Stroup v. Doran & Peter Doran Landscape Design, LLC

Crawford, J.

¶ 1. Plaintiffs Sylvia and Stanley Stroup appeal from an order of the superior court, civil division, denying their motion for default judgment against trustee Brattleboro Savings and Loan Association (BSL). We affirm.

¶2. In 2007, plaintiff's sued defendants Peter Doran and Peter Doran Landscape Design, LLC for breach of contract, fraud, and consumer fraud after defendants failed to perform landscaping for plaintiffs. Plaintiffs obtained a judgment against defendants in Bennington Superior Court. Defendants failed to pay the judgment. Plaintiffs obtained a writ of execution, and the court approved plaintiffs’ motion for trustee process to attach funds owned by defendants and held by BSL.

¶ 3. BSL disclosed to plaintiffs that it held a balance of $2,853.05 in,a checking account titled in the name of one of the defendants. A few days later, the parties stipulated that BSL would release $750 to plaintiffs, and that BSL would then be discharged as a trustee and defendant’s account would be free of any lien or charge benefitting plaintiffs. Defendants further agreed to pay $3,500 to plaintiffs before January 31, 2008. BSL paid plaintiffs $750. Plaintiffs claim that defendants never paid the remainder of their debt.

¶ 4. On July 22, 2013, plaintiffs served BSL with another trustee summons. BSL did not reply within thirty days, and on August 27 plaintiffs moved for default against BSL and entry of judgment against it as trustee for $24,155.12, the balance due under the judgment. On September 12, the court ordered the clerk to schedule a hearing on plaintiffs’ motion, and directed that a copy of plaintiffs’ motion and the notice of hearing be served on BSL.

¶ 5. On September 16, BSL filed a trustee disclosure indicating that it did not have any of defendants’ property in its possession. The court subsequently entered an order denying plaintiffs’ motion for default judgment against BSL. The court stated that “[a]lthough Trustee failed to make a timely disclosure, its disclosure now made in response to Plaintiff[s’] motion for default shows that it holds no assets for the benefit of Defendant^]. Default judgment under these circumstances would be inequitable.” Plaintiffs appealed.

¶ 6. Plaintiffs argue that the trial court erred in denying their motion for default because applicable Vermont law makes default mandatory when a trustee fails to serve a disclosure within thirty days. Plaintiffs did not contest the information contained in the trustee’s disclosure form or request an evidentiary hearing below. See V.R.C.P. 4.2(g) (stating that party who intends to contest information contained in trustee’s disclosure is entitled to evidentiary hearing upon written request). Nor do they contest the information on appeal. Their sole argument before this Court is that default was mandatory under 12 V.S.A. § 3062 and V.R.C.P. 4.2(f).

¶ 7. Vermont’s trustee process statute provides that “[w]hen a person summoned as trustee does not serve his disclosure within such time as the supreme court may by rule provide, he shall be defaulted, and adjudged a trustee.” 12 V.S.A. § 3062. Civil Rule 4.2(f) requires a trustee to serve a disclosure “within 30 days after the service of the trustee summons upon the trustee, unless the court otherwise directs.” A person who is adjudged trustee by default is liable “for the amount of damages and costs recovered by the plaintiff in the action, and payable in money at the time the judgment is rendered against the principal defendant.” 12 V.S.A. §3063.

¶ 8. Thus, “[o]nee process has been served, heavy responsibilities rest on the trustee.” First Wisconsin Mortg. Trust v. Wyman’s, Inc., 139 Vt. 350, 355, 428 A.2d 1119, 1123 (1981). We explained in First Wisconsin that:

If a trustee fails to disclose as the statutes require, it may be defaulted. In such case, the goods, chattels and estate of the trustee itself are chargeable for the amount of the judgment recovered by the plaintiff. Thus, the trustee has ... a very direct interest in proper disclosure for the protection of its own assets from assessment. This result may follow not only from a total failure to disclose, but also if the disclosure is incomplete or negligently inadequate.

