Trustee process. Divided SCOVT affirms denial of motion to default trustee for late disclosure.

Stroup v. Doran, 2014 VT 92 (01-Aug-2014)

CRAWFORD, J. Plaintiffs appeal from an order of the superior court denying their motion for default judgment against trustee Brattleboro Savings and Loan Association (BSL). We affirm.

On July 22, 2013, plaintiffs served BSL with a trustee summons. BSL did not reply within thirty days, and on August 27 plaintiffs moved for default against BSL and entry of judgment against it as trustee for $24,155.12, the balance due under the judgment. On September 16, BSL filed a trustee disclosure indicating that it did not have any of defendants’ property in its possession. The court denied plaintiffs’ motion for default judgment against BSL. The court stated that “[a]lthough Trustee failed to make a timely disclosure, its disclosure now made in response to Plaintiff[s’] motion for default shows that it holds no assets for the benefit of Defendant[s]. Default judgment under these circumstances would be inequitable.”

Plaintiffs argue that the trial court erred in denying their motion for default because applicable Vermont law makes default mandatory when a trustee fails to serve a disclosure within thirty days.

 Vermont’s trustee process statute provides that “[w]hen a person summoned as trustee does not serve his disclosure within such time as the supreme court may by rule provide, he shall be defaulted, and adjudged a trustee.” 12 V.S.A. § 3062. Civil Rule 4.2(f) requires a trustee to serve a disclosure “within 30 days after the service of the trustee summons upon the trustee, unless the court otherwise directs.” A person who is adjudged trustee by default is liable “for the amount of damages and costs recovered by the plaintiff in the action, and payable in money at the time the judgment is rendered against the principal defendant.” 12 V.S.A. § 3063.

Under the plain language of Rule 4.2(f), the court has discretion to extend the thirty-day deadline for service of a trustee disclosure. Here, the trial court effectively extended the deadline in Rule 4.2(f) by accepting BSL’s late disclosure. This was not an abuse of discretion.

In this case, neither an entry of default nor a default judgment against the trustee ever issued. For this reason, the remedy proposed by the dissent of a motion under Civil Rules 55 or 60 would be premature. Instead, the trial court exercised its separate authority under Rule 4.2(f) to extend the time for the trustee’s response prior to entry of judgment.

DOOLEY, J., dissenting. I fully endorse the desirability of resolving litigation on the merits and of avoiding default judgments. But the discretion we grant to the trial court to give relief from a default judgment must have some limits and be governed by some standards; otherwise, we simply create injustice under the guise of preventing it. I cannot go along with the standardless, unlimited discretion the majority creates, and therefore dissent. I agree that the bank should have the opportunity to seek relief from the default trustee judgment, but the opportunity should occur through a motion to set aside the judgment under Rule 55(c), and the bank should have to demonstrate good cause or compliance with Rule 60. By letting this bank off with no demonstrated showing that it has a system to respond in the future, we are sending the signal that compliance is unimportant. I am authorized to state that Justice Skoglund joins this dissent.