Drinan v. Green Mountain Stock Farm

7ermont Superior Court
Filed 04/02/25
Orange Unit

VERMONT SUPERIOR COURT CIVIL DIVISION
Orange Unit Case No. 24-CV-02231
5 Court Street
Chelsea VT 05038
802-685-4610
www.vermontjudiciary.org

Heather Drinan v. Green Mountain Stock Farm, Inc.

ENTRY REGARDING MOTION
Tide: Motion to Dismiss per VRCP 12(b)(6), 12(b)(7), 19 (Motion: 4)
Filer: Cabot Teachout; Green Mountain Stock Farm, Inc.
Filed Date: November 19, 2024

The motion is DENIED.

This is a dispute about competing responsibilities between a buyer and seller to know what
encumbrances burden a property.

Defendant Green Mountain Stock Farm, Inc. (GMSF) has been the developer of a 1300-acre
farm known as the Green Mountain Stock Farm, in Randolph, Vermont since the early1980s when

it began subdividing and selling lots. In 2023, it was still advertising "building" lots for sale. These

lots included Lots #15-16 and #27, which are at the heart of this case.

Plaintiff Heather Drinan purchased the three lots with the intent to develop them. She

signed a purchase and sale agreement with GMSF, and it conveyed the property to her through two

warranty deeds. Neither deed made mention of the view easements that burdened the three

properties. When Drinan took the first steps to develop the lots, a neighbor advised her of the view
easements, which rendered two of the lots entirely undevelopable and isolated development on the
third to narrow building envelop. Drinan filed the present case claiming breach of warranty (the

covenant against encumbrances), negligent or intentional misrepresentation, and a violation of

Vermont's Consumer Protection Act.

GMSF has filed a motion to dismiss arguing that all three claims fail as a matter of law
because Drinan had constructive notice of the encumbrances as they could be found in the land

records. GMSF also contends that the complaint should be dismissed because Ms. Drinan's real

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estate lawyer and insurance company are necessary parties for the just adjudication of this case under
Rule 19 but have not been joined as parties.

Rule 12(b)(6) Standard

Courts rarely grant motions to dismiss for failure to state a claim and generally disfavor
them. Colby v. Umbrella Inc., 2008 VT 20, at ¶ 5; see also Bock v. Gold, 2008 VT 81, ¶ 4 (citation
omitted). To determine whether a complaint survives a motion to dismiss, the court assumes the
factual allegations in the complaint are true. Colby, 2008 VT 20, at ¶ 5. The court will only grant the
motion if there are no facts or circumstances that would grant plaintiff relief. Id. This is because the
purpose of a motion to dismiss for failure to state a claim is “to test the law of the claim, not the
facts which support it.” Brigham v. State of Vermont, 2005 VT 105, ¶ 11 (quoting Powers v. Office of Child
Support, 173 Vt. 390, 395 (2002)); see also Levinsky v. Diamond, 140 Vt. 595, 600 (1982), overruled on
other grounds in Muzzy v. State, 155 Vt. 279, (1990).

Factual Background

The allegations of the complaint are as follows. GMSF is the developer of a 1300-acre
parcel known as the Green Mountain Stock Farm, in Randolph, Vermont. In 1982, GMSF sold Lot
#17 to the Raffels. The Raffel Deed included covenants that burden the adjacent Lots #15–16 by
prohibiting structures of any kind to be erected thereon and Lot #27 by limiting any erected
structures to a 200x100 ft area in the southwestern part of the Lot. The expressed intent of these
covenants was to provide Lot #17 a view “unobstructed by man-made structures and/or buildings.”
Lot #17 has since changed hands twice and is currently owned by Forman and Blumenthal. The
Forman–Blumenthal Deed repeats the language regarding the restrictive covenants benefitting the
Lot in the Raffel Deed. Apart from the GMSF-to-Raffel chain of deeds, the restrictions are not
otherwise memorialized.

In 2023, GMSF was still selling Lots from the Green Mountain Stock Farm and advertising
“10-plus acre building sites.” The offerings included Lots# 15, 16, and 27, but GMSF did not
disclose the encumbrances or provide an exclusion or disclaimer for the lots that would distinguish
them from the other unencumbered lots being sold.

