Editor’s note: This article is by Daniel Richardson, founder of SCOV Law Blog, and a partner with Tarrant, Gillies, Merriman and Richardson.
State v. Rounds, 2011 VT 39
A friend of mine once told me a story that falls in line with today’s case. After finding a good contractor who did a great job repairing sheathing on the side of his house, he asked them to bid on a bathroom renovation job. The bid came in low, and the crew started right away. The problem is that they never went away, and while work progressed slowly, costs rose quickly. When my friend inquired what was taking so long and costing so much, the foreman answered honestly. They were going slow until the winter weather broke for their next job, and he admitted, they probably could have done the job cheaper, but they hadn’t done a bathroom renovation before and were teaching themselves as they went along.
If you think my friend asked for a refund or that one was offered, then you really do not know much about construction practices in Vermont.
The complainants in today’s case certainly do. Both are New York residents who bought a second home in Andover, Vt., in 2005 and contracted with the defendant to build a two-bedroom addition and large deck on the house. The defendant won the job by offering the low bid of $68,000 for the entire job (including labor and materials). The owners thought this was a “very good” price and gave the defendant a $7,000 advance at the signing. This would turn out to set a pattern between the parties. The owners would come to the site from their home in New York. The defendant would show them some nominal progress, and then the owners, at the defendant’s request, would cut a sizable check.
Construction on the addition formally began in May 2007. The owners visited the site each month for a progress review. By summer, the defendant had laid the foundation for the addition and framed the addition. By September, the defendant had, following several requests by the owners, done the initial installation on the roof. But the roof was not actually completed until late October.
In October, the defendant asked for a $7,500 payment, which the owners made using a check from their credit card company. The defendant complained that this would take 10 days to clear and asked for a replacement check. The owners complied, and the defendant cashed both. In November, the owners received an invoice for $600 for French doors that they had already given the defendant $2000 to purchase. In December, the defendant stopped taking their calls or appearing at the work site. By this point, the owners had paid the defendant $70,000 to construct the shell of an addition that was not tied to the house, lacked insulation, Sheetrock, interior doors, and the deck. The owners, frustrated, then spent another $30,000 on another contractor who undid portions of the defendant’s work and completed much, if not all, of the project.
In January 2008, the owners notified the defendant that they were canceling their contract and would no longer require his services. The defendant, perhaps offended at the implication of this notice, sued the owners for breach of contract—seeking damages for lost revenue he would have received if he had been allowed to continue building the house. The owners, making things explicit, countersued and reported the defendant to the Attorney General’s Office who brought the immediate criminal case against the defendant.
The problem for the state in this case is that the owners never asked the defendant to perform the rest of the contract or refund the money. That’s OK, says the state. The Supreme Court can infer it from the evidence. Not so fast says the Supreme Court. We are double-stacking inferences, and unlike pancakes, this cannot be done.”
The state charged the defendant with one count of home improvement fraud and two counts of false pretenses. The latter two were for double payments the owners made in October and November. A jury found the defendant guilty on all three counts. On appeal to the Supreme Court of Vermont, the defendant seeks only to overturn his home improvement fraud conviction, accepting the judgment of his peers on the other two counts.
On appeal, the defendant raises three issues. First, he argues that there was not enough evidence to convict him of home improvement fraud because there was no evidence that he intended to defraud the owners at the time the contract was formed. The element here is whether the defendant “knowingly promised performance that he knew would not be performed, in whole or in part.” The Supreme Court of Vermont reviews this question of acquittal as a matter of law by a very high standard by looking at the state’s evidence in the most generous light possible. The policy being that the Supreme Court of Vermont or the trial court should not take an issue from a jury unless there is absolutely no basis for them to make findings on the critical elements.
No dice for the defendant in this case. The evidence showed that he worked slowly from the start and was taking double payments on false pretenses up to the last month of his work. The Supreme Court rejects the defendant’s contention that his substantial performance (framing and roofing) of the agreement provides an absolute defense. That is an issue for the jury to weigh and not a get out of jail free card. Since there is more than enough circumstantial evidence, the Supreme Court rejects the defendant’s argument and lets the verdict stand.
