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Record v. Kempe (2005-224)
2007 VT 39
[Filed 04-May-2007]
NOTICE: This opinion is subject to motions for reargument under
V.R.A.P. 40 as well as formal revision before publication in the Vermont
Reports. Readers are requested to notify the Reporter of Decisions,
Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
any errors in order that corrections may be made before this opinion goes
to press.
2007 VT 39
No. 2005-224
Bernard G. Record and Anna A. Record Supreme Court
a/k/a Ann F. Record
On Appeal from
v. Windham Superior Court
G. Steven Kempe and Lucy Mary Kempe May Term, 2006
Karen R. Carroll, J.
L. Raymond Massucco of Massucco Law Offices, P.C., Bellows Falls, for
Plaintiffs-Appellees.
Herbert G. Ogden of Ogden Law Offices, P.C., Rutland, for
Defendants-Appellants.
PRESENT: Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.
1. SKOGLUND, J. Defendants Mr. & Mrs. Kempe appeal a jury
verdict in favor of plaintiffs Mr. & Mrs. Record on plaintiffs' claim that
defendants breached a contract for the sale of plaintiffs' home.
Plaintiffs asserted they were entitled to retain defendants' deposit as
authorized in the purchase and sale contract because defendants breached
the contract. Defendants countered that they were entitled to return of
the deposit because it was plaintiffs, in fact, who had breached the
contract for sale. The jury found in favor of plaintiffs. We affirm.
2. In June 2001, defendants contracted to purchase plaintiffs'
home and made a deposit of $21,600. The contract provided that if
defendants discovered a defect in the title, defendants were required to
notify plaintiffs, and plaintiffs would then have a minimum of thirty days
from the date of notice to cure the defect. Specifically, the contract
provided:
Purchaser . . . shall notify Seller in writing prior to the date
set for closing of the existence of any encumbrances or defects
which are not excepted in this Contract . . . . In such event,
Seller shall have an additional thirty (30) days from the time
Seller receives such notice to remove the specified encumbrances
or defects . . . . If, at the expiration of 30 days from the
receipt of such notice or on the date set for closing, whichever
is later, Seller is unable to convey marketable title free and
clear of such encumbrances and defects, Purchaser may terminate
this Contract, and, if so, shall receive back all deposit money
and may, in addition, pursue all legal and equitable remedies
provided by law.
3. Three days before the scheduled closing date, defendants'
lawyer discovered a cloud on the title. The existence of the cloud on
title is not disputed. (FN1) Defendants' lawyer telephoned plaintiffs'
lawyer, described the title defect, and declared that his clients would buy
the property only if the defect was cured. The next day, defendants'
lawyer faxed a note to plaintiffs' lawyer which stated in total: "Buyers do
not want to close with matter unresolved - 60 day contract extention
[sic]." In addition, plaintiff Mrs. Record testified at trial that
defendant Mr. Kempe specifically represented to her that defendants were
willing to extend the contract for sixty days. The day after the lawyers
first discussed the problem with the title, plaintiffs' attorney left for
vacation, returning to Vermont thirteen days into the cure period. (FN2)
Sixteen days into the cure period, defendants sent a letter by certified
mail to plaintiffs purporting to cancel the contract due to the cloud on
the title and also because they were unwilling to pay the two extra
interest payments that would come due on their bridge loan during a
sixty-day delay.
4. Plaintiffs brought this action, asserting their right to retain
defendants' deposit because defendants had breached the contract.
Defendants counterclaimed, alleging that plaintiffs breached the contract
by failing to cure the title defect, and that defendants were entitled to
recover their deposit as a result.
5. One of the issues the parties focused on at trial was whether
plaintiffs would have been able to cure the title defect in the time
allotted. In written discovery to plaintiffs, defendants asked plaintiffs
to admit that they could not have accomplished a timely cure regardless of
whether the grace period was thirty or sixty days. Plaintiffs failed to
answer the discovery request, and defendants moved for partial summary
judgment, relying in part on plaintiffs' implied admission that they could
not have cured the defect in time. The court granted plaintiffs' request
to withdraw the admission and denied summary judgment.
