Vastano v. Killington Valley Real Estate

Vastano v. Killington Valley Real Estate (2005-324)

2007 VT 33

[Filed 01-May-2007]

                                 ENTRY ORDER

                                 2007 VT 33

                      SUPREME COURT DOCKET NO. 2005-324

                              MARCH TERM, 2006


  Frank Vastano and Tracy Lees         }         APPEALED FROM:
                                       }
                                       }
      v.                               }         Rutland Superior Court
                                       }
  Killington Valley Real Estate        }
                                       }         DOCKET NO. 751-12-01 Rdcv

                                                 Trial Judge: William D. Cohen

             In the above-entitled cause, the Clerk will enter:

       ¶  1.  Plaintiffs Frank Vastano and Tracy Lees appeal from the
  jury's verdict in favor of defendant Killington Valley Real Estate (KVRE)
  in this consumer fraud action.  KVRE acted as the property manager and
  listing agent for a home that plaintiffs purchased.  Shortly after
  purchasing the property, plaintiffs discovered that the home was located
  near a leaking underground storage tank (LUST) site and that their well was
  being monitored for the presence of gasoline-related contaminants. 
  Plaintiffs alleged that KVRE knew this information and violated the
  Consumer Fraud Act by failing to disclose it to them before the sale.  The
  jury rejected plaintiffs' claim, finding that,  although KVRE made an
  omission likely to mislead reasonable consumers, and plaintiffs interpreted
  the omission reasonably, the omission was not material.  We conclude that
  the omission was material as a matter of law, and therefore set aside the
  jury's verdict and direct the trial court to enter judgment for plaintiffs. 

       ¶  2.  The record indicates the following history.  Richard Paul
  owned a home in Killington, Vermont.  In 2000, he listed the property for
  sale with Judy Storch, a principal in KVRE.  KVRE placed the property in
  the multiple listing service, which allowed other realtors to show the
  property to prospective customers.  Plaintiffs lived in New Jersey, and
  they purchased the Paul property in November 2000.  Shortly after the sale,
  plaintiffs discovered that their well was being monitored on an ongoing
  basis by Marin Environmental, an environmental engineering firm, for
  possible gasoline contamination.  In December 2001, plaintiffs filed a
  complaint against KVRE alleging consumer fraud.
   
       ¶  3.  In October 2003, plaintiffs moved for summary judgment,
  asserting that it was undisputed that KVRE knew of the ongoing testing of
  their well and failed to disclose this information.  The trial court denied
  the motion, finding that, although KVRE admitted that it was aware that the
  Paul well was being regularly monitored for potential gasoline
  contamination and did not disclose this information to plaintiffs, KVRE
  denied having any knowledge of unacceptable drinking water at the subject
  property.  Accordingly, the court concluded that it remained for the trier
  of fact to decide if failing to inform plaintiffs of the testing and
  monitoring of the Paul well and other wells in the area rose to the level
  of a material omission. 

       ¶  4.  Plaintiffs moved for reconsideration, arguing in part that
  the court erroneously focused its analysis on what KVRE did not know,
  rather than what it did know.  Plaintiffs reiterated  that it was
  undisputed that KVRE knew of the monitoring of wells in the area, including
  the Paul well, and asserted that, given its failure to disclose this
  information, plaintiffs were entitled to judgment in their favor as a
  matter of law.  The court denied the request for reconsideration in a May
  2004 entry order.  Plaintiffs renewed their motion for summary judgment in
  February 2005, before trial began, reiterating their assertion that KVRE's
  failure to disclose the monitoring was a material omission as a matter of
  law.  The renewed motion was denied as moot after trial.

       ¶  5.  At trial, plaintiffs presented evidence about the underground
  gasoline spill, which was discovered in 1993, as well as the ongoing
  remediation efforts.  KVRE acknowledged that it provided Marin
  Environmental with keys to the Paul property, as well as other properties,
  to facilitate the monitoring and testing of the water supply in connection
  with the remediation efforts.  Judy Storch of KVRE admitted knowing about
  the spill and the testing of nearby wells, including the Paul well. 
  According to a record kept by KVRE, the Paul well was tested for possible
  contamination at least three times in 2000, the latest of which occurred
  just prior to the sale of the property.  Although Storch was never informed
  of any test results, she stated at trial that she now considered the
  gasoline spill and monitoring to be material facts that should have been
  disclosed to plaintiffs.  Nevertheless, plaintiff Lees acknowledged during
  cross-examination that she testified  in her deposition that she did not
  know what she would have done differently had she known of the testing
  prior to purchase.

       ¶  6.  On a special verdict form, the jury found that defendant made
  an omission that was likely to mislead reasonable consumers and that
  plaintiffs had interpreted the information reasonably under the
  circumstances.  It concluded, however, that the omission was not material. 
  Plaintiffs filed a motion for a new trial or to amend the judgment under
  V.R.C.P. 59, which was denied, and this appeal followed.

       ¶  7.  Plaintiffs raise numerous arguments on appeal.  Because we
  agree with their assertion that the alleged omission was material as a
  matter of law, we do not reach their remaining arguments.  For the same
  reason, we do not address the argument raised by the State of Vermont in
  its amicus curiae brief.
        
