Bissonnette v. Wylie, 96-029

CourtUnited States State Supreme Court of Vermont
Citation693 A.2d 1050,166 Vt. 364
Docket NumberNo. 96-029,96-029
Parties, 34 UCC Rep.Serv.2d 724 Donald and Claudette BISSONNETTE v. Nicholas J.H. WYLIE, Daniel E. Mendl and Martin V. Lavin.
Decision Date28 March 1997

Page 1050

693 A.2d 1050
166 Vt. 364, 34 UCC Rep.Serv.2d 724
Donald and Claudette BISSONNETTE
v.
Nicholas J.H. WYLIE, Daniel E. Mendl and Martin V. Lavin.
No. 96-029.
Supreme Court of Vermont.
March 28, 1997.
Motion for Reargument Denied
April 23, 1997.

Page 1052

Donald E. O'Brien, Burlington, for plaintiffs-appellees.

Leslie C. Pratt, Montpelier, for defendants-appellants.

Before GIBSON, DOOLEY, MORSE and JOHNSON, JJ., and ALLEN, C.J. (Ret.), Specially Assigned.

DOOLEY, Justice.

This case is here for the second time. See Bissonnette v. Wylie, 162 Vt. 598, 654 A.2d 333 (1994) (Bissonnette I ). On remand from this Court, the Franklin Superior Court held that two of the defendants, sureties on a promissory note, could not claim discharge of their liability under 9A V.S.A. § 3-606, 1 which discharges a surety of its obligation if the creditor unjustifiably impairs the collateral. This decision was based on the conclusion that plaintiffs, who were creditors on the promissory note, had a legal obligation to subordinate their mortgage, and thus did not unjustifiably impair the collateral when they subordinated their mortgage three times. Defendants contend that the trial court erred in concluding that plaintiffs had a legal obligation to subordinate their mortgage and that plaintiffs did not unjustifiably impair the collateral when they discharged their mortgage, without defendants' consent, to the Bank of Vermont. We affirm the court's holding as to plaintiffs' obligation to subordinate their mortgage, but reverse as to the reasonableness of the discharge. We remand to determine the extent of impairment of the collateral, if any.

In Bissonnette I, we held that comakers of a promissory note may be discharged under 9A V.S.A. § 3-606 when the comaker is in the position of a surety, the creditor obtains actual knowledge of the suretyship, and the creditor unjustifiably impairs the collateral. 162 Vt. at 605-07, 654 A.2d at 338-39. We remanded the case to the trial court to determine whether plaintiffs had used reasonable care to prevent impairment to the collateral and the extent of any impairment. Id. at 611, 654 A.2d at 341.

On February 5, 1986, plaintiffs Claudette and Donald Bissonnette and defendants Nicholas Wylie, Daniel Mendl, and Martin Lavin entered into a sales agreement in which defendants agreed to purchase approximately two acres of land (parcel one) with a ranch house and two-story brick duplex from plaintiffs for $210,000. The property was adjacent to another parcel of land owned by defendants (parcel two). The agreement provided that defendants would pay plaintiffs $110,000 in cash, obtained from the Vermont National Bank and secured by a first mortgage, and $100,000 in the form of a promissory note to plaintiffs, secured by a second mortgage on the property. The sales agreement had an addendum that required plaintiffs to "subordinate the 2nd mortgage at Purchasers [sic] option for any purposes of improving, preserving and developing the property." The sale was completed in June 1986.

During the course of the next three years, plaintiffs subordinated their mortgage three times. In October 1986, defendants wanted to borrow $1,540,000 from Vermont National Bank to construct the Highpoint Office Building. Plaintiffs were asked and agreed to subordinate their mortgage. Defendants' attorney drafted a new mortgage deed for plaintiffs, which was subject to three mortgage deeds--the first mortgage of $110,000 and two others dated November 3, 1986--all in favor of Vermont National Bank, totalling $1,650,000 and covering both parcel one and parcel two. These mortgages also contained future advance clauses. All parties believed

Page 1053

that plaintiffs were required by the purchase and sales agreement to subordinate to these new mortgages. There was no discussion as to whether the subordination clause would be part of the new mortgage deed. On October 21, 1987, defendants replaced one of the two existing construction loans created on November 3, 1986 with a new promissory note. The result of this transaction was an increase in the debt owed to Vermont National Bank by $380,000. The new note specified that the whole amount, including the additional $380,000, was secured by the preexisting mortgages.