6. Defendants later moved to prevent plaintiffs from introducing
evidence tending to demonstrate that the parties had made an oral
modification to the contract to extend the cure period from thirty to sixty
days. The court also denied this motion, instead placing the issue of oral
modification before the jury.
7. The jury returned a verdict in favor of plaintiffs, and the
court awarded plaintiffs their attorneys' fees. Defendants filed this
appeal. On appeal, defendants assert that they should have been granted
summary judgment based on plaintiffs' implied admission that they could not
cure the title defect in the time allowed. Defendants also argue that the
superior court erred by instructing the jury that defendants were required
to prove that it would be "impossible" for plaintiffs to cure the title
defect in time. Instead, defendants allege, they were required to prove
only that plaintiffs' performance was "highly unlikely." Defendants allege
further error in the superior court's failure to instruct the jury that, in
order for any oral modification of the contract to be valid, plaintiffs had
to show they relied on the modification to their detriment. Finally,
defendants claim that plaintiffs' lawyer should not have been permitted to
both serve as a lawyer and a witness during the trial. (FN3) We address these
in turn.
I.
8. Defendants argue that, because plaintiffs had failed to timely
respond to defendants' requests for admissions, plaintiffs impliedly
conceded that they could not have cured the defect in title within either
the thirty days provided in the purchase and sale contract or the sixty-day
period allegedly created by oral modification. See V.R.C.P. 36(a)
(providing that an issue subject to a request for admission is deemed
admitted if the party to whom discovery is directed does not answer or
object to the request within thirty days). The superior court granted
plaintiffs' request to withdraw the implied admission, and denied
defendants' motion for summary judgment. Defendants argue that this was
error.
9. While we review de novo the legal conclusion underlying a
decision to grant or deny summary judgment, defendants do not directly
attack the merits of the summary judgment ruling. Rather, defendants take
issue with the superior court's decision to allow plaintiffs to withdraw
their discovery response. (FN4) Discovery rulings such as this are
discretionary, and discretionary rulings "are not subject to review if
there is a reasonable basis for the court's action." Cliche v. Fair, 145
Vt. 258, 261, 487 A.2d 145, 148 (1984). Therefore, to support a claim of
error defendants must show that "the court failed to exercise its
discretion, or exercised it for reasons clearly untenable or to an extent
clearly unreasonable." Id.
10. Under Vermont Rule of Civil Procedure 36(b), the court has
discretion to allow withdrawal of an admission if "the presentation of the
merits of the action will be subserved" by allowing withdrawal and the
party who obtained the admission "fails to satisfy the court that
withdrawal or amendment will prejudice that party in maintaining the action
or defense on the merits." The court noted that, while plaintiffs had
changed counsel right around the time the discovery response were due,
which resulted in some confusion, plaintiffs failed to explain why they
still did not respond when defendants pointed out their oversight in a
letter nearly two months later. Nonetheless, the court allowed withdrawal
because the facts that would be deemed admitted were "both key issues,"
such that "denying Plaintiffs' motion would essentially preclude a
determination of the substantive merits of the case." Further, the court
found that defendants had failed to identify discovery that they would have
pursued had they not relied on the admission; rather, defendants admitted
they had continued with their original discovery plan because they
anticipated that plaintiffs would ultimately seek to withdraw the
admission. Thus, there was no showing of prejudice. While emphasizing
that plaintiffs' delay in responding was not excusable, the court correctly
noted that "excusable neglect is not a requirement for allowing withdrawal
of admissions."
11. These conclusions provided a sound basis for the exercise of
the court's discretion. We find no error in the court's decision to permit
withdrawal of the admissions and deny defendants' motion for summary
judgment.
II.
12. Defendants also argue that the superior court erred in its
instructions to the jury setting forth their defense. Defendants' theory
at trial was that they were entitled to cancel the contract prematurely
because plaintiffs would not have been able to cure the title defect in
time, and therefore it would have been futile for defendants to wait until
the end of the cure period to cancel the contract. In support of this
notion, defendants cited Hall v. Hodgon, 114 Vt. 63, 69, 39 A.2d 195, 199
(1944), for the general proposition that "the law does not require one to
do a useless act." In their motion for summary judgment, defendants
couched their theory in the following terms: "[A] demand for performance is
unnecessary where there has been a prior absolute refusal or repudiation,
or where the party from whom performance is due has placed it out of his
power to perform, or has demonstrated his inability to perform." (Quoting
17A C.J.S. Contracts 478 (1963).) Along these lines, defendants
requested that the jury be instructed that defendants had the right to
cancel "if it was reasonably clear that [plaintiffs] could not show legal
ownership within the agreed-upon time."
