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Ring v. Carriage House Condominium Owners' Association

Supreme Court of Vermont

November 21, 2014

David Ring
Carriage House Condominium Owners’ Association, Thomas Maroldt, Edward Morrison and Donna Beck

On Appeal from Superior Court, Lamoille Unit, Civil Division Alden T. Bryan, J. (Ret.), Specially Assigned

Steven H. Atherton, Northfield Falls, for Plaintiff-Appellant/Cross-Appellee.

Brice Simon of Breton & Simon, PLC, Stowe, for Defendant-Appellee/Cross-Appellant Beck.

PRESENT: Reiber, C.J., Dooley, Skoglund, Robinson and Crawford, JJ. [1]


¶ 1. This appeal is the culmination of a longstanding feud stemming from plaintiff David Ring’s renovation of his recently purchased condominium units and resulting in multiple legal proceedings as well as several superior court decisions. Ring argues that the superior court erred in awarding him only a fraction of his requested attorney’s fees after determining, following a lengthy bench trial, that defendants—the condominium owners’ association and some of its individual members—had breached the covenant of good faith and fair dealing implied in the parties’ earlier settlement agreement. He also argues that the court erred in denying his request for pre-litigation attorney’s fees and prejudgment interest. Defendant Donna Beck cross-appeals, arguing that the court erred in assessing punitive damages against defendants and holding her liable for punitive damages attributable to her deceased husband, defendant Edward Morrison, based on her real estate partnership with him. We affirm.

I. Facts and Procedural History

¶ 2. The membership of Carriage House Condominium Owners’ Association includes several owners of condominium units in two buildings comprising a commercial condominium located on Main Street in the Town of Stowe. In 1996, Ring, a licensed engineer and surveyor, purchased two unfinished units located in the hayloft space of a former barn, one of the two buildings. Among the other unit owners was defendant Thomas Maroldt, who owned a unit in the barn, and Beck and Morrison, who owned four units, including one in the barn. At the same time Ring purchased his units, he obtained rights from the condominium declarant that allowed him to develop the units without obtaining approval from the Association. Association members believed that the declarant’s development rights either already had been, or could only be, transferred to the Association. Ring’s asserted ownership of the development rights led to legal actions to clarify ownership of those rights. When Ring obtained a building permit, the Association sued him and appealed the Town of Stowe’s issuance of the permit.

¶ 3. These disputes were resolved by a 2001 settlement agreement that is at the heart of the instant case. Essentially, Ring agreed to give up his claim to the declarant’s development rights, and the Association agreed to allow Ring to build the permitted addition, as long as the roof and floor were “structurally sound” and there was no negative stress impact on the other units. A year after the settlement agreement was signed, Maroldt sued Ring and joined the Association as a necessary party. Maroldt alleged, among other things, that Ring was engaged in construction without the Association’s approval. Ring counterclaimed, arguing that the Association had wrongfully withheld its approval. The lawsuit went to trial in March 2003, and Ring prevailed. The jury awarded Ring $3600 for his increased costs resulting from the Association’s violation of the settlement agreement.

¶ 4. Six days after the jury verdict, notwithstanding the jury’s conclusion that Ring had not violated the settlement agreement, the Association sent a letter to the town zoning administrator stating that Ring’s construction was not in compliance with the settlement agreement. The Association also hired an engineering firm to look into its concerns about the structural integrity of Ring’s addition. Based on its understanding that Ring did not intend any additional structural support for his project, the engineering firm found that the structure did not meet code requirements. By May 2003, Ring realized that the structural impacts of his addition would have to be addressed, and that cooperating with the Association’s engineering firm would be the easiest and least expensive way to do so.

¶ 5. By the end of September 2003, Ring was agreeable to a plan devised by the Association’s engineering firm, but some members of the Association, including Maroldt, Morrison, and Beck, were not. As the result of letters from Maroldt and Morrison, the Department of Labor and Industry had another engineering firm assess the building’s structural systems. Pressured by the Department, the Association had its engineering firm come up with another plan to make Ring’s project structurally sound. In December 2003, Ring accepted the new plan and submitted it to the Department, which indicated that it was satisfied. Ring went ahead with construction and completed the work in 2004. After a final inspection in October 2004, the Association’s engineering firm wrote a letter to the Association stating that the work had been completed according to its recommendations.

¶ 6. Meanwhile, in July 2003, Maroldt wrote a letter to the Office of Professional Regulation making allegations against Ring in connection with his work on the condominium units. In March 2005, the Vermont Board of Professional Engineering filed various charges against Ring, all of which were eventually dismissed following a hearing before the board. In May 2005, after Ring had applied for a certificate of occupancy, the Association’s attorney wrote a letter to the zoning administrator questioning whether the town could issue a permit for a structurally unsound project such as Ring’s appeared to be. The superior court later found that defendants intended the letter to make it as cumbersome and expensive as possible for Ring to get his certificate of occupancy. In the end, despite defendants’ efforts to thwart his project, Ring was eventually able, with the aid of an attorney, to renew his zoning permit, which had expired in December 2003, and to obtain a certificate of occupancy.

