Heindel & Noyes, Inc. v. Tilly

Heindel & Noyes, Inc. v. Tilly, No. S0360-11 CnC (Tomasi, J., Sept. 14, 2011)
[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
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STATE OF VERMONT
SUPERIOR COURT CIVIL DIVISION
Chittenden Unit Docket No. S0360-11 CnC
)
Heindel & Noyes, Inc., )
)
Plaintiff/Appellant, )
v. )
)
David Tilly, )
)
Defendant/Appellee. )
Ruling on Small Claims Court Appeal
Plaintiff/Appellant Heindel & Noyes, Inc. (H&N) appeals from a
judgment entered in its favor and against Defendant/Appellee David Tilly.
The dispute arises out of certain engineering services provided by H&N to
Tilly in connection with the development of a subdivision in Mt. Holley,
Vermont. H&N claimed that Tilly owed it $2.916.75 for the work it
performed. Those amounts are reflected on three invoices submitted by H&N
to Tilly. Tilly argued that the sums were not owed, that the amounts
included work performed concerning a parcel that was not actually within the
proper scope of work, and that responsibility for the erroneously performed
work should be placed with H&N. The Small Claims Court awarded
judgment to H&N for the full sum it sought as damages, $2,916.75, plus court
costs of $78.75.
In the instant appeal, which required the expenditure of another
$105.00 in court costs, H&N claims that that the Small Claims Court erred in
not awarding it interest and/or penalties and attorneys’ fees as is provided for
under the Prompt Payment Act. 9 V.S.A. § 4002-4009. Tilly disagrees and
asserts that the Court specifically chose not to award such relief based on the
equities of the case. For the following reasons, the Court concludes that
Vermont law requires H&N to receive additional relief.
Standard of Review
An appeal from a small claims judgment is heard and decided “based
on the record made in the small claims procedure.” 12 V.S.A. § 5538. The
“appeal is limited to questions of law.” V.R.S.C.P. 10(d). If the Small Claims
Court has applied the correct law, this Court will affirm its “conclusions if
they are reasonably supported by the findings.” Maciejko v. Lunenburg Fire
Dist. No. 2, 171 Vt. 542, 543 (2000) (mem.). In turn, the findings of fact must
be supported by the evidence, Brandon v. Richmond, 144 Vt. 496, 498 (1984),
and such findings “must be construed, where possible, to support the
judgment,” Kopelman v. Schwag, 145 Vt. 212, 214 (1984). The Court’s review
of the Small Claims Court’s legal conclusions, however, is “non-deferential
and plenary.” Maciejko, 171 Vt. at 543 (quoting N.A.S. Holdings, Inc. v.
Pafundi, 169 Vt. 437, 439 (1999)).
Analysis
On appeal, H&N claims that, based on the judgment in its favor, it is
legally entitled to receive penalties for late payments on invoices, interest on
the unpaid invoices, and attorneys’ fees. For reasons described below, the
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Court agrees that H&N is entitled to reasonable attorneys’ fees and interest,
but disagrees that it is entitled to penalties.
First, the Prompt Pay Act (the “Act”) requires that attorneys’ fees be
awarded to the “substantially prevailing party.” The court does retain
discretion to determine which, if any, party is the substantially prevailing
party in any given case. Here, the Small Claims Court did not specifically
address whether H&N was the substantially prevailing party. Given that the
Small Claims Court awarded H&N the full amount of the actual damages
that it sought in bringing the suit, the Court determines that it substantially
prevailed in this case. Any other determination would not be supported by
the terms of the judgment.
Tilly correctly notes that the Small Claims Court chose not to award
fees and interest based on its conclusion that some of the blame for the
dispute between the parties rested with H&N. Nonetheless, there is often
merit on both sides of civil cases. That H&N may have contributed to cause
the underlying conflict does not change the fact that it fully prevailed in its
substantive claim for relief. Under such circumstances, the Prompt Pay Act
requires that H&N be awarded its reasonable attorneys’ fees.
