Quenneville v. Buttolph, 02-333.

• Decision Date: 05 September 2003
• Docket Number: No. 02-333.,02-333.
• Court: Vermont Supreme Court
• Parties: Richard and Bettina QUENNEVILLE v. Thomas and Mary BUTTOLPH, Elizabeth Campbell and Karen Houghton

833 A.2d 1263

Richard and Bettina QUENNEVILLE v. Thomas and Mary BUTTOLPH, Elizabeth Campbell and Karen Houghton

No. 02-333.

Supreme Court of Vermont.

September 5, 2003.

Andrew Jackson, Middlebury, for Plaintiffs-Appellees.

Charles S. Martin of Martin & Associates, Barre, for Defendants-Appellants Campbell and Houghton.

James C. Foley, Jr. of Deppman & Foley, P.C., Middlebury, for Defendants-Cross-Appellants Buttolph.

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

AMESTOY, C.J.

¶ 1. Defendants Elizabeth Campbell and Karen Houghton appeal the Addison Superior Court's decision extinguishing their claim to the Buttolph Farm and its owner corporation, Buttolph Farms, Inc. Appellants Campbell and Houghton argue that the superior court erred in finding that no contractual relationship existed between them and the Buttolphs and in refusing to enforce the terms of the agreements they reached. Co-defendants Thomas and Mary Buttolph cross-appeal the decision of the superior court ordering them, as the sole shareholders of Buttolph Farms, Inc., to convey the farm to plaintiffs Richard and Bettina Quenneville based on an oral agreement for the sale of the farm. The Buttolphs argue that the superior court erred in finding and enforcing an oral agreement between the Buttolphs and the Quennevilles for the sale of the farm. We affirm.

¶ 2. In late March 2000, cross-appellants Thomas and Mary Buttolph began negotiating with appellant Elizabeth Campbell, a Rutland accountant, for the sale of the Buttolph Farm, located in Shoreham, Vermont. Campbell met numerous times with Mr. Buttolph over the next several weeks to discuss a sale and to examine the farm's financial and tax records. Since the farm was held in "C" Corporation ownership by Buttolph Farms, Inc., upon selling the farm as real estate, the Buttolphs would incur double taxation that would consume an estimated 50% of the $500,000 sale price. During her meetings with the Buttolphs, Campbell structured an offer advantageous to both parties: she would acquire the farm by purchasing its owner corporation Buttolph Farms, Inc., paying far less than the nominal asking price in the process, while at the same time providing the Buttolphs a greater return on the sale and avoiding the double taxation incurred by selling the farm as real estate.

¶ 3. On April 7, 2000, Campbell gave Buttolph a check for $1,000 to demonstrate that, as her memo on the check said, "we're serious." On April 28, Campbell met with the Buttolphs and their accountant, John Chamberlain, to discuss the terms of the proposed deal. The parties discussed a deal in which Campbell and Houghton would purchase the Buttolph Farms, Inc. stock with an owner-financed payment of $56,000, assume $200,000 of Yankee Farm Credit debt, permit Tom Buttolph's father to remain in his trailer on the property, and continue to carry his health insurance through the corporation. Moreover, the Buttolphs would keep their cows, equipment, and the right to collect the value of Agrimark stock and USDA drought relief, expected to be worth $270,000 collectively.

¶ 4. On April 28, 2000 Tom Buttolph requested that Campbell prepare the following handwritten memo, which he signed:

4/28/00.

We agree to sell our stock in Buttolph Farms, Inc. to Karen Houghton and Liz Campbell for $56,000. This sale is after we have taken possession of the cows, the feed the equipment, except for various small equipment (Grey Matter). Details of this deal will be stipulated in a formal agreement. To be reviewed and signed later.

T. Buttolph II /s/ Thomas Buttolph II

On May 22, 2000 the Buttolphs' attorney sent a letter to the attorney of Campbell and Houghton denying the existence of any binding agreement between the parties. At various points in their ongoing negotiations, Campbell and Buttolph also discussed the disposition of sundry farm equipment referred to as "grey matter." Although the parties agreed that the value of the "grey matter" would be included in the overall sale price, the superior court found that their disputes about the exact items included in this list were never resolved. ¶ 5. Before the Buttolphs had started the negotiations with Campbell and Houghton, plaintiff-appellees, the Quennevilles, had looked at the farm for possible purchase. Within a few days after their April 28 meeting with Campbell, the Buttolphs began negotiating for sale of the farm with the Quennevilles. The Buttolphs and Quennevilles met as many as six times to discuss the terms and structure of the sale. The negotiations culminated in a July 6, 2000 meeting between the Buttolphs, Quennevilles, and their respective attorneys, during which, according to the superior court, the parties orally agreed to the terms of the sale. Under those terms, the Quennevilles would purchase Buttolph Farms, Inc., thereby acquiring the farm itself, by assuming approximately $200,000 of Yankee Farm Credit debt, financing through Chittenden Bank an $80,000 payment for an unmortgaged 148 acre parcel of the farm, and paying a balance of $70,000 to the Buttolphs. This last payment consisted of $5000 that the Quennevilles had already paid in cash and a $65,000 seller-financed promissory note with a rate of nine percent and a five-year balloon note. Although a written agreement was prepared by their attorneys, it was never signed, and the trial court found that only an oral agreement was reached between the parties.

