Gettis v. Green Mountain Economic Development Corp.
Annotate this Case
Gettis v. Green Mountain Economic Development Corp. (2004-262); 179 Vt. 117;
892 A.2d 162
2005 VT 117
[Filed 28-Oct-2005]
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.
2005 VT 117
No. 2004-262
Patricia A. Gettis and James N. Gettis Supreme Court
On Appeal from
v. Windsor Superior Court
Green Mountain Economic Development April Term, 2005
Corporation, Connecticut River Valley
Revolving Loan Fund and Town of Hartford
Theresa S. DiMauro, J.
Christopher D. Roy of Downs Rachlin Martin PLLC, Burlington, for
Plaintiffs-Appellants.
Peter G. Beeson of Devine, Millimet & Branch, P.A., Manchester, New
Hampshire, for Defendant-Appellee Green Mountain Economic Development
Corporation.
Robert S. DiPalma of Paul, Frank + Collins, P.C., Burlington, for
Defendant-Appellee Connecticut River Valley Revolving Loan Fund.
James F. Carroll and Susan P. Ritter of English, Carroll & Ritter,
P.C., Middlebury, for Defendant-Appellee Town of Hartford d/b/a Hartford
Business Revolving Loan Fund.
PRESENT: Reiber, C.J., Dooley, Johnson and Skoglund, JJ., and Allen,
C.J. (Ret.), Specially Assigned
¶ 1. DOOLEY, J. Plaintiffs, Patricia and James Gettis, appeal a
superior court order granting summary judgment to defendants, Green
Mountain Economic Development Corporation, Connecticut River Valley
Revolving Loan Fund, and the Town of Hartford. Defendants were involved in
loan transactions with plaintiffs. The trial court determined that: (1)
all of plaintiffs' claims for non-economic damages were barred by the
statute of limitations; (2) defendants were entitled to summary judgment on
plaintiffs' claims for economic damages; (3) plaintiffs could not establish
a prima facie case for tortious interference with contractual relations and
prospective economic advantage; and (4) there were no grounds for punitive
damages. We affirm the first two of the court's decisions and do not reach
the remainder.
¶ 2. The parties submitted statements of undisputed facts in
support of their summary judgment motions.(FN1) From these statements, the
trial court determined which of the material facts were undisputed and used
those facts to render its decision. The following statement of facts is
primarily based on the recitation of facts in the summary judgment
decision.
¶ 3. For several years, plaintiffs ran an inn and a catering
business under the auspices of Gettis, Inc., a subchapter S corporation.
In the early 1990s, they sold the inn in order to focus on their catering
business. Eventually, they sought start-up funding to open a gourmet,
take-out delicatessen to augment their catering business.
¶ 4. After being denied loans by other lenders, plaintiffs
approached Green Mountain Economic Development Corporation [GMEDC] for
assistance. GMEDC is a regional development corporation that acts as a
loan administrator for the other defendants, Connecticut River Valley
Revolving Loan Fund [CRV] and Town of Hartford Business Revolving Loan Fund
[the Town]. Plaintiffs further developed their business plan with the
assistance of Lenae Quillen-Blume, a small business development advisor for
the Small Business Administration [SBA], whose office was located in the
GMEDC building. Plaintiffs have alleged that Ms. Quillen-Blume was acting
for GMEDC in her interactions with plaintiffs.
¶ 5. Through GMEDC, plaintiffs submitted a "Financing Proposal" to
the Town and CRV, seeking a total of $75,000 in financing. Both lenders
initially denied the application. Plaintiffs revised their application,
reducing their loan request from the Town and CRV to a total of $35,000.
On September 20, 1996, James Saudade, executive director of GMEDC,
informed plaintiffs that their loan would not be recommended for approval
due to insufficient collateral and a concern about non-competition
provisions in the proposed lease for their business location. Plaintiffs
worked to address those concerns and identified an alternative location for
their business.
¶ 6. On October 30, 1996, CRV approved a $15,000 loan to Gettis,
Inc., and on November 26, 1996, the Town of Hartford Selectboard approved a
$20,000 loan to Gettis, Inc. Both loans were conditioned upon zoning and
permit approval. Throughout November and early December 1996, plaintiffs
applied for zoning approval, arranged for health and fire inspections, and
worked to secure other necessary permits and licenses.
