Gramatan Home Investors Corp. v. Starling

Citation143 Vt. 527,470 A.2d 1157
Decision Date01 November 1983
Docket NumberNos. 82-148,s. 82-148
CourtUnited States State Supreme Court of Vermont
PartiesGRAMATAN HOME INVESTORS CORP.; The Gramatan Company (A Division of Home Investors Trust); and Jonah Goldstein, d/b/a Home Investors Company v. Richard and Patricia STARLING, Raymond and Eva Cole, Daisy Hall and Nicholas and Sandra Martocci. to 82-151.

Smith & Craven, Brandon, for plaintiffs-appellants.

Sam Farrington, Vermont Legal Aid, Inc., Rutland, for defendants-appellees.

Before BILLINGS, C.J., and HILL, UNDERWOOD, PECK and GIBSON, JJ.

BILLINGS, Chief Justice.

Plaintiffs appeal, and defendants cross-appeal from final judgment and the denial of their post-judgment motions by the Rutland Superior Court. Following a joint hearing on the merits, the court dismissed plaintiffs' complaint for moneys due and owing on promissory notes executed by the defendants and found for the defendants on those parts of their counterclaims seeking restitution of moneys paid on the notes and cancellation of the notes, home mortgages and sales contracts entered into with plaintiffs' assignor. The court denied plaintiffs' post-judgment motion for a new trial and defendants' post-judgment motions to amend the court's findings, conclusions and judgment orders.

On appeal, plaintiffs argue that the evidence heard by the trial court does not support the court's findings of fact and conclusions of law that: (1) defendants' defenses of fraud are good against plaintiffs and the existence of fraud renders defendants' promissory notes unenforceable; (2) there was a total failure of consideration between the seller/assignor and each of the defendants, and such failure is a good defense against the claims of the plaintiffs/assignees; (3) under federal Truth in Lending regulations the defendants effectively rescinded the transactions entered into with the seller and are therefore discharged from any obligation owed to plaintiffs on the promissory notes; and (4) the defendants' notices of rescission are likewise effective under Vermont's Consumer Fraud Act, 9 V.S.A. §§ 2451-2462. In their cross-appeals, defendants aver that the superior court erred in not awarding them civil penalties and reasonable attorney's fees as provided for in 9 V.S.A. § 2461 of the Vermont Consumer Fraud Act.

Home Investors Trust (HIT) was engaged in the business of purchasing and financing home improvement transactions. Jonah Goldstein was chairman of HIT. After its 1975 dissolution, HIT's assets were sold to Goldstein doing business as Home Investors Company (HIC). Through its agent, plaintiff Gramatan Home Investors Corp. (GHIC), of which Goldstein was sole stockholder, HIC continued to operate the business of HIT, that is, the discounting and collection of home improvement obligations. All the plaintiffs operated from the same location in the state of New York. Vinyl Distributors, Inc., (Vinyl) not a party to this action, sold and installed vinyl home siding in Vermont during 1973 and 1974. Vinyl was an "Approved Dealer" with HIT, meaning that HIT would purchase and finance home improvement obligations entered into by customers of Vinyl. Four of Vinyl's obligations, purchased by HIT and subsequently assigned to GHIC upon HIT's dissolution, were the defendants'.

Testimony at trial revealed that each defendant experienced a similar sales approach used by Vinyl Distributors in its endeavor to sell vinyl siding. Vinyl's agent, accompanied by an associate, would appear at a defendant's door, the defendant having done nothing to invite the solicitation (all the defendants were approached by the same agent and his associate). Once inside, the agent told the defendant of the financial, structural, ecological and aesthetic benefits of vinyl siding. The agent guaranteed the structural qualities of the siding and warranted that installation would be accomplished in a workmanlike manner. The agent solicited personal financial information from the defendant and assured the defendant that financing could be arranged through Vinyl and be tailored to the defendant's economic means. As an added inducement, the agent suggested that the defendant allow Vinyl to use the defendant's house as a model home: in return for allowing Vinyl to place a Vinyl Distributors, Inc. sign on the defendant's front lawn and to take before-and-after pictures of the defendant's house for future sales use, the defendant would be given a reduction in the price of the siding.

Once a defendant agreed to purchase the siding, the agent showed the defendant a sales contract attached to a clipboard. After the defendant finished reading the contract, the agent would take back the clipboard. Thereupon, the agent's associate would position himself between the defendant and the agent and proceed to demonstrate the structural qualities of the siding and show the various colors of siding available. After this demonstration, the agent would present the clipboard, with the sales contract on top of a number of other papers, to the defendant for signing. After the defendant signed the top sales contract, the agent would expose the signature lines on the underneath documents for the defendant to sign, explaining that the underlying documents were copies of the top sales contract. During the time it took for a defendant to sign the contract and copies, the agent retained hold of the clipboard and documents.

