B. B. & J., Ltd. v. Bedell

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NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.

No. 89-238

B.B. & J., A Vermont Limited Supreme Court
Partnership
On Appeal From
v. Lamoille Superior Court

Melvin G. and Luella B. Bedell, May Term, 1990
William F. Pryme and Brian N. Pryme

Linda Levitt, J.

Polow & Polow, Hyde Park, for plaintiffs-appellees

Valsangiacomo, Detora, McQuesten, Rose & Grearson, Barre, for
defendants-appellants

PRESENT: Allen, C.J., Peck, Gibson, Dooley and Morse, JJ.

ALLEN, C.J. Defendants appeal from the jury's compensatory damages
award in plaintiffs' action for breach of the covenant of quiet enjoyment
implied in the lease between plaintiffs and defendants. We reverse and
remand for a new trial on the issue of compensatory damages alone.
On May 29, 1987, plaintiffs, acting through a limited partnership
entitled B.B. & J., leased from defendants the Hayloft Restaurant in
Morrisville, Vermont, for a period of one year. Within two weeks of
entering the lease plaintiffs received their first indication of a problem
with their water supply. The results of a test of the restaurant's water
taken on June 4 were returned, stating that the water was contaminated. The
next few months witnessed a series of conflicting tests, a notice from the
Vermont Department of Health instructing plaintiffs to boil their water and
warning of a possible suspension of the restaurant's license, a temporary
shutting off of plaintiffs' water without warning, and two periods during
which the water was brown, sedimentary, and "odoriferous." During the first
such period plaintiffs were forced to close for two days. Following the
second period, which occurred in late September, plaintiffs closed the
restaurant and vacated the premises.
Plaintiffs' claim as finally submitted to the jury was for breach of
the covenant of quiet enjoyment implied in the lease between plaintiffs and
defendants. Defendants counterclaimed for unpaid rent and certain unpaid
bills. The jury found on the interrogatory submitted by the court that
defendants breached the covenant of quiet enjoyment, and awarded
compensatory damages and attorney's fees to plaintiffs. The jury also found
against defendants on their counterclaim. Following denial of their motion
in the alternative for judgment notwithstanding the verdict or for new
trial, defendants brought a timely appeal to this Court.
Defendants raise two issues on appeal. The first is that the damage
award is not supported by the evidence. The second is that the jury was
prejudiced by admission into evidence of testimony regarding defendants'
financial holdings. Because we reverse and remand on defendants' first
ground, we do not reach the second.
A motion to set aside a verdict as being without evidentiary support
will fail "if the record contains any evidence that 'fairly and reasonably'
tends to support the jury's verdict." Champlain Oil Co. v. Trombley, 144
Vt. 291, 295, 476 A.2d 536, 538 (1984) (quoting Smith v. Blow & Cote, Inc.,
124 Vt. 64, 66, 196 A.2d 489, 491 (1963)). In ruling on a motion for
judgment notwithstanding the verdict, "we must view the evidence in the
light most favorable to the nonmoving party, excluding the effect of any
modifying evidence." Kinzer v. Degler Corp., 145 Vt. 410, 412, 491 A.2d 1017, 1018 (1985). Ultimately, the question to be resolved is "whether the
result reached by the jury is sound in law on the evidence produced." Id.
We conclude that the result reached by the jury on the issue of damages
is not "sound in law on the evidence produced." Without defining the extent
to which compensatory damages are available in an action for breach of an
implied covenant of quiet enjoyment, it is clear that, at a minimum, damages
for such a breach must have been caused by the breach. It is axiomatic that
plaintiffs can be compensated only for those damages which proximately
resulted from defendants' breach. See Vermont Electrical Supply Co. v.
Andrus, 135 Vt. 190, 192, 373 A.2d 531, 532 (1977) ("in a contract action
one can only recover the natural and proximate damages caused by the
injury"); Norton & Lamphere Construction Co. v. Blow & Cote, Inc., 123 Vt.
130, 138, 183 A.2d 230, 236 (1962) ("The general rule is that in an action
of contract the damages must be the direct, natural result of the breach . .
. ."); 5 A. Corbin, Corbin on Contracts { 997, at 21 (1964) ("a causal
relation [must] be shown to exist between the defendant's conduct and the
harm for which damages are sought").
Plaintiffs in this case have failed to show that their damages were
proximately caused by defendants' breach. Plaintiffs' evidence on damages
consisted almost exclusively of two exhibits: their partnership income tax
return showing a business loss from the restaurant, and a list of additional
expenses not reflected in the income tax return. The business loss
calculation on plaintiffs' partnership income tax return showed the gross
receipts of the business minus allowable expenses and deductions. No
attempt was made by plaintiffs to attribute any of the expenses or
deductions to defendants' breach of the covenant of quiet enjoyment.
Likewise, the additional expenses listed -- taxes due the State of Vermont
and the federal government, and bills for food, linen, a newspaper
subscription, and gas -- in no way were attributed by plaintiffs to
defendants' breach. (FN1)
The source of plaintiffs' error is easily grasped. Plaintiffs sought
to recover as damages all of their losses associated with the business
operated on the leased premises. Plaintiffs assert on appeal that such a
recovery is necessary for them "to be made whole." Yet what plaintiffs fail
to appreciate is that they are entitled "to be made whole" only to the
extent that they were injured by defendants' breach. (FN2)
We decline, however, to acquiesce in defendants' request for a reversal
and entry of judgment in their favor. Plaintiffs have established
defendants' breach of the implied covenant of quiet enjoyment and the merits
of this determination have not been contested on appeal. Further, it
appears that some damage occurred as a result of the breach. We therefore
remand the cause for a new trial on the question of damages to prevent a
failure of justice. Hathaway v. Ray's Motor Sales, Inc., 127 Vt. 279, 282,
247 A.2d 512, 514 (1968) ("While we might enter judgment for the defendant
on this state of the record, discretion persuades us that justice would be
better served by remanding . . . ."); Wing Memorial Hospital Ass'n v. Town
of Randolph, 120 Vt. 277, 284, 141 A.2d 645, 651 (1957) ("to assure full
consideration of all issues, remand is ordered"); Essex Chair Co. v. Fine
Furniture Co., 116 Vt. 145, 148, 70 A.2d 578, 581 (1950) ("Enough appears in
the record to satisfy us that the plaintiff may well have a meritorious case
if the facts are properly presented and found, and we think he should have
an opportunity to have this done."). Accordingly, we reverse the trial
jury's compensatory damages award and remand on this issue alone. (FN3)
Reversed and remanded.

