Cunavelis v. Giancola d/b/a Edgewood Entm’t, No. 731-10-11 Rdcv (Teachout, J., Apr. 6, 2012)

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                                                      STATE OF VERMONT

SUPERIOR COURT                                                                                                 CIVIL DIVISION
Rutland Unit                                                                                                 Dckt. # 731-10-11 Rdcv


JOHN CUNAVELIS and
MT. MANSFIELD MEDIA, INC.,
     Appellants

           v.

DAVID GIANCOLA
d/b/a EDGEWOOD ENTERTAINMENT,
       Appellee

                                                   SMALL CLAIMS APPEAL
                                                     Decision and Opinion

        There are cross-appeals in this case from a judgment of the Small Claims Court dated
September 27, 2011. The Small Claims Court entered judgment for Plaintiff David Giancola
against Defendant John Cunavelis in the amount of $2,463.75. On appeal, Mr. Cunavelis argues
that the Small Claims Court erred by entering judgment against him personally instead of against
Mt. Mansfield Media, Inc., ignoring his evidence, showing bias toward Mr. Giancola, and
miscalculating damages. In his cross-appeal, Mr. Giancola argues that the Small Claims Court
erred by not finding additional damages. Oral argument was heard on January 17, 2012. John
Cunavelis was present on behalf of himself and his business corporation, Mt. Mansfield Media,
Inc. David Giancola was present and represented himself as the sole proprietor of Edgewood
Entertainment.

        It is not the function of the Superior Court to substitute its own judgment for that of the
Small Claims Court Judge. Rather, the role of the Superior Court is to determine whether or not
the evidence presented at the hearing supports the facts that the Judge decided were the credible
facts, and whether or not the Judge correctly applied the proper law and procedure.

Proceedings Before Small Claims Court

        Mr. Giancola, on behalf of Edgewood Entertainment, filed a small claims complaint on
May 10, 2011, alleging that Mt. Mansfield Media, Inc. and Mr. Cunavelis breached a lease for
motion picture lighting equipment by refusing to pay for the equipment while also refusing to
return the equipment. The complaint sought damages both for unpaid rental fees and for the
value of the equipment that Mt. Mansfield Media retained. Mr. Cunavelis, on behalf of Mt.
Mansfield Media, filed an answer stating that the parties had entered into an oral lease-to-
purchase agreement.
         The Small Claims Court held a hearing on September 14, 2011. At the start of the
hearing, the Small Claims Judge informed both parties that she knew Mr. Giancola’s parents.
She further stated that she was aware that Mr. Giancola was their son, but that she did not have
any type of relationship with Mr. Giancola. She went on to state that she did not believe her
relationship with Mr. Giancola’s parents would pose any type of problem for her in deciding the
case, but that she wanted to acknowledge it for the record and to give Mr. Cunavelis the
opportunity to object if he desired. Mr. Cunavelis responded that he had no problem with the
judge and he agreed that it would not be an issue. He did not request that the judge recuse
herself.

       The Small Claims Judge next inquired about whether this case was being brought
between business entities or individuals. Mr. Giancola responded that he put both the business
names and the individual names in the complaint because he did not know what would be proper.
Mr. Cunavelis then moved to have himself dismissed as a defendant because the suit pertained to
business contracts on which only Mt. Mansfield Media, Inc. was liable. The court stated that it
would wait and see how the evidence came in before ruling on the motion to dismiss Mr.
Cunavelis.

        The evidence included much conflicting testimony. The two key areas of disagreement
were whether Mt. Mansfield Media continued to retain any of Edgewood Entertainment’s
equipment and whether the parties reached an oral “rent-to-own” contract allowing for Mt.
Mansfield Media to eventually gain title to Edgewood’s equipment. Mr. Giancola, on the one
hand, and Mr. Cunavelis and his fellow employee Brian Stephenson, on the other, presented very
different evidence with regards to these two questions.

        Mr. Giancola testified that both parties desired a flexible arraignment whereby Mt.
Mansfield Media would pay a fixed rate of $750 per month to take as much or as little of
Edgewood’s equipment as it needed at the time. As the arrangement evolved, Mt. Mansfield
Media would store this equipment on its premises with the understanding that Edgewood could
come reclaim it as needed. A written contract signed August 30, 2010 provided the inventory list
for the equipment that Mt. Mansfield Media had taken. Mr. Giancola also testified about an
August 4, 2010 contract, which predated the flexible arrangement. He stated that Mt. Mansfield
Media had never returned any of the equipment rented on August 4, 2010.

         Mr. Giancola testified that the parties never agreed on an oral rent-to-own agreement. He
acknowledged that a rent-to-own was one possible idea that was discussed, but he stated that the
parties ultimately agreed to continue with this flexible rental arrangement. He noted that all of
the billing invoices paid by Mt. Mansfield Media stated “rental” and did not state “rent-to-own”
or “rent-to-purchase.”

