Heindel & Noyes, Inc. v. Tilly, No. S0360-11 CnC (Tomasi, J., Sept. 14, 2011)

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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.



                                              -------------------------------
                                              Timothy B. Tomasi
                                              Superior Court Judge




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