Martin v. Ort

• Court: Superior Court of Maine
• Decided: February 3, 2016
• Docket: PENcv-15-195
• Status: Unpublished

Opinion

STATE OF MAINE SUPERIOR COURT PENOBSCOT, ss. CIVIL ACTION DOCKET NO. BANSC-CV-2015- 195 DARREN MARTIN and SHERI MARTIN,

Plaintiffs and Counterclaim Defendants ORDER AND DECISION ON PLAINTIFF/ V. COUNTERCLAIM DEFENDANTS' MOTION TO DISMISS KENNETH ORT and DEBRA ORT,

Defendants and Counterclaim Plaintiffs.

Before the Court is Plaintiff/Counterclaim Defendants Darren Martin and Sheri Martin's

("the Martins") Motion to Dismiss all seven counts of Defendant/Counterclaim Plaintiffs

Kenneth Ort and Debra Ort's ("the Orts") Counterclaim. The Court has reviewed the parties'

filings and denies the Motion.

BACKGROUND 1

In the early Fall of 2008, the Orts, a husband and wife, found a listing for the sale of a

property located at 145 Cedar Breeze Center in Glenburn, Maine (the "property"). The property

was owned by the Maiiins, also husband and wife. (Def.'s Countercl. ~~ 1-4.) The Orts wished to

proceed with owner financing from the Martins for the purchase of the property. (Def.' s

Countercl. ~ 6.) The Martins and Orts entered into an agreement whereby the Orts would

purchase the property for the price of $159, 000. (Def. 's Countercl. ~~ 7-8.) The Orts made a

$17 ,000 down payment and agreed to make monthly payments of $1,800 for six months while

they attempted to obtain bank financing for the remaining balance of the purchase price. (Def. ' s

1 For purposes of this Motion, the Court considers the following facts asserted in the Counterclaim as

true. Moody v. State Liquor & Lottery Comm 'n, 2004 ME 20, ~ 7, 843 A.2d 43.

1 Countercl. ~ 8.) The Orts also obtained homeowners' insurance and paid the property taxes.

(Def.' s Countercl. ~ 9.)

By March 2009, six months later, the Orts were still unable to obtain bank financing .

(Def.' s Countercl. ~ 10.) Mr. Martin indicated to the Orts that he would extend the owner-

financing agreement. (Def. 's Countercl. ~ 11.) The Martins and Orts then agreed that the Orts

would continue making payments toward the purchase of the property, but at an increased rate of

$2,000 per month. (Def.'s Countercl. ~ 12.) The Orts stated it was the understanding of both

parties that the Martins would finance the purchase of the property by the Orts and that

ownership would eventually pass to the Orts. (Def.' s Countercl. ~ 13.)

In the Counterclaim, the Orts refer to a lease entered into in April 2009, and claim that

this lease was subsequently orally modified in 2009.2 (Def. 's Countercl. ~ 70.) The lease

describes the property as leased premises and states that the term of the lease is month to month

beginning on April 1, 2009 for the rent of $2,000 per month payable to the Martins. (Pl. 's

Second Substituted Ex. B ~~ 1-3.) It also includes provisions stating that all improvements to the

property shall be the property of the Martins, and that the Orts shall pay all utilities, taxes,

insurance, and costs ofrepairs and maintenance. (Pl.'s Second Substituted Ex. B ~~ 4-7.) Finally,

the lease includes an "Entire Agreement, Severability" clause (the parties both refer to this as the

integration clause), which states, in pertinent part, "[t]his Lease expresses the entire agreement

between the parties, and supersedes all previous discussions and understandings between them.

There are no terms or conditions of this Lease that are not reduced to writing by both parties."

(Pl. 's Second Substituted Ex. B ~ 18.)

