Howe Center, Ltd. v. Suburban Propane, L.P.

Howe Center, Ltd. v. Suburban Propane, L.P., No. 702-9-08 Rdcv (Cohen, J., Jan. 28, 2010)
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STATE OF VERMONT
RUTLAND COUNTY
)
HOWE CENTER, LTD., ) Rutland Superior Court
) Docket No. 702-9-08 Rdcv
Plaintiff, )
)
v. )
)
SUBURBAN PROPANE, L.P., D/B/A )
SUBURBAN PROPANE, )
)
Defendant )
DECISION ON DEFENDANT’S MOTION FOR PARTIAL SUMMARY
JUDGMENT, FILED JULY 2, 2009
This matter came on before the Court on Defendant Suburban Propane, L.P.’s
(Suburban) Motion for Partial Summary Judgment, filed July 2, 2009. Plaintiff Howe
Center LTD. (Howe) brought claims for breach of contract, fraud, breach of the covenant
of good faith, and action for accounting, arising out alleged breaches by Suburban of
contracts for the supply of propane gas and for the management of Howe Center’s
propane distribution system.
Plaintiff Howe Center, LTD. is represented by Michelle A. Kenny, Esq. and
Rodney E. McPhee, Esq. Defendant Suburban Propane, L.P. is represented by William B.
Miller, Jr., Esq.
Summary Judgment Standard
Summary judgment is appropriate where there is no genuine issue of material fact
and the party is entitled to judgment as a matter of law. V.R.C.P. 56(c)(3). In response to
an appropriate motion, judgment must be rendered "if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, ... show that
there is no genuine issue as to any material fact and that any party is entitled to judgment
as a matter of law." V.R.C.P. 56(c)(3). In determining whether a genuine issue of
material fact exists, the court accepts as true allegations made in opposition to the motion
for summary judgment, provided they are supported by evidentiary material. Robertson v.
Mylan Labs, Inc., 2004 VT 15, ¶ 15, 176 Vt. 356. The nonmoving party then receives the
benefit of all reasonable doubts and inferences arising from those facts. Woolaver v.
State, 2003 VT 71, ¶ 2, 175 Vt. 397. Furthermore, where, as here, "the moving party does
not bear the burden of persuasion at trial, it may satisfy its burden of production by
showing the court that there is an absence of evidence in the record to support the
nonmoving party's case. The burden then shifts to the nonmoving party to persuade the
court that there is a triable issue of fact." Ross v. Times Mirror, Inc., 164 Vt. 13, 18
(1995) (internal citations omitted).
BACKGROUND
In October 1989, Howe entered into two contracts with Suburban. One was an
LP-Gas Sales Agreement (sales agreement) for the supply of liquid propane to Howe’s
Rutland, Vermont commercial real estate development, the Howe Center, and for the
construction of Howe Center’s propane infrastructure. The other was a Managing Agency
Agreement (managing agreement) which set forth Suburban’s responsibilities for
managing Howe Center’s propane distribution system.
In the sales agreement, Howe agreed to pay $.6333 per gallon of liquid propane.
The sales agreement itemized the $.6333 price per gallon as follows:
Managing Agency Fee, Per Gallon $.0750
Per Gallon Construction Add on $.1610
Price Per Gallon, Subject to Posted Rate, Selkirk, NY $.3973
Total $.6333
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The Posted Rate, Selkirk, NY, is also known as the “Selkirk Rate” because
Selkirk is the New York town where a major propane pipeline ends. According to the
president of Howe, Joseph Giancola, Suburban had told him specifically that the price per
gallon propane ($.3973) would be the posted Selkirk Rate. Further, according to Mr.
Giancola, Suburban representatives told him that because Suburban was so big, it could
obtain propane for a cost less than the Selkirk Rate, charge the Selkirk Rate, and still
make a profit.
In January 1993, Howe received a handwritten note from Suburban which stated:
“Tina – my appologies [sic] again – please disregard full invoices 939286 and 939293 for
transport Received 12/24/92. I keep leaving out the .06 add on profit margin to your price
per gallon. I have written out the formula for myself, so this not happen again. Thanks for
your patience – Deb.” Suburban invoice No. 939293 states: “Gas priced at incorrect price
per gallon. price [sic] did not include .06 per gallon profit margin.” The “Tina” referred
to in the handwritten note is Tina Graves of the Howe Center billing department.
