Justia Contracts Opinion Summaries

Appellants Warren and Wynne Kirschbaum appealed a trial court's ruling in favor of Appellee First Quality Carpets, Inc. arising from a dispute they had over carpet installed in 2007. The Kirschbaums argued that the civil division erred in awarding First Quality attorney's fees under 9 V.S.A. 4007(c) of the Prompt Pay Act because that section of the statute authorizing attorney's fees recovery effectively expired in 1996 pursuant to a sunset provision included in the Act. Alternatively, the Kirschbaums argued that because they withheld payment to First Quality in good faith, they were entitled to a directed verdict and that First Quality should not have been awarded attorney's fees under 4007(c). Finally, the Kirschbaums argued that the court erred in denying their counterclaim under the Consumer Fraud Act. Upon review, the Supreme Court affirmed the trial court in all respects.

James Bennett, the father of Brooke Bennett and the administrator of her estate, appealed a trial court's declaration of no coverage for the claims made in the lawsuit filed against homeowner Denise Woodward for negligent supervision and damages arising out of the abduction, assault, and death of his daughter, Brooke. Woodward was formerly married to Brooke’s uncle, Michael Jacques, who was alleged to have kidnapped, sexually assaulted, and murdered Brooke. Woodward's insurer brought a declaratory judgment action asking the trial court to hold that its policy does not cover these claims. The trial court decided the case on summary judgment, holding that the insurance policy excluded coverage and Bennett appealed. The trial court granted summary judgment for the insurer, concluding that insurer owed no duty of defense or indemnification in the underlying suit in part because the policy barred coverage for intentional acts by "an insured" that are not "occurrences." The court rejected Bennett's argument that the separate insureds, or severability clause provided coverage for homeowner because the complaint alleged that the uncle committed intentional acts. On appeal, father reiterated his argument that Jacques' alleged intentional acts did not preclude coverage for homeowner because the policy contained a severability clause. Upon review, the Supreme Court found that the plain meaning of the terms in the insurance policy at issue did not include intentional tortious acts nor allowed for severability under the facts of this case.

Defendant Randy J. Rouleau appealed the decision of the Washington Civil Division which held that Wells Fargo Bank Minnesota, N.A., as Trustee for the registered holders of Credit Suisse First Boston Mortgage Security Corp., Commercial Mortgage Pass-Through Certificates, Series 2001-CF2 (Wells Fargo), was entitled to enforce his personal guaranty of a promissory note secured by mortgages on five mobile home parks.  The civil division concluded that Wells Fargo could enforce the guaranty as the holder of the note under 9A V.S.A. § 3-301(i), which defines who may enforce a negotiable instrument.  Defendant argued that the court erred in ruling that Wells Fargo has standing to enforce the guaranty because Wells Fargo could not prove the chain of assignments from the original lender to itself and therefore that Wells Fargo, and not some third party, is the assignee of the guaranty.  Defendant also argued that the court erred in treating assignment of the note as sufficient to show assignment of the guaranty because the guaranty, in contrast to the note, is a separate contract that must be expressly assigned.  Finally, defendant argued that because Wells Fargo lacked standing to enforce the guaranty, the court lacked jurisdiction over the enforcement action.  Based on the evidence presented, the Supreme Court could not conclude that the court's finding that Wells Fargo was assigned the note and mortgage was clearly erroneous.  Moreover, the court's finding on this point, essential to Wells Fargo's status as a holder, directly supports its conclusion that Wells Fargo has standing to enforce the guaranty.  Because Wells Fargo had standing, Defendant's final argument that the court lacked jurisdiction over the enforcement action has no merit. The Supreme Court affirmed the civil division.

Defendant Junior's Pizza, Inc. appealed a superior court decision that confirmed an arbitration award and awarded attorney's fees to Plaintiff UniFirst Corporation. The Superior Court held that Junior's waived its right to object to arbitration by failing to challenge the award within thirty days of receiving notice. In June 2009, pursuant to the arbitration clause in the parties' contracts, UniFirst filed a demand for final and binding arbitration. Junior's declined to submit to arbitration, stating that it would reconsider if UniFirst produced a valid agreement. UniFirst subsequently provided copies of the contract provision to both Junior's and the arbitrator. In July 2009, the arbitrator notified the parties that UniFirst had met all filing requirements and arbitration would proceed absent a court order staying the matter. Junior's never sought a court order staying arbitration. UniFirst did not seek a court order compelling Junior's to participate. Notice of the arbitration hearing was provided to both parties, and the hearing took place. Junior's did not participate. UniFirst was awarded damages and attorney's fees, and Junior's was ordered to reimburse UniFirst in administrative fees associated with conducting the arbitration. The next day, the arbitrator notified Junior's of the award by email and certified mail. On appeal to the Supreme Court, Junior's argued (1) it did not waive its right to object to the arbitration award, (2) UniFirst was required to petition to compel arbitration prior to engaging in arbitration without Junior’s participation, and (3) the arbitration was not conducted in strict accordance with the terms of the contracts. Finding no error, the Supreme Court affirmed the arbitration award.

In 2006, Defendants Tristan Vaughan and Grace Zambon purchased all outstanding shares of defendant Northland Specialties, Inc., from Plaintiffs Philip and Patricia Pierce.  Under the terms of the promissory note, Defendants would repay $30,000 in three installments, due annually on the first day of April. In 2007, Plaintiffs filed suit against Defendants.  The complaint alleged that Defendants had entered into two verbal agreements following the sale of the business whereby Defendants allegedly agreed to buy a specified list of materials and hardware for $20,000, with payments to be made over time as the materials were used.  The suit alleged Defendants had failed to make any payments under either of these verbal agreements and therefore owed Plaintiffs for breach of contract and damages.  The first payment of $10,000 came due on the promissory note.  Defendants were not able to make this payment on time, nor did they communicate with Plaintiffs regarding when the payment would be made. Three days later, Plaintiffs filed a motion for default judgment.  Grace Zambon prepared a response which was received by Plaintiffs' attorney but was not filed with the court. Plaintiffs' attorney allegedly "interpreted this documents [sic] as an offer to settle."  Despite the response, he moved forward with a motion for default judgment, which the superior court granted. Two months later, Plaintiffs filed a second suit against Vaughan and Zambon, this time to recover the balance of the purchase price under the original stock purchase agreement.  After exchanging settlement offers, the parties reached a settlement agreement.  Roughly three years later, Plaintiffs filed a motion for trustee process in order to collect on the default judgment entered in the first lawsuit.  Defendants filed a Rule 60(b) motion seeking relief from the default judgment.  In 2010, the superior court held a hearing on this motion and granted the relief from judgment as sought by Defendants.  In early 2011, the Supreme Court granted Plaintiffs permission to take an interlocutory appeal on the issue of whether the superior court erred in granting the 60(b) motion. More specifically, the issue was whether the court could grant the motion beyond the one-year limitations period for mistake or inadvertence when the parties had reached an agreement after the default judgment entered. The Supreme Court concluded that the superior court's grant of Defendants' 60(b) motion was in error, and reversed the lower court's decision.

This appeal stemmed from a written agreement between the City of Rutland and the Vermont Swim Association (VSA) that granted VSA the right to host its annual swim meet at a facility in a city park. VSA appealed the trial court's award of attorney's fees to the City. Because the plain language of the parties' contract did not require VSA to pay attorney's fees incurred by the City in pursuing either indemnity from VSA or other third-party actions, the Supreme Court reversed the trial court's ruling and remanded the case for further proceedings.

This case concerns a construction contract dispute between contractor Trombly Plumbing & Heating and homeowners Edward Quinn, Thomas Quinn, and Regina Gority ("Homeowners"). In the summer of 2007, Trombly and the Homeowners agreed that Trombly would perform services relating to the heating and hot water systems of Homeowners' residential vacation property. Between November 2007 and February 2008, Homeowners experienced a number of problems with the home that they attributed to Trombly's work, such as pipes freezing and furnaces shutting down and leaking.  Trombly brought an initial action for breach of contract and violation of the Prompt Payment Act (9 V.S.A. 4001-4009) seeking the balance due plus the cost of collection.  The Homeowners counterclaimed for breach of contract, negligence, intentional misrepresentation, negligent misrepresentation, fraudulent misrepresentation, and consumer fraud.  They sought actual and punitive damages, as well as litigation costs. The trial court ultimately decided that Trombly could not recover from the Homeowners and the Homeowners could not recover from Trombly, and each party would bear its own costs and fees.  The court found that the Homeowners were not liable to Trombly for anything beyond what they had already paid because the work "was not well done," there were many problems with the work, and the problems were not resolved until another plumber came to fix them.  The court thus found the Homeowners to be the prevailing parties on Trombly's claims because Trombly did not prove its case by a preponderance of the evidence.  As Trombly did not prevail on the merits of the case, the court found there could be no award of attorney's fees.  The court also dismissed all of the Homeowners' counterclaims.  It found that the evidence submitted was insufficient, given that there was no testimony from anyone who did repair work about the problems that had to be corrected or whether the amounts paid for corrective work were fair and reasonable. On appeal, Trombly argued the trial court erred by: (1) improperly placing the burden of proof on contractor with respect to homeowners' defenses and making insufficient findings to support its decision, and (2) improperly applying the "substantially prevailing party" standard under the Prompt Payment Act.  Homeowners cross-appealed, arguing the trial court erred in finding that homeowners were not qualified to offer testimony as to damages for the corrective work performed.  Upon review of the trial record and the applicable legal authority, the Supreme Court affirmed the trial court's decision with regard to all issues brought on appeal.

