Huntington v. McCarty

Huntington v. McCarty (2000-545); 174 Vt. 69; 807 A.2d 950

[Filed 28-Jun-2002]


       NOTICE:  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,
  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.


                                No. 2000-545


  George Huntington	                         Supreme Court
    
                                                 On Appeal from
       v.	                                 Orange Superior Court


  William M. McCarty and 	                 November Term, 2001
  Patricia Baker


  M. Kathleen Manley, J.
     
  Richard E. Davis, Jr., Barre, for Plaintiff-Appellee.

  Anthony Z. Roisman and P. Scott McGee of Hershenson, Carter, Scott & McGee,
    Norwich, for Defendant-Appellant.
   

  PRESENT:  Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.


       AMESTOY, C.J.   Defendant Patricia Raitt Baker appeals an Orange
  Superior Court order denying her motion to dismiss a foreclosure action
  filed by plaintiff George Huntington.  On appeal, this Court is asked to
  determine whether an enforceable mortgage debt can survive when the statute
  of limitations has run on the underlying promissory note and what remedy,
  if any, the mortgagee retains.  We affirm. 
   
       The parties have stipulated to the following facts on appeal, pursuant
  to V.R.A.P. 10(d).  In November 1990, Patricia Raitt Baker issued a
  promissory note in the amount of $9,000 to George Huntington, with the
  principle and interest due in November of 1991.  The note was secured in


 

  December 1990 by a mortgage deed.  Raitt Baker made no payments to
  Huntington, and therefore, in November 1991, was in default on the note. 

       In August 1998, nearly seven years after Raitt Baker had defaulted,
  Huntington filed a complaint for foreclosure on the mortgage in Orange
  Superior Court.  Raitt Baker filed a motion to dismiss, claiming that the
  six-year statute of limitations applicable to promissory notes had run and
  rendered both the note, and the mortgage securing it, unenforceable.  The
  trial court, in a February 1999 order, held the note was barred by the
  six-year statute of limitations but found the mortgage deed was governed by
  a fifteen-year statute of limitations, and accordingly, was still
  enforceable pursuant to 12 V.S.A. § 502.  

       Following the original order, the parties stipulated to vacate and
  revise the judgment.  In an  October 2000 revised judgment order, the
  court, based on the stipulation of the parties, awarded Huntington
  foreclosure by power of sale, with a six month redemption period for Raitt
  Baker, but stayed execution of the foreclosure pending Raitt Baker's appeal
  to this Court.  

       On appeal, Raitt Baker argues: (1) that the mortgage is unenforceable
  where the statute of limitations has run on the underlying promissory note;
  and (2) that the power of sale is a remedy governed by the statute of
  limitations for the promissory note, hence even if the mortgage is
  enforceable, so long as the note is unenforceable, the remedy of the power
  of sale is not available.  Because we find that the obligations under the
  mortgage are enforceable even where the statute of limitations on the
  promissory note has run, and that the remedy of power of sale survives the
  statute of limitations, we affirm.
   
       Where a promissory note is secured by a mortgage, the mortgage is an
  incident to the note.  Island Pond Nat'l Bank v. Lacroix, 104 Vt. 282,
  294-95, 158 A. 684, 690 (1932).  However, a 

 

  promissory note and a mortgage are individually governed by different
  statutes of limitations - the enforcement of a note is a civil action with
  a six-year statute of limitations, 12 V.S.A. § 511, whereas enforcement of
  a mortgage is an action in land with a fifteen-year statute of limitations. 
  12 V.S.A. § 502; Cameron v. Bailey, 117 Vt. 158, 160, 86 A.2d 643, 645
  (1952).  Raitt Baker argues that where a promissory note is secured by a
  mortgage, and the statute of limitations has run on the note, both the note
  and the mortgage are unenforceable.    