¶ 7. In July 2006, Ring sued the Association and some of its members, alleging that they had, by their conduct since the March 2003 jury verdict, violated the express terms of the 2001 settlement agreement and its implied covenant of good faith and fair dealing. Ring sought compensatory and punitive damages, as well as attorney’s fees. Defendants asserted several counterclaims on a variety of theories. On April 2, 2012, following an eleven-day bench trial, the superior court determined that Ring was entitled to $1230 in compensatory damages and $3000 in punitive damages from Maroldt.

¶ 8. In arriving at this decision, the court found a “shared responsibility for David Ring’s troubles in undertaking and completing his project.” According to the court, Ring’s questionable purchase of declarant’s development rights, although seemingly resolved by the 2001 settlement agreement, festered and established a tone of mistrust. For their part, although defendants had legitimate concerns about the structural impacts of Ring’s project and were understandably put off by Ring’s initial reluctance to discuss his plans to address those concerns, they continued their efforts to thwart his project long after the structural concerns had been addressed to the satisfaction of the state and their own engineering firm. In determining that defendants had violated the settlement agreement’s implied covenant of good faith and fair dealing, the court found that defendants repeatedly engaged in actions to harass Ring and obstruct his project, even after their legitimate concerns were satisfactorily addressed, despite their promise to allow the project’s completion in exchange for his relinquishment of the declarant’s development rights. The court concluded that these actions undermined Ring’s right to receive the benefit of the settlement agreement.

¶ 9. The court, however, rejected Ring’s request for nearly $45, 000 in compensatory damages because the requested amount included work that was not the result of the breach found by the court and because Ring had used an unreasonably inflated hourly rate to calculate the damages. Regarding Ring’s claim for punitive damages, the court concluded that Maroldt’s conduct warranted an award of $3000, but that the actions of the Association and Beck “were neither outrageous nor malicious enough to warrant punitive damages, ” given Ring’s own role in fomenting a mistrust and ill will among the parties. The court acknowledged that Morrison, Beck’s late husband and business partner, had, along with Maroldt, continued the fight against Ring long after any legitimate concerns over Ring’s project had been resolved; the court, however, noted that Morrison’s estate had not been made a party to the suit and expressed its belief that the estate could not be held liable for punitive damages. [2]

¶ 10. In response to Ring’s motion to amend, the court increased Ring’s compensatory award to $4000 and considered whether Beck could be held liable for any punitive damages assessed based on Morrison’s conduct. The court stated that it was mistaken in assuming that Morrison or his estate had been effectively dismissed from the case, noting that Ring had consented to substituting Beck and the Association for Morrison “for all purposes in this action.” The court stated that, pursuant to the substitution order, Beck would stand in Morrison’s shoes for all purposes, including the imposition of punitive damages. The court then went on to find that Morrison had acted in bad faith in making repeated attempts to halt or delay Ring’s project by resurrecting issues that had been resolved and making claims that had no basis in fact, thereby warranting a punitive damages award against him in an amount to be determined following a hearing. The court reiterated that Beck would be liable for punitive damages attributable to Morrison, but noted that although Beck signed documents as an Association member and voted with Morrison and Maroldt at Association meetings, her own conduct, in and of itself, did not exhibit the type of malice or ill will warranting punitive damages.

¶ 11. The superior court later issued two more decisions regarding punitive damages. In the first one, the court concluded that no judgment could be entered against Morrison or his estate for punitive damages, and that Beck could not be liable for punitive damages attributable to Morrison’s conduct based on the substitution order, as it had previously determined, because such an order under Vermont Rule of Civil Procedure 25 is procedural in nature and does not create survival rights or liabilities. Nevertheless, the court determined that Beck should be held jointly and severally liable as her late husband’s business partner because she and Morrison “together as a partnership plotted against Mr. Ring, voted in meetings, and made demands on Mr. Ring in the course of the development of his project.” The court further stated that Beck, as Morrison’s partner in their jointly held condominium units, “went along with all the actions Mr. Morrison took to obstruct the process.” In a second subsequent decision on punitive damages, the court increased the award based on Maroldt’s conduct from $3000 to $8000 and established an award of $24, 000 for Morrison’s conduct, for which the court found Beck liable. Thus, the court’s final damage award was $36, 000—$4000 in compensatory damages and $32, 000 in punitive damages.

¶ 12. The superior court also issued multiple decisions on Ring’s motion for attorney’s fees and costs, which he submitted one month after the court’s April 2, 2012 decision. In its first decision, the court rejected Ring’s request to recover attorney’s fees and costs incurred before commencement of the instant litigation. The court acknowledged that most of the fees could have been included in Ring’s request for damages because they related to defendants’ breach of the 2001 settlement agreement, but concluded that they could not be recovered in a post-trial ...

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