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Walsh v. Frank Cluba And Good Stuff, Inc.

Supreme Court of Vermont

February 13, 2015

David Walsh
Frank Cluba and Good Stuff, Inc.

On Appeal from Superior Court, Chittenden Unit, Civil Division January Term, 2014. Geoffrey W. Crawford, J.

Frank P. Urso of Reis Urso & Ewald, PC, Rutland, for Plaintiff-Appellee/Cross-Appellant.

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

Ronald I. Merelman, Stowe, for Cross-Appellee Good Stuff, Inc.

PRESENT: Reiber, C.J., Dooley, Skoglund and Robinson, JJ., and Morse, J. (Ret.), Specially Assigned


¶ 1. This case concerns a dispute over damage to a leased commercial space located on Church Street in Burlington, Vermont. The case was tried before a jury, which awarded plaintiff, landlord David Walsh, just under $11, 000 in damages attributable to defendant, tenant Frank Cluba. Following the jury verdict, the trial court awarded Walsh over $44, 000 in attorney’s fees. Cluba appeals, arguing that the court erred by allowing Walsh to testify on the reasonableness of repair work done after Cluba vacated the property and by awarding Walsh an unreasonable amount of attorney’s fees under the circumstances. Walsh cross-appeals, arguing that the court erred by dismissing his claims against defendant Good Stuff, Inc., the business that Cluba and his partner incorporated shortly after Cluba signed the initial lease of the subject property. We affirm.

¶ 2. In August 2004, Cluba signed a three-year lease agreement for the rental of commercial space on Church Street. Two months later, in October 2004, Cluba and his business partner incorporated Good Stuff, Inc., of which Cluba was the president and a director, and turned over possession of the space to Good Stuff for the sale of adult novelties. The lease expired in August 2007, but Good Stuff continued occupying the space and paying rent until vacating the premises in October 2009. A provision in the lease agreement stated that any permissive holdover after the expiration of the lease shall be on a month-to-month basis, provided that all terms and conditions of the lease remained in full force during the holdover period.

¶ 3. Walsh sued Cluba in January 2010, alleging in his complaint that Cluba had defaulted on an extended lease agreement in effect through September 2011 and had left the premises in a damaged state. He sought damages for, among other things, unpaid rent, attorney’s fees, and the cost of repairing the damaged premises. In November 2010, Walsh moved to amend the complaint to include Good Stuff as a defendant, citing authority for the proposition that a corporation formed after the execution of a contract previously executed by a promoter of that corporation may, by accepting the benefits of the contract, ratify the contract and thus be bound by it, even without formal or documented action. See Rich v. Chadwick, 136 Vt. 122, 124, 385 A.2d 677, 678 (1978) (citing Koerber v. Middlesex Coll., 128 Vt. 11, 258 A.2d 572 (1969), as “authority for the proposition that a subsequently formed corporation may, by accepting the benefits of a contract, ratify the contract, even without formal or documented action”). The court granted the unopposed motion, and in December 2010, Walsh filed an amended complaint, alleging in part that Good Stuff, through its agent Cluba, had ratified the lease Cluba signed and then defaulted on an agreed extension of that lease.

¶ 4. In August 2011, defendants filed a motion for partial summary judgment in which they argued in relevant part that Good Stuff should be dismissed from the case because Walsh knew that the lease agreement was only with Cluba, Good Stuff never ratified the agreement, and Walsh made no attempt to bind Good Stuff. Walsh opposed the motion, asserting that Good Stuff should remain in the case based on the doctrine of successor liability. In a January 12, 2012 decision, the trial court granted defendants’ summary judgment motion, ruling that Good Stuff had not signed the lease and that Walsh had failed to point to any post-lease writing or action that could have bound Good Stuff to the lease. The court stated that the successor liability doctrine was inapplicable to this case, and that Walsh had abandoned his ratification theory by neither raising it nor offering facts to support it in his response to defendants’ summary judgment motion. Accordingly, the court concluded that “[a]ll contractual claims against Good Stuff must be dismissed.”

¶ 5. Walsh filed a motion to clarify, stating that a dispute had arisen among the attorneys as to whether the court’s order had dismissed Good Stuff from the case, and asking the court to allow him to amend the complaint a second time to add a negligence claim against Good Stuff to seek damages incurred as the result of necessary repairs after defendants vacated the subject property. Over defendants’ objections, the court granted the motion, and Walsh filed a second amended complaint alleging that defendants, including Good Stuff as the party in possession of the property, were liable for damages resulting from the cost of repairing the property after it was vacated.

¶ 6. A jury trial was held over two days in November 2013. At the close of plaintiff’s case, Good Stuff moved, pursuant to Vermont Rule of Civil Procedure 50, for judgment as a matter of law with respect to Walsh’s negligence claim. Good Stuff argued that Walsh had not claimed anything other than economic losses, which were not recoverable in tort. After noting that Good Stuff was a third-party beneficiary contractually bound by the lease, Walsh argued that the lease had expired and there was no valid extension of the lease, making Good Stuff an at-will tenant who had an independent duty towards Walsh. He also argued that the economic-loss rule did not apply because he was claiming physical damage to property in addition to economic losses. The trial court granted Good Stuff’s Rule 50 motion on the record, ruling that the economic-loss rule precluded the tort claim because the instant dispute was completely covered by Walsh’s and Cluba’s contractual relations and because the parties’ duties were defined by the contract, which required the tenant to leave the premises in the condition in which he took them. At the conclusion of the trial, the jury awarded Walsh $10, 793 in damages for breach of the lease agreement. In a February 26, 2013 decision following the jury verdict and a hearing on Walsh’s motion for attorney’s fees, the trial court awarded Walsh $44, 600 in attorney’s fees.