¶ 7. On December 10, 1996, the parties closed on the two loans,
totaling $35,000, even though plaintiffs had not received zoning approval
and other permits as required by the loan agreement. On December 18, the
Town issued conditional use approval for the delicatessen. The site
development plan was approved on December 23. The Town issued a zoning
permit for construction and operation of the delicatessen on January 10,
1997.
¶ 8. At the time of the loans, it was expected that the loan
proceeds would cover necessary equipment and facilities renovations.
Patricia Gettis had already expended over $15,000 on renovations by the
time the loans closed, so that the sum was immediately reimbursed. By late
January 1997, plaintiffs recognized, however, that the renovations would
cost much more than expected because of regulatory requirements imposed by
the Vermont Department of Labor and Industries, and that the loan funds
would not cover both the renovations and equipment. They determined that
they would need an additional $20,000 to purchase equipment. They
contacted their GMEDC loan administrator, Margo Watson, who advised them to
complete the renovations and to purchase the necessary equipment with
personal credit cards. She assured them that funds for an additional
consolidated loan at a lower interest rate would soon be available to
replace the credit card debt. Using their credit cards, plaintiffs bought
over $20,000 worth of business equipment, which was ultimately subject to
the lenders' security interests.
¶ 9. On February 27, 1997, plaintiffs opened "A La Carte," their
new delicatessen. In March 1997, plaintiffs met with the loan
administrator, Margo Watson, and the SBA advisor to discuss the
consolidation loan they desired. They presented the loan administrator
with documentation of business equipment purchases they had made on their
credit cards. She informed them at that meeting that funds for the
consolidation loan they sought would not be available for another six
months.
¶ 10. In September 1997, and again in early October, Ms. Gettis
was hospitalized with an unprecedented flare-up of her inflammatory
arthritis. Her doctor associated the flare-ups with stress and overwork,
which, according to Ms. Gettis, was caused by the business's financial
difficulties. Ms. Gettis continued to work despite her doctor's pleas to
stop. She continued to suffer from aggravated arthritis throughout the
period A La Carte was in business. On October 3, 1997, while Ms. Gettis
was hospitalized, Mr. Gettis met with the loan administrator and the SBA
business development advisor, who informed him that no additional loan
funds would be available to replace plaintiffs' credit card debt.
¶ 11. A year later, in early October 1998, the lenders agreed to
allow plaintiffs to make interest-only payments from December through
March, spreading the principal due during those months over the remainder
of the year. On October 9, the loan administrator sent plaintiffs a letter
asking them to make payments on their loans immediately, as no payment had
been received since August 1998. She also requested that plaintiffs return
signed letters acknowledging their agreement with the proposed modified
payment plan. On November 3, the executive director of GMEDC sent another
letter to plaintiffs, warning them that GMEDC still had not received
payment. He informed them that the modified payment plan was conditioned
upon plaintiffs bringing their loans current. No payments were made.
¶ 12. On December 1, 1998 the GMEDC executive director sent
letters declaring plaintiffs in default on their loans from CRV and the
Town and demanding payment in full within fifteen days. A La Carte closed
its doors permanently at the end of December 1998. Defendants never
repossessed their collateral. Plaintiffs eventually filed for bankruptcy.
¶ 13. Plaintiffs filed suit against defendants GMEDC, CRV, and the
Town on December 12, 2001. The counts of the complaint were: (1) breach of
contract; (2) negligent or intentional breach of fiduciary duty; (3) breach
of the implied covenant of good faith and fair dealing; (4) equitable and
promissory estoppel; (5) negligent or intentional misrepresentation; (6)
tortious interference with contractual relations and prospective economic
advantage (against GMEDC only); (7) tortious interference with prospective
economic advantage (against the Town and CRV only); and (8) negligent or
intentional infliction of emotional distress.
¶ 14. The exact bases for plaintiffs' claims are often not
specified, but have emerged in the briefing and argument. The central
factual allegation behind virtually all of plaintiffs' counts is contained
in paragraph fifty-six of the complaint as follows:
But for the unexpected imposition of personal credit card
debt that needed to be serviced with payments much higher
than would have been the case if additional loan proceeds had
been advanced, the Gettises' business would have met or
exceeded the expectations and projections set forth in the
original business plan. Thus, but for the burden of personal
credit card debt, their business would have been on the track
to success.