Defendant Applejack Art Partners, Inc., appealed a trial court enforcing an arbitration award and entered judgment in Plaintiff Albert Stephens, III's favor for $1,538,164.50 plus interest. Plaintiff began working with the company in September 2006 and subsequently invested $1,125,000 in the company in exchange for stock shares.  In April 2008, Applejack terminated plaintiff's employment.  Plaintiff filed suit against Defendants Applejack, Jack P. Appelman, Aaron S. Young, and William Colvin (collectively, Applejack) and Applejack counterclaimed.  Applejack also sought an order enforcing its right to repurchase Plaintiff's stock.  The parties engaged in binding arbitration and following four days of evidentiary hearings, the arbitrator issued his decision.  He found that in October 2006, plaintiff executed an employment contract, stock purchase agreement, and shareholders' agreement.  Pursuant to the stockholder's agreement, the executive stockholders had the right to buy out plaintiff's shares in the event that plaintiff's employment was terminated.  The agreement identified a specific formula for valuing the stock shares and allowed for Applejack to either pay for the stock in full or provide a 10% down payment and a promissory note for payment of the balance in three equal annual installments, plus interest. Plaintiff refused to sell his stock, in part because he misunderstood the terms of the stock purchase agreement.  An arbitrator concluded that Applejack had the right to buy the shares, and it ordered Plaintiff to transfer his stock into an escrow account, pending full performance of all payment obligations. Applejack did not meet its obligation on the first payment and Plaintiff brought an enforcement action.  Plaintiff sought both a judgment confirming the arbitration award as well as an immediate judgment for all amounts awarded by the arbitrator due to Applejack's default.  The court granted Plaintiff's request.  It found that Applejack's default went to the essence of the arbitrator's award and that Applejack could not now resort to the terms of the promissory note to delay its payments. Applejack argued on appeal that the court should have remanded this case to the arbitrator for clarification, although it was not clear what part of the award Applejack believed was ambiguous.  Applejack also suggested (apparently for the first time on appeal) that notwithstanding the arbitrator's decision Plaintiff should simply keep the stock shares because Applejack was unable to pay for them.  Finally, Applejack asserted that the court erred in ordering full payment of the award suggesting that by doing so, the court modified the arbitration award under Vermont Rule of Civil Procedure 60(b) without authority to do so.  It also argued that there was no clear basis for accelerating the payments due. Upon review of the arbitration record and the applicable legal authority, the Supreme Court found no abuse of discretion by the trial court nor from the arbitration proceedings and affirmed the decision against Applejack: [t]he court imposed an appropriate remedy for Applejack's default, and there was no error."

Landlord Downtown Barre Development appealed a trial court's denial of its request for declaratory relief. Landlord argued that Tenant GU Markets of Barre, LLC established a corporate structure that entitled it to terminate the parties' commercial lease.  Landlord claimed the trial court erred by not considering Tenant's conduct when deciding whether tenancy under the terms of their agreement could be terminated.  Upon review of the lease and the applicable legal authority, the Supreme Court concluded that the essence of Landlord's claim was for "anticipatory repudiation." Even assuming Landlord could rely on this common law principle, Tenant had not indicated to Landlord an intent to breach, nor did Tenant commit an act to render it "unable to perform." Accordingly, because the language of the lease was clear and unambiguous and Tenant's conduct did not constitute notice as required by the plain language of the lease, the Court affirmed the trial court's ruling that landlord was not entitled to terminate the agreement on this ground.

Plaintiff US Bank National Association appealed a trial court order that granted summary judgment to Defendant Homeowner Christine Kimball and dismissed with prejudice US Bankâs foreclosure complaint for lack of standing.  On appeal, US Bank argued that it had standing to prosecute the foreclosure claim and that the courtâs dismissal with prejudice was in error.  Homeowner cross-appealed, arguing that the court erred in not addressing her claim for attorneyâs fees. Homeowner purchased the property in question in June 2005.  To finance the purchase, she executed an adjustable rate promissory note in favor of Accredited Home Lenders, Inc. (Accredited).  The note was secured by a mortgage deed to Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for Accredited. In 2009, US Bank filed a foreclosure complaint for Homeownerâs failure to make required payments.  The complaint alleged that the mortgage and note were assigned to US Bank by MERS, as nominee for Accredited.  Attached to the complaint was a copy of the instrument signed by a "Duly Authorized Agent" of MERS.  The promissory note was also attached to the complaint and appended to it was an undated allonge signed by a corporate officer of Accredited, endorsing the note in blank. Homeowner moved for summary judgment claiming, among other things, that US Bank failed to present sufficient evidence that it held homeownerâs note and corresponding mortgage. Because neither note submitted by US Bank was dated, the court concluded that there was no evidence that the note was endorsed to US Bank before the complaint was filed.  Therefore, the court held that US Bank lacked standing to bring the foreclosure action.  Following a hearing, the court denied the motions for reconsideration and to amend the complaint.  The court concluded that US Bank had submitted a defective complaint and the deficiencies were not mere technicalities, but essential items, without which the case could not proceed.  The court held that US Bank lacked standing when the complaint was filed, and dismissed the complaint âwith prejudice.â  Upon review of the trial record and briefs submitted by the parties, the Supreme Court affirmed the trial court's decision in all respects but for the 'with prejudice': "this may be but an ephemeral victory for homeowner.  Absent adjudication on the underlying indebtedness, the dismissal cannot cancel her obligation arising from an authenticated note, or insulate her from foreclosure proceedings based on proven delinquency." The Court dismissed the foreclosure complaint and remanded the case for consideration of the parties' fees dispute.