DaimlerChrysler Services North America, LLC v. Ouimette
Annotate this Case
DaimlerChrysler Services N. A., LLC v. Ouimette (2002-423); 175 Vt. 316;
830 A.2d 38
2003 VT 47
[Filed 16-May-2003]
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.
2003 VT 47
No. 2002-423
DaimlerChrysler Services North Supreme Court
America, LLC
On Appeal from
v. Franklin Superior Court
Duane Ouimette and Stephanie Faulkner April Term, 2003
a/k/a Ouimette
David A. Jenkins, J.
Alan A. Bjerke of Bauer, Anderson & Gravel, Burlington, for
Plaintiff-Appellant.
PRESENT: Amestoy, C.J., Dooley, Johnson and Skoglund, JJ., and Allen, C.J.
(Ret.), Specially Assigned
¶ 1. DOOLEY, J. Plaintiff DaimlerChrysler Services North
America, LLC (DaimlerChrysler) appeals a superior court decision denying
its request for a default judgment in an action to collect a deficiency
remaining on a motor vehicle retail installment sales contract.
DaimlerChrysler argues that the superior court erred by (1) applying the
statute of limitations sua sponte, and (2) using the four-year statute of
limitations for sales contracts in 9A V.S.A. § 2-725 instead of the general
six-year statute of limitations for civil actions in 12 V.S.A. § 511. We
affirm.
¶ 2. In 1992, defendants Duane Ouimette and Stephanie Faulkner
purchased a Pontiac Grand Prix from Burt Paquin Ford, Inc., along with an
extended warranty service contract, credit life insurance policy, and
credit accident and health policy. Defendants and the car dealership
entered into a Vermont simple interest retail installment sales contract
(the contract) pursuant to the Motor Vehicle Retail Installment Sales
Finance Act, 9 V.S.A. §§ 2351-2362. The contract provided for deferred
payments on the balance remaining after defendants' down payment and
trade-in, and granted a security interest in the car to the dealership in
order to ensure full payment of the purchase price. Under the terms of the
contract, the dealership simultaneously sold and assigned the rights under
the contract to Chrysler Credit Corporation, which later became
DaimlerChrysler.
¶ 3. When defendants failed to make all payments, DaimlerChrysler
repossessed the car and sold it at auction as provided under the terms of
the contract. In addition, DaimlerChrysler terminated the extended
warranty and insurance agreements and obtained a refund of the unearned
premiums. All funds collected by DaimlerChrysler were credited to
defendants' account, leaving a balance due of $10,044.76. In May 2002,
approximately five and one-half years after default and repossession,
DaimlerChrysler sued to collect the deficiency, plus costs of service,
interest, and attorney's fees, for a total of $17,551.06. After defendants
failed to appear, DaimlerChrysler moved for a default judgment. The
superior court denied the claim as barred by the four-year statute of
limitations for sales contracts under Article 2 of the Uniform Commercial
Code (UCC). See 9A V.S.A. § 2-725(1) ("An action for breach of any
contract for sale must be commenced within four years after the cause of
action has accrued."). The court later denied DaimlerChrysler's motion for
reconsideration. This appeal followed.
¶ 4. DaimlerChrysler first challenges the court's authority to
apply the statute of limitations sua sponte on behalf of a party in
default. DaimlerChrysler contends that because V.R.C.P. 8(c) requires the
statute of limitations defense to be affirmatively pled in the defendant's
answer or the defense is waived, Lillicrap v. Martin, 156 Vt. 165, 170, 591 A.2d 41, 43 (1991), and because the defendant bears the burden to establish
the defense, Monti v. Granite Sav. Bank & Trust Co., 133 Vt. 204, 209, 333 A.2d 106, 109 (1975), it was error for the court to raise the issue sua
sponte and dismiss the complaint. DaimlerChrysler relies upon a series of
cases from other jurisdictions which hold that the waiver provisions in
Rule 8(c) prevent a court from raising an affirmative defense sua sponte
for a party in default. See, e.g., Estabrook v. Baden, 943 P.2d 1334,
1336-37 (Mont. 1997); Adams v. Inman, 892 S.W.2d 651, 653 (Mo. Ct. App.
1994); Smith v. Rheaume, 623 So. 2d 625, 626 (Fla. Dist. Ct. App. 1993).