13. In formulating the jury instruction, however, the superior
court relied on cases invoking the related but distinct doctrine of
impossibility of performance. That doctrine applies to excuse a party's
breach of contract where that party's own performance has become impossible
due to an unanticipated change in circumstances. See, e.g., Agway, Inc. v.
Marotti, 149 Vt. 191, 193, 540 A.2d 1044, 1046 (1988) (recognizing defense
of impossibility of performance). Ultimately, the superior court gave the
following instruction to the jury:
If you find that a reasonable person under the same circumstances,
having all of the information defendants and their attorneys had
at the time, would have believed that it would have been
impossible for plaintiffs to have cleared their title within the
period of time agreed, you may find that defendants were justified
in withdrawing from the contract. . . . [Y]ou must find that
defendants withdrew from the contract for this reason.
Defendants objected to this formulation of the instruction, pointing out
that the issue was not whether defendants could be excused from performance
under the contract, but rather whether plaintiffs would be able to meet
their contractual obligations-namely, providing clear title to the
property. (FN5) Defendants argued that their theory of the case-which
defendants referred to as "futility"-was different than the concept of
impossibility articulated by the court in its instructions.
14. On appeal, defendants reiterate their argument that the
superior court's instruction erroneously confused the concepts of
"futility" and "impossibility." Defendants further argue that the
instruction was in error because defendants were required to prove only
that it was "highly unlikely"-not "impossible"-for plaintiffs to clear
title in time. A party who claims error in the jury charge has the burden
of establishing both that the charge was wrong and that prejudice resulted
from that error. Mobbs v. Cent. Vt. Ry., 155 Vt. 210, 218, 583 A.2d 566,
571 (1990). In reviewing jury instructions, we look at them in their
entirety. Winey v. William E. Dailey, Inc., 161 Vt. 129, 143, 636 A.2d
744, 753 (1993). If the charge as a whole "breathes the true spirit and
doctrine of the law and there is no fair ground to say the jury has been
misled, there is no ground for reversal." Id. (quotations omitted). The
instruction was a correct statement of the law and an accurate reflection
of defendants' theory of the case.
15. Although defendants referred to their theory as the doctrine
of "futility," their citations and arguments both in the superior court and
on appeal make clear that defendants' theory of the case is grounded in the
more familiar and contemporary contract doctrine of repudiation. When one
party repudiates a contract, the other party is discharged from her duties
under the contract and may bring an action for breach. See Lowe v. Beaty,
145 Vt. 215, 218, 485 A.2d 1255, 1257 (1984) ("A repudiation before the
time for performance constitutes an anticipatory breach of the
agreement."); Restatement (Second) of Contracts 253 (1981). A party
repudiates a contract when that party explicitly or implicitly represents
that he cannot or will not perform his obligations under the contract.
This can be accomplished by either:
(a) a statement by the obligor to the obligee indicating that the
obligor will commit a breach that would itself give the obligee a
claim for damages for total breach . . . , [or]
(b) a voluntary affirmative act which renders the obligor unable
or apparently unable to perform without such a breach.
Restatement (Second) of Contracts 250. Implicit repudiation is also
referred to as "apparent impossibility." See, e.g., Restatement (Second)
of Contracts 250, cmt. c. ("[A] party's act must be both voluntary and
affirmative, and must make it actually or apparently impossible for him to
perform.").
