Kelley v. Kelley

7ermont Superior Court
Filed 05/05/25
Orleans Unit

VERMONT SUPERIOR COURT CIVIL DIVISION
Orleans Unit Case No. 24-CV-00649
247 Main Street
Newport VT 05855
802-334-3305
.vermontjudiciary.org

Floyd Kelley et al v. Donald Kelley et al

FINDINGS, CONCLUSIONS, AND ORDER
This landlord-tenant dispute between plaintiffs Floyd and Shauna Kelley and defendants
Donald Kelley and Sarah Carey came before the court for a bench trial on April 3, 2025. Plaintiffs
were represented by attorney William Grigas and defendants were pro se. Judgment is entered in
favor of plaintiffs as set forth below.

Findings of Fact
Plaintiffs Floyd and Shauna Kelley are husband and wife. Defendant Donald Kelley is
plaintiffs' nephew and defendant Sarah Carey is Donald Kelley's partner. On February 29, 2020,
the parties executed a lease for defendants to live on property owned by plaintiffs at 4065
Vermont Route 105 in Newport Center. The term of the lease was for one year beginning April 1,
2020, and the monthly rent was $800. Defendants were responsible under the lease for paying for
utilities on the property. The lease provides for automatic renewal on a month-to-month basis
unless terminated, which could occur in several ways including by mutual agreement of the
parties.
Defendants paid rent under the lease and continued living on the property past the initial
one-year term, and in July 2022, the parties executed a purchase contract for defendants to buy
the property. That contract provided:
On this day we enter into an agreement regarding the house, garage and property
located at 4065 VT RT 105 in Newport Center, VT.
[Defendants] agree to make a down payment of $20,000 and will pay $800 per
month for the next 12 months to begin the purchase process for [the property]. 4%
interest will be charged.
[Plaintiffs] agree to replace the garage doors on the garage, replace the door on the
basement and clean up the electrical in the basement.
Donald will paint the house, replace 3 windows, replace necessary flooring and will
complete the closet in the house.
This will be completed so that he can qualify for conventional mortgage within the
12 month agreement.

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Purchase price of the property is $120,000. $20,000 down payment leave a balance
of $100,000. After 12 months of $800 payments at 4% interest, will leave a balance
of $94,297.00.
If after the 12 months Donald hasn’t secured a mortgage, we will reevaluate and
recreate an agreement.
Pls.’ Exh. 5. Defendants paid the $20,000 down payment pursuant to the purchase contract, and
continued making payments of $800 per month, but were unable to secure a mortgage for the
remainder of the purchase price within 12 months. Plaintiffs also did not complete the work on
the property that was contemplated by the purchase contract within 12 months. Despite their
agreement to do so, the parties did not negotiate a new agreement.
The parties dispute whether there was a verbal agreement for defendants to be
responsible for maintenance costs, utilities, or pay property taxes during their occupancy,
although defendants did pay at least some bills upon plaintiffs’ requests. Plaintiffs testified that
they spent approximately $5,000 on property tax and utility bills that should have been paid for
by defendants. Defendant Donald Kelley also performed a variety of maintenance work on the
property while living there. This includes much of the work identified in the purchase contract as
his responsibility. Defendant testified he spent approximately $6,000 on maintenance and
improvement to the property.
Defendants continued paying $800 per month until November 2023 when a dispute arose
about replacing a hot water heater on the property and defendants stopped making payments.
In November and December of 2023, defendants began making complaints about health
and safety code violations. A fire safety report from November 2023 indicates several violations
including minor electrical issues and a need for smoke and carbon monoxide detectors. Several
weeks later, on December 22, 2023, defendants each sent a “Major Code Violations” form to
plaintiffs identifying concerns with electrical issues and water damage related to a leak from the
roof. These form complaints identified Floyd Kelly as defendants’ landlord and threatened
withholding of rent, among other tenant remedies provided by Vermont’s landlord-tenant
statues. Plaintiff Floyd Kelley responded to defendants’ concerns either personally or through an
electrician he hired, although at times had difficulty coordinating with defendants to access the
property to evaluate and make repairs.
On December 28, 2023, plaintiffs, through counsel, notified defendants that their tenancy
would be terminated for nonpayment of rent on February 1, 2024, unless defendants paid the
$800 per month owed since November 2023. Defendants did not pay as requested, and plaintiffs
filed this lawsuit on February 20, 2024. Defendants answered the complaint and filed their
counterclaims on March 20.
On June 7, 2024, based on the parties’ stipulation, the court issued a rent escrow order
requiring defendants to pay $800 per month into court beginning July 1 while the case was