¶ 5. We decline to make such a hard and fast rule. This Court has
generally taken a flexible approach to Rule 8(c) in light of our
determination that the rule is primarily "a notice provision, intended to
prevent unfair surprise at trial." Merrilees v. State, 159 Vt. 623, 623,
618 A.2d 1314, 1315 (1992) (mem.). For instance, in Lillicrap we held that
Rule 8(c) does not automatically waive any affirmative defense not promptly
pled, but rather that in considering a request to amend the pleadings to
add an affirmative defense under V.R.C.P. 15, the trial court must balance
the right of a party to adequate notice of the defense asserted against the
right of the other party to be heard on the merits. Lillicrap, 156 Vt. at
170-71, 591 A.2d at 44. Similarly, we have recognized that Rule 8(c) is
subject to exceptions allowing the court to act sua sponte if necessary to
do substantial justice and if there is no prejudice to the parties. See
Merrilees, 159 Vt. at 623, 618 A.2d at 1315 (this Court may raise the
affirmative defense of res judicata sua sponte and for the first time on
appeal, so long as the parties are given an opportunity to fully brief the
issue); City of Burlington v. Mountain Cable Co., 151 Vt. 161, 163, 559 A.2d 153, 154 (1988) (this Court will recognize unraised affirmative
defense of illegality and deny relief if the illegality is "of a serious
nature"). We think such an exception is also appropriate in the context of
a default judgment where, as here, there have been no pleadings submitted
by the party in default, there will be no trial, and there is no prejudice
to the plaintiff since the statute of limitations defect is apparent on the
face of plaintiff's complaint. Cf. Gartrell v. Gaylor, 981 F.2d 254, 256
(5th Cir. 1993) (a district judge may dismiss sua sponte an in forma
pauperis complaint under 28 U.S.C. § 1915(d) when it is apparent from the
face of the complaint that the statute of limitations has run).
¶ 6. Rule 8(c) must also be balanced in this case against V.R.C.P.
55(b), which commits judgment by default to the trial court's discretion.
Rule 55(b)(3) authorizes the court to hold hearings prior to issuing a
default judgment if necessary "to take an account or to determine the
amount of damages or to establish the truth of any averment by evidence or
to make an investigation of any other matter." V.R.C.P. 55(b)(3). Thus,
if the court can investigate the merits prior to issuing judgment against a
party in default, it also has the authority to consider expiration of the
statute of limitations if apparent on the face of plaintiff's complaint.
Indeed, to hold otherwise would obligate the court to issue judgment
against a party that has not made an appearance no matter how old or unjust
the claim. See Desjarlais v. Gilman, 143 Vt. 154, 158-59, 463 A.2d 234,
237 (1983) ("Generally, the rules relating to default judgments should be
liberally construed in favor of defendants, and of the desirability of
resolving litigation on the merits, to the end that fairness and justice
are served."). Under these circumstances, we see no abuse of discretion in
the trial court's sua sponte conclusion that the statute of limitations
bars DaimlerChrysler's request for a default judgment. Cf. Exeter Hosp. v.
Hall, 629 A.2d 88, 89-90 (N.H. 1993) (trial court did not abuse its
discretion in raising sua sponte the statute of limitations defense for a
pro se defendant).
¶ 7. DaimlerChrysler's second argument is that the court applied
the wrong statute of limitations. The court held that actions for a
deficiency on a motor vehicle retail installment sales contract are
governed by the four-year statute of limitations, 9A V.S.A. § 2-725,
included in Article 2 of the UCC (Sales). DaimlerChrysler contends that
deficiency actions should instead be governed by Article 9 of the UCC
(Secured Transactions), which contains no specific time bar other than the
general six-year statute of limitations set forth in 12 V.S.A. § 511.
¶ 8. The question of which article applies to a suit for default on
a motor vehicle retail installment sales contract has not previously been
addressed in Vermont. Nearly every jurisdiction that has addressed the
issue, however, has concluded that the four-year limitation period in
Article 2 applies. See, e.g., Jack Heskett Lincoln-Mercury, Inc. v.
Metcalf, 204 Cal. Rptr. 355, 357 (Cal. Ct. App. 1984); Worrel v. Farmers
Bank of Del., 430 A.2d 469, 471-72 (Del. 1981); First Hawaiian Bank v.
Powers, 998 P.2d 55, 67 n.8 (Haw. Ct. App. 2000); Citizen's Nat'l Bank of
Decatur v. Farmer, 395 N.E.2d 1121, 1122-24 (Ill. App. Ct. 1979); Scott v.
Ford Motor Credit Co., 691 A.2d 1320, 1322-26 (Md. 1997); First of Am. Bank
v. Thompson, 552 N.W.2d 516, 520-22 (Mich. Ct. App. 1996); Assocs. Disc.
Corp. v. Palmer, 219 A.2d 858, 860-61 (N.J. 1966); Ford Motor Credit Co. v.
Arce, 791 A.2d 1041, 1042-44 (N.J. Super. Ct. App. Div. 2002) (considering
intervening law); First Nat'l Bank in Albuquerque v. Chase, 887 P.2d 1250,
1253 (N.M. 1994); but see N.C. Nat'l Bank v. Holshouser, 247 S.E.2d 645, 648 (N.C. 1978) (Article 9, not Article 2, governs deficiency actions);
Chaney v. Fields Chevrolet Co., 503 P.2d 1239, 1241 (Or. 1972) (although a
deficiency action is more closely related to a sale than to a security, an
action by the party in default to recover a surplus is more closely related
to a security and thus is governed by Article 9); see generally,
Annotation, Causes of Action Governed by Limitations Period in UCC § 2-725,
49 A.L.R.5th 1, 144-49 (1997).
¶ 9. We find the seminal case of Associates Discount Corp. v.
