Tuesday, June 20, 2017

SCOVT affirms denial of motion to set aside default judgment of foreclosure. Does not decide whether permission is required to appeal a judgments of foreclosure based on a judgment lien

Cramer v. Billado, 2017 VT 38

ROBINSON, J. Defendant James Billado appeals the trial court’s denial of his motion to set aside a default judgment of foreclosure on the grounds that the trial court erred in allowing service of the foreclosure complaint by tack order and in declining to set aside the default foreclosure judgment in light of his defenses. Plaintiff Laura Cramer argues that defendant’s appeal was untimely and we thus need not consider the merits of his appeal. We conclude that the trial court’s orders were within its discretion and accordingly affirm.

While this case was pending, this Court on its own initiative issued an order requesting defendant to show cause why his appeal should not be dismissed for failure to file a timely motion for permission to appeal pursuant to 12. V.S.A. § 4601 (requiring court permission for appeal of judgment "for the foreclosure of a mortgage") and Vermont Rule of Civil Procedure 80.1(m) (requiring that request for permission to appeal be filed within ten days of entry of judgment or order appealed from "[w]hen the judgment is for foreclosure of the mortgage"). Defendant argues that by their plain terms, the above requirements apply only to judgments foreclosing a mortgage, and not to judgments of foreclosure based on a judgment lien. Plaintiff argues that pursuant to 12 V.S.A. § 2903(d), the foreclosure of judgment liens is subject to the same requirements as the foreclosure of a mortgage. We decline to decide this jurisdictional question because we conclude that even if defendant's appeal was timely, his claims on appeal fail on the merits.

We review the trial court's denial of the motion to set aside the judgment for abuse of discretion. LaFrance Architect, 2013 VT 115, ¶ 9.  A trial court "should give substantial weight to a meritorious defense when determining whether to vacate a default judgment." Id. ¶ 11.

The trial court’s conclusion that defendant did not present meritorious defenses was within its discretion. Defendant does not deny that plaintiff had a judgment against him for $50,000 from 2007, that plaintiff duly perfected her judgment lien, or that he paid any amounts toward that judgment. Instead, he essentially argues that he was entitled to an offset of plaintiff’s judgment on account of her prior misappropriation of funds from his business. As the trial court noted, collateral estoppel and the statute of limitations are both obstacles to his set-off claims in response to plaintiff’s foreclosure action. Given these considerations, and the absence of any substantial defense to plaintiff’s action for foreclosure, the trial court’s denial of defendant’s motion to set aside the default judgment in this case was within the trial court’s discretion.


SCOVT NOTE: The statute of limitations does not bar a "setoff" claim, which "shall be allowed, to the extent of plaintiff's demand" if it arises out of the transaction or occurrence that is the subject matter of plaintiff's claim.
A cross-claim or counterclaim shall not be brought if an independent action upon the same claim would have been barred under the provisions of this chapter at the time of commencement of the plaintiff's action, except that a counterclaim arising out of the transaction or occurrence that is the subject matter of plaintiff's claim shall be allowed, to the extent of plaintiff's demand, at any time.
12 V.S.A. § 463 .

Rule 13(c), in permitting recovery exceeding the opposing claim, states what was previously the practice in set-off. See 12 V.S.A. § 5469 (now superseded); Franklin Co. Realty Corp. v. Cunnius, 127 Vt. 452, 252 A.2d 524 (1969). Previously, defendant could, in a contract action at law, set off an opposing contract claim, 12 V.S.A. §§ 5461-5478 (now superseded), but such set-off was not compulsory.  Thus, under former practice, at least, a default judgment did not preclude a party from bringing  a later suit for indebtedness which existed before rendition of  the default judgment, Hutchins v. George, 92 Vt. 371, 104 Atl. 108 (1918).

Now, the failure to plead setoff as an affirmative defense results in a waiver of this defense. Wursthaus, Inc. v. Cerreta  149 Vt. 54, 539 A.2d 534 (1987).  Whether the claim is compulsory is determined by Rule 13.

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