Installation of the siding generally began the day following the agent's visit. Each defendant made monthly payments directly to HIT, and subsequently to GHIC, using payment coupon books supplied by HIT. Defendants' homes were never used as model homes by Vinyl. Subsequent to the installation of the siding on defendants' homes, each of the defendants experienced similar problems with the siding (improperly installed vapor barriers between the siding and the house resulting in collection of moisture; inadequate nailing of the siding to the house so that various siding panels became detached; blistered and cracked siding). Complaints made by each of the defendants over a period of a year and a half, to both Vinyl and HIT, went unanswered. Sometime during this period Vinyl's telephone was disconnected and no new listing was provided for it. Also during this time, each of the defendants became aware that HIT had recorded assignments and mortgages on their homes. As was established at trial, the documents signed by the defendants, with the agent's express assurance that they were copies of the sales contract, were actually credit applications, retail installment contracts, notices of right of rescission, promissory notes and home mortgages. Defendants, none of whom had more than a high school education or its equivalent, never received copies of the notes and mortgages which they had unknowingly signed, nor did they receive notices of their right to rescind the sales transaction until past the time allowed for rescission as provided for in 9 V.S.A. § 2454(a)(1).

This Court has repeatedly held that findings rendered by the trial court will not be set aside unless, taking the evidence in the light most favorable to the prevailing party and excluding the effects of modifying evidence, they are clearly erroneous. V.R.C.P. 52(a); Blanchard v. Villeneuve, 142 Vt. 267, 269, 454 A.2d 1235, 1236 (1982); Cliche v. Cliche, 140 Vt. 540, 541, 442 A.2d 60, 61 (1982). It is within the purview of the trier of fact to determine the weight of the evidence, the credibility of the witnesses and the persuasiveness of the testimony, Trudeau v. Conway, 139 Vt. 167, 168, 423 A.2d 854, 856 (1980), and to accept or reject any of that testimony. Thibault v. Vartuli, 143 Vt. 178, 465 A.2d 248 (1983). Reviewing the record, we decline to disturb the findings of the superior court. The court found that defendants' installment sales contracts and the credit instruments executed to finance them were "fatally tainted with fraud." The record clearly discloses that Vinyl, plaintiffs' assignor, made fraudulent representations relating to the nature and quality of the vinyl siding. These misrepresentations were reasonably relied on by the defendants and induced their agreement to purchase the siding. Additionally, the court found that defendants were tricked into signing instruments imposing debt obligations to which defendants had never consented. Plaintiffs' contention that the defense of fraud cannot stand because they are holders in due course, 9A V.S.A. § 3-305, is without merit. The court correctly found that, irrespective of plaintiffs' status under the Uniform Commercial Code, 9A V.S.A. § 3-305, as purchasers of consumer paper executed in connection with a consumer contract they hold defendants' promissory notes "subject to all defenses ... which would be available to the consumer in an action on a simple contract ...." 9 V.S.A. § 2455; Randolph National Bank v. Vail, 131 Vt. 390, 308 A.2d 588 (1973). In addition to the defense of fraud, the court found a total failure of consideration. This finding is also amply supported by the record. Contrary to the express warranties given by Vinyl's agents, the siding was defective and the installation on defendants' homes was not performed in a workmanlike manner. Under 9 V.S.A. § 2455 the defense of failure of consideration is good against the plaintiffs.

Defendants also claim that they lawfully rescinded the credit transactions under both federal Truth in Lending provisions, 15 U.S.C. §§ 1601-1635, and Vermont's Consumer Fraud Act, 9 V.S.A. § 2451. Under 15 U.S.C. § 1635 an obligor in a consumer credit transaction, in which a security interest is acquired on the obligor's principal dwelling place, has three days to rescind the credit transaction following delivery of the full disclosure of credit terms. 15 U.S.C. § 1635(a). When these disclosures are not provided, the right to rescind continues for three years from the date of the transaction. 15 U.S.C. § 1635(f); Dougherty v. Hoolihan, Neils &...

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    ...attorney's fees “was fashioned in order to promote and encourage prosecution of ... claims.” Gramatan Home Investors Corp. v. Starling, 143 Vt. 527, 536, 470 A.2d 1157, 1162 (1983) (describing attorney's fees under the Consumer Fraud Act). As we said with respect to consumer fraud claims, “......
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