In April 1989, defendants received preliminary approval for the second phase of development from the Colchester Planning Commission. Defendants were planning to build an additional office building, restaurant, bank, and parking spaces to serve the existing office building.

On May 3, 1989, defendants Mendl and Lavin (hereinafter surety defendants) transferred their interest in the properties to defendant Wylie, who agreed to assume the mortgage to plaintiffs and to indemnify surety defendants if either were obligated to pay any sums as a result of the mortgage or promissory note. Plaintiffs received actual notice of the transfer by letter, but were not asked to consent to the transfer or to Wylie's assumption of the debt. Surety defendants never informed plaintiffs that they would object to further subordination of their mortgage.

On this same day, plaintiffs subordinated a second time to a mortgage to Vermont National Bank, this time in the amount of $2,108,000. This added $458,000 of debt with a priority before plaintiffs' mortgage. 2 Of this amount, $380,000 was attributable to the debt added on October 21, 1987 and $78,000 was new money.

On June 30, 1989, plaintiffs further subordinated their mortgage to a $2,700,000 3 mortgage to the Bank of Vermont. A portion of this money was given to Vermont National Bank to reduce Wylie's debt. This enabled Vermont National Bank to reduce the coverage of its mortgage to include only two of three units in the Highpoint Building and a small area of land surrounding the building, which in turn allowed the Bank of Vermont to secure its mortgage with the balance of the Bissonnette property.

In the spring of 1991, both plaintiffs and Vermont National Bank learned that Wylie was having financial difficulties. Wylie had a debt of $1,623,159 due to Vermont National Bank, which brought a foreclosure action. Wylie also defaulted on plaintiffs' note and on the Bank of Vermont's notes. The amount due on all the notes far exceeded the value of the properties, and plaintiffs filed this suit to recover what was due on their note. Surety defendants claimed that plaintiffs unjustifiably impaired the collateral by subordinating their mortgage to those of the banks.

In August 1991, the Bank of Vermont's agent contacted plaintiffs' attorney by letter and informed plaintiffs that a conditional sales contract for the office building had been signed, but plaintiffs had to discharge their lien to allow the sale to go through. The bank explained that if plaintiffs did not discharge their lien, it would be forced to foreclose on its mortgage, leaving plaintiffs without any...

To continue reading

Request your trial
17 cases
  • Sutton v. Vt. Reg'l Ctr.
    • United States
    • United States State Supreme Court of Vermont
    • 31 d5 Julho d5 2020
    ...by the parties of the meaning that they give and have given to the terms of their contract previously made.’ " Bissonnette v. Wylie, 166 Vt. 364, 371-72, 693 A.2d 1050, 1055 (1997) (quoting 3 A. Corbin, Corbin on Contracts § 558, at 249, 251-53 (1960)). Plaintiffs lean heavily on a case tha......
  • Bloomer v. Gibson, 04-540.
    • United States
    • United States State Supreme Court of Vermont
    • 20 d5 Outubro d5 2006
    ...on a different or improper rationale." Sorge v. State, 171 Vt. 171, 174 n. *, 762 A.2d 816, 818 * (2000) (citing Bissonnette v. Wylie, 166 Vt. 364, 370, 693 A.2d 1050, 1055 (1997) ("We agree with the trial court's conclusion, but use a different rationale to reach it."), and Hudson v. Town ......
  • Sutton v. Vt. Reg'l Ctr., 2018-158
    • United States
    • United States State Supreme Court of Vermont
    • 4 d5 Outubro d5 2019
    ...by the parties of the meaning that they give and have given to the terms of their contract previously made." Bissonnette v. Wylie, 166 Vt. 364, 371-72, 693 A.2d 1050, 1055 (1997) (quoting 3 A. Corbin, Corbin on Contracts § 558, at 249, 251-53 (1960)). Plaintiffs lean heavily on a case that ......
  • Ferry v. City of Montpelier
    • United States
    • United States State Supreme Court of Vermont
    • 20 d5 Janeiro d5 2023
    ...intertwined with the substance of their claims. See Daye, 171 Vt. at 478, 769 A.2d at 633; Hinesburg Sand & Gravel Co., 166 Vt. at 344, 693 A.2d at 1050. We do not take such approach here. In this case, we conclude first that plaintiffs have standing and second that their claims fail on the......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT