Opinion ID: 1057442
Heading Depth: 1
Heading Rank: 1

Heading: A. Consequential Damages

Text: ¶ 7. We begin by addressing Britly's claim that consequential damages are not available as a matter of law. A motion for judgment as a matter of law is granted only where there is no legally sufficient basis for a reasonable jury to find for the nonmoving party. Perry v. Green Mountain Mall, 2004 VT 69, ¶ 7, 177 Vt. 109, 857 A.2d 793. The relevant facts pertaining to this issue are not in dispute, and thus, our review of the court's legal conclusion is nondeferential and plenary. N.A.S. Holdings, Inc. v. Pafundi, 169 Vt. 437, 438-39, 736 A.2d 780, 783 (1999). ¶ 8. The jury's award to EBWS included compensation for both direct and consequential damages that EBWS claimed it would incur while the facility closed for repairs. Direct damages are for losses that naturally and usually flow from the breach itself, and it is not necessary that the parties actually considered these damages. A. Brown, Inc. v. Vt. Justin Corp., 148 Vt. 192, 196, 531 A.2d 899, 901 (1987). In comparison, special or consequential damages must pass the tests of causation, certainty and foreseeability, and, in addition, be reasonably supposed to have been in the contemplation of both parties at the time they made the contract. Id. at 196, 531 A.2d at 902. ¶ 9. In this case, the trial court concluded that EBWS was not entitled to future lost profits, but did allow EBWS to present evidence of costs it would incur during a three-week closure  specifically, ongoing payments for milk and staff wages. On appeal, Britly contends that these damages are not available as a matter of law because the payments are prospective and voluntary and thus neither certain nor foreseeable. EBWS counters that Britly failed to properly preserve this argument below. We conclude that Britly properly preserved its objection and that the court erred in submitting these elements of damages to the jury. ¶ 10. Although EBWS agrees that Britly generally objected to the inclusion of consequential damages, EBWS argues that Britly should have presented a clearer statement of its objection, specifically, that the damages for milk and wages were not recoverable because they were uncertain and voluntary. The stated objections were adequate to meet our standard. A motion for judgment as a matter of law may be made at any time prior to submission of the case to the jury and must specify the judgment sought and the law and facts upon which the moving party relies. V.R.C.P. 50(a)(2). The purposes of this requirement is to allow the trial court to determine if sufficient evidence exists to submit the issue to the jury, and to allow the nonmoving party an opportunity to cure any defects in proof, if possible. Cooper v. Cooper, 173 Vt. 1, 11, 783 A.2d 430, 438-39 (2001). ¶ 11. It is evident from the transcript that the trial court understood Britly's objection and responded to it, and that EBWS had an opportunity to rectify any deficiencies in proof. On the second day of trial, at the close of EBWS's evidence, Britly objected to submitting evidence of consequential damages to the jury, based on its theory that lost profits for a new business are inherently speculative. The court deferred its ruling until the following morning. At the beginning of the second day of trial, the court ruled that EBWS could not recover for lost profits because it was not a going concern at the time the contract was entered into, and profits were too speculative. The court concluded, however, that EBWS could submit evidence of other business losses, including future payment for unused milk and staff wages. At the close of the evidence, defendant again moved for judgment as a matter of law on consequential damages. See Maynard v. Travelers Ins. Co., 149 Vt. 158, 160, 540 A.2d 1032, 1033 (1987) (requiring moving party to renew objection at the close of the evidence where the trial court defers ruling at the close of opponent's case). The court reiterated its ruling that lost profits were not recoverable, but reasoned that it was up to the jury whether damages for milk and wages were certain and foreseeable. After the court read the jury instructions, Britly again restated its objection. See V.R.C.P. 51(b) (requiring objection to jury instructions to be made before jury retires to consider verdict). ¶ 12. Although Britly's objections were not phrased with exactly the same terminology it uses on appeal, the objections were clear enough to allow both EBWS to cure defects in proof and the court to rule on the objection. See Cooper, 173 Vt. at 11, 783 A.2d at 438-39 (explaining that purpose of requiring an objection on sufficiency of the evidence at the close of the evidence is to allow the nonmoving party an opportunity to cure defects in proof). The trial court understood Britly's objection and responded to it by excluding lost profits, but allowing other expenses. Cf. Roberts v. Chimileski, 2003 VT 10, ¶ 14, 175 Vt. 480, 820 A.2d 995 (mem.) (limiting issues on appeal to those that trial court had an opportunity to evaluate). Under these circumstances, we conclude that Britly adequately preserved the issue for appeal. ¶ 13. Having decided that the issue was properly preserved, we turn to the substance of the dispute. At trial, Huyffer, the CEO of EBWS, testified that during a repairs closure the creamery would be required to purchase milk from adjacent Rock Bottom Farm, even though it could not process this milk. She admitted that such a requirement was self-imposed as there was no written output contract between EBWS and the farm to buy milk. In addition, Huyffer testified that EBWS would pay its employees during the closure even though EBWS has no written contract to pay its employees when they are not working. The trial court allowed these elements of damages to be submitted to the jury, and the jury awarded EBWS consequential damages for unused