In June 2023, Drinan entered into a contract with GMSF to purchase Lots #15, 16, and 27.
GMSF was aware that Drinan was purchasing the lots with the intent to develop them. Under the

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parties’ purchase and sale agreement, GMSF promised to deliver a warranty deed for these lots at
closing. Drinan also had the right to conduct a title examination. If the review found any
encumbrances or defects, Drinan had the obligation to notify GMSF and give it the opportunity to
cure. If no cure followed, then Drinan could either go forward or cancel the agreement. Drinan did
not notify GMSF of any such encumbrance or defect, and GMSF conveyed the Lots to Drinan by
warranty deed. As part of their warranty, the deeds include a covenant stating that the Lots were
conveyed “free from every encumbrance.” There were no express exception to this covenant cited
in the deeds, and they are silent about any restrictive covenants protecting the view secured to Lot
#17.

Following the closing in July 2023, Drinan began developing the Lots and hired an
engineering company to build single family residences on each of the Lots. After learning about
Drinan’s plans, Forman and Blumenthal notified Drinan in December 2023 of the view easements.
Drinan states that this was the first time she was told or informed that her Lots had any
encumbrance that would affect how she could develop or use them. Drinan halted development
plans and initiated this case.

Legal Analysis

Count I: Breach of Warranty/Covenant Against Encumbrances

A warranty deed includes, among others, a covenant against encumbrances. The covenant is
an agreement whereby the grantor promises that the title conveyed is free from encumbrances. See
Olcott v. Southworth, 115 Vt. 421, 424 (1949) (citation omitted). An encumbrance “is a right to or
interest in land that may subsist in third persons, to the diminution of the value of the land, but
consistent with the passing of the fee.” Hunter Broad., Inc. v. City of Burlington, 164 Vt. 391, 393 (1995)
(citing Olcott, 115 Vt. at 424). Contrary to defects which adversely affect a clear title, an
encumbrance merely diminishes the value of a property. See Trinder v. Connecticut Att’ys Title Ins. Co.,
2011 VT 46, ¶ 17 (citation omitted). Thus, as other New England Supreme Courts have noted, the
covenant against encumbrances serves “to protect a grantee from the reduction in value that results
from an encumbrance that was not disclosed in the deed.” McCormick v. Crane, 37 A.3d 295, 298–99
(Me. 2012) (citation omitted); Choquette v. Roy, 114 A.3d 713, 723 (N.H. 2015) (citation omitted).
The view easements at issue in this case are such an encumbrance.

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The Vermont Supreme Court has held that the covenant in a warranty deed may be
breached even if the buyer has constructive notice of the encumbrance. In Olcott, the seller knew
about a water right encumbering a property but failed to inform the buyer or the attorney who
prepared the deed. 115 Vt. at 423. Refusing to apply the theory of mutual mistake in such
circumstances, the Supreme Court held that the buyer’s constructive notice of an easement by
reason of the references to previous deeds in his chain of title did not frustrate buyer’s right to a
claim of breach of covenant. Id. at 425. Further, “[a]ctual notice on the plaintiff’s part would not
relieve the defendants from the obligation of the covenant.” Id. (citing Butler v. Gale, 27 Vt. 739
(1855)).

Several other states’ courts have expressed similar views. See, e.g., Blissett v. Riley, 667 So. 2d
1335, 1338–39 (Ala. 1995) (citations omitted) (holding that “[k]nowledge, or notice of an
encumbrance, however full, does not impair the covenantee’s right of recovery upon covenants
against encumbrances, for the covenants are executed for the protection and indemnity against
known and unknown encumbrances.”); Loveland Essential Grp., LLC v. Grommon Farms, Inc., 251 P.3d
1109, 1118 (Colo. App. 2010) (citations omitted) (“a buyer’s mere prior knowledge of an
encumbrance does not preclude an action for breach of a covenant against encumbrances. . . . It is
only where the buyer demonstrates an intent to accept the encumbrance that it waives the right to
claim a breach.”); cf. Choquette, 114 A.3d at 723 (citing McCormick, 37 A.3d at 299) (“Accordingly,
‘[w]hen an encumbrance has been disclosed in a deed, even if only by strong implication,’ the
covenant has not been breached.”).

