Wharton v. Tri-State Drilling & Boring
Annotate this Case
Wharton v. Tri-State Drilling & Boring (2001-520); 175 Vt. 494; 824 A.2d 531
2003 VT 19
[Filed 19-Feb-2003]
2003 VT 19
ENTRY ORDER
SUPREME COURT DOCKET NO. 2001-520
SEPTEMBER TERM, 2002
Clyde E. and Vivian Wharton } APPEALED FROM:
}
}
v. } Essex Superior Court
}
Tri-State Drilling & Boring }
} DOCKET NO. 1-1-00 Excv
Trial Judge: Dennis R. Pearson
In the above-entitled cause, the Clerk will enter:
¶ 1. Appellant Tri-State Drilling and Boring admits to having
mistakenly drilled a well on the property of appellees Clyde and Vivian
Wharton and filed a fraudulent mechanics' lien against the Whartons'
property in an effort to compel the Whartons to negotiate an easement. The
trial court found Tri-State liable for abuse of process and awarded
compensatory and punitive damages. Tri-State appeals the trial court's
denial of Tri-State's motion to dismiss for failure to state a claim and
award of actual and punitive damages to the Whartons. Although we find
that Tri-State's actions in this case did not constitute abuse of process,
we find that the Whartons proved the elements of slander of title and we
affirm the trial court's award of compensatory and punitive damages on this
basis.
¶ 2. The facts of this case are not disputed. The well had been
commissioned by the Whartons' neighbors, the Beans. There was no
suggestion, and the trial court found no evidence, that the Whartons were
responsible for the mistake that led to the well being drilled on their
property. Before the episode with the well began, the Whartons had decided
to sell their property in Vermont and retire to Tennessee, and they had
placed a "For Sale" sign at the end of their driveway. As the Tri-State
drilling operators were finishing the well, Clyde Wharton returned home and
realized the well had actually been dug on his property. A discussion
ensued between Wharton and the drill-rig operator during which Wharton made
it clear that he had no intention of paying Tri-State for the well.
Approximately one week after completion of the well, a Tri-State employee
approached the Whartons asking them to grant an easement that would allow
the well to be hooked up and used by the Beans. Tri-State offered to pay
the Whartons for the easement, but the Whartons rejected the offer because
they were concerned that encumbering their deed with an easement would
impair their ability to sell their house.
¶ 3. On May 24, 1999, Tri-State sent a bill to both the Beans and
the Whartons for $2,095, the cost of the well. On the same day, Tri-State
filed a Notice of Mechanics' Lien against the Whartons' property in the
amount of $2,095 with the Concord Town Clerk. The President of Tri-State,
Neil Faulkner, testified at trial that Tri-State never intended to bring
suit against the Whartons to perfect the lien. He stated that the purpose
of the lien was to obtain "leverage" in order to compel the Whartons to
grant the easement that they had previously declined to give. The lien
expired by law on August 24, 1999 without having been perfected by suit
against the Whartons.
¶ 4. On September 10, 1999, the Whartons entered into an agreement
to sell their camp to Patricia Branch for $64,000. Before the closing date
on October 29, 1999, Branch's attorney, William Neylon, discovered the lien
filed by Tri-State and advised Branch that the lien clouded title to the
Whartons' property. Until Tri-State had formally released and discharged
the lien, Neylon believed the title to have a constructive, if not actual,
title defect. Neylon was unable to persuade any title insurance company to
insure over the potential defect.
¶ 5. The Whartons' real estate agent had several conversations
with Tri-State in an effort to convince Tri-State to discharge the lien and
release its claim against the Whartons. Tri-State refused. The Whartons
then hired a series of attorneys to assist in their effort to resolve the
lien issue, again to no avail. The Branch sales agreement was extended to
November 1999, but the sale ultimately fell through. The trial court found
that the Whartons were unable to close the sale to Branch because of
Tri-State's refusal to formally discharge the expired lien.
¶ 6. In anticipation of selling their home to Branch, the Whartons
had packed and moved their belongings to Tennessee where they intended to
retire. They stayed several additional months in Vermont during the fall
of 1999 in an effort to salvage the sale of the property to Branch,
incurring expenses, such as utility bills and pro rata real estate tax,
that they would not have faced if the sale had closed as planned on October
28, 1999.