At some point in 2002 or 2003, Mr. Giancola discovered that Suburban was
charging Howe a $.06 margin for the delivery of propane. This $.06 margin was included
in the $.3973 price per gallon, which was subject to the Selkirk Rate.
Mr. Giancola had numerous conversations with Suburban manager Robert
Munukka regarding whether it was appropriate for Suburban to charge Howe a $.06
margin for the delivery of propane. No later than then end of 2003, Howe and Suburban
agreed to a reduced margin of $.03 per gallon of liquid propane. Suburban’s margin
remained at $.03 until Howe terminated the Sales Agreement in August 2008.
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Another issue concerning the sales agreement arose in 1997—Howe became
aware of interest charges being applied to the promissory note in relation to the
construction of Howe Center’s propane distribution system. In 2000, Mr. Giancola met
and discussed the interest charges with Mr. Manukka and David Macaid, then Northeast
Regional Vice President of Suburban. According to Mr. Giancola, at that meeting, Howe
and Suburban agreed that the contract for the installation and payment of the fuel
distribution system was paid in full and that Suburban would provide Howe with a
truckload of propane as reimbursement for the interest.
Almost every year thereafter, Mr. Giancola discussed the interest issue with
Suburban and was told each time by Suburban that it would “fix the problem.”
According to Mr. Giancola, he had several meetings with Mr. Manukka’s successor at
Suburban, but later meetings were canceled while Suburban continued to assure him that
the interest matter would be settled. At some point between 2002 and 2004, Mr. Giancola
met with Chris Daly, the regional vice-president for Suburban, to negotiate the interest
overcharges. Mr. Daly promised to provide Howe with a 30,000 gallon propane tank in
consideration of the interest charges. Suburban never delivered the tank or the truckload
of propane gas.
The managing agreement set forth Suburban’s duties in managing Howe Center’s
propane distribution system. These duties included, inter alia, reading meters, invoicing
Howe Center tenants, collecting and receiving tenants’ monthly payments, and
forwarding security deposits to Howe. In August 2007, Howe terminated the managing
agreement.
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On September 16, 2008, Howe filed the instant Complaint, alleging five counts:
(I) breach of the sales agreement by Suburban for charging Howe more than the posted
Selkirk Rate from 1990-2008; (II) breach of the managing agreement by Suburban for
failing to adhere to its duties and obligations under the contract; (III) breach of the
implied covenant of good faith and fair dealing by Suburban because it concealed the
actual amount charged to Howe in excess of the Selkirk Rate and because it failed to
notify and reimburse Howe for interest charged in the construction of the LP-Gas
distribution system; (IV) fraud by Suburban because it intentionally and fraudulently
concealed facts regarding its obligation to reimburse Howe for interest charged in the
construction of the LP-Gas distribution system and for overcharging Howe for propane
gas, above the Selkirk rate; and (V) action for accounting seeking a full accounting of all
accounts held by Suburban.
In its Motion for Partial Summary Judgment, Suburban argues that that (Count I)
Howe’s claim for breach of the sales agreement is barred by the time limitations set forth
in the Uniform Commercial Code. Suburban also argues that (Count IV) the fraud claims
related to interest charged in the construction of the gas distribution system and the
overcharging for propane are both time barred by 12 V.S.A. § 511. Suburban further
argues that (Count II) breach of the managing agreement and (Count V) action for
accounting are both time barred regarding events prior to September 16, 2002, pursuant
to 12 V.S.A. § 511. Finally, Suburban argues that Count (III) claims for breach of the
covenant of good faith and fair dealing are time barred and duplicative.
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DISCUSSION
Count I – Breach of Sales Agreement
The sales agreement was a contract between Suburban and Howe for the sale and
delivery of propane gas. Therefore, the contract was for the sale of goods and is governed
by the terms of the UCC. See Levin v. Hoffman Fuel Co., 462 N.Y.S.2d 195, 196 (N.Y.
App. Div. 1983) (holding that contract which called for sale and delivery of heating oil
was “predominately” one for the sale of goods).
An action for breach of any contract for sale must be commenced within four
years after the cause of action has accrued. 9A V.S.A. § 2-725(1). The cause of action
accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of
the breach. 9A V.S.A. § 2-725(2). “The burden of proving that a claim is barred by the
statute of limitations rests on the party asserting the defense.” Fucci v. Moseley & Fucci
Associates, Ltd., 170 Vt. 626, 627 (2000) (mem.) (citing Monti v. Granite Savings Bank
& Trust Co., 133 Vt. 204, 209 (1975)).
