Court Opinion

ID: 1043583
Source: CourtListenerOpinion
Date Created: 2013-10-08 00:23:56.004883+00
Date Added: 2024-06-11T12:51:40.328196
License: Public Domain

2013 VT 76

Kellogg v. Shushereba (2011-355)
 
2013 VT 76
 
[Filed 06-Sep-2013]
 
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 by email at: JUD.Reporter@state.vt.us or by
mail at: 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.
 
 

2013 VT 76

 

No. 2011-355

 

Thomas Kellogg

Supreme Court

 

 

 

On Appeal from

     v.

Superior Court, Windsor Unit,

 

Civil Division

 

 

Cindy Shushereba

April Term, 2012

 

 

 

 

Katherine
  A. Hayes, J.

 

Frank F. Berk, South Royalton, for
Plaintiff-Appellee/Cross-Appellant.
 
Thomas Hayes and Susan J. Manley of Hayes & Windish,
Woodstock, for Defendant-Appellant.
 
 
PRESENT:  Reiber, C.J., Dooley, Skoglund, Burgess and
Robinson, JJ.
 
 
¶ 1.            
DOOLEY, J.   This case presents the difficult task of
equitably resolving the fallout from a collapsed, unwritten real estate
transaction.  Both parties challenge the monetary award arrived at by the
trial court, sitting in equity.  We conclude that, although correct in
some respects, the trial court’s decision mistakenly treated the parties’
agreement as though it were an agreement for rent.  The decision is
therefore affirmed in part, reversed in part, and remanded for further
proceedings. 
¶ 2.            
Plaintiff Thomas Kellogg owns a house and land on Christian Hill Road in
Bethel.  In roughly 1999, he entered into a rent-to-own agreement with
William Oren—who is not a party to this case—whereby Oren would pay $180,000
over time for the property, at which point ownership would be transferred to
him.  
¶ 3.            
Not long thereafter, beginning for several months in 2000 and then from
2001 onwards, defendant Cindy Shushereba began to occupy the house with Oren in
a romantic relationship.  By August 2004, it was contemplated that
defendant would come to co-own the property.  Plaintiff indicated that he
wished to come to an agreement to sell the property to defendant and Oren.
¶ 4.            
To that end, in August 2004, defendant liquidated her savings and paid
plaintiff the sum of $41,793 as a downpayment on the house.  Plaintiff
again set the sales price at $180,000 and credited Oren and defendant with the
$39,486 that Oren had paid in rent.  These two contributions left roughly
$98,721 to be paid to reach the purchase price.  The parties agreed orally
that the balance would be paid over fifteen years in the amount of $833 per
month based on a six-percent interest rate.  In addition, Oren and
defendant agreed to be responsible for the real estate taxes and the property
insurance.  No written purchase and sale agreement was ever prepared, but
the parties intended that Oren and defendant would receive title immediately
and give a mortgage secured by a promissory note for the installments.  Oren
was concerned about having his name appear on the deed due to outstanding tax
debts, so a warranty deed, mortgage and promissory note were drawn up in
defendant’s name only.  Plaintiff delivered the signed warranty deed to
defendant, but defendant never signed the promissory note or the
mortgage.  Because defendant could not pay the property transfer tax that
would be due on recording, she never recorded the warranty deed. 
Plaintiff testified that, at this time, he considered himself the mortgage
holder only.
¶ 5.            
From 2004 until 2008, Oren made the $833 monthly payments.  He also
paid the property taxes until the final quarter of 2007 when plaintiff resumed
paying the property taxes.[1] 
Ultimately, the relationship between Oren and defendant dissolved,[2] and, in May 2008, Oren moved out after
defendant obtained a relief-from-abuse order against him.
¶ 6.            
A couple of months after Oren moved out, plaintiff and defendant became
sexually involved.  Although the parties dispute whether to characterize
the relationship as “romantic,” both parties testified that they regularly
spent the night together at each other’s residences from 2008 until 2010. 
During this time, plaintiff sought neither rent nor the purchase installments
from defendant, and she made no payments.  There was testimony that
defendant unsuccessfully sought financing to complete the purchase.  At
some point in 2010, plaintiff began seeking rent from defendant, and she did
make between two and four monthly rental payments of $650 at this time.
 Plaintiff paid the property taxes on the property throughout the time
that defendant lived by herself in the house.
¶ 7.            
In 2008, not long after moving out, Oren brought suit against both
plaintiff and defendant, seeking to be declared half-owner of the property
along with defendant, from whom he sought a partition and accounting.  Of
relevance to this case, defendant filed a cross-claim—although erroneously
styled as a counterclaim—in that action, seeking an order requiring plaintiff
to execute a warranty deed in her name and seeking to be declared sole owner of
the property.[3] 
In September 2009, the superior court rejected the claims of both Oren and
defendant.  In regard to defendant’s cross-claim, the court concluded,
“There is no testimony before the court that the parties ever agreed that
[defendant] would be sold this property for $41,793.48, the amount which she
has paid to [plaintiff] to date.”  Plaintiff testified that, even after
this decision and despite the fact that defendant was not making payments, he
still expected that defendant would, at some point, pay the remaining balance
due on the purchase price.  Defendant’s testimony about her desire
to buy the house was confused, but she stated on more than one occasion during
her testimony that she still wished to purchase the house after the conclusion
of the first lawsuit.  
¶ 8.            
While defendant lived in the house, the water source for the residence—a
spring dug many years earlier—had deficiencies that became acute beginning
around 2007.  The spring water was not potable due to a bacterial
contamination producing high coliform levels.  Furthermore, the water
was extremely hard, which led to rust stains and mineral buildup in the
appliances.  Defendant testified that the water would turn her hair and
laundry orange.  Eventually, and over some resistance from plaintiff, defendant
arranged to have a well dug, and she paid for this herself at a cost of $3992,
plus $995 for the installation of a water pump.  During her residency,
defendant also paid $787 for roof repairs and $750 for repairs to a plumbing
leak.
¶ 9.            
By August 2010, whatever relationship existed between plaintiff and
defendant had ended.  Plaintiff served defendant with an eviction notice
alleging defendant owed $25,823 in back rent.  As a result of this notice,
defendant moved out of the property in early September 2010.  In October
2010, plaintiff initiated this action for unpaid rent of $26,656, based on a
“rent” of $833 per month for thirty-two months.  At trial, plaintiff also
sought compensation for the property taxes he paid during her residency and for
the value of certain appliances and personal property that he alleged should
have been left at the property.
¶ 10.        
Defendant counterclaimed, contending that she owned the property or, in
the alternative, that plaintiff had been unjustly enriched by defendant’s
payments to him.  Prior to trial, the court dismissed as res judicata
defendant’s claim that she owned the property, leaving the unjust-enrichment
claim in her counterclaim.  At trial, defendant additionally contended that
she was owed for various capital contributions that she had made and the value
of certain personal property.
¶ 11.        
After a bench trial consisting entirely of testimony from plaintiff and
defendant, the trial court ruled in favor of plaintiff’s claims for back rent
and property taxes, amounting to $40,063.  Of this amount, $23,324 was
awarded for rent, representing $833 per month from May, 2008 through August,
2010.  The remaining $16,739 was awarded for property taxes, covering the
last quarter of 2007 through eight months of 2010.  However, the trial
court ruled in favor of defendant with regard to her unjust enrichment claims
for the return of the $41,793 downpayment on the purchase price and several of
her alleged capital and repair contributions.  The court concluded that
defendant was owed $50,067 on the counterclaim, meaning defendant received a
net judgment of $10,004.
¶ 12.        
Both parties appealed.  Defendant argues that the court erred in
finding an agreement that she would pay the property taxes and in finding that
she owed $833 per month as rent.  Plaintiff argues that defendant’s
unjust-enrichment claim should have been dismissed as res judicata or as
securing an option that was never exercised and that defendant was not entitled
to an offset for her capital contributions because she did not follow the
statutory notice requirements before making the changes.  In summary,
plaintiff wants rent and property taxes for the period defendant occupied the
property, without returning defendant’s lump-sum payment or her capital
contributions.  Defendant wants return of the lump-sum payment and an
amount equal to the capital contributions without paying any more for her
occupancy after Oren left.
¶ 13.        
In reviewing the trial court’s decision, we accept its findings of fact
as long as they are supported by the record.  See V.R.C.P. 52(a)(2); Mann
v. Levin, 2004 VT 100, ¶ 17, 177 Vt. 261, 861 A.2d 1138 (“[W]e will
uphold the court’s factual findings unless, taking the evidence in the light
most favorable to the prevailing party, and excluding the effect of modifying
evidence, there is no reasonable or credible evidence to support them.”). 
We review the trial court’s legal conclusions without deference, Charbonneau
v. Gorczyk, 2003 VT 105, ¶ 2, 176 Vt. 140, 838 A.2d 117, but we give
deference to the trial court’s decision to grant or withhold equitable
remedies, see Weed v. Weed, 2008 VT 121, ¶ 16, 185 Vt. 83, 968 A.2d 310.
¶ 14.        
We begin with defendant’s assertions of error challenging the judgment
amounts for rent and property taxes.  The rental award was based on the
assumption, not explored, that there was a landlord-tenant relationship between
the parties because they had entered into a rent-to-own contract.  The
trial court’s opinion is somewhat ambiguous on this point and is focused more
on the nature of the payment, rather than the nature of the relationship. 
On the one hand, the trial court referred to “their informal and unwritten
landlord-tenant arrangement” and states that “[r]ent . . . was $833
per month.”  On the other hand, the trial court found only that defendant
“had agreed to pay $833 per month under the purchase-and-sale agreement” and
that “[t]he parties did not seriously dispute that $833 per month was a reasonable
amount of rent for the property in question.”  The trial court did not
make the explicit finding that defendant agreed to pay $833 per month as rent.
¶ 15.        
We start by analyzing that assumption.  In the recent decision of Prue
v. Royer, 2013 VT 12, ___ Vt. ___, 67 A.3d 895, we described the difference
between a contract for a deed and a lease purchase contract:
 