. 2 Because this lease is referenced in the Counterclaim, and because the document is central to evaluating the Orts' claims, the Court may consider this lease without conve11ing this Motion to one for summary judgment. See Moody, 2004 ME 20, ~ 11, 843 A.2d 43. Based on their understanding that they were buying the property, the Orts paid for a

number of substantial improvements to the property: they replaced the existing trailer with a

year-round home, installed a well on the prope1iy, and installed a septic system. (Def. 's

Countercl. ~~ 14, 16, 18, 20, 22, 28.) For each one of these improvements, the Martins gave the

Orts verbal permission, assisted them in performing the improvements, and never indicated at

any time that the Orts were making improvements on land that they were only leasing and would

not eventually own. (Def.'s Countercl. ~~ 15, 17, 29, 21, 23-27.)

In or about July 2013, Mr. Ort delivered a $5,000 check to Mr. Martin and told him that

the Orts would be making larger monthly payments in order to finish paying for the property

sooner. (Def. 's Countercl. ~ 29.) Although the Martins told the Orts not to make larger payments

because of adverse tax consequences, the Martins did not tell the Orts that the payments were for

anything other than the payment for the purchase of the property. (Def.'s Countercl. ~ 30.)

Sometime thereafter, the Orts presented the Martins with an itemization of all the money

they had paid towards the purchase of the property and indicated that the payment in September

of 2014 would be the last because the purchase price would have been paid in full by then.

(Def.'s Countercl. ~ 31.) Approximately one week later, Mr. Martin contacted the Orts and for

the first time denied that the payments were for the purchase of the property and claimed they

were in fact only for a leasehold interest. (Def. 's Countercl. ~ 32 .) Although they disagreed with

Mr. Martin's characterization, the Orts continued to make payments. (Def.'s Countercl. ~ 33.)

In May of 2015, the Orts met with the Martins and explained how they had made all the

improvements with the Martins knowledge, permission, and assistance, and the Martins never

suggested that Orts' payments were merely towards a lease. (Def.'s Countercl. ~ 34.) The Orts

3 then offered to sell the house to the Martins or make additional payments to the Martins for the

purpose of purchasing the property. (Def.' s Countercl. ~ 35.)

On or about September 3, 2015, Mr. Maiiin asked the Orts to make a written offer to

complete the sale of the Property. (Def.'s Countercl. ~ 36.) Through counsel, the Orts made a

written offer to the Martins on October 2, 2015. (Def.'s Countercl. ~ 37.) The Martins responded

to the offer by filing the Complaint in the present lawsuit. (Def.'s Countercl. ~ 38.) On October

2 7, 2015, the Orts answered and asserted a counterclaim consisting of the following counts: I)

fraud, II) fraudul ent concealment, III) negligent misrepresentation, IV) breach of contract, V)

unjust enrichment, VI) quantum meruit, and VII) declaratory judgment. On November 16, 2015,

the Martins filed the Motion to Dismiss all counts of the Orts' Counterclaim.

ST AND ARD OF REVIEW

Dismissal of a counterclaim, like a complaint, is proper only when the counterclaim fails

to state a claim for which relief may be granted. See M.R. Civ. P. 12(b)(6). A motion to dismiss

tests the legal suffi ciency of the counterclaim, In re Wage Payment Litig. v. Wal-Mart Stores,

Inc., 2000 ME 162, 13, 759 A.2d 217, and is a pure question of law. Persson v. Dep 't of Human

Servs., 2001 ME 124, 18, 775 A.2d 363. To be sufficient, a counterclaim need only consist of a

short and plain statement of the claim to provide fair notice of the cause of action. Johnston v.

Me. Energy Recovery Co. , Ltd. P 'ship, 2010 ME 52, 116, 997 A.2d 741 (quotation marks

omitted). The court accepts facts, but not legal conclusions, as true. Harvey, Maine Civil

Practice § 12:11 at 415-16 (3d ed. 2011). The court views the pleadings in the "light most

favorab le to the [non-moving party] to determine whether it set forth elements of a cause of

action or alleges facts that would entitle the [non-moving party] to relief pursuant to some legal

theory ." Me. Energy Recovery Co., Ltd. P 'ship , 2010 ME 52, ~ 10, 997· A.2d 741 (quotation

4 marks omitted). "A dismissal should only occur when it appears beyond doubt that a plaintiff is

enti tied to no relief under any set of facts that he might prove in support of his claim." Moody,

2004 ME 20, ~ 7, 843 A.2d 43 (quotation marks omitted).

DISCUSSION

Underlying each count of the Counterclaim is the allegation that after signing the April

2009 lease the Martins made statements or representations to the Orts that the monthly payments

the Orts were making were toward the purchase price of the Property. The admissibility, truth,

and/or relevancy of these statements or representations is the key dispute underlying the various

arguments made by each party regarding the sufficiently of each count of the Counterclaim.

