Saturday, June 24, 2017

SCOVT gives full retroactive effect to a new rule in a case pending on appeal when the rule was announced.

Deutsche Bank National Trust Co, v.  Watts, 2017 VT 57 [ 6/23/2017]

DOOLEY, J. Defendant borrowers appeal the trial court’s summary judgment decision in favor of plaintiff lender in this mortgage foreclosure action. They assert that the trial court erred by finding that a dismissal with prejudice under Vermont Rule of Civil Procedure 41(b) is not an adjudication on the merits given preclusive effect in a foreclosure action. Lender argues in response that decisions of this Court that gave preclusive effect to the dismissal of foreclosure actions, made only after the trial court’s decision, should be applied only prospectively and not to this case. We reverse and dismiss lender’s action.


In Deutsche Bank v. Pinette, 2016 VT 71, 149 A.3d 479, this Court held that in mortgage foreclosure actions, the effect of 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. Id. ¶ 8. In Cenlar FSB v. Malenfant, 2016 VT 93, 151 A.3d 778 we held that foreclosing entities must give borrowers notice and an opportunity to reinstate loans prior to pursuing subsequent foreclosure actions based on new defaults. Malenfant, 2016 VT 93, ¶¶ 39-40. 

Lender asks us to rule under three-factor test laid out in Chevron Oil Co. v. Huson, 404 U.S. 97 (1971), that lender’s 2013 action was not precluded under the Pinette and Malenfant holdings because the underlying facts here transpired before we announced the holdings in those cases. But the Supreme Court limited the scope of the Chevron Oil test in Harper v. Virginia Department of Taxation, 509 U.S. 86 (1993). The Court requires that a new rule of federal law be given full retroactive in all civil cases “still open on direct review and as to all events, regardless of whether such events predate or postdate our announcement of the rule.” Id. at 97.

For a number of reasons, we decide to adopt the Harper rule. Because this case was on direct review when Pinette and Malenfant were decided, the rule of those cases applies. This action is barred by claim preclusion under Pinette and Malenfant because the foreclosure that lender seeks is based on the same default as the earlier action.

The court’s summary judgment decision is reversed and the matter is remanded for dismissal of plaintiff’s February 2013 complaint.

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