State v. Delaney

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                                No. 89-580


State of Vermont                             Supreme Court

     v.                                      On Appeal from
                                             Washington Superior Court
Robert D. Delaney
                                             February Term, 1991



John P. Meaker, J.

Jeffrey L. Amestoy, Attorney General, and William E. Griffin, Chief
   Assistant Attorney General, Montpelier, for plaintiff-appellant

James P. W. Goss and Peter W. Hall of Abell, Kenlan, Schwiebert & Hall,
   P.C., Rutland, for defendant-appellee



PRESENT:  Allen, C.J., Gibson and Morse, JJ., and Cheever, Supr. J.,
          and Peck, J., (Ret.), Specially Assigned


     GIBSON, J.   The State, which seeks specific performance of an alleged
contract to sell certain land formerly owned by defendant, appeals from
summary judgment in his favor and the denial of its motions for summary
judgment and a preliminary injunction.  Defendant cross-appeals the denial
of his motion for sanctions.  We affirm.
                                   I.
     Defendant is trustee for a group of individuals who, in the summer of
1988, put up for sale a 3,135-acre parcel of land adjoining Willoughby
State Forest.  During the fall of 1988 and winter of 1989, the Nature
Conservancy made three different offers for the land, all of which were
rejected.  The Nature Conservancy was acting, at least in part, as an agent
for the State.
      On January 30, 1989, defendant's broker told John Roe, director of
land protection at the Nature Conservancy, that the land was to be sold to
the Dotolis for $1.2 million on February 1, 1989.  This information was
passed on to State officials and, in response, Governor Kunin telephoned
defendant that same evening.  She confirmed that the price was $1.2 million
and requested defendant not to sell the property to a third party because
the State wanted to purchase it.  Defendant declined the governor's request,
stating that he "was not interested in that because [he] didn't believe the
state was in a position to consummate any kind of a deal" in the time before
the scheduled sale to the Dotolis.
     At about that time, the Nature Conservancy decided it would advance
the purchase money for the property if the Legislature adopted a resolution
in support of the purchase.  With this in mind, the governor decided to
sponsor such a resolution and, on January 31, again telephoned defendant,
this time reading the text of the draft resolution to him.  The draft stated
that it was the intention of the State to appropriate $750,000 toward the
purchase price of the land, but did not set forth the full purchase price.
Defendant suggested that a reference to the full purchase price be added so
there would be no misunderstanding.  This was done.
     A few hours later, defendant called the governor's office and left a
message to the effect that the governor was "off the hook for another week."
In response, the governor called defendant, and according to her affidavit,
defendant "offered and agreed to give the State of Vermont until February 8,
1989 to commit to the purchase of the property at the agreed upon price.  In
that same conversation, [defendant] stated that he had always preferred to
sell the property to the State."  Defendant's recollection of the conver-
sation is somewhat different.  In his deposition, he stated that he told the
governor that the State "had another week to do whatever they wanted to do"
and that "[i]f they had a viable contract I saw that was right I told her I
would consider it."  The joint resolution passed the Senate on January 31,
1989 and the House on February 3, 1989.
     On February 2, the Nature Conservancy telefaxed a signed purchase and
sale agreement to defendant.  The next day, John Roe telephoned defendant on
behalf of the Nature Conservancy to discuss the document.  Defendant said
that, although the document looked perfectly acceptable, he wanted to speak
with a real estate attorney before giving final approval.  After being
pressed for an appointment to sign the document, defendant said he would
check his partners' schedules and call back on Monday, February 6.
Defendant did not indicate there was any change in the February 8 deadline.
     On February 6, defendant called the Nature Conservancy, reached Robert
Klein, its Vermont director, and informed him that the property was being
sold to the Dotolis.  After Klein expressed surprise, defendant voiced
several objections to the Nature Conservancy's proposed purchase and sale
agreement.  Klein said they could all be accommodated.  Defendant neverthe-
less ended the conversation and, by letter dated February 6, informed the
governor that the property was being sold to a third party, "even though the
Nature Conservancy seemed to have everything pretty well in line to be able
to go to contract tomorrow."
     The State immediately initiated this suit and filed a motion for a
preliminary injunction, seeking to restrain defendant from selling the
property to the Dotolis.  The State argued it had entered into a binding
contract to purchase the property from defendant prior to the agreement
between defendant and the Dotolis.  The trial court denied the motion,
holding that the State had not established a reasonable likelihood of
prevailing on the merits.  The State's motion for reconsideration was also
denied, and the sale from defendant to the Dotolis was completed.  Subse-
quently, the State requested specific performance under several contractual
