Murphy v. Stowe Club Highlands

• Decision Date: 23 June 2000
• Docket Number: No. 99-019, No. 98-263, No. 99-032.
• Citation: 761 A.2d 688
• Parties: Thomas C. MURPHY and Carol A. Presley v. STOWE CLUB HIGHLANDS, Robinson Springs Partnership, and Robinson Springs Corporation.
• Court: Vermont Supreme Court

761 A.2d 688

Thomas C. MURPHY and Carol A. Presley v. STOWE CLUB HIGHLANDS, Robinson Springs Partnership, and Robinson Springs Corporation.

Nos. 98-263, 99-019, 99-032.

Supreme Court of Vermont.

June 23, 2000.

Motions for Reargument Denied August 21, 2000.

Russell D. Barr and William L. Durrell of Barr & Associates, Stowe, for Plaintiffs-Appellees (98-263) Appellants (99-019 & 99-032).

Douglas C. Pierson and Thomas M. Higgins of Pierson, Wadhams, Quinn & Yates, Burlington, and Thomas J. Amidon, Stowe, for Defendants-Appellants (98-263) Appellees (99-019 & 99-032).

Present: AMESTOY, C.J., DOOLEY, MORSE, JOHNSON and SKOGLUND, JJ.

DOOLEY, J.

Defendants Stowe Club Highlands, Robinson Springs Partnership, and Robinson Springs Corp., appeal from a jury verdict finding them liable to plaintiffs Thomas Murphy and Carol Presley for breach of contract and awarding them $53,000 in compensatory and $100,000 in punitive damages. The verdicts result from the jury's finding that defendants breached a contractual obligation to perform site work, called "dirt work," on plaintiffs' lot in preparation for plaintiffs building a house on the lot. Defendants also appeal from a jury verdict in their favor on their counterclaim for conversion of gravel because the jury awarded them no damages. Defendants make four arguments on appeal: (1) the trial court erred in ruling that plaintiffs' recovery was not limited to receipt of $5,000 placed in escrow by the parties; (2) there was no basis for a punitive damage award; (3) the compensatory damage award was excessive and not justified; and (4) the failure to award damages on defendants' counterclaim was inconsistent with the jury instructions. Plaintiffs, in turn, appeal (1) the denial of their motion for attorneys' fees, and (2) the granting of defendants' motion to post a corporate surety bond in lieu of attachments. The appeals were consolidated for review. We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

In July 1994, plaintiffs, husband and wife, as buyers and defendants as sellers¹ signed a purchase and sales contract for lot # 31 in Stowe Club Highlands, a residential development. Attached to the purchase and sales contract was an addendum containing "special conditions." One of these conditions provided that defendants would perform "all `dirt work' necessary for the construction of the house on lot # 31." This work was to include: "Excavation and backfill of cellar hole ... and trenches for water, electric, cable TV, telephone and septic lines ... installation of driveway ... removal and/or burial of stumps and debris created by reason of the dirt work ... final grading around house, retaining walls as necessary, rake, seed and mulch." The condition also provided that the work was to be completed to the satisfaction of the buyers, and another condition specified that the parties would enter into a separate escrow agreement "for the purpose of escrowing $5,000 pending completion of the work detailed [in the other condition]."

The parties entered into an escrow agreement at the closing on September 26, 1994. It recites substantially the same list of dirt work to be performed by defendants, and also provides that all items other than the final grading around the house, the installing of any retaining walls, and the raking, seeding, and mulching were to be completed no later than December 31, 1995, or the escrow fund would be released to plaintiffs. Pursuant to the agreement, $5,000 was deposited in the escrow account, held by plaintiffs' lawyer.

Virtually no activity occurred with respect to the site until the summer of 1995, apparently because plaintiffs were trying to sell their existing house. When plaintiffs bought lot # 31, it contained a rough driveway allowing entry onto the land from the access road. During the summer of 1995, almost a year after the closing, defendants performed work on the lot, adding gravel to the rough driveway, and creating a "stump dump" to bury stumps and water bars to control erosion. The stump dump was created by digging a hole in the lot, pushing a number of tree stumps into it, and covering them with dirt to create a mound. There was conflicting evidence about whether the stumps came from plaintiffs' lot or from neighboring lots. In July 1995, plaintiffs visited the site, discovered the stump dump and water bars, and told James Connacher, President of Stowe Club Highlands, that they were displeased with the condition of the land.