¶ 7. In January 2000, the Whartons reached a tentative agreement
to sell the property to Bonnie McPhetres for $65,000. The sale was
contingent upon the removal of the Tri-State lien. The Whartons filed this
action demanding that Tri-State release and discharge its lien and
underlying claim to enable this sale to take place. The parties agreed to
escrow the amount of the Tri-State bill pending the resolution of this
dispute. Tri-State then discharged the lien and the sale of the property
to McPhetres closed.
¶ 8. In addition to injunctive and declaratory relief declaring
Tri-State's lien void on its face and ordering Tri-State to discharge the
lien, the Whartons sought actual and punitive damages and costs from
Tri-State. The trial court found that actual damages the Whartons suffered
included lost interest as a result of losing the initial sale to Branch,
additional expenses incurred due to the Whartons' continued residence in
Vermont after the sale to Branch would have gone through, expenses to
travel back from Tennessee and stay in Vermont to complete the sale to
McPhetres, and legal expenses to bring this suit. The trial court found
that the Whartons were entitled to compensatory damages of $4409.67, and
also found that they were entitled under V.R.C.P. 54(a) to court costs of
$186.08. Furthermore, the trial court found that Tri-State's improper use
of the mechanics' lien statute "reprehensible" and awarded the Whartons
$10,000 in punitive damages. Thus, the total amount that the trial court
ordered Tri-State to pay was $14,945.75 in actual damages, attorneys' fees,
punitive damages, and costs.
A. Motion to Dismiss
¶ 9. We first address Tri-State's claim that the trial court
should have granted its motion pursuant to V.R.C.P 12(b)(6) to dismiss for
failure to state a claim upon which relief may be granted. Tri-State
contends that the expiration of the mechanics' lien pursuant to 9 V.S.A. §
1924 rendered the mechanics' lien void on its face and therefore removed
any cloud on title as a matter of law. Tri-State's motion to dismiss
asserts that "it is beyond dispute that as a matter of law the lien could
not have been the legitimate basis for the termination of the purchase and
sales contract." According to Tri-State, at the time the Whartons filed
their suit they had no cognizable legal complaint because the lien had
expired. The Court is left to wonder, however, why Tri-State refused to
discharge a lien that had no legal effect upon the marketability of title.
Indeed, in a case involving a contractors' lien that had not been perfected
during the three month statutory period, this Court observed that a
recorded but unperfected lien can create a cloud upon title: "[A recorded
lien], even without attachment, has a practical effect upon alienation, in
that disclosure is required, 9 V.S.A. § 1922, and a cloud upon title
created." Filter Equipment Co., Inc. v. I.B.M. Corp., 142 Vt. 499, 502,
458 A.2d 1091, 1093 ( 1983) (emphasis added).
¶ 10. When reviewing the disposition of a Rule 12(b)(6) motion to
dismiss, this Court assumes that all factual allegations pleaded in the
complaint are true. Richards v. Town of Norwich, 169 Vt. 44, 48-49, 726 A.2d 81, 85 (1999). We disregard all of defendant's contrary assertions.
Id. Moreover, a motion to dismiss for failure to state a claim upon which
relief may be granted should not be granted unless it is beyond doubt that
there exist no facts or circumstances that would entitle the moving party
to relief. Richards, 169 Vt.at 48, 726 A.2d at 85; Amiot v. Ames, 166 Vt.
288, 291, 693 A.2d 675, 677 (1997). By this standard, the trial court
correctly denied Tri-State's motion to dismiss. Even though the mechanics'
lien had expired, until it is discharged a mechanics' lien must be
disclosed to potential purchasers. 9 V.S.A. § 1922. Assuming the
Whartons' allegations that they had suffered actual damages from the cloud
on title created by the Tri-State lien were true, they met their burden
under V.R.C.P. 12(b)(6) of stating the grounds upon which they were
entitled to relief. We therefore affirm the trial court's denial of
Tri-State's motion to dismiss.
B. Cause of Action
¶ 11. The trial court based its theory of recovery upon its finding
that Tri-State committed the tort of abuse of process. In Vermont, a
plaintiff alleging the tort of abuse of process is required to plead and
prove: "1) an illegal, improper or unauthorized use of a court process; 2)
an ulterior motive or an ulterior purpose; and 3) resulting damage to the
plaintiff." Jacobsen v. Garzo, 149 Vt. 205, 208, 542 A.2d 265, 268 (1988).
While the trial court's findings of fact support the second and third of
these elements, filing a mechanics' lien does not require the use of any
court process. We uphold the court's damage award, however, under the
alternative theory mentioned by the trial court: slander of title.