I. CountI:Fraud

Count I of the Counterclaim alleges fraud on the part of the Martins. For this claim to

survive the Motion, the Orts' Counterclaim must allege facts that claim the Martins:

"(1) [made] a false representation (2) of a material fact (3) with knowledge of its falsity or in reckless disregard of whether it is true or false (4) for the purpose of inducing another to act or refrain from acting in reliance upon it, and (5) [the Orts] justifiably [relied] upon the representation as true and [acted] upon it to [their] damage .. .. Reliance is unjustified only if the [Martins] [knew] the representation [was] false or its falsity [was] obvious to [them]."

Francis v. Stinson, 2000 ME 173, ~ 38, 760 A.2d 209. Fraud must be pleaded with particularity,

but malice, intent, knowledge, and other conditions of the mind may be averred generally. M.R.

Civ. P. 9(b). This is to ensure "the defendant is fairly apprised of the elements of the claim." 2

Harvey, Maine Civil Practice § 9:2 at 384.

Here, the Orts have set forth the circumstances of the Martins' alleged fraud with

sufficient particularity to give the Court, and the Martins, a "clear picture" of the manner,

character, and causes of the fraud. Semo v. Goudreau, 147 Me. 17, 20-21, 83 A.2d 209, 211

5 ( 19 51) ("The statement should be so full and explicit as to show the court a clear picture of the

particulars of the fraud, - the manner in which the party was misled, or imposed upon, - the

character and causes of the accident, or mistake, and how it occurred. Without such a statement .

. . the court can not grant relief or even hear evidence in the matter."). As detailed above, the

Orts allege the Martins told them the monthly payments being made by the Orts were payments

toward the purchase price of the property. This alleged affirmative statement alone is sufficiently

particular to show at this procedural window a false representation of a fact that is clearly

material. The Counterclaim also alleges the Orts relied on this statement in making

improvements and down payments to their detriment.

The allegations in the Counterclaim are sufficient to survive a motion to dismiss because

the Court cannot say as a matter of law that it appears from the Counterclaim "beyond doubt that

the [Orts are] entitled to no relief under any set of facts that [they] might prove in support of

[their] claim." Moody, 2004 ME 20, ~ 7, 843 A.2d 43 .3

3 Moreover, a failure to disclose or an omission by silence may be equivalent to an affirmative

false representation if the plaintiff proves: (1) active concealment of the truth; or (2) a special relationship that imposes a duty to disclose; or a (3) statutory duty to disclose. See Picher v. The Roman Catholic Bishop of Portland, 2009 ME 67, ~~ 30-32, 947 A.2d 286. Even if none of these elements are present, fraud based on a party's silence may still be actionable depending on the facts of the case. Eaton v. Sontag, 387 A.2d 33, 38 (Me. 1978) ("Furthermore, it is not fraud for one party to say nothing respecting any particular aspect of the subject property for sale where no confidential or fiduciary relation exists and where no false statement or acts to mislead the other are made .. . ." (emphasis added)); Alexander Maine Jury Instruction Manual§ 7-30 (2015); accord Gnagey Gas & Oil Co. v. Pa. Underground Storage Tank Indemnification Fund, 82 A.3d 485, 501 (Pa. Commw. Ct. 2013) ( "Although silence as to a material fact (nondisclosure), without an independent disclosure duty, usually does not give rise to an action for fraud, suppression of the truth with the intent to deceive (concealment) does ."). While the 011s simply make the conclusory statement that the Martins had a legal and/or equitable duty to disclose, there are sufficient facts pleaded to, at this stage, provide a basis for fraud not based on an affirmative statement. The Court makes particular note of the allegation that the Martins withheld a truth in order to gain the benefit of the Orts' mistaken belief- the value of the improvements. Because it depends on the facts whether there is fraud based on silence, absent a duty to disclose, a motion to dismiss where facts of silent fraud have been pleaded should be denied. See Sontag, 387 A.2d 33, 38. The facts alleged could also prove a confidential relationship or active concealment, even though neither theory was asserted. Harkn ess v. Fitzgerald, 1997 ME 207, ~ 9, 701 A.2d 370 ("A confidential