       The question of the applicability of the statute of limitations is one
  of law, Fitzgerald v. Congleton, 155 Vt. 283, 294, 583 A.2d 595, 602
  (1990), accordingly, our review is de novo.  State v. Longe, 170 Vt. 35,
  36, 743 A.2d 569, 570 (1999).  A century ago, in Houghton v. Tolman, 74 Vt.
  467, 469 -70, 52 A. 1032, 1033 (1902), we held that the remedies under a
  mortgage survive the extinguishment of the note:

    The true doctrine is, that the [s]tatute of [l]imitations does not
    extinguish the debt, but only bars the remedy; and that a
    mortgagee has two independent remedies, one upon the note.
    . . . . 
    and one upon the mortgage. . . . the debt is not extinguished by
    barring the remedy on the note, but continues to exist for all
    purposes of foreclosing the mortgage until that remedy is barred
    also.

  Raitt Baker argues that since Houghton, this Court has moved away from the
  doctrine expounded in that case, and now hold that mortgage actions are
  concurrent with actions on the debt, citing Island Pond National Bank, 104
  Vt. at 294, 158 A.  at 690.  While this precedent stands for the proposition
  that a note, secured with a mortgage is to be "construed together as if
  they were parts of the same instrument," Id. at 294-95, 158 A.  at 690, we
  have not yet extended this principle specifically to the time limitations
  set forth on each of the separate actions.  
   
 
             
       Moreover, the rule set forth in Houghton is neither new to Vermont
  law, see Gleason v. Kinney's Administrator, 65 Vt. 560, 564, 27 A. 208, 209
  (1893) ("if secured by the mortgage, as we hold, the age of the note does
  not defeat its recovery under the mortgage, so long as the mortgage is a
  subsisting security"), nor is it inconsistent with the majority rule,
  prevalent in title jurisdictions, such as Vermont, that the mortgage is
  unaffected by a barring of remedy on the debt.  See Note, The Relation of
  the Equitable Doctrine of Subrogation to Vermont's Strict Foreclosure Laws,
  7 Vt. L. Rev. 71, 77-78 (Spring 1982) ("Vermont is a 'title' state; as
  such, it recognizes a mortgage deed as purporting to convey legal title");
  G.E. Osborne, Law of Mortgages § 296 (2d ed.1970) (majority rule holds even
  where a note is barred from enforcement by the statute of limitations,
  mortgagee may maintain an action of foreclosure on the mortgage deed as the
  statute of limitations bars remedy on debt but not the right). (FN1)  The
  mortgage is enforceable beyond the barring of the note because, as we
  reasoned in Houghton, the statute of limitations bars the remedy alone on
  the note, and not the underlying debt.  74 Vt. at 469, 52 A.  at 1033. 
  Statutes of limitations are intended to ensure that a defendant can " 'be
  secure in [their] reasonable expectation that the slate has been wiped
  clean of ancient obligations.' " Investment Props., Inc. v. Lyttle, 169 Vt.
  487, 492, 739 A.2d 1222,1226 (1999) (alteration in original) (citing Note
  Developments in the Law - Statutes of Limitations, 63 Harv. L. Rev. 1177,
  1185 (1950)).  In the case of a promissory note secured by a mortgage,
  however, the impetus of securing a debt with a mortgage, is to provide the
  mortgagee with certain protections that the promissory note alone does not
  provide.  Among these protections, to which both parties to 

 

  a mortgage implicitly agree, is an extended statute of limitations which
  allows a mortgagee to enforce the debt beyond the life of the promissory
  note.  In such case, it is entirely within a defendant's "reasonable
  expectation[s]," id. (emphasis added), that they are bound to the terms of
  the mortgage for a period of fifteen years after the defendant defaulted on
  the mortgage.

       Raitt Baker asserts, however, that even if we conclude - as we have -
  that an enforceable mortgage debt can survive when the statute of
  limitations has run on the underlying promissory note, plaintiff's only
  remedy is strict foreclosure.  Raitt Baker argues that the remedy of strict
  foreclosure is barred in this case because the power of sale remedy has
  been invoked and that remedy is unavailable because the underlying debt is
  barred by the six-year statute of limitations.  Raitt Baker's contention is
  that strict foreclosure is a remedy for recovery of land whereas a power of
  sale relates only to a debt and thus should be construed as an action for
  recovery of money for which the applicable statute of limitations is
  provided by 12 V.S.A. § 511. (FN2)  
   
       In Houghton, we noted that the statute of limitations may bar
  enforcement of the note by extinguishing the remedy; however, we also found
  that the mortgagee had not only an action on the note, but also one on the
  mortgage.  74 Vt. at 469, 52 A.  at 1033.  Vermont favored strict
  foreclosure, the most harsh of the mortgage remedies, for many years. 
  Note, supra, 7 Vt. L. Rev. at 77-79.  However, in 1973, the Legislature
  created two more remedies on the foreclosure of a mortgage: (1) judicial
  sale in cases where the United States is a party to the foreclosure; and
  (2) the power of sale.  

