RPM Builders, Inc. v. Baxter ( 2013 )

RPM Builders, Inc. v. Baxter et. al. v. Shores et. al., No. 57-2-12 Wmcv (Wesley, J., Nov. 12, 2013).
[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
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VERMONT SUPERIOR COURT
SUPERIOR COURT CIVIL DIVISION
Windham Unit Docket No. 57-2-12 Wmcv
RPM Builders, Inc.,
Plaintiff.
v.
Robert Baxter and Diane Baxter,
Defendants and Third-Party Plaintiffs,
v.
Shane A. Shores and Allen M. Hart,
Third-Party Defendants.
Opinion & Order
Granting RPM Builders’ Motion for Partial Summary Judgment
Background
On February 9, 2012, RPM Builders, Inc. filed suit against Robert and Diane Baxter for
breach of contract. RPM alleged it contracted with the Baxters to build a house and the Baxters
withheld the final payment of $33,360.32. On March 9, 2012, the Baxters answered RPM’s
complaint and filed a counter-claim against RPM for breach of contract, common law fraud,
consumer fraud, and conversion. According to the counter-claim, RPM defrauded the Baxters by
misrepresenting the amount and value of work. RPM allegedly converted the Baxters’ property
by using the Baxters funds to pay for materials the Baxters never received. The Baxters also filed
a third-party complaint indivdually against Shane Shores and Allen Hart, as officers and
shareholders in RPM, for their role in managing the construction.
On September 20, 2013, RPM moved for partial summary judgment. RPM seeks
summary judgment on Counts II–IV and on the claim against Shores and Hart. RPM argues the
Baxters cannot show evidence of intent to deceive, cannot show RPM wrongfully deprived the
Baxters of their property, and have not made a sufficient showing to pierce the corporate veil.
RPM supported its motion with a statement of undisputed facts, a copy of the original contract
between RPM and the Baxters, and excerpts from four depositions.
On October 15, the Baxters opposed RPM’s motion. The Baxters argue summary
judgment is inappropriate because there are disputed material facts. For common law fraud, the
Baxters argue there is enough information to infer RPM made statements about the value of the
work with reckless disregard for their truth. In regard to the claim for consumer fraud, the
Baxters argue RPM, Shores, and Hart, intentionally misrepresented their ability to provide goods
and services at the agreed on price. For the conversion claim, the Baxters point to their own
deposition testimony that RPM did not deliver appliances and removed lumber from the work
site. Finally, the Baxters assert the Court should allow them to pierce the corporate veil because
Shores and Hart perpetuated fraud. RPM responded to the opposition on October 30, 2013.
Standard of Review
The Court grants summary judgment “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
V.R.C.P. 56(a). The Court makes all reasonable inferences and resolves all doubts in favor of the
non-moving party. Lamay v. State, 2012 VT 49, ¶ 6, 191 Vt. 635. Nevertheless, the non-moving
party cannot rely solely on the pleadings to rebut credible evidence. Boulton v. CLD Consulting
Eng’rs, Inc., 2003 VT 72, ¶ 5, 175 Vt. 413. Parties should present facts that are supported by
admissible evidence. See V.R.C.P. 56(c),(e).
Discussion
1. Common Law Fraud (Count II)
The Court first considers whether there are disputed material facts that RPM committed
common law fraud. The underlying facts alleged by the Baxters are that RPM misrepresented the
amount of time they worked on the Baxters’ home and the value of that work. “One who
fraudulently makes a misrepresentation of fact, opinion, intention or law for the purpose of
inducing another to act or to refrain from action in reliance upon it, is subject to liability to the
other in deceit for pecuniary loss caused to him by his justifiable reliance upon the
misrepresentation.” Restatement (Second) of Torts § 525.
The Vermont Supreme Court discussed a similar set of claims in Winey v. William E.
Dailey, Inc. See 161 Vt. 129 (1993). In Winey, the plaintiff sued the defendant on a home
construction contract for breach of contract, fraud, and consumer fraud. Id.at 131. The jury
awarded damages to the plaintiff on the breach of contract claim, but the trial judge directed the
verdict against the plaintiff on the claims for fraud and consumer fraud. Id. The trial court
directed the verdict because it found no evidence the defendant made a knowing
misrepresentation at the time of the initial estimate. Id. at 133.
The Court reversed because it found sufficient evidence to go to a jury. The Court
acknowledged that estimates are often non-actionable as mere expressions of opinion.
Nonetheless, “[w]ith respect to promises to preform, we have held that misrepresentations about
future actions can be fraudulent if defendant, at the time of the statement, intends to act
differently from the promise.” Id. The Court held that the jury could have inferred intentional
misrepresentation from the low initial estimate defendant provided plaintiff, coupled with
defendant’s testimony he actually expected at the time the job would cost $55,000 more than the
contract estimate. Id. at 134. Under these circumstances, the question of common law fraud
should have been submitted to the jury. Id.
In this case, by contrast, there is not sufficient evidence to make out a claim for fraud.
Even taking the evidence in the light most favorable to the Baxters, the allegations are that RPM
overbilled for its services, but fall short of establishing evidence of knowing misrepresentations
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at the inception of the contract. Furthermore, in their depositions, the Baxters could not point to
specific areas where RPM had overbilled them. Additionally, the Baxters’ experts admitted they
had no evidence of fraud. Unlike Winey, there is no testimony RPM knew its statements of value
were incorrect. See id. There is no evidence of intentional misrepresentation. See Restatement
(Second) of Torts § 525. Disputes about whether RPM delivered the services required by the
contract fall under Baxters’ breach of contract claim, not under a claim for fraud.