A contract for deed is an agreement in which a “prospective purchaser occupies
the premises and makes . . . payments until the point of delivery of the deed
and execution of the mortgage.” Tromblay v. Dacres, 135 Vt. 335, 339,
376 A.2d 753, 756 (1977). Such contracts are bilateral: both parties have
duties to which they have already agreed and cannot choose not to perform
without breaching the contract.
 
 
A second important characteristic of a contract for deed is that the payments
under such an agreement “are applied to the purchase obligation as they
accumulate.” Id. Therefore, under a contract for deed, there is an
“accumulation of an equitable interest in the property that deserves
recognition even without the execution of a formal mortgage instrument.” Id.
at 340, 376 A.2d at 756.
 
 
A lease option to purchase, on the other hand, is “ ‘an agreement by which
one binds himself to sell and convey to another party certain property at a
stipulated price within a designated time, leaving it in the discretion of such
other party to take and pay for the property.’ ” Buchannon v. Billings,
127 Vt. 69, 74, 238 A.2d 638, 641 (1968) (quoting Durfee House Furnishing
Co. v. Great Atl. & Pac. Tea Co., 100 Vt. 204, 207, 136 A. 379, 381
(1927)). It is a unilateral contract: “ ‘The optionor is bound that the
offer shall be kept open and available in accordance with its terms, but its
acceptance rests wholly in the discretion of the optionee, and there is no
obligation upon the latter with regard to it.’ ” Id. (quoting Durfee,
100 Vt. at 207, 136 A. at 381).
 
 
Besides its unilateral nature, the other main way in which a lease option is
distinguished from a contract for deed is that the lease payments are “not
. . . applied on the purchase price.” Tromblay, 135 Vt. at
340, 376 A.2d at 756. Therefore, no equity is accrued. See Harden v. Vt.
Dep’t of Taxes, 134 Vt. 122, 125, 352 A.2d 685, 687 (1976) (citing LaGue
v. State, 128 Vt. 212, 214, 260 A.2d 387, 389 (1969)).
 
Id. ¶¶ 21-24.
 
¶ 16.        
We agree that Oren’s initial oral understanding with plaintiff involved
a lease purchase contract.  But the oral contract made in 2004 between
plaintiff, Oren, and defendant changed the nature of the agreement.  The
2004 agreement was bilateral, and defendant accrued equity as she made
payments.  As we found in Prue, a contract for deed is a form of
equitable mortgage.[4] 
Id. ¶ 29.  Plaintiff understood that his legal relationship
with defendant was that of mortgagee and mortgagor.
¶ 17.        
We conclude that the contract between plaintiff and defendant was a
contract for deed[5];
the trial court erred in concluding it was a landlord-tenant relationship.[6]  Although “[t]he existence of an
agreement is ordinarily a question of fact for the trier,” Town of Rutland
v. City of Rutland, 170 Vt. 87, 90, 743 A.2d 585, 587 (1999), the question
here is about legal interpretation of whatever hazy agreement existed between
the parties, namely, whether that agreement constituted a rental
agreement.  Cf. O’Brien Bros.’ P’ship, LLP v. Plociennik, 2007 VT
105, ¶ 9, 182 Vt. 409, 940 A.2d 692 (“The interpretation of an unambiguous
contract is . . . a question of law, which we review de
novo.”).  We conclude that the understanding described by both parties is
not, as a matter of law, a rental agreement.  To the extent that the trial
court and both parties’ briefs before this Court treat this case as, in part,
governed by landlord-tenant law, we consider that to be in error.  See
generally 2 Wolf, supra, § 16.02[3][b][iv], at 16-26 to 16-27; W.
Shipley, Annotation, Vendee’s Liability for
Use and Occupancy of Premises, Where Vendor Disaffirms an Unenforceable Land
Contract, 49 A.L.R.2d 1169, § 1[b] (1956) (“[I]t seems clear that a vendor in the situation
discussed should not be allowed to recover from the purchaser for the use and
occupation of the land under any theory of implied contract of renting, since
clearly the vendor-vendee status of the parties under the supposed contract is
inconsistent with the implication of a landlord-tenant relationship, at least
until the vendor puts the purchaser on notice that he will not honor the
contract.  So, it has usually been held that the vendor cannot obtain an
affirmative judgment for rent in an independent action against the purchaser
for use and occupation.”).
¶ 18.        
Because the agreement between plaintiff and defendant was a contract for
deed, the amount of $833 per month that defendant had agreed to pay plaintiff
went entirely toward the purchase price plus interest.  When the periodic
payments were complete, defendant would become the owner of the property, free
and clear of any interest of plaintiff, without a further payment.  There
was not an agreement to pay rent[7];
the $833 monthly payment was not part of a rental agreement between plaintiff
and defendant.
¶ 19.        
While the parties intended a contract for deed, this agreement did not
comply with the statute of frauds, as concluded in the earlier
litigation.  See 12 V.S.A. § 181 (requiring that an action on a real
estate contract cannot be brought unless the agreement is in writing and
signed).  This does not make the parties’ agreement irrelevant. 
Unenforceability under the statute of frauds does not render an agreement
void.  See, e.g., Bedell v. Tracy, 65 Vt. 494, 499, 26 A. 1031,
1032 (1893) (“The contract was executory, unwritten, and related to real
estate.  No action of law nor equity could be maintained upon the naked
contract, either to enforce it or to recover damages for nonperformance of its
provisions.  The contract was not unlawful, but its enforcement is
forbidden by statute.”); Shaw v. Shaw, 6 Vt. 69, 75 (1834) (“The statute
does not declare such parol contracts void.  It only provides that no
action shall be maintained thereon . . . .”); see generally
Restatement (Third) of Restitution & Unjust Enrichment § 31(1)(b) (2011); 2
G. Palmer, Law of Restitution § 6.1(b), at 5 (1978) (“Restitution does no
violence to the provisions of the Statute of Frauds or its
purposes . . . .”).  Failure to conform to the statute
of frauds does not prevent recovery based on unjust enrichment, rather than
breach of contract.  Cliche v. Fair, 145 Vt. 258, 262, 487 A.2d
145, 148-49 (1984).
¶ 20.        
First, plaintiff seeks back rent from defendant.  Because this was
not a landlord-tenant relationship, plaintiff’s claims for back rent are
incorrectly framed.  To the extent that the trial court found in
plaintiff’s favor on this claim,[8]
its judgment was erroneous.  Nelson v. Gibson, 90 Vt. 423, 430, 98
A. 1006, 1009 (1916) (explaining that an agreement to pay rent is necessary to
enable one to recover rent); Adams v. Cooty, 60 Vt. 395, 397, 15 A. 150,
151 (1888) (same); Clark v. Clark’s Adm’r, 58 Vt. 527, 529, 3 A. 508,
510 (1886) (“It is well settled that to lay the foundation for a recovery in
assumpsit for use and occupation of real estate, the relation of landlord and
tenant must exist under a contract, expressed or implied.”).  Because no
rental agreement existed, plaintiff cannot obtain relief in the form of back
rent.
¶ 21.        
This is not to say that plaintiff has no avenue for relief. 
Plaintiff is entitled to relief based on defendant’s occupation of the
premises, even though he is not entitled to back rent where no rental agreement
existed.  Cf. Haberman v. Singer, 710 N.Y.S.2d 64, 64 (App. Div.
2000) (mem.) (holding that claim for back rent was properly dismissed where no
rental agreement existed and that landlord’s proper remedy was via a quantum
meruit claim).
¶ 22.        
There are two ways to look at plaintiff’s recovery, and they lead to the
same result.  The first is that plaintiff is entitled to recovery for
unjust enrichment.  “Under the doctrine of unjust enrichment, a party who
receives a benefit must return the [benefit] if retention would be inequitable. 
Unjust enrichment applies if ‘in light of the totality of the circumstances,
equity and good conscience demand’ that the benefitted party return that which
was given.”  Gallipo v. City of Rutland, 2005 VT 83, ¶ 41, 178
Vt. 244, 882 A.2d 1177 (quoting Brookside Mem’ls, Inc. v. Barre City,
167 Vt. 558, 560, 702 A.2d 47, 50 (1997) (mem.)).  Here, defendant
received the benefit of living in plaintiff’s home without paying for that
benefit.  In these circumstances, the retention of the benefit is unjust. 
Defendant must pay back the value of the benefit.  
¶ 23.        
The second takes us back to plaintiff’s complaint.  Although
plaintiff styled his action as one for eviction, it is more properly viewed as
a common law action for ejectment governed by 12 V.S.A. § 4761, with such
“damages” as would be due under 12 V.S.A. § 4765.[9]  We have explained that the
reference to “damages” in that context refers to “mesne profits.”  
Mesne
profits at common law were the pecuniary gains and benefits received by the
disseizor during his unlawful occupancy, and the term is commonly used to
denote the damages recoverable in ejectment.  These may be measured by the
rental value of the premises, or they may be more.  When the rental value,
alone, compensates the plaintiff, it governs the award of damages; when that
value falls short of such compensation, it does not.  Compensation being
the basis of the recovery, the wrongdoer must respond for gains prevented as
well as for losses sustained, so far as the same are sufficiently alleged and
proved.
 