 

  Id.  The law, codified as 12 V.S.A. § 4531a, allowed the power of sale to
  be used as a remedy where it was provided for in an express provision of
  the deed or instrument, and where one of the parties to the mortgage
  invoked the remedy in either the complaint or the answer.  Id.   

       Raitt Baker's argument asks us to conclude that the Vermont
  legislature created the power of sale as a remedy to a mortgage deed, but
  did not in fact intend for that remedy to survive so long as the deed was
  enforceable.   We cannot do so.  In construing a statute to determine
  legislative intent, we look first to the language of the statute, presuming
  the plain and ordinary meaning of the language.  In re Handy, 171 Vt. 336,
  341, 764 A.2d 1226, 1232-33 (2000).  "It is inappropriate to read into a
  statute something which is not there unless it is necessary in order to
  make the statute effective."  Id. at 341, 764 A.2d  at 1233 (internal
  quotations omitted) (emphasis in the original).  In this case, the
  insertion into 12 V.S.A. § 4531a, on our part, of a statute of limitations
  separate from that set forth for mortgage deeds in 12 V.S.A. § 502, is not
  only unnecessary, but would be contrary to the intent and purpose of
  creating an alternative remedy to strict foreclosure.  Other jurisdictions
  have also held that where the legislature has not specifically provided for
  a specific statute of limitations on the power of sale, the courts should
  not read them into the law.  National Tailoring Co. v. Scott, 196 P.2d 387,
  394 (Wyo. 1948) (Wyoming Supreme Court held where statute of limitations is
  silent as whether the power of sale is barred, court could not read as much
  into statute); Sipe v. McKenna, 200 P.2d 61, 64 (Cal. Ct. App. 1948) (where
  no statute specifically provides "[t]he power of sale under a deed of trust
  may be exercised after an action on the principal obligation is barred"),
  superceded by statute, Cal. Civil Code § 882.020(a)(1) (1982).  	
   
       Moreover, in this case, we see no reason why the parties should not be
  bound by the terms of the stipulated judgment, including the term to which
  they both agreed - that the property, if 

 

  foreclosed, would be foreclosed under the power of sale.  The mortgage deed
  at issue in this case provided for the power of sale.  Furthermore, while
  Raitt Baker's pro se answer to the complaint did not explicitly invoke the
  words "power of sale," she indicated that she built equity in the property
  which she felt should be returned to her in the event of foreclosure. 
  These facts, in light of the parties' stipulation to invoke the power of
  sale, are enough to establish that 12 V.S.A. § 4531a (a) was invoked, and
  the trial court properly ordered foreclosure by power of sale.

       Affirmed. 



                                       FOR THE COURT:



                                       _______________________________________
                                       Chief Justice


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                                  Footnotes


FN1.  See, e.g., Sipe v. McKenna, 200 P.2d 61, 64 (Cal. Ct. App. 1948)
  (running of statute of limitations "on the principle obligation did not
  extinguish the debt or operate as payment"); Markham v. Smith, 176 A. 880,
  882 (Conn. 1935) (same); Del Norte, Inc. v. Provencher, 703 A.2d 890, 893
  (N.H. 1997) (same).  

FN2.  The parties devote a considerable portion of their briefing to
  argument about whether the power of sale was invoked.  This may be
  explained by plaintiff's implicit acceptance of defendant's theory that if
  we find the power of sale has been invoked, we must conclude that the
  six-year statute of limitations controls.  We disagree.  Moreover, it is
  disingenuous, at the very least, for Raitt Baker to assert, on appeal, that
  her purpose in entering into a stipulated judgment providing for a power of
  sale was to eliminate the remedy.