Wright v. Doolin

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                                 No. 90-060

 Cecil Wright and Beverly Wright              Supreme Court

                                              On Appeal from
      v.                                      Chittenden Superior Court

 Mary E. Doolin and Frank L. Doolin           November Term, 1991
 and Newport Air Freight

 Richard W. Norton, J.

 Sandra A. Strempel of Dinse, Erdmann & Clapp, Burlington, for plaintiffs-

 Gerald W. Desautels, Burlington, for defendants-appellees

 PRESENT:  Gibson, Dooley, Morse and Johnson, JJ., and Peck, J. (Ret.),
           Specially Assigned

      MORSE, J.   Following the sale of Newport Air Freight, Inc., from Cecil
 and Beverly Wright to Mary and Frank Doolin, the Doolins ceased making
 payments on promissory notes given to purchase the business.  The Wrights
 sued to collect, and, in defense and as a counterclaim, the Doolins pled
 fraud and breach of contract in the sale of the business.
      The trial court gave judgment to the plaintiffs on both their claims
 and defendants' counterclaim.  The Wrights appealed, claiming that they were
 entitled to recover (1) attorney's fees in defense of defendants' counter-
 claim, contrary to the court's ruling denying them those fees, and (2)
 additional pre- and post-judgment interest which the court failed to grant.
 The Doolins cross-appealed, claiming that critical findings by the court
 were clearly erroneous.  We reverse and remand on points (1) and (2) and
 affirm the cross-appeal.
      We address defendants' cross-appeal first.  The Doolins contended that
 the Wrights did not adequately inform them before sale of the loss of
 Newport's biggest customer, Burlington Northern Air Freight (BNAF), which
 they say amounted to a fraudulent concealment and a breach of contract for a
 failure to disclose a "material adverse change" in the business.  The trial
 court found that fraud was not supported by clear and convincing evidence of
 an intent to deceive.  The court also found that the loss of BNAF was not a
 material adverse change to Newport's financial well-being, and even if it
 was, that fact was reasonably disclosed in company records given to the
 buyers before the sale.
      Applying our deferential standard of review of the trial court's
 findings, as governed by the clearly erroneous test of V.R.C.P. 52(a)(2),
 we conclude that the judgment is adequately supported by the evidence.
      We need not review all of defendants' claims challenging the findings.
 A critical finding relevant to both fraud and breach of contract was the
 reasonableness of notice to the defendants of the loss of BNAF's account.
 The evidence supported a finding that sufficient information was provided
 to the Doolins for them to reasonably determine the fact, and evaluate the
 effect, of the loss of BNAF.  The business being purchased was highly
 competitive, and the turnover of customers was relatively frequent.  The
 customer profile, thus, was a likely subject to be explored by a would-be
 purchaser of the business.  BNAF ceased doing business with Newport over a
 year before the sale of Newport to the Doolins.  The Doolins had access to
 all the company records and were given accurate customer lists.  While the
 Doolins said they did not realize the loss of BNAF as a customer, the court
 found they should have known had they investigated.  Lewis v. Cohen, 2 Vt.
 L.W. 484, 485, ___ A.2d ___, ___ (1991).  In addition, the trial court
 viewed the lawsuit brought by the Doolins as follows:  "The court is
 disinclined to allow the Doolins to strike a hard bargain based on the
 recent downturn in Newport's business and then turn around and claim fraud
 based on that very same downturn."  The findings support the judgment.
      The trial court awarded plaintiffs interest from the date of judgment
 at the annual rate of nine percent provided in the note.  The Wrights claim
 the court erred in not awarding them nine percent from date of default to
 date of judgment and twelve percent from the date of judgment as provided by
 12 V.S.A. { 2903(b): "Interest on a judgment lien shall accrue at the rate
 of 12 percent per annum."
      The only colorable argument advanced that plaintiffs should not receive
 nine percent from the time of default to date of judgment and twelve percent
 interest thereafter is that they did not first raise these issues before the
 trial court by way of a post-judgment motion.  V.R.C.P. 59(e).  A post-
 judgment motion, however, is not required to address this kind of oversight.