Sabourin
v. Woish, 117 Vt. 94, 99, 85 A.2d 493, 497 (1952); see also Capital
Garage Co. v. Powell, 98 Vt. 303, 306-07, 127 A. 375, 377 (1925) (holding
that statute that is now § 4765 blended ejectment action with action for
trespass for mesne profits).
¶ 24.        
In this context, mesne profits, recoverable in ejectment, and the
monetary recovery available in the case of unjust enrichment are
identical.  See 1 D. Dobbs, Law of Remedies § 5.8(2), at 788 (2d ed.
1993).  On remand, the trial court should treat plaintiff’s complaint—in
particular the prayer “for such other and further relief as the Court deems
just and proper”—as a claim for mesne profits under a theory that defendant has
held the property without right.[10] 
This will involve—but is not necessarily limited to[11]—a factual inquiry into the fair market
value that defendant received by virtue of her occupancy of plaintiff’s
property.[12] 
The amount of $833 per month that was agreed to go toward purchase of the
property does not control this inquiry. 
¶ 25.        
In addition to back rent, plaintiff seeks reimbursement for the property
taxes paid by him during defendant’s residency, alleging that there was an
agreement that defendant would pay the property taxes.[13]  The trial court agreed and ordered
that defendant compensate plaintiff for the property taxes paid during her time
living at the property.  Defendant responds with essentially two
arguments.  First, defendant contends that, regardless of what agreement
existed with respect to property taxes between plaintiff and Oren, no such agreement
existed between plaintiff and defendant.[14]  Second, defendant argues that,
even if there had been such an understanding, it would be unenforceable under
the Statute of Frauds and was voided as a nullity by the decision in the
previous lawsuit.
¶ 26.        
As with earlier issues, the trial court decision and the arguments of
the parties are based on the premise that the relationship between the parties
is one of landlord and tenant and the item in controversy is a component of
rent.  Having found that the monthly payments were not rent, we find no
ground to distinguish the payment of property taxes.  Payment of property
taxes is part of the purchaser’s obligation to obtain title to the property
free and clear of the interest of the seller.
¶ 27.        
Viewed in the proper perspective, the property taxes are an unsegregated
component of mesne profits to which plaintiff is entitled, as we held
above.  The “rental value” of property includes expenses as well as
whatever return on investment the lawful owner can obtain in the market. 
It would be error for the court to award property taxes in addition to mesne
profits.
¶ 28.        
We turn next to defendant’s counterclaim for unjust enrichment seeking
return of her downpayment.  Plaintiff argues that defendant’s counterclaim
should have been precluded because defendant should have litigated this issue
in the earlier lawsuit.[15] 
See Iannarone v. Limoggio, 2011 VT 91, ¶¶ 14-15, 190 Vt. 272, 30
A.3d 655 (explaining that res judicata covers not only claims that were
litigated, but also claims that should have been previously litigated).
¶ 29.        
Although styled as a counterclaim, defendant’s action in the previous
lawsuit was a cross-claim because plaintiff and defendant were
codefendants.  Cross-claims are permissive.  See V.R.C.P.
13(g).  As such, defendant was not required to raise her potential claims
against plaintiff in the previous lawsuit.  See 6 C. Wright et al., Federal
Practice and Procedure, § 1431, at 275-76 (3d ed. 2010) (explaining that
cross-claims are always permissive and that a party who decides not to bring
his claim will not be barred by res judicata, waiver, or estoppel from
asserting it in a later action).
¶ 30.        
Defendant did, however, assert claims against plaintiff in the first
lawsuit—she sought to be declared owner of the property and she sought an order
that a deed be conveyed to her.[16] 
In making this cross-claim, defendant even noted that plaintiff would be
“unjustly enriched” if she were not declared owner.  Once defendant
raised her cross-claim—which she was not required to do—she essentially became
a second plaintiff in the original litigation.  To the extent that
defendant’s unjust-enrichment claim was available to her at that time, she may
be precluded from raising it here, as she would be if she had been plaintiff
rather than codefendant in the original action.  See Ingersoll-Rand Co.
v. Valero Energy Corp., 997 S.W.2d 203, 209 (Tex. 1999) (“In the earlier
. . . suit [party 1] and [party 2] were co-defendants, and [party 1]
chose to file a permissive cross-claim against [party 2] based on indemnification language in
their contract.  By taking this action [party 1] put itself in the same
position, for purposes of res judicata,
as a plaintiff filing a cause of action for damages. . . . As
the plaintiff for res judicata purposes, [party 1] was subject to the
general rule of res judicata that any cause of action that arises out of
the same subject matter should, if practicable, be litigated in the same
lawsuit.”); see also Trans Helicoptere Serv. v. Jet Support Servs., Inc.,
No. 03 C 0498, 2004 WL 2921856, at *7 (N.D. Ill. Dec. 14, 2004) (“While the
initial filing of a crossclaim in an action is permissive, once the cross claim
is filed, it is a claim like any other claim in an action.”).
¶ 31.        
We conclude, however, that the trial court was correct in allowing
defendant’s unjust enrichment claim.  In the earlier action, defendant was
not attempting to have the court determine that the agreement had been
terminated, and the court did not so find—it found merely that the agreement
did not provide that defendant should get a warranty deed after having paid
only $41,493.  Both defendant and plaintiff testified at trial for this
case that even after the earlier decision, they intended to continue with the
sale.  Unjust enrichment is present only if: “(1) a benefit was conferred
on defendant; (2) defendant accepted the benefit; and (3) defendant retained
the benefit under such circumstances that it would be inequitable for defendant
not to compensate plaintiff for its value.”  Mad River Corp., 151
Vt. at 412, 561 A.2d at 93.  Thus, defendant’s unjust-enrichment claim was
not yet ripe at the time of the first decision, for she was still living on the
land, and it was not yet clear either if defendant was going to follow through
with the agreement to purchase the land or if plaintiff was going to take any
action to eject her from the land.  “If a second claim has not ripened
when the first claim is filed, res judicata does not bar the second
claim.”  Schenden v. Addison Twp., No. 244389, 245805, 2004 WL
1908231, at *4 (Mich. Ct. App. Aug. 26, 2004) (per curiam).  The claim
came into existence only after the resolution of the first case, when defendant
continued to not make the monthly payments and plaintiff brought his eviction
action.  Consequently, defendant is not barred from bringing it now.
¶ 32.        
Although we find that the trial court was correct to reach the unjust
enrichment claim, we disagree with its conclusion.  The existence of
unjust enrichment, given a certain set of facts, is a question of law that we
review de novo.  See Morris Pumps v. Centerline Piping, Inc., 729
N.W.2d 898, 903 (Mich. Ct. App. 2006) (noting that “[w]hether a specific party
has been unjustly enriched is generally a question of fact,” but “whether a
claim for unjust enrichment can be maintained is a question of law, which we
review de novo” (citations omitted)).  Turning to the law, we conclude
that this case is squarely controlled by Cobb v. Hall, 29 Vt. 510
(1857).  In that case, the question confronting this Court was the
following: “[W]hether the party paying part of the purchase money of an estate,
when the contract is within the statute of frauds, may, at his election, and
while the other party is ready and willing to perform on his part, recover it
back.” Id. at 513.  The answer in that case was a resounding “no”:
“[S]o long as the party agreeing to convey is ready and willing to perform, he
is not liable to any action, either at law or in equity, for anything done
under the contract.”  Id.; see also Bedell, 65 Vt. at 499,
26 A. at 1032 (“[I]f the vendor [in a contract for the sale of land
unenforceable under the Statute of Frauds] is ready to perform, no recovery of
the price, or of part of the price paid, can be had.”); Shaw, 6 Vt. at
76 (“[The vendee in a contract for the sale of land unenforceable under the
Statute of Frauds] cannot repudiate the contract and recover back what she has
paid thereon, the [vendor] having never refused to complete the same.”).
¶ 33.        
This is a nearly universal rule.  
“ ‘According
to the great weight of authorities, . . . the vendee of
real property under an oral contract which is within the statute of frauds may
not recover partial payment of the purchase price which he has paid pursuant to
the agreement, in the absence of fraud, while the vendor is ready, able and
willing to fulfill the terms and conditions of the contract.’ ”
 
