New Eng. Phx. Co. v. Grand Isle Veterinary Hosp.

• Decision Date: 25 February 2022
• Docket Number: 2021-124
• Citation: 2022 VT 10
• Parties: New England Phoenix Company, Inc. v. Grand Isle Veterinary Hospital, Inc. et al.
• Court: Vermont Supreme Court

2022 VT 10

New England Phoenix Company, Inc. v. Grand Isle Veterinary Hospital, Inc. et al.

No. 2021-124

Supreme Court of Vermont

February 25, 2022

This opinion is subject to motions for reargument under V.R.A.P 40 as well as formal revision before publication in the Vermont Reports. Readers are requested to notify the Reporter of Decisions by email at: JUD.Reporter@vermont.gov or by mail at: Vermont Supreme Court, 109 State Street, Montpelier Vermont 05609-0801, of any errors in order that corrections may be made before this opinion goes to press.

On Appeal from Superior Court, Grand Isle Unit, Civil Division Robert A. Mello, J.

Herbert J. Downing of Kolvoord, Overton & Wilson, P.C. Williston, for Plaintiff-Appellant.

Anne K.G. Bazilwich, Pro Se, Blacksburg, Virginia, Defendant-Appellee.

PRESENT: Reiber, C.J., Eaton, Carroll and Cohen, JJ., and Teachout, Supr. J., Specially Assigned

CARROLL, J.

¶ 1. New England Phoenix Company, Inc. appeals a trial court order denying its motion for a deficiency judgment following a foreclosure decree and an order confirming its purchase of a mortgaged property at a judicial sale. We reverse the order denying the deficiency judgment and remand.

I. Factual Background

¶ 2. In 2010, Bank of America lent a veterinary hospital business in Grand Isle a total of $610, 244.20.^[1] Paws and Laws, LLC owned the hospital's real property, and Grand Isle Veterinary Hospital, Inc. owned the business assets. Bank of America lent Paws and Laws $374, 000.00, secured by a mortgage on the real property. The bank also lent Grand Isle Veterinary Hospital $236, 244.20 under a finance agreement, secured by the business's personal property and assets. Guarantor Anne Bazilwich, owner and operator of the businesses, executed personal guarantees for both loans.

¶ 3. In 2012, violating the terms of the 2010 mortgage, Paws and Laws conveyed the real property by quit claim deed to Grand Isle Veterinary Hospital. In 2014, Grand Isle Veterinary Hospital gave Bank of America a second mortgage on the real property securing the $236, 244.20 finance agreement. Soon thereafter the business defaulted on the loans and guarantor abandoned the property. Guarantor's attempts to sell the property were unsuccessful. Bank of America did not initiate foreclosure proceedings on the loans.

¶ 4. In 2018, Bank of America assigned the loans and mortgages to New England Phoenix. New England Phoenix filed this foreclosure action in April 2019. Guarantor, who had since moved to Virginia, did not respond to repeated attempts to serve her notice of the foreclosure action, and did not participate in the proceedings.^[2]

¶ 5. In late 2019, the trial court entered a default judgment against guarantor, Paws and Laws, and Grand Isle Veterinary Hospital, issued a foreclosure decree by judicial sale, and set a thirty-day redemption period. Neither guarantor nor Grand Isle Veterinary Hospital redeemed the property, and a judicial sale was held in July 2020 after a delay due to COVID-19-related scheduling complications. At the sale, New England Phoenix submitted the winning bid of $325, 000.00.

¶ 6. In August 2020, New England Phoenix filed a motion for a confirmation order and deficiency judgment. In its motion, New England Phoenix represented that the total amount due for the loans was $790, 230.48, which included previous unpaid interest plus interest accrued after the foreclosure decree and the costs of the judicial sale. It then subtracted the proceeds from the judicial sale-$325, 000.00-from this total and requested the difference-$465, 230.48-as a deficiency. New England Phoenix did not reference Vermont Rule of Civil Procedure 80.1(j)(2) in this motion.

¶ 7. A hearing was held on New England Phoenix's motion in January 2021. The court granted New England Phoenix's motion for a confirmation order but requested additional information before it would rule on the deficiency, including the appraised value in 2010 when the loans were first disbursed, when exactly guarantor abandoned the property, how long guarantor had the property on the market and for what listing price. Neither the court nor counsel mentioned Rule 80.1(j)(2) at the hearing.

