Rose v. City of Burlington, No. S1480-03 CnC (Norto n, J., Aug. 31, 2005)

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STATE OF VERMONT SUPERIOR COURT Chittenden County, ss.: Docket No. S1480-03 CnC

ROSE

v.

CITY OF BURLINGTON

ENTRY

This case is about ambiguity in contract language and whether it arises in terms that reference federal regulations. The City of Burlington, one party to a purchase and sale agreement, has mov ed for summary judgment on Plaintiff Sellers’ cause of action for breach of contract. The City argues there is no ambiguity as the clear lang uage of the agreement dictates the terms and intentions of the parties. Sellers disagree and point to three clauses that they argue cannot be resolved wi thout extrinsic evidence. With such evidence, Sellers argue, a breach of cont ract becomes clear. Bymutual stipulation, Sellers have agreed to dismiss their other claim of

misrepresentation.

Sellers owned a parcel of land in South Burlington near the Burlington International Airport, which is owned an d operated by the City of Burlington. In 1998, the City approached Seller s about purchasing their property for the airport’s expanding needs. Seller s, at first reluctant, realized that through a negotiated sale they could obtain more beneficial terms than through an eminent domain process. Sell ers entered into negotiations with the City, and in 2001, the partie s signed a purchase and sale agreement. The property was transferred soon thereafter, and Sellers were paid 1.5 million dollars in return.

Sellers’ breach of contract claim stems from provi sions in the agreement that addressed Sellers’ tax concerns and other expenses. As part of their negotiations, Sellers stated their desire to re-invest the money in another property to avoid the tax penalties from su ch a large sale. Under § 1031 of the Internal Revenue Code, Sellers’ proceed s would not be taxed if they purchased a similar property within a year of the sale, thereby “exchanging property” tax-free. As part of the agr eement, the City agreed to bear expenses that Sellers foresaw in this searc h and eventual purchase.

Sellers claim that this was memorialized in the con tract and the City has failed to fully perform. City argues that it has p aid Sellers all of the money that it was obliged to reimburse under the contract as federal regulations limited the amount. At the heart of this dispute a re three sections from the parties’ agreement.



### Section 4Section 4. Purchase Price/Application/Deposit . Buyer agrees to purchase the said Premises and pay to the Seller th e sum of One Million Four Hundred and Eighty One Thousand and 00 /100 Dollars ($1,481,000.00), (the “Purchase Price”), to be paid by check drawn from the City of Burlington funds at th e time of delivery of the deed. . . .

In addition thereto, Buyer agrees to pay and/or re imburse Seller at closing for all reasonable costs and expe nses incurred by Seller in the sale of the Premises to Buyer, includ ing, but not limited to, reasonable attorney’s fees for preparat ion and negotiation of this Agreement, preparation of Warra nty Deed and Vermont Property Transfer Tax Return, and other clo sing documents, and attendance at closing, and accountin g fees for accounting advice related to Seller’s sale of the P remises, the intention of the parties being that Buyer shall rei mburse Seller for all reasonable professional fees and expenses incur red by Seller relative to sale of the Premises that are considere d eligible under the Uniform Relocation Assistance and Real Property Acquisition Policy Act of 1970 (49 C.F.R. Part 24), as amended.

This first section that Sellers cite begins with a recital of the purchase price, goes on to explain the deposit amou nt, and established the parties’ escrow arrangement; it then shifts to the issue of expenses. This paragraph, quoted above in full, starts with a laun dry list of what can be dubbed “closing costs” that the City as Buyer “agre es to pay and/or reimburse Seller.” The phrase “including, but not limited to,” at the beginning of the list suggests that the items that follow are the minimum expenses for which the City is obligated. The pro blem, according to

Sellers, comes at the end of the list with a statem ent that it is their intent that the Sellers be reimbursed expenses to the exte nt allowed by 49 C.F.R., part 24. This section of the Code of Federal Regul ations governs the amounts that federal or state agencies can reimburs e Sellers for property acquired for Federal or federal-assisted projects. In particular, it contains asection that requires the owner to be reimbursed fo r “recording fees,

transfer taxes, documentary stamps, evidence of tit le, boundary surveys, legal descriptions of the real property, and simila r expenses incidental to conveying.” Expenses Incidental to Transfer of Tit le to the Agency , 49 C.F.R. § 24.106 (1989).