10
R. Lord, Williston on Contracts § 27:31 (4th ed.) (quoting Thompson v.
Schurman, 150 P.2d 509, 512 (Cal. Ct. App. 1944)); see generally R. Fox,
Annotation, Vendor’s Willingness and Ability to Perform Contract Which Does
Not Satisfy Statute of Frauds as Precluding Purchaser’s Recovery Back of
Payments Made Thereon, 169 A.L.R. 187 (1947).  This nearly universal
rule is the Statute-of-Frauds-context cousin of a rule applicable to
enforceable contracts[17]
whereby, in the words of Professor Corbin:
Neither
by a repudiation nor by mere failure to pay other instalments, when due, can
the vendee terminate the vendor’s right to payment of the full price—his right
to specific performance, his right as holder of a lien for the purchase
price.  As long as the vendor continues to assert these rights and to
remain ready and willing to make conveyance as agreed, the defaulting vendee
has no right of restitution; he cannot recover back money that he has paid if
it is money that the vendor could still compel him to pay if as yet unpaid. 
 
A.
Corbin, The Right of a Defaulting Vendee to the Restitution of Instalments
Paid, 40 Yale L.J. 1013, 1018 (1931).
¶ 34.        
The question in this case, then, should have been whether plaintiff was
to be considered ready and willing to make the conveyance.  Of course, it
will be noted that this lawsuit began when plaintiff filed an eviction action
to remove defendant from his land—an action incompatible, some might say, with
being “ready and willing” to perform under the (unenforceable) contract. 
To so simply interpret his actions, however, would be to make an untenable rule
that a vendor may never take any actions to remove a defaulting vendee after that
party’s default.  Courts have managed to avoid such a rule by finding
that, even when a vendor has taken actions to remove defaulting vendees from
the land or even more significant actions such as mortgaging or selling the
land in question to another, “restitution may still be denied on the ground
that the [vendor] had already remained willing and able to perform for a
sufficient period of time.”  L. Jeanblanc, Restitution Under the
Statute of Frauds: What Constitutes an Unjust Retention, 48 Mich. L. Rev.
923, 956 (1950); see Kenniston v. Blakie, 121 Mass. 552, 554 (1877)
(finding that, under oral contract for deed where vendee was in possession,
when vendee refused to continue with his payments and vendor ordered him off
the land, vendor’s actions did not mean that he was not prepared to follow
through with agreement and his retention of vendee’s downpayment was therefore
not unjust); Durham Consol. Land & Improvement Co. v. Guthrie, 21
S.E. 952, 954 (N.C. 1895) (holding that vendor’s disposal of land more than
twelve months after vendee’s default on a land contract within the statute of
frauds did not mean that vendor was not willing and able to convey, because “it
would have been unreasonable to require [vendors] to hold their property in an
unproductive state until it suited the pleasure of the [vendee] to make the
first move”).
¶ 35.        
In this case, after making the downpayment, defendant made no further
payments to plaintiff, and despite testimony at trial that she still intended
to continue with the purchase of the property after the resolution of the first
suit, and that plaintiff was willing and able to convey, defendant took no
action towards that goal.  Plaintiff was willing to convey, at least for a
certain period of time after the first case was concluded.  If defendant
was not going to cure her default, he had to be free at some point to take
action to remove defendant from the land without subjecting himself to a
restitution claim.  The first case was resolved in September 2009, and
plaintiff served defendant with the eviction notice nearly a year later, in
August 2010.  Plaintiff styled it as an eviction action, but, as explained
above, it is most appropriately viewed as an ejectment action. 
Instituting that action does not, on its own, determine whether plaintiff was
willing and able to convey.
¶ 36.        
Apart from testimony and evidence about the eviction/ejectment action,
and despite the trial court’s announcement that one of the two focuses at trial
was on defendant’s unjust enrichment claims, no evidence was presented at trial
as to whether plaintiff was ready and willing to convey the property, even
after the default.  Such evidence would likely have had to do with whether
plaintiff had remained ready and willing to convey the property for a
sufficient period of time before commencing his eviction/ejectment
action.  This leads us to the question of whose burden of proof it is to
show that a vendor is unwilling to perform.  The burden of proof in unjust
enrichment claims lies with the party making the claim.  See Mad River
Corp., 151 Vt. at 412-13, 561 A.2d at 93; see also Trenwick Am.
Reinsurance Corp. v. W.R. Berkley Corp., 54 A.3d 209, 218 (Conn. App. Ct.
2012) (“It is the plaintiff's burden to prove the elements of a claim of unjust
enrichment . . . .”).  Therefore, since the
unwillingness of the vendor to convey is a necessary element of the unjust
enrichment claim, the burden to prove that fact must lie with the vendee. 
See Kofmehl v. Baseline Lake, LLC, 275 P.3d 328, 337 (Wash. Ct. App.
2012) (stating that because “[e]stablishing that [the vendor] was not ready,
willing, and able to perform as agreed is a necessary element of [the vendee’s
unjust enrichment] claim,” the vendee must bear that burden), aff’d, ___
P.3d ___, No. 87395-0, 2013 WL 3089600 (Wash. June 20, 2013).
¶ 37.        
Given the absence of evidence regarding plaintiff’s ability and
willingness to convey the property after defendant’s default, the trial court erred
in its legal conclusion that plaintiff had been unjustly enriched.  We
must reverse on this issue.
¶ 38.        
Before moving on, however, we note that the rule established in Cobb
v. Hall and followed above—that a purchaser who defaults on a contract for
deed unenforceable under the Statute of Frauds cannot recover back payments on
the purchase price if the vendor is willing and able to convey—may not be
justified if the defaulting purchaser would be forced to forfeit an excessively
high percentage of the purchase price.  In such a situation, the
enrichment of the vendor might be so great that we would find it to be unjust,
notwithstanding the vendor’s continued willingness to proceed with the oral
contract.  Other states have analyzed this conundrum as it arises both in
the unenforceable-contract context and in the enforceable-contract context
(where the installment contract often includes a forfeiture clause), because in
most states a defaulting purchaser on an enforceable contract for deed cannot force
foreclosure as the purchaser can in Vermont, and may only pursue restitution
through an unjust-enrichment claim.  See Prue, 2013 VT 12,
¶ 30; 2 Palmer, supra, § 6.6, at 47.  The question is the
same in all of these circumstances—because the vendor has not defaulted, the
well-established rule is that the defaulting vendee may not recover, but the
percentage of the purchase price to be forfeited may be simply too high to
accept.  Professor Palmer described this problem in the following way in
the enforceable-contract context:
The
most troublesome problem arises in this setting: the vendor has received substantial
payments on the price, he is in possession of the land to which he also has
title, and he is content to remain passive by retaining both the land and the
purchaser’s payments.  He has no desire, that is, to obtain specific
performance.  Will he be permitted to defeat the purchaser’s restitution
action on the ground that restitution will destroy his right to specific
performance, a right which he has no intention of asserting?  There is a
need to develop some technique by means of which the vendor’s assertion of a
right to specific performance cannot be used merely for the purpose of
retaining an unjust benefit.
 
