Court Opinion

ID: 2749039
Source: CourtListenerOpinion
Date Created: 2014-11-07 16:07:38.916854+00
Date Added: 2024-06-11T11:25:59.318778
License: Public Domain

2014 VT 117

Choiniere and P&D Consulting,
Inc. v. Marshall and Beach, PPLC (2013-142)
 
2014 VT 117
 
[Filed 7-Nov-2014]
 
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.
 
 

2014 VT 117

 

No. 2013-142

 

Paul H. Choiniere and P&D
  Consulting, Inc.

Supreme Court

 

 

 

On Appeal from

     v.

Superior Court, Windsor Unit,

 

Civil Division

 

 

Anthony P. Marshall and Harris
  Beach, PLLC

January Term, 2014

 

 

 

 

Harold
  E. Eaton, Jr., J.

 

Michael F. Hanley of Plante & Hanley, P.C., White River
Junction, for Plaintiffs-Appellants.
 
Allan R. Keyes and Thomas S. Valente of Ryan Smith &
Carbine, Ltd, Rutland, for 
  Defendants-Appellees.
 
 
PRESENT:   Reiber, C.J., Dooley, Skoglund and Crawford, JJ.,[1]
and Pineles, Supr. J. (Ret.),
                     Specially Assigned
 
¶ 1.            
SKOGLUND, J.    Plaintiffs Paul Choiniere and P&D Consulting,
Inc. sued defendants, attorney Anthony Marshall and his law firm, Harris Beach,
PLLC, alleging that they made negligent and intentional misrepresentations
while representing a client in a matter involving commercial loan guaranties. 
Choiniere alleges that he relied upon the misrepresentations when deciding not
to call a $1 million loan that he made in September 2003, and P&D
Consulting alleges that it relied upon the misrepresentations when deciding to
loan an additional $1.3 million in June 2004.  We reverse the trial court’s
decision granting defendants summary judgment. 
¶
2.            
The events underlying this case began in September 2003 when Choiniere
loaned $1 million to Andrew Button to help him purchase an automotive
dealership and move it to another location.  Button’s father and stepmother
Christine Rowe-Button personally guaranteed the loan.  After receiving that loan,
Button began negotiating with Choiniere for an additional loan of $1.3 million
to acquire two more automobile dealerships.  When Button’s father died in
January 2004, Rowe-Button hired defendant Marshall to assist in settling her
late husband’s estate and to try and obtain a release of any and all personal
guaranties made to Choiniere.
¶
3.            
On April 8, 2004, after several months of fruitless negotiations between
Marshall and Button’s attorneys, Marshall arranged for Rowe-Button to send each
of the creditors, including Choiniere, a letter captioned “Termination of
Guaranty.”  In the letter she stated that her signature on the guaranty “may
not reflect my actual signature thereon,” intimating that it may have been
forged.  Then in bold lettering she wrote:
  PLEASE
TAKE NOTICE THAT EFFECTIVE AS OF THE DATE OF THIS LETTER, THE ESTATE AND I
HEREBY TERMINATE ALL AND ANY GUARANTIES EXECUTED OR PROVIDED OR PURPORTEDLY
EXECUTED AND PROVIDED, TO YOU OR YOUR ASSIGNS WITH RESPECT TO ALL AND ANY
INDEBTEDNESS OWING TO YOU BY BUTTON HOLDINGS REAL ESTATE, LLC OR ANY AFFILIATE
OR OTHER ENTITY, WHETHER EXISTING AT THE TIME OF THE EXECUTION OF THE GUARANTY
OR THEREAFTER ARISING.
 