The first count is based on the failure of defendants to provide additional
loans to pay off the credit card debt. The fourth and fifth counts raise
various arguments on that subject. According to plaintiffs' fourth count,
defendants should be estopped from enforcing the loan terms because they
induced plaintiffs' financial failure through the credit card debt and the
failure to provide business loans to eliminate that debt. The fifth count
alleges misrepresentation because defendants knew they would not extend
further credit when they induced plaintiffs to incur credit card debt, but
stated that they would provide further loans. The bases for the second,
third and eighth counts are not specified, but again appear to be the
statement in paragraph fifty-six or a variation on that theme.
¶ 15. In the sixth count, plaintiffs allege that GMEDC
tortiously interfered with their loan contracts with CRV and the Town by
instructing plaintiffs to purchase equipment with credit cards and
preventing plaintiffs' performance of their loan obligations. The seventh
count alleges that "CRV/RLF and the Town intentionally and improperly
interfered with the Gettises' prospective contractual relations with other
actual and potential lenders with whom the Gettises already had, or could
otherwise have, pursued supplemental loans." The complaint also contains
vague allegations that suggest that the Town's zoning actions or
representations were linked to the unanticipated regulatory requirements
imposed by the Department of Labor and Industries and, as a result, the
Town was responsible for plaintiffs' inability to finish the renovations
and purchase the equipment with the loan amounts provided. To the extent
plaintiffs made such allegations, they waived them in their response to
defendant's motion for summary judgment either by not actually responding
to defendants, or by their express waiver. Plaintiffs seek relief in the
form of compensatory damages for economic, emotional, and physical
injuries, as well as punitive damages.
¶ 16. Defendants submitted several different motions for summary
judgment on the following grounds: (1) the statute of limitations barred
plaintiffs' claims for damages for physical and emotional injuries; (2)
plaintiffs failed to establish a causal connection between defendants'
conduct and the damages alleged; (3) plaintiffs failed to present a prima
facie case for tortious interference with contractual relations and
tortious interference with prospective economic advantage; (4) plaintiffs
failed to present a prima facie case for negligent and intentional
infliction of emotional distress; (5) the Town is immune from claims
regarding its governmental function of issuing land use permits; and (6)
the Town is immune from claims of punitive damages.
¶ 17. Along with their summary judgment motions, defendants
submitted a lengthy statement of undisputed material facts. Plaintiffs
submitted a counter statement, disputing some of the facts in defendants'
statement and agreeing with others. The trial court ultimately granted
summary judgment in favor of defendants on all claims, using several
different rationales. The court granted summary judgment on counts one
through five-the contract-related claims-for failure to establish that
defendants' actions caused plaintiffs' injury. The court also found that
the statute of limitations barred plaintiffs' claims for damages for
physical and emotional injuries, which were found in several claims, but
especially in the intentional infliction of emotional distress claim (claim
eight). The court held that plaintiffs did not establish a prima facie
case against GMEDC for tortious interference with contractual relations, or
for tortious interference with prospective economic advantage against any
defendant (claims six and seven). Finally, the court denied plaintiffs'
claim for punitive damages because it found no actual damages. The trial
court did not decide whether plaintiffs established a prima facie case for
intentional infliction of emotional distress or whether the Town would
qualify for municipal immunity, as it granted summary judgment on all
claims before it reached those issues.
¶ 18. Plaintiffs appeal all of the superior court rulings. We
conclude that we need reach only two of those decisions-that plaintiffs'
claims for non-economic loss are barred by the statute of limitations, and
that plaintiffs' claims for economic loss fail for lack of causation-in
order to dispose of this appeal.
