Introduction

In Ditech Financial LLC v. Brisson, 2025 VT 54 (Vt. Sept. 19, 2025), the Vermont Supreme Court reversed a trial court’s order that had dismissed a long-running foreclosure case with prejudice and vacated the 2018 judgment of foreclosure for alleged failure to prosecute. Writing for the Court, Justice Carroll held that the trial court abused its discretion because there was no genuine failure to prosecute and because the court’s concerns were governed by the wrong procedural rule.

The decision sets an important procedural marker for Vermont civil practice—particularly in mortgage foreclosure cases where loan ownership, servicing, and enforcement rights frequently change hands post-judgment. The Court clarifies that:

• Rule 17(a)’s “real party in interest” requirement applies at the time the action is commenced, not throughout the life of the case (¶¶ 14–16).
• Post-commencement transfers of interests are governed by Rule 25(c), which permits the action to continue in the name of the original plaintiff unless the court orders substitution or