¶
4.            
Six days later, on April 14, 2004, Marshall sent a letter to Choiniere
with a reference captioned “Termination of Bank Guaranty,” in which he acknowledged
that Rowe-Button may have some irrevocable obligations pursuant to the terms of
the guaranty agreement,[2]
but indicated that the letter was to serve as notice that any guaranty would
not extend to any new advances or new indebtedness created after receipt of the
letter.  The attorney representing Choiniere, Douglas Riley, advised him to
call the 2003 loan and not to make any additional loans to Button unless the
April 8 and April 14 letters were retracted and new assurances were made.  Counsel
for Button at the time, Mark Sperry, wrote to Rowe-Button and Marshall on April
27 demanding that Rowe-Button, both individually and as executrix of her late
husband’s estate, immediately sign letters revoking the earlier letters
respecting termination of any guaranties and assuring that any such guaranties
remained in force in accordance with their terms.
¶
5.            
Marshall responded on behalf of Rowe-Button with the letter that is the
focus of this appeal.  On April 28, 2004, he sent a letter to one of Choiniere’s
attorneys acknowledging that Rowe-Button had sent a letter twenty days earlier advising
that any guaranties were terminated, but stating: “We have been authorized by
our clients to deliver this letter to you.”  The letter further stated, in bold
capital letters, “BE ADVISED THAT THE TERMINATION NOTICE IS HEREBY REVOKED AND
RESCINDED.  If you have any questions, please do not hesitate to contact me.”  On
June 11, 2004, Choiniere, through his company P&D Consulting, loaned an
additional $1.3 million to Button. 
¶
6.            
The matter in dispute is what was meant by the “rescission” letter of
April 28 and whether Rowe-Button had authorized Marshall to send the letter. 
Choiniere claims that the rescission letter misrepresented the facts about
whether Rowe-Button intended to guarantee the loans, and that he and his
company relied on the letter in their business decisions.  
¶
7.            
Legal action began with a complaint filed by Button in January 2005
seeking a declaration that his stepmother’s signature on the guaranty was valid. 
In 2006, he filed for bankruptcy and was dismissed from the instant proceeding. 
Before he was dismissed, however, Choiniere intervened and added a claim
against Rowe-Button for the guaranteed balance owed on the $1 million loan.
¶
8.            
Cross-motions for summary judgment in 2008 largely involved the question
of whether the April 28 “rescission” letter estopped Rowe-Button from reneging
on any guaranties. Choiniere relied on theories of ratification, equitable
estoppel, and waiver in arguing that Rowe-Button should remain liable.  He
claimed that her rescission letter misled him into believing that any guaranties
would be honored, and that he relied upon the letter when making his business
decisions, including his decision to loan Button an additional $1.3 million
through his company P&D Consulting.  Rowe-Button opposed Choiniere’s motion
and cross-moved for summary judgment on the theories advanced by Choiniere. 
She claimed that she had not authorized Marshall or his law firm to send the
rescission letter on her behalf.
¶
9.            
In a December 21, 2008 decision, the court denied both summary judgment motions
in all respects, except for Rowe-Button’s motion with regard to Choiniere’s waiver
claim.  The court concluded that there were material facts in dispute as to
whether Rowe-Button ratified the rescission letter and whether she was
equitably estopped from claiming that she had not authorized the letter.  The
court also rejected Rowe-Button’s motion to dismiss Choiniere’s
breach-of-contract claim, ruling, among other things, that there was an issue
of fact for trial as to damages.  At this stage of the case, the court found as
follows: “Mr. Choiniere received the April 28th letter and interpreted it as an
affirmance of [] Rowe-Button’s obligations under the personal guaranty.  He
considered this when evaluating [Button’s] credit risk, and relied on the
affirmance when he and his wife loaned an additional $1.3 million dollars to
another business entity managed by Andrew Button (Button Automotive Group,
Inc.) on June 11, 2004.” 
¶
10.        
In January 2009, in response the court’s summary judgment ruling, Choiniere
added defendants Marshall and Harris Beach to the case.  In his fourth amended
complaint, which the court allowed, Choiniere claimed that Marshall and Harris Beach
were liable to him for fraud in the inducement and negligent misrepresentation
in connection with the April 28 rescission letter.[3] 
He also amended his complaint to specifically include the claim that P&D
Consulting had relied upon the rescission letter when deciding to lend the $1.3
million to Button [hereinafter the P&D loan].  Plaintiffs then settled the
case against Rowe-Button, leaving only Marshall and Harris Beach as defendants.
¶
11.        
Marshall and Harris Beach then moved for summary judgment based on four
independent rationales: (1) the letter of April 28, 2004 was not false in any
material sense; (2) the letter was not intended to induce lenders to lend $1.3
million to Button Automotive Group, Inc. [hereinafter the P&D note]; (3)
the lenders did not justifiably rely on the letter as meaning that Rowe-Button
had relinquished her claim of forgery; and (4) there was no evidence that shows
what Choiniere would have collected on the $1 million note or any guaranty at
the time the letter was sent.
¶
12.        
In its March 19, 2013 decision on defendants’ motion for summary
judgment, which is the subject of this appeal, the trial court first rejected
defendants’ argument that the court lacked personal jurisdiction over them. 
The court ruled that defendants waived the defense by not asserting it in their
answer to the fourth amended complaint and, in any event, did not timely assert
