Ebws, LLC v. Britly Corp.

• Citation: 2007 VT 37,928 A.2d 497
• Decision Date: 25 May 2007
• Docket Number: No. 05-449.,05-449.
• Parties: EBWS, LLC v. BRITLY CORPORATION.
• Court: Vermont Supreme Court

928 A.2d 497

2007 VT 37

EBWS, LLC v. BRITLY CORPORATION.

No. 05-449.

Supreme Court of Vermont.

May 25, 2007.

William L. Durrell and David R. Bookchin of Benjamin, Bookchin, Colburn & Durrell, P.C., Montpelier, for Plaintiff-Appellee/Cross-Appellant.

Thomas M. Higgins and Robin Ober Cooley of Pierson Wadhams Quinn Yates & Coffin, Burlington, for Defendant-Appellant/Cross-Appellee.

Present: REIBER, C.J., DOOLEY, JOHNSON and SKOGLUND, JJ., and ALLEN, C.J. (Ret.), Specially Assigned.

¶ 1. REIBER, C.J.

This dispute arises from a construction contract in which defendant Britly Corporation agreed to build a creamery for plaintiff EBWS, LLC. After EBWS filed suit for alleged defects in construction, the superior court granted summary judgment for Britly on EBWS's claims of consumer fraud and negligence. Following a trial on the remaining claims, a jury awarded EBWS direct and consequential damages for breach of contract and breach of an express warranty. Both parties now appeal. Britly claims that the superior court erred in admitting evidence of consequential damages and by denying its motion for a new trial. In its cross-appeal, EBWS argues that the court erred in granting summary judgment on its consumer fraud and negligence claims, and by denying its request for attorney's fees, costs and prejudgment interest. We conclude that the court erred in allowing consequential damages in this case, and remand for further consideration of attorney's fees. In all other respects, we affirm.

¶ 2. The Ransom family owns Rock Bottom Farm in Strafford, Vermont, where Earl Ransom owns a dairy herd and operates an organic dairy farm. In 2000, the Ransoms decided to build a creamery on-site to process their milk and formed EBWS to operate the dairy-processing plant and to market the plant's products. In July 2000, Earl Ransom, on behalf of EBWS, met with Britly's president, Larry Tassinari, to discuss building the creamery. Although Tassinari has no formal training in architecture or building design, he has been in the construction business for twenty-eight years and over the last ten years has constructed an average of five commercial buildings per year. After several months of negotiations, in January 2001, EBWS and Britly entered into a contract requiring Britly to construct a creamery building for EBWS in exchange for $160,318. EBWS contracted directly with other entities to perform the site work, electrical, heating and plumbing on the building. The creamery was substantially completed by April 15, 2001, and EBWS moved in soon afterward. On June 5, 2001, EBWS notified Britly of alleged defects in construction.

¶ 3. On September 12, 2001, EBWS filed suit against Britly for damages resulting from defective design and construction. The complaint included several causes of action: (1) negligent design and execution, (2) negligent supervision, (3) consumer fraud, (4) breach of express warranties, (5) breach of contract, (6) breach of fiduciary duty, and (7) unjust enrichment. Britly claimed that the defects were minor and not attributable to its work. In addition, Britly counterclaimed for breach of contract and unjust enrichment.

¶ 4. In response to opposing motions for summary judgment, the trial court dismissed EBWS's consumer fraud claim on January 5, 2004. The court also issued a show cause order for EBWS to demonstrate why its negligence claims should not be dismissed as a matter of law pursuant to the economic-loss rule. Both parties submitted responses on the issue and, on the first day of trial, the court dismissed the negligence claims.

¶ 5. The trial proceeded on EBWS's contract claims. EBWS and Britly both presented expert testimony regarding which construction defects were attributable to Britly and what the cost would be to repair the problems. EBWS's expert estimated the repairs would cost $38,020 and would require the creamery to cease operations for three weeks. Amy Huyffer, the CEO of EBWS, testified that during a three-week shut-down the creamery would suffer losses of $35,711. She explained that loss would come from two sources: milk the creamery would be required to purchase and dump, and employee wages it would be obligated to pay. Britly's principal, Tassinari, testified that Britly was not responsible for the plumbing, heating and site work of the building and that many of the drainage problems were attributable to work done by others. He further testified that EBWS owed $16,785 for work and materials in unpaid change orders. Britly's expert testified that to fix the ponding and mold problems the floor and walls could be cut and patched with concrete mortar. He estimated the repairs would take three to four days and cost between $7,000 and $8,500.

