Town of Lunenberg v. Supervisor and Board of Governors of the Unorganized Towns and Gores
of Essex County, No. 63-10-00 Excv (Morris, Jr., J., Feb. 7, 2005)


[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the
original. The accuracy of the text and the accompanying data included in the Vermont trial court
opinion database is not guaranteed.]


                                   STATE OF VERMONT
                                   ESSEX COUNTY, SS.

                                                    )
Towns of Lunenberg, Canaan,                         )
Brighton, Bloomfield, Victory                       )
and Concord,                                        )
Plaintiffs,                                         )
                                                    )      Essex Superior Court
v.                                                  )
                                                    )      Docket No. 63-10-00 Excv
Supervisor and Board of Governors                   )
of the Unorganized Towns and Gores                  )
of Essex County,                                    )
             Defendants.                            )
                                                    )

                                  DECISION AND ORDER

        This matter is before the Court to resolve remaining issues in a declaration of
rights action regarding sums of money held by Defendants. Specifically, sums of money
held on account by Defendants as of May 18, 2000, when the legal and supervisory
authority of the Defendants over the unorganized towns and gores (“UTG”) of Essex
County was essentially abolished by the Legislature and the latter towns and gores
effectively became their own quasi-municipal entity. In a detailed Memorandum
Decision and Order [hereinafter “Decision”] dated November 20, 2002, the Court
(Pearson, J.) addressed most of the issues presented, but consistent with that Decision and
as agreed by the parties, two remain: First, whether there is justification for the
Defendant supervisors to claim an additional $40,000.00 for fiscal year 1999 because it
had been the practice of the Supervisor to “seed” her checking account with $40,000.00
with money from one fiscal year to provide some money for expenses for the next fiscal
year; and Second, whether the Plaintiff Towns are entitled to interest at the statutory rate

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of 12 per cent per annum on the amount of money in the UTG savings account at the time
of the filing of the complaint as well as the interest accruing in the savings account since
the date of the filing of the complaint. After a series of status conferences, convened to
permit the parties an opportunity to negotiate resolution of the remaining issues, the
parties ultimately submitted a stipulation of facts and memoranda of law on these issues,
for determination by the Court.


1999 Surplus Revenue

       The parties stipulate that the Supervisor’s practice was to begin the year with
$40,000 in the checking account from leftover funds from the prior fiscal year, in order to
provide money for expenses until she began to receive property tax payments. They also
stipulate that as of July 1, 2000, the checking account initial actual surplus for 1999 was
$67,514. From that amount, the Supervisor paid two bills attributable to 1999 expenses:
$17,150 to the Town of Brighton for a school bill, and $26,000 to the Essex County
Sheriff. This left a 1999 surplus of $24,362 in the checking account.1

         The Plaintiffs seek only that latter amount of $24,362 because they acknowledge
the Supervisor’s right to pay bills even after July 1, 2000, provided those bills were
properly attributable to fiscal year 1999. The Defendants argue they are entitled to keep
the sum remaining in the checking account because the former 32 V.S.A. § 4938 granted
the Supervisor such discretion. That statute reads as follows: “During the month of July
each year, upon adequate provision being made for the expenses of all unorganized towns
and gores in Essex County, any surplus revenue . . . shall be distributed by the supervisor .
. . to each organized town and city within that county . . . .” See former 32 V.S.A. § 4983
(emphasis added). The Defendants argue that the term “adequate provision” granted the
Supervisor discretion to withhold funds and create a reserve for any late expenses; in
effect, the discretion to declare – despite the $24,362 remaining from 1999 – that no more
“surplus revenue” existed from that year.

       In the Court’s assessment, the Defendants’ contention is without merit. After a
thorough review of the statutes and the essential claims and arguments, Judge Pearson
concluded that the Legislature intended to set up a “pay as you go” system, “with any
surplus left over after the prior year’s books were closed to be paid to the incorporated
towns of Essex County” during the month of July each year. Decision at 3, ¶ 6. The

1 As to the separate savings account in issue, the parties stipulate that the savings account contained $174,021.24 on
October 26, 2000, the date on which this action was commenced; and that the savings account should have earned an
additional $1,024.80 interest if the Supervisor had not withdrawn and subsequently replaced $42,745.26 to pay the
UTG 1999 education property taxes.