Seller’s argument is that § 24.106 does not includ e all of the expenses that the parties listed out in their agree ment and that the two sections must be read in opposition. This is not n ecessarily true. The court

favors a fair and reasonable construction of a cont ract over one that does not. Trustees of Net Realty Holding Trust v. AVCO Fin. Serv. of Barre,

Inc. , 147 Vt. 472, 476 (1986); see also Morrisseau v. F ayette , 164 Vt. 358, 366–67 (1995). Here the parties are clear that the ir intent is for the City to pay and/or reimburse Seller for “all reasonable pro fessional fees and expenses incurred by Seller relative to sale of the Premises that are considered eligible” under the federal regulations. The laundry list includes some of these expenses and § 24.106 does not contra dict or exclude them. In fact, they easily fit into the category of allo wable “similar expenses.”

The real issue is that the federal regulations cre ate a ceiling on “eligible” expenses. Sellers would like to argue t hat they were unaware that the inclusion of the federal regulation langua ge would mean a limit to what they would receive for closing costs, but the plain language of the agreement makes clear that the federal regulation w ould govern, which expenses would be “eligible” and thereby establish the amount Sellers would receive. Murphy v. Stowe Club Highlands , 171 Vt. 144, 152–53 (2001); see also Quenneville v. Buttolph , 2003 VT 82, ¶ 15 (unspoken intentions are not relevant to contract interpretat ion).While Sellers’ proffered interpretation of this se ction is possible, it is

neither reasonable nor preferable. Sellers were re imbursed for their closing costs, albeit only to the extent that the expenses were eligible under § 24.106. But they were not categorically denied clo sing costs, and their brief does not cite a particular closing cost from their laundry list that was denied outright by the City or the FAA. Donnelly v . Guion , 467 F.2d 290, 293 (2d Cir. 1972) (“A summary judgment motion is i ntended to ‘smoke out’ the facts so that the judge can decide if anyt hing remains to be tried.”); Travellers Ins. Co. v. Demarle, Inc. USA , 2005 VT 53, ¶ 9 (mem.). Without proof of any breach of this particular sect ion’s plain language, Sellers’ argument about the monetary limits is not supported by the terms of the contract. Therefore, the City is entitled t o summary judgment on the question of breach for Section 4.



### Section 6

Section 6 Tax Free Exchange. The Seller anticipates exchanging the property at 3060 Williston Road for other prope rty of a like kind within the meaning of Section 1031 of the Inte rnal Revenue Code. The Buyer hereby acknowledges that it is the intent of the

Seller to effect an IRC Section 1031 tax deferred e xchange which will not delay the Closing. . .

The Buyer agrees to reimburse the Seller for neces sary and reasonable business expenses associated with acquir ing the exchange property. These costs would include origi nation/loan application fees, purchase and acquisition fees, in cluding reasonable consulting fees in connection with the t ax free exchange, reasonable attorney’s fees, property tran sfer tax fees, title search fees, title insurance costs, mortgage preparation fees,and other reasonable closing costs, appraisal fees, credit check fees, agent fees related to the exchange process, a nd certain miscellaneous costs, including but not limited to r easonable travel expenses to locate an exchange property, the intent being that

Sellers will be reimbursed consistent with the Unif orm Relocation Assistance and Real Property Acquisition Policy Act of 1970 (49 C.F.R. Part 24), as amended.

This next section that Sellers cite for their brea ch of contract claim deals directly with the Sellers’ desire to nullify the tax consequences of this transaction. The section begins with a recitation of this aim, citing to the specific section of the IRC that covers property ex changes. As in Section

4, this section then lists several reasonable busin ess expenses that the City agrees to reimburse. It also ends in a similar man ner to Section 4 with the clause that the parties intend Sellers to be reimbu rsed consistent with 49 C.F.R., part 24.

Notwithstanding this superficial similarity, the t wo sections have striking and critical differences. Section 6 has t he limited purpose of obligating the City to pay for certain expenses tha t the Sellers expect to incur subsequent to the immediate land purchase. T his intent is made clear from the beginning of the section. At the time of the agreement, the City was well aware that Sellers were seeking a comparab le property to purchase immediately and that any purchase agreement would h ave to include provisions to reimburse them for these expenses. W hile this project went beyond the immediate purpose of the agreement—to tr ansfer Sellers’ land to the City—it was a critical part of the agreement in the eyes of the Sellers, and the City agreed to pay their reasonable expense s.

