Hi, y’all. It’s been a minute. Andy asked me to cover this week’s cases and then it turns out there’s one and it’s a foreclosure and it's a bit of a mess. You'll find it at Ditech Financial, LLC v. Karen Brisson a/k/a Karen Caputo, 2025 VT 54.
Basically it went like this. Homeowner bought a property with a mortgage. The mortgage note was sold several times (this becomes important later). It even got to the point where Homeowner wasn’t even entirely sure who owned her note. Homeowner defaulted and the mortgage company filed a foreclosure action, which was granted. After the 6 month redemption period but before the property auction, Homeowner filed for bankruptcy protection, which led to a dismissal of the foreclosure case. The bankruptcy case settled, and the bank moved to reopen the foreclosure. The parties mediated but were unsuccessful, so back to court they go.
This is where the problem lies: in the meantime, the original bank-plaintiff went out of business and a new bank/business/foreclosure mill needed to sub in. The court permitted this, because there was still an outstanding note. But then that party maybe said they lost the note. (editor’s note: what?) But they still wanted to go forward because there was still an outstanding debt. The court held a hearing where the original plaintiff tried to have the new note-holder sub in for them as the party in interest.
The court dismissed the action with prejudice and vacated the foreclosure because the original plaintiff couldn’t prove who the new plaintiff should be. Plaintiff appealed and SCOV reversed.
In an action like this SCOV reviews for abuse of discretion, which is a high bar. SCOV found the court abused its discretion in dismissing because even though it wasn’t clear who the proper plaintiff was, the plaintiff showed up and tried to prove who ought to stand in their shoes. And just because it wasn’t clear who the plaintiff was through all the note selling, doesn’t mean the obligation to the Homeowner goes away. The interest is still there even if the party needs to be sorted. (Note: this is very much boiled down; please read the opinion to see all the details.)
Justice Cohen is not having this and writes a fairly stinging dissent. He points out that nobody really knew who held the note, in part because nobody knew where the note was. He also pointed out that although the parties mediated, Homeowner couldn’t really engage because she couldn’t possibly know if she settled with the company that it was the correct company. He called their work and recordkeeping “sloppy,” which seems like a fair assessment of the situation.
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