FOR THE COURT:

Chief Justice

FN1. Searching the record, the only evidence which bears even a remote
relation to establishing a causal link between defendants' breach and
plaintiffs' damages was plaintiff William Pryme's testimony that a special
dinner was cancelled because of water problems, that part of a four hundred
and seven dollar phone bill concerned water problems, and that inventory was
lost upon plaintiffs' cessation of the business. Without deciding whether
all of these items are cognizable in a suit for breach of an implied
covenant of quiet enjoyment, or whether they were proximately caused by the
breach in this case, and overlooking the fact that even proximately caused
damages must be established with reasonable certainty as to amount, Berlin
Development Corp. v. Vermont Structural Steel Corp., 127 Vt. 367, 372, 250 A.2d 189, 193 (1968), it is clear that these items do not come close to
supporting the jury's compensatory award of seventeen thousand dollars.

FN2. Plaintiffs point us to the Restatement (Second) of Contracts {
344(b) (1981), which defines a promisee's reliance interest as "his interest
in being reimbursed for loss caused by reliance on the contract by being put
in as good a position as he would have been in had the contract not been
made . . . ." This definition does not take the causation requirement out
of the law of reliance damages. Rather, it expressly limits such damages to
"loss caused by reliance." See Norton & Lamphere Construction Co., 123 Vt.
at 136, 183 A.2d at 235 (reliance damages must be "such as fairly and
reasonably may be considered as arising naturally from the breach of the
contract itself"). It simply cannot be said that plaintiffs' expenses as
presented on the record below constituted "loss[es] caused by reliance" on
the existence of an unbreached lease.

FN3. Plaintiffs have asked this Court to recognize and reserve their
right to apply to the trial court for the cost of attorney's fees incurred
on appeal. Given our disposition, plaintiffs' request is denied.

________________________________________________________________________________

DISSENTING

No. 89-238

B.B. and J., A Vermont Limited Supreme Court
Partnership
On Appeal From
v. Lamoille Superior Court

Melvin G. and Luella B. Bedell, May Term, 1990
William F. Pryme and Brian N. Pryme

Linda Levitt, J.

Polow & Polow, Hyde Park, for plaintiff-appellee

Valsangiacomo, Detora, McQuesten, Rose & Grearson, Barre, for
defendants-appellants

PRESENT: Allen, C.J., Peck, Gibson, Dooley and Morse, JJ.

MORSE, J., dissenting. I respectfully dissent because a remand for a
new trial on damages will not "prevent a failure of justice."
At the close of plaintiff's case and again at the close of the
evidence, defendants moved for a directed verdict on the ground that
plaintiff had not proved the amount of damages suffered as a result of
defendants' breach. Although plaintiff alleged total business losses of
more than $28,000, jurors were left to speculate about what portion of that
amount was caused by defendants as opposed to other causes. The trial
court, as the Court today holds, erred in denying all motions for directed
verdict and the motion for j.n.o.v.
Plaintiff was not ambushed; it knew defendants had made a challenge
that its case on damages had not been proved. Plaintiff nevertheless chose
to stand pat on the evidence. Even the jury was aware of the deficiency in
the evidence. During deliberation, a note was submitted asking,
If we decide the defendants breached the covenant of
quiet enjoyment and we feel the evidence shows the
breach caused damages, but that the evidence does not
show the amount of damages, must we award all or
nothing?

After the court answered "no" to this question, the jury asked a second
question:
We are confused. Your instructions say our award should
not be based on speculation or guesswork, so how would
we arrive at any other amount?

The trial court then instructed the jury to do the impossible, "You
have to look at all of the evidence," of which there was none. The jury's
award of $17,000 compensatory damages was obviously a number picked out of
the air (somewhere between zero and the total amount asked by plaintiff).
Having decided to rest its case on the evidence presented, despite a
motion for a directed verdict, why should plaintiff have a second chance?
We do not ordinarily grant, and cannot often afford to give, plaintiffs new
trials when the evidence is insufficient, as was the case here.
The Court's only authority for a second "bite of the apple" are cases
over twenty years old. These cases are anomalies and obviously do not
require the result in this case. Although, in a compelling case, the court
may provide a particularly deserving litigant a new trial, there is nothing
out of the ordinary in this case to support that kind of discretion.
Plaintiff simply took its chances. And, we must not forget that
magnanimity bestowed on one litigant must be at the expense of the other
party. Today, when appreciable backlogs exist and continue to build in our
courts, we should be less cavalier about expending limited resources, ours
and litigants'.
I would reverse.

Associate Justice

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