Divided Court reverses, as abuse of discretion, dismissal of foreclosure action under Rule 41 for failure to prosecute in the name of the real party in interest, holding Rule 25 governs transfers of interest pending litigation and that real-party- in-interest rule applies only at the time the action commences.

 Ditech Financial LLC v. Brisson, 2025 VT 54 [9/18/2025]

CARROLL, J.   In this foreclosure action, plaintiff Ditech Financial LLC appeals the trial court’s order dismissing the case with prejudice and vacating the foreclosure judgment for plaintiff’s failure to prosecute.  We agree with plaintiff that the court abused its discretion in dismissing the case for want of prosecution and thus reverse the court’s order, reinstate the judgment of foreclosure, and remand for further proceedings consistent with this opinion.

 

In July 2024, the court concluded the parties agreed that US Bank Trust National Association was not the real party in interest, but that “a glaring question” remained “as to who the real party in interest is.”  The court set a hearing for the parties to present evidence on the real party in interest stating that “the action w[ould] be dismissed for failure to prosecute” if plaintiff “fail[ed] to prove who the real party in interest is at the hearing.”

 

A hearing was held in August 2024, following which the court dismissed the case.  The court concluded “Ditech no longer exists” and had gone through bankruptcy, that plaintiff failed to prove that it, or Shellpoint, emerged from bankruptcy with continued control in the foreclosure judgment and that plaintiff  failed to prove who the real party in interest is.”  Accordingly, the court dismissed the case with prejudice and vacated the foreclosure judgment.

 

On appeal, plaintiff argues that the court lacked authority to dismiss the case with prejudice or vacate the foreclosure judgment under the applicable civil rules. 

 

Rule 17

 

We begin our discussion with the applicable rules governing the real party in interest.  Civil Rule 17(a) requires that an action “be prosecuted in the name of the real party in interest.”  Rule 17(a) applies at the time the action commences.  Hilbrands v. Far E. Trading Co., 509 F.2d 1321, 1323 (9th Cir. 1975); see also Smedberg v. Detlef’s Custodial Serv., Inc., 2007 VT 99, ¶ 30,(noting  V.R.C.P. 17(a) “must be construed to the same effect” as “identical” federal rule); Reporter’s Notes, V.R.C.P. 17 (“This rule is based on Federal Rule 17, as modified in Maine Rule 17.”). 

 

 In her 2023 motion to dismiss plaintiff’s motions, defendant did not challenge plaintiff’s standing at the time the action commenced, nor did the court consider whether plaintiff was the proper plaintiff to have commenced the suit.  Thus, Rule 17 was inapplicable.

 

Rule 25

 

 Rather, to the extent a transfer occurred during the pendency of the proceedings, Civil Rule 25(c) governs.  Rule 25(c) provides “[i]n case of any transfer of interest, the action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party.”

 

Rule 25 “expressly permits parties to continue in an action, even if they do not remain the real party in interest, as long as the cause of action itself survives the transfer to the new party.”  ELCA Enters., Inc. v. Sisco Equip. Rental & Sales, Inc., 53 F.3d 186, 191 (8th Cir. 1995) 7 C. Wright & A. Miller, Federal Practice & Procedure § 1958 (3d ed. 2025) (explaining Federal Rule 25(c) “does not require that anything be done after an interest has been transferred”).  Accordingly, to the extent there was a transfer of interest, the action could continue in plaintiff’s name, unless upon motion the court required otherwise.

Rule 41

 

The court did not rely on Rule 25 in dismissing the action, however.  Rather, it dismissed the case and vacated the foreclosure judgment for failure to prosecute because plaintiff failed to comply with the court’s August 2024 order to prove, after a hearing, who the real party in interest was.  Although it did not cite the rule, the court was plainly referring to Civil Rule 41(b)(2).

 

Rule 41(b)(2) provides: “For failure of the plaintiff to prosecute or to comply with [the Vermont Rules of Civil Procedure] or any order of court, a defendant may move for dismissal of an action or of any claim against the defendant.”

This “general power” of the court to dismiss a case for want of prosecution “is limited by several important considerations” including that “the law favors disposition of cases on their merits,” that “sanctions against litigants should be proportionate to their offenses” and “appropriate to the circumstances,” and that “courts must be wary of imposing sanctions on a party without notice and an opportunity to be heard.”  Ying Ji, 2013 VT 81, ¶¶ 6-7 (quotation omitted); cf. John v. Med. Ctr. Hosp. of Vt., Inc., 136 Vt. 517, 519 (1978) (requiring “findings . . . that 10 there has been bad faith or deliberate and willful disregard for the court’s orders, and . . . the party seeking the sanction has been prejudiced thereby” for “the ultimate sanction of dismissal” under Civil Rule 37(b)(2)). 