       The arrangement between the parties broke down in February 2011. At this point, Mt.
Mansfield Media believed that it had paid a sufficient amount to take ownership of all the
equipment and ceased paying the $750 per month. After a series of unsuccessful negotiations,
Mr. Giancola decided to repossess the equipment. On April 21, 2011, Mr. Giancola went to Mt.
Mansfield Media’s place of business and took back all the equipment that he believed belonged



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to him. He testified that he was not able to recover every item listed in the August 30 inventory
and that he sought damages for those unrecovered items in addition to unpaid rental fees and the
unreturned items detailed in the August 4 contract.

       The witnesses on behalf of Mt. Mansfield Media disputed much of Mr. Giancola’s
testimony. They stated that all of the equipment from the August 4 contract was returned before
August 30, when the equipment in the second contract was taken out. They also testified that Mt.
Mansfield Media no longer retained any of Edgewood’s equipment as Mr. Giancola had
successfully repossessed all of the remaining equipment on April 21, 2011.

        The Mt. Mansfield Media witnesses also testified concerning what they believed was an
oral rent-to-own agreement entered into on September 23, 2011. On that date, Mr. Giancola
came to the Mt. Mansfield Media offices. Mr. Cunavelis and Mr. Stephenson testified that, after
a lengthy discussion entirely concerned with a possible rent-to-purchase agreement, such an
agreement was entered into. Mr. Giancola directly contradicted this testimony and stated that a
rent-to-purchase agreement was never discussed at this meeting and that the parties never
reached such an agreement.

        Further testimony on behalf of Mt. Mansfield Media was that it stopped paying the rental
fees in February 2011 because the total amount of rental fees paid up to that point well exceeded
the total value of all the equipment if it had been purchased new. Mr. Cunavelis and Mr.
Stevenson thus believed that they were now the owners of the equipment under the oral rent-to-
own contract. They were surprised to find out when they contacted Mr. Giancola that he denied
the existence of any rent-to-own agreement.

        The Small Claims Court Judge issued a written decision on September 27, 2011. She
concluded that the parties had a written contract governing the rental of equipment, and that they
did not reach an oral contract to alter the terms of the written contract. The Court found that
Defendant breached the contract in February 2011 when it stopped paying for the equipment
rental. The Court also concluded that Plaintiff failed to meet its burden of proof with regard to its
claim that Defendant retained its equipment. On these bases, the Court calculated Plaintiff’s
damages at $2,385.00, accounting for the missed rental payments in February, March, and April
at $795.00 per month (including rental at $750.00 per month and sales tax at $45.00 per month).
The written decision did not address Mr. Cunavelis’s motion to dismiss himself personally as a
defendant.

Claims on Appeal

        Appellant raises four claims of errors on appeal: 1) the Small Claims Court judgment
improperly ran against Mr. Cunavelis personally and not against Mt. Mansfield Media, Inc.,
2) the Small Claims Judge was biased because of her relationship with Mr. Giancola’s parents,
3) the Small Claims Court ignored evidence of an oral “lease to purchase” contract, and
4) the Small Claims Court miscalculated the measure of damages. On cross-appeal, Mr. Giancola
argues that the Small Claims Court erred in calculating damages by omitting the cost of
equipment that was not returned.




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Individual Liability

         On appeal, Mr. Cunavelis renews his request, originally made below, that he be
dismissed as a defendant. The evidence below showed that this case involved business dealings
between Edgewood Entertainment, a proprietorship of Mr. Giancola, and Mt. Mansfield Media,
Inc., of which Mr. Cunavelis is an officer. There was no evidence that Mr. Cunavelis sought to
rent the film production equipment for his own personal use. Rather, the equipment was rented
for use in Mt. Mansfield Media’s film production business. Mt. Mansfield Media, Inc. is a valid
Vermont corporation and a separate legal entity from Mr. Cunavelis.

        In order to hold Mr. Cunavelis personally liable for the breach of contracts entered into
by Mount Mansfield Media, the Court would have to pierce the corporate veil. The corporate veil
may be pierced when the corporate form has been used to perpetrate a fraud or where the
interests of fairness, equality, and the public need dictate. Agway, Inc. v. Brooks, 173 Vt. 259,
262-63 (2001). In the latter group of cases, corporate formality has usually been entirely ignored
and the corporation is merely a straw figure for its owner. See id. at 263-64; In re Vt. Toy Works,
Inc.. 135 B.R. 762, 770 (D. Vt. 1991). There is no evidence here that Mr. Cunavelis ever abused
the corporate form, and he clearly negotiated the contracts with Edgewood in his capacity as a
corporate officer of Mt. Mansfield. In the absence of any evident of abuse of the corporate form,
Mr. Cunavelis cannot have personal liability for a breach of contract by the corporation.

