Wyatt v. Palmer

Wyatt v. Palmer  (94-608); 165 Vt 600; 683 A.2d 1353

[Opinion Filed 11-Aug-1996]

                          ENTRY ORDER

                 SUPREME COURT DOCKET NO. 94-608

                        OCTOBER TERM, 1995


Stephen Wyatt and               }          APPEALED FROM:
Donna Wyatt                     }
                                }
     v.                         }          Chittenden Superior Court
                                }
Warren Palmer and               }
Courtney Palmer                 }          DOCKET NO. S2029-91CnC


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


       Defendants Warren and Courtney Palmer appeal a judgment in favor of
  plaintiffs Stephen and Donna Wyatt in a breach of contract action that
  arose out of a sale of real property.    We affirm in part and reverse in
  part.

       Defendants own Palmer Real Estate Development.  They construct new
  homes for resale on properties that they buy and subdivide.  In July 1990
  the Wyatts agreed to buy a new home from the Palmers on lot 39 of the
  Foothills Development, and the parties executed a purchase and sale
  agreement to that effect.  The purchase and sale agreement included a
  default clause which read, in part, "In the event legal action is
  instituted arising out of a breach of this contract, the prevailing party
  shall be entitled to reasonable attorney's fees and court costs."

       In August 1990, when the house was substantially complete, the Palmers
  delivered a warranty deed conveying the house and lot 39 to the Wyatts, and
  promising to warrant and defend title against all lawful claims.  About a
  year later, the Langes, owners of adjacent lot 38, notified the Wyatts of a
  possible boundary encroachment.  A surveyor hired by the Langes had
  discovered that the boundary between the properties ran through the Wyatts'
  driveway and garage.

       Before constructing the Wyatts' house, Warren Palmer had discussed the
  location of the boundary with the Langes' predecessor in title.  Although
  Mr. Palmer expressed some doubt about the location of the boundary, he did
  not commission a survey to locate it accurately. Instead, he and the
  Langes' predecessor agreed that the line ran just beyond a row of trees,
  some forty feet from the subsequent location of the Wyatts' garage.  Mr.
  Palmer pointed to this same

 

  line when he described the boundaries of lot 39 to the Wyatts, indicating
  that the trees fell within the lot.

       In September 1991, the Wyatts' counsel notified the Palmers' counsel
  that the Wyatts expected the Palmers to indemnify them for expenses
  incurred in resolving any dispute with the Langes.  This notice was
  repeated in October 1991 and January 1992.

       In November 1991, the Langes instituted an action seeking to eject the
  Wyatts and to obtain damages from the Palmers.  In answer to the complaint,
  the Palmers denied building plaintiffs' home on the Langes' property.  They
  did not answer on behalf of the Wyatts or take any action to defend their
  title.

       Before this action was filed, Mr. Palmer had disputed the results of
  the Langes' survey. He claimed he had engaged a surveyor to locate the
  boundary.  In response, the Langes commissioned another survey, which
  confirmed the results of the prior one.  When, as of March 1992, Palmer had
  not produced any survey results, the Wyatts wrote to his counsel saying
  that they would be forced to hire a surveyor if he did not.

       In July 1992, the Wyatts' counsel wrote to the Palmers' counsel
  stating that, because they had produced no survey results to rebut the
  Langes' claim, the Palmers could not justifiably refuse to pay for the
  Wyatts' defense.  Subsequently, the Wyatts filed a cross-claim against the
  Palmers.

       In January 1994, the Palmers paid the Langes $3000 to settle their
  claim with the Wyatts. As part of the settlement, the Langes attempted to
  convey a parcel that extended from the actual boundary of lot 39 to the
  boundary line that Mr. Palmer had shown to the Wyatts.  The Wyatts elected
  to accept only enough of the parcel to resolve the encroachment issue,
  because accepting the entire parcel would have entailed granting the Langes
  a septic easement.  Furthermore, the unaccepted portion of the parcel would
  have been of little use to the Wyatts, because the presence of the easement
  foreclosed the possibility of expanding their home or otherwise developing
  that area.  Thus, after the settlement, lot 39 was .09 acres smaller than
  Mr. Palmer had initially described it to be.

       After settling with the Langes, the Wyatts pursued their cross claim
  against the Palmers. A special master was appointed to assist the court.
  The master recommended judgment for the Wyatts and an award of attorney's
  fees, costs and damages totaling $23,801.13 plus interest. The trial court
  adopted the master's findings and conclusions.  This appeal followed.

       On appeal, the Palmers argue that they adequately defended the Wyatts'
  title, and that they should be relieved of the obligation to indemnify the
  Wyatts for litigation expenses because the Wyatts filed a crossclaim
  against them.  The Palmers also argue that the court erred in finding them
  liable under several theories and in awarding the Wyatts damages for land
  not received, litigation expenses incurred in their cross-claim against the
  Palmers, lost opportunity to refinance a home mortgage, and interest on a
  line of credit used to finance litigation.   The Wyatts cross-

 

  appeal, contending that the court erred in concluding that defendants were
  not liable for fraudulent misrepresentation, and in denying punitive
  damages.

                                I.

       The findings of a special master, once adopted by the court, "have the
  same force and effect as findings of the court."  Darling v. Ennis, 138 Vt.
  311, 314, 415 A.2d 228, 230 (1980); V.R.C.P. 53 (e).  "`Upon appellate
  review we will not interfere if a reasonable evidentiary basis supports the
  court's findings and the findings are sufficient to support the conclusions
  of law.'" Bartley-Cruz v. McLeod, 144 Vt. 263, 264, 476 A.2d 534, 535
  (1984) (quoting Emmons v. Emmons, 141 Vt. 508, 511, 450 A.2d 1113, 1115
  (1982)).  Furthermore, "we may affirm a correct judgment even though the
  grounds stated in support of it are erroneous."  Gochey v. Bombardier Inc.,
  153 Vt. 607, 613, 572 A.2d 921, 925 (1990).  Thus, the scope of our review
  is limited to determining whether the court's conclusions are legally
  supportable.

                                II.

       We need not reach the issues of implied warranties in sales by
  builder-vendors, or covenants of title in a warranty deed, which formed the
  basis of the trial court decision, to decide whether the trial court erred
  in awarding the Wyatts attorney's fees and court costs. Merger did not
  extinguish the Palmers' agreement to complete construction of a house on
  lot 39 and the express language of the purchase and sale contract
  adequately supports their liability for attorney's fees and court costs.

      The doctrine of merger by deed does not bar the enforcement of . . .
      independent or collateral undertakings simply because they are
      expressed in a writing containing terms of sale which merge into the
      deed. . . . "[B]uild" provisions of build-sale contracts are not
      performed by delivery and acceptance of the warranty deed . . . .

  Worthey v. Holmes, 287 S.E.2d 9, 10 (Ga. 1982); see also Ting-Wan Liang v.
  Malawista, 421 N.Y.S.2d 594, 597 (N.Y. App. Div. 1979) ("The agreement to
  erect a house has been construed to be collateral to the main purpose of
  the conveyance and, accordingly, not subject to the doctrine of merger."). 
  Here, the purchase and sale contract contained two distinct agreements: one
  for the transfer of title to lot 39 and the appurtenances thereto, which
  was merged into the deed and performed by the Palmers, and the other to
  complete the construction of a single family home on lot 39.(FN1)  Because
  the construction agreement did not merge with the deed, the trial

 

  court properly concluded that the Palmers breached that agreement when they
  constructed the house such that the garage and the driveway encroached on
  lot 38.

       Affirming the trial court's conclusion that the Palmers breached the
  construction agreement in the purchase and sale contract supports the
  court's award of the Wyatts' fees and costs.  First, as provided in the
  purchase and sale contract, the Palmers became liable for the Wyatts'
  reasonable attorney's fees and court costs for the cross-claim against
  defendants because the Wyatts prevailed on their breach of contract claim. 
  Further, under the holding in Albright v. Fish, 138 Vt. 585, 422 A.2d 250
  (1980), the Palmers are liable for the Wyatts' fees and costs for the
  litigation against the Langes.  Id. at 591, 422 A.2d  at 254 ("There is a
  substantial body of case law which holds that where the wrongful act of one
  person has involved another in litigation with a third person or has made
  it necessary for that other person to incur expenses to protect his
  interest, litigation expenses, including attorney's fees, are
  recoverable."); see also Welch v. Lague, 141 Vt. 644, 647, 451 A.2d 1133,
  1135 (1982) (affirming vendor's liability for purchaser's attorney's fees
  from litigation against third party resulting from vendor's breach of
  covenant to convey marketable title).  The interest paid by the Wyatts on
  the line of credit to finance the cost of litigation also falls within the
  Albright rule and should be affirmed on that basis.  Albright, 138 Vt. at
  591, 422 A.2d  at 254 (reasonable litigation expenses recoverable where
  wrongful act of one party has involved another in litigation with third
  person).

