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| That's it! No more biting! |
By Elizabeth Kruska
How many bites at the apple are authorized? One.
Sort of related. I’m currently surrounded by Apple Products. I’m like that guy in the old commercials: I’m a Mac. But I just noticed that the ubiquitous Apple logo has one bite taken out of it, and now I wonder why. I wonder if it’s simply because it’s good design, or if it’s something larger. Maybe it means you only get one bite at the apple, so make it count. I don’t know. Maybe that’s a little too deep for right now.
Anyway, the Wattses—Paris and Skip—had some property and executed a mortgage back in 2006, and the note ultimately ended up with Detusche Bank, who we’ll just call “Lender.” The Wattses, or the “Borrowers” didn’t make their mortgage payment that was due on December 1, 2008. The Lender wasn’t hip to this action and filed a complaint in the appropriate Vermont Superior Court seeking foreclosure and all sorts of associated fees. In February of 2010, Lender filed an affidavit with the court indicating that service was complete.
Then for a very long time, just like in Vermont itself, nothing happened.
In April 2011, the court noticed this case had been hanging around for some time and sent a letter to Lender saying, “Hey friends, what’s going on with this? This is collecting dust and we’re inclined to give it the heave-ho if something doesn’t happen.” No, they didn’t really say it like that, but it would be funnier if they did. Lender didn’t file anything, so the court gave it the court equivalent of a heave-ho and dismissed it with prejudice.
Lender and Borrowers then tried to work it out and figure out a way to resume payments, but they weren’t able to come up with a resolution.
So, Lender filed again in 2013, and again based its foreclosure on the December 1, 2008 nonpayment.
And here’s where everyone who ever took civil procedure goes, “This is it! This is claim preclusion! It really happens in real life!” It’s the lawyer equivalent of seeing the Loch Ness Monster. You’re pretty sure it exists, but you never see it.
Both parties filed motions for summary judgment. Lender asked for foreclosure. Borrowers asked that this claim be dismissed because Borrower had its bite at the apple before, and when the court dismissed with prejudice, that ended the case. Borrowers argued that Lender was precluded from proceeding on a new case based on the same default as before.
The trial court granted summary judgment in favor of Lender, saying the initial dismissal with prejudice was not a preclusive adjudication on the merits. Borrowers appealed this, and SCOV reverses, agreeing with Borrowers.
A review of summary judgment is de novo because it’s a review only of the law and not the facts. As always, summary judgment is appropriate where there is no genuine issue of material fact, and where a party is entitled to judgment as a matter of law.
SCOV first starts by noting that there were two other very recent, very similar cases. In each of them, borrowers defaulted on their payments, and the lenders filed suits. Because of inaction by parties, the claims were dismissed. There’s a timing problem here. These two cases were decided while the Watts case was pending, and are not helpful to Lender. Lender wants SCOV not to apply the decisions it made in those cases to the Watts case because the facts in the Watts case happened before those cases were decided.
Lender wants SCOV to use the “rule of selective prospectivity” which has a 3-part test, and was articulated in a United States Supreme Court case in 1971. This rule lets courts apply a new rule in the case in which it is pronounced, but go to the old rule with respect to other cases that come from facts predating the new rule’s pronouncement.
SCOV says no. First of all, this rule comes from a case that is no longer good law. In that case, the Court established the three-factor test for determining the effect on cases that are in progress, not on cases that are already decided.
Basically, the issue is this. If a party has a suit pending and a new rule comes out mid-suit, what rule applies? Is it the rule from when the issue happened or the new rule that came out? The way to figure it out is to use this test that originally was set forth by the Supreme Court. First, the new decision overrules an existing decision or resolves a novel issue. Second, the court has to look at the facts of each case to figure out if using the new rule would hinder the operation of law. Last, the court has to decide if it would be inequitable to impose a new law retroactively.
As I mentioned, though, the case this test comes from is no longer good law, and the test has been narrowed a lot over the last forty-six years. The long and short of it is that it isn’t right for the law to “shift and spring” based on the particular equities of claims of reliance on an old rule or harm from retroactive application of a new rule. SCOV adopts this reasoning. It’ll treat similarly-situated litigants all the same, and not selectively apply new rules.
All that having been said, in looking at the merits of the case at hand, Lender tries to argue that even though the 2008 default would be barred by claim preclusion, there were subsequent defaults since Borrowers didn’t pay on other dates. And for that reason, the case should go forward.
SCOV says no. Why? Because under the standard for summary judgment, for summary judgment to be appropriate, there can be no genuine issue of material fact. In Lender’s support for summary judgment, it relied on documents referring only to the 2008 default. Lender doesn’t get to use new facts; if it does there might actually be a genuine issue of material fact, thus making summary judgment inappropriate in the first place.
All this said, SCOV reverses the 2013 summary judgment grant and remands to the trial court so this can be dismissed.
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