it.
¶
13.        
On the merits of the motion, the trial court granted summary judgment to
defendants on three alternative, independent grounds.  First, the court ruled
that the April 28 letter did not contain any false promises because it was
non-responsive to the specific demands made by Sperry as counsel for Button in
his April 27 letter and therefore could not be construed as an acceptance of
those demands.  The court acknowledged that the April 28 letter agreed to
rescind the April 8 letter, but stated, among other things, that the April 28
letter did not retract the April 14 letter, did not make any promises of any
kind, did not say that any guaranties were still in place, did not state that
Rowe-Button still guaranteed the September 2003 loan, and did not indicate that
Rowe-Button no longer claimed her signature was forged.  The court held that plaintiffs
failed to produce sufficient evidence to persuade a reasonable jury that the
letter contained the alleged false promise, thus finding that plaintiffs did
not show sufficient evidence to prevail at trial on each element of their claim
of misrepresentation.
¶
14.        
Second, the court found that plaintiffs failed to show that any reliance
on the April 28 letter was justifiable, noting that Choiniere’s own attorney
advised him not to make any more loans without retractions and new assurances, and
that Choiniere testified at his deposition that he relied on the legal advice
of his attorneys.  Further, the court noted that the April 28 letter expressly
invited plaintiffs to contact Marshall if they had any questions about the
letter.  The court pointed out that neither Choiniere nor his attorney did so.
¶
15.        
As a third independent basis for summary judgment on the claim based on
Choiniere not calling the September 2003 note, the court held that the evidence
of damages deriving therefrom was merely speculative.  Thus, it granted defendants’
motion for summary judgment on the merits and on damages.
¶
16.        
On appeal, plaintiffs identify the principal issue as whether Marshall
and his firm, either fraudulently or negligently, stated that Rowe-Button
withdrew her claim that her signature on the guaranty was a forgery, causing
Choiniere not to call the $1 million note and inducing P&D Consulting to
make an additional $1.3 million loan.  They argue that there are material
disputes of fact as to whether: (1) Rowe-Button authorized Marshall to rescind
her previous attempt to terminate her personal guaranty; (2) Marshall said that
Rowe-Button had withdrawn her assertion that she was not liable for future
advances on the note, but preserved her claim that her purported signature on
the guaranty was forged; (3) Marshall wrote the rescission letter with an
intent to deceive plaintiffs; whether the rescission letter was designed either
to induce plaintiffs not to call the $1 million note guaranteed by Rowe-Button
or to induce an additional loan or both; and (4) the parties dispute the
meaning of the phrase “termination of guaranty.”  Plaintiffs also contend that a
reasonable jury could find that Marshall caused them some economic loss.
¶
17.        
For their part, defendants argue that there are no material facts in
dispute precluding summary judgment.  They also argue that plaintiffs failed to
address the trial court’s conclusion that there was no evidence of justifiable
reliance, as an independent ground for granting summary judgment.  Finally,
they argue that P&D Consulting’s claim is barred by the applicable statute
of limitations.
¶
18.        
The standard for reviewing a motion for summary judgment under Vermont Rule
of Civil Procedure 56 is well-established.  We apply the same standard as the
trial court, affording its decision no deference.  In re Lowry, 2013 VT
85, ¶ 7, ___Vt. ___, 84 A.3d 816.  Summary judgment is appropriate when
“the record clearly shows that there is no genuine issue of material fact and
that the movant is entitled to judgment as a matter of law.”  Glassford v.
BrickKicker, 2011 VT 118, ¶ 12, 191 Vt. 1, 35 A.3d 1044 (quotation
omitted); see V.R.C.P. 56(a).  The purpose of a summary judgment hearing is
solely to determine whether a genuine issue of material fact exists, not to
adjudicate disputed issues “no matter how unlikely it seems that the party
opposing the motion will prevail at trial.”  Fonda v. Fay, 131 Vt. 421,
422, 306 A.2d 97, 98 (1973).
¶
19.        
Further, on appeal of a summary judgment motion, we afford the nonmoving
party “the benefit of all reasonable doubts and inferences.”  Doe v. Forrest,
2004 VT 37, ¶ 9, 176 Vt. 476, 853 A.2d 48.  The burden of persuasion is on
the movants, attorney Marshall and Harris Beach; Choiniere and P&D
Consulting need only respond “with specific facts raising a triable issue” and
“demonstrate sufficient evidence to support a prima facie case.”  Dulude v.
Fletcher Allen Health Care, Inc., 174 Vt. 74, 79, 807 A.2d 390, 395 (2002).
¶
20.        
We decline to follow the rationale employed by the trial court in
granting defendants’ motion for summary judgment, including its reasoning for
concluding that the April 28 letter neither made any promises nor explicitly
stated that Rowe-Button’s guaranty was still in place.  Allegedly, Choiniere’s
lawyer at the time, Riley, told Choiniere not to make any additional loans to
Button unless both the April 8 and April 14 letters were retracted and new
assurances were made.  Riley then asked Button’s attorney, Sperry, to obtain “a
retraction or other firm, written assurances from Christine Rowe-Button that
the Guaranties were still in place, that they still guaranteed the September
2003 loan (in whatever amount is currently still due) and that she no longer
claimed that her signature was forged.”  The letter sent by Sperry to Marshall
on April 27 contained the following demand: “we need immediate letters signed
by the Estate and Christine to each of these creditors revoking those letters
and stating that the guarantees remain in force in accordance with their
terms.”  Marshall responded with the April 28 letter detailed above.  The trial
court found that the letter was non-responsive to almost all of the demands
that were made on Marshall in Sperry’s letter and was therefore a rejection,
rather than an acceptance, of the proposed terms. 
¶
21.        
  We reject this
contractual analysis.  In stating that that the termination notice was revoked
and rescinded, the April 28 letter referred to the April 8 letter, irrespective
of any demands made in the April 27 letter.  The trial court characterized the
April 28 letter from Marshall as a rejection of the “proposed terms” demanded
by Sperry’s letter, but Sperry’s April 27 letter was never intended to be an
invitation to contract.  If anything, the letter was meant to clarify that the
original guaranty agreement remained in force in accordance with its terms.[4] 
The question for the court on summary judgment was how the letter affected the guaranty,
not whether the letter met the requirements of a contract.  The trial court went
astray by reformulating the question as whether plaintiffs had adduced
sufficient evidence to persuade a reasonable jury that the letter contained the
alleged false promise.  The April 28 letter either rescinded and revoked any
guaranty of future indebtedness while preserving the claim that Rowe-Button’s
purported signature on the guaranty was a forgery, or it rescinded everything
stated in the Termination of Guaranty letter of April 8 or both the April 8 and
April 14 letters,[5]
leaving the guaranty in place and rescinding the assertion that her purported
signature was a forgery.  This is a material factual dispute that determines in
large part the resolution of the case.  The question of the viability of the
guaranty agreement remains firmly in dispute in this case, and summary judgment
is inappropriate.
¶
22.        
Plaintiffs also claim reasonable or justifiable reliance, which requires
application of an objective standard.  “Plaintiffs may justifiably rely upon a
representation when the representation is not obviously false and the truth of
the representation is not within the knowledge of, or known by the plaintiffs.” 
Silva v. Stevens, 156 Vt. 94, 108, 589 A.2d 852, 860 (1991) (approving
trial court’s charge to jury on justifiable reliance).  As to whether
plaintiffs’ reliance on the April 28 letter was justifiable, the trial court
again reiterated that the letter failed to provide the assurances demanded, and
ended by noting that the letter “expressly invited plaintiffs to contact him if
they had any questions about the meaning of the April 28th Letter.”  However,
the invitation from Marshall was not that specific.  He ended the letter with a
very common signoff—“if you have any questions, please do not hesitate to
contact me.”  This is not a suggestion that there might be confusion in the letter. 
The question of whether reliance was justified remains in dispute. 
¶
23.        
Then, too, there is the issue of whether Marshall was actually
authorized to send the April 28 letter.  In Rowe-Button’s deposition, which was
incorporated into plaintiffs’ statement of disputed facts, she testified that
she never authorized Marshall to send the April 28 letter, that she repeatedly
told Marshall that the guaranty was an “obvious forgery,” and that she would
strenuously resist making any payments on the guaranty.  The court found the
issue of no moment, stating that plaintiffs had not explained how a false
statement from Marshall about his authorization was in any way material to the
transaction or how the statement met any of the elements of intentional or
negligent misrepresentation.  Again, we disagree.  Whether the secondary
guarantor had revoked her guaranty agreement was plainly in dispute and
material. 
¶
24.        
Finally, the court held that, as an independent basis for summary
judgment on the claim for the noncalling of the $1 million note, Choiniere
failed “to adduce more than speculative evidence of his damages deriving
therefrom.”  In order to show that he was damaged as a result of the noncalling
of the note, Choiniere would have to show that money could have been collected
on the note and any guaranty at the time the April 28 letter was sent.  Larochelle
v. Komery, 128 Vt. 262, 268, 261 A.2d 29, 33 (1969) (explaining that
plaintiff’s measure of damages in fraud and deceit action is net amount of
money actually lost as result of fraud).  Choiniere attached a report to his
opposition to summary judgment, in which his damages expert opined that “had
Mr. Choiniere called the $1 million note on June 1, 2004, he would have
collected all amounts due.”  While an assumption is not evidence, again there
is a material factual issue in dispute: Was the termination letter designed to
discourage Choiniere from calling in the $1 million note, and was there a
possibility of redemption on the note?  
¶
25.        
Button did not file for bankruptcy until 2006.  Choiniere offered as
evidence the strong credit history he had with Button and reported on three
payoffs made by Button with respect to other loans totaling $306,000.  The
trial court found that a jury would have had to speculate as to whether Button or
his real estate holding company had sufficient funds in May 2004 to repay the
entire September 2003 note.  But that holding begs the question of the validity
of the guaranty made by Rowe-Button.  If Button or Button’s company could not
make good on the note, there remained the question of whether the secondary
obligor was still obligated to honor the guaranty.  While reasonable people may
differ over whether and how much the plaintiffs would have been able to collect
from the makers and guarantors of the two notes, this is far different from the
court’s conclusion on summary judgment that defendants’ actions had no adverse
economic impact on plaintiffs.[6] 

