Winton v. Johnson & Dix Fuel Corp., 84-186

• Decision Date: 07 July 1986
• Docket Number: No. 84-186,84-186
• Citation: 147 Vt. 236,515 A.2d 371
• Court: Vermont Supreme Court
• Parties: David H. WINTON v. JOHNSON & DIX FUEL CORP.

Page 371

515 A.2d 371

147 Vt. 236

David H. WINTON v. JOHNSON & DIX FUEL CORP.

No. 84-186.

Supreme Court of Vermont.

July 7, 1986.

Douglas S. Moore of Brownell & Moeser, Norwich, for plaintiff-appellee.

Laurence F. Gardner and Bernard Waugh, Hanover, N.H., for defendant-appellant.

Before ALLEN, C.J., and HILL, PECK, GIBSON and HAYES, JJ.

ALLEN, Chief Justice.

The defendant, Johnson & Dix Fuel Corporation, appeals the trial court's determination that its advertisement for a solar hot water heater violated the Consumer Fraud Act, 9 V.S.A. §§ 2451-2462. Plaintiff cross appeals the court's dismissal of his fraud claim and the adequacy of the damages awarded. We affirm on the issue of liability but remand for further proceedings on the issue of damages.

In September, 1980, the plaintiff purchased a Daystar solar hot water heater from the defendant. The plaintiff's interest in the solar device was sparked by newspaper and radio advertisements for the heater, including statements that emphasized the availability of the Vermont state energy tax credit, 32 V.S.A. § 5922. These statements, however, did not mention that the credit was available only to "resident individual" taxpayers. The plaintiff was not a resident taxpayer within the meaning of the statute and, as a result, his application for the tax credit was denied. After an unsuccessful administrative appeal of the denial, plaintiff instituted an action against the defendant, which is the subject of the present appeal.

The plaintiff contended that the advertisements were intentionally misleading, and therefore actionable in fraud. He also claimed that the misleading advertisements were in violation of the Consumer Fraud Act. At a bench trial, the trial court found that the defendant was unaware of the residency requirement, and concluded that "fraud cannot be predicated on an opinion of law in this situation...." Accordingly, he dismissed the plaintiff's fraud claim. The court, however, also concluded that the advertisements, absent any statement about the residency requirement, were capable of deceiving a consumer, and held that the defendant had violated the Consumer Fraud Act, 9 V.S.A. § 2453. The court awarded the plaintiff $1,000 in actual damages caused by the denial of the tax credit, and attorney's fees as allowed by the Act. While the Act also allows an award of exemplary damages, the court concluded that the plaintiff had waived this claim.

On appeal, the defendant contends that the trial court erred in concluding that the advertisements were capable of deception, and that, as a matter of law, there can be no violation of the Consumer Fraud Act absent a showing that defendant possessed a culpable mental state. The plaintiff cross appeals the dismissal of his first count sounding in fraud, the finding that he waived exemplary damages, and the amount of the attorney's fee award.

During the pendency of this appeal, this Court held in Bagley v. Vermont Department of Taxes, 146 Vt. 120, 500 A.2d 223 (1985), that the residency requirement upon which the Tax Department based its denial of the credit was unconstitutional, and an order was issued to show cause why this matter was not rendered moot by the holding in Bagley. The issue of mootness and the merits will be addressed in order.

I. Mootness

The general rule underlying the mootness doctrine is that a case becomes moot "when the issues presented are no longer 'live' or the parties lack a legally cognizable interest in the outcome. In re S.H., 141 Vt. 278, 280, 448 A.2d 148, 149 (1982) (quoting United States Parole Commission v. Geraghty, 445 U.S. 388, 396, 100 S.Ct. 1202, 1208, 63 L.Ed.2d 479 (1980)). "The mootness doctrine requires that 'an actual controversy must be extant at all stages of review, not merely at the time the complaint is filed.' " In re Gross, 476 Pa. 203, 209, 382 A.2d 116, 119 (1978) (quoting G. Gunther, Constitutional Law 1578 (9th ed. 1975)). An issue can be made moot by a change in the law as well as by a change in the facts. Id. at 209, 382 A.2d at 120.

The defendant suggests two theories of mootness in this case: one, that Bagley renders its representation true at the time it was made, and two, that the plaintiff can now obtain his tax benefit and be made whole, thereby eliminating all legal harm, whether or not the original representation was false. In order to examine the mootness issue the Court will assume, arguendo, that an untrue representation was made at the time of the sale, and then examine whether later events (here, the Bagley decision) can equitably be said to have rendered the untrue representation true as a matter of law at the time it was made. If it is concluded that Bagley did not render the representation true when made, it must then be determined whether this case is nevertheless moot because Bagley has the effect of making the plaintiff whole and eliminating any legal harm.

