Cramer v. Billado

         On Appeal from Superior Court, Franklin Unit, Civil Division Thomas Z. Carlson, J.

          Daniel S. Triggs, Milton, for Plaintiff-Appellee.

          Karen R. Shingler, Burlington, for Defendant-Appellant.

          PRESENT: Reiber, C.J., Dooley, Skoglund, Robinson and Eaton, JJ.

          ROBINSON, J.

         ¶ 1. Defendant James Billado appeals the trial court's denial of his motion to set aside a default judgment of foreclosure on the grounds that the trial court erred in allowing service of the foreclosure complaint by tack order and in declining to set aside the default foreclosure judgment in light of his defenses. Plaintiff Laura Cramer argues that defendant's appeal was untimely and we thus need not consider the merits of his appeal. We conclude that the trial court's orders were within its discretion and accordingly affirm.

         ¶ 2. The events leading to this appeal are rooted in the parties' 2007 divorce. In September 2005, the parties entered into a final stipulation that provided, among other things, that defendant was to pay plaintiff $50, 000 on or before November 15, 2005, to buy out her interest in defendant's business. Before the court entered a divorce judgment, defendant sought to set aside his uncounseled stipulation on the ground that, since signing the stipulation, he learned that while acting as bookkeeper, plaintiff had been stealing money from the business. After an evidentiary hearing, the trial court rejected his claim, concluding that plaintiff had not engaged in any deception. The court found that the parties treated the various business accounts as personal accounts, withdrawing funds at will to pay for vacations, credit card debt, and other personal expenses. Defendant left the bookkeeping to plaintiff, and turned a blind eye to poor bookkeeping practices since both he and plaintiff received the financial benefit. Given this record, the trial court declined to set aside the parties' stipulation. In a February 2007 final judgment of divorce, the court incorporated the stipulation and ordered defendant to pay plaintiff $50, 000. This Court considered defendant's arguments and affirmed the final order on appeal. See Billado v. Billado, No. 2007-099, 2007 WL 5313617, at *3 (Vt. Nov. 1, 2007) (unpub. mem.), https://www.vermontjudiciary.org/sites/default/files/documents/eo07-099.pdf.

         ¶ 3. Plaintiff recorded a certified copy of the judgment in the Bakersfield, Vermont land records to perfect her judgment lien on defendant's property. On May 11, 2015, plaintiff filed this foreclosure action alleging that defendant had failed to pay on the 2007 judgment.

         ¶ 4. On June 18, 2015, pursuant to Vermont Rule of Civil Procedure 4(d)(1), plaintiff sought alternative service through a tack order, which would allow the sheriff to leave a copy of the summons and complaint at defendant's home. The accompanying affidavit of diligent search from a deputy sheriff stated that he tried to serve the papers in person at defendant's residence on May 23, a Saturday, but got no answer. He noted that there were no vehicles present at defendant's home at that time. The affidavit reflected that on May 27, a Wednesday, he spoke with defendant by telephone and defendant promised to collect the paperwork in St. Albans. And the affidavit also reflected that on Sunday morning, June 7, the deputy sheriff again went to defendant's residence and got no answer.

         ¶ 5. By order dated July 2, the trial court granted plaintiffs motion for alternative service, finding that plaintiff had shown that, despite due diligence, personal service of process in this matter could not be made on defendant, that plaintiffs proposed method of service was reasonable and appropriate, and that the method of service proposed by plaintiff was preferable to an order that service be made by publication. The court ordered that service of the summons and complaint for foreclosure, and other process, notices, and orders, could be made "by securely affixing a copy of such process on the main entrance of [defendant's home], reasonably protected from weather." The deputy sheriff effected service by tack order on July 18.^[*]

         ¶ 6. Defendant did not answer the foreclosure complaint, and on January 14, 2016, plaintiff filed a motion for default judgment of foreclosure and the issuance of a clerk's accounting. The trial court awarded plaintiff default judgment, and on February 8, 2016, issued a judgment and decree of foreclosure by judicial sale. Considering accrued interest on the 2007 debt, attorney's fees, and recording fees, the court calculated an outstanding judgment of $112, 527.23.

         ¶ 7. Several days later, through counsel, defendant filed a verified motion to set aside the default judgment. He said that the judgment of foreclosure was the first document he had ever received in the foreclosure action, that he did not see any prior pleadings "tacked" to the premises, and that personally serving him pursuant to the rule should have been easy since he has a high personal profile in the community, has lived in the same location for years, and owns a localbusiness. Following an evidentiary hearing focused primarily on the deputy sheriff's initial efforts to serve defendant, as well as on service of the pleadings pursuant to the tack order, defendant filed a supplemental memorandum laying out his underlying defenses to the foreclosure as an alternative basis to support his motion to set aside the default judgment. Defendant argued that he was entitled to a set-off against plaintiff's judgment because she had improperly diverted funds from his business prior to their divorce.

         ¶ 8. Based on the parties' pleadings and the evidence presented at the evidentiary hearing, the trial court found that the deputy sheriff had attempted to serve defendant at his home on two weekends, and also reached defendant between those efforts to try to make arrangements for service of the summons and complaint. The court credited the deputy sheriff's testimony, including his recollection that defendant agreed to come to the courthouse during the day to accept service but then failed to do so, and his observation that defendant understood that plaintiff was taking legal action to pursue her outstanding claims against him. The court also credited the deputy sheriff's testimony that in executing the tack order he secured the pleadings to defendant's door in a weatherproof bag. The court concluded that the service by tack order was lawful and sufficient.

         ¶ 9. In addition, the court concluded that defendant had not pled sufficient grounds under Vermont Rule of Civil Procedure 60(b) to set aside the default judgment on the merits. The court determined that defendant had not presented any meritorious defenses to the judgment. It reasoned that the allegations supporting defendant's claim for a set-off against the amount he owes plaintiff under the final order had already been litigated. In 2007, the family court thoroughly litigated very similar if not identical allegations against plaintiff in connection with defendant's effort to set aside the parties' stipulation. Moreover, the court rejected defendant's argument that the court should revisit the previously litigated allegations because defendant had new evidence to support them. Defendant's new evidence consisted of the findings of an accountant who reviewed the 2003-2005 business books in 2013 and found what he believed to be payroll tax diversions while plaintiff was managing the books. Those problems did not come to light until 2008, when the IRS contacted defendant about unmet payroll tax obligations. The court noted that defendant made no effort to reopen the divorce or otherwise seek a remedy against plaintiff in 2008, when the ...