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pending. The court thereafter granted plaintiffs’ motion to disburse $4,800 of the funds held in
escrow. 1 The court is currently holding an additional $3,200 in escrow.
Conclusions of Law
Plaintiffs seek a writ of possession, payment of back rent since November 2023, unpaid
utilities and property taxes, attorney’s fees, and costs. Although defendants’ counterclaim seeks
specific performance under the purchase contract, they did not pursue that remedy at trial.
Defendant Donald Kelley stated he did not want anything to do with the property anymore and
argued that defendants do not owe plaintiffs anything given the work they performed and
expenses they incurred at the property, various habitability issues, and the $20,000 down
payment that defendants made under the purchase contract.
Plaintiffs argued at trial that the lease agreement remains in effect and that the purchase
contract was essentially an option contract under which defendants paid $20,000 for the option of
purchasing the property during a 12-month period. Therefore, the argument goes, defendants
have no right to recover or be credited the $20,000 down payment, and the terms of the lease
agreement (including a right to recover attorney’s fees) remain in effect for the purpose of
resolving the parties’ dispute.
The court disagrees and concludes that (i) by entering into the purchase contract, the
parties terminated the lease agreement; (ii) the purchase contract was a “contract for deed” not
an option contract; (iii) the parties later mutually abandoned the purchase contract, and (iii) in
the absence of binding contractual language resolving the current dispute, the court must apply
equitable principles.
The court concludes that the lease terminated when the parties entered into the purchase
contract in July 2022. As noted above, the lease provided for termination by mutual agreement of
the parties. When the parties entered into the purchase contract, they agreed to a new
arrangement that was fundamentally inconsistent with the original lease agreement. Critically,
the parties agreed that defendants would stop making payments to rent the property and start
making payments toward the purchase of the property. By so doing, the court concludes the
parties mutually agreed to terminate the prior lease agreement.
With respect to plaintiffs’ argument that the purchase contract should be considered an
option contract, the court looks to the Vermont Supreme Court’s explanation of the difference
between a “contract for deed” and “lease option to purchase”:
A contract for deed is an agreement in which a prospective purchaser occupies the
premises and makes payments until the point of delivery of the deed and execution
of the mortgage. Such contracts are bilateral: both parties have duties to which
they have already agreed and cannot choose not to perform without breaching the
contract.

1 As explained at the time, due to an internal administrative error, this disbursement was erroneously

ordered based on the court’s mistaken belief that defendants had not opposed the disbursement request.