As with Section 4, the City tried to limit its obl igation by insertinglanguage that the terms of this obligation would be governed by 49 C.F.R.,

part 24. The problem is that these federal regulat ions do not explicitly deal with such an individualized requirement. To the ex tent that they do, they disallow such expenses. Ineligible Moving and Rela ted Expenses , 49 C.F.R. § 24.305(i) (1989) (“A displaced person is n ot entitled to payment for: . . . Expenses for searching for a replacement dwelling . . . .”). But even this provision may not apply to Sellers as it is unclear from the parties’ briefs whether or not Sellers qualify as “ displaced persons” for the purpose of reimbursement under § 24.304 or § 24.401 . Definitions , 49 C.F.R. 21 24.2 (1989). If Sellers do not qualify a s such, then even the language of § 24.305 does not apple leaving the par ties in a regulatory void. It would be highly improbable that this was the par ties intent, to create an explicit benefit at the beginning of a sentence onl y to immediately revoke it

in the next clause.

By arguing for a plain reading, the City is trying to force these regulations to do something that they were simply n ot created to do. These regulation were promulgated to create a fair, consi stent, and equal policy for federal agencies that purchase private property for federal projects. Uniform Relocation Assistance and Real Property Acq uisition Policy Act of 1970, Pub. L. No. 91-64, 1970 U.S.C.C.A.N. (84 S tat. 1894) 2222; see

also id . at 5850 (legislative history); Purpose , 49 C.F.R. § 24.1 (1989). The resulting statute and regulations act as minimum re quirements and do not necessarily deal with sophisticated land purchase t ransactions that parties may independently bargain for in their dealings. T he City’s insistence on reading these regulations into Section 6 without fu rther evidence is merely pounding at a square peg over a round hole.

The provisions of 49 C.F.R., part 24 and the agree ment’sindividually listed expenses collide. There are mo re than one reasonable

interpretations that are equally valid. Sellers wo uld argue that the

individual elements should control and the federal regulations should be applied only to the extent that they agree with the se terms, if at all. The City argues the opposite, that the regulations shou ld control and the individual elements pushed aside. Neither interpre tation is satisfactory as a

matter of law, and the circumstances of the contrac t do not offer any greater clarification. The problem boils down to the inser tion of federal regulations after one party had drafted the language concerning the individual expenses. The addition created a conflict, and the terms cancel each other out. Since both are included in the final signed a greement, the parties’ intent is ambiguous and must be decided as a matter of law. Trustees of Net Realty Holding Trust v. AVCO Fin. Serv. of Barr e, Inc. , 144 Vt. 243, 248 (1984). Summary judgment on Sellers’ claim of breach relating to the terms of Section 6 of the agreement would be improp er at this time.

Section 10. Relocation Assistance Benefits . The Seller acknowledges that in addition to the Purchase Price , Seller and tenants may be eligible to receive from the Buyer r esidential and

non-residential Relocation Assistance Benefits in a ccordance with the Federal Register, part II, United States Depart ment of Transportation, 49 C.F.R. Part 24, Uniform Relocati on Assistance and Real Property Acquisition Regulations for Feder ally Assisted Programs, dated March 2, 1989, and as said rules an d regulations may be amended prior to the Closing Date.

The final section that Sellers cite in their breac h of contract claim is

Section 10. This section deals with the relocation assistance benefits that 49 C.F.R., part 24 offers to Sellers who are displa ced as a result of a move. This term of the contract does not promise anything beyond the applicationof this section, which must apply anyway as this pu rchase was part of a

federally funded project through the FAA. Sellers do not cite to any individual benefit in part 24 that they claim was n ot appropriately applied

to their benefit in this case.

Instead, Sellers argue that Section 10 is further proof that the citations of the federal regulations in Sections 4 and 6 are redundant. This is not necessarily true. There are several benefit s within part 24 that are not covered in either Section 4 or 6. See, e.g., Payme nt for Actual Reasonable Moving and Related Expenses—Non-residential Moves , 49 C.F.R. § 24.303 (1989). The inclusion of a general term pro mising the benefits of part 24 is, therefore, not redundant or proof that the inclusion of such language in Section 4 and 6 was. The only reasonab le interpretation is that

the inclusion in each section was intended to creat e overlapping provisions and provide clear proof of the parties’ intent to i ncorporate the provisions of 49 C.F.R., part 24 in their final agreement. As such, Section 10 cannot,

as a matter of law, be a source of the breach that Sellers allege. Its meaning and purpose are clear by the plain language of the Section.

Based on the foregoing, the City’s motion for summ ary judgment is

Denied in so far as it concerns Seller’s claim of b reach under Section 6 of the parties’ agreement and is Granted for Seller’s claims under Sections 4 and 10 of their agreement.

Dated at Burlington, Vermont________________, 2005

.________________________________ Richard W. Norton, Judge