16. While defendants attempt to disavow the repudiation framework
on appeal, it is beyond argument that this was their position at
trial-regardless of the name they attached to their defense. First, as
stated above, defendants referenced repudiation in their motion for summary
judgment (arguing that, "a demand for performance is unnecessary where
there has been a prior absolute refusal or repudiation, or where the party
from whom performance is due has placed it out of his power to perform, or
has demonstrated his inability to perform"). (Quoting 17A C.J.S. Contracts
478 (1963).) Second, defendants requested a jury instruction stating
that defendants had the right to cancel the contract "if it was reasonably
clear that [plaintiffs] could not show legal ownership within the
agreed-upon time." Third, the authorities cited by defendants set forth
the doctrine of repudiation. For example, Drew v. Bowen, an early case,
stands for the proposition that "where the nature of the defect of title is
such that the vendor cannot acquire it, the purchaser may rescind and put
an end to the contract to purchase, even before the day for the delivery of
the deed arrives." 102 Vt. 124, 128, 146 A. 254, 256 (1929). Similarly,
the section of Corbin relied on by defendants pertains to "Repudiation or
Other Total Breach," and explains that repudiation may take the form of
"express words or . . . an act that makes performance by the repudiator
apparently impossible or very improbable." 9 A. Corbin, Contracts 977,
at 815-16 (1979).
17. As Corbin explains, a repudiation occurs "[i]f the promisor so
acts as to make subsequent performance by him so difficult or expensive
that it is reasonable for the other party to believe that the promisor
intends not to perform." Id. 984, at 840. This is consistent with
Vermont's case law interpreting the term "impossible" in the context of a
defense of impossibility of performance. We have previously equated the
term "impossibility" with the term "impracticability" and defined both as
involving "extreme and unreasonable difficulty, expense, injury, or loss to
one of the parties." Agway, 149 Vt. at 193, 540 A.2d at 1046 (quoting
Restatement (Second) of Contracts 261 cmt. d)).
18. Thus, the concept of implicit repudiation (FN6) invoked by
defendants revolves on the same concept of practical impossibility as the
related defense of impossibility of performance. In one instance, the
breaching party excuses his breach by claiming that circumstances made his
own performance impossible. In the other, the breaching party seeks to
excuse his breach by claiming that it was apparent the other party's
performance was no longer possible. The superior court did not err in its
instruction because impossibility of one's own performance and the apparent
impossibility of the other party's performance are but two sides of the
same doctrinal coin. There is nothing to suggest that the term
"impossibility"-which we have previously equated with the term
"impracticability"-has a different meaning in the context of another
party's contractual performance. Id. at 193, 540 A.2d at 1046 (quoting
Restatement (Second) of Contracts 261 cmt. d)). There is no basis in
case law or logic to apply a less stringent standard of impossibility (that
performance is "highly unlikely") in the latter case. (FN7)
19. Defendants argue in the alternative that, even accepting the
superior court's instruction, the evidence at trial met the standard on
which the jury was instructed: that it would have been impossible for
plaintiffs to clear the title within the time allotted. In reviewing the
jury's verdict, we view the evidence in the light most favorable to the
verdict, excluding the effect of modifying evidence, and will sustain the
verdict if it is fairly and reasonably supported by any evidence. McGee
Constr. Co. v. Neshobe Dev., Inc., 156 Vt. 550, 556, 594 A.2d 415, 418
(1991). There was ample evidence from which the jury could have reasonably
concluded that defendants failed to prove apparent impossibility.
20. As we have previously recognized, while the term
"impossibility" has been expanded to include the concept of
"impracticability," both terms are narrowly defined. See 30 Williston on
Contracts 77:1, at 277 (4th ed. 2004); see also Restatement (Second) of
Contracts 250 ("[I]mpossibility means not only strict impossibility but
impracticability because of extreme and unreasonable difficulty, expense,
injury or loss involved."). "While impracticability embraces situations
short of absolute impossibility, mere increase in difficulty is not
enough." 30 Williston, 77:1, at 278. Thus, it is a "strict standard"
that excuses nonperformance only when performance would cause "extreme,
unreasonable, and unforeseeable hardship due to an unavoidable event or
occurrence." Id. at 279; see also Agway, 149 Vt. at 193, 540 A.2d at 1046.