Id. at 356, 428 A.2d at 1123 (citations omitted).

¶ 9. However, under the plain language of Rule 4.2(f), the court has discretion to extend the thirty-day deadline for service of a trustee disclosure. See V.R.C.P. 4.2(f) (requiring service within thirty days “unless the court otherwise directs”). Here, the trial court effectively extended the deadline in Rule 4.2(f) by ordering that BSL be notified of plaintiffs’ motion for default and accepting BSL’s late disclosure, which BSL filed prior to the date of the hearing on the motion. This was not an abuse of discretion. As we noted in a recent case:

Because “a judgment by default effectively deprives a defendant of an opportunity to have the merits . . . determined through the normal adversary judicial process,” we have held that “the rules relating to default judgments should be liberally construed in favor of defendants, and of the desirability of resolving litigation on the merits, to the end that fairness and justice are served.”

Ying Ji v. Heide, 2013 VT 81, ¶ 12, 194 Vt. 546, 82 A.3d 1160 (quoting Desjarlais v. Gilman, 143 Vt. 154, 157, 158-59, 463 A.2d 234, 236, 237 (1983)).

¶ 10. The trial court acted within its discretion to extend the deadline and accept the late disclosure in order to avoid a default judgment against BSL, which held no funds belonging to defendants. Although the trial court was not obligated to extend the deadline, its decision to accept the late filing did not violate the statutory scheme. The statute imposes no fixed deadline for service of a trustee disclosure. 12 V.S.A. § 3062. The only deadline is contained in the associated rule, V.R.C.R 4.2(f), which the trial court appropriately applied in a liberal fashion in order to avoid an unjust result.

¶ 11. The dissent holds up the experience of the Maine courts as a proposed model for Vermont based on the view that “identical regulatory standard[s]” are present in both states. Post, ¶ 22. In fact, the current legislation in Maine is now quite different. In addition, Levine v. KeyBank National Ass’n, 2004 ME 131, ¶ 19, 861 A.2d 678, and the other decisions cited by the dissent are cases in which default was actually entered by the court clerk and Rule 55 of the Maine Rules of Civil Procedure applied.

¶ 12. We first consider the legislative differences. It is true that both the applicable statutory provisions and the civil rules are generally similar in the two states. Compare 12 V.S.A. § 3062, with 14 Me. Rev. Stat. § 2614; V.R.C.P. 4.2, with Me.R.C.P. 4B. However, following the events which gave rise to the decision in Levine and the forfeiture of $264,422 by the trustee in that case, the Maine legislature amended its trustee process statute to limit any default to amounts actually held by the trustee. Levine, 2004 ME 131, ¶ 9; 14 Me. Rev. Stat. § 2614. Under the law of Maine currently in effect, the recovery against BSL in this case would be zero.

¶ 13. This case is also procedurally different from the Maine cases cited by the dissent. In this case, neither an entry of default nor a default judgment against the trustee ever issued. For this reason, the remedy proposed by the dissent of a motion under Civil Rules 55 or 60 would be premature. Instead, the trial court exercised its separate authority under Rule 4.2(f) to extend the time for the trustee’s response prior to entry of judgment.

¶ 14. In contrast, the Maine cases concern the post-judgment remedies available under Rule 55 and Rule 60. The Levine decision explicitly declined to consider remedies arising under Maine Civil Rule 4B(j) on the ground that these are barred by the clerk’s entry of default. See Levine, 2004 ME 131, ¶ 9 (“Rule 4B(j) is designed to afford a trustee an immediate opportunity to be heard following its receipt of an ex parte trustee summons, and it is not an alternative avenue for challenging a default.”). By shifting the analysis into the realm of post-judgment remedies, the dissent effectively removes the trial court’s additional authority under Rule 4.2(f) to extend the time for the trustee to respond.

Affirmed.