The defendant has more luck with his second argument, which forces the Supreme Court into a fairly abstract discussion about the nature of inferences and our Constitution’s criminal standard of proof, which requires evidence beyond a reasonable doubt. The issue here revolves around the word “knowingly.” The state must prove beyond a reasonable doubt that a defendant “knowingly promised performance” in order to convict him on home improvement fraud. Since few suspects willingly confess their plans to defraud a homeowner, the law allows the state to prove this element by inference. Instead of proving directly that the defendant “knew,” the state can establish guilt by putting on evidence that shows:
- That the defendant failed to perform the contract;
- That the owner requested him to perform the rest of the contract or tender a refund; and
- That the defendant failed to either complete the contract or tender a refund.
The problem for the state in this case is that the owners never asked the defendant to perform the rest of the contract or refund the money. That’s OK, says the state. The Supreme Court can infer it from the evidence. Not so fast says the Supreme Court. We are double-stacking inferences, and unlike pancakes, this cannot be done.
Logical thinking 101
As an aside, let me offer this primer on inference as a logical concept. Basic logic begins with a deduction, which moves from the general to the specific. All men are mortal. Socrates is a man. Therefore, Socrates is mortal.
Deductive thinking is safe. As long as you do it right, your conclusions will always be sound. If all men really are mortal and if Socrates really is a man, then it simply follows that Socrates will die.
Inductive thinking goes the opposite way. From specific examples we infer the general. For example, all of our ancestors have died. No one we know has ever lived forever. Therefore all men are mortal. See the problem? We cannot know that the conclusion necessarily follows. We are pretty sure that this is true, but unlike deductive logic, we cannot be absolutely sure, even if the first two sentences are absolutely true.
An inference, in other words, is our best guess. They range from sure bets like “the sun will rise tomorrow” to more attenuated conclusions like he “knowingly promised performance that he knew he could not provide.”
Inferences are a bit like bets: We build them on the best evidence and the best inferences are indistinguishable from deductions because our evidence and data is so thorough.
Supremes raise the bar of proof
But good enough for the logician is not the same as “beyond a reasonable doubt” for the jury. The problem with the state’s argument is that they want allow the jury to infer the elements of the inference. The problem being that the jury would be forced to infer twice, and that is one time too many to establish an essential element of a crime. The Supreme Court notes that the state needs to establish the three basic facts of the inference (did not complete contract, owner made request, and defendant failed to comply).
Heady stuff, but it breaks down to this. The law will allow the State to prove an essential element of a crime by inference (that is without direct or circumstantial evidence) but the basis for that inference must rest on basic facts established through the testimony of witnesses or evidence. Here the trial court cannot allow a jury to “infer” that the owners made a request when there is no direct evidence that they did. Otherwise, the jury would start a domino chain of reasoning that would be below the threshold of beyond a reasonable doubt.
Since the state did not establish the elements of the inference, it was not entitled to a jury instruction on this element. The question then pivots to whether this error was a “plain error” or whether it was a minor defect that does not alter the basic justice done. Plain error is a term of art and means that the error was obvious, that it affected substantial rights and resulted in prejudice to the defendant, and that it seriously affected “the fairness, integrity or public reputation of judicial proceedings.” Not an easy standard to meet, but as you can guess, the Supreme Court does not come this far to turn back. Given the serious implications of the error, the Supreme Court concludes that it is plain error, and it vacates the conviction and remands for either re-trial or dismissal.
Much is going on in this decision. Apart from the colorful facts, the Supreme Court appears to be sending direction to the trial courts to tighten up the standard for inferences and raising the bar of proof for the state.
For contractors, though, the message is equally clear. Diligent work is not only its own reward but it is likely the best way to avoid prosecution.