Under the similar federal rule, courts recognize that dismissal for lack of prosecution “is a harsh remedy to be utilized only in extreme situations.”  Minnette v. Time Warner, 997 F.2d 1023, 1027 (2d Cir. 1993)

  

We agree with plaintiff that there was no failure on its part to prosecute the case, and thus, conclude the court exceeded its discretion by dismissing the case with prejudice

Here, the trial court made no findings that plaintiff failed to pursue the case, caused undue delay, or demonstrated continued noncompliance with the court’s orders.  Nor does the record demonstrate inaction by plaintiff such as failure to attend a hearing or respond to repeated requests from the court, or that plaintiff unreasonably delayed its response to the court’s order to prove the identity of the real party in interest. Plaintiff attended the hearing and complied with the court’s order to provide proof of the real party in interest, although the court was unpersuaded.  The court therefore exceeded its discretion by dismissing the case with prejudice for plaintiff’s failure to comply with the court’s order.

 

Reversed.  The judgment of foreclosure is reinstated, and the matter is remanded for further proceedings consistent with this opinion.

 

COHEN, J., dissenting.   I cannot agree with the majority that the trial court abused its discretion in dismissing this foreclosure proceeding.  Plaintiff’s incompetent recordkeeping, its shifting representations to the trial court, its sale of a mortgage and note that it now claims no longer legally exist, and its failure to provide adequate proof that it was the party entitled to enforce the foreclosure judgment, together support the sanction of dismissal here.  Accordingly, I dissent.  

 

What the trial court described as dismissal for failure to prosecute can be viewed as dismissal for failure to comply with the court’s July 2024 order directing plaintiff to provide proof that plaintiff was the entity that owned the right to enforce the judgment.  See V.R.C.P. 41(b)(2).

 

The facts of this case justify the court’s decision. Plaintiff was on notice that it faced dismissal if it did not demonstrate that it owned the right to enforce the foreclosure judgment, yet it did not seriously address the trial court’s concerns.  Plaintiff’s failure to adequately respond to the court’s order, coupled with its slipshod recordkeeping and its sale of a mortgage and note that it now claims no longer exists—which undoubtedly caused real confusion and anxiety for the pro 15 se defendant here—lead me to conclude that the court acted within its discretion in dismissing the action.

 

The sanction of dismissal with prejudice was not disproportionate to the actions and inaction that caused it.  Dismissal under these circumstances would serve both as a penalty and an important deterrent to future similar conduct by foreclosure plaintiffs.  See  John v. Med. Ctr. Hosp. of Vt., Inc., 136 Vt. 517, 520 (1978) (noting that sanction of dismissal is sometimes warranted, and can serve “not only as a penalty, but as a deterrent as well”)

 

For that reason, I would affirm the trial court’s decision.

How cited

 

Civil procedure. Sanctions. SCOVT reverses sanction against mortgagee for repeatedly filing foreclosure actions and failing to prosecute them to completion.

Provident Funding Associates, LP v. Campney, 2017 VT 120  [filed 12/22/2017]

REIBER, C.J. Senior mortgagee appeals the trial court’s order dismissing junior mortgagee as a defendant from senior mortgagee’s fourth foreclosure action against mortgagors. The trial court determined that junior mortgagee was entitled to dismissal as an equitable remedy because senior mortgagee had imposed unnecessary costs on junior mortgagee by repeatedly filing foreclosure actions against defendants and failing to prosecute them to completion. The court’s order had the effect of reordering the priority of mortgages, making senior mortgagee’s interest second in priority to that of junior mortgagee. We reverse and remand for the court to consider monetary sanctions, such as attorney’s fees, as an alternative sanction.

The central question posed by this appeal is whether the court appropriately invoked equitable authority to dismiss junior mortgagee as a defendant as a penalty for senior mortgagee’s conduct in the prior foreclosure actions. The power to impose dismissal as a sanction must be exercised sparingly. This is because “the law favors disposition of cases on their merits.”. Furthermore, “sanctions against litigants should be proportionate to their offenses.” For this reason, we have held that “[t]he use of a dismissal sanction is proper only if the court finds that the defendant would be prejudiced by anything less than dismissal.”

We conclude that the litigation approach employed by senior mortgagee warranted sanction, but the court’s dismissal of senior mortgagee’s claim against junior mortgagee was erroneous. The court should have considered imposing monetary or other less drastic sanctions before proceeding to the extreme sanction of dismissal.

