Title: Pomfret Farms Ltd. v. Pomfret Associates

State: vermont

Issuer: Vermont Supreme Court

Document:

Pomfret Farms Ltd. v. Pomfret Associates (2001-160); 174 Vt. 280;
811 A.2d 655

[File 23-Aug-2002]
[Motion for Reargument Denied 11-Oct-2002]

       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.


                                No. 2001-160


  Pomfret Farms Limited Partnership	         Supreme Court
       
                                                 On Appeal from
       v.	                                 Windsor Superior Court


  Pomfret Associates, James Monahan and 	 May Term, 2002 
  Michael Giuliano

  Alan W. Cheever, J.
      
  Richard I. Rubin and Kerry B. DeWolfe of Rubin, Kidney, Myer &
    DeWolfe, Barre, for Plaintiff-Appellee.

  Anthony Z. Roisman and C. Daniel Hershenson of Hershenson, Carter,
    Scott & McGee, P.C., Norwich, and James C. Gallagher and Carrie J. 
    Legus of Downs, Rachlin & Martin, PLLC, St. Johnsbury, for 
    Defendants-Appellants.


  PRESENT:  Amestoy, C.J., Dooley, Morse, Johnson, JJ., and Kupersmith, D.J.,
            Specially Assigned


       MORSE, J.   Third-party defendants Pomfret Associates (PA), James
  Monahan and Michael Giuliano appeal from a jury verdict in favor of Pomfret
  Farms Limited Partnership (PFLP), finding them liable for negligent
  misrepresentation in the course of the sale of land.  We reverse the
  judgment on the grounds that PFLP's claim is barred by the doctrine of res
  judicata. 
   
       This suit arises out of the sale of a parcel of land in Pomfret. 
  James Monahan and Michael Giuliano are the managing partners of PA.  Robert
  Sarvis is the general partner of PFLP and an experienced real estate
  developer.  On December 19, 1988, PA, as seller, entered into a purchase
  and 

 

  sale agreement with Robert Sarvis with respect to 423 acres of land in
  Pomfret. Sarvis subsequently assigned the purchase and sale agreement to
  PFLP.  The closing of the sale occurred on February 27, 1989, and PFLP paid
  $1.25 million for the property.

       Sarvis stated that he intended to immediately develop the property
  into twenty-one residential lots.  Sarvis admits that he knew there was no
  electricity available at the site at the time of closing.  He assumed,
  however, that electricity would be available shortly and claimed that he
  would not have purchased the property otherwise.

       In furtherance of the development, PFLP obtained a $2.3 million loan
  from the Proctor Bank.  It also executed a real estate promissory note and
  mortgage in the amount of $350,000 to PA.  PFLP subsequently defaulted upon
  its obligations under the note to PA.	

       On July 3, 1990, PA filed suit against PFLP to foreclose on the
  mortgage and to recover on the promissory note.  PFLP did not file a
  responsive pleading despite being represented by counsel.  On November 20,
  1990, PA was granted a judgment of foreclosure on the mortgage, and awarded
  $411,528 on the note.

       On March 6, 1991, Proctor Bank brought a separate foreclosure action
  against PFLP, joining PA as a party.  On September 30, 1992, PFLP filed a
  cross-claim against PA, and Monahan and Giuliano individually, which forms
  the basis of this appeal.  PFLP charged PA, Monahan and Giuliano with fraud
  and negligent misrepresentation regarding the availability of electricity
  to the Pomfret property. 	
   
       Third-party defendants PA, Monahan and Guiliano filed a motion to
  dismiss PFLP's cross-claim on the grounds that it had been a compulsory
  counterclaim in the previous suit, and was barred under the doctrine of res
  judicata.  The trial court denied the motion and allowed PFLP's claims to

 

  proceed.  It reasoned that since the foreclosure was an action in rem,
  which lies only against the property, and did not subject PFLP to further
  liability, the counterclaim was not compulsory.  After trial, the jury
  returned a verdict finding PA, Monahan and Giuliano liable to PFLP for
  negligent misrepresentation, but not for fraud.

       On appeal defendants argue that PFLP's claims of fraud and negligent
  misrepresentation were compulsory counterclaims under V.R.C.P. 13(a), and
  are now barred by the doctrine of res judicata.  We agree and reverse.	

       We first address the trial court's basis for denying defendants'
  motion to dismiss.  Counterclaims are not compulsory under Rule 13(a) if
  "the opposing party brought suit upon the claim by attachment or other
  process by which the court did not acquire jurisdiction to render a
  personal judgment on [the] claim."  V.R.C.P. 13(a).  The court was correct
  in stating that a foreclosure is an action in rem which does not impose
  personal liability on a defendant.  See Lafarr v. Scribner, 150 Vt. 159,
  160-61,