Merchants Bank v. Patterson, No. 65-1-10 Rdcv (Teachout, J., Feb. 7, 2011)

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                                                STATE OF VERMONT
SUPERIOR COURT                                                                             CIVIL DIVISION
RUTLAND UNIT                                                                               Docket # 65-1-10 Rdcv


MERCHANTS BANK

v.

DALE PATTERSON et al


                                          Order
              Motion to Enforce Order of Confirmation, filed December 13, 2010

       This is a foreclosure case in which Plaintiff Merchants Bank seeks foreclosure on
a commercial property in Rutland. Defendant formerly operated a business on the
property, and there is another business tenant. Plaintiff is represented by Attorney
Elizabeth A. Glynn. Defendant Dale Patterson has actively represented himself
throughout the proceeding.

        A Judgment and Decree of Foreclosure by Judicial Sale was issued July 14, 2010,
providing for a 30 day redemption period by stipulation. Redemption did not occur, and
a public auction was held on September 30, 2010 following proper notices of sale and
additional publicity initiated by the auctioneer, Thomas Hirchak Company. In the Report
of Sale filed October 6, 2010, the auctioneer reported that there were 6 parties qualified
and registered to bid. The property was sold for the highest bid of $210,000 to Roger
Dumas, who paid a deposit of $10,000 and signed a Sale and Purchase Agreement
providing for payment of the balance and other terms.

        A Motion for Confirmation was filed, and a confirmation hearing took place on
November 1, 2011, attended by Attorney Glynn and Dale Patterson. The court reviewed
all procedural requirements and the proposed distribution of proceeds pursuant to 12
V.S.A. § 4533(a) and V.R.C.P. 80.1 (f) and (j). After payment of all expenses, there was
a surplus of $3,242.17 due Dale Patterson, which the parties agreed would be held by
Attorney Glynn in trust pending resolution of another case between the parties. The
Order of Confirmation issued on November 1, 2010.

       On December 13, 2010, Plaintiff filed the present Motion to Enforce Order of
Confirmation, claiming that the high bidder, Roger Dumas, had refused to complete the
sale. The court scheduled a hearing and required Plaintiff to serve Roger Dumas with the
Motion, Notice of Hearing, and Entry Order scheduling the hearing. This was done, and
on January 14, 2011, Attorney Victor J. Segale filed a limited appearance on behalf of
Roger Dumas and Opposition to the Motion. Plaintiff filed a Reply. The hearing was
held on January 18, 2011.
        Plaintiff argues that Roger Dumas has declined to specify the reason for wanting
to back out, but Plaintiff infers that it has something to do with an allegation that there
was misleading information in the advertizing of the property for public sale. Plaintiff
argues that if Roger Dumas had problems with advertizing as part of the conduct of the
public sale, he should have raised them at the confirmation hearing, which he did not
attend. Plaintiff concedes that Roger Dumas was not served with the Motion for
Confirmation or notice of the confirmation hearing. Plaintiff moves the court to require
Roger Dumas to complete the sale, relying on a 1929 South Carolina case cited in Am.
Jur. 2d on “Judicial Sales.”

        Roger Dumas argued first that the court had no personal jurisdiction over him as
he is not a party to the case, but the court orally ruled that by bidding at the public sale
conducted in accordance with the judgment and decree in this case, Roger Dumas
voluntarily subjected himself to the personal jurisdiction of the court. He then argues that
since Plaintiff is alleging breach of a contract to purchase property, he must be given due
process consisting of the filing of a new case by summons and complaint, so he will have
the “opportunity file a defense and counterclaims for negligent misrepresentation,
misrepresentation, (civil) fraudulent (mis)representation in the inducement of the bid of
Roger Dumas which resulted in the ‘contract’ the Plaintiff is seeking to enforce,
apparently by specific performance.”

        At the hearing, Plaintiff and Roger Dumas each argued for the court to proceed in
the manner each had advocated: Plaintiff wanted to proceed directly with a hearing on its
motion to enforce, and Roger Dumas argued that he was entitled to receipt of a full
complaint and an opportunity to bring counterclaims. The court considered the effects of
each proposed procedure on the interests of third parties involved, including the
Defendant Dale Patterson and the other bidders at the judicial sale auction. The court
also considered the manner in which each proposed procedure would affect the integrity
of the judicial foreclosure process as statutorily prescribed.

        Roger Dumas’s request to halt the entire judicial sale foreclosure process while an
ancillary separate case takes place, based on breach of contract and addressing
counterclaims, is not reasonable in view of the statutory process set out for judicial
foreclosures, which is straightforward and designed to promote the efficient transfer of
property interests so that property may be put to productive use without stagnation.
Stopping the foreclosure process to litigate a case within a case would slow down the
transfer of property considerably. It would also give high bidders an incentive to decline
to pay the balance due and force litigation and attempt to negotiate the price down.