¶ 19. We note that plaintiffs criticize the superior court for
failing to state the Rule 56 standard for ruling on a summary judgment
motion, and for finding facts that were disputed. The standard for summary
judgment is familiar-whether the materials properly before the court "show
that there is no genuine issue as to any material fact and that any party
is entitled to a judgment as a matter of law." V.R.C.P. 56(c)(3). We
review a grant of summary judgment using the same standard as the trial
court, giving the benefit of all reasonable doubts and inferences to the
non-moving party. Fireman's Fund Ins. Co. v. CNA Ins. Co., 2004 VT 93, ¶
8, 177 Vt. 215, 862 A.2d 251. As plaintiffs point out, the trial court
cannot resolve disputed issues of material fact in ruling on a summary
judgment motion. See Mellin v. Flood Brook Union Sch. Dist., 173 Vt. 202,
211, 790 A.2d 408, 417 (2001). Rule 56 requires, however, a party to
submit a statement of the material facts for which the party contends there
is "no genuine issue to be tried" and the opposing party to specifically
controvert any facts it disputes. V.R.C.P. 56(c)(2). Thus, even if the
parties do not stipulate to facts, the submissions allow the trial court to
determine which facts are uncontroverted and to render summary judgment on
those facts if appropriate. The superior court followed that procedure in
the current case. Specifically, we find that the trial court did not make
any findings of disputed facts, and, on review, we do not have to make any
findings on disputed facts in order to rule as a matter of law.
¶ 20. The first issue on appeal is whether plaintiffs can maintain
their claim for damages from their physical and emotional injuries. The
trial court determined that those claims were barred by the applicable
statute of limitations, which requires claims for "injuries to the person"
to be brought within three years after the cause of action accrues. 12
V.S.A. § 512(4). The statute of limitations issue is a question of law,
and both parties agree that there are no genuine issues of material fact to
prevent our reaching this legal question. For the reasons explained below,
we agree that, to the extent plaintiffs seek physical and emotional
damages, their claims are time-barred.
¶ 21. For several of their claims, plaintiffs seek damages for
emotional distress and "mental suffering," and for the physical pain and
suffering Ms. Gettis experienced as a result of her arthritic flares.
Regardless of the characterization of a cause of action, claims for damages
resulting from mental anguish, emotional distress, and personal humiliation
are considered "injuries to the person" for purposes of the statute of
limitations. Fitzgerald v. Congleton, 155 Vt. 283, 291, 583 A.2d 595, 600
(1990). Plaintiffs do not contest the application of the three-year
statute of limitations to their claims for injuries to the person. They
filed this suit in Windsor County Superior Court on December 12, 2001, so
the claims must have accrued on or after December 12, 1998.
¶ 22. Generally, the statute of limitations begins to run at
the point when a plaintiff has a cause of action. Rennie v. State, 171 Vt.
584, 586, 762 A.2d 1272, 1275 (2000) (mem.). In personal injury claims
governed by 12 V.S.A § 512(4), the cause of action accrues at the time a
plaintiff discovers or reasonably should have discovered the basic elements
of a cause of action, including the existence of an injury and its causes.
Lillicrap v. Martin, 156 Vt. 165, 175, 591 A.2d 41, 46 (1991). This
"discovery rule" is meant to prevent the injustice of barring a plaintiff
from a deserved remedy simply because a plaintiff may not have been aware
of his or her "legal injury" for a considerable time after the events that
caused the harm occurred. There is no allegation here that plaintiffs'
injuries were undiscovered until a time within the three-year limitations
period. Plaintiffs had knowledge of their claims for personal injuries
prior to December 12, 1998. They have presented evidence which shows they
were aware of an injury as early as October 1997 when Ms. Gettis was
hospitalized, and by at least January 1998, they had causally connected the
injuries to the stress of their failing business. Thus, under our general
statutes of limitation law, including the discovery rule, plaintiffs'
claims for personal injury damages are time-barred.
¶ 23. Plaintiffs attempt to save their claims for personal injury
damages by urging the Court to adopt a "continuing tort" rule. The
continuing tort doctrine allows a plaintiff to support his or her cause of
action with events that occurred outside of the limitations period by
delaying the accrual of a claim until the "the date of the last injury or
the date the tortious acts cease." Feltmeier v. Feltmeier, 798 N.E.2d 75,
85 (Ill. 2003).
¶ 24. We have never adopted the continuing tort doctrine, although
we indicated a variation of it may exist for discrimination cases in Lee
v. University of Vermont, 173 Vt. 626, 626-27, 800 A.2d 444, 445-46 (2002)
(mem.). In Lee, plaintiff claimed that the University discriminated
against him when it classified him as dismissed for inadequate academic
performance although he was actually on medical leave. We reversed the
trial court's grant of summary judgment because there was a genuine issue
of material fact as to whether plaintiff had applied for readmission after
his dismissal. Id. If he had reapplied, he might have established a
"continuing violation" that might have brought his claims within the
limitations period, but we did not reach the issue. Id.