Disputes arose between the parties, with Mr. Connacher representing defendants. Plaintiffs decided that the existing access to the lot was not suitable for a driveway, and informed defendants in late October or early November 1995 where they wanted the access relocated. As Mr. Connacher learned of the work plaintiffs were expecting of him under the purchase and sale contract, he grew concerned about the cost and told plaintiffs that they needed to work out a new dirt work agreement to spell out in detail the work that would be done. Plaintiffs were unwilling to enter into a new agreement. Earlier, Mr. Connacher had recommended an excavation contractor to plaintiffs. At some point in late 1995 or early 1996, he told that excavation contractor not to do any work for plaintiffs, causing a delay while they arranged another contractor.

Pursuant to its Act 250 permit and as part of the mutual covenants between landowners in the development, the Stowe Club Highlands development has an architectural review committee, which must review and approve all building and land-scape designs prior to development of a lot. To obtain preliminary and then final approval, the landowner must present: (1) preliminary plans showing "proposed location, preliminary elevations, shape and dimensions of the proposed improvements," and (2) final plans including a "site plan, a foundation plan, working drawings for the proposed improvements, . . . elevations, and the landscape plan." The committee has 30 days to respond to requests for approval.

In the fall of 1995, the members of the architectural review committee included an architect, a resident of Stowe Club Highlands, and a representative of one of the owners of the development, Mr. Connacher. At trial, plaintiff Murphy testified that Mr. Connacher stated at a site meeting that all plaintiffs needed to submit to the architectural review committee were exterior elevations and outside finishes. Plaintiffs' evidence also showed that a previous review by the committee had taken about a week and had been very informal.

On November 22, 1995, plaintiffs gave their preliminary plans to the architectural review committee, hoping to start construction before the winter. Although their designer had substantially completed the construction plans by that date, the submission consisted only of exterior elevations, color swatches, and a computer rendering of the exterior. On December 19, 1995, the committee informed plaintiffs that their submission was incomplete and that they were required to submit interior floor plans and a revised site plan in accordance with the covenants before their proposal could be considered. Plaintiffs responded by letter stating they had submitted everything Mr. Connacher had told them to submit, and asking again for prompt approval. When they received no immediate response, they contacted their attorney. Plaintiffs' attorney wrote a letter to Mr. Connacher on their behalf on December 29, 1995, demanding that he complete the dirt work and stating that the escrow money would not be released at the end of the year. Plaintiffs did not start construction that winter.

In March and April 1996, plaintiffs submitted most of the needed plans, and on April 5, 1996, the architectural review committee issued preliminary approval of the plans. On May 10, 1996, the committee gave final approval to the plans for the house,² and plaintiffs began construction, hiring their own contractor to perform the dirt work. Plaintiffs' excavation contractor used some gravel from piles belonging to defendants. Construction was not completed within the two-year limit required to avoid a land gains tax, and plaintiffs paid a tax of $19,000.³

The legal battle between the parties continued, however. Plaintiffs' attorney, not having received a response to the December letter, sent a letter to Mr. Connacher in March 1996, demanding immediate action to complete the dirt work and to remove the stump dump and water bars and accusing him of manipulating the architectural review process to avoid performing the dirt work. Through counsel, defendants responded that the dirt work obligation had not survived closing because it was not in the deed, no dirt work could be performed until plaintiffs obtained approval from the architectural review committee, Mr. Connacher had abstained from deliberations of the committee, and plaintiffs' counsel could release the escrow money to plaintiffs. Further letters only escalated the controversy, and this suit was filed in August 1996.

The complaint charged defendants with violating the Vermont Consumer Fraud Act; trespassing on lot # 31 when they entered onto it in July 1995 to create the stump dump and water bars; negligence in the creation of the stump dump and water bars; and breach of contract for failing to complete the dirt work specified in the purchase and sale and escrow agreements. Included in the relief requested were attorneys' fees pursuant to the Vermont Consumer Fraud Act, and punitive damages. Defendants filed a counterclaim for conversion of the gravel used by plaintiffs' contractor.

Following a five-day trial, the jury found that defendants breached their contractual obligations to plaintiffs, but were not negligent and did not trespass on lot # 31. The jury also found plaintiffs converted some of defendants' gravel, but did not assign any damages to that claim. The jury verdict awarded plaintiff...