Harvard Trust Co. v. Bray

Citations: 413 A.2d 1213; 138 Vt. 199; 1980 Vt. LEXIS 1130Docket: 333-78

Court: Supreme Court of Vermont; March 25, 1980; Vermont; State Supreme Court

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The case involves Harvard Trust Company suing Dana S. Bray and his wife, Germaine Bray, regarding a promissory note for $50,000 guaranteed by the defendants, linked to a partnership in default. Dana Bray had previously been divorced from Anne Bray, with a court decree requiring him to pay alimony secured by an escrow arrangement involving shares of Vermont corporations. The plaintiff initiated the lawsuit in July 1975, serving process on the Brays in Florida, where they resided. The court proceedings included a motion for possessory attachment of certain stocks held in escrow, with the court ruling that the defendants were not subject to personal jurisdiction.

Despite the initial ruling, a default judgment of $57,752.81 was later entered against Dana Bray, leading to the attachment of the stocks. The judgment was subsequently amended to include an interest provision that had been overlooked. Later, the defendants moved to join Anne Bray and the escrow agent, Louis Lisman, as necessary parties due to their interests in the escrowed property. The court granted this motion, allowing the ex-wife and escrow agent to be joined as defendants in the amended judgment. The case raises issues of personal jurisdiction, waiver of defenses, and the rights of parties in relation to a secured agreement.

Counsel for the ex-wife filed a motion to strike the judgment, which the escrow agent supported. In October 1977, the judgment was stricken, and a proposed amended judgment was submitted by the plaintiff in July 1978, seeking an in personam judgment against Dana and Germaine Bray based on their counsel's general appearance. The Brays' attorney objected, asserting that their appearance was limited to jurisdiction issues. A subsequent amendment requested permission to file an answer if the court found jurisdiction. After an inadvertently signed judgment was stricken, a new order in September 1978 dismissed the escrow agent and ex-wife. The court ruled that the defendants' counsel's general appearance conferred in personam jurisdiction, allowing 14 days for the defendants to respond.

The court addressed the plaintiff's claim that the defense of lack of personal jurisdiction was waived due to untimely assertion. Under Vermont Rule of Civil Procedure 12(h)(1), such a defense can be waived if not included in a motion or responsive pleading. However, lack of personal jurisdiction was not a defense until the plaintiff asserted it in 1978. Previous law indicated that a defendant waives a defense only if not asserted when available. The plaintiff's assertion of waiver followed the vacating of a default judgment, which was based on the defendants' failure to respond. The law allows a defendant to assert defenses after vacating a default judgment unless explicitly prohibited. Consequently, the court concluded that the plaintiff's claim of waiver was unfounded. Additionally, it reaffirmed that entering a general appearance confers in personam jurisdiction, consistent with longstanding jurisdictional principles in Vermont.

Applying the rule in this case presents a dilemma for defendants, forcing them to either default and lose the attached property or appear and risk an in personam judgment that Vermont courts may not have the authority to impose, potentially exceeding the property's value. This raises significant constitutional concerns regarding the use of quasi in rem jurisdiction to compel submission to in personam jurisdiction. Jurisdictions that allow limited appearances avoid this issue by restricting judgments to the value of the attached property unless the defendant consents to in personam jurisdiction or takes certain actions like filing a counterclaim. Under V.R.C.P. 4(e), an appearance only grants jurisdiction proportional to the proceeding's nature, with judgments affecting only the attached property interest unless due process requirements are met. The defendants' motion to join additional parties does not constitute an affirmative pursuit of relief, and contrary statements in prior cases are considered dicta. The case is reversed and remanded for proceedings consistent with these findings. Additionally, the excerpt notes that the validity of quasi in rem jurisdiction claims is assessed under the minimum contacts test established in previous U.S. Supreme Court cases, although this specific validity is not being evaluated here. An amendment to V.R.C.P. 4(e) effective December 3, 1979, has since altered the rules regarding quasi in rem jurisdiction, aiming to prevent similar issues in future cases.