¶ 8. In response to the court's request, New England Phoenix filed a supplemental affidavit again detailing a deficiency judgment of $465, 230.48. The supplemental affidavit represented that the value of the property had continued to decline in the years since guarantor had abandoned it, and that the current tax assessment of the property was $439, 500.00. New England Phoenix told the court that its purchase of the property for $325, 000.00 was "in between the current listing price of $295, 000.00 and the [tax-]assessed value of $439, 500.00 and, therefore, a reasonable reflection of the fair market value."

¶ 9. In March 2021, the court issued an order confirming the sale and transferring title to the property to New England Phoenix.^[3] In a separate entry order, the trial court restated its request from the hearing that New England Phoenix provide the 2010 appraisal before it would rule on the deficiency judgment. New England Phoenix explained that it had not provided the court with a copy of the 2010 appraisal in its supplemental affidavit because Bank of America never supplied one. New England Phoenix argued, in effect, that the 2010 appraisal was immaterial to the court's decision, and that in any case, by the time it took an assignment of the loans and mortgages, the property had long been abandoned and contained no business assets. New England Phoenix represented that the buildings on the property would likely need to be demolished and that guarantor's uncooperativeness was to blame for the delays in bringing the matter to a close. Finally, New England Phoenix argued that "the value of the [m]ortgaged [p]roperty today is low in relation to the debt owed."

¶ 10. The trial court denied New England Phoenix's motion for deficiency judgment. The court cited a Connecticut case for the proposition that "it is within this court's discretion whether to grant or deny a motion for a deficiency judgment, in whole or in part." The court found that New England Phoenix knew when it took the assignment "that the loans had been in default for many years and the value of the mortgaged premises had depreciated very significantly due to years of abandonment and disuse." The court concluded that the foreclosure proceedings "ha[d] been extremely protracted." Accordingly, the court found that assessing "so large an amount of interest" under these circumstances would be unjust.

¶ 11. New England Phoenix filed a motion to reconsider. It first conceded that it had erred by not pleading for a deficiency under Rule 80.1(j)(2). Now using the Rule, New England Phoenix calculated that the deficiency was $340, 230.48, not $465, 230.48. Moreover, it argued that Vermont case law contains no "factors in equity" which would permit a trial court to deny a deficiency judgment in its entirety, and suggested that the case the court cited, to the extent it was applicable, merely stood for a court's ability to equitably reduce the interest owed. In the alternative, New England Phoenix argued that, even if the court did have the authority to deny the deficiency judgment outright, it could independently recover against guarantor in her personal capacity, because she was a guarantor not a mortgagor.

¶ 12. The court denied the motion to reconsider. It concluded that New England Phoenix was attempting to "obtain a second bite at the apple" by presenting new arguments and introducing new facts, which it is not permitted to do in a motion to reconsider. The court found that New England Phoenix's claim against guarantor should have been raised earlier. It found that New England Phoenix's supplemental affidavit, filed with its motion to reconsider, contained facts that contradicted New England Phoenix's earlier representations. For example, New England Phoenix now represented that guarantor did not default and abandon the property "within a few years" of the 2010 loan origination as the court's order had found. New England Phoenix now represented that the greatly reduced value of the property was not due to the deterioration of the property but rather to its location, and that the buyers would not demolish or reconstruct buildings on the property.

¶ 13. The court reasoned that any errors in the factual record on which it relied to deny the deficiency judgment were the fault of New England Phoenix, and not the fault or mistake of the trial court. Moreover, it concluded that New England Phoenix had failed to present any new authority as to why the court could not deny a deficiency judgment in its entirety. However, it did not address New England Phoenix's argument that the court had erred by failing to use Rule 80.1(j)(2) to calculate a potential deficiency judgment.

¶ 14. On appeal New England Phoenix makes three arguments: (1) the trial court erred when it did not apply Rule 80.1(j)(2) in its order denying the deficiency; (2) the trial court abused its discretion by denying the deficiency in its entirety; and (3) New England Phoenix's claim against guarantor is an independent cause of action because she is not a "mortgagor" within the meaning of the applicable statute.

II. Standard of Review

¶ 15. We begin with New England Phoenix's argument that the court abused its discretion by denying its motion for deficiency judgment in its entirety. As an initial matter, we must determine the appropriate standard of review to evaluate this argument. New England Phoenix suggests the correct standard is for an abuse of discretion. However, this depends on whether the relevant statutes provide trial courts the discretion to...