1
Palmer, supra, § 5.7, at 609-10 (emphasis added).  He went on to
describe a Maryland case, Quillen v. Kelley, 140 A.2d 517 (Md. 1957), to
demonstrate that the principle of not allowing restitution when the vendor is
ready and willing to convey cannot be blindly applied without looking at the
amount of the purchase price already paid:
[T]he
purchaser defaulted after paying $22,500 on a price of $245,000, and the
vendor, who was in possession, took no steps to terminate the purchaser’s
rights on the contract. . . .  [R]estitution was denied
partly for the reason that there is no right to restitution so long as the
vendor is entitled to specific performance. . . .  The
reasoning would seem to be equally applicable had the purchaser paid $100,000
instead of $22,500, yet the demands of justice do not permit the retention of a
clearly unjust enrichment in order to protect a theoretical right of the vendor
which he asserts merely for the purpose of retaining the enrichment.
 
2
Palmer, supra, § 5.7, at 610 (quoting Quillen, 140 A.2d at 521).
¶ 39.        
A number of courts in other jurisdictions have dealt with this
problem—in either the unenforceable-contract context or enforceable-contract
context (with or without a forfeiture clause)—by making the percentage of the
forfeiture a factor in analyzing whether unjust enrichment exists.  See Hook
v. Bomar, 320 F.2d 536, 541 (5th Cir. 1963) (applying Florida law and
noting the importance of the “ratio . . . between down
payment and purchase price” in determining unjust enrichment in case of
defaulting vendee); J. Pearson, Modern Status of Defaulting Vendee’s Right
to Recover Contractual Payments Withheld by Vendor as Forfeited, 4
A.L.R.4th 993, § 2 (1981) (“In the cases involving a forfeiture provision
but no resale of the property after the vendee’s default, an important factor
in determining the right of the vendee to a refund is the percentage of the
purchase price that had been paid at the time of the
default. . . .  [T]here has been an increased incidence of
the vendee’s recovering at least part of his payments as the percentage that
such payments constitute of the purchase price increases.”).
¶ 40.        
We will also take the percentage of the purchase price paid into
consideration in determining whether a vendor has been unjustly enriched. 
In this case, that consideration does not alter the outcome.  The
percentage of the payment to be forfeited here was 23.22%[18]—high, but not high enough to find that
the enrichment was clearly unjust, given that we approved a similar forfeiture
in Cobb, where the payment forfeited was $100 of a $450 purchase price
(22.22%).  29 Vt. at 510.
¶ 41.        
Lastly, defendant sought to recover for various repairs and improvements
to the property, also on a theory of unjust enrichment.  The trial court
found in defendant’s favor for some, but not all, of the claimed repairs and
improvements.  The award was for improvements to the roof, plumbing, well,
and water pump, for a total of $6,324.  On appeal, plaintiff contends that
the trial court’s finding in defendant’s favor was erroneous because defendant
failed to provide plaintiff with statutory notice before making the repairs and
improvements.  The statute upon which plaintiff relies requires that a tenant
give a landlord notice before making repairs so that the landlord has an
opportunity to cure the defects.  See 9 V.S.A. § 4458.  This was
not a landlord-tenant relationship, so the statute cited does not apply. 
The failure of defendant to give notice under the statute is not a bar to
recovery based on unjust enrichment.  Accordingly, we must uphold the
trial court’s judgment for the improvements against the only challenge
plaintiff made.[19]
¶ 42.        
In leaving the award in place, we recognize there is an interaction
between plaintiff’s recovery of mesne profits and defendant’s unjust enrichment
recovery.  As noted above, the measure of mesne profits is the value of
the occupancy of the premises.  The trial court awarded defendant recovery
expenses “necessary to the continued habitability of the home.”  The
main items in the award were for the cost of a new well and pump to replace a
well that did not produce potable water and caused rust stains and mineral
buildup in appliances.  Other expenditures were for roof and plumbing
repairs.
¶ 43.        
The interrelationship between mesne profits and the cost of improvements
made by the occupant is governed by 12 V.S.A. § 4814, which provides that the
amount of mesne profits awarded must be “just and equitable, in view of the
improvements made by the” occupant.  We applied this statute in Birkenhead,
143 Vt. 167, 465 A.2d 244, which is relevant here.  In Birkenhead,
a landlord-tenant case, we allowed the tenant to offset the cost of
improvements[20]
against back rent owed to the landlord, relying on § 4814.  Id.
at 174, 465 A.2d at 247.  We held that the jury-awarded damages could
include both the cost of the improvements and an offset to the rent before the
improvements were made to reflect the diminished value of the property.  Id. 
Section 4814 also applies to cases that do not involve a landlord-tenant
relationship.[21] 
Applying § 4814 to this case, in light of Birkenhead, the trial
court can offset the cost of the improvements against the mesne profits owed to
plaintiff, as well as reduce the monthly mesne profits for the periods when the
repairs or improvements were needed, but not made.  Here, the award for
the improvements has already been made so it would be a double recovery to
allow them through an offset to mesne profits.  On remand, the court can
consider the need for the improvements, before they were made, as bearing on
the mesne profit award for any given month.
Affirmed in part,
reversed in part, and remanded for further proceedings.  
 