¶ 25. We need not determine whether we would adopt the continuing
tort doctrine to determine statute-of-limitations accrual outside of
discrimination cases because it would not help plaintiffs in this case. The
continuing tort doctrine requires at least two elements: a continuing
wrong, and some action contributing to the wrong that occurred within the
limitations period. Even if plaintiffs are correct that defendants'
actions could be considered to be a continuing wrong, we can find no part
of that wrong that occurred in the limitations period.
¶ 26. Plaintiffs allege the following actions in an effort to
demonstrate that defendants engaged in an "ongoing pattern of tortious
conduct," which caused plaintiffs' personal injuries:
- December 10, 1996: Defendants closed on plaintiffs'
loans before the required permits were secured.
- January 1997: The GMEDC loan administrator advised
plaintiffs to purchase business equipment with personal
credit cards, and assured them that a lower-interest loan
would be available that would relieve them of the
high-interest credit card debt.
- March 27, 1997: The loan administrator informed
plaintiffs that GMEDC would not provide plaintiffs with a
loan to consolidate their credit card debt. She suggested
that funds might be available in six months, but that in the
meantime they should restructure the ownership of the
business and solicit credit denials from other lenders.
- October 3, 1997: Mr. Gettis met with the loan
administrator and SBA advisor, both as GMEDC representatives,
who informed him that no additional loan funds would be
provided under the existing loans and plaintiffs would have
to begin the application process again if they sought
additional loans.
- October 1, 1998: GMEDC executive director met with
plaintiffs and was "furious" about their use of credit cards.
He agreed to allow plaintiffs to make interest-only payments
over the winter.
- November 3, 1998: The executive director sent a letter
informing plaintiffs that they were required to bring their
loans current before they could commence interest-only
payments.
- December 1, 1998: Appellees sent default letters to
plaintiffs, demanding payment of the loans in full within
fifteen days-that is, before December 16, 1998.
The only act plaintiffs can point to within the limitations period is the
expiration of the fifteen-day redemption period-or grace period, as
plaintiffs characterize it-to cure the loan default. Plaintiffs contend
that during this time defendants could have discontinued the default
declaration or provided plaintiffs with an alternate means of meeting their
obligations.
¶ 27. Nothing in the factual statements indicates that defendants
took any action to collect on the loan obligations after plaintiffs
defaulted. The complaint states that since plaintiffs had no "other
financial options," they "regrettably shut their business down." In their
supplemental statement of material facts, plaintiffs asserted that at no
time after the default letter did any representative of defendants contact
plaintiffs "to discuss their situation." The complaint goes on to state
that plaintiffs were forced to file for bankruptcy and "also surrendered
possession of the restaurant equipment and other property purchased with
their personal credit cards." Consistent with that allegation, plaintiffs'
supplemental statement of material facts states that after plaintiffs'
delicatessen closed, defendants did not repossess any of the collateral and
received no further payments on their loans.
¶ 28. The continuing tort doctrine requires that a tortious
act-not simply the continuing ill effects of prior tortious acts-fall
within the limitation period. See Harris v. City of New York, 186 F.3d 243, 250 (2d Cir. 1999); Ward v. Caulk, 650 F.2d 1144, 1147 (9th Cir.
1981); Maslauskas v. United States, 583 F. Supp. 349, 351 (D. Mass. 1984);
Feltmeier, 798 N.E.2d at 85; Jackson Cty. Hog Producers. v. Consumers Power
Co., 592 N.W.2d 112, 116 (Mich. Ct. App. 1999). The necessary tortious act
cannot be the failure to right a wrong committed outside the limitation
period. See Fitzgerald v. Seamans, 553 F.2d 220, 230 (D.C. Cir. 1977). If
it were, the tort in many cases would never accrue because the defendant
could undo all or part of the harm.