¶ 6. Following a three-day trial, the jury found Britly had breached the contract and its express warranty, and awarded EBWS: (1) $38,020 in direct damages, and (2) $35,711 in consequential damages. The jury also awarded Britly $3,500 in damages on its counterclaim. Britly filed a motion for judgment as a matter of law or alternatively for a new trial. EBWS filed a motion for attorney's fees. The trial court denied the motions, and both parties appealed.

I.

A. Consequential Damages

¶ 7. We begin by addressing Britly's claim that consequential damages are not available as a matter of law. "A motion for judgment as a matter of law is granted only where there is no legally sufficient basis for a reasonable jury to find for the nonmoving party." Perry v. Green Mountain Mall, 2004 VT 69, ¶ 7, 177 Vt. 109, 857 A.2d 793. The relevant facts pertaining to this issue are not in dispute, and thus, our review of the court's legal conclusion is nondeferential and plenary. N.A.S. Holdings, Inc. v. Pafundi, 169 Vt. 437, 438-39, 736 A.2d 780, 783 (1999).

¶ 8. The jury's award to EBWS included compensation for both direct and consequential damages that EBWS claimed it would incur while the facility closed for repairs. Direct damages are for "losses that naturally and usually flow from the breach itself," and it is not necessary that the parties actually considered these damages. A. Brown, Inc. v. Vt. Justin Corp., 148 Vt. 192, 196, 531 A.2d 899, 901 (1987). In comparison, special or consequential damages "must pass the tests of causation, certainty and foreseeability, and, in addition, be reasonably supposed to have been in the contemplation of both parties at the time they made the contract." Id. at 196, 531 A.2d at 902.

¶ 9. In this case, the trial court concluded that EBWS was not entitled to future lost profits, but did allow EBWS to present evidence of costs it would incur during a three-week closure — specifically, ongoing payments for milk and staff wages. On appeal, Britly contends that these damages are not available as a matter of law because the payments are prospective and voluntary and thus neither certain nor foreseeable. EBWS counters that Britly failed to properly preserve this argument below. We conclude that Britly properly preserved its objection and that the court erred in submitting these elements of damages to the jury.

¶ 10. Although EBWS agrees that Britly generally objected to the inclusion of consequential damages, EBWS argues that Britly should have presented a clearer statement of its objection, specifically, that the damages for milk and wages were not recoverable because they were uncertain and voluntary. The stated objections were adequate to meet our standard. A motion for judgment as a matter of law may be made at any time prior to submission of the case to the jury and must specify the judgment sought and the law and facts upon which the moving party relies. V.R.C.P. 50(a)(2). The purposes of this requirement is to allow the trial court to determine if sufficient evidence exists to submit the issue to the jury, and to allow the nonmoving party an opportunity to cure any defects in proof, if possible. Cooper v. Cooper, 173 Vt. 1, 11, 783 A.2d 430, 438-39 (2001).

¶ 11. It is evident from the transcript that the trial court understood Britly's objection and responded to it, and that EBWS had an opportunity to rectify any deficiencies in proof. On the second day of trial, at the close of EBWS's evidence, Britly objected to submitting evidence of consequential damages to the jury, based on its theory that lost profits for a new business are inherently speculative. The court deferred its ruling until the following morning. At the beginning of the second day of trial, the court ruled that EBWS could not recover for lost profits because it was not a going concern at the time the contract was entered into, and profits were too speculative. The court concluded, however, that EBWS could submit evidence of other business losses, including future payment for unused milk and staff wages. At the close of the evidence, defendant again moved for judgment as a matter of law on consequential damages. See Maynard v. Travelers Ins. Co., 149 Vt. 158, 160, 540 A.2d 1032, 1033 (1987) (requiring moving party to renew objection at the close of the evidence where the trial court defers ruling at the close of opponent's case). The court reiterated its ruling that lost profits were not recoverable, but reasoned that it was up to the jury whether damages for milk and wages were certain and foreseeable. After the court read the jury instructions, Britly again restated its objection. See V.R.C.P. 51(b) (requiring objection to jury instructions to be made before jury retires to consider verdict).

¶ 12. Although Britly's objections were not phrased with exactly the same terminology it uses on appeal, the objections were clear enough to allow both EBWS to cure defects in proof and the court to rule on the objection. See Cooper, 173 Vt. at 11, 783 A.2d at 438-39 (explaining that purpose of requiring an objection on sufficiency of the evidence at the close of the evidence is to allow the nonmoving party an opportunity to cure defects in proof). The trial court...