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statutes did not create any provision or authority for a forward-looking reserve or
“emergency” fund. Id. (emphasis added). About the provision the Defendants cite as
authority for the discretionary holdover, Judge Pearson said:

       [T]his provision is clearly backward-looking and related solely to the expenses
       for the year already completed; it hardly authorizes the creation of a
       continuous “emergency fund” whose primary purpose was to provide a
       financial cushion for the ensuing year (or even future years) which had already
       commenced that January 1st. Moreover, it hardly seems this provision would
       provide the necessary authority to segregate $40,000 at the start of every new
       year, and then include that amount as justification for not paying the entire
       surplus otherwise calculated for the preceding year, as the supervisor appears
       to have done in July 2000 for the 1999 (and last) calendar year under the old
       system.

Id. at 9. (emphasis in original). Accordingly, “[i]f there was in fact a surplus under the
former § 4983 for calendar year 1999, Defendants were still obligated to pay it to
Plaintiffs by the end of July 2000.” Id. at 10.

        Here, the Defendants paid two bills after July 1, 2000, stipulated as authorized by
the Plaintiffs. The Defendants’ suggested interpretation – that the Supervisor could
arbitrarily declare an amount of the 1999 surplus revenue as simply not that – is in our
assessment not a plausible construction of the statute. The statute’s plain meaning grants
no such discretion. The term “adequate provision” is plainly linked to “expenses,” and
the Defendants do not dispute that the actual expenses from 1999 have long been known
and paid for. As the remaining $24,362 was not required to cover any further 1999
expenses, the 1999 books must be “netted out” and the remaining surplus be paid to the
Plaintiffs in the amount of their pro rata shares.

Interest

       In his decision, Judge Pearson awarded the savings account as of October 25,
2000, to the Plaintiffs – at the time of his decision, an unknown amount. The parties now
stipulate, and the Court finds as fact, that on October 25, 2000, the savings account
contained $174,021.24. The parties also stipulate that as to the separate checking account
maintained by the Supervisor, as of payment of 1999 expenses, this account had an
approximate balance of $24,364.00.

       The Plaintiffs maintain that they are further entitled to the bank interest earned on
the savings account to the date of the judgment order, as well as prejudgment interest at

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the statutory rate of 12% per annum on the checking account, the savings account, and the
bank interest earned on the savings account. Plaintiffs assert that such prejudgment
interest is payable to them as a matter of right from the date of commencement of this
action, October 26, 2000, The Defendants object to such assessment on grounds that the
right to prejudgment interest does not arise here because the sums sought by the Plaintiffs
were not readily ascertainable.

       There is no question that, as the sums in issue have been determined by the Court
to be properly awarded to the Plaintiff Towns in their principal sum, the Plaintiff Towns
are also clearly entitled to the payment out of any interest that may have accrued in these
accounts over time through application of the prevailing rates paid by the bank on such
depositary accounts. In other words, the present balances in those accounts with any
interest accrued to date of ultimate payment . Such shall be the case with respect to all
“bank” or “earned” interest so accrued here.

      Different considerations apply with respect to the Plaintiff Towns’ request for
assessment of prejudgment interest at the statutory rate of 12%.

        Prejudgment interest may be awarded as damages for detention of money “due to
breach or default.” Reporter’s Notes to 1981 Amendment, V.R.C.P. 54. Both parties
look to the general rule that where the damages are liquidated or readily ascertainable, the
award of prejudgment interest is a matter of right. P.F. Jurgs & Co. v. O’Brien, 160 Vt.
294, 304 (1993). However, under the particular circumstances, sorting through the issues
of entitlement to prejudgment interest and juncture from which such is to be calculated is
not a simple task.

       This case involves somewhat novel issues not customarily presented in a civil
action for damages, as reflected in the parties’ competing and creative arguments on the
subject of assessment of prejudgment interest, and the difficulties that they have
experienced in heroic and difficult mutual effort over time to reach agreement as to the
sums in issue in the referenced accounts.

        Defendants assert that prejudgment interest is not to be assessed as a matter of
right, in that the damages here were not liquidated or readily ascertainable, at the least
until the stipulation of the parties as to the sums in issue. Plaintiffs urge the Court to
conclude that statutory prejudgment interest is to be assessed as a matter of right, with
reference to dicta appearing in Quinlan v. Hamel, 143 Vt. 147, 149 (1983) and d’Arc
Turcotte v. Estate of LaRose, 153 Vt. 196, 199-200 (1989), which overrules Quinlan as to
the characterization and award of prejudgment interest.