milk and staff wages. ¶ 14. On appeal, Britly contends that because there is no contractual or legal obligation for EBWS to purchase milk or pay its employees, these are not foreseeable damages. EBWS counters that it is common knowledge that cows continue to produce milk, even if the processing plant is not working, and thus it is foreseeable that this loss would occur. We conclude that these damages are not the foreseeable result of Britly's breach of the construction contract and reverse the award. ¶ 15. In assessing EBWS's claim, we draw upon our past cases as a basis for comparison. Particularly instructive is Norton & Lamphere Constr. Co. v. Blow & Cote, Inc., 123 Vt. 130, 183 A.2d 230 (1962). In Norton, the plaintiff contracted to perform part of a highway construction project for the defendant. Id. at 131-22, 183 A.2d at 232. The defendant, however, never provided the plaintiff with an opportunity to complete the work, and the plaintiff sued for breach of contract. Following a trial, the jury awarded damages to the plaintiff for wages, costs to alter equipment, and financing costs for a loader and crusher. On appeal, the defendant argued that these elements of damages were not foreseeable and were therefore unavailable as a matter of law. We concluded that the first two items were recoverable as consequential damages, but the costs relating to the loader and crusher were not. In affirming the award for wages, we emphasized that the plaintiff had paid workmen in anticipation of the contract, and that the payments were made solely for the purpose of performing the contract. Id. at 136, 183 A.2d at 235. Similarly, the equipment was altered specifically for performance of the contract and was made with the full knowledge of the defendant. Id. at 137, 183 A.2d at 235. ¶ 16. In contrast, we reversed the trial court's inclusion of damages relating to a loader and stone crusher. Although the plaintiff had purchased these items in connection with its work under the contract and had to pay to finance the purchase, it was not a circumstance known to the defendant, nor one which could reasonably be supposed to have been in its contemplation at the time it contracted with the plaintiff. Id. at 138, 183 A.2d at 236. Consequently, costs relating to the crusher and loader were not recoverable. ¶ 17. In comparison, we conclude that EBWS's claims for consequential damages are more like the finance charges, in that it is not reasonable to expect Britly to foresee that its failure to perform under the contract would result in this type of damages. While we are sympathetic to EBWS's contention that the cows continue to produce milk, even when the plant is closed down, this fact alone is not enough to demonstrate that buying and dumping milk is a foreseeable result of Britly's breach of the construction contract. Here, the milk was produced by a separate and distinct entity, Rock Bottom Farm, which sold the milk to EBWS. There was no output contract between EBWS and Rock Bottom Farm at the time the parties entered their construction contract, and a contractor could not have reasonably anticipated this expense. See Berlin Dev. Corp. v. Vt. Structural Steel Corp., 127 Vt. 367, 372, 250 A.2d 189, 192 (1968) (explaining that where premises were leased several months after building contract was entered into, contractor could not have foreseen that faulty construction would result in damage to tenant's interest). ¶ 18. Similarly, EBWS maintained no employment agreements with its employees obligating it to pay wages during periods of closure for repairs, dips in market demand, or for any other reason. Any losses EBWS might suffer in the future because it chooses to pay its employees during a plant closure for repairs would be a voluntary expense and not in Britly's contemplation at the time it entered the construction contract. It is not reasonable to expect Britly to foresee losses incurred as a result of agreements that are informal in nature and carry no legal obligation on EBWS to perform. [P]arties are not presumed to know the condition of each other's affairs nor to take into account contracts with a third party that is not communicated. Id. at 371, 250 A.2d at 192. While it is true that EBWS may have business reasons to pay its employees even without a contractual obligation, for example, to ensure employee loyalty, no evidence was introduced at trial by EBWS to support a sound rationale for such considerations. Under these circumstances, this business decision is beyond the scope of what Britly could have reasonably foreseen as damages for its breach of contract. See Wyatt v. Palmer, 165 Vt. 600, 602-03, 683 A.2d 1353, 1357 (1996) (mem.) (reversing trial court's award of damages for lost opportunity to refinance a mortgage in breach of a construction contract); Albright v. Fish, 138 Vt. 585, 590, 422 A.2d 250, 254 (1980) (rejecting claim for interest on loans and future property taxes on land purchased resulting from breach of a restrictive land covenant). ¶ 19. In addition, the actual costs of the wages and milk are uncertain. Unlike the wages in Norton that were paid in anticipation of the contract, the milk and wages here are future expenses, for which no legal obligation was assumed by EBWS, and which are separate from the terms of the parties' contract. We note that at the time of the construction contract EBWS had not yet begun to operate as a creamery and had no history of buying milk or paying employees. See Berlin Dev. Corp., 127 Vt. at 372, 250 A.2d at 193 (explaining that profits for a new business are uncertain and speculative and not recoverable). Thus, both the cost of the milk and the number and amount of wages of future employees that EBWS might pay in the event of a plant closure for repairs are uncertain. Cf. Norton, 123 Vt. at 136, 183 A.2d at 235 (allowing consequential damages for wages already paid in anticipation of contract).