¶
26.        
One further note—the court’s decision granting summary judgment to
defendants also resolved the claim presented by P&D Consulting, Inc., as
set forth in the fourth amended complaint.  Because it will surely come up as
an issue on remand, we note that the guaranty agreement executed was a
continuing guaranty.
A
continuing guaranty is a contract pursuant to which a person agrees to be a
secondary obligor for all future obligations of the principal obligor to the
obligee.  A continuing guaranty is terminable, and may be terminated by the
continuing guarantor by notice to the obligee. . . .  Upon termination of a
continuing guaranty, the continuing guarantor remains a secondary obligor with
respect to obligations of the principal obligor incurred prior to termination .
. . .
 
Restatement
(Third) Of Suretyship and Guaranty § 16.  The court granted permission for
the fourth amended complaint, but later clarified that, given Choiniere’s
concession that he was not seeking individual damages based on the P&D
note, his complaint was dismissed to the extent he seeks damages in his
individual capacity based on the P&D note.  P&D’s claim of reliance
remains in the case on remand because, as noted, there remains a factual
dispute as to whether the April 28 letter rescinded that April 14 letter in
addition to the April 8 letter.
¶
27.        
Defendants also argue that P&D Consulting’s claim is barred by the
statute of limitations.  In a December 13, 2011 ruling in response to
defendants’ motion to dismiss plaintiffs’ fourth amended complaint, the trial
court rejected this argument.  In doing so, the court relied upon the
relation-back doctrine originating in Rule 15(c)(2), which permits an amendment
of a pleading to relate back to the original pleading when the new claim or
defense “arose out of the conduct, transaction, or occurrence set forth . . . in
the original pleading.”  That rule “is grounded on the notion that a party who
has been notified of litigation concerning a given transaction has been
accorded all the notice that statutes of limitations are intended to afford.”  Korda
v. Chicago Ins. Co., 2006 VT 81, ¶ 15, 180 Vt. 173, 908 A.2d 1018