6 The Martins argue that any oral statements made by them are not sufficient for the Orts to

survive a motion to dismiss because their (the Martins) statements would be inadmissible

pursuant to the parol evidence rule. This argument fails because the parol evidence rule does not 4 bar evidence where a party alleges fraud, misrepresentation, or mistake. 6-25 Corbin on

Contracts § 25 .20 (2015) ("It is widely agreed that oral testimony is admissible to prove fraud or

misrepresentation, mistake or illegality. This exception to the parol evidence rule applies even if

the testimony contradicts the terms of a completely integrated writing."); Francis, 2000 ME 173,

~ 43 , 760 A.2d 209 . Moreover, the parol evidence rule applies in the context of interpreting a

contract; it does not apply where a party seeks to introduce evidence of subsequent oral

modifications. See Me . Mortg. Co. v. Tonge, 448 A.2d 899, 902 (Me. 1982) ("[A]ny contract

may be modified by subsequent agreement of the parties so long as the new agreement itself

complies with the requirements of a valid contract."); accord Beal Bank S.S.B. v. Krock, No . 97-

2241, 1998 U.S. App. LEXIS 22051 (1st Cir. Sep. 3, 1998) (holding that under Massachusetts

law, the parol evidence rule does not bar consideration of parol evidence where it could be found

that a new oral contract was entered into by the parties that supersedes the original contract).

relationship exists when there is an "actual placing of trust and confidence in fact by one party in another and a great disparity of position and influence between the parties.").

4 Even more accurately, the parol evidence rule is a rule of substantive law, not a rule of evidence, and so even if it applied here, the rule addresses the consideration of the evidence not the admissibility. Spaulding v. Am. Realty Co., 121 Me. 493 , 496, 118 A. 322, 323 (1922) ("The so-called parol evidence rule is attended with a confusion and an obscurity which make it the most discouraging subject in the whole law of Evidence .... First and foremost, the rule is in no sense a rule of evidence, but a rule of substantive law. It does not exclude certain data because they are for one or another reason untrustworthy or undesirable means of evidencing some fact to be proved .... What the ru le does is to declare that certain kinds of fact are legally ineffective in the substantive law; and this of course (like any other ruling of substantive law) results in forbidding the fact to be proved at all." (quotation marks omitted)).

7 II. Count II: Fraudulent Concealment

Count II of the Counterclaim alleges fraudulent concealment on the part of the Martins.

To the extent Fraudulent Concealment is a separate tort, as opposed to an equitable remedy for

overcoming a statute of limitation defense 5 , to establish fraudulent concealment, the Orts must

assert facts that can show (1) the Martins failed to disclose; (2) a material fact; (3) where a legal

or equitable duty to disclose exists; (4) with the intention of inducing the Orts to act or to refrain

from acting in reliance on the non-disclosure; and (5) that the Orts did in fact rely on it to their

detriment. See Barr v. Dyke, 2012 ME 108, ~ 16, 49 A.3d 1287. Again, any tort of fraud must be

pleaded with particularity, but malice, intent, knowledge, and other conditions of the mind may

be averred generally. M.R. Civ. P . 9 (b). To the extent fraudulent concealment is a separate tort,

it has been adequately pled in the counterclaim.

III. Count III: Negligent Misrepresentation

Count III of the Counterclaim alleges negligent misrepresentation on the part of the

Martins. To survive a motion to dismiss on a claim of negligent misrepresentation, the Orts must

allege facts that show the Martins (1) supplied false information for the guidance of the Orts in

their business transaction; (2) in the course of their business, profession, employment, or

transaction in which they had a pecuniary interest; (3) failed to exercise reasonable care or

competence in obtaining or communicating the information; and then show (4) that they, the

Orts, justifiably relied upon the information;(5) causing them, the Orts, to suffer a pecuniary loss .