¶ 29. Here, plaintiffs identify no acts of defendants that
occurred within the limitation period. Instead, they identify the failure
to act-that is, the failure to rescind the default during the fifteen-day
payment period. We note, however, that the declaration of default could
have been waived even after the payment period and did not itself inflict
an additional injury on plaintiffs. Indeed, we question whether the
default declaration itself could be characterized as a tortious act rather
than an effect of plaintiffs' financial situation caused, in plaintiffs'
view, by defendants' acts. Because defendants committed no tortious act
within the limitation period, plaintiffs' claims for personal injury
damages would be barred even if we adopted the continuing tort doctrine.
¶ 30. The second issue involves plaintiffs' claims for economic
damages. The superior court also ruled that these could not be maintained,
but for a different reason. Defendants' expert, an economic consultant,
concluded in his report that plaintiffs' business had failed because its
revenues were well below expectations and not because of the credit card
debt. Based on that report, which was not directly controverted by
plaintiffs,(FN2) the court concluded that plaintiffs were unable to show a
causal link between their legal theories and their injury, and granted
summary judgment on that basis. The court reached that result for counts
one through five of plaintiffs' complaint, but we see no reason why it does
not apply to all eight counts. Although the counts express various
contract and tort theories, they are all based on the common allegation
that plaintiffs' business failure and resulting damages were caused by
defendants' direction, through their agent, to incur credit card debt to
open the delicatessen, followed by the failure to extend additional credit
to pay the credit card debt and reduce the interest rate.
¶ 31. Defendants' summary judgment position was that plaintiffs
could not establish causation. See B.B. & J. v. Bedell, 156 Vt. 203, 205,
591 A.2d 50, 51-52 (1991) (where plaintiff claimed that business failure
was due to lessor's failure to supply potable water, it had the burden to
prove causation). That position was based on a report of defendant's
expert witness, economist Richard Heaps. The Heaps report-based upon
plaintiffs' tax returns from 1997 and 1998, an accountant's report from
1997, and plaintiffs' 1999 bankruptcy filing-showed that plaintiffs'
business had failed because of insufficient revenues, and would have failed
even without the additional credit card debt.(FN3) The witness calculated
plaintiffs' cash inflows and outflows, including both personal and business
expenses.(FN4) The economist made his conclusions after "excluding all
payments that could have been associated with additional borrowing costs."
He determined that "after two years [plaintiffs] would have had a
cumulative personal deficit of $29,073." Thus, in the economist's view,
even if everything had gone as planned without the additional credit card
costs, plaintiffs still would have incurred a deficit of nearly $30,000
over the initial two-year period.
¶ 32. Defendants also emphasize that the economist's report
overstated the impact of the credit card debt because it did not include
the carrying costs of an additional $22,000 loan. They argue that the
deficit figure was too low because it assumed that the original loans would
have paid for all renovation and equipment, whereas the reality was that
additional financing was necessary to pay for the equipment. They argue
that if defendants had granted the loan plaintiffs argue they should have
granted, plaintiffs would have had to pay an annual debt service of at
least $5,609, bringing their cumulative two-year deficit to over $40,000.
¶ 33. Whether plaintiffs' theory was based on tort or contract,
they still had to establish that the damages that they claimed were caused
by defendants' unlawful activities. Thus, for their tort claims,
plaintiffs had to show "reasonable certainty or a reasonable probability
that the apprehended future consequences will ensue from the original
injury. Consequences which are contingent, speculative, or merely possible
[are not included]." Howley v. Kantor, 105 Vt. 128, 133, 163 A. 628, 631
(1933); see also Callan v. Hackett, 170 Vt. 609, 609, 749 A.2d 626, 628
(2000) (mem.) (tort damages must be the "direct, necessary, and probable
result" of defendant's tortious act); My Sister's Place v. City of
Burlington, 139 Vt. 602, 612, 433 A.2d 275, 281 (1981). For their contract
claims, plaintiffs had to show that their damages were reasonably certain
and foreseeable and were reasonably within the contemplation of the parties
at the time in which they entered into the contract. See Wyatt v. Palmer,
165 Vt. 600, 602, 683 A.2d 1353, 1357 (1996) (mem.); Pareira v. Wehner, 133
Vt. 74, 78-79, 330 A.2d 84, 86-87 (1974).
¶ 34. While plaintiffs might have claimed minor damages-for
example, for the extra interest paid to the credit card companies-their
overall claim was that the failure of the business and its consequences was
caused by defendants' breach of contract and tortious conduct.(FN5) As the
superior court held, defendant's expert testimony went directly to
plaintiffs' central claim and showed it to be false. Without response,
plaintiffs could not show that they could prevail on their claims.
