Title: The Electric Man, Inc. v. Charos

State: vermont

Issuer: Vermont Supreme Court

Document:

The Electric Man, Inc. v. Charos (2004-542); 179 Vt. 351; 895 A.2d 193

2006 VT 16

[Filed 10-Feb-2006]


       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.


                                 2006 VT 16

                                No. 2004-542


  The Electric Man, Inc. 	                 Supreme Court

            v.

  George Charos and John Charos
                                                 On Appeal from
       v.	                                 Windham Superior Court

  Ernest Salo and Linda Salo	                 September Term, 2005 


  Karen R. Carroll, J.

  Elizabeth A. Boepple of Witten, Woolmington, Campbell, Boepple, Welford &
    Sawyer, P.C., Manchester Center, for Third-Party Plaintiffs-Appellees.

  Joshua L. Simonds and Gregory S. Mertz of Mertz, Talbott & Simonds, PLC,
    Burlington, for Third-Party Defendant/Counterclaimant-Appellant. 


  PRESENT:  Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.

        
       ¶  1.  DOOLEY, J.   Contractor Ernest Salo appeals from a superior
  court order awarding him only a portion of his attorneys' fees, pursuant to
  Vermont's prompt payment act, 9 V.S.A. § 4007(c), against owners George
  Charos, John Charos, and Patricia Costello.  The case arises out of a
  contract under which contractor was to remodel owners' house.  Contractor
  prevailed below on his claims for breach of contract and conversion, and on
  owners' claims for defective workmanship, but the superior court did not
  award him all of his attorneys' fees.  On appeal, contractor argues that
  the trial court erred when it:  (1) separated out the percentage of the
  total verdict that represented the payment-withholding claim from the
  claims for breach of contract and conversion, and awarded attorneys' fees
  under the prompt payment act only for that portion of the fees associated
  with the payment-withholding claim; and (2) specifically disallowed
  attorneys' fees associated with unsuccessful mandatory and voluntary
  mediation. We reverse and remand for imposition of a new attorneys' fee
  award.  

       ¶  2.  In the spring of 2001, contractor entered into an oral contract
  with owners to expand owners' vacation home in Jamaica, Vermont. 
  Contractor was to construct a one-story addition with two bedrooms, a
  bathroom, and a loft over an existing garage.  The parties did not enter
  into a single, written contract regarding the construction, but instead
  made plans through a series of conversations and e-mail correspondence. 
  Contractor began work on the project in early summer 2001.  As work
  progressed, owners made periodic payments by check or cash, and contractor
  used the funds to buy supplies and pay employees.  In September 2001,
  contractor requested additional funds from owners in order to complete the
  construction.  At one point he left owner a ledger sheet marking expenses
  and payments received, and indicating that his unreimbursed out-of-pocket
  expenses were $2,600.  Owners responded by leaving a message demanding that
  contractor stay away from the property or risk being arrested for trespass. 
  As a result, contractor was unable to retrieve ladders and building
  materials he had left on the premises before the falling-out.  On January
  2, 2002, contractor's lawyer sent owners a letter detailing the amount
  contractor claimed was owed to him.  The letter claimed a total of $7,231:
  (1) $3,218 for unreimbursed materials; (2) $3,040 for unreimbursed labor;
  and (3) $973 for three ladders owned by contractor but kept by owners. 
  Owners paid no additional funds to contractor and eventually hired a new
  contractor to complete the project with modifications.  
   
       ¶  3.  Due to the lack of payment by owners, contractor was unable
  to pay an electrical subcontractor who had worked on the home addition. 
  Subcontractor, who is not a party in this appeal, eventually sued owners
  for the amount owed and filed a mechanics' lien on owners' property. 
  Owners then impleaded contractor as a third-party defendant alleging breach
  of contract, among other reasons, for defective construction, and claiming
  compensatory and punitive damages.  Contractor answered the third-party
  complaint and counterclaimed for breach of contract, unjust enrichment,
  conversion, and violation of the Vermont's prompt payment act, 9 V.S.A. §§
  4001-4009.  He sought the amount due under the contract, payment for
  extras, sums for the value of materials and business equipment left on
  site, as well as interest and attorneys' fees pursuant to the statute. 

       ¶  4.  Prior to trial, the parties engaged in both court-ordered and
  voluntary meditation, but neither led to a settlement and there was no
  agreement that either party would bear the costs associated with the
  mediation attempts.  The case was tried to a jury, and the verdict was for
  contractor on each of his claims and against owners on each of theirs.  The
  jury awarded contractor $1,000 for breach of contract, $600 for money
  wrongfully withheld by the plaintiffs in violation of the prompt payment
  act, and $4,941 for conversion of property, for a total award of $6,541.  
   
       ¶  5.  In accordance with the favorable verdict, contractor filed a
  motion seeking attorneys' fees pursuant to the 9 V.S.A. §  4007(c),
  prejudgment interest on the damages awards for breach of contract and
  conversion, interest under § 4002(d), penalties under § 4007(b), and
  attorneys' fees for bad faith litigation if statutory attorneys' fees were
  not awarded.  After receiving subsequently ordered affidavits, the trial
  judge awarded prejudgment interest on the breach-of-contract award, but not
  on the conversion claim, and declined to award attorneys' fees based upon
  bad faith litigation.  The court found contractor to be the "substantially
  prevailing party" within the meaning of § 4007(c), but limited its award of
  attorneys' fees and interest under the statute to an amount in proportion
  to that part of the overall judgment that represented recovery of the
  wrongfully-withheld contract payment.  Finding that the contractor received
  a total judgment award of $6,541, of which $600, or about 10 percent, was
  for sums wrongfully withheld in violation of the prompt payment act, the
  court awarded contractor attorneys' fees only in the amount of $3,745, or
  approximately 10 percent, of his claimed $37,445.91 total for attorneys'
  fees.  The court also noted that part of the attorneys' fees contractor
  claimed were for legal services in connection with the mediations and ruled
  it  "[in]appropriate to award costs or fees for mediation to [contractor]
  because both parties are required to participate in mediation per Court
  order."  Accordingly, the trial court did not award attorneys' fees for
  contractor's breach-of-contract claims and defenses, or for his conversion
  claim.  Contractor now appeals this limitation on attorneys' fees under §
  4007(c), and appeals the trial court's specific decision to deny attorneys'
  fees for mediation-related expenses.

       ¶  6.  Contractor bases his claim for attorneys' fees on the prompt
  payment act, which in relevant part provides that "the substantially
  prevailing party in any proceeding to recover any payment within the scope
  of this chapter shall be awarded reasonable attorneys' fees in an amount to
  be determined by the court or arbitrator, together with expenses."  9
  V.S.A. § 4007(c).    The statute creates an exception to the "American
  Rule," which generally provides that parties to litigation are responsible
  for their own attorneys' fees regardless of the litigation outcome.  Galkin
  v. Town of Chester, 168 Vt. 82, 91,