 Lewis, 2 Vt. L.W. at 486, ___ A.2d at ___ (while a motion to amend judgment
 under 59(e) avoids the delay and cost of an unnecessary appeal, it is "not a
 prerequisite to appellate review").  The promissory notes, submitted to the
 trial court, provided for nine percent interest from the date of default,
 but were silent as to the interest rate following judgment.  Plaintiffs
 also submitted proposed findings reiterating the pre-judgment interest rate.
 Therefore, interest should have been computed at nine percent for the period
 before the court's order and at twelve percent for the period after judg-
 ment.  Greenmoss Builders, Inc. v. King, 155 Vt. 1, 8, 580 A.2d 971, 975
 (1990) ("[i]nterest is a legal right of the plaintiff. . . . and [w]hen a
 debt becomes payable, if the contract does not stipulate a rate of interest,
 the statutory or legal rate applies") (citations omitted); see also V.R.A.P.
 37 ("if a judgment for money in a civil case is affirmed, whatever interest
 is allowed by law shall be payable from the date the judgment was entered in
 the superior . . . court).  We hold that these issues were properly raised
 and plaintiffs were entitled to a judgment in the amount of $52,738.03 as of
 the date of judgment with interest to accrue at twelve percent per annum
 thereafter until satisfied.
      Plaintiffs also claim, predicated on language in the notes, they were
 entitled to recover attorney's fees incurred in defense of defendants'
 counterclaims.  That language stated, "If this Note is placed in the hands
 of an attorney for collection, a reasonable attorney's fee may be added."
 The trial court determined that this sentence manifested the parties'
 intention to include, as damages only, "the cost of prosecuting the
 promissory notes," not "the cost of defending against a good faith
 counterclaim," and declined to award the latter fees.
      We disagree and are persuaded by the reasoning of Kudon v. f.m.e.
 Corp., 547 A.2d 976 (D.C. App. 1988), in resolving this issue.  In that case
 the court utilized a four-factor analysis to determine whether a party
 requesting an award of attorneys' fees under such a contract provision was
 entitled to a fee recovery for defending a claim by the party opposing  pay-
 ment of those fees.  The Kudon court considered the following factors:
         (1) whether the party requesting the fees was respon-
         sible for precipitating the litigation. . . ; (2)
         whether the litigation for which the party relying on
         the contract provision recovers the fees was bona fide
         and made necessary by the party opposing payment of such
         fees. . . ; (3) whether the claim asserted by the party
         opposing payment of such fees was raised by way of
         offset in an attempt to reduce or extinguish the debt
         owed to the party requesting the fees. . . ; and (4)
         whether it was necessary for the party requesting the
         fees to defend against the claim of the party opposing
         the fees in order to collect the underlying debt or
         enforce the underlying contractual obligation.

 Id. at 980 (citations omitted).

      In applying these factors to the facts of this case, we conclude that
 an award of attorney's fees is warranted for defending against the defend-
 ants' counterclaim.  First, the defendants' failure to make the required
 payments under the notes precipitated the litigation.  Second, the plain-
 tiffs' collection action was bona fide and made necessary by the defendants'
 default on their payment obligations.  Third, the counterclaim asserted was
 raised to offset the debt owed the plaintiffs.  Fourth, and most convinc-
 ingly, the counterclaim brought by the Doolins was compulsory in nature,
 arising from the same transaction or occurrence leading to the Wrights'
 complaint.  The Doolins faced a possibility that they would have been
 collaterally estopped from relitigating certain issues in a later suit
 involving claims laid out in the present counterclaim.  Thus, the counter-
 claim was integral to the action for collection of the promissory notes.
 Defending against the counterclaim was necessary in order to collect the
 debt owed by the Doolins.
      For the above reasons, we hold that attorney's fees are warranted to
 the Wrights for defense of the Doolins' counterclaim.
      Judgment on defendants' counterclaim is affirmed.  Reversed and
 remanded on the issues of interest and attorney's fees.

                                         FOR THE COURT:

                                         Associate Justice