Birchwood Land Co. v. Ormond Bushey & Sons, Inc.

• Decision Date: 10 September 2013
• Docket Number: No. 12–083.,12–083.
• Citation: 2013 VT 60,82 A.3d 539,194 Vt. 478
• Court: Vermont Supreme Court
• Parties: BIRCHWOOD LAND COMPANY, INC. v. ORMOND BUSHEY & SONS, INC.

194 Vt. 478

82 A.3d 539

2013 VT 60

BIRCHWOOD LAND COMPANY, INC.

v.ORMOND BUSHEY & SONS, INC.

No. 12–083.

Supreme Court of Vermont.

Aug. 2, 2013.

Motion for Reargument Denied Sept. 10, 2013.

William Alexander Fead of Fead Construction Law, PLC, South Burlington, for Plaintiff–Appellee/Cross–Appellant.

David D. Aman of Heilmann, Ekman & Associates, Inc., Burlington, for Defendant–Appellant/Cross–Appellee.

Present: REIBER, C.J., DOOLEY, SKOGLUND, BURGESS and ROBINSON, JJ.

DOOLEY, J.

¶ 1. This appeal involves a dispute between developer, Birchwood Land Company, Inc., and contractor, Ormond Bushey & Sons, Inc., arising out of a construction contract. Developer sued for breach of contract, claiming mainly that contractor had removed excavated sand from the construction site without permission. Contractor counterclaimed for amounts due under the contract. The court found that contractor breached the contract and granted developer damages for the lost sand. The damages were offset by the unpaid balance owed to contractor. The court concluded that neither party was entitled to penalties or attorney's fees as the substantially prevailing party under the Prompt Pay Act and granted contractor prejudgment interest on its net award. On appeal, contractor argues that the court erred in denying its request for interest, penalties and attorney's fees as the substantially prevailing party. Developer argues that the court erred in limiting damages for the sand removal, denying its request for punitive damages, granting prejudgment interest on contractor's net recovery, and denying its claim for slander of title. We affirm.

¶ 2. The parties' relationship began in 2006 when they entered into three written contracts—the Rosewood Contract, the Tanglewood Contract, and the Sewer Contract. The projects were designed to create roadways and building lots on a wild and overgrown parcel of land. Under the agreements, contractor was obligated to clear the area and install sewers, utilities and roads, among other items. Disagreements arose after developer discovered that contractor had removed sand from the project site. Because of the sand dispute, developer withheld payment of $29,202 to contractor for work completed under one of the contracts. Contractor filed a contractor's lien for the unpaid balance on all of developer's property involved in the development project in February 2008. The lien hampered developer's ability to sell two building lots, and developer asked contractor to release some of the land. Contractor refused, and eventually the parties negotiated a mutual resolution whereby contractor discharged the lien and developer deposited the unpaid sum in an escrow account maintained by contractor's counsel.

¶ 3. Contractor was obligated to complete road paving under one of the contracts. Because of the ongoing dispute over the sand, contractor was concerned developer would withhold payment for the paving, and did not do the work. Instead, developer hired a third party to complete the paving project, and was forced to pay more than what had been agreed to in the contract.

¶ 4. Developer filed suit for breach of contract, and contractor counterclaimed. Developer alleged breach of contract, slander of title and fraud and requested compensatory and punitive damages and attorney's fees under the Prompt Pay Act (PPA), 9 V.S.A. §§ 4001–4009. Contractor counterclaimed for breach of contract, and violation of the PPA, requesting damages, penalties, and attorney's fees. Some claims were dismissed or settled prior to trial.

¶ 5. After a four-day trial and a site visit, the court issued an initial decision, eventually supplemented by a lengthy decision on contractor's motion for reconsideration and a similarly lengthy decision in support of the final judgment. In summary, the court made the following findings. The main dispute between the parties concerned the disposal and removal of excess sand from the construction site. The question of how to dispose of or store excess sand from the project site arose early on. In June 2006, the parties met with the town zoning administrator who explained that without a special permit no excess materials, including sand, could be removed from the site. Soon thereafter, developer's representative walked the site with contractor and they identified locations where extra fill could be deposited. In conversations thereafter, developer communicated that sand was to be placed in the designated places. Difficulties arose in storing excess sand. For a time, there was a solution when the town approved the removal of sand for developer's personal use, which allowed sand to be taken to developer's personal property.