 

 

 

FOR THE COURT:

 

 

 

 

 

 

 

 

 

 

 

Associate
  Justice
 
 

¶ 44.        
ROBINSON, J., concurring in part, dissenting in part.   The
majority concludes that in sorting out the equitable claims between the
parties, the trial court should require defendant to reimburse plaintiff for
the value of defendant’s occupancy of the premises for approximately six years,
and should credit defendant for some expenditures she made to keep the house
habitable and for a brief period of rental payments, but should not, as a
matter of law, consider the substantial payments defendant and her then-housemate
Oren paid plaintiff in connection with the purchase of the property—including
defendant’s $41,793 payment to plaintiff.  In essence, the majority
concludes that in cooking this equitable stew, the trial court should leave out
one of the most important ingredients.  From an equitable perspective, the
resulting concoction just doesn’t taste right.  
¶ 45.        
The majority reaches three subsidiary conclusions on the path to its ultimate
holding on this issue.  First, it concludes that the underlying
transaction between the parties was actually an unwritten contract for a
deed.  Second, it concludes that the purchaser in such an unwritten
contract for a deed generally is not entitled to a return of payments made
toward the purchase if the purchaser defaults while the seller remains ready
and willing to perform.  Third, it concludes that the dollars at stake in
this case are not sufficiently high relative to the overall purchase price to
take this case out of that general rule.  I disagree with each of these
conclusions, and respectfully dissent from the majority’s holding that
defendant is not entitled to consideration in the equitable calculus for the
downpayment she made to plaintiff.
¶ 46.        
I should say at the outset that I do agree with the majority that the
relationship between the parties cannot be properly characterized as one
between landlord and tenant.  But I believe the majority’s own attempt to
squarely fit the transactions before us into a recognized legal box is also
unavailing.  
¶ 47.        
Consistent with the trial court’s findings, and the evidence supporting
them, the majority describes the dealings among the parties (including
non-party Oren) as follows:
[T]he
parties intended that Oren and defendant would receive title immediately and
give a mortgage secured by a promissory note for the installments.  Oren
was concerned about having his name appear on the deed due to outstanding tax
debts, so a warranty deed, mortgage and promissory note were drawn up in
defendant’s name only.  Plaintiff delivered the signed warranty deed to
defendant, but defendant never signed the promissory note or the
mortgage.  Because defendant could not pay the property transfer tax that
would be due on recording, [defendant] never recorded the warranty deed. 
Plaintiff testified that, at this time, he considered himself the mortgage
holder only. 
 
Ante, ¶ 4.  
¶ 48.        
The above does not squarely describe a contract to make a deed.  A
contract to make a deed contemplates continued ownership of property by the
seller, occupancy by the buyer, and a future transfer of the property by
deed.  See Tromblay v. Dacres, 135 Vt. 335, 339, 376 A.2d 753, 756
(1997) (“These agreements are entered into, in many instances, where the
prospective purchaser cannot raise the difference between the price of the
property and an acceptable mortgageable balance.  The prospective
purchaser occupies the premises and makes the payments until the point of delivery
of the deed and execution of the mortgage is reached.”); Prue v. Royer,
2013 VT 12, ¶ 21, ___ Vt. ___, 67 A.3d 895.  In this case, the
parties did not contemplate some future transfer.  Defendant paid a
substantial sum of money—$41,793—as a downpayment, plaintiff delivered a deed,
and Oren, who at that time was aligned with defendant in connection with the
purchase of the property, began paying the monthly mortgage payments toward the
yet-to-be-executed mortgage.  The amount of the purchase-money mortgage
was agreed-upon and satisfactory to the parties.  Plaintiff understood
himself to be a mortgage-holder only, and received his $833 monthly payments in
accordance with the unexecuted mortgage.  Oren, with whom defendant was
living in the house at the time, assumed the property tax and insurance
payments—actions consistent with the understanding of the transaction as an
actual conveyance of the property subject to a purchase-money mortgage, albeit
an unexecuted mortgage likely to run up against significant Statute-of-Frauds
issues.
¶ 49.        
Our ability to categorize these transactions is further complicated by
the parties’ shifting interpersonal relationships and the changes in their
financial interactions that accompanied those.  Within roughly a six-month
period, Oren—an intended, but unnamed purchaser along with defendant—moved out,
defendant and plaintiff became engaged in a relationship of sorts, plaintiff
began paying the property taxes, and defendant, for the most part, stopped
paying the agreed-upon mortgage payments.  The trial court’s findings do
not offer much clue as to whether the changes in the parties’ conduct with
respect to the finances surrounding the property reflected a superseding
agreement of some sort, a change in the parties’ individual or collective
understandings of their respective obligations and rights, a breach of the
existing agreement, an informal relaxation of plaintiff’s expectations and
defendant’s obligations incident to their intimate relationship, or even outright
forgiveness of defendant’s obligations during the period of their relationship.[22]  
¶ 50.        
In the face of the above record, I cannot conclude as a matter of law
that the arrangement between the parties amounted to a contract to make a
deed.  I fully acknowledge that I would be hard pressed to find a more
fitting legal label for the above circumstances.  Colloquially, I would
simply call them a mess.  Rather than trying to fit them into a specific
category, and then applying the specific equitable framework applicable to that
category, I would apply general equitable principles to the analysis of
defendant’s unjust-enrichment claim.  
¶ 51.        
Plaintiff’s claim against defendant, as construed by the majority, is an
equitable claim for payment.  In evaluating plaintiff’s unjust enrichment
claim, we must determine “whether, in light of the totality of the
circumstances, it is against equity and good conscience to allow defendant to
retain what is sought to be recovered.”  Savage v. Walker, 2009 VT
8, ¶ 8, 185 Vt. 603, 969 A.2d 121 (mem.) (quotation omitted).  The
majority acknowledges that defendant got the benefit of living on plaintiff’s
property without paying rent for the benefit, and that under the circumstances
it would be unjust to allow defendant to keep that benefit.  Ante,
¶ 22 (citing Gallipo v. City of Rutland, 2005 VT 83, ¶ 41, 178
Vt. 244, 882 A.2d 1177).  But that’s only part of the story. 
Defendant was living on plaintiff’s property in connection with some sort of
agreement that ultimately fell through.  In connection with that
agreement, she personally paid plaintiff $41,793.  That payment was part
and parcel of the same transaction or set of transactions that gave defendant
her occupancy of the home.  The equitable balancing here requires
consideration of the totality of the circumstances surrounding defendant’s
occupancy of the property and the associated agreements and
understandings.  See Savage, 2009 VT 8, ¶ 8 (inquiry requires
“ ‘a realistic determination based on a broad view of the human setting
involved,’ rather than ‘a limited inquiry confined to an isolated
transaction.’ ”) (citation omitted); see also Johnson v. Harwood,
2008 VT 4, ¶ 15, 183 Vt. 157, 945 A.2d 875 (unjust enrichment inquiry
requires consideration of “totality of the circumstances”) (quotation omitted);
Gallipo, 2005 VT 83, ¶ 41 (same).  In this case, evaluation of
the totality of the circumstances includes not only consideration of
defendant’s possession of the property free of charge for a period of time, but
also recognition of the sizeable sum of cash defendant paid to plaintiff in
connection with their deal-gone-awry.  Cf. Lalime v. Desbiens, 115
Vt. 165, 55 A.2d 121 (1947) (affirming trial court’s ruling in action in assumpsit
offsetting defendant’s obligation to plaintiff and plaintiff’s obligation to
defendant).  
¶ 52.        
Even assuming that the parties here had a contract to make a deed, I
could not join the majority’s opinion.  The majority concludes that when a
buyer enters into a contract for deed that is unenforceable due to the Statute
of Frauds, that buyer acquires no equitable interest in the property by virtue
of payments made toward the purchase as long as the seller remains willing and
able to complete the sale.  In so holding, the majority relies primarily
on decisions of this Court from 1834, 1857, 1893, as well as the “nearly
universal rule” reflected in the decisions of other courts.  However, the
majority’s holding creates an illogical divergence between our case law
relating to the rights of a defaulting purchaser in an executed contract for a
deed and the rights of a defaulting purchaser in an oral, unexecuted contract
for a deed.  
¶ 53.        
It is no surprise that the prevailing majority rule denies a defaulting
purchaser any equitable claim for unjust enrichment for return of purchase
monies paid in the context of an unwritten contract for a deed; the majority
rule in the context of legally enforceable contracts for a deed likewise
denies such relief to a defaulting purchaser.  However, in cases in which
the purchasing party to a contract for a deed defaults, this Court has long
departed from the majority rule that would deny that party any equitable
interest in the subject property, no matter how much the party had paid toward
the ultimate purchase price.  See Prue, 2013 VT 12, ¶ 30 (“Although
Vermont has consistently treated a contract for deed as an equitable mortgage,
it has been one of only a small minority of states to do so.”).  In Prue,
we reiterated that the defaulting purchaser in a contract for a deed builds an
equitable interest in the property through regular payments pursuant to the
contract, and is entitled to foreclose on that interest in the event of
default—even the purchaser’s own default.  Id. ¶¶ 30, 51, 68. 
The rationale for this approach is based on the functional similarity between a
transaction in which the seller holds the title and the purchaser pays down the
purchase price, and a transaction in which the seller conveys title to the
purchaser and holds a mortgage.  Id. ¶ 29 (citing Town of Weston
v. Town of Landgrove, 53 Vt. 375, 378 (1881)).  The equitable
interest of the purchaser arises from the act of making payments on the
contract for a deed, and does not depend upon the legal enforceability
of that contract.  See Tromblay, 135 Vt. at 339, 376 A.2d at 756
(“Since the payments [pursuant to a contract for a deed] are applied to the
purchase obligation as they accumulate, an equity, though perhaps small, comes
into being.  It is this interest that is referred to as the equitable
mortgage interest that requires foreclosure.”). 
¶ 54.        
Given that Vermont has departed from the majority rule in connection
with executed contracts for a deed, I see no rationale for adhering to the
majority rule when a contract for a deed is unenforceable at law, and the
majority does not provide one.  As a leading commentator on the law of
restitution has observed with respect to the availability of restitution claims
for defaulting purchasers in the context of written and unwritten
contracts:  “[T]he two situations should be governed by a single rule, at
least as to restitution of payments on the price.”  2 G. Palmer, The Law
of Restitution § 6.6, at 47-48 (1978).  Although Palmer advocates a rule
that denies restitution to defaulting purchasers in both contexts, he
acknowledges that logic supports consistent treatment of defaulting purchasers
in these parallel scenarios.  The majority provides no rationale for
forging disparate paths in the signed-contract and unsigned-contract
situations.  The nineteenth-century Vermont cases involving unenforceable
contracts for a deed relied upon by the majority are outdated and unhelpful in
the context of Vermont’s modern divergence from the national pack on the
parallel subject of enforceable contracts for a deed.[23]  And, in contrast to Vermont’s
legal regime, the majority’s holding in equity gives seller relief akin to
strict foreclosure, and buyer no avenue to mitigate the harsh effects of strict
foreclosure.  See Prue, 2013 VT 12, ¶ 57 (foreclosure statute
provides opportunities to avoid strict foreclosure).  I would realign our
case law in law and equity concerning contracts for a deed by recognizing the
purchaser’s equitable interest arising from purchase monies paid whether or not
the underlying contract was legally enforceable.
¶ 55.        
Lastly, the majority acknowledges an exception to its general rule when
the payments made toward the purchase price, on a percentage basis, are so high
as to render the enrichment to seller unjust.  Ante, ¶ 40. 
The majority applies this test by comparing the initial purchase money paid by
defendant to the stated purchase price of the property and concluding that the
ratio—23.22% of the purchase price—was not so high as to render plaintiff’s
enrichment unjust.  
¶ 56.        
I disagree.  Even without consideration of additional factors,
$41,793 is a lot of money to most Vermonters, and represents nearly a quarter
of the purchase price of the property.  The majority’s comparison of the
applicable percentage to that in Cobb does not persuade me otherwise, as
there is no indication in Cobb that the Court considered the argument
here or affirmatively concluded that the sums paid (and lost) by the purchaser
did not represent an unjustly high percentage of the purchase price. 
Moreover, in this case, a third factor comes into play: very significant
payments toward the purchase price by a third party to this litigation. 
Although the agreed-upon purchase price in this case was identified as
$180,000, at the time of the 2004 transaction, plaintiff credited the
purchasers (defendant and Oren) with Oren’s prior rental payments—a total of
$39,486.  Net of this credit, the actual sum due for the purchase
of the property at the time of the 2004 transaction, was $140,514.  Toward
this sum, defendant paid $41,793, or around 30%.  The balance due, to be
secured by the unexecuted mortgage, was $98,720.  From the summer of 2004
through around the end of 2007, Oren, who was aligned with defendant at that
time, made monthly payments on the unexecuted promissory note.  The trial
court did not make findings as to the total payments made by Oren, but the 2009
judgment in the last round of litigation reflects that he made about 40
payments of $833, for a total of $33,320.  It appears that the outstanding
debt due to plaintiff on the property was closer to $65,401—about a third of
the original purchase price.  From the perspective of plaintiff’s
windfall—he has received approximately two-thirds of the value of the property
that the courts have now allowed him to keep without paying anyone back—the
unjustness of the overall enrichment seems clear.  I do not mean to
suggest that defendant is entitled to be repaid for Oren’s contributions, but
the fact of these contributions, undertaken at a time when defendant and Oren
were living together in the house and aligned vis-à-vis plaintiff, is a
relevant consideration in the calculus concerning the unjustness of plaintiff’s
enrichment.
¶ 57.        
I concur in the majority’s unjust-enrichment analysis concerning
defendant’s equitable obligation to plaintiff in connection with her occupancy
of the property.  Defendant was not entitled to live rent-free for a
period of years while plaintiff waited for her to finish paying him for the
purchase of the property, and the cost of the property taxes on the property is
one of the factors built into the determination of a reasonable monthly
rent.  And I concur in the majority’s affirmance of the trial court’s
recognition of a credit in defendant’s favor for certain improvements. 
But to the extent the Court treats defendant’s $41,793 payment to plaintiff as
a nonrecoverable investment, not to be considered in the overall equitable
balance, I respectfully dissent.
¶ 58.        
I am authorized to state that Justice Burgess joins this concurrence and
dissent.
 

