Deutsche Bank National Trust Company, as Trustee v. Skip Watts & Paris Watts
171 A.3d 392
Vt.2017Background
- In 2006 the Watts executed a promissory note and mortgage; the note was later assigned to Deutsche Bank. The Watts defaulted by failing to make the December 1, 2008 payment.
- Deutsche Bank filed a foreclosure and collection complaint in 2009 but failed to seek a default judgment; the superior court dismissed that action for failure to prosecute in July 2011.
- Deutsche Bank filed a second, identical foreclosure complaint in February 2013 based on the same December 1, 2008 default. The Watts pleaded claim preclusion (res judicata).
- The trial court granted summary judgment to Deutsche Bank, reasoning the 2011 dismissal did not have preclusive effect and limiting recovery of interest to amounts accruing after the 2009 complaint.
- On appeal, this Court reversed: it applied its prior holdings in Deutsche Bank v. Pinette and Cenlar FSB v. Malenfant (which treat involuntary dismissals for failure to prosecute in foreclosure cases as adjudications on the merits) and adopted the U.S. Supreme Court’s Harper rule for retroactivity of new civil-law rules.
- The Court rejected Deutsche Bank’s attempt to invoke selective prospectivity (Chevron Oil test) and declined to consider the lender’s unpresented claim of a later, separate default because it was not raised below. Judgment reversed and 2013 complaint dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an involuntary dismissal for failure to prosecute under V.R.C.P. 41(b) bars a later foreclosure based on the same default | Deutsche Bank argued the 2011 dismissal should not operate as an adjudication on the merits and therefore did not preclude the 2013 action | Watts argued the 2011 dismissal was an adjudication on the merits in a foreclosure case and thus claim-preclusive | The Court held such dismissals in mortgage-foreclosure cases operate as adjudications on the merits and bar subsequent foreclosure on the same default (consistent with Pinette/Malenfant) |
| Whether Pinette/Malenfant should be applied retroactively to this case | Deutsche Bank urged selective prospectivity, saying the underlying facts predated Pinette/Malenfant so those rulings should not bar its 2013 suit | Watts urged full retroactive application, barring the 2013 suit | The Court adopted Harper and declined selective prospectivity; Pinette/Malenfant apply to cases pending on direct review, so the 2013 action is barred |
| Whether the Chevron Oil three-factor test governs retroactivity of state-law rulings | Deutsche Bank relied on Solomon and Chevron Oil to argue for selective prospectivity | Watts argued federal precedent (Harper/Griffith) counsel against selective prospectivity and for uniform treatment | The Court rejected Chevron Oil as obsolete for this context, adopted Harper, and refused Deutsche Bank’s Chevron-based selective-prospectivity claim |
| Whether lender preserved and proved a new default after the 2011 dismissal | Deutsche Bank pointed to a 2012 demand letter it said showed a new reinstatement default and asked for remand to take evidence | Watts noted the 2013 complaint and Deutsche Bank’s summary-judgment facts alleged the same December 1, 2008 default; the demand letter was not presented below | The Court refused to consider the unproduced demand letter/new-default theory because it was not presented to the trial court; summary judgment reversed and the 2013 complaint dismissed |
Key Cases Cited
- Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) (articulated three-factor test for prospectivity of new rules)
- Griffith v. Kentucky, 479 U.S. 314 (1987) (new criminal-law rules apply retroactively to cases on direct review)
- Harper v. Virginia Dep't of Taxation, 509 U.S. 86 (1993) (when a court announces a new rule of federal law in civil cases, it must be applied retroactively to cases on direct review)
- James B. Beam Distilling Co. v. Georgia, 501 U.S. 529 (1991) (plurality/concurring opinions rejecting selective prospectivity for federal-law questions)
- Solomon v. Atlantis Dev., Inc., 145 Vt. 70, 483 A.2d 253 (1984) (Vt. Court previously applied Chevron Oil prospectivity test)
- Robertson v. Mylan Labs., Inc., 176 Vt. 356, 848 A.2d 210 (2004) (standard of review for summary judgment)