21. In light of this standard and the evidence presented in this
case, the jury could not have reasonably concluded that defendants were
justified in deciding that plaintiffs' performance was "apparently
impossible." Here, the bare fact that the parties' contract anticipated
the possibility of a cloud on title and set a specific time period in which
to cure demonstrates that such a contingency was neither unforeseeable nor
extreme. See 30 Williston, 77:1, at 279 (impossibility exists only where
hardship is unforeseeable and extreme). Morever, not even defendants' own
expert, who was their attorney at the time of the underlying contract
between the parties, would testify that performance was impossible.
Rather, he went only so far on direct examination as to claim that "it was
unlikely that [plaintiffs] were going to be able to resolve this within the
thirty day period." According to his testimony, because of problems
plaintiffs' attorney was having in getting the names of the potential
parties to a probate proceeding, "we told our clients that we thought that
this was not going to be completed in thirty days." The attorney
acknowledged that "you can move pretty quickly" if you get the consents
from the parties, but added that it "seemed unlikely" that plaintiffs could
do that. When pressed on direct examination to quantify how unlikely, the
best that the attorney could offer from defendants' perspective was "pretty
unlikely."
22. We have already upheld the trial court's charge instructing
the jury that it could find that defendants were justified in withdrawing
from the contract if "a reasonable person under the same circumstances,
having all of the information defendants and their attorneys had at the
time, would have believed that it would have been impossible for plaintiffs
to have cleared their title within the period of time agreed." Defendants'
evidence failed to meet this standard. Indeed, based on the evidence
presented by defendants, the jury could have concluded only that
defendants' cancellation of the contract sixteen days into the cure period
was premature.(FN8) This is true regardless of whether plaintiffs had
thirty or sixty days to cure, and thus defendants' arguments regarding
failure of the evidence of an extension of the cure period are not
determinative of the outcome of this issue. (FN9)
III.
23. Finally, defendants argue that the trial court erred in
denying their motion to disqualify plaintiffs' attorney, which was grounded
on defendants' intention to call him as a witness. In making this
argument, defendants rely on Vermont Rule of Professional Conduct 3.7,
which permits a lawyer to be both a witness and an advocate at trial only
when the testimony offered addresses an uncontested issue or
"disqualification of the lawyer would work substantial hardship on the
client." We find this argument unavailing for the following reasons.
24. The day before trial, the superior court denied defendants'
motion to disqualify plaintiffs' attorney because (1) defendants made their
motion orally minutes before the jury draw even though they had known for
most of the two-year discovery phase of the litigation that plaintiffs'
attorney would be testifying in the case; (2) defendants had ample time to
seek relief from the court on this issue, but failed to do so; (3)
defendants themselves intended to call (and in fact did call) plaintiffs'
attorney as a witness to support their theory that plaintiffs could not
have cured the defect in title within the time frame allowed by the
parties' contract; (4) plaintiffs' attorney made reasonable accommodations
to address the situation and had informed defendants of those
accommodations; and (5) defendants had failed to make any proffer
whatsoever as to what the substance of the testimony would be, how
important the testimony was to their case, or whether the testimony would
concern disputed facts.
25. Even if we determined that the trial court abused its
discretion by denying defendants' motion under these circumstances, we
conclude that defendants have failed to demonstrate any prejudice resulting
from the ruling. As we held above, defendants failed to offer sufficient
evidence for the jury to conclude that an objective person could believe it
was impossible for plaintiffs to cure the title defect within the allocated
time. Thus, the evidence solicited from plaintiffs' counsel was
unnecessary and superfluous. Accordingly, defendants were not prejudiced
by its admission in violation of the ethical code.
Affirmed.
FOR THE COURT:
_______________________________________
Associate Justice
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Footnotes
FN1. The nature of the cloud on the title is as follows. Plaintiffs had
purchased the property from the Fishers, who had purchased it from Nellie
Walker. Circumstances surrounding an earlier conveyance by Walker of a
seven-acre portion of the property could support an argument that the
Fishers held title to that portion only by operation of adverse possession.
In particular, while the land records indicated that Walker conveyed the
subject property to the Fishers in 1944, a 1925 deed indicates that seven
acres of the parcel of the land possessed by Walker had been reserved in a
deed of conveyance to a Herbert Fletcher. No further mention of these
seven acres is found in the deed of conveyance to the Fishers.
FN2. The parties calculate this period slightly differently, but this
difference is not material to resolution of this appeal.
FN3. Defendants assert in passing that the award of attorneys' fees was
excessive, but we do not address this issue as defendants offer no
substantive argument on the point in their appellate brief.
FN4. Once the implied admission was permitted to be withdrawn, there was
clearly a factual dispute as to whether plaintiffs could have cured title
in time which precluded summary judgment. See V.R.C.P. 56(c) (summary
judgment appropriate only where there are no genuine issues of material
fact and moving party is entitled to judgment as matter of law); Greene v.
Stevens Gas Serv., 2004 VT 67, 9, 177 Vt. 90, 858 A.2d 238 (same).
FN5. Specifically, in their supplemental submission in support of their
proposed jury instructions, defendants asserted that
The three authorities cited by the Court are inapposite because
they say when a promisor may be excused from doing what he
contracted to do on the grounds that it is impossible to do it. .
. . The Kempes' actual defense, futility, is different. It says
the Kempes are excused from waiting the 30 days to see whether the
Records could clear the title that still existed on the agreed
closing date, because there was little or no chance that the
Records could do it in 30 days.
FN6. Defendants do not argue-nor could they, based on the evidence-that
plaintiffs explicitly repudiated the contract by stating that they would
not or could not perform.
FN7. We also note that a "highly unlikely" standard substantially diverges
from the language that defendants themselves suggested in their proposed
jury instructions.
FN8. The evidence at trial showed that, at the time defendants withdrew from
the contract, plaintiffs were working to cure the alleged title defect.
Assuming that the shorter, thirty-day time period would have applied,
plaintiffs had until September 29 or 30 to accomplish the cure. Assuming
that the jury concluded that the parties had extended the cure period to
sixty days, defendants would have had until nearly the end of October to do
so. On September 14, plaintiffs' attorney filed a petition in Probate
Court pursuant to 14 V.S.A. 1801 to clear the discrepancy in the title.
The petition sought a determination that the heirs of Nellie Walker were
not in possession of the subject real estate and were not entitled to
maintain a suit for possession thereof. Included was a motion for service
by publication supported by an affidavit that said, after diligent inquiry,
plaintiffs could not locate all the heirs of Nellie Walker. By October 1,
plaintiffs' attorney had notified the Probate Court that all heirs were
identified and service by publication was unnecessary as the heirs could be
notified directly. Consent of Judgment forms were sent to each heir along
with the petition. Nonetheless, defendants asserted that it was highly
unlikely that plaintiffs could clear the title within thirty days and that
to wait until the thirty days had actually expired would be futile.
FN9. Defendants present a number of challenges to the superior court's
evidentiary rulings that we do not address for the reasons stated below.
First, defendants argue that the court erred in excluding evidence of
probate rules and procedures that would have demonstrated that it was
impossible for Plaintiffs to cure the defect in title in either thirty or
sixty days. Defendants do not demonstrate, however, how this ruling
prejudiced presentation of their case, as defendants' attorney explained
the probate process to the jury in detail. Second, defendants argue that
it was error for the court to exclude evidence of what actually transpired
following their cancellation of the contract, that is, whether Plaintiffs
were successful in their efforts to clear the title and how long this
process took. In light of the applicable standard-specifically, whether a
reasonable person with the same information as that available to defendants
would have believed it impossible for Plaintiffs to clear the title in
time-the court was correct to exclude the evidence as irrelevant. The
standard requires the jury to examine the reasonableness of defendants'
decision in light of the information available to defendants at the time
they decided to cancel the contract, not information that came to light
only later. Third, defendants argue that the court erred in admitting
certain evidence related to the issue of reliance. The question of reliance
goes to the issue of whether the cure period was verbally extended.
Because the jury's verdict can be affirmed regardless of whether the jury
found that there had been a verbal extension of the cure period, we need
not address those arguments related to the verbal extension. Finally,
defendants contend it was error to exclude evidence that they were
financially capable of purchasing the house despite their decision to
cancel the contract. As defendants conceded, such evidence would go to
their motivation for canceling, not the reasonableness of their beliefs
regarding whether Plaintiffs could perform, and is therefore not relevant
to any element of their defense. |