       ¶  8.  The Consumer Fraud Act prohibits "unfair or deceptive acts or
  practices in commerce."  9 V.S.A. § 2453(a).  To establish a "deceptive act
  or practice" under the Act, plaintiffs needed to show that:  (1) there was
  a representation, practice or omission likely to mislead them; (2) they
  interpreted the message reasonably under the circumstances; and (3) the
  misleading effects were "material," that is, "likely to affect [their]
  conduct or decision with regard to a product."  Greene v. Stevens Gas
  Serv., 2004 VT 67, ¶ 15, 177 Vt. 90, 858 A.2d 238 (quotations omitted);
  see also 9 V.S.A. § 2453(b) (in determining what constitutes an unfair or
  deceptive act under the Vermont Consumer Fraud Act, courts should be guided
  by the construction of similar terms in the Federal Trade Commission Act,
  15 U.S.C. § 45(a)(1)).  As reflected above, the jury found that the first
  two elements were satisfied.  Given the undisputed facts, as conceded by
  KVRE and specifically found by the trial court in its denial of summary
  judgment, that KVRE knew of, and failed to disclose the testing, we
  conclude that the third element is satisfied as a matter of law.

       ¶  9.  The question of whether an omission is material is "generally
  measured by an objective standard, premised on what a reasonable person
  would regard as important in making a decision."  Carter v. Gugliuzzi, 168
  Vt. 48, 56, 716 A.2d 17, 23 (1998) (noting that test may include subjective
  component where seller knows that consumer, because of some peculiarity, is
  particularly susceptible to omission or misrepresentation); see also Kraft,
  Inc. v. Fed. Trade Comm'n, 970 F.2d 311, 322 (7th Cir. 1992) (Under the FTC
  Act, "[a] claim is considered material if it involves information that is
  important to consumers and, hence, likely to affect their choice of, or
  conduct regarding a product." (quotations omitted)).  In this case, as the
  trial court found, it was undisputed that KVRE knew about the underground
  gasoline spill, knew that there was ongoing monitoring of the Paul well in
  connection with the spill, and failed to disclose these facts to
  plaintiffs.  Even if Ms. Lees indicated that she was not sure if she would
  have done anything different had KVRE disclosed this information, the
  relevant test is an objective one. We are certain that a reasonable person
  would consider the information possessed by KVRE-that the well of their
  prospective home was being monitored on an ongoing for possible gasoline
  contamination from a nearby LUST site-to be important in deciding whether
  to purchase the property or calculating how much to pay for it.  See
  Carter, 168 Vt. at 56-57, 716 A.2d  at 23-24 (finding omission material
  where "it plainly could have affected the parties' negotiations or the
  purchase price").  The omission here deprived plaintiffs of the ability to
  make a fully-informed decision, and it violated the basic purpose of the
  Consumer Fraud Act, which is to "encourage a commercial environment
  highlighted by integrity and fairness."  Gramatan Home Investors Corp. v.
  Starling, 143 Vt. 527, 536, 470 A.2d 1157, 1162 (1983).  The omission was
  objectively and plainly material.  

       ¶  10.  Our conclusion is consistent with the Federal Trade
  Commission's interpretation of the FTC Act, and its position that omissions
  are presumptively material "if they significantly involve health, safety,
  or other areas with which the reasonable consumer would be concerned." 
  Letter from James C. Miller, III, Chairman, FTC, to John D. Dingell,
  Chairman, Committee on Energy & Commerce, U.S. House of Representatives
  (Oct. 14, 1983), appended to In re Cliffdale Assocs., 103 F.T.C. 110, 182
  (1984).  Reasonable consumers shopping for a residence would rightfully
  expect a seller's agent to disclose the known fact that a home's water
  supply is being monitored on an ongoing basis for gasoline contamination. 
        
       ¶  11.  Because the omission was material as a matter of law, we
  conclude that plaintiffs were entitled to judgment in their favor. (FN1) 
  Accordingly, we vacate the jury's verdict, and remand the case to the trial
  court for entry of judgment in plaintiffs' favor and for consideration of
  the question of damages.  Given our conclusion, we do not reach plaintiffs'
  remaining arguments, nor the argument raised by amicus curiae State of
  Vermont.
                                                                          
       The trial court's final judgment order is vacated and the case is
  remanded to the trial court to enter judgment for plaintiffs and to
  consider the question of damages.


                                       BY THE COURT:


                                       _______________________________________
                                       John A. Dooley, Associate Justice

                                       _______________________________________
                                       Denise R. Johnson, Associate Justice

                                       _______________________________________
                                       Marilyn S. Skoglund, Associate Justice

                                       _______________________________________
                                       Brian L. Burgess, Associate Justice


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                                  Footnotes


FN1.  We enter judgment for plaintiffs, rather than granting their request
  for a new trial, because  granting a new trial would serve no purpose.  Cf.
  State v. Provost, 2005 VT 134, ¶ 20, 179 Vt. 337,  896 A.2d 55 (vacating
  defendant's sentence but declining to remand case to trial court for
  resentencing where doing so would serve no purpose as only one sentence was
  permissible and any other sentence would be inappropriate).  Defendant can
  hope for no verdict in its favor given the undisputed and conceded evidence
  that KVRE knew of the testing and failed to disclose this known information
  to plaintiffs, and given our ruling above that such an omission was
  material as a matter of law.