Goldman v. Town of Plainfield

Goldman v. Town of Plainfield (98-560); 171 Vt. 575; 762 A.2d 854 

[Filed 17-Oct-2000]


                                 ENTRY ORDER

                       SUPREME COURT DOCKET NO. 98-560

                               MAY TERM, 2000


Alan B. Goldman and	               }	APPEALED FROM:
ABG Corporation	                       }
                                       }
     v.	                               }	Washington Superior Court
                                       }	
                                       }
Town of Plainfield	               }	DOCKET NO.  120-3-95 Wncv

Trial Judge: Matthew I. Katz 

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


       Plaintiffs Alan Goldman and ABG Corporation appeal from the dismissal
  of their complaint  upon defendant Town of Plainfield's motion for summary
  judgment.  On appeal, plaintiffs claim the  trial court erred in (1)
  concluding as a matter of law that misrepresentations by the Town made in
  the  course of contract negotiations were not material, and (2) in failing
  to properly apply the rational  basis test to their claim of unjust
  discrimination.  We affirm.

       This Court reviews a motion for summary judgment using the same
  standard as the trial court.  Summary judgment is appropriate only when the
  moving party has demonstrated that there are no  genuine issues of material
  fact and it is entitled to judgment as a matter of law.  See O'Donnell v. 
  Bank of Vermont, 166 Vt. 221, 224, 692 A.2d 1212, 1214 (1997).

       Plaintiff Goldman is a developer who purchased some land and unused
  dormitories known as  Northwood Campus from Goddard College in 1987 to
  convert into private condominiums.  ABG  Corporation is Goldman's successor
  in interest.  In the process of purchasing the property, Goldman 
  approached the Town of Plainfield to negotiate access to its public water
  and sewer system.  Goddard  College, including its Northwood Campus, had
  been using Plainfield's sewer system since 1968 and  its water since 1983,
  but because the Northwood Campus is located in East Montpelier rather than 
  Plainfield, the Town was acting in a private capacity, and not as a public
  institution, in dealing with  Goldman.

       The Town's water comes from six springs and five wells.  In the course
  of negotiations, the  Town representatives told Goldman that it lacked the
  capacity to provide water to the planned  Northwood Campus condominium
  project, which would have 60 condominium units.  Therefore, as  a condition
  of the contract to supply water and sewer services, it required plaintiffs
  to limit the total  number of bedrooms, to retain the existing footprint of
  the buildings, and to develop a new source of  water supplying at least 11
  gallons of water per minute.  When plaintiffs could not perform the last 
  condition, the parties renegotiated their contract, and plaintiffs agreed
  to pay 

 

  $10,000 and convey to the Town the former Goddard private water system and
  the land upon which  the system is located.
   
       In 1993, plaintiffs ceased paying their water and sewer bills and sued
  the Town for damages,  alleging it fraudulently or negligently
  misrepresented the fact that it lacked the capacity to provide  water to
  the Northwood Campus condominium project.  The complaint was dismissed
  because the  court found that the alleged misrepresentations went only to
  the motive for the Town's bargaining  position and were not material to the
  agreement.

       In order to recover for fraud, (FN1) plaintiffs had to show "an
  intentional misrepresentation of  existing fact, affecting the essence of
  the transaction."  Silva v. Stevens, 156 Vt. 94, 102, 589 A.2d 852, 867
  (1991) (quoting Union Bank v. Jones, 138 Vt. 115, 121, 411 A.2d 1338, 1342
  (1980)); see  also Lewis v. Cohen, 157 Vt. 564, 568, 603 A.2d 352, 354
  (1991).  The misrepresentation must "be  made as to a material fact." 
  Lewis, 157 Vt. at 569, 603 A.2d  at 354.  As described in the early case  of
  Stone & Wellington v. Robie, 66 Vt. 245, 247, 29 A. 257, 257 (1894):

    [T]he misrepresentations must relate distinctly and directly to
    the  contract, must affect its very essence and substance, and
    must be  material to the contract.  If the representations relate
    to other matters,  or to the contract in a trivial and unimportant
    respect only, or are  wholly collateral, they afford no ground for
    avoiding the contract.

  The Court in Robie found no fraud or misrepresentation because the
  "representations did not relate to  the quantity, quality, or value of the
  articles sold."  Id.; see also Restatement (Second) of Torts §  538(2)
  (1977) (a fact is material either if "a reasonable man would attach
  importance to its existence  or nonexistence in determining his choice of
  action in the transaction in question" or the person  making the
  misrepresentation knows or has reason to know that the other party is
  likely to regard it  so).  A statement of the motives underlying a party's
  bargaining position is generally not deemed to  be material.  See In re
  Davenport's Estate, 2 N.W.2d 17, 22 (Neb. 1942). 

       Assuming that representatives of the Town misrepresented why they were
  requiring plaintiffs  to develop an alternative water source, as we must on
  summary judgment, we conclude that the trial  court correctly ruled that
  the representations were not material.  Even if plaintiffs attached
  important  significance to these representations, there is no evidence that 
  the Town knew that plaintiffs did so;  in fact, the record indicates
  Goldman obtained the water capacity and flow-rate information from the 
  Town before entering into the contract.  The representations went to the
  Town's motives in  formulating its bargaining position and not to the
  essence of the contract.