Palmer to be particularly instructive. In examining the nature of a suit
for deficiency on a retail installment sales contract, the Supreme Court of
New Jersey held:
Such a suit is nothing but a simple in personam action for
that part of the sales price which remains unpaid after the seller
has exhausted his rights under Article 9 by selling the
collateral; it is an action to enforce the obligation of the buyer
to pay the full sale price to the seller, an obligation which is
an essential element of all sales and which exists whether or not
the sale is accompanied by a security arrangement. Thus . . . a
deficiency action must be considered more closely related to the
sales aspect of a combination sales?security agreement rather than
to its security aspect and be controlled by the four?year
limitation in . . . § 2?725.
219 A.2d at 861 (footnote and internal citations omitted). The Palmer
court further noted that although Article 2 expressly does not apply to any
transaction "intended to operate only as a security transaction," id. at
861 n.3 (quoting UCC § 2-102), a retail installment sales contract, as a
hybrid sales-security agreement, was not intended to operate "only" as a
security transaction, and therefore Article 2 applied. Id. The UCC
language considered in Palmer has been adopted in Vermont. See 9A V.S.A. §
2-102 (scope of Article 2 of UCC), § 2-725(1) (statute of limitations for
sales contracts). We find Palmer persuasive and follow its reasoning.
Accordingly, we hold that 9A V.S.A. § 2-725 sets out the appropriate
statute of limitations for deficiency actions on retail installment sales
contracts.
¶ 10. DaimlerChrysler next argues that because it is not the
original seller, and because its installment sales contract with defendants
financed not just a car, but also an extended warranty and insurance
agreements, the contract at issue must be viewed as primarily a security
agreement. We disagree. The installment sales contract at issue here
defines defendants as the "buyer" and the car dealership as the
"creditor(seller)." Further, the contract simultaneously assigned the
dealership's rights directly to the predecessor of DaimlerChrysler,
Chrysler Credit Corporation. In that assignment the dealership, as the
"seller," warranted that the entire contract, including the warranty and
insurance provisions, "arose from the sale of the property described on the
face of this contract" and that the buyer "was quoted both a time price and
a lesser cash price." We conclude that there is a direct buyer-seller
relationship between defendants and the dealership that arose primarily
from a transaction in goods. As assignee of that contract, DaimlerChrysler
stands in the shoes of the seller. The extended service and insurance
agreements are incidental parts of that contract. We conclude that the
statute of limitations for sale of goods, 9A V.S.A. § 2-725, applies to
this contract. See also 9A V.S.A. § 2-707 cmt. (financing agency is
included in the term "a person in the position of seller"); Farmer, 395 N.E.2d at 1122-23 (as assignee of motor vehicle retail installment
contract, bank had stepped into the shoes of the seller, and therefore the
UCC's statute of limitations for sale of goods applies).
¶ 11. Finally, DaimlerChrysler argues that when the Legislature
enacted the UCC, it expressly subordinated Article 2 to the pre-existing
Motor Vehicle Retail Installment Sales Finance Act (MVRISFA). See 1966,
No. 29, § 5(b) ("This act does not repeal 9 V.S.A. §§ 2351-2361 (Motor
Vehicle Retail Instalment Sales Financing) . . . and if in any respect
there is any inconsistency between this act and those sections, the
provisions of those sections shall control."). DaimlerChrysler's argument
appears to be that since the Legislature left the MVRISFA fully intact, the
statute of limitations previously applicable to that Act should apply. The
short answer is that there is no inconsistency between the statute of
limitations of the UCC and the provisions of the MVRISFA.
¶ 12. The MVRISFA does not contain a statute of limitations.
Rather, the Act regulates the licensing of motor vehicle financing
agencies, 9 V.S.A. § 2352, and the formation of motor vehicle retail
installment sales contracts. Id. § 2355. Remedies for deficiencies on
contracts under the MVRISFA were originally governed by the former Uniform
Sales Act, 9 V.S.A. §§ 1501-1577, which borrowed the general six-year
statute of limitations for civil actions. See 12 V.S.A. § 511 ("A civil
action . . . shall be commenced within six years after the cause of action
accrues and not thereafter."). The Uniform Sales Act was replaced by
Article 2 of the UCC, which contained its own four-year statute of
limitations for "breach of any contract for sale." 9A V.S.A. § 2-725. The
express purpose of that provision was "[t]o introduce a uniform statute of
limitations for sales contracts, thus eliminating the jurisdictional
variations and providing needed relief for concerns doing business on a
nationwide scale whose contracts have heretofore been governed by several
different periods of limitation depending upon the state in which the
transaction occurred." Id. cmt. We find no inconsistency between the
MVRISFA and 9A V.S.A. § 2-725, and have no doubt that applying the
four-year statute of limitations to motor vehicle retail installment sales
contracts is consistent with the Legislature's intent. See also Aube v.
O'Brien, 140 Vt. 1, 4, 433 A.2d 298, 299 (1981) ("[W]here there is a
conflict between a general statute of limitations and a specific statute of
limitations, the latter will prevail.").
Affirmed.
FOR THE COURT:
_______________________________________
Associate Justice
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