¶ 6. In July 2007, developer visited the construction site and observed a truck leaving with a load of sand. He followed it and watched the truck deposit the load at a different construction site where contractor was working. Developer contacted contractor and directed that no more sand should be removed. Despite this direction, the court found that contractor continued to remove sand from the project site. At trial, the parties disputed whether there was sufficient space for the excess sand at the project site. The court found that contractor was not authorized to dispose of developer's property however it desired, and found that developer had not consented to contractor removing the sand from the site. The court construed the contract as contemplating that the sand would remain on site. As a result, the court found that contractor breached its contract with developer. The court also ordered contractor to pay for the extra cost of paving performed by the third party.

¶ 7. As to damages, the court granted developer the replacement cost of the lost sand—$11,144. Developer also sought the cost of transporting the sand back to the construction site from the closest source and for spreading it on site. The court denied this request concluding that the transport and spreading costs were too speculative and otherwise unavailable. The court also denied developer's request for punitive damages, concluding that contractor did not engage in sufficiently egregious conduct to warrant imposition of exemplary damages.

¶ 8. Turning to developer's remaining claims, the court concluded developer failed to meet all the elements of a slander-of-title claim. The court found that contractor had a credible basis for its lien, that the lien properly extended to the entirety of developer's property, and therefore that the lien did not amount to a false statement about developer's interest in land. Further, the court concluded that contractor did not file the lien with malicious intent—a requirement for slander of title.

¶ 9. As to the parties' claims under the PPA, the court found that neither party substantially prevailed, and denied both parties' requests for attorney's fees. See 9 V.S.A. § 4007(c). The court also concluded that contractor was not entitled to payment of penalties under the PPA for developer's failure to pay amounts due under the contract because developer had withheld payment based on a good-faith dispute and that the amount withheld bore a reasonable relation to the disputed sum. Id. § 4007(b).

¶ 10. Based on the parties' stipulation, the court ordered judgment for contractor on the unpaid sum due under the contract of $23,511.28. This award was diminished by developer's recovery on its sand claim. The court increased the award to provide prejudgment interest to contractor. After subtracting amounts due to developer for recovery on its claims, contractor received a net damage award of $9980.28. Contractor appealed, and developer cross-appealed.

¶ 11. We begin with developer's claim regarding the amount of damages. Developer argues that the court erred in calculating the damages solely for the removed sand, claiming that the court should also have awarded sums for transporting the sand back to the site and spreading it.¹ Before we look at this claim, we summarize the basis for liability and the evidence on the use of the sand.

¶ 12. The court found a breach of contract based on three theories—breach of the implied covenant of good faith and fair dealing, breach of an oral agreement that the sand removed during contractor's work should remain on site, and breach of a written condition that contractor comply with “regulations and lawful orders of public authorities bearing on performance of the work.” The court found that contractor viewed the sand “as excess materials that needed to be disposed of in order for construction to continue” and did not remove it for profit. Because contractor did not charge developer for removing the sand, contractor attempted to reduce its losses by selling it. The court agreed with contractor “that sand could not have been lawfully placed at some of the points” developer designated. Storing all the sand “likely would have required a permit change and would have required removing certain trees and undertaking a significant spreading and grading operation.” The court noted that developer's owner testified that “if he were awarded monetary relief in this case he probably would use it to obtain sand fill and would store it on site for possible use in developing a building lot.”

¶ 13. In a breach-of-contract case, the court will normally award expectation damages in an amount equal to the lost benefit of the parties' bargain. See Tour Costa Rica v. Country Walkers, Inc., 171 Vt. 116, 124, 758 A.2d 795, 802 (2000). The court may also award damages for incidental or consequential loss. See Murphy v. Stowe Club Highlands, 171 Vt. 144, 158, 761 A.2d 688, 698 (2000) (quoting Restatement (Second) of Contracts § 347 (1981)). Here, developer argues that the benefit is the increased value of the propertywith the sand, so that the loss is the reduction in the value of the property when the sand is removed. Because this is hard to measure, an alternative is authorized—the...