theories, both parties filed motions for summary judgment, and defendant
filed a motion for sanctions.  The court denied the State's motion for
summary judgment, granted defendant's motion for summary judgment, and
denied defendant's motion for sanctions.
     On appeal, the State argues that the court erred in its summary
judgment rulings. (FN1) Defendant cross-appeals the denial of sanctions.
                                    II.
     The State advances two contractual arguments: (1) its part performance
of an offer from defendant created an option contract for sale of the
property, and (2) it entered into a contract for sale of the property with
defendant before defendant sold the property to the Dotolis. (FN2) We are not
persuaded by either argument and conclude that the trial court did not err
by granting defendant's motion for summary judgment and denying the State's
motion for summary judgment.
     Initially, we set out the law applicable to both arguments.  Summary
judgment is appropriate where there is no genuine issue of material fact and
the moving party is entitled to judgment as a matter of law, after giving
the benefit of all reasonable doubts and inferences to the opposing party.
Toys, Inc. v. F.M. Burlington Co., ____ Vt. ___, ___, 582 A.2d 123, 125
(1990); V.R.C.P. 56(c).  Where both parties seek summary judgment, each
party receives this benefit when the opposing party's motion is being
considered.  Toys, Inc., ___ Vt. at ___, 582 A.2d  at 125.  On appeal, the
same summary judgment standard serves as our standard of review.  Cavanaugh
v. Abbott Laboratories, 145 Vt. 516, 520, 496 A.2d 154, 157 (1985).  "'The
question whether there was a contract between the parties does not depend
alone upon the specified facts found but also upon the reasonable inferences
to be drawn from them,'" the "'situation and purpose of the parties,'" and
the "'subject matter and course of the negotiations.'"  Toys, Inc., ___ Vt.
at ___, 582 A.2d  at 126-27 (quoting Ackerman v. Carpenter, 113 Vt. 77, 81,
29 A.2d 922, 925 (1943)).
                                    A.
     The State argues that its motion for summary judgment should have been
granted or, alternatively, defendant's motion denied, because an option
contract was created between the defendant and the State by the State's part
performance of defendant's offer.  For support, the State cites to Restate-
ment (Second) of Contracts { 45 (1981).  Under the State's theory, defend-
ant's offer of a unilateral contract consisted of defendant's (1) partici-
pation in the drafting of the resolution, (2) assurance that he wanted to
sell the property to the State, (3) statement that he would not sell to a
third party before February 8, 1989, and (4) promise that he would give the
State until then to make a final commitment.  The State further contends
that it began to complete the invited performance by drafting, debating, and
enacting the joint resolution, and negotiating through the Nature
Conservancy with defendant for a deposit amount, closing date, and draft
contract.
     An argument analogous to the State's argument was made, and rejected,
in Ragosta v. Wilder, 2 Vt. L.W. 164 (Apr. 26, 1991).  In Ragosta, the
defendant had told the plaintiffs -- the prospective purchasers -- that he
would sell his property to them if they appeared at a designated place
before a certain time with the purchase money, provided the property was not
sold to someone else in the meantime.  The defendant later assured the
plaintiffs that no one else was currently interested in purchasing the
property.  The plaintiffs obtained a loan and incurred certain costs in
attempting to acquire the property.  The trial court ruled that obtaining
financing constituted the  beginning of performance, apparently relying on
Restatement (Second) of Contracts { 45.  We reversed, holding that
"plaintiffs merely engaged in preparation for performance."  Id., at 165;
cf. Chomicky v. Buttolph, 147 Vt. 128, 131-32, 513 A.2d 1174, 1176 (1986)
(part-performance exception to Statute of Frauds not satisfied by making
financing arrangements).
     This case is governed by Ragosta and is less compelling.  Defendant
told the State on several occasions that he was interested only in a
"solid, viable contract."  The joint resolution did not appropriate any
money; it merely expressed an "intention to proceed with the State's appro-
priation," which was set forth as $750,000 of the $1.2 million purchase
price.  The remainder of the purchase price was to be raised privately by
the Nature Conservancy during the spring and summer of 1989.  Thus, the
resolution could not constitute the beginning of performance.  Ragosta, 2
Vt. L.W. at 165 (obtaining loan did not constitute beginning of perform-
ance).  Nor do the Nature Conservancy's attempts to negotiate certain other
terms, such as the deposit amount, closing date, and the date when payment
would be made, help the State's argument.  Rather, the need to negotiate
additional material terms in order to reach an agreement indicates that
defendant did not make an offer.  See Restatement (Second) of Contracts {
33(3) (1981) ("The fact that one or more terms of a proposed bargain are
left open or uncertain may show that a manifestation of intention is not
intended to be understood as an offer or as an acceptance."); id. comment c
("The more terms the parties leave open, the less likely it is that they
have intended to conclude a binding agreement."); see also Benya v. Stevens
and Thompson Paper Co., 143 Vt. 521, 526, 468 A.2d 929, 931 (1983) (where
financing was an integral part of contract, failure to agree on it prevented
contract formation).
