Tooley v. Robinson Springs Corp.

TOOLEY_V_ROBINSON_SPRINGS_CORP.94-306; 163 Vt 627; 660 A.2d 293

[Filed 29-Mar-1995]

                               ENTRY ORDER

                      SUPREME COURT DOCKET NO. 94-306

                            FEBRUARY TERM, 1995


James F. Tooley                      }         APPEALED FROM:
                                     }
                                     }
     v.                              }         Lamoille Superior Court
                                     }
Robinson Springs Corp.               }
                                     }         DOCKET NO. S0078-93LaC


                     In the above entitled cause the Clerk will enter: 

         Defendant, Robinson Springs Corporation, appeals a summary judgment
for plaintiff, James Tooley, awarding plaintiff compensation for the
Corporation's default on a $37,500 debenture.  On June 24, 1981, Tooley
purchased a $37,500 subordinated debenture from the Corporation.  According
to the debenture's terms, Tooley would receive annual interest payments of
ten percent on the unpaid principal; and, starting in 1992, the Corporation
would begin paying back twenty percent of the principal each year until paid
in full. 

         Throughout the duration of the debenture, the Corporation was
consistently late in making the interest payments.  In 1992, the Corporation
missed its interest payment and its first installment for repayment of
principal.  In January of 1993, pursuant to the default provision of the
debenture, Tooley requested payment of the full principal and all accrued
interest.  In response, the Corporation sent two checks, in trust to Tooley's
attorney, covering the first installment of principal and the interest
payment for 1992.  Tooley's attorney deposited these funds in the firm's
IOLTA trust account, and wrote the Corporation requesting the additional
amounts due.  When the Corporation refused to pay the full principal, Tooley
initiated this court action.  Both parties moved for summary judgment, and
the court granted summary judgment for Tooley, awarding him recovery of the
principal plus accrued and unpaid interest thereon. 

         On appeal, the Corporation argues that the court's summary judgment
order was erroneous because (1) Tooley either waived or was estopped from
claiming default, (2) Tooley's claim was satisfied when the checks were
deposited, (3) Tooley was contractually obligated to sell his shares to the
Corporation and to offer his debenture for redemption, and (4) there were
genuine issues of material fact in dispute, precluding summary judgment.  On
cross-appeal, Tooley argues the court should have (1) awarded him ten percent
interest on the late payment of annual interest obligations from 1982 to
1991, and (2) denied twelve percent interest credit on the funds in the IOLTA
trust account.  We reverse the twelve percent interest credit and affirm on
all 

 

other issues. 

         Summary judgment is appropriate only when there are no genuine
issues of material fact and the moving party is entitled to judgment as a
matter of law.  Wesco, Inc. v. Hay-Now, Inc., 159 Vt. 23, 26, 613 A.2d 207,
209 (1992); V.R.C.P. 56(c).  When both parties seek summary judgment, both
parties are entitled to the benefit of all reasonable doubts and inferences
when the opposing party's motion is being judged.  Toys, Inc. v. F.M.
Burlington Co., 155 Vt. 44, 48, 582 A.2d 123, 125 (1990). 

         The Corporation claims that Tooley waived his right to claim default
because his conduct evidenced intent to relinquish payment in full.  A waiver
is the intentional relinquishment or abandonment of a known right and may be
evidenced by express words or by conduct.  Chimney Hills Owners' Ass'n, Inc.
v. Antignani, 136 Vt. 446, 453, 392 A.2d 423, 427 (1978).  The Corporation
argues that Tooley, by accepting late interest payments from 1982 to 1991,
waived his right to assert default when the Corporation failed to meet its
1992 obligations.  We disagree. The language of the debenture gives the
holder the right to claim default sixty days after the Corporation fails to
meet its obligation.  Just because Tooley did not declare default when there
were other opportunities to do so does not mean he could not declare default,
after the Corporation failed to meet its first principal repayment
obligation. 

         The Corporation further argues that by paying for dinner after
discussing nonpayment of the debenture with the Corporation's president,
Tooley implicitly agreed to an extension of payment.  Such an act, however,
does not rise to the level of intentional relinquishment of a known right. 
The Corporation also argues that two-thirds of the debenture holders had
agreed to delay and extend the payment of principal and interest.  Their
agreements, however, are not binding on Tooley, who did not make such an
agreement.  We conclude that Tooley did not waive his right to claim full
payment on the debenture. 

         Similarly, because Tooley's actions were insufficient to permit the
Corporation to act upon them, the estoppel argument is without merit.  Fisher
v. Poole, 142 Vt. 162, 168, 453 A.2d 408, 412 (1982) (second element of
estoppel requires party being estopped to intend that conduct be acted upon,
or acts must be such that party asserting estoppel has right to believe they
are so intended). 

