Cunningham v. Diemer, No. S0467-03 CnC (Katz, J., Apr. 28, 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.:



CUNNINGHAM

v.

DIEMER



                                 ENTRY

        Plaintiff sellers seek to enforce their legal and equitable rights
following the breach of a purchase and sale agreement by defendant
purchasers. Purchasers argue that sellers have waited too long under the
terms of the agreement and are no longer entitled to any remedy other than
the retention of the deposit. Both parties have moved for summary
judgment.

      For the purpose of summary judgment, the facts are as follows.
Sellers and Purchasers signed a standard purchase and sale agreement in
October 2002 fixing the price at $300,000 and the closing date at January
15, 2002.?? (Pl. Mot. for Summ. J., Ex. A, Nov. 18, 2003.) As early as
December 14, purchasers began communicating with seller’s broker about
the price of the property and advising him that they would not be
purchasing the property. (J. Diemer Aff., at ¶ 4, Jan. 4, 2004.) This was
followed by at least two calls to the seller’s broker on December 16 and 17
where the purchasers discussed lowering the price to $275,000 and
expressing the desire that “hopefully we can work with that.” ( Pl. Rep. to
Summ. J., Ex. 1, Jan. 14, 2004.) On December 18, purchasers contacted
sellers and advised them that they would not be purchasing the property.
(J. Diemer Aff., at ¶ 5, Jan. 4, 2004.) On December 30, purchasers
contacted broker by phone. (Pl. Rep. to Summ. J., Ex. 1, Jan. 14, 2004.)
The message included several references to putting the deal “to bed.” Id.
Purchasers appeared to be unsure of whether the agreement was over. “We
really haven’t gotten a firm decision about whether or not [sellers] wanted
to move forward or if the deal was completely dead.” Id. Regardless of any
confusion, purchasers sent a letter to sellers on December 31 releasing the
contract deposit and expressing their intent to walk away from the contract.
(Pl. Mot. for Summ. J., Ex. B, Nov. 18, 2003.) Sellers received this letter
on January 3, and on January 8, they drafted a settlement letter offering to
drop their legal rights against purchasers for a flat sum. Id. at Ex. C. The


      1
        With a formation date of October 9, 2002, this closing date is
apparently a misprint and was most likely intended as January 15, 2003.
While neither party has raised the issue, it appears to be a good candidate
for reformation. See Traveler’s Ins. Co. v. Bailey, 124 Vt. 114, 118 (1964)
(reformation will be liberally granted where equity allows). For our
purposes, we will merely presume that the parties had fixed a closing date
and that it was sometime after December 2002.
letter gave purchasers until the afternoon of January 14 to accept the
settlement. Purchasers apparently did not receive this offer until January
15 when they also did not close on the property. Id. On January 29, the
sellers sent written notice to the purchasers that they intended to pursue a
lawsuit for damages stemming from purchasers’ breach. Id. at Ex. D.

        According to paragraph 20 of the sale agreement, sellers, as the non-
defaulting party, had the right to either keep purchasers’ deposit as a
remedy or elect to pursue legal and equitable remedies. If they chose to
sue, however, sellers needed to notify the purchasers of this choice in
writing, in accordance with the formal notification procedures of paragraph
29, within 30 days of the notice of default. The question raise by both
parties is whether purchasers actions on December 14 or 18 qualify as
notice of default such that sellers’ remedy election clock was started.
Purchasers urge the conclusion that either date constitutes a breach under
the purchase and sale agreement. This conclusion is untenable, however, in
light of summary judgment. Looking at the facts in a light most favorable
to the non-moving party, we have to infer that these conversations, in
conjunction with the phone messages left with the broker, were part of an
on-going attempt to renegotiate the price rather than an outright breach.
Boulton v. CLD Consulting Eng’rs, 2003 Vt. 72, ¶ 11 (motions for
summary judgment require all inferences to be given to the non-moving
party). As such, the conversations hardly comprise a breach of the
agreement. Together with the phone messages, the purchasers appear as
late as December 30 to believe themselves to be still bound by the
agreement. Whether this was truly the intent of the purchasers is a material
fact that remains for the fact finder to decide.