Chapman v. Rideout, 568 A.2d 829, 830 (Me. 1990) (adopting the formulation of the tort as

5 See Brawn v. Oral Surgery Assocs ., 2003 ME 11 , ~ 21, 819 A.2d 1014 ("Fraudulent concealment is an

eq uitab le remedy recogni zed by courts as a potential means to ameliorate the harsh application in individual cases' of the medical malpractice statute of limitations."); Conroy v. Roman Catholic Bishop of Portland, No. CV-13 -204, 2013 Me. Super. LEXIS 251 (Nov. 21, 20 13) ("Fraudul ent concealment is not a separate tort but a means of overcoming the statute of limitations") (quotation marks omitted); but see Alexander, Maine Jury Instruction Manual§ 4-9 at 4-27 (2015 ed.) (provid ing jury instructions for the "claim" of fraudulent concealment).

8 stated in the Restatement (Second) of Torts § 552(1) (1977)); accord Rand v. Bath Iron Works

Corp., 2003 ME 122, ~ 13 , 832 A.2d 771.

Again, the Orts plead the Martins affirmatively told them their monthly payments were

being applied toward the purchase price of the property. The fact that the Martins now contend

the transaction was never for the sale of property is sufficient evidence of its falsity. The alleged

facts detailing the Martins' behavior towards the Orts when the Orts made improvements to the

property satisfy the third, forth, and fifth elements of negligent misrepresentation. Because the

Orts allege the Martins made at least one false statement that, in part, orally modified that 2009

lease, it is not necessary to address the Martins' arguments this claim should be dismissed

because it is based on the Martins' failure to disclose their state of mind. However, even though

the Law Court has not addressed this issue directly, it does appear the law relating to failure to

disclose information, discussed in the above section on fraud , is equally applicable to negligent

misrepresentation claims. Alexander Maine Jury Instruction Manual § 7-31 ("The law relating to

failure to disclose information, discussed in the comments to the fraud instruction, appears

equally applicable to negligent misrepresentation claims. ").

The Court also does not find that the 2009 lease requires dismissal of this Count.

Although it is true that parties to a contract are deemed to have read the contract and are bound

by its terms, Francis, 2000 ME 173, ~ 42, 760 A.2d 209, it is also true the parol evidence rule

does not apply on the issue of subsequent oral modifications to a contract or claims of negligent

misrepresentation. 6-25 Corbin on Contracts§ 25.20; Francis, 2000 ME 173, ~ 43, 760 A.2d

209; Me . Mortgage Co., 448 A.2d 899, 902.

9 IV. Count IV: Breach of Contract

The Orts' fourth count is for breach of the contract created when the 2009 contract was

allegedly orally modified. 6 The Martins argue the breach of contract claim fails as a matter of

law for two reasons. First, the Martins argue the alleged oral modification is not enforceable

because it lacks consideration. Second, the Martins argue the evidence of an oral modification is

inadmissible because the 2009 lease was fully integrated and the parol evidence rule bars

admission of evidence altering or contradicting a fully integrated contract.

A. Consideration

To establish a breach of contract, Plaintiffs must first establish the existence of a binding

contract, McClare v. Rocha, 2014 ME 4, 1 16, 86 A.3d 22, and then establish the following

elements: "(1) breach of a material term; (2) causation; and (3) damages." Me. Energy Recovery

Co. v. US. Steel Structures, Inc., 1999 ME 31, 17, 724 A.2d 1248. A contract exists where there

is mutual assent supported by consideration. E.g., In re Estate of McP hee, 2006 ME 3 8, 1 7, 904

A.2d 401. Consideration is a bargained-for exchange; a contract lacks consideration where the

exchange is merely gratuitous. Panasonic Communs. & Sys. Co. v. Dep 't ofAdmin., Bureau of

Purchases, 1997 ME 4 3, 1 12, 691 A.2d 190. "It matters not from whom the consideration moves

or to whom it goes . If it is bargained for and given in exchange for the promise, the promise is

not gratuitous ." Restatement (Second) of Contracts§ 71 cmt. e (1981). A contract can be

modified so long as the modification also complies with the aforementioned requirements.