 

 

Associate Justice

 

[1]  There
is no indication what happened with respect to the payment of insurance costs.

[2]
 Although the romantic relationship apparently ended some time before,
Oren and defendant both continued to occupy the house until 2008.
 

[3]
 We have no explanation as to why defendant sought a deed when, according
to the findings in both this case and the earlier case, she already possessed
such a deed.

[4] 
It is, of course, an equitable mortgage because the mortgagee and mortgagor
have not taken the steps to turn the arrangement into a mortgage recognized at
law—creating deeds to be exchanged and filing them in the land records. 
The fact that the mortgagee in this case took one of the steps—the delivery of
a deed to the mortgagor—does not change the legal interests of the
parties.  Plaintiff as mortgagee had an equitable mortgage based on a
contract for a deed.
 

[5]
 The dissent rejects this conclusion as well as the trial court’s
conclusion that a landlord-tenant relationship was created, labeling the
relationship colloquially a “mess.”  Post ¶ 50.  Although
we acknowledge the difficulty of describing the relationship in definitive
legal terms, we differ on whether we can avoid the question and apply general
equitable principles.  It is our duty as the highest court of Vermont,
creating binding precedent, to fit the messy happenings of informal agreements
into predictable rules.
 

[6]
 We recognize that a landlord-tenant relationship may have been created in
2010 when plaintiff demanded rent from defendant and defendant paid some rent,
albeit not in the amount of $833 per month.  A landlord-tenant
relationship can exist with a contract for deed, if there is such an
agreement.  See 2 M. Wolf, Powell on Real Property § 16.02[3][b][iv], at
16-26 to 16-27 (2012).  The trial court did not find that a
landlord-tenant relationship was created in this way in 2010, and it held
defendant liable for $833 per month, less the amount actually paid, for the
entire period until defendant left.  The possible existence of a
short-term landlord-tenant relationship at the end of defendant’s occupancy
does not change our analysis.

[7] 
Plaintiff alleges that defendant agreed to pay the property taxes on the home,
a claim which the trial court accepted but which defendant denies on
appeal.  As discussed further below, see infra ¶ 24, this
could conceivably be considered a rental payment.  We doubt that either
party considered the payment of the property taxes to be the agreed-upon
rent.  But more telling is the fact that the remainder of the agreement
cannot plausibly be read as merely an option contract.  

[8] 
We note that the trial court’s citation to Center v. Mad River Corp.,
151 Vt. 408, 412, 561 A.2d 90, 93 (1989), suggests that the decision could be
read as basing plaintiff’s recovery on equitable considerations of unjust
enrichment, which would accord with this opinion’s guidance.  We conclude,
however, that the court was referring to defendant’s recovery and not to
plaintiff’s recovery.  Although we would prefer to interpret the trial
court’s opinion liberally and affirm on those grounds, we are unable to do
so.  The trial court explicitly held that defendant “owes in rent and
agreed-upon taxes.”  The court did not attempt to calculate the benefit
that defendant received by virtue of her use and occupancy of the property, but
instead assumed that defendant owed the amount of the anticipated payments as
rent.
 