Because mortgagors did not cross-appeal, we do not reach their argument raised in their brief that the trial court should revise its judgment decree for foreclosure and recompute any sums due.. See See Huddleston v. Univ. of Vt., 168 Vt. 249, 255, 719 A.2d 415, 419 (1998) (“An appellee seeking to challenge aspects of a trial court’s decision must file a timely cross-appeal …”).

The trial court was within its discretion in deciding to impose some form of sanction. However, the trial court’s dismissal of senior mortgagee’s action against junior mortgagee was an unsustainable exercise of its inherent authority to discipline litigants and attorneys for their conduct. We therefore reverse the trial court’s order dismissing junior mortgagee as a defendant and remand the action for the trial court to consider monetary sanctions against senior mortgagee

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.

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.

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.

Compare Ditech Financial LLC v. Brisson, 2025 VT 54 (reversing, as abuse of discretion, dismissal of foreclosure action for failure to prosecute in the name of the real party in interest)

Foreclosure. Duress does not void mortgage unless it was signed under immediate threat of imminent physical harm, but mortgage may be voidable if, as a result of improper threat, signor had “no reasonable alternative.” Defense is available against assignee of mortgagge with constructive notice.

EverBank v. Marini, 2015 VT 131 [filed 10/16/2015]

EATON, J. This is an appeal from an order granting summary judgment in favor of defendant Caroline Marini on plaintiff EverBank’s complaint for foreclosure on grounds Caroline signed mortgage under the threat of physical violence. On appeal, EverBank argues the trial court erred in concluding that the mortgage was void as to Caroline because she was not physically compelled to sign the mortgage documentation, and that the trial court erred in concluding that the bona fide purchaser doctrine was not available to EverBank. We reverse on the issue of whether the mortgage is void, and direct the trial court to enter judgment for EverBank on that issue. We remand for trial the issues of whether the mortgage is voidable and, if so, whether it is enforceable because it was ratified by Caroline, but affirm the trial court’s decision that the bona fide purchaser doctrine is not available to EverBank. 

There are two forms of duress —duress by physical compulsion, which renders an agreement void, and duress by improper threat, which results in an agreement that is voidable by the victim. Under Vermont law, improper conduct sufficient to render a contract void, as opposed to voidable, must consist of either the actual application of physical force that is sufficient to, and does, cause a victim to appear to assent to the execution of a document, or the threat of immediate application of physical force sufficient to place a person in the position of the signer in actual, reasonable, and imminent fear of death or serious personal injury.

On the evening prior to Caroline signing the mortgage paperwork, Gary removed a pair of large scissors from the knife drawer and waved them back and forth. This scared Caroline and, in an attempt to protect her children, she told Gary that she would sign the mortgage documents if he would leave the children alone, which she did the following day in front of a notary public. When the notary asked Caroline if her signature was her free act and deed, she replied, “it is what it is.”

Nothing in the record reveals any evidence of a threat of imminent physical violence upon Caroline such that she reasonably feared loss of life or serious physical injury at the time she signed the document in front of an independent person. Accordingly,we reverse the trial court’s decision that the mortgage was void. 

To constitute improper conduct such that an agreement can be held voidable, there must be both an inducement by an “improper threat” and the victim must have no “reasonable alternative” but to succumb. Construing the record in favor of EverBank as we must we also conclude that the undisputed facts do not establish as a matter of law that Caroline was without a reasonable alternative.  We therefore remand the matter of whether the mortgage is voidable to the trial court.

The trial court also concluded that EverBank was not a bona fide purchaser. We agree. It is undisputed that EverBank acquired its interest in the mortgage seven months after Caroline raised the duress claim in her answer. EverBank cannot now argue that was a bona fide purchaser when it had constructive, if not actual, notice of this defect. See 9A V.S.A. § 3- 305(a)(1) (holder of a negotiable instrument is not “holder in due course” where holder took instrument with notice that party had duress defense). We affirm the trial court’s conclusion and he that the bona-fide-purchaser doctrine is not available to EverBank should Caroline prove her duress claim. 

Foreclosure; future advances: Creditor with judgment lien takes priority over future advances by mortgagee with actual notice of the lien, whether or not in writing, and whether or not notice is given by the creditor.