Based on Plaintiff’s complaint, the deeds in this case do not disclose the easements, which
substantially affect and impact the Lots at issue. Given the warranty covenants, Drinan’s breach of
warranty claim survives as a matter of law because it arises from precisely the type of encumbrance
that the covenant is intended to address. Therefore, Defendant’s motion is Denied in regard to
Plaintiff’s breach of warranty claim.

Count II: Misrepresentation

GMSF argues that both misrepresentation claims fail as a matter of law because, again,
Drinan herself is at fault for not discovering the encumbrances in the land records.

Intentional misrepresentation occurs when (1) there is an intentional misrepresentation of
existing fact; (2) that fact affected the essence of the transaction; (3) the maker of the
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misrepresentation knew the statement to be false when it was made; (4) it was not open to the
defrauded party’s knowledge; and (5) it was relied on by the defrauded party to their damage.
Pettersen v. Monaghan Safar Ducham PLLC, 2021 VT 16, ¶ 20 (2021) (citation omitted). Negligence on
the part of the Plaintiff “is not an absolute defense to fraudulent misrepresentation.” Silva v. Stevens,
156 Vt. 94, 105 (1991). Whether the fourth element is met, depends on the circumstances, such as
the full text of a representation or the relationship of the parties. Id. (citation omitted); see also
White v. Pepin, 151 Vt. 413, 420 (1989) (holding that due diligence is case-specific).

As to negligent misrepresentation, Vermont courts apply Restatement (Second) of Torts
§ 552(1) (1977). Burgess v. Lamoille Hous. P’ship, 2016 VT 31, ¶ 21. It provides, in relevant parts, that
when a person with a pecuniary interest in a transaction supplies false information for the guidance
of others in their business transactions, that person is subject to liability for pecuniary loss caused to
the others, when the others justifiably relied upon the information and the person failed to exercise
reasonable care or competence in obtaining or communicating the information. Id. Whether the
person providing the false information exercised “reasonable care or competence” depends on the
facts and the circumstances of the case. Howard v. Usiak, 172 Vt. 227, 230–31 (2001) (citation
omitted).

Defendant argues that the contract put the burden on Ms. Drinan to “cause the title to the
Property to be examined,” and whatever title search was conducted was the problem. This is
ultimately a question of fact, and it is insufficient for Rule 12(b)(6) purposes. Therefore,
Defendant’s motion is Denied in regard to Plaintiff’s second set of claims arising from
misrepresentation.

Count III: Violation of Consumer Protection Act

The Vermont Consumer Protection Act (VCPA) prohibits “unfair or deceptive acts or
practices in commerce.” 9 V.S.A. § 2453. The elements of a VCPA violation are that (1) there was a
representation or omission by Defendant that was likely to mislead consumers; (2) Plaintiff
interpreted the message reasonably under the circumstances; and (3) the misleading effects were
material, meaning that the conduct influenced Plaintiff’s conduct regarding the transaction. See, e.g.,
Ianelli v. U.S. Bank, 2010 VT 34, ¶ 10 (mem.) (citation omitted).

Deception is measured by an objective standard, looking to whether the
representation or omission had the “capacity or tendency to deceive” a reasonable
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consumer; actual injury need not be shown. To be reasonable, moreover, the
consumer’s understanding need not be the only one possible; “if an ad conveys more
than one meaning to reasonable consumers and one of those meanings is false, that
ad may be condemned.” Furthermore, the Act “does not require a showing of intent
to mislead, but only an intent to publish the statement challenged.”

Carter v. Gugliuzzi, 168 Vt. 48, 56 (1998) (internal citations omitted and cleaned up) (emphasis in
original).