         The Small Claims Judge did not address the distinction between Mr. Cunavelis and the
corporation Mount Mansfield Media, Inc. in her decision. The complaint listed both John
Cunavelis and “Mt. Mans. Media” as Defendants. The caption on the Findings of Fact,
Conclusions of Law and Order issued September 27, 2011 identifies the Defendant as “James
(sic) Cunavelis dba/ Mt. Mansfield Media, Defendant.” The Court issued Judgment against
“John Cunavelis” only in his individual capacity, although the form also states that the
“Defendant was represented and appeared by John Cunavelis.” It was error for the Judge below
to fail to address the motion of individual Defendant John Cunavelis to be dismissed in his
individual capacity, and error to issue a judgment against him personally. The evidence is
undisputed that the proper Defendant against which the judgment should issue is Mount
Mansfield Media, Inc.

Judicial Bias

        At the small claims hearing, the Small Claims Judge raised the issue of her relationship
with Mr. Giancola’s parents and explicitly asked Mr. Cunavelis if he objected to her presiding
over the case. Mr. Cunavelis replied that he had no problem with her presiding. Therefore, this
issue has been waived and is not preserved for appeal. See DeLeonardis v. Page, 2010 VT 52, ¶
31, 188 Vt. 94.

Lease-to-Purchase Oral Contract

       Appellant asserts that the Small Claims Judge ignored its evidence of an oral lease-to-
purchase contract. The Judge did not ignore the evidence. On the contrary, it is evident that the
Small Claims Judge considered the evidence about whether an oral lease-to-purchase agreement



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had been formed and did not find it to be credible. The Small Claims Court concluded:
“Although there were discussions to possibly change the [written] contract, there was never an
agreement between the parties to other terms that would change the terms of the rental contract.”
This is a finding of fact based on consideration of conflicting evidence.

        This conclusion necessarily rejects Appellant’s theory that an oral lease-to-purchase
contract was formed. There was evidence presented at the hearing that cut both ways; therefore,
the Small Claims Judge was ultimately left with an issue of credibility as to whether a
supplemental oral contract was formed. The trial court is in the best position to determine the
credibility of witnesses, and the court's decision will not be overturned simply because there was
conflicting evidence. Wells v. Rouleau, 2008 VT 57, ¶ 12, 184 Vt. 536. All that is required is that
the Small Claims Court’s conclusions are supported by evidence in the record, which is the case
here. Brandon v. Richmond, 144 Vt. 496, 498 (1984).

Calculation of Damages

        Both parties disagree with the Small Claims Court’s measure of damages. Appellant
argues that damages were improperly awarded for the period between when the business
relationship between the parties broke down in February 2011 and when Mr. Giancola reclaimed
the rented equipment in late April 2011. The problem with Appellant’s argument is that Mt.
Mansfield Media continued to retain the rented equipment during this period. Edgewood
Entertainment was thus precluded from re-renting the equipment or using the equipment itself
until the time it repossessed the equipment. Mt. Mansfield Media did not pay rental fees during
this period nor did it return the equipment. Mr. Giancola presented evidence that through phone
calls and collection letters he repeatedly requested payment until he decided that payment was
not forthcoming and he chose to repossess the equipment on April 21, 2011. Under these facts,
the Small Claims Court had an evidentiary basis to conclude that Plaintiffs were entitled to the
unpaid rental fees for the months of February, March, and April.

        Turning to the argument on cross-appeal, Appellee contends that the Judge improperly
omitted from the judgment damages for equipment not recovered from Mt. Mansfield Media.
The Small Claims Court acknowledged the claim for over $6,000 in damages in missing
equipment, but once again did not find the evidence supporting it to be credible. The Small
Claims Court specifically found that Plaintiff failed to meet its burden of proof on this issue. As
the evidence presented at the hearing was in conflict, the trial judge had a proper basis for
determining credibility and deciding the facts as she did as long as there was evidence in the
record to support her finding, which there was. Again, the trial court finding will not be
overturned on appeal simply because there was conflicting evidence. This Court thus does not
have a legal basis to reverse the determination of damages. Wells v. Rouleau, 2008 VT 57, ¶ 12,
184 Vt. 536. Because the damage award is supported by the record, it is affirmed.




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                                            ORDER

       The Judgment of the Small Claims Court dated September 27, 2011 must be reversed and
remanded due to the failure to dismiss John Cunavelis as a Defendant and the error in issuing the
judgment against Defendant Mount Mansfield Media, Inc. In all other respects, the decision is
affirmed.

      The case is remanded to the Small Claims Court to issue a corrected Judgment against
Mount Mansfield Media, Inc. and not against John Cunavelis.

       Dated at Rutland, Vermont this 5th day of April, 2012.


                                                                   ________________________
                                                                     Hon. Mary Miles Teachout
                                                                                  Superior Judge




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