¶ 35. Plaintiffs make several arguments attacking the expert's
evaluation. Their main response is to claim that their other reasons for
the failure of the business are related to the assumption of the credit
card debt, and not independent of it, so they can still prove causation
despite the simplistic analysis of defendants' expert witness. Plaintiffs
cite particularly to three reasons which they claim are related to the
assumption of the credit card debt: (1) the assumption of the credit card
debt made plaintiffs financially vulnerable and dependent on defendants and
severely damaged their creditworthiness; (2) defendants' actions caused
plaintiffs to open their business in the slowest period of the season when
their revenue was the lowest; and (3) the deterioration in the health of
Patricia Gettis prevented her from improving the delicatessen business.
The trial court responded to this argument with the conclusion "that it
relies entirely on allegations and arguments, without citations to
evidence" and that plaintiffs needed an expert witness to respond to
defendants' expert witness.
¶ 36. We do not reach the superior court's conclusion that
plaintiffs had to produce expert testimony to refute that offered by
defendants. We agree with the court's conclusion that plaintiffs failed to
respond to defendants' expert evidence. Plaintiffs' first example of a
reason why the business failed demonstrates why their response was
inadequate. Plaintiffs did not identify any lender who would have provided
a consolidation loan had they not been burdened by credit card debt, nor
did they identify how, if at all, their future creditworthiness affected
the failure of the business. In fact, the evidence showed that they had
unsuccessfully sought credit from other sources prior to obtaining the
loans from defendant. Indeed, the apparent point of the government lending
programs defendants implemented was to provide credit where normal
commercial lenders would not. Thus, their claim that other lenders might
have provided a consolidation loan if the credit card debt did not exist is
mere speculation.
¶ 37. Plaintiffs' second reason for their business failure, that
the business opened during a slow period, is also only a speculative claim,
especially because defendants' economic expert analyzed the business based
on two years of operation. Whether plaintiffs would have generated more
annual revenue if they had opened at a different time is entirely
speculative when looking at the record on summary judgment. Moreover,
apart from plaintiff's conjecture in argument, nothing in the evidence
suggests that plaintiffs, who needed income, did not seek to open as soon
as possible.
¶ 38. The third reason for which plaintiffs suggest their
business failed is superficially related to the expert witness's conclusion
that the business failed because it did not generate enough income.
Plaintiffs claim that Patricia Gettis's health deterioration prevented her
from improving the delicatessen business. Patricia Gettis lost two
five-day periods of work because of her hospitalization. In general,
however, the evidence showed that she refused to curtail her long work
hours, despite advice from her doctor to do so, to attempt to improve her
medical condition. Nothing in the evidence suggested that her medical
condition prevented her from doing the necessary work to meet customer
demand. Further, plaintiffs offered no evidence to show what plaintiffs
would have done differently to generate more income. Thus, whether
Patricia Gettis's medical condition contributed to the failure of the
business is wholly speculative.
¶ 39. Plaintiffs' other objection to the expert's report is that
the analysis involved the personal financial status of plaintiffs, as well
as the corporation, Gettis, Inc. In fact, the report showed that Gettis,
Inc. made a small amount of money in each of the years of its operation
after paying a salary to James Gettis of between $14,000 and $15,000 in
1997 and 1998. The problem was, however, that plaintiffs were spending
more than the small amount they were making.
¶ 40. The expert's report looked at both the corporate and
personal circumstances of the Gettises because Gettis, Inc. was a
subchapter S corporation in which earnings passed through the corporation
directly to the owners. See supra ¶ 32 n.3. Subchapter S tax status was,
however, only one of many reasons to look at both the personal and
corporate financial circumstances together. The case was brought by the
Gettises, not Gettis, Inc., based on their economic damages. The Gettises
were personally obligated to repay the loans to defendants. When they ran
into financial problems, they stopped paying on those loans, inducing the
declaration of default. Plaintiffs' theory centered upon the alleged
forced use of their personal credit cards. We thus see no error in
judging causation in relation to the combined financial position of Gettis,
Inc. and plaintiffs.