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A second important characteristic of a contract for deed is that the payments under
such an agreement are applied to the purchase obligation as they accumulate.
Therefore, under a contract for deed, there is an accumulation of an equitable
interest in the property that deserves recognition even without the execution of a
formal mortgage instrument.
A lease option to purchase, on the other hand, is an agreement by which one binds
himself to sell and convey to another party certain property at a stipulated price
within a designated time, leaving it in the discretion of such other party to take
and pay for the property. It is a unilateral contract: The optionor is bound that the
offer shall be kept open and available in accordance with its terms, but its
acceptance rests wholly in the discretion of the optionee, and there is no obligation
upon the latter with regard to it.
Besides its unilateral nature, the other main way in which a lease option is
distinguished from a contract for deed is that the lease payments are not applied
on the purchase price. Therefore, no equity is accrued.
Kellogg v. Shushereba, 2013 VT 76, ¶ 15, 194 Vt. 446 (quoting Prue v. Royer, 2013 VT 12, ¶¶ 21-
24, 193 Vt. 267 (cleaned up)). Here, both plaintiffs and defendants had obligations under the
purchase contract, and defendants’ down payment of $20,000 and monthly payments of $800
were to be applied toward the purchase price of the property. By contrast, “[t]he language that
suggests the parties entered into an option agreement is sparse.” Prue, 2013 VT 12, ¶ 27
(construing agreement as deed for contract based on its terms notwithstanding that parties
labeled it as “Lease-Option to Purchase”). Accordingly, the court concludes the purchase contract
was a contract for deed and not, as plaintiffs suggest, an option agreement.
The court further concludes, however, that the parties abandoned the purchase contract
by failing to perform their obligations thereunder. As discussed above, plaintiffs never completed
the promised repairs on the property; defendants never secured financing to purchase the
property; the parties failed to negotiate a new arrangement as contemplated when defendants
failed to obtain a mortgage after 12 months; in November 2023, defendants stopped making any
payments to plaintiffs and thereafter filed complaints that suggested a landlord-tenant
relationship; and in February 2024, plaintiffs sued to evict defendants, alleging that the parties
had a traditional landlord-tenant relationship. See Fletcher v. Cole, 23 Vt. 114, 119 (1850)
(“[W]here, by the terms of the contract, concurrent acts are to be performed, as a delivery of the
property by one party and a payment of the price by the other, if either party should refuse to
perform his part of the contract, the other party would be at liberty to treat it as an abandonment
of the contract and justify a rescision of it.”); Preheim v. Ortman, 331 N.W.2d 62, 64 (S.D. 1983)
(“Mutual assent to abandon or rescind a real estate contract can sometimes be evidenced by
failure of both parties to take action towards enforcement or performance of the contract.” (citing
Wallace v. Johnson, 234 S.W.2d 49 (Ark. 1950)). The court accordingly concludes the purchase
contract terminated in November 2023 when the parties’ relationship broke down and defendants
stopped making payments to plaintiffs.
Moreover, there was no subsequent written agreement regarding defendants’ occupancy of
the property, and the evidence introduced at the hearing does not support a finding that the

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parties subsequently agreed to revert to the original lease agreement or reached a new verbal
rental agreement.
Under the circumstances—specifically, the absence of binding rental agreement—the
court concludes that this case should be “properly viewed as a common law action for ejectment
governed by 12 V.S.A. § 4761, with such ‘damages’ as would be due under 12 V.S.A. § 4765,” as
“measured by the rental value of the premises” and any other “gains prevented” or “losses
sustained.” Kellogg, 2013 VT 76, ¶ 23 (quoting Sabourin v. Woish, 117 Vt. 94, 99 (1952)). In
determining an appropriate damages award in this context, the court is guided by general
equitable principles including principles of unjust enrichment. See id. ¶¶ 22-24.
The court further concludes that plaintiffs are lawful owners of the property, that
defendants have failed to purchase the property as contemplated by the purchase contract and
otherwise have no right to continue in possession of the property, and that accordingly, plaintiffs
are entitled to possession of the property. 12 V.S.A. §§ 4761, 4854.
With respect to damages, as noted above, plaintiffs are entitled to the reasonable rental
value of the premises. In the absence of contradictory evidence, the court will determine the
rental value as $800 per month plus utilities, as set forth in the original lease, along with
property taxes from the date of the purchase agreement.2 Defendants have occupied the property
since November 2023—or 17 months (including May 2025)—without making payments. Plaintiffs
are accordingly entitled to $13,600 for defendants’ occupancy during this period. Plaintiff Floyd
Kelley also testified without contradiction that plaintiffs paid $5,000 on utilities and tax bills on
the property during this period. This amount will also be included in the damages calculation.
Defendants argued at trial that, in determining any damages award, the court should
credit them for their $20,0000 down payment toward the purchase price and for $6,000 in
expenses incurred to maintain the property. Although defendants did not file a counterclaim and
thus cannot affirmatively recover any damages in this case, these payments are potentially
relevant to whether and to what extent equity requires a damages award to plaintiffs. See
Kellogg, 2013 VT 76, ¶ 22 (applying unjust enrichment principles and considering totality of
circumstances to determine plaintiff’s recovery).
In Vermont, unlike most other states, payments made under an enforceable contract for
deed create an equitable mortgage interest in the property. Prue, 2013 VT 12, ¶ 41; Tromblay v.
Dacres, 135 Vt. 335, 339-40 (1977). But that interest can be abandoned. Prue, 2013 VT 12, ¶ 44.
“A finding of abandonment depends upon the intentions of the parties,” considering “all of the
facts and circumstances” and focusing “on the intent of the purchasers.” Prue, 2013 VT 12, ¶ 44
(quotation omitted). The record here does not support a finding that defendants abandoned their
equity interest. Defendants remained on the property, and although they stopped making
payments because of a dispute over repairs, they continued to assert a right to their equity in the