     The evidence discloses, at best, an attempt by the State to convince
defendant that it was serious about acquiring the property.  In the absence
of extraordinary circumstances, not present here, efforts to obtain
financing will not constitute part performance of a unilateral offer to sell
real estate.
                                    B.
     In further opposition to defendant's motion for summary judgment, the
State argues that defendant "manifested a willingness to enter into a
bargain" -- that is, he made an offer -- by telling the governor that the
joint resolution should include a reference to the full purchase price, by
later telephoning to say that the State had until February 8, 1989, to make
a commitment, and by stating that he preferred to sell to the State.
Further, the offer was accepted by the purchase and sale agreement telefaxed
by the Nature Conservancy to defendant on February 2, 1989. (FN3)
     "An offer is the manifestation of willingness to enter into a bargain,
so made as to justify another person in understanding that his assent to
that bargain is invited and will conclude it."  Restatement (Second) of
Contracts { 24 (1981); see also A. Corbin, Corbin on Contracts { 11 at 23
(1963) ("An offer is an expression by one party of his assent to certain
definite terms, provided that the other party involved in the bargaining
transaction will likewise express his assent to the identically same
terms.").  It is axiomatic that preliminary negotiations do not constitute
an offer.  Channel Home Centers v. Grossman, 795 F.2d 291, 298 (3d Cir.
1986); Restatement (Second) of Contracts { 26 (1981).
     In this case, defendant told the governor what price the State needed
to match, suggested that it be included in the draft resolution, and indi-
cated how much time the State had to put together an offer.  The governor,
in her affidavit, states that defendant told her he would rather sell to the
State and that the State must "commit to the purchase of the property"
before February 8, 1989.  These facts establish, at best, that defendant was
inviting the State to make an offer.  See Ferrero Constr. Co. v. Dennis
Rourke Corp., 311 Md. 560, 577-78, 536 A.2d 1137, 1145 (1988) (letter
reciting terms of an acceptable offer and setting deadline for submission of
contract "in order to be considered" was an invitation to submit an offer;
offer submitted in response was not an acceptance).  Additionally, the
joint resolution did not commit the State to anything; rather, it merely
expressed an intention to appropriate certain funds.  Thus, it could not
form the basis for a contract.  See Foster & Kleiser v. Baltimore County, 57
Md. App. 531, 537-38, 470 A.2d 1322, 1325-26 (1984) (negotiations were
preliminary where further action by government body was legally required).
In short, defendant said and did nothing that could be construed reasonably
as a binding commitment to sell the property to the State.  See Bemis v.
Lamb, 135 Vt. 618, 620, 383 A.2d 614, 617 (1978) ("We cannot make a contract
where none is shown to have been made by the parties.").  Because defendant
never agreed to the February 2, 1989, purchase and sale agreement, which was
telefaxed to him by the Nature Conservancy, there was no contract.  See
Ferrero Constr. Co., 311 Md. at 578, 536 A.2d  at 1145 (no contract where
letter was an invitation for an offer and the response, which was the
initial offer, was never accepted).
                                   III.
     Defendant cross-appeals the trial court's denial of his motion for
sanctions.  He argues that the State failed to make a reasonable inquiry
into the facts and the law, as evidenced by its frequent change of legal
theories and continued pursuit of the action after it should have realized
that defendant had never signed a writing that would satisfy the Statute of
Frauds.  Defendant's argument focuses on the "reasonable inquiry" require-
ment of V.R.C.P. 11, which became part of the rule in 1984, following the
1983 federal Rule 11 amendment. (FN4) See Reporter's Notes to 1984 Amendment to
V.R.C.P. 11.  Although there may be subjective components, the sufficiency
of the signer's inquiry is tested principally by what was objectively
reasonable under the circumstances.  See 5A C. Wright & A. Miller, Federal
Practice and Procedure { 1335, at 60-63 (2d ed. 1990).  "Sanctions are not
likely to be imposed, however, on a matter of first impression, even if
there is contrary authority in other courts, or when the law is not clear."
Id. at 69 (footnotes omitted).  Absent an abuse of discretion, we will not
reverse a trial court's determination of a Rule 11 motion.  See Addison
County Community Action v. City of Vergennes, 152 Vt. 161, 169, 565 A.2d 233, 237-38 (1989); see also Cooter & Gell v. Hartmarx Corp., 110 S. Ct. 2447, 2463 (1990)(adopting abuse of discretion as standard of review for
Fed. R. Civ. P. 11).
     In this case, the State argued that the Statute of Frauds had been
satisfied and, alternatively, that defendant was equitably estopped from
asserting it.  Given our disposition of the contractual issues, we did not
need to discuss the Statute of Frauds issue.  For the Rule 11 appeal, we
have reviewed it and conclude that the State's argument is not frivolous.
Nor are the State's contractual theories, which we addressed above, frivo-
lous, particularly given the sparsity of Vermont law on them at the time
this suit was prosecuted.  Ragosta v. Wilder, which we discussed above, was
issued after oral argument in this case.  The trial court did not abuse its
discretion by denying defendant's motion for sanctions.
     Affirmed.



