Dismissal for failure to prosecute is an adjudication on the merits. Court will not override settled procedural rules to prevent a windfall.

Deutsche Bank v. Pinette, 2016 VT 71 (filed June 24, 2016)

DOOLEY, J. Lender appeals from a decision that dismissed lender's claims for mortgage foreclosure and a deficiency judgment on the ground that they were barred by claim preclusion, as lender had previously instituted an identical action against borrower in 2013, which had been dismissed for failure to prosecute. On appeal, lender argues that because the 2013 action did not actually adjudge the enforceability of the note and mortgage, the dismissal did not have preclusive effect. We affirm.

Under Rule 41(b)(1)(ii), a court may, by its own motion, dismiss any action where "all parties against whom a judgment for affirmative relief is sought have failed to plead or otherwise defend as provided by these rules and the lender has failed to request or apply for a default judgment within six months of the filing of the action." Rule 41(b)(3) states that "[u]nless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision (b) and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction, for improper venue, or for failure to join a party under Rule 19, operates as an adjudication on the merits." The plain language of Rule 41(b) is therefore exceedingly clear—by its express terms, unless a trial court specifically says otherwise in its order, a dismissal predicated on a lender's failure to seek a default judgment operates as an adjudication on the merits.

That dismissal was with prejudice is explicitly part of Rule 41, and lender was on notice of it.

Lender argues that barring subsequent foreclosure actions in cases like those at bar would result in a "significant and unjustified windfall” for mortgagors. The consequence of a procedural default is usually a windfall to the other side. While borrower in this instance is enriched, and has kept a benefit he would otherwise be bound to relinquish, we cannot override settled procedural rules, essential to the swift and efficient administration of justice, in order to force a contrary result. See In re Verizon Wireless Barton Permit, 2010 VT 62, ¶ 21, 188 Vt. 262, 6 A.3d 713 ("[P]rocedural rules are devices to ensure fairness, uniformity and regularity of treatment to all litigants appearing before the courts, and to be meaningful, they must be enforced" (citation omitted)); Bloomer v. Gibson, 2006 VT 104, ¶ 14, 180 Vt. 397, 912 A.2d 424 ("The court does not abuse its discretion where it enforces the rules of civil procedure equitably, even against a pro se litigant." (emphasis added)).

Lender had numerous opportunities to avoid the "windfall" created by the dismissal with prejudice, either by moving for default judgment, appealing the dismissal or moving to reopen the dismissal. It would have been in a stronger position if the third complaint, the one in this case, reflected the earlier dismissal and the requested consequences of that dismissal; instead its filing of the virtually identical complaint in each action transmits a message that it expected no consequences from its default. The trial court acted well within the law, and we must uphold its decision.

Affirmed.

SCOVT NOTE: The rule announced in Pinette, that in mortgage foreclosure actions an involuntary dismissal for failure to prosecute operates as an adjudication on the merits, barring a mortgagee’s subsequent foreclosure claims based on the same default, is retroactive to pending cases. See Deutsche Bank National Trust Co, v. Watts, 2017 VT 57