Pownal Development Corp. v. Pownal Tanning Co.

No. 98-577 (765 A.2d 489) (Vt. November 17, 2000)

ELR Digest

The court affirms a trial court decree allowing a developer to partially foreclose on 9 parcels of land while not foreclosing on a 10th contaminated parcel. A tannery owned the land at issue and contaminated the land surrounding its mill. The mill parcel was listed as a Superfund site and underwent a cleanup action. The tannery then obtained a loan, secured with mortgages on 10 parcels of land, including the mill. After the tannery defaulted on the loan, the developer purchased the mortgage and foreclosed on all but the mill parcel. The state, as judgment lienholder on the mill parcel, argued that the developer must foreclose on all or none of the 10 parcels.

The court first holds that the common law imposes no bar against the developer's foreclosure of some, but less than all, of the property on which it holds a mortgage. It is not the law in Vermont, or any, where, that a foreclosing mortgagee must seek to recover all mortgaged lands or none at all. In fact, all the authority cited by the state implicitly supports the conclusion that a foreclosing mortgagee may determine to recover some, but not all the lands to which it might be entitled under its mortgage instruments. Further, partial foreclosure in this case may be required because the state holds subordinate interest in the mill parcel, and parcels with such encumbrances must be foreclosed on last. In addition, the public policy of free alienability of land dictates allowing partial foreclosure. The court then holds that partial foreclosure under the circumstances is not inequitable. The court also holds that the developer may be liable under the Vermont Waste Management Act. Although the developer qualifies as a secured lender exempt from liability under the Vermont Waste Management Act, it did foreclose on a lot contiguous to and potentially part of the same facility as the mill lot. The contiguous lot could be considered a facility under the Vermont Waste Management Act. However, once a mortgagee commences foreclosure, it is still only a secured creditor. The state's counterclaim must set forth any claim that it had against any opposing party at the time of serving its pleading. The state has not shown what claim it had under the Vermont Waste Management Act at the time it served its pleadings. At a later time, the developer will become the owner of the contiguous lot. Whether it becomes liable in some way for being the owner of the contiguous lot is not for determination at this time.

The full text of this opinion is available from ELR (7pp., ELR Order No. L-300).

Counsel for Plaintiff
James J. Cormier Jr.
Cormier & Cormier
204 Union St., Bennington VT 05201
(802) 442-5500

Counsel for Defendant
John H. Hasen, Ass't Attorney General
Attorney General's Office
Pavilion Office Bldg.
109 State St., Montpelier VT 05609
(802) 828-3171

[31 ELR 20306]

[OPINION OMITTED BY PUBLISHER IN ORIGINAL SOURCE]