       The court erred, however, in awarding the Wyatts damages for the lost
  opportunity to refinance their mortgage at lower interest rates.  Although
  an aggrieved party may recover consequential damages for breach of
  contract, consequential damages are subject to the limitations of
  causation, certainty, and foreseeability.  Id. at 590, 422 A.2d  at 254.
  "Consequential damages are recoverable where they `may be reasonably
  supposed to have been in the contemplation of both parties[,] at the time
  they made the contract, [as the probable result of the breach of it].'" 
  Id. (quoting Norton & Lamphere Constr. Co. v. Blow & Cote, Inc., 123 Vt.
  130, 136, 183 A.2d 230, 236 (1962)).  In Albright, the plaintiffs sought
  damages for interest on loans for the purchase of, and future property
  taxes on, a parcel of land they purchased as a result of the defendants'
  breach of a restrictive land covenant.  We concluded that such damages were
  not the type that could ordinarily be considered to result from the breach
  of a restrictive covenant.  Id.  The same can be said about the damages in
  this case.  Damages for the lost opportunity to refinance a mortgage are
  not the foreseeable result of a breach of a construction contract.  The
  award of these damages is reversed.

                                    III.

       The Palmers claim the court erred in awarding damages for the parcel
  of land the Wyatts did not accept and in determining its value.  We reverse
  on the valuation issue as well as on the question of the Palmers' liability
  for these damages.  In this case, the Palmers liability for the value of
  the parcel is supported only by the theory that they negligently
  misrepresented the

 

  boundaries of lot thirty-nine to the Wyatts.  The trial court concluded
  only that the Palmers negligently represented the boundary of lot
  thirty-nine, but failed to examine the other elements of a negligent
  misrepresentation claim, such as justifiable reliance.  Restatement
  (Second) of Torts § 552(1) (1977).  Because the court's analysis is
  insufficient to support liability we remand for a more complete analysis.

       In the event the court finds liability for negligent
  misrepresentation, it must then reconsider the valuation of the parcel not
  conveyed as well.  At trial, the court apparently relied exclusively on Mr.
  Wyatt's testimony in determining the value of the parcel.  He was the only
  witness who valued the parcel at $4000, the sum the court awarded.  Other
  testimony indicated that the land was worth between $1500 and $3000.  A
  landowner is competent to testify as to the value of his property, 12
  V.S.A. § 1604; Mr. Wyatt, however, did not own the parcel in question.  It
  was error, therefore, to rely on Mr. Wyatt's testimony in assessing the
  value of the land.

       In addition, assessing damages involves more than simply comparing the
  size of the disputed parcel to the size of the whole lot and awarding a
  like proportion of the purchase price, because the value of different areas
  of the lot may be unequal.  Hudson v. McClaskey, 641 N.E.2d 36, 41 (Ind.
  Ct. App. 1994) (where grantee deprived of use of any part of tract, damages
  equal value that specific part contributed to value of whole tract).  A
  proper analysis will entail consideration of both qualitative and
  quantitative factors to account for differences in both size and utility.
  See id. (proportional value, not just quantity of land, should be measure
  of damages).
                               IV.

       In their cross-appeal the Wyatts contend that Mr. Palmer is liable for
  fraudulent misrepresentation and that the court erred in failing to award
  punitive damages.  The trial court found no credible evidence of
  intentional misrepresentation.  This finding is not clearly erroneous. 
  Indeed, as the court noted, common sense dictates that if the Palmers knew
  the correct boundary they would have sited the house differently.  The
  court did not err in denying punitive damages.  We agree with the court as
  well that the damages requested for marital strain and anxiety are too
  remote to be considered a foreseeable result of a breach of a construction
  contract.

       The awards of damages for lost opportunity to refinance the mortgage
  and for the value of the parcel not conveyed are reversed, and the case is
  remanded on the issue of defendants' liability for negligent
  misrepresentation; otherwise, 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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                                  Footnotes


FN1.  The Purchase and Sale Contract provided that the Wyatts agreed
  to buy a "single family home located on Lot 39 [in the] Foothills
  Development."  This agreement was "[s]ubject to clarification in writing
  between purchasers and sellers on construction details prior to July 23,
  1990."  The July 21, 1990 addendum on construction details merely noted
  that clarification of construction details had been completed.