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        The “playing field” so to speak, as to the issue of prejudgment interest, is staked
out in the more familiar and commonly experienced territory of tort and contract actions.
Winey v. William E. Dailey, Inc., 161 Vt. 129, 141 (1993) (citing Newport Sand & Gravel
Co. v. Miller Concrete Constr., Inc., 159 Vt. 66, 71 (1992) (contract) and d’Arc Turcotte,
supra. (tort)). Of course, this action for declaratory relief sounds squarely in neither type
of cause.

        In cases other than “traditional” tort and contract matters, the Court has proceeded
more cautiously in addressing the subject of prejudgment interest as either a matter of
right or discretion of the Court. For example, in Remes v. Nordic Group, Inc., 169 Vt. 37
(1999), the Court was called to determine the availability of prejudgment interest upon a
jury award of damages on a claim of promissory estoppel. The Court construed
prejudgment interest as an element of compensatory damages, stating further that “….the
nature of damages afforded must correlate to the nature of the action brought.” Id. At 40.
The complexity presented in Remes was that estoppel is of course an equitable remedy or
cause, not sounding precisely in contract or tort. The Court ultimately concluded that
prejudgment interest was awardable as a matter of the Court’s discretion, declining to
reach the issue of whether prejudgment interest is available as a matter of right in such
cases. The Court did go on to note, though, that “…..in a promissory estoppel case the
question of interest may be more properly committed to the sound discretion of the trial
court than awarded as of right given the mixed legal and equitable nature of the claim.”
Id., at 41. The decision in Remes provides reasonably clear indication, in our assessment,
that prejudgment interest is not necessarily to be awarded in all cases, regardless of cause
of action, even where damages are liquidated or readily ascertained.

        None of the cases cited as authority by either party are addressed to the particular
circumstances of this case. The cases primarily address the issue of assessment of
prejudgment interest in more traditionally cognizable cases in tort and contract, involving
private parties. In Newport Sand & Gravel Co., supra., the Court did hold that
municipalities were not exempt from assessment of prejudgment interest in appropriate
cases, but that was essentially a contract case. However, in Herbert v. Town of Mendon,
159 Vt. 255, 261 (1992), the Court sustained assessment of prejudgment interest in a case
in which development impact fees had been assessed by and paid to the Town under
terms of an ordinance declared by the trial court in its decision to be invalid. Certainly,
the actionable “wrong” in issue in Herbert sounded neither in tort nor contract, and yet
the award of prejudgment interest as a matter of right was sustained by the Court on
appeal. Herbert, supra. at 261.

       Here, the authority of the Court is invoked to declare the rights and responsibilities
of the parties as to the sums presently held in certain accounts that remained upon the

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legislative revision of the former statutory scheme established for supervision of
financing for the public needs of the unorganized towns and gores of Essex County. The
Plaintiffs pray for an order that their pro rata share of said funds be paid over to the
towns, with interest at the statutory rate of 12% per annum. This dispute over distribution
of public funds provided for the needs of the unorganized towns and gores does not have
an easy “fit” with traditional causes sounding in either tort or contract. The record of the
case quite clearly establishes the difficulties experienced by the parties, in their diligent
efforts to sort out the status of the accounts and records in issue in an effort to ascertain
the exact sums in issue, or reasonable approximation of the same. Even so, it would
appear that the referenced precedent establishes that Plaintiffs have a right to the
assessment of prejudgment interest as to the sums in issue in this case, at least from the
time that the sums were “liquidated or ascertained” forward.

        Applying the principle of assessment of prejudgment interest where sums in issue
are “liquidated or capable of ready ascertainment”, it would fairly and reasonably appear
that such did not occur until the date of the parties’ stipulation as to the sums in issue in
this case, on January 28, 2004. Even though by stipulating as to amounts, Defendants did
not concede liability for payment of the sums, or portions thereof, in issue, the sums in
issue were liquidated, “readily ascertained”, and thus in the Court’s assessment, from that
date, consistent with precedent, prejudgment interest at the statutory rate is payable to
Plaintiffs as a matter of right.2

        Given our conclusion as to the point of liquidation or “ready ascertainment”, we
decline to award prejudgment interest as a matter of right to Plaintiffs for any period prior
to that stated. Even though the Court retains capacity to award prejudgment interest as a
matter of discretion, to “avoid injustice,” See, Agency of Natural Resources v. Glens
Falls Ins. Co., 169 Vt. 426, 435 (1999), and even though municipalities are certainly not
exempt from assessment of prejudgment interest in appropriate cases, Herbert, supra. and
Newport Sand & Gravel, supra. at 73, discretionary interest award beyond that specified
as a matter of right is not fairly or reasonably warranted under the particular
circumstances of this case. The parties have been engaged in a dispute over the value and
entitlement to the accounts against the backdrop of statutory interpretation and a long-
standing, previously unchecked practice of setting aside an annual “reserve”, spanning the
tenure of at least two Supervisors. The sums in question are public funds, disputed by