The Court also finds the Baxters’ arguments about how RPM committed fraud
unpersuasive. The Baxters testified they believed RPM overbilled and did not deliver the
services they promised. As described above, without evidence of intentional misrepresentation,
these assertions do not support a claim for fraud. The Baxters also claim RPM was “stealing
labor.” Again, allegations the Baxters did not receive the value of labor for which they
contracted should be raised under a contract theory. Similarly, the Baxters’ experts’ testimony
that the Baxters did not receive $600,000 in value is evidence of breach of contract but not fraud.
2. Consumer Fraud under 9 V.S.A. § 2453 (Count III)
The Court next considers whether the Baxters have sufficient evidence of consumer
fraud. By statute, “Unfair methods of competition in commerce, and unfair or deceptive acts or
practices in commerce, are hereby declared unlawful.” 9 V.S.A. § 2453(a). Again, Winey is
helpful for understanding how consumer fraud applies. See 161 Vt. at 134–35. Consumer fraud is
a broader cause of action than common law fraud. Id. at 134. The Baxters must “show that there
was a representation likely to mislead [them], that [they] interpreted it reasonably under the
circumstances and that the misleading nature of the representation was likely to affect [their]
conduct of decision with respect to the contract.” Id. at 134–35. Statements about opinion that
are neither likely to mislead nor influence the contract decision are not grounds for consumer
fraud. See EBWS, LLC v. Britley Corp., 2007 VT 37, ¶¶ 26–28, 181 Vt. 513.
The Baxters have failed to show evidence of consumer fraud. The Baxters claim RPM’s,
Shores’, and Harts’ failure to provide the offered goods and services is consumer fraud. The
Baxters do not, however, point to any specific statements that were misrepresentations and do
not discuss how they relied on those statements. The Baxters also suggest the Court could infer
fraud from RPM’s knowledge of the Baxters’ budget. This inference does not show consumer
fraud. See Winey, 161 Vt. at 134–35. The Baxters cannot sustain a claim for consumer fraud
because they have not shown what evidence of misrepresentation on which they reasonably
relied. See EBWS, 2007 VT 37; see also, Webb v. Leclair, 2007 VT 65, 182 Vt. 559 (evidence
that appraiser was mistaken as to value does not support consumer fraud, and summary judgment
affirmed in the absence of further evidence of misrepresentation).
3. Conversion (Count IV)
Conversion is “an intentional exercise of dominion or control over a chattel which so
seriously interferes with the right of another to control it that the actor may justly be required to
pay the other the full value of the chattel.” Montgomery v. Devoid, 2006 VT 127, ¶ 12, 181 Vt.
154 (quoting Restatement (Second) of Torts § 222A(1)). The Baxters allege RPM converted their
property by buying appliances which it did not deliver and removing lumber without permission.
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Mr. Baxter claims to have knowledge as to the lumber removal from information he received
from a well driller, Mr. Tom Lynde.
The Baxters’ argument is not based on admissible evidence. See V.R.C.P. 56(c). Instead,
Mr. Baxter describes what he has heard from another person. The Court may grant summary
judgment where the opposing party fails to support its disputed facts with admissible evidence.
See V.R.C.P. 56(e)(3). In this case, in the absence of any personal knowledge, the Baxters
needed either an affidavit or deposition from someone with such knowledge to meet their
burden. As to the appliances, the Baxters have presented no admissible evidence – receipts,
invoices, affidavits of eyewitness observations – demonstrating that RPM ordered the appliances
and now exercises dominion over them contrary to the rights of the Baxters. They simply insist
that they still have not received the appliances. This is insufficient to make out a claim for
conversion. See Montgomery, 2006 VT 127, ¶ 12.
4. Liability of Third-Party Defendants
Finally, the Court considers whether Shores and Hart, as managers of RPM, can be
personally liable for their actions. In their argument, the Baxters seek to pierce the corporate veil.
The Baxters ask the Court to pierce the corporate veil because the managers used the corporation
to perpetuate fraud. “The court will look beyond the corporation to its shareholders for liability,
that is, pierce the corporate veil, where the corporate form has been used to perpetrate a fraud,
id., and also where the needs of justice dictate.” Agway, Inc. v. Brooks, 173 Vt. 259, 262 (2001).
The purpose of piercing the corporate veil is hold accountable principals who set up the
corporation as a sham, under capitalize it to protect their assets from creditors, and do not follow
corporate formalities. See id. Normally, a party seeking to pierce the corporate veil must show
both a failure to follow corporate formalities and a substantive harm. See id.. at 263; see also
Andrews v. 1 Cornell, Inc., 278-5-08 Wmcv, 2011 WL 8472962 (Vt. Super. Ct. 2011) (Wesley,
J.) (discussing when piercing the corporate veil is inappropriate).
In this case, the Baxters do not have sufficient evidence to pierce the corporate veil. As
discussed above, there is no evidence RPM, Shores, or Hart, engaged in fraud. Moreover, the
Baxters are not framing the correct type of fraud. A court may pierce the corporate veil where
there the moving party shows the principals operated the corporation to defraud creditors. See
Agway at 263. Allegations that employees misrepresented facts are not enough to pierce the
corporate veil. Instead, there must be a scheme to abuse the corporate form. See id. The Baxters’
allegations show neither under-capitalization, nor an intent to defraud creditors, nor failure to
follow corporate formalities. There is no evidence to support piercing the corporate form.
5. Conclusion
The Court grants RPM’s motion for partial summary judgment. The Baxters have failed
to show admissible evidence to support their claims for fraud, consumer fraud, conversion, and
to pierce the corporate veil.
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Order
The Court GRANTS RPM Builder’s motion for partial summary judgment.
Dated at Newfane, Vermont on November 8, 2013
John P. Wesley
Superior Court Judge
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