         Such a procedure would also prejudice the rights of other bidders, who were
apparently ready and willing to purchase, and may have been willing to pay a price close
to the high bid. Plaintiff represents that the second highest bid in this case was $207,500.
It is not reasonable for Roger Dumas as high bidder to prevent the opportunity of such
bidders access to the opportunity to buy the property in a timely manner.




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        Such a procedure also prejudices the rights of the original defendant. In this case,
Dale Patterson appeared at the confirmation hearing, consented to the sale and the
distribution of proceeds, and was entitled to a surplus. Plaintiff argues that Dale
Patterson, as the debtor on the note and defendant, should continue to be subject to the
per diem provided for in the judgment until Plaintiff is fully paid, but Dale Patterson is
entirely blameless as to the reason for any delays beyond the Order of Confirmation and
should not have his debt increased by the actions of others.

        Any delay beyond confirmation was caused by the failure of the Plaintiff to serve
Roger Dumas with the Motion for Confirmation and Notice of Hearing on the motion.
The confirmation hearing is the opportunity afforded by statute to address all issues and
claims with respect to procedural infirmities of the judicial sale process. In order to make
sure that any such claims are addressed at this hearing in a timely way, plaintiffs have the
opportunity to serve not only the high bidder but other bidders at the sale as well. While
neither statute nor rule explicitly requires such service and notice, the statute
demonstrates that the hearing is the opportunity to finalize issues related to completing
the sale and it is the opportunity for persons affected to raise any issues: “Any person
interested may appear or be summoned and heard on such proceedings, and the order of
the court confirming the sale shall be conclusive evidence as against all persons that the
power was duly executed.” 12 V.S.A. § 4533(a). Plaintiffs are the only party with
knowledge of who such interested persons, including bidders at the sale, are. If plaintiffs
do not serve such interested persons with the motion for confirmation and notice of the
hearing, plaintiffs proceed with the risk represented by this case.

        Plaintiff’s request that the court enforce the confirmation order without giving
Roger Dumas opportunity to contest the conduct of the sale is also unreasonable. If
Plaintiff had served Roger Dumas with the Motion for Confirmation and Notice of
Hearing for the confirmation hearing, any claims that the sale should not be confirmed
according to the bid could have been addressed by the court prior to the issuance of a
confirmation order. Plaintiff did not do so, thus creating the current situation.

        It is not necessary to halt the foreclosure sale and confirmation process to litigate
a separate breach of contract case in order to give both Plaintiff and Roger Dumas the
opportunity to sort out claims based not on foreclosure procedure but on the Sale and
Purchase Contract itself, which was a contract directly between them, not involving the
court. This could still occur as a separate suit to allow both parties to address any claims
of alleged damages arising out of the contract. It should not, however, be a reason to
delay the foreclosure sale and transfer of property. Any contract between the parties is
not a required part of the statutory foreclosure process. To the extent such a contract
gives rise to obligations and claims between the parties beyond the obligation to complete
the sale in accordance with statutory procedure, that is a private matter between the
parties, to be addressed in a separate suit between them.

        Based on the foregoing considerations, and in order to best protect the interests of
all persons affected as well as to further the policy underlying the statutory judicial sale
foreclosure procedure, it is hereby ordered:



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1. The Order of Confirmation of November 1, 2010 is vacated.

2. A new hearing on confirmation will be scheduled. Plaintiff shall serve Roger
   Dumas and all bidders at the sale held on September 30, 2010 with its Motion
   for Confirmation and the Notice of Hearing of the confirmation hearing and a
   copy of this Order.

3. Any claims of procedural infirmities related to the conduct of the sale must be
   addressed at the confirmation hearing; if not raised then, all persons served
   with the Motion for Confirmation and Notice of Hearing are precluded from
   raising them later as a defense to proceeding with the sale.

4. Defendant Dale Patterson’s obligation to Plaintiff is fixed at the figures set
   forth in the November 1, 2010 confirmation order, and Plaintiff is precluded
   from collecting from Dale Patterson any additional amounts due or attorney’s
   fees related to this case.

5. Nothing in this order precludes the parties to the Sale and Purchase
   Agreement from pursuing any claims arising from that contract in a separate
   action, to the extent not inconsistent with this ruling.



Dated at Rutland, Vermont this 7th day of February, 2011.


                                             _____________________________
                                             Mary Miles Teachout
                                             Presiding Judge




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