013) (on reargument).
A motion to reconsider an order disposing of a time tolling post-trial motion of the kind enumerated in Rule 4(a)(4) does not again terminate the running of the time for appeal.

This Court's March 15, 2013 opinion is withdrawn. The appeal is dismissed as untimely filed.

Fagnant v. Foss, 2013 VT 16 (March 15, 2013)
Robinson J. Plaintiff appealed after the court denied plaintiff’s motion to reconsider the denial of plaintiff’s motion for new trial. Defendant contends the appeal is untimely. Although a timely motion for new trial terminates the running of time for the appeals period, defendant argues that once a motion for new trial is denied, then the full time for filing a notice of appeal begins to run again, unaffected by defendant’s later motion to reconsider. We hold plaintiff’s appeal was timely filed.

A “motion to reconsider” is not expressly recognized in the Vermont Rules of Civil Procedure. The Court will treat a motion to reconsider as a motion under V.R.C.P. 59(e) that terminates the running of the appeal period.when the timing and content of the motion to reconsider indicate that it was, for all intents and purposes, a motion to alter or amend. Although Plaintiff’s motion for reconsideration here was directed at the court’s denial of a Rule 59 motion, rather than at its initial judgment, it was essentially a motion to alter or amend, and the appeal period did not begin to run again until the court ruled on plaintiff’s motion to reconsider. Plaintiff’s appeal was timely filed.

Reconsideration. Denial of Rule 59 motion to amend judgment reversed on question of law intrinsic to, but not raised before judgment.

In re SP Land Co., LLC, 2011Vt 104 (Johnson, J.) (Reiber, C.J., dissenting.)

 Mountainside Properties, LLC, an adjoining property owner, appeals the Environmental Court’s denial of its motion to alter and amend a grant of summary judgment in favor of co-applicants.  We reverse.

The goal of Rule 59(e) is to “make clear that the [trial] court possesses the power to rectify its own mistakes in the period immediately following the entry of judgment.” 

Rule 59(e) “gives the court broad power to alter or amend a judgment.”  Reporter’s Notes, V.R.C.P. 59.  We have stated that Rule 59(e), is “invoked ‘to support reconsideration of matters properly encompassed in a decision on the merits.’ ”   Under this rule, “the court may reconsider issues previously before it, and generally may examine the correctness of the judgment itself.”  That is, Rule 59(e) “codified the trial court’s inherent power to open and correct, modify, or vacate its judgments.”   See 11 C. Wright et al., Federal Practice and Procedure § 2810.1, at 124-25 (2d ed. 1995) (describing correction of manifest error of law upon which judgment is based as one of four basic grounds upon which Federal Rule of Civil Procedure 59(e) motion may be granted).  The trial court enjoys considerable discretion in deciding whether to grant such a motion to amend or alter.  11 Wright, supra, §2810.1, at 124. Indeed, we have held that the court’s power on a Rule 59(e) motion even extends to issues not raised in the motion. Once a Rule 59(e) motion is filed, the trial court has the power to make an appropriate modification or amendment, including issues not raised in the Rule 59(e) motion.

Whether or not the Rule 34 issue was expressed for the first time in Mountainside’s Rule 59(e) motion, it was a question of law intrinsic to the Environmental Court’s summary judgment ruling and therefore well within the court’s discretion to reconsider this question of law on the merits upon on Mountainside’s Rule 59(e) motion. 

Reiber, C.J., dissents because the issue the majority decides was not raised below in a timely and proper manner and therefore should not be reviewable on appeal. The question it addresses—whether an administrative amendment under Rule 34 requires an underlying Act 250 permit—was not raised with the trial court before the entry of judgment but only later in a Rule 59(e) motion to alter or amend.  

Denial of Rule 59(e) motion to amend judgment reversed. Rule 59 is available to reconsider and correct manifest, intrinsic error of law, whether or not expressed for the first time in the Rule 59(e) motion.

In re SPLand Co., LLC,  2011 VT 104 (Johnson, J.) (Reiber, C.J., dissenting.)


This appeal arises out of a dispute over an administrative amendment to the master development plan for Killington Resort Village. An adjoining property owner appeals the Environmental Court’s denial of its motion to alter and amend a grant of summary judgment in favor of applicants. Adjoiner argues that the Environmental Court erred because as a matter of law administrative amendments under Rule 34(D) require an underlying Act 250 land use permit. We agree and therefore reverse the denial of the motion to reconsider.


Applicant argues that Rule 59 does not permit reconsideration of the summary judgment ruling, especially on issues raised for the first time. The goal of Rule 59(e) is to “make clear that the [trial] court possesses the power to rectify its own mistakes in the period immediately following the entry of judgment.” Whether or not the Rule 34 issue was expressed for the first time in the Rule 59(e) motion, it was a question of law intrinsic to the Environmental Court’s summary judgment ruling and therefore well within the court’s discretion to reconsider on Rule 59(e) motion.