 

       In reaching this conclusion, we emphasize that this case does not
  concern claims brought  under Vermont's Consumer Fraud Act, see 9 V.S.A. §§
  2451-2480g, or the Federal Trade  Commission Act, see 15 U.S.C. §§ 41-77. 
  Those statutes have broad remedial purposes that extend  beyond common law
  fraud or misrepresentation.  See 9 V.S.A. §  2451 (Consumer Fraud Act was 
  enacted "to protect the public, and to encourage fair and honest
  competition"); D.D.D. Corp. v.  Federal Trade Comm'n, 125 F.2d 679, 682
  (7th Cir. 1942) ("false, unfair or deceptive acts defined in  the Federal
  Trade Commission Act need not be such as would constitute fraud, as that
  term is  ordinarily understood in law").  Accordingly, misrepresentation or
  nondisclosure of facts not directly  pertaining to the essential terms of a
  contract but which reasonably could have affected a consumer's  decision
  whether to purchase a product or service may be actionable under those
  statutes.  See, e.g.,  Peabody v. P.J.'s Auto Village, Inc., 153 Vt. 55,
  57-58, 569 A.2d 460, 462 (1989) (trial court erred in  dismissing
  plaintiff's consumer fraud claim based on its conclusion that defendant's
  failure to inform  plaintiff that used car he was buying had been "clipped"
  was not material because it did not affect  reliability, safety, or value
  of vehicle); People ex rel. Hartigan v. Knecht Serv., 575 N.E.2d 1378, 
  1387 (Ill. App. Ct. 1991) (business's false representation that its
  services were being offered at  "minimum charge" may have been insufficient
  for false advertising claim, but was sufficiently  deceptive to support
  Consumer Fraud Act violation because consumers could have been expected to 
  rely on representation in determining whether to solicit business's
  services).  As noted, however, this  appeal does not concern statutory
  claims of consumer fraud or deceptive business practices.

       Plaintiffs' second ground for appeal involves their claim that water
  and sewer rates charged to  Goddard College are so unreasonably low
  compared to those charged to other ratepayers that they are  unjustly
  discriminatory.  Prior to 1967, Goddard College maintained its own water
  and sewer  systems, and the Town did not have a municipal sewer system.  In
  1967, Goddard and the Town  entered into a contract whereby they would
  jointly construct a municipal sewer system.  Goddard  agreed to pay a
  proportionate share of the construction and maintenance costs, based upon
  its share  of the population using the system. The construction cost has
  been completely paid, and Goddard  currently pays 22% of the maintenance
  costs of the system.  Residents pay $180.00 per year for  sewer use. 
  Goddard connected to the Town water system in 1983.  Goddard pays $3,000.00
  annually  for up to 1,520,000 gallons of water, plus $2.10 for every 1000
  gallons over that amount.  A single  residence on the water system pays
  $180.00 annually for up to 60,000 gallons, plus the same $2.10  for every
  1000 gallons over that amount. 

       "Claims of 'unjust discrimination' in cases involving the provision or
  cost of municipal  services have been analyzed under the equal protection
  clause of the federal constitution."   Colchester Fire District No. 2 v.
  Sharrow, 145 Vt. 195, 198, 485 A.2d 134, 136 (1984).  Equal  protection
  claims must be reviewed under the rational basis test, where different
  treatment of  different persons or groups will be permitted unless such
  treatment is based upon "wholly arbitrary  and capricious grounds."  Id. at
  199, 485 A.2d  at 136.  Under this standard, different rates may be  charged
  to various classes of customers if the classifications are reasonable, such
  as based on the  quantity used, the time used, the purpose of the use, the
  duration of the use, and other such factors.   See Cleveland Electric
  Illum. Co. v. Public Util. Comm'n Of Ohio, 330 N.E.2d 1, 18 (Ohio 1975).

 

       Goddard is a unique user of water and sewer services within the Town
  because of the volume  of its use, the nature of its use and the history of
  its involvement in constructing the sewer plant.  As  clarified in their
  reply brief, plaintiffs particularly challenge the minimum water fee of
  $180 for  60,000 gallons applicable to users in the Town other than Goddard
  because most water consumers do  not reach the mandatory minimum amount,
  while Goddard always exceeds its minimum allotment.   Mandatory minimum
  allotments are justified by the need for the utility to recover its costs
  of  establishing and maintaining a hookup, apart from the costs of the
  commodity delivered, and are  always subject to the discrimination charge
  made here.  Overall, we conclude that plaintiffs may  have arguments that
  alternative rate structures might be fairer to them and residential users
  generally,  but we cannot conclude that the different treatment of Goddard
  is so irrational as to deny plaintiffs  equal protection of the laws.


       Affirmed.


                                       BY THE COURT:



                                       _______________________________________
                                       Jeffrey L. Amestoy, Chief Justice

                                       _______________________________________
                                       John A. Dooley, Associate Justice

                                       _______________________________________
                                       James L. Morse, Associate Justice

                                       _______________________________________
                                       Denise R. Johnson, Associate Justice

                                       _______________________________________
                                       Marilyn S. Skoglund, Associate Justice


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                                  Footnotes


FN1.  Although plaintiffs pled negligent misrepresentation, they have not
  argued here that the  relevant elements of this tort are different from the
  elements of deceit.