As the Small Claims Court did not consider the reasonableness of the
attorneys’ fees claimed by H&N, a remand typically would be required for
consideration of that issue. In this case, however, a remand is not required.
At trial, H&N submitted documentation supporting its claim for attorneys’
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fees in the amount of $1,395. During the argument on appeal, Tilly conceded
that, were the Court to award fees, he had no basis to contest and did not
request a hearing to determine the reasonableness of the $1,300 sought by
H&N. Accordingly, the Court awards H&N $1,395 in attorneys’ fees.
Second, for similar reasons, the Small Claims’ Court’s failure to award
interest cannot be sustained. Under Vermont law prejudgment “’interest is
awarded as of right when the principal sum recovered is liquidated or capable
of ready ascertainment and may be awarded in the court’s discretion for other
forms of damage.’” Windsor Sch. Dist. v. State, 2008 VT 27, ¶30, 183 Vt. 452,
469 (quoting Newport Sand & Gravel Co. v. Miller Concrete Constr., Inc., 159
Vt. 66, 71 (1992)). In this instance, the parties disputed the sums owed
under the invoices, and there is a serious question whether that dispute
fatally undermines H&N’s request for interest as a matter of general law.
Windsor Sch. Dist., 2008 VT 27, ¶31, 183 Vt. at 469 (dispute as to amount
owed can defeat claim to mandatory interest).
The Court need not address that issue, however, because H&N’s
principal claim for interest is not based on general principles of Vermont law
but on the terms of the contract between the parties. The instant contract
provided that interest on the unpaid portions of invoiced amounts would
accrue at the rate of 1.5% per month. H&N has calculated the interest due
on the three invoices at issue to be $886.85. Tilly has not disputed those
calculations. Accordingly, since H&N prevailed on its claim for the principal
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amounts owed under both invoices, H&N was entitled to interest in the
amount of $886.85 on its claims.
Finally, H&N seeks penalties of 1% per month under the Prompt Pay
Act. The Act requires that statutory penalties be imposed to the extent an
owner’s failure to make prompt payment to a contractor was not based on a
good faith dispute concerning the amounts owed. 9 V.S.A. § 4007(b).
Further, to the extent an owner withholds payment based on a good faith
dispute, the amount withheld must bear a “reasonable relation” to the sums
that are in dispute. Id. While the Small Claims Court’s findings were not
detailed, it is evident that it concluded that Tilly had a good faith dispute
with H&N regarding the amounts claimed and that Tilly did not withhold
funds beyond those that were disputed. The Court concludes those
determinations are appropriate and supported by the record.
H&N asserts that Tilly is not entitled to rely upon that good faith
dispute because he did not contest the accuracy of the underlying invoices in
writing within ten days of receipt as required by 9 V.S.A. § 4004. Tilly
contends that he made an oral protest to H&N concerning the invoices but
did not contest them in writing. The Court concludes that Section 4004 does
not prohibit an owner from contesting the merits of an invoice under the
circumstances presented in this case. Section 4004, though broadly worded,
is directed principally at “errors in documentation.” Here, Tilly made no
claim that the invoices were defective or deficient. Instead, he contested the
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validity of the amounts charged as a substantive matter. In addition, H&N
did not dispute that Tilly informed H&N’s representative of his position
regarding the disputed charges. Section 4004 should not be interpreted to
preclude an owner from contesting invoiced amounts under such facts.
Conclusion
Based on the foregoing, the judgment of the Small Claims Court is
affirmed in part and reversed in part. H&N is awarded the following relief:
1. Damages based on the disputed invoices in the amount of $2,916.75.
2. Contract-based pre-judgment interest in the amount of $886.85.
3. Attorneys’ fees in the amount of $1,395.
4. Court costs in the amount of $183.75.
Dated at Burlington, Vermont this ____ day of September, 2011.
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Timothy B. Tomasi
Superior Court Judge
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