         The Corporation further claims that the deposit of the checks
constituted an accord and satisfaction of Tooley's claims.  A creditor may
deposit a check for partial payment without sacrificing the right to recover
the remainder as long as the creditor "makes a reservation of rights in a
manner that clearly and explicitly notifies the debtor that the check is not
accepted as full payment on the debt and that no accord and satisfaction has
been effected."  Frangiosa v. Kapoukranidis, 160 Vt. 237, 244, 627 A.2d 351, 355 (1993).  On the same day Tooley's attorney deposited the checks in the
firm's trust account, he wrote a letter rejecting the Corporation's offer and
requesting the additional amounts due.  The Corporation argues that this
letter was an ineffective reservation of rights because the checks were
received by the attorney almost one month earlier.  While we agree that
payment on a check relates back to the time the 

 

check was delivered, Roy v. Mugford, ___ Vt. ___, ___, 642 A.2d 688, 690-91
(1994), we do not think this rule controls the issue of proper reservation of
rights.  When an attorney receives a check in trust for a client and waits to
deposit the check until the attorney can communicate with the client and then
sends a rejection letter on the same day the check is deposited, that letter
is a reasonable reservation. 

         Similarly, the Corporation argues that Tooley, by depositing the
checks, accepted the Corporation's offer to buy his shares and redeem his
debenture.  In accordance with this argument, the Corporation requests
enforcement of this agreement.  Tooley specifically rejected, however, the
Corporation's offer when his attorney wrote the Corporation after depositing
the checks.  See 1 A. Corbin, Corbin on Contracts  3.41, at 520 (rev. ed.
1993) (rejection is offeree's manifestation of intention not to accept
offer).  Therefore, there is no agreement to enforce.  See Evarts v. Forte,
135 Vt. 306, 309, 376 A.2d 766, 768 (1977) (must have meeting of minds to
form contract). 

         Finally, the Corporation claims summary judgment was inappropriate
on these issues because there were genuine issues of material fact concerning
the affirmative defenses.  The moving party has the burden to prove that
there are no genuine issues of material fact.  Wesco, Inc., 159 Vt. at 26,
613 A.2d  at 209.  Because the Corporation's arguments consist of differences
as to the legal significance of the facts, not as to the facts themselves, we
conclude that there were no genuine issues of material fact. 

         On cross-appeal, Tooley claims the court erred when it failed to
award interest on the late payment of annual interest obligations.  Tooley
argues that because the Corporation was consistently late in making the
annual interest payments, he should be awarded interest on that money while
the obligation was outstanding.  The Corporation, in its main brief, argues
that eventual acceptance of the interest payment without any reservation of
rights waives any future claim regarding that payment, including interest. 

         In this case, Tooley waived his right to collect interest on the
late payment of annual interest obligations from 1982 to 1991.  His conduct
during this time was markedly different from his conduct after the
Corporation's failure to pay the 1992 obligations.  For each of these late
interest payments, Tooley accepted the payment when it arrived.  There is no
evidence that Tooley reserved his right to claim any damages arising from
these late payments.  Furthermore, Tooley did not exercise his right to claim
default as specifically provided for in the debenture. Acceptance of payment
without reservation and failure to initiate the remedy provided by the terms
of the debenture are sufficient evidence to conclude that Tooley, by his
conduct, waived any rights for collecting interest on the late payments from
1982 to 1991.  See Chimney Hills, 136 Vt. at 453, 392 A.2d  at 427 (waiver may
be evidenced by conduct).  Thus, the court properly denied recovery of
interest on the late payment of annual interest obligations. 

         Finally, Tooley claims that the court erred in granting the
Corporation a credit of twelve percent interest on the money that had been
deposited in the attorney's IOLTA trust account. We agree.  Tooley's attorney
deposited the two checks into the firm's IOLTA trust account in 

 

accordance with the terms of the offer of settlement in the Corporation's
letter of February 6, 1993.  After Tooley rejected the Corporation's offer,
the Corporation did nothing to remove the restrictions it had placed on the
funds.  Neither Tooley, nor his attorney, had the use of the money while it
was in the trust account.  See DR 9-103(A) (interest accrued on this account
paid to Vermont Bar Foundation).  Therefore, Tooley should not be held liable
for interest that might have been earned if the Corporation had not
restricted the use of the funds.  It was an abuse of discretion to grant the
credit.  See Legault v. Legault, 142 Vt. 525, 532, 459 A.2d 980, 984-85
(1983) (trial court has discretion to award interest for noncontractual
obligations). 

         Interest credit awarded on amount in IOLTA trust account is
reversed; all other issues are affirmed. 



     BY THE COURT:



     ____________________________________
     Frederic W. Allen, Chief Justice


     _______________________________________
     Ernest W. Gibson III, Associate Justice


     _______________________________________
     John A. Dooley, Associate Justice


     _______________________________________
     James L. Morse, Associate Justice


     _______________________________________
     Denise R. Johnson, Associate Justice


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