Quechee Lakes Corp. v. Terrosi, 250-80

• Docket Nº: No. 250-80
• Citation: 141 Vt. 547, 451 A.2d 1080
• Case Date: August 31, 1982
• Court: United States State Supreme Court of Vermont

Page 1080

451 A.2d 1080 141 Vt. 547 QUECHEE LAKES CORPORATION
v.
Robert E. TERROSI. No. 250-80. Supreme Court of Vermont. Aug. 31, 1982.

Page 1081

[141 Vt. 549] Mahady, Johnson, Dunne, Hershenson & Scott, Norwich, for plaintiff-appellee.

Philip E. Bonz and Mark D. Oettinger, Law Offices of Robert J. O'Donnell, Woodstock, for defendant-appellant.

Before [141 Vt. 547] BARNEY, C.J., and BILLINGS, HILL, UNDERWOOD and PECK, JJ.

[141 Vt. 549] UNDERWOOD, Justice.

The defendant, a contractor, appeals an order requiring him to pay to the plaintiff, a land developer, the [141 Vt. 550] balance due on a piece of real estate according to the provisions of a contract between them. The defendant alleges numerous points of error. We find one of his claims has merit. He correctly asserts that the trial court erred by holding his counterclaim for rescission barred by a statute of limitations. We deal with this issue first, and then address the defendant's remaining claims.

Plaintiff and defendant entered into a contract for the plaintiff to sell and the defendant to buy a lot in the plaintiff's Quechee Lakes Development on July 1, 1974. Closing took place on August 28, 1974. When the defendant defaulted on his obligation to make monthly payments to the financing bank, the plaintiff paid off the defendant's note, and brought this action against the defendant for the balance due on July 17, 1978. In an answer filed on August 29, 1978, the defendant interposed 14 affirmative defenses, one of which was the plaintiff's alleged failure to comply with provisions of the federal Interstate Land Sales Full Disclosure Act (hereinafter Act).

The Act mandates that "It shall be unlawful for any developer ... to sell ... any lot ... unless ... a printed property

Page 1082

report ... is furnished to the purchaser in advance of the signing of any contract or agreement for sale or lease by the purchaser ...." 15 U.S.C.A. § 1703(a)(1).

"If a property report is not furnished, the execution of an agreement to sell is a violation of the Act. It gives rise to a cause of action to rescind the agreement." Gaudet v. Woodlake Development Co., 413 F.Supp. 486, 488 (E.D.La.1976). The Act, however, contains a limitation section which then provided, "In no event shall any such action be brought by a purchaser more than three years after the sale or lease to such purchaser." 15 U.S.C.A. § 1711. Notwithstanding the defendant's arguments to the contrary, a sale takes place "at the time of signing the initial contract," not when all installments due under it are finally paid. Aldrich v. McCulloch Properties, Inc., 627 F.2d 1036, 1043-44 (10th Cir.1980).

Clearly, the defendant would be barred by the three-year statute of limitations from bringing a separate action for rescission. A different situation exists, however, when an otherwise barred action is brought in recoupment.

[141 Vt. 551] Recoupment is a species of counterclaim which a defendant may assert only if it arises out of the same transaction as the plaintiff's claim, and then only as a defensive device to defeat or diminish the plaintiff's recovery. 6 C. Wright and A. Miller, Federal Practice and Procedure § 1401 (1971). It is to be distinguished from a set-off, which does permit affirmative relief and which may involve an unrelated claim, but which is limited by the requirement that the claim be for a liquidated amount, or arise out of a contract or judgment. Id.

At federal common law, a defense of recoupment "is never barred by the statute of limitations so long as the main action itself is timely." Stone v. White, 301 U.S. 532, 539, 57 S.Ct. 851, 854, 81 L.Ed. 1265 (1937). See...