¶ 7. On appeal, Cluba argues that the trial court committed reversible error by (1) allowing Walsh to testify on the necessity and reasonableness of the repair work done on the premises, and (2) awarding Walsh an unreasonable amount of attorney’s fees, considering the totality of the circumstances. Walsh cross-appeals, arguing that the court erred by (1) dismissing his contractual claims against Good Stuff on summary judgment, and (2) granting Good Stuff judgment as a matter of law during the trial on his negligence claim.

¶ 8. We begin with Cluba’s evidentiary claim of error. Cluba argues that it was reversible error to allow Walsh to testify regarding the necessity and reasonableness of repair costs because Walsh’s testimony was not based on his own perceptions and thus violated Vermont Rule of Evidence 701. Cluba contends that because Walsh’s property manager had overseen the repair work, she was the only person with first-hand knowledge regarding the need for the work-and yet, despite being subpoenaed, she never appeared at trial to link Walsh’s testimony on the cost of the work to her anticipated testimony confirming the need for the work. According to Cluba, because Walsh’s testimony was based almost exclusively upon information ascertained from his property manager rather than his own perceptions, the trial court’s admission of the testimony over his objection constituted an abuse of discretion and a violation of Rule 701, thereby depriving him of a fair trial. We disagree.

¶ 9. Rule 701 provides that a lay witness’ testimony concerning the witness’ opinions or inferences is limited to opinions or inferences that are “(a) rationally based on the perception of the witness, (b) helpful to a clear understanding of the witness’ testimony or the determination of a fact in issue, and (c) not based on scientific, technical or other specialized knowledge within the scope of Rule 702.”

¶ 10. Walsh testified that the subject property was in good condition when he leased it to Cluba but was not in a similar condition when defendants vacated it. When Walsh began listing the various repairs necessary to restore the property to its condition at the time he leased it to Cluba, Cluba’s attorney objected on grounds of the lack of a foundation for the testimony and a violation of Rule 701. At an ensuing bench conference, Cluba’s attorney asserted that Walsh had no personal knowledge of what repairs were needed because his property manager had handled the repair work. At one point during the bench conference, Walsh’s attorney stated that he intended to have the property manager testify. After the trial court ruled that it would “just take it as it comes, ” the direct examination of Walsh resumed.

¶ 11. Walsh then testified that he visited the subject property along with his property manager, Cluba, and Cluba’s partner in November 2009 shortly after defendants had vacated it. He agreed that he got “a really good look at the condition of the premises.” He testified that, at his instruction, the property manager took photographs of the premises and turned them over to him. He identified dozens of photographs as accurately depicting the condition of the premises at the time defendants vacated it, and those photographs were admitted into evidence without objection. Referring to the photographs, Walsh then proceeded to testify as to all the repairs required to restore the property to the condition in which he had leased it to Cluba, including: (1) replacing sheetrock destroyed by defendants removing strapping and slatwalls that had held their products; (2) dealing with dangling electrical wires left after the removal of fixtures; (3) repairing and painting trim and window frames; (4) repairing broken ceiling tiles; (5) repairing a damaged door; and (6) repairing components of the heating system that had been damaged.

¶ 12. Walsh further testified that his property manager gave him copies of the invoices for the required repair work. The court sustained Cluba’s hearsay objection to admission of the invoices themselves, but allowed Walsh to testify as to what he paid to repair the damage to the premises observed after defendants left. Walsh then agreed that he reviewed, audited, and paid “each and every invoice related to repair costs.” He expressed certainty that his written summary of those costs contained in an exhibit reflected payments that he had actually made as the result of damage done to the premises by defendants. The trial court admitted the exhibit without objection after Walsh explained the basis for each of the individual expenses set forth in the summary. Walsh also testified that he had thirty-three years’ experience as a landlord and knew how to deal with contractors and not spend money unnecessarily.

¶ 13. Apart from the fact that Cluba fails to cite specific testimony that was the subject of his general Rule 701 objection, we find no merit to his objection to Walsh’s testimony concerning the repair work that was done. Walsh testified as to his personal knowledge of the condition of the premises both when he leased it to Cluba and when defendants vacated it. He also testified that he personally audited the invoices for the work done to repair the premises. Thus, his testimony regarding the repairs was rationally based on his own perceptions, and the trial court did not abuse its discretion in admitting it. See Reporter’s Notes, V.R.E. 701 (noting “broad discretion under this rule to allow ‘lay’ opinions where it is ‘helpful’ ”).

¶ 14. Cluba’s second claim of error is that the trial court abused its discretion by awarding Walsh an unreasonable amount of attorney’s fees under the circumstances of this case, including that: (1) defendants prevailed on a majority of the issues litigated; (2) at least $8000 of the fees awarded to Walsh were for Walsh’s unnecessary and unsuccessful litigation against Good Stuff; (3) Walsh’s attorney acknowledged that Walsh was not likely to prevail on the most prominent claim in his complaint-the alleged lease extension; and (4) the attorney’s fee award was unreasonably disproportionate to the damage award. According to Cluba, the attorney’s fee award ...

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