¶ 12. A mechanics' lien expires by operation of law ninety days
after its filing if not perfected by a court order. 9 V.S.A. § 1924.
Tri-State never perfected its lien against the Whartons, and therefore no
court order was involved. Merely filing, but not perfecting, a lien does
not involve court process and therefore cannot be the basis for a claim of
abuse of process in Vermont. See Carl E. Jones Development, Inc., v.
Wilson, 255 S.E.2d 135, 136 (Ga. Ct. App. 1979) (unperfected mechanics'
lien not basis for abuse of process claim). Cf. Kleinschmidt v. Morrow,
642 A.2d 161, 164 n.3 (Me. 1994) ("assum[ing] without deciding" that the
filing of a fraudulent lien constitutes an abuse of process where
contractor who filed but never perfected fraudulent lien never challenged
plaintiff's allegation that his conduct constituted an abuse of process);
Display Fixtures Co. v. R.L. Hatcher, Inc., 438 N.E.2d 26, 31 (Ind. Ct.
App.1982) (approving recovery for abuse of process claim based on filing
but not perfecting a fraudulent mechanics' lien in state where use of
"court process" not an element of the abuse of process tort).
¶ 13. Although the trial court erred in finding that Tri-State's
actions constituted an abuse of process, we affirm because the Whartons are
entitled to recovery for slander of title. We will affirm a judgment even
if the grounds stated in its support are erroneous as long as the result is
the same under the correct law and reasoning. Vt. State Colleges Faculty
Fed'n v.Vt State Colleges, 151 Vt. 457, 463, 561 A.2d 417, 421 (1989); see
also In re Handy, 171 Vt. 336, 343, 764 A.2d 1226, 1234 (2000) (holding
that Court will not reverse an erroneous trial court decision if record
discloses any legal ground justifying the result).
¶ 14. The elements of slander of title as a cause of action have
not been clearly laid out in Vermont. The tort has been recognized by this
Court, however, first in a nineteenth century case in which we declared
that we had jurisdiction over claims for slander of title, Sherman v.
Champlain Transportation Company, 31 Vt. 162 (1858), and next in a more
recent case where we held that an essential element of the cause of action
for slander of title is special damages. Gardner v. West-Col, Inc., et
al., 136 Vt. 381, 387, 392 A.2d 383, 386 (1978). The essence of the tort
is the publication of an assertion that is derogatory to the plaintiff's
title to property in an effort to prevent others from dealing with the
plaintiff. See Prosser and Keeton on Torts, § 128, at 967 (5th ed. 1984).
To prove slander of title, a plaintiff must prove that a defendant falsely
published a statement concerning plaintiff's title that caused special
damages to the plaintiff and that defendant acted with malice. Restatement
(Second) of Torts § 623A, 624 (1977); see also Macia v. Microsoft
Corporation, 152 F. Supp. 2d 535, 541 (D. Vt. 2001); Elm Street Builders v.
Enterprise Park Condominium, 778 A.2d 237, 245 (Conn. App. Ct. 2001);
Paidar v. Hughes, 615 N.W.2d 276, 279-80 (Minn. 2000).
¶ 15. The Whartons established each of the elements of slander of
title. Even though it had not been perfected within the statutory period,
Tri-State's mechanics' lien was a falsely published assertion regarding
title to the Whartons' home. See, i.e., Kleinschmidt, 642 A.2d at 164
(rejecting argument that because a mechanics' lien has not been perfected
it cannot cause damages as a matter of law); Filter Equipment Co., Inc.,
142 Vt. at 502, 458 A.2d at 1093 (finding that a recorded lien even if
unperfected "has a practical effect upon alienation"). The trial court
found that the Whartons suffered pecuniary damages as a result of the lost
sale to Branch because of the cloud on their title.
¶ 16. As for the final element of a claim for slander of title,
malice, the trial court found malice as a necessary element for its award
of punitive damages. The record supports this finding. Tri-State's
behavior epitomized malice, which we have defined as "conduct manifesting
personal ill will, evidencing insult or oppression, or showing a reckless
or wanton disregard of plaintiffs' rights." Ainsworth v. Franklin County
Cheese Corp., 156 Vt. 325, 332, 592 A.2d 871, 875 (1991). By Tri-State
President Neil Faulkner's own admission, the mechanics' lien was filed only
as "leverage," and was intended to force the Whartons into negotiating an
easement which they previously declined to give. Tri-State argues that
there is no malice because Tri-State made an honest mistake in locating the
well and there was no evidence of any "bad blood" between Tri-State and the
Whartons before the digging of the well. Tri-State's arguments miss the
point of the Whartons' claims. Although the misplacement of the well was
an honest mistake, Tri-State acted with malice subsequent to the drilling
of the well when it filed a fraudulent mechanics' lien, an act that
intentionally disregarded the Whartons' rights.