(quotation omitted).
¶
28.        
The trial court found that there was sufficient notice to allow the
amended complaint because Choiniere had alleged since at least the summer of
2008 that he had relied upon the April 28 letter in making his business
decisions, including his decision to provide the additional $1.3 million loan
through his company, P&D Consulting, and that he had been harmed by his
reliance on that letter.  For the reasons stated in the trial court’s December
2011 ruling, we agree that defendants, who were joined in the litigation within
six years of April 28, 2004, had adequate notice of the P&D claim so as to
support the court’s decision to allow the amendment.
¶
29.        
In sum, we hold that there are several material issues in dispute that
preclude summary judgment, including the viability of the guaranty agreement
after the April 28, 2004 letter, whether plaintiffs’ reliance on the April 28
letter was justifiable, whether Marshall was authorized to send the letter, and
whether there are any economic damages.  Accordingly, we reverse and
remand for a trial on the merits.
Reversed and remanded for further proceedings consistent
with this decision.
 
 

 

 

FOR THE COURT:

 

 

 

 

 

 

 

 

 

 

 

Associate
  Justice

 

[1] 
Justice Crawford was present for oral argument, but did not participate in this
decision. 

[2] 
The court ruled that a guaranty “cannot be ‘terminated’ as to the debt that has
already been extended in reliance upon the guaranty, however, because a guaranty
is irrevocable as to existing debt.”  As such, the court held that “the April 8th
letter was entirely ineffective to the extent that it purported to ‘terminate’
the existing [$1 million] debt.”  This ruling is not contested on appeal.

[3] 
They also alleged a claim of equitable estoppel that was dismissed by the court
on a motion pursuant to Vermont Rule of Civil Rule 12(b)(6).

[4] 
A “guarantor” typically contracts to fulfill an obligation upon the default of
the principal obligor.  Restatement (Third) of Suretyship and Guaranty § 1 cmt.
b (1996).  The Restatement makes clear that the undertaking of the guarantor or
secondary obligor will be a contractual obligation.  Id. § 2 cmt. a
(“Regardless of its form . . . the secondary obligation is
created by contract or becomes a secondary obligation by contract.”)  Here, as
noted above, there was an executed contract establishing the guaranty
agreement.
 

[5] 
The April 28 letter referred only to the April 8 letter, but the April 14
letter also labeled itself a termination notice, and there remained a question
for the factfinder to determine if the April 28 letter purported to rescind the
termination notices provided in both the April 8 and April 14 letters or only
the April 8 letter.

[6] 
Choiniere suggests that it is reasonable to conclude he could have collected at
least $250,000 from stepmother in 2004, since he recovered that amount from her
in 2011 in settlement of the litigation against her.