                                        FOR THE COURT:



                                        _______________________________
                                        Associate Justice





FN1.     The State also contends that the trial court erroneously denied
its motion for a preliminary injunction.  This issue is moot, however,
because the State's motion for a preliminary injunction requested that
defendant be enjoined from selling the property to the Dotolis, an event
that took place some time ago.  See Doria v. University of Vermont, ___ Vt.
___, ___, 589 A.2d 317, 319 (1991) (request for injunctive relief moot as
election was over and defendant's interest in a pre-election poll was no
longer "legally cognizable"); In re Moriarty, ___ Vt. ___, ___, 588 A.2d 1063, 1064 (1991) (a matter is moot if effective relief can no longer be
granted); Winton v. Johnson & Dix Fuel Corp., 147 Vt. 236, 239, 515 A.2d 371, 373 (1986)(change in facts can render an issue moot).

FN2.     The State also makes several arguments regarding the Statute of
Frauds, which, in view of our disposition of the contractual issues, we do
not address except to say, with respect to defendant's motion for sanctions,
that they are not frivolous.

FN3.     This argument underlies the State's contention that the trial court
erred by denying the preliminary injunction.  As we previously noted,
insofar as the motion for a preliminary injunction is concerned, the
argument is moot.  In a footnote, however, the State appears to cross-
reference the contractual argument's merits to the summary judgment issues.
Although the cross-reference may well be inadequate, we give the State the
benefit of the doubt and address the merits of this issue.

FN4.    V.R.C.P. 11 provides in pertinent part:
     The signature of an attorney or party constitutes a certificate by
     the signer that the signer has read the pleading, summons, writ,
     motion, or other paper; that to the best of the signer's know-
     ledge, information, and belief formed after reasonable inquiry it
     is well grounded in fact and is warranted by existing law or a
     good faith argument for extension, modification, or reversal of
     existing law, and that it is not interposed for any improper pur-
     pose, such as to harass or to cause unnecessary delay or needless
     increase in the cost of litigation.