Even disregarding the 1993 invoice, it is undisputed that at some point in 2002 or
2003, Mr. Giancola discovered that Suburban was charging Howe a $.06 margin for the
delivery of propane, included in the rate subject to the posted Selkirk Rate. Furthermore,
it is undisputed that no later than the end of 2003, Howe and Suburban agreed to a
reduced margin of $.03 per gallon of liquid propane. Suburban’s margin remained at $.03
until Howe terminated the sales agreement.
Thus, not only is it undisputed that the alleged breach occurred more than four
years prior to the commencement of the action, but it is also undisputed that Howe had
knowledge of the breach more than four years prior to commencement. Howe did not file
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its complaint until September 16, 2008. Even accepting as true Howe’s allegations made
in opposition to the motion for summary judgment, see Robertson v. Mylan Labs, Inc.,
2004 VT 15, ¶ 15, and giving Howe the benefit of all reasonable doubts and inferences
arising from those facts, see Woolaver v. State, 2003 VT 71, ¶ 2, there is no genuine issue
of material fact and Suburban is entitled to judgment as a matter of law as to Howe’s
claim for breach of the sales agreement. See V.R.C.P. 56(c)(3).
Count II – Breach of the Managing Agreement; Count V – Action for Accounting
Howe claims that Suburban breached the managing agreement by failing to
properly conduct its duties, including, inter alia, reading meters, invoicing and collecting
receivables in a timely manner, properly managing the supply of propane to the tenants,
and maintaining the gas supply equipment. In bringing an action for accounting, Howe
seeks a full and accurate accounting of all accounts held by Suburban arising out of its
duties under the managing agreement.
Suburban argues that any breach of the Managing Agreement prior to September
16, 2002, is time barred pursuant to 12 V.S.A. § 511. In response, Howe asserts that it did
not discover Suburban’s alleged mismanagement until 2007, at the earliest.
Title 12, V.S.A. § 511 sets forth that a civil action shall be commenced within six
years after the cause of action accrues and not thereafter. “[A] cause of action for breach
of contract accrues when the breach occurs and not when it is discovered.” Alexander v.
Morrissey, 137 Vt. 20, 24 (1979). Therefore, it is irrelevant when Howe discovered
Suburban’s alleged mismanagement. Any claim that Suburban breached the managing
agreement prior to September 16, 2002, is barred by the six-year time limitation set forth
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in 12 V.S.A. § 511. Likewise, any claim for accounting prior to September 16, 2002, is
also barred by 12 V.S.A. § 511.
Count IV – Fraud
Howe asserts two separate bases for fraud. First, that Suburban intentionally and
fraudulently concealed facts concerning its obligation to reimburse Howe for the interest
charged in the construction of the LP-Gas distribution system. Second, that Suburban
intentionally and fraudulently concealed facts concerning its overcharging of Howe for
propane gas, above the Selkirk Rate.
Howe’s claims for fraud are governed by the six-year time limitation set forth in
12 V.S.A. § 511. The Vermont Supreme Court has stated the well-settled general rule
governing accrual of actions:
a cause of action is generally said to accrue upon the
discovery of facts constituting the basis of the cause of
action or the existence of facts sufficient to put a person of
ordinary intelligence and prudence on inquiry which, if
pursued, would lead to the discovery. Thus, the statute of
limitation begins to run when the plaintiff has notice of
information that would put a reasonable person on inquiry,
and the plaintiff is ultimately chargeable with notice of all
the facts that could have been obtained by the exercise of
reasonable diligence in prosecuting the inquiry.
Agency of Natural Resources v. Towns, 168 Vt. 449, 452 (1998) (internal quotations and
citations omitted).
Concerning Howe’s claim for fraud regarding reimbursement of the interest
charged in the construction of the LP-Gas distribution system, it is undisputed that in
1997 Howe became aware of interest charges being applied to the promissory note in
relation to the construction of Howe Center’s propane distribution system. In 2000, Mr.
Giancola met and discussed the interest charges with representatives from Suburban.