¶ 6. In late May 2000, Mr. Quenneville planted corn at the Buttolph Farm at a cost of between $20,000 and $30,000. On June 8, Quenneville moved his herd of 400 cattle from New York to the Buttolph Farm. He took care of Buttolph's sixty cows for several months without getting paid for the labor. The Quennevilles also upgraded and repaired, over the course of the summer and at their own expense, the milking parlor, barn, roads, manure pit, fencing, and tenant house. Finally, at some point it was orally agreed that the Buttolphs would move out of the main farmhouse by August 15, 2000. Based on this agreement, the Quennevilles enrolled their special-needs child in the Middlebury school district, of which Shoreham is a member. While engaged in these activities, and since the sale could not be closed while a lawsuit against Campbell and Houghton was in progress (see below), the Quennevilles began negotiating with the Buttolphs for a lease agreement. Although they paid a monthly rent of $3,000 while the case was pending, a written lease agreement was never executed.

¶ 7. On June 2, 2000, the Buttolphs filed suit in the Rutland Superior Court seeking a declaratory judgment that their agreements with Campbell and Houghton were unenforceable, as well as damages for interference with contractual relationships, abuse of process, and malicious prosecution. On June 14, Campbell and Houghton filed an answer and counterclaim seeking specific performance of their oral agreement memorialized in the note signed by Tom Buttolph. On November 7, 2000, after learning that the Buttolphs were considering a settlement with Campbell and Houghton, the Quennevilles filed a complaint in the Addison Superior Court against Campbell, Houghton, and the Buttolphs, seeking specific performance of their oral agreement with the Buttolphs, legal and equitable damages, costs, and interest. On December 1, 2000 the Quennevilles filed an intervenor complaint in the Rutland litigation, seeking the same relief as in their Addison County complaint. On February 22, 2001, Campbell and Houghton filed a third-party complaint against Buttolph Farms, Inc. On May 2, 2001, the Rutland and Addison cases were consolidated in the Addison Superior Court. A hearing on the merits was held before Judge Matthew I. Katz, concluding on January 2, 2002. ¶ 8. On March 19, 2002, the Addison Superior Court issued an entry order in which it declared that Campbell and Houghton had no enforceable contract for the purchase of the Buttolph Farm property or Buttolph Farms, Inc. stock and ordered the Buttolphs to sell the farm to the Quennevilles based on their oral contract. In relevant part, the superior court found that while the handwritten note signed by Mr. Buttolph on April 28 established the basic elements of an oral agreement with Campbell and Houghton, it also anticipated the preparation of a formal agreement at a later date. Moreover, according to the court, particular issues left unresolved were the interest rate, amount of payments, amount of a balloon note, items included in the "grey matter," security for purchasers' note, and a possible right of first refusal to be retained by the Buttolphs on a small portion of the farm. Consequently, according to the superior court, the Buttolphs entered neither a written agreement that encompassed all the terms agreed upon, nor an oral agreement that encompassed all the terms discussed.

¶ 9. Defendants Campbell and Houghton filed a motion to reconsider on April 3, 2002. In response, the Addison Superior Court filed another entry order on May 17, 2002. In it, the court first found that, as a matter of fact, the Buttolphs never reached an agreement with Campbell and Houghton regarding the composition of the "grey matter" list. The court further found that, as a matter of law, the composition of the "grey matter" was a substantial part of the intended contract. Finally, the superior court reaffirmed its conclusion that, since Campbell's agreement with the Buttolphs was for owner financing, and since the court cannot substitute a different agreement for one the parties made, her ability to pay cash was irrelevant.

¶ 10. On June 27, 2002 the Addison Superior Court filed its judgment order extinguishing the claim of Campbell and Houghton to Buttolph Farms and Buttolph Farms, Inc., and ordering the Buttolphs to convey the Buttolph Farms premises and stock to the Quennevilles in accordance with the terms of the purchase and sale...