Bissonette v. Southland Log Homes, Inc., No. S0901-01 CnC (Katz, J.,
Feb. 4, 2004)

[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
Chittenden County, ss.:



ARTHUR E. & JUDY L. BISSONETTE

v.

SOUTHLAND LOG HOMES, INC., W.R.
PRESTON & CO. INC., WARD R.
PRESTON, and RICHARD PRESTON



                                  ENTRY

       This is a summary judgment motion in a construction contract case.
Defendant Richard Preston moves to dismiss all claims against him on the
basis that he is not personally liable for any damages caused by his work or
advice as he was an agent and officer of W.R. Preston & Co., Inc.
Homeowners dispute this denial by citing numerous dealings with Preston
where he did not disclose his corporate affiliation. As well, they argue that
Preston remains liable for damages stemming from his negligence.

        Homeowners initially contacted Richard Preston when they wanted
to purchase a log cabin home. Acting as a sales representative for
Southland Homes, Preston facilitated a contract between homeowners and
Southland for a log cabin kit. At the same time, Preston, or one of the
employees at W.R. Preston & Co., Inc., drew up a “Proposal” outlining a
plan for the company to act as general contractor. The “Proposal” is signed
by Richard Preston without any title, but the document is captioned with
W.R. Preston & Co. Inc. and their business address. Homeowners do not
deny that it was so captioned when they received the “Proposal.” Despite
homeowners’ signed acceptance of the “Proposal,” the plan was never
enacted, and Homeowners assembled the cabin themselves, acting as their
own general contractor. Preston apparently visited the construction site
several times to offer advice and to watch the work progress. Through
conversations with homeowners, Preston suggested that they change the
roof of the house from its standard A-frame to a gambrel style to give the
second floor more space. Homeowners orally accepted this as a proposal
and allowed Preston to design and build the roof frame. For this work,
homeowners were billed through unsigned invoices captioned with the
name “W.R. Preston & Co. Inc” and its address. In return, they made all
checks payable to “W.R. Preston & Co. Inc.” Following completion of the
log house, homeowners become dissatisfied with the quality of the house
and its alleged structural flaws.

       The issue of Preston’s liability for his work on the Bissonette home
is premised on his liability as an agent for W.R. Preston & Co. Inc. As an
officer of the corporation, Preston is considered its agent as a matter of law.
2 W.M. Fletcher et al., Fletcher Cyc. Corp. § 434 (2002). If performed
under the authority granted to him by W.R. Preston & Co. Inc., Preston’s
acts are imputed to the principal. 18B Am. Jur. Corporations §§ 1523,
1525 (1985). To escape liability for these actions, however, Preston must
establish that he fully disclosed this relationship with the principal to
homeowners. Proper disclosure requires Preston to demonstrate that the
homeowners knew or should have known the identity of his principal and
that Preston was working on its behalf in his dealings with them. Douglas
v. O’Connell, 139 Vt. 427, 429 (1981); Restatement (Second) of Agency §
4 (1958).

        Homeowners do not deny that Preston disclosed his relationship with
Southland Homes and is not personally liable to them for the sale of the
home or any dispute arising from the initial sale transaction. Both the
contract for the Southland house and Preston’s dealings with homeowners
strongly support this position. Homeowners pinpoint their argument for
liability to their subsequent dealings with Preston concerning the changes to
the roof and its framing. From the evidence, however, we can conclude
that homeowners had actual notice of W.R. Preston as an agent for the
principal corporation. Unlike the plaintiffs in either Douglas v. O’Connell,
139 Vt. 427 (1981), or A.G. Anderson Co., Inc. v. T.C. Industries, Inc., 135
Vt. 522 (1977), homeowners were given and signed, in the case of the
“Proposal,” documents stating clearly that W.R. Preston & Co. was
incorporated. By including “Inc.” on every invoice and document, Preston
put homeowners on notice that W.R. Preston & Co. was incorporated and
not merely a trade name. Cf. Douglas, 139 Vt. at 429 (“He could just as
easily have penned in the word ‘Inc.’ after ‘Top of Square’ . . .”).
Homeowners tacitly acquiesced to this by making each check payable to
W.R. Preston & Co. Inc. See Am. Plumbing Co., Inc. v. Hadwin, 483 So.
2d 169, 173 (La. App. 1986) (affirming notice of agency when
subcontractor agreed to bill and receive payments from a corporation).
Furthermore, despite his personal dealings with the homeowners, Preston
never made any indication that he intended to be held personally liable for
the contract or that the work was outside his role as vice-president.
Ridgewells Caterer, Inc. v. Nelson, 688 F. Supp. 760, 762–63 (D.D.C.
1988). While some of Preston’s informal dealings with homeowners when
taken individually permit a counter-interpretation, they do not, in context,
contradict or weaken the notice contained in the initial proposal, billing
records, and payment choices. Any confusion homeowners may have had
became their responsibility after notice was given. 3A W.M. Fletcher et al.,
Fletcher Cyc. Corp. § 1118, at 162 (2002).

        Homeowners oppose Preston’s motion for summary judgment on a
second ground of negligence based on the premise that tortfeasors are liable
for their personal torts. Costa v. Katsanos, 163 Vt. 586, 588 (1995).
Homeowners, however, have not demonstrated either physical injury or
property damage that would allow this claim to sound in tort. The damages
claimed by homeowners are defects within the house itself. While the
source of these problems is disputed, the damage is not. Such loss is purely
economic since it comes directly from the subject of the contract, rather
than some unanticipated physical injury to person or property. Springfield
Hydroelectric Co. v. Copp, 172 Vt. 311, 314 (2001). Homeowners’
complaint is that they did not receive the house that they bargained for, and
their remedy is to receive the money that will allow them to repair the
house to what it should have been. This is a contract issue and will not
profit from mixing tort theories. Therefore, the economic loss rule governs
and prohibits any negligence action against Preston for his work.

     Based on the foregoing, defendant Richard Preston’s motion for
summary judgment is granted. The claim against him shall be dismissed.
Dated at Burlington, Vermont________________, 20_______.




                              ________________________
                              Judge