Panasonic Communs. & Sys. Co., 1997 ME 43, 113, 691 A.2d 190.

Taking what is pleaded as true, an exchange of values has occurred: per the agreement as

modified after March 2009, the Orts allege they paid a monthly amount for the purpose of

6 Because an allegation that a contract was created is a mixed question of law and fact, the Court is not

required to accept it as true for purposes of this motion. Harvey, Maine Civil Practice§ 12:11 at 415-16 .

10 obtaining title and that the Martins agreed to take a ce1iain amount of money per month to

relieve themselves of this title. It does not matter, for purposes of consideration, that the monthly

rental payments before the contract was modified are of the same dollar amount as the monthly

payments towards the purchase of the property-a new obligation has still been created for both

parties.

B. Integration Clause & the Paro! Evidence Rule

The Orts ' assertion that the 2009 lease was orally modified sometime after March 2009 is

the crux of nearly every count of the Counterclaim, including the count for breach of contract.

The Martins contend that this Court should dismiss this count as a matter of law because the

2009 lease contains an integration clause that bars any evidence of oral modification.

"The parol evidence rule operates to exclude from judicial consideration extrinsic

evidence offered to alter, augment, or contradict the unambiguous language of an integrated

written agreement." Handy Boat Serv., Inc. v. Prof! Servs., Inc., 1998 ME 134, ~ 11, 711 A.2d

1306. However, because the issue here is whether the Martins breached the contract as

subsequently orally modified, the parol evidence rule does not apply. 6-25 Corbin on Contracts §

25 .20; Francis, 2000 ME 173, ~ 43, 760 A.2d 209; Me . Mortg. Co., 448 A.2d 899, 902; see

Handy Boat Serv. , Inc., 1998 ME 134, ~ 11, 711 A.2d 1306 (applying the rule to interpretation of

the language of a contract, not evidence of words or actions taking place after the contract was

made). Therefore, this count survives the Motion to Dismiss.

III. Count V: Unjust Enrichment; Count VI: Quantum Meruit

Counts V and VI of the Counterclaim allege unjust enrichment and quantum meruit. With

respect to these counts, it appears the Martins' argument is that any evidence of the alleged oral

modification to the 2009 lease would be inadmissible and therefore there is no support for the

11 equitable claims. As addressed at length above, the parol evidence rule only applies to

interpretation of contracts. Absent any other arguments, the only role of the Court is to analyze

whether the Counterclaim contains facts to support the elements of the two equitable claims .

To establish a claim for unjust enrichment, the Counterclaim must allege facts that can

prove three elements: (1) a benefit was conferred upon the Martins by the Orts; (2) an

appreciation or knowledge by the defendant of the benefit; and (3) the acceptance or retention

by the defendant of the benefit under such circumstances as to make it inequitable for the

defendant to retain the benefit without payment of its value. Id. at 1144 ( quoting Estate of White,

521 A.2d 1180, 1183 (Me. 1987)) ( emphasis added) . Here, the Orts have alleged that the Martins

agreed the payments made by the Orts were for the purchase .of the property and that the Martins

gave permission for the Orts to make improvements. These facts satisfy the first and second

elements, and the question of equity is not one to be resolved on a motion to dismiss. Therefore,

this claim is properly set forth in the Counterclaim. Likewise, the Orts' quantum meruit claim is

satisfactorily pleaded.7

IV. Count VII: Declaratory Judgment

The Orts have sufficiently pled the declaratory judgment count of their counterclaim.

CONCLUSION

Therefore, for the aforementioned reasons, the Martins' Motion to Dismiss denied.

The Entry is:

1. Plaintiff /Counterclaim Defendants' Motion to Dismiss Defendant/Counterclaim Plaintiffs' Counterclaim is DENIED.

7 At least for purposes of this Motion, the difference between the two claims is not important and

is satisfied with by same facts.

12 2. This Order shall be incorporated into the docket by reference pursuant to M.R. Civ. P. 79.

Dated: February]_, 2016 J&a-y-,-Ju-s-tice Maine Superior Court