[9]
 We do not view it as significant that the main purpose of the action was settled,
leaving the damages aspect unresolved.  The ejectment statute provides
that if plaintiff receives judgment for ejectment, he shall recover his damages
as well as possession.  12 V.S.A. § 4765.  We do not read the statute
as providing that defendant can avoid a damages judgment by leaving the
property so that no ejectment is required.
 

[10] 
On appeal, defendant seeks to block certain claims made by plaintiff on the
grounds that they were not pled in plaintiff’s complaint.  It is true that
plaintiff’s complaint did not specifically request the relief considered
herein, although he did pray for “such other and further relief as the Court
deems just and proper.”  Even assuming that this was inadequate,
defendant’s counterclaim for unjust enrichment opened the door to plaintiff
seeking an offset.  See Blanchard v. Knights, 121 Vt. 29, 37, 146
A.2d 173, 178 (1958) (“[H]e who seeks equity must do equity.”).
 

[11] 
The trial court may, for example, consider the benefit to defendant and the
opportunity cost to plaintiff of the indefinite delays in closing.  We
acknowledge plaintiff’s position that defendant may have received some value
from the open-ended purchase agreement and that plaintiff may have lost
potential profits.  We reject, however, plaintiff’s resulting contention
that defendant’s downpayment was simply the price of an option that she chose
not to exercise.  The recoverable mesne profits in this case must also
consider improvements under 12 V.S.A. § 4814, as explained infra
¶¶ 47-48.
 

[12]
 Plaintiff’s recovery should cover the period commencing in the first
month after Oren made a payment and continuing through the month in which defendant
vacated the premises.  Defendant should receive an offset for the rent she
paid in 2010.
 

[13] 
Defendant argues that plaintiff never requested reimbursement for property
taxes, that such a request should have been made during the previous lawsuit
and is therefore precluded by the doctrine of res judicata, and that the trial
court’s award regarding property taxes constituted “a gift to Kellogg.” 
For the reasons stated in note 5, supra, and paragraphs 29 and 30, infra,
we reject these arguments, even though we ultimately reverse the trial court’s
order for reimbursement of the property taxes.
 

[14] 
In support of this claim, defendant emphasizes that Oren moved out after plaintiff
resumed paying the property taxes, which defendant views as refuting the
presence of any agreement during the period of defendant’s residency. 
Defendant argues that the trial court’s finding to the contrary was
erroneous.  The relevant finding of the trial court stated, “[b]eginning
after Mr. Oren moved out in 2007, plaintiff paid the real-estate taxes for the
property, . . . [starting with] the final quarter of the 2007
tax year . . . .”  We agree that the record does not
support the finding that Oren moved out in 2007.  Plaintiff testified that
Oren moved out in May 2008, and defendant agreed that it was sometime after the
end of 2007.  We disagree, however, that this erroneous factual
finding undermines the trial court’s award of property taxes.  Regardless
of when Oren moved out, the trial court found that defendant was party to the
original agreement contemplating the payment of the property taxes and that
defendant eventually assumed sole responsibility for the purchasing side of
this arrangement. 
 

[15] 
Plaintiff also argues that, even absent the alleged procedural bar, the $41,793
should not have been returned to defendant because it was the price paid for an
option to purchase, which was never exercised even though it could have
been.  As already discussed, we reject the interpretation of the agreement
between plaintiff and defendant as a lease-option arrangement.  In
addition, both the trial court in this action and the trial court in the
previous action found that the payments were intended to go towards a purchase
price of $180,000.
 

[16] 
Plaintiff and defendant engage in some argument concerning the preclusive
effect of an action seeking declaratory relief plus some accompanying coercive
relief.  We need not reach this question because we conclude that
defendant’s unjust enrichment argument was not yet ripe at the time of the
previous lawsuit and thus is not barred.  See infra ¶ 31.
 

[17] 
That the rule should be the same in the enforceable-contract and
unenforceable-contract context is natural—Professor Palmer explains that “the
two situations should be governed by a single rule, at least as to restitution
of payments on the price.”  2 Palmer, supra, § 6.6, at 47.  He
justifies that statement by pointing out that “when the
plaintiff . . . is the breaching party, restitution is his
only possible remedy in either event, whether the contract is enforceable or
unenforceable.”  Id.  This is not the case in Vermont, as a
defaulting purchaser on an enforceable contract for deed is entitled to the
equitable remedy of foreclosure—a remedy not available without an enforceable
contract.  See Prue, 2013 VT 12, ¶ 29.  Nonetheless, we
have through our cases chosen to follow this “nearly universal” rule in the
unenforceable-contract context.
 
The dissent sees tension between the result in the
enforceable-contract and unenforceable-contract cases.  As we say above,
the remedies cannot be equalized, and neither involves recovery of a
downpayment as the dissent urges.  In any event, the “tension,” if any,
preexists this case, as the dissent acknowledges.  Post ¶ 54
n.23.  
 
The “divergence from the national pack” which the
dissent asserts should make our precedents “outdated and unhelpful” is really a
divergence that other states have made from the continuous path that Vermont
has maintained.  Post ¶ 54.  Our older precedents are
entirely consistent with the development of Vermont law.
 

[18] 
Defendant paid $41,793 of a total agreed purchase price of $180,000.  We
do not take into account in making this calculation the payment for mesne
profits that is to be assessed against defendant on remand, as those payments
were not forfeited but instead were for defendant’s use of the land during the
times in question.
 

[19]  In relying upon nonpreservation, we
are not ruling on whether reimbursement for improvements is available as a
matter of right.  Professor Palmer notes that restitution for such
improvements is rarely granted to a defaulting purchaser in either the
enforceable-contract or unenforceable-contract context, and “[t]he central fact
is that the improvements were unsolicited.”  2 Palmer, supra,
§ 6.6(a), at 49 n.10.  He concludes that the justification for such
relief is particularly weak in the unenforceable-contract context, citing a
Kentucky case, Shreve v. Grimes, 14 Ky. (4 Litt.) 220, 1823 WL 1259
(1823) for the following explanation: 
 
[I]f
the purchaser should choose to live upon the land at such an uncertainty, and
should make such amelioration, and should himself disaffirm the contract and
never offer to fulfil it, and cast the improvements made upon the hands of his
adversary, and thus attempt to make him a debtor in that amount, against his
consent, and without his default, the right to recover the value of
improvements, in such case, would be very problematical.
 
Id. at *3.  This
Court cited approvingly that very Kentucky case in Bedell, explaining
its holding in the following way: “[A] purchaser of real estate, under a parol
contract, which is not enforceable, cannot recover on implied assumpsit for
improvements made on the estate.”  65 Vt. at 503.
 
Recovery for improvements, under the label of
betterments, is governed by statute, 12 V.S.A. §§ 4811-4824.  We rely
upon § 4814, but note that the basic entitlement to an award for
betterments is governed by 12 V.S.A. § 4811.  We do not decide
whether § 4811 applies in this case or would produce a result different
from that produced by § 4814, as interpreted in Birkenhead v. Coombs,
143 Vt. 167, 465 A.2d 244 (1983).  See infra ¶ 44. 
 

[20]
 Although the court used the term “improvements” in Birkenhead, the
expenses were for repairs necessary to make the premises habitable.  In
this case, the trial court provided recovery for expenses necessary to provide
habitability, rejecting some expenses the court found did not meet that
standard, essentially using the same standard as the court used in Birkenhead. 
Thus, to the extent that we found that § 4814 applied to the expenses in Birkenhead,
we must find that the statute applies to the expenditures in this case.  
 

[21]
 The special provisions for landlord-tenant ejectment actions are 12
V.S.A. §§ 4851-4856.

[22] 
Moreover, plaintiff’s actual delivery of a deed to defendant alongside
defendant’s unsuccessful subsequent request to the trial court in 2009 to order
plaintiff to deliver a deed to her adds an additional element of inscrutability
to these transactions.  See ante, ¶ 7 n.3.

[23] 
I acknowledge that one of the three unenforceable-contract cases cited by the
majority post-dated this Court’s statement concerning enforceable contracts in
the Town of Weston decision.  However, the Court’s dicta in that
case does not address the tension between the rule announced in the Town of
Weston decision and the Court’s previously articulated approach in the
unenforceable-contract setting.