2 Although the parties disagree about whether there was an agreement with respect to maintenance,

utility, and tax costs, there appears to be no dispute that these expenses were not considered covered by
the $800 per month payments, at least not as of July 2022 when the purchase contract was executed.

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property, including at trial. See Prue, 2-13 VT 12, ¶ 43-46. Accordingly, the court will consider
defendants’ $20,000 down payment in determining plaintiffs’ damages. 3
The court will also consider, however, the extent that defendants’ payments during the
pendency of the purchase contract included interest payments. Interest is the cost of borrowing
money. Plaintiffs, in effect, provided defendants with an equitable mortgage—i.e., a loan—when
they executed the purchase contract and agreed to terms under which defendants would occupy
the property and make payments toward its purchase. The purchase contract provided for 4%
interest on a $120,000 purchase price, which amounts to $4,800 per year or $400 per month. As
noted above, the purchase contract was in effect from August 2022 through October 2023, or 14
months. The court thus concludes that defendants are entitled to $5,600 in interest payments on
account of their having, in effect, provided defendants with a mortgage loan during this period.
With respect to defendants’ claimed expenses to maintain and improve the property, the
evidence does not support including these amounts in the damages calculation. The court is
unable to determine from the evidence presented the extent to which these expenses were
incurred for routine maintenance, which under the circumstances of a contract for deed should be
borne by the defendants as prospective purchasers occupying the property, or the extent that
these expenses were for genuine improvements to the property that can fairly be considered as
having provided a benefit to the plaintiffs upon returning possession of property to them. If,
however, defendants have purchased materials or supplies that have not yet been used on the
property, they shall be entitled to retain those materials or supplies.
In light of the above, the court finds that plaintiffs are entitled to $13,600 for defendants’
occupancy of the property since November 2023, $5,000 in utility and property tax payments, and
$5,600 in interest payments, for a total of $24,200. Defendants, however, are entitled to a credit
of $20,000 on account of the down payment they made toward the purchase price, which reduces
plaintiffs’ damages award to $4,200. As the prevailing party, plaintiffs are also entitled to their
court costs, including a $295 filing fee and sheriff fees of $158.34, for a total of $453.34. Plaintiffs
are not entitled to recover attorney fees because, as explained above, their written rental
agreement is no longer in effect. See 12 V.S.A. § 4854.
Plaintiffs are accordingly entitled to judgment in the amount of $4,653.34. Because the
court has already disbursed $4,800 of the funds held in escrow to plaintiffs, plaintiffs are ordered
to return $146.66 to defendants. The remaining funds held in escrow shall be disbursed to
defendants.

Order

The clerk shall issue a writ of possession restoring plaintiffs to possession of the property
at 4065 Vermont Route 105 in Newport Center.

3 The Vermont Supreme Court in Kellogg held that payments toward a purchase under a contract for deed

were generally not recoverable if the contract was unenforceable under the State of Frauds. See 2013 VT
76, ¶¶ 28-40. The contract here was in writing and neither party has argued it was unenforceable.

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Because the rent escrow funds already disbursed to plaintiffs exceed the amount of the
judgment in this case, plaintiffs are ordered return $146.66 of the disbursed funds to defendants.

The clerk shall disburse the remaining funds held in escrow to defendants.

Electronically signed on: 5/1/2025 pursuant to V.R.E.F. 9(d)

_______________________________________
Benjamin D. Battles
Superior Court Judge

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