Rule 59(e) “gives the court broad power to alter or amend a judgment.” Reporter’s Notes, V.R.C.P. 59. We have stated that Rule 59(e), is “invoked ‘to support reconsideration of matters properly encompassed in a decision on the merits.’ ” Under this rule, “the court may reconsider issues previously before it, and generally may examine the correctness of the judgment itself.” Rule 59(e) “codified the trial court’s inherent power to open and correct, modify, or vacate its judgments.” See 11 C. Wright et al., Federal Practice and Procedure § 2810.1, at 124-25 (2d ed. 1995) (describing correction of manifest error of law upon which judgment is based as one of four basic grounds upon which Federal Rule of Civil Procedure 59(e) motion may be granted).


The trial court enjoys considerable discretion in deciding whether to grant such a motion to amend or alter. 11 Wright, supra, §2810.1, at 124. Indeed, we have held that the court’s power on a Rule 59(e) motion even extends to issues not raised in the motion. Once a Rule 59(e) motion is filed, the trial court has the power to make an appropriate modification or amendment, including issues not raised in the Rule 59(e) motion. This approach srikes “an appropriate balance between reconsideration and finality.”


Here, the Environmental Court was asked to reconsider an issue of legal interpretation “properly encompassed in a decision on the merits,” which in no way offended the interests of finality. The issue of whether a Rule 34(D) administrative amendment may be used to authorize a fifteen-lot subdivision absent positive findings on all Act 250 criteria is at the core of this case. It was thus well within the Environmental Court’s discretion to fully reconsider this question of law on the merits upon Rule 59(e) motion.


Because the Environmental Court fully considered on the merits the applicability of Rule 34(D), neither our preservation rule nor Rule 59(e) prevents us from considering it here.


Reiber, C.J., dissents because the issue the majority decides was not raised below in a timely and proper manner and therefore should not be reviewable on appeal. The question it addresses—whether an administrative amendment under Rule 34 requires an underlying Act 250 permit—was not raised with the trial court before the entry of judgment but only later in a Rule 59(e) motion to alter or amend.


As the majority acknowledges, it is well settled that a "Rule 59(e) motion may not be used . . . to raise arguments . . . that could have been raised prior to the entry of judgment." N. Sec. Ins. Co. v. Mitec Elecs., Ltd., 2008 VT 96, ¶ 44 (quoting 11 C. Wright et al., Federal Practice and Procedure § 28101.1, at 127-28 (2d ed. 1995)) Rule 59(e) "does not provide a vehicle for a party to undo its own procedural failures, and it certainly does not allow a party to introduce new evidence or advance arguments that could and should have been presented to the [trial] court prior to the judgment." Adjoiner plainly waived the issue the majority decides by failing to raise it either explicitly or implicitly throughout the lengthy litigation process that preceded the trial court's entry of judgment. Accordingly, on this basis I would affirm the judgment.  

Probate appeal. Statement of questions does not limit superior court. Summary judgment is always provisional until final judgment is entered.

In re Estates of Allen, 2011 VT 95 (Dooley, J.)

This case originates from a quiet-title action in probate court by defendant Richard Rupe and his father laying claim to certain mineral rights by way of adverse possession.  Defendant and his father appealed the probate decision to the superior court, which, after first granting summary judgment in favor of plaintiff on certain issues, ultimately dismissed plaintiff’s claim to the mineral rights and awarded all rights, title, and interest to defendant. Plaintiff now appeals this superior court judgment, arguing  the court exceeded its authority by considering more than the issues raised in the statement of questions submitted on appeal from the probate court and resolved by summary judgment.  We affirm. 

 Plaintiff’s main argument on appeal is that, under Rule 72, the superior court had no authority to require plaintiff’s to prove an interest in the mineral rights by adverse possession because the court granted summary judgment for plaintiff on defendant’s four questions. The summary judgment decision was an interlocutory order.  If plaintiff believed that the summary judgment meant that he had prevailed fully on the merits, he should have sought entry of judgment under Vermont Rule of Civil Procedure 58.  See Powers v. Hayes, 170 Vt. 639, 640, 751 A.2d 781, 782 (2000) (mem.) (stating that summary judgment is not entry of judgment as required for a final judgment).  As it was the summary judgment did not preven the trial court from requiring him to prove his adverse possession claim.

A case such as this is a hybrid of an appeal from the probate court and a de novo proceeding that is conducted as if the probate court proceeding never occurred.  The statement of questions required by Rule 72(c) has a limited function.  Recently, we have held that while a list of certified questions is mandatory, it only “serves to focus, but cannot limit, the issues for the court.”  In re Estate of Doran, 2010 VT 13, ¶ 14, 187 Vt. 349, 993 A.2d 436.

We hold that the superior court acted correctly in determining that plaintiff had no interest in the mineral rights.

Affirmed.