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Thus it is undisputed that Howe was put on inquiry no later than 2000. The statute of
limitation began to run at that time and Howe did not file suit until September 2008. See
Towns, 168 Vt. at 452 (stating “the statute of limitation begins to run when the plaintiff
has notice of information that would put a reasonable person on inquiry…”).
Howe argues that equitable estoppel calls for the tolling statute of the statute of
limitations, due to Suburban’s promises to “fix the problem” regarding the interest issue.
The Court does not agree.
In this case, equitable tolling is applicable only if Suburban actively misled Howe
or prevented Howe “in some extraordinary way from filing a timely lawsuit.” Lodge at
Bolton Valley Condominium Ass’n v. Hamilton, 2006 VT 41, ¶ 8, 180 Vt. 497. A party
asserting equitable estoppel must satisfy the following elements: (1) that the party to be
estopped knew the facts; (2) that the party being estopped intended that its conduct would
be acted upon; (3) that the party being estopped was ignorant of the true facts; and (4)
that the party asserting estoppel detrimentally relied on the other party’s conduct. Id.
Howe has presented no evidence that Suburban intended its conduct would be
acted upon or that Howe detrimentally relied on Suburban’s conduct. Howe asserts that
Suburban promised to “fix the problem” regarding the interest issue by promising first a
truckload of propane gas and next a propane tank, neither of which was ever delivered.
Even taking these assertions as true, there is no evidence that limitations was ever
discussed in negotiations—there was neither an express nor an implied agreement for
Suburban to waive the limitations period. See Beecher v. Stratton Corp., 170 Vt. 137, 140
(1999) (finding equitable estoppel inappropriate where party never asked adversary,
either orally or in writing, to waive or extend the statute of limitations). Furthermore,
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there is no evidence that Howe was ignorant of the true facts regarding its fraud claim.
Howe could have filed its suit at anytime and chose not to until September 2008.
Therefore, equitable estoppel is inappropriate and Howe’s claim for fraud based on the
interest charged on the promissory note is barred by the statute of limitations set forth in
12 V.S.A. § 511.
Howe also alleges that Suburban intentionally and fraudulently concealed facts
concerning its overcharging of Howe for propane gas, above the Selkirk Rate. However,
Howe received a note from Suburban in January 1993, regarding the $.06 profit margin.
As such, Howe had “notice of information that would put a reasonable person on
inquiry,” see Towns, 168 Vt. at 452, and the statute of limitations began to run at that
point. Howe did not file suit until September 2008; therefore, Howe’s claim for fraud
relating to the alleged overcharging for propane gas also is barred by the six-year time
limitation set forth in 12 V.S.A. § 511.
Count III – Breach of the Covenant of Good Faith and Fair Dealing
Howe claims that Suburban breached the implied covenant of good faith and fair
dealing present in the sales agreement by charging Howe in excess of the posted Selkirk
Rate and by failing to notify and reimburse Howe for the interest charged in the
construction of the gas distribution system. Howe’s claim for breach of the implied
covenant of good faith and fair dealing relies on the same alleged conduct by Suburban as
Howe’s claims for breach of contract and fraud.
The Court “will not recognize a separate cause of action for breach of the implied
covenant of good faith and fair dealing when the plaintiff also pleads a breach of contract
based upon the same conduct.” See Monahan v. GMAC Mortgage Corp., 2005 VT 110,
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¶ 54 fn. 5, 179 Vt. 167 (emphasis in original) (citing Cary Oil Co. v. MG Ref. & Mktg.,
Inc., 90 F. Supp. 2d 401, 419 (S.D.N.Y.2000) (stating “a claim for breach of the implied
covenant will be dismissed as duplicative if the conduct allegedly violating the implied
covenant is also the predicate for breach of the underlying contract.”)).
Furthermore, Howe had “notice of information that would put a reasonable person
on inquiry,” as to the alleged overcharging of the Selkirk Rate in 1993, and as to the
interest issue no later than 2000. See Towns, 168 Vt. at 452. Therefore, even if the claim
for breach of implied covenant was not duplicative, it would still be barred by the six-
year time limitation set forth in 12 V.S.A. § 511.
ORDER
Defendant Suburban Propane L.P.’s Motion for Partial Summary Judgment, filed
July 2, 2009, is GRANTED.
Dated at Rutland, Vermont this _____ day of ________________, 2010.
____________________
Hon. William Cohen
Superior Court Judge
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