Vt. Small Bus. Dev. Corp. v. Fifth Son Corp., 12–170.

• Decision Date: 25 January 2013
• Docket Number: No. 12–170.,12–170.
• Citation: 67 A.3d 241,2013 VT 7
• Parties: VERMONT SMALL BUSINESS DEVELOPMENT CORPORATION v. FIFTH SON CORPORATION, J. Michael Henzel, Mad Partners, LLC and Chris Pierson.
• Court: Vermont Supreme Court

67 A.3d 241
2013 VT 7

VERMONT SMALL BUSINESS DEVELOPMENT CORPORATION
v.
FIFTH SON CORPORATION, J. Michael Henzel, Mad Partners, LLC and Chris Pierson.

No. 12–170.

Supreme Court of Vermont.

Jan. 25, 2013.

[67 A.3d 242]

Chris Pierson of Mad Partners, LLC, Pro Se, Waitsfield, Appellant.

J. Michael Henzel of Fifth Son Corporation, Pro Se, Charlotte, Appellee.

Present: REIBER, C.J., DOOLEY, SKOGLUND, BURGESS and ROBINSON, JJ.

DOOLEY, J.

¶ 1. Appellant landlord appeals a partial summary judgment order concluding that his eviction of appellee tenant from a property was wrongful, as well as the trial court's ruling on a post-trial motion that tenant was not liable to landlord for rent that accrued post-eviction. Because landlord's notice of default was defective, and because a wrongful eviction releases a tenant from liability for rent accrued post-eviction, we affirm.

¶ 2. Mad Partners, LLC and Chris Pierson (collectively, lessor) leased a restaurant and residential condominium to defendants Fifth Son Corporation and J. Michael Henzel (collectively, lessee) for a two-year period beginning January 1, 2009. Until March 2010, lessee operated a restaurant called “Miguel's at Sugarbush” in the leased commercial building, and stayed in the condominium irregularly.

¶ 3. Lessor and lessee signed two separate leases, one for the restaurant and one for the condominium, but each lease provided that default on either one would allow lessor to exercise default rights under both. The leases differed, however, in how lessor was to give notice if he wished to exercise such rights. Article XI of the restaurant lease provided that in the case of an “Event of Default,” which included nonpayment of rent for a specified period:

[67 A.3d 243]

Lessor ... may give written notice to Lessee specifying the occurrence giving rise to such Event of Default ... and stating that this Agreement and terms hereby demised shall expire and terminate on the date specified in such notice, which shall be at least twenty (20) days after the giving of such notice....

It went on to describe how lessee could cure the default before that specified date.

¶ 4. Article 5 of the condominium lease, by contrast, provided:

If the Lessee shall neglect or fail to perform any of its covenants, and in particular if any monthly installment of rent be overdue and unpaid, the Lessor may, immediately or at any time thereafter, give notice pursuant to State statutes for Lessee to vacate the premises....

¶ 5. Article XIII of the restaurant lease contained a “survival clause,” whereby:

No expiration of the term of this Lease or repossession of the Leased Premises by reason of an Event of Default shall relieve Lessee of its liability and obligations under this Lease, all of which shall survive any such expiration or repossession.

That same article contained a provision for liquidated damages. It continued:

In the event of any such expiration, Lessee shall be liable to Lessor for, and shall pay to Lessor, as and for liquidated and agreed damages for Lessee's default....

The liquidated damages included the “total accelerated unpaid portion of the rent,” as well as interest, court costs, and attorney's fees.

¶ 6. Lessee fell behind on the rent payments, and as of March 5, 2010, was in default on both leases. On that date, lessor sent what was characterized as a notice of default on both leases to lessee's address by certified mail. It is not clear why the Postal Service's three attempts at delivery on March 6, 16, and 22 failed, but whatever the reason, notice was either not accepted or not received by the lessee, and the Postal Service eventually stamped the envelope “unclaimed.” After having learned about the failed delivery, lessee called lessor to discuss it. Although details of the conversation are not in the record, lessee apparently learned that he was about to be evicted from both properties. Lessor and lessee disagree as to whether and/or when lessee requested that the notice be emailed to him.

¶ 7. There is no disagreement, however, as to the form and content of the notice, which was emailed to lessee on March 28, 2010, and submitted into evidence. The notice referenced both leases and informed lessee that he was “in default” of each. It did not provide a date of termination or give any details as to the alleged default. It reminded lessee that he had the opportunity to bring the lease payments current.

¶ 8. On March 28, 2010—the same day that he emailed the notice—lessor locked lessee out of both premises. After that date, he did not allow lessee to access the properties to retrieve any items. This action began when the Vermont Small Business Development Corporation (VSBDC) filed suit against both lessor and lessee based on a default on a loan to lessee. Lessor then cross-claimed against lessee for rent, damages, utility costs, interest, and attorney's fees. Lessee, in turn, cross-claimed against lessor for lost profits due to a wrongful eviction and conversion of personal property left on the premises. The suits by VSBDC settled as to both defendants, but the case between lessor and lessee continued.

¶ 9. The superior court granted partial summary judgment to lessee, holding that lessor had wrongfully evicted lessee from

[67 A.3d 244]

the premises. The rest of the claims were tried before a jury. After evidence was presented, the court entertained for the first time the question of whether lessee was liable for rent for the restaurant property for the remaining period of the lease—that is, for post-eviction rent. We do not have transcripts of the trial testimony and events, but the trial court's order on the resulting motion states that the issue was first raised by lessee's counsel. Lessor submitted a memorandum in which he conceded that lessee was not liable for post-eviction rent on the condominium, but argued that under Article XIII of the restaurant lease, lessee was liable for post-eviction rent on that property. Lessee similarly submitted a memorandum, taking the opposite position with respect to the restaurant lease. During the charge conference, the court decided not to give a clear legal instruction on this question to the jury,¹ including instead: “[Lessors] claim they are entitled to full satisfaction of all obligations under the entirety of the [restaurant] lease contract. You will calculate [lessor]'s damages as what you determine to be the total amount of unpaid rent and utilities.” However, the court advised both parties that it would entertain a motion for judgment as a matter of law on this issue after the verdict.

¶ 10. The jury awarded lessor past rent and past utility costs for both the restaurant and the condominium, but did not award damages for nonpayment of post-eviction rent or utility fees for either property. It also declined to award damages to lessee for the wrongful eviction, for lessor's failure to return the security deposit, or for punitive damages, for either property.

¶ 11. As had been discussed during the charge conference, lessor filed a post-trial motion asserting that the trial court erred in failing to instruct the jury that lessor was entitled to prospective rent or damages for loss of post-eviction rent under the restaurant lease, and further that the jury miscalculated damages for both...