2 d’Arc Turcotte, supra. relied upon by Plaintiffs, appears to establish the date at which damages are liquidated or
capable of ready ascertainment as “the date of the tort” (presumably also, date of breach, or actionable conduct in
issue). However, in Estate of Fleming v. Nicholson, 168 Vt. 495, 500-503 (1998), the Court appears to reject, or at
least modify this juncture as the sole point of ascertainment in holding that interest might accrue from a later time of
valuation of the damages in issue, as determined by the fact finder, to time of judgment. See also, Winey, supra. at
141.

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municipalities under circumstances in which there has been no indication of bad faith, ill
will, or withholding of funds under plainly meritless circumstances. Both the savings
account and the checking account are interest bearing accounts, and our decision is that
Plaintiffs take the benefit of the “bank interest” that has accrued in these accounts over
time. This is not a case in which, in the Court’s assessment, an interest award beyond that
provided as a matter of right is reasonably required to avoid injustice. We decline to
award statutory prejudgment interest, prior to January 28, 2004 as a matter of right or
judicial discretion. Of course, thereafter, it is to be assessed and payable by Defendants.3

       We recognize that under the particular circumstances of this case, if the purpose of
award of prejudgment interest is to compensate a Plaintiff for the loss of use of money
that would have otherwise been available, the assessment of interest at the statutory rate
of 12% may be perceived as unduly punitive. However, as we construe the cases, we are
obliged to assess prejudgment interest as a matter of right from January 28, 2004 forward.
If assessment of such interest for this period of time were a matter committed solely to
our discretion, rather than a matter of right, we would decline to assess prejudgment
interest in our assessment of the particular circumstances of this case. To the extent that
assessment of prejudgment interest is a matter committed to our discretion at any
juncture, we decline to do so in consideration of the particular circumstances presented.

                                                          ORDER

       The Plaintiff Towns4 shall have payment of their pro rata shares of the balances of
the referenced savings account and checking account, with all “bank” or “earned” interest
accrued on each through date of payment. The referenced sums shall be distributed to the
Plaintiff Towns pro rata, according to the population-based formula established and
observed under the previously applicable statutes.5

       Plaintiffs’ demand for prejudgment interest is GRANTED IN PART, with
prejudgment interest accrued at the statutory rate from and including January 28, 2004 to
date of entry of judgment herein; Plaintiff’s demand for prejudgment interest is DENIED

3 Quite apart from the established criteria governing award of prejudgment interest in this case, in consideration of
the legislative history described in Judge Pearson’s decision, and the apparent intentions of the legislature with
respect to treatment of revenues and expenditures of the Unorganized Towns and Gores over the years and into the
future, it would appear contrary to legislative intent to burden the Gores in the particular circumstances here with
substantial financial burdens that would accrue in any discretionary assessment of prejudgment interest at the
statutory rate of 12% retroactive to date of filing of the Plaintiffs’ complaint.
4 The “non-Plaintiff” organized Towns of Essex County are: Brunswick, East Haven, Granby, Guildhall,
Lemington, Maidstone, and Norton. 24 VSA § 6. These Towns are not parties; however, under the terms of the
Decision given in this case, all organized Towns in the County shall receive pro rata distribution of the funds in
issue, with accrued “bank interest” and prejudgment interest as indicated. See Decision (Pearson, J.) at 11.
5 Former 32 V.S.A. § 4983.

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IN PART, in that prejudgment interest shall not be assigned, assessed, or payable, as a
matter of right or discretion of the Court, prior to that date.

       To address the problem presented in Plaintiffs’ memorandum (pp. 4-6) as to the
accumulation of “bank interest” in the accounts in relation to application of statutory pre-
judgment interest, the Court orders that prejudgment interest at the statutory rate of 12%
shall accrue as to the balances in the referenced accounts from January 28, 2004 forward.
These balances shall of course include all “bank” or “earned” interest accrued as of that
date.

       Plaintiffs’ counsel shall prepare a judgment order, consistent with the decision
given herein, for review and approval by the Court.

       DATED at Guildhall, this ____ day of February, 2005.

                                                  ________________________
                                                  Walter M. Morris, Jr.,
                                                  Presiding Judge




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