C. Damages
¶ 17. Tri-State contends that the trial court erred in awarding
compensatory and punitive damages. Parts of its arguments essentially
repeat the same points made in its motion to dismiss, that is, that the
Whartons could not as a matter of law have suffered damages from a
mechanics' lien that had expired by operation of law. We have already
rejected these arguments in Part A above. Tri-State does, however, raise
two questions that deserve separate consideration. In this section we
consider whether the Whartons met their obligation to mitigate damages and
whether the trial court abused its discretion by awarding punitive damages
in this case.
¶ 18. Tri-State does not dispute that the Whartons incurred
pecuniary damages but Tri-State alleges that it should not be held liable
for these damages because the damages could have been mitigated if the
Whartons had agreed to escrow the $2000 in dispute out of proceeds from the
initial sale, thus allowing the sale agreement with Branch to close. The
burden of demonstrating that damages could have been mitigated falls on the
party asserting it. Cartin v. Continental Homes of N.H., 134 Vt. 362, 367,
360 A.2d 96, 100 (1976). The burden is not met by speculation, id., and
Tri-State cannot demonstrate that the sale would have taken place in
October of 1999 if the lien had been discharged on the basis of this
record. The record does disclose that the Whartons took steps to mitigate
damages by having Tri-State notified that a formal discharge and release of
the lien was necessary, and by continuing their efforts to sell their house
after the initial sale agreement with Branch fell apart. The specific sale
of property to Patricia Branch was impeded by Tri-State's refusal to
discharge the mechanic's lien, and as courts have long recognized, "a
specific lost sale is the best proof of special damages." Maragos v. Union
Oil Co. of Ca., 584 N.W.2d 850, 852 (N.D. 1998).
¶ 19. Finally, Tri-State argues that the court erred in awarding
punitive damages, and that even if punitive damages were justified, the
amount of punitive damages was excessive. This Court will not overrule a
trial court finding regarding punitive damages unless it appears that the
trial court had no reasonable basis for the exercise of its discretion.
Finley v. Williams, 142 Vt. 153, 156, 453 A.2d 85, 87 (1982). In slander
of title cases, punitive damages are awarded at the trial court's
discretion. Diapulse Corp. of America v. Birtcher Corp., 362 F.2d 736, 744
(2d. Cir. 1966), cert. dismissed 385 U.S. 801 (1966); Display Fixtures Co.
v. R.L. Hatcher, Inc., 438 N.E.2d 26, 31 (Ind. Ct. App.1982). Here, we
find that the award of punitive damages was well supported by the record.
As the trial court noted, "the self-help nature of the lien law is utterly
dependent on the good faith of those who utilize its provisions." The
mechanics' lien statute provides protection for those who contribute to
construction projects by giving them a method for obtaining compensation
for their products. Newport Sand and Gravel v. Miller Concrete, 159 Vt.
66, 69, 614 A.2d 395,397 (1992). Tri-State violated the trust inherent in
this system when it used the lien statute in an effort to compel action
from the Whartons, who owed Tri-State nothing. "The purpose of punitive
damages is to 'punish conduct that is morally culpable . . . [and] to deter
a wrongdoer . . . from repetitions of the same or similar actions.' "
Brueckner v. Norwich Univ., 169 Vt. 118, 129, 730 A.2d 1086, 1095 (1999).
An award of punitive damages requires that a plaintiff show that defendant
acted with malice. Id. As we have already noted, the trial court's
finding of malice was supported from the evidence on this record. Even
after the Whartons notified Tri-State about the effect of the outstanding
mechanics lien on their efforts to sell their home, Tri-State refused to
discharge it. The trial court took into account Tri-State's financial
circumstances in calibrating the amount of the punitive damages. Under the
totality of the circumstances, the trial court's award of $10,000 in
punitive damages was well within the court's discretion.
Affirmed.
BY THE COURT:
_______________________________________
Jeffrey L. Amestoy, Chief Justice
_______________________________________
John A. Dooley, Associate Justice
_______________________________________
Denise R. Johnson, Associate Justice
_______________________________________
Marilyn S. Skoglund, Associate Justice
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Note: Justice Morse was present when the case was submitted on the
briefs but did not participate in this decision.
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