       On the other hand, the sellers argue that purchasers mere intent not
to perform does not constitute a default as defined in the agreement. This
depends on the meaning of the word default. As a contract term, its
interpretation is for the court to decide as a matter of law. Vermont Nat’l
Bank v. Chittenden Trust Co., 143 Vt. 257, 266–67 (1983). We will look to
the plain meaning of the word and the intent of the parties intended by its
meaning. Congdon v. Auto. Club Ins. Co., 174 Vt. 586 (2002) (mem.).
Black’s defines default as “the omission or failure to perform a legal or
contractual duty.” Black’s Law Dictionary 376 (5th ed. 1979). This is
supported by other decisions that have dealt with the term explicitly.
Masssachusetts Mun. Wholesale Elec. Co. v. Town of Danvers, 577 N.E.2d
283, 294–95 (Mass. 1991) (discussing the effect of a parties’ agreement on
the meaning of “default”). The only context for default provided by the
agreement is the first sentence of the paragraph, which states, “If Purchaser
fails to close as provided herein, or is otherwise in default . . .” Id. A fair
reading of this phrase would equate default with the failure of the purchaser
to close on the property or an equal material failure or omission. Thus, we
conclude that the use of the word default—as opposed to a mere
“breach”— creates a higher standard for the parties. Rather than a mere
defect, default in the agreement suggests a substantial non-performance.

        In this case, the parties, already bound by the contract, began
communicating in December. The purchasers expressed their concerns and
desire not to continue with the contract at the current price. This escalated
as purchasers professed a growing desire to walk away from the deal. Still,
neither party was due to perform or owed each other an obligation until the
closing. While we give short shrift to sellers argument that purchasers
needed to follow the formal notice procedures of paragraph 29 to announce
their default, we do conclude that default requires something more
substantial than counteroffers and equivocation. By definition, it requires a
failure or omission of a contractual duty. Thus, when purchasers declared
that they did not want to close on the property, they expressed a desire not
to fulfill their contract obligations, but they did not actually fail or omit
such a contractual duty. Sellers waited until the closing. Then, considering
the purchasers in default, sellers elected to pursue legal action for damages.

        Still, paragraph 20 only appears to require notice of default. At the
very least, this means that purchasers must give sellers a clear and
unequivocal notice of their intent to leave the contract and not perform
under any circumstances. Given that on December 30 the purchasers were
still expressing interest in the possibility of a deal, it is not until the
December 31 letter that sellers have unequivocal notice of purchasers’
intent not to perform, which is not contradicted by any evidence. To assign
notice of default to any earlier time would be to declare notice of default
before the party fully manifested their intent not to perform. Such a
conclusion would discourage candor in real estate transactions. If a party,
by admitting it was unable to pay a purchase price, knew that it would be
subject to default, it would wait until closing to announce its position.
Without the shadow of default, parties are free to negotiate up to the time of
performance and can be honest about their situations without fear of default
and its accompanying legal consequences. In this case, the purchasers may
have made up their minds early in December that they were not going to
purchase the property, but their subsequent actions gave sellers a mixed
message. Notice of default must be more substantial than mere unspoken
or garbled intent by a party. See Quenneville v. Buttolph, 2003 Vt. 82, ¶ 15
(unspoken or unclear mental intentions have no meaning in the law of
contracts). We conclude that sellers did not receive notice of the intended
default until at least January 3. Therefore, sellers’ letter on January 29,
electing to pursue legal damages, was timely under paragraph 20 of the
agreement.

       Based on the foregoing, plaintiffs’ motion for summary judgment is
granted and defendants’ motion is denied.



      Dated at Burlington, Vermont________________, 2004.




                                        ________________________
                                        Judge