¶ 41. Finally, on this issue, plaintiffs argue that this case is
governed by Stacy v. Merchants Bank, 144 Vt. 515, 482 A.2d 61 (1984), which
holds that a business owner denied a promised loan is entitled to have his
or her consequential damages determined by a jury. Stacy has, however,
limited applicability here, and does not stand for the claimed proposition.
In Stacy, a dairy farmer was promised a loan by defendant bank to cover the
period between the date that the Farmers Home Administration made a
commitment to extend financing to plaintiff and the date the money actually
arrived. After defendant reneged on the loan commitment, plaintiff went
out of business and sued for his "unrecoverable investment" in the farm.
We announced a general rule that:
Where a contract involves a promise to lend money, the law
presumes that alternative financing is always available on
the open market; therefore, recovery for a breach will often
be limited to the cost of obtaining the promised amount
elsewhere. . . . The above authorities are in accord,
however, that if the borrower is unable to obtain alternative
funds at the time of the breach, the lender will be liable
for such actual damages incurred by the borrower as were
reasonably foreseeable at the time the contract was made.
Id. at 520, 482 A.2d at 64 (citations omitted).
¶ 42. The general rule of Stacy is of no help to plaintiffs.
Assuming that we should view this case as one in which alternative
financing is unavailable,(FN6) the question is what "actual damages"
plaintiffs can prove were within the parties' contemplation and were
reasonably certain. To the extent Stacy answers that question, the answer
does not support plaintiffs' position. As in this case, the plaintiff in
Stacy overclaimed his compensable damages seeking "all labor and material
costs incurred in the preparation of the farm prior to purchasing the cows,
as well as all of his operating expenses, minus income, incurred during the
short life of the farm." Id. at 518, 482 A.2d at 63. We reversed a jury
verdict allowing these damages, holding that plaintiff could recover only
those expenses incurred in reliance upon receipt of the loan when
established with reasonable certainty. Id. at 522, 482 A.2d at 65. In any
event, Stacy does not support plaintiffs' argument that they are entitled
to have their damages determined by a jury when we find as a matter of law
that those damages are not shown with reasonable certainty.
¶ 43. We concur with the superior court that there is no
disputed issue of material fact relevant to whether plaintiffs can recover
economic damages on any of their theories. In light of defendants'
uncontroverted expert evidence, we also agree that as a matter of law
plaintiffs cannot recover economic damages. This holding applies to all
counts of plaintiffs' complaint.
¶ 44. Since plaintiffs can recover neither economic nor
non-economic damages, the superior court was correct in awarding summary
judgment on all counts for defendant. Because of our disposition, we do
not reach the other issues decided by the superior court and briefed by the
parties.
Affirmed.
FOR THE COURT:
_______________________________________
Associate Justice
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Footnotes
FN1. Defendants specified that many of the facts were undisputed
solely for the summary judgment motion. Defendants continue to deny many
of these facts, including that there is a link between defendants' actions
and plaintiffs' alleged injuries and that there was a promise to lend
plaintiffs more money.
FN2. Plaintiffs also offered a report of an expert witness to show
how much profit plaintiffs could have been expected to make had they opened
the business as originally proposed to GMEDC and received the forecasted
revenue. This report was relevant, if at all, only if plaintiffs could
have established that defendants caused their business to fail. Thus,
plaintiff's expert did not directly rebut defendant's expert and, as we
explain in this opinion, the testimony was immaterial because plaintiffs
cannot prove that defendants were the cause of plaintiff's failed business.
FN3. There is a dispute over the amount plaintiffs charged to their
credit cards. Plaintiffs claimed that the amount was over $22,000, but
defendants' expert could identify only about $7,000. The difference in the
amount of principal is irrelevant because plaintiffs argued that the
interest and bank charges resulted in their failure, not the principal
amount.
FN4. Gettis, Inc. is an S-corporation, and as such its finances are
tied to the owners' personal finances. H. Henn & J. Alexander, Laws of
Corporations § 76, at 135 (3d ed. 1983).
FN5. Plaintiffs have not argued that the case should go forward solely so
that they can claim the extra interest that they paid as a result of
defendants' breach of contract and tortious acts.
FN6. Without attempting to decide the validity of this assumption, we note
that plaintiffs had alternative financing through their credit cards.
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