The gist of the complaint is that the defendant's representations about the availability of an energy tax credit were both fraudulent and violated the Consumer Fraud Law because they were capable of deceiving a consumer. The issue of the change in the law brought on by our decision in Bagley is critical, because the allegedly deceptive claim in the advertisements for the solar device purchased by the plaintiff was clearly a representation about the state of the law, under either count of the complaint.

While representations about the status of the law were held at common law not to be actionable, Abbott v. Treat, 78 Me. 121, 125-26, 3 A. 44, 46-47 (1886), and actionable only in limited circumstances in Vermont, Rice's Admr. v. Press, 117 Vt. 442, 447, 94 A.2d 397, 399-400 (1953), the rule has long been subject to strong qualifications. ¹ An important distinction must be made between representations of legal opinions and representations of fact relating to the law as it exists. While it is fruitless to attempt to conform every decision to a single consistent principle, in general cases have distinguished between misrepresentations involving opinions and those involving facts. The first involves the legal meaning and effect of a statute, court ruling, document, instrument or other source of law, while the latter involves statements that imply the existence of accurate and readily ascertainable facts that either concern the law or have legal significance, but which are not part of the law themselves.

Many cases involve statements of opinion. In Hutton v. Ming, 155 Mont. 149, 467 P.2d 688 (1970), for instance, a realtor told an owner that the only way to avoid the loss of his home was to sign a quitclaim deed. The basis of the representation was the realtor's judgment that a general provision of law applied to the facts of the plaintiff's case in a particular way, clearly a matter of opinion rather than a misrepresentation of fact. Id. at 154, 467 P.2d at 690. See also Christopher v. Whitmire, 199 Ga. 280, 283, 34 S.E.2d 100, 102 (1945) (representation to woman that divorce from former husband in another jurisdiction was valid held to be expression of opinion); Ryan v. Lumbermen's Mutual Casualty Co., 485 S.W.2d 548 (Tenn.1972) (workers' compensation claim manager's misrepresentation to claimant that "Tennessee would not accept jurisdiction" of claimant's case). In each of these cases, the court concluded that opinions cannot give rise to misrepresentation, because opinions are not facts, and the tort of fraud is grounded upon a defendant's misrepresentation of facts. See Keeton, Fraud-Misrepresentations of Law, 15 Tex.L.Rev. 409 (1937).

By contrast, many cases that are characterized as involving representations of law actually involve representations of facts that concern the law or that have legal significance. These fact-representation cases have as their common thread that the representor generally states or implies that the matter asserted is readily ascertainable, is not subject to specialized or expert interpretation, and does not depend on judgment or speculation about future events as fundamental to the accuracy of the assertion. See, e.g., City of Aurora v. Green, 126 Ill.App.3d 684, 688, 81 Ill.Dec. 739, 467 N.E.2d 610, 614 (1984); Bobak v. Mackey, 107 Cal.App.2d 55, 57, 236 P.2d 626, 627 (1951). As one commentator has said:

Misrepresentations of law have often been called statements of opinion on which no one has a right to rely. But here, too, the statement may imply the existence of external facts. For one thing it may imply the existence or non-existence of an applicable statute, regulation, or judicial decision, and this is one kind of external fact which may seem very important to the person addressed by the statement.

James & Gray, supra, at 494. (Citations omitted.).

The representations by the defendant in the present case concerned the law, i.e., the status of defendant's products under Vermont tax statutes, but were fashioned as facts, rather than opinions about the application of the law. A prospective customer might have been induced to purchase one of the defendant's products because of the favorable tax benefits alone, with the understanding that the right to obtain the tax benefit was an established fact and that the cost of obtaining the tax benefit would not be significant with respect to the benefit itself.

Where a representation as to a matter of law is essentially a matter of fact, the recipient may rely on it in a business transaction to the same extent as the recipient would other facts. Restatement (Second) of Torts § 545(1) (1977). This principle is not applicable where it is clear from the full text of a representation or from facts about the relationship of the parties that reliance should only follow an independent inquiry. No such limitation, however, is presented in the instant case. Made in connection with other inducements to purchase the defendant's product, the representations here contained no provisos or warnings...