Daniels v. Elks Club of Hartford, 2012 VT 55 (Dooley, J.) (Cohen, S.J. concurring) (Reiber C.J.  joined by Burgess,  J. dissenting)

Plaintiff seeks to foreclose a mortgage on real property owned by defendant Elks Club of Hartford, Vermont (the Club).  Defendant creditors  all have junior liens  arising from a discrimination lawsuit aginst the Club. Creditor sappeal from a trial court decision on summary judgment, concluding that plaintiff  is entitled to a judgment of foreclosure against all parties, and dismissing creditors’ counterclaims.   On appeal, creditors argue the Bank was on actual notice of creditors’ interest, and, therefore money advanced thereafter is not part of the mortgage amount that has priority over creditors’ interests. We  reverse and remand the trial court’s decision to include certain advances in the mortgage amount and remand for reconsideration under the correct legal standard. 

The trial court ruled the Bank’s future advance did not lose its priority because, regardless of what the Bank may have known or inferred, it had not received written notice and objection from the creditors.  We disagree and hold that demonstrated actual notice from any source cuts of the priority of future advances , and that the notice need not be a writing and need not be an objection to future advances.

27 V.S.A. § 410(b)(3)(B) does not require that the intervening interest holder actually object to future advances.  It is enough that the mortgagee “receives written notice of the intervening interest.”  Also, § 410(b)(3)(B) does not require that it be the intervening creditor that provides the notice; the statute is written in the passive voice, requiring that “the mortgagee receives written notice” without specifying by whom.  In short § 410(b)(3)(B) is satisfied by any written notice and requires neither that the notice come from the junior creditor nor that the junior creditor specifically object to future advances.  

Further, although a mortgagee need not seek out information about attachments to ensure that its priority is preserved, we hold it  loses its priority where it has received such information, even though the information is not in writing, as the statute requires. see In re Blackmore , No. 05-12045, 2006 WL 1666194, at *2 (Bankr. D. Vt. Jan. 25, 2006) (“[F]uture advances made by a mortgagee will be subordinate if made after the mortgagee has actual notice of the intervening lien.”)

Foreclosure complaint dismissed for lack of standing.

U.S. Bank National Association v. Kimball, 2011 VT 81 (Burgess, J.)

Plaintiff US Bank  appeals from a trial court order granting summary judgment for defendant homeowner and dismissing with prejudice US Bank’s foreclosure complaint for lack of standing.  The court concluded that to enforce a mortgage note, “a plaintiff must show that it was the holder of the note at the time the Complaint was filed,” and here there was “simply no evidence of an assignment to a party in interest.”  Because neither note submitted by US Bank was dated, the court concluded that there was no evidence that the note was endorsed to US Bank before the complaint was filed.  Therefore, the court held that US Bank lacked standing to bring the foreclosure action. On appeal, US Bank argues that it had standing to prosecute the foreclosure claim and the court’s dismissal with prejudice was in error.  Homeowner cross-appeals, arguing that the court erred in not addressing her claim for attorney’s fees.  We affirm the dismissal and remand for consideration of homeowner’s motion for attorney’s fees. The foreclosure complaint is dismissed and the case is remanded for consideration of defendant’s motion for attorney’s fees.

 It is neither irrational nor wasteful to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit.  Nevertheless, and despite the court’s invocation of “with prejudice” in its dismissal order, US Bank cannot be precluded from pursuing foreclosure on the merits should it be prepared to prove the necessary elements.   The court’s dismissal on just jurisdictional grounds was not adjudication on the merits.  See V.R.C.P. 41(b)(3).

To foreclose a mortgage, a plaintiff must demonstrate that it has a right to enforce the note, and without such ownership, the plaintiff lacks standing.   While a plaintiff in a foreclosure should also have assignment of the mortgage, it is the note that is important because “[w]here a promissory note is secured by a mortgage, the mortgage is an incident to the note.”  Under the  UCC the Bank had the burden of demonstrating that it was a “ ‘[p]erson entitled to enforce’ ” the note, by showing it was “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument.”  9A V.S.A. § 3-301.  On appeal, US Bank asserts that it is entitled to enforce the note under the first category—as a holder of the instrument.

To be a holder, US Bank was required to show that at the time the complaint was filed it possessed the original note either made payable to bearer with a blank endorsement or made payable to order with an endorsement specifically to US Bank.  US Bank lacked standing because it has failed to demonstrate either requirement.  Initially, US Bank’s suit was based solely on an assignment of the mortgage by MERS.  The complaint did not allege that US Bank held the original note. While US Bank eventually produced the original note with an endorsement to it, none of the evidence submitted at summary judgment by US Bank established the timing of the endorsement. Fraught with contradictions and evidently lacking information based on personal knowledge, the affidavit was insufficient to establish that US Bank had an interest in the note prior to the time the complaint was filed. Based on this contradictory and uncertain documentation, the trial court did not err in concluding that there was no evidence to show that US Bank was a holder of the note at the time it filed the complaint.