GMSF cites no authority to the effect that a “constructive notice” available to the consumer
vitiates the seller’s misrepresentation for VCPA purposes. This is because consumer fraud cases
look to the actions of the seller and whether seller’s affirmative actions were deceptive or an unfair
business practice. 9 V.S.A. § 2453(a); Jordan v. Nissan North America, Inc., 2004 VT 27, ¶ 5. At best,
GMSF’s arguments might constitute an affirmative defense, but this is an issue of fact and not law.
To succeed, GMSF would have to show that the title search that Drinan undertook factually
overtook any liability GMSF may have for its misleading statements and omission. See Jordan, 2004
VT 27, at ¶ 10 (discussing an affirmative defense of statutory compliance to a consumer fraud
claim). As Judge Pearson noted in a similar case:

Circumstances tending to show Buyers’ constructive, or “inquiry” notice of the [real
estate issue] may reflect on the justifiability of Buyers’ reliance on the alleged
misrepresentations, the materiality of the misrepresentations, and even the basic
nature of the alleged misrepresentations—issues that usually should be decided by
the finder of fact—but they do not, as a matter of tort law, simply make the alleged
misrepresentations go away. See W. Keeton, et al., Prosser and Keeton, Law of
Torts, § 108, at 752 (5th ed. 1984) (“The plaintiff is not required, for example, to
examine public records to ascertain the true state of the title claimed by the
defendant.”); Restatement (Second) of Torts, § 540 (describing the general rule that
one does not have a duty to determine the falsity of a representation through
investigation). Taking the record evidence in the light most favorable to the Buyers,
the jury could find that the incomplete information packet provided by [Seller] was
inaccurate, and misleading.

Anderson v. Johnson, Dckt. No. 199-4-06 Wncv, 2008 WL 8496067 (Feb. 3, 2008) (Pearson, J.).1

1 Embedded in this analysis is the additional question not briefed by the parties of whether the title search

provision of the purchase and sale agreement was intended to create a benefit for buyer or to create an
obligation on which seller may also rely.
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GMSF’s position is also distinguishable from the argument that the seller did not know about
encumbrance, which the Vermont Supreme Court has indicated in the context of landlord/tenant
habitability issues may limit liability if such knowledge was unknown to the defendant, and
defendant did not have a duty to know. Terry v. O’Brien, 2015 VT 132, ¶¶ 36–38. In either case, the
issue is ultimately fact-driven as to what each party knew or should have known at the time of the
transaction and whether such statements constituted misrepresentations or omissions likely to
deceive the buyer. Moffitt v. Icynene, Inc., 407 F.Supp.2d 591, 603–04 (D.Vt. 2005).

The fact that Drinan could have discovered the encumbrances through a title search does
not necessarily relieve GMSF from liability for false, misleading, or deceptive statements. The
Vermont Consumer Fraud Act is a remedial act and to be construed liberally. Ianelli, 2010 VT 34, at
¶ 9. As such, the Court’s analysis must begin with the seller’s statements and representations, and it
would, at most, be a question of fact, to evaluate if such constructive knowledge constituted such a
duty that the law would impute such knowledge onto a buyer. Therefore, Defendant’s motion is
Denied to Plaintiff’s third set of claims arising from the Vermont Consumer Fraud Act.

Parties Needed for the Just Adjudication of the Case

In the alternative, GMSF argues that Plaintiff’s complaint must be dismissed, because she
has failed to join her real estate lawyer and title insurance company. GMSF alleges that Drinan’s title
attorney, Attorney Tallman, and her title insurance company, CATIC, should be considered as joint
tortfeasors. GMSF’s argument does not suggest any specific facts, but it outlines a general legal
position that Tallman and CATIC are necessary parties because their actions contributed to the
ultimate injury. Based on the present facts, there is no compelling basis to require the joinder of
either Tallman or CATIC as necessary parties under V.R.C.P. 19. While they may be witnesses and
provide necessary testimony, they are not necessary parties under Rule 19. Vermont recognizes no
right of contribution among joint tortfeasors. Murray v. J & B Int’l Trucks, Inc., 146 Vt. 458, 468
(1986) (citation omitted). Therefore, Drinan can choose which tortfeasor(s) to pursue or not pursue
for recovery. See State v. Therrien, 2003 VT 44, ¶ 24, 175 Vt. 342. For this reason, the Court finds no
basis to dismiss the present action under V.R.C.P. 19 or for a failure to join Tallman and CATIC,
and Defendant’s motion on this count is Denied.

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ORDER

Defendant’s Motion to dismiss Plaintiff’s complaint pursuant to V.R.C.P. 12(b)(7) is
DENIED. The Court will schedule this matter for a preliminary discovery conference.

Electronically signed on 4/2/2025 2:44 AM pursuant to V.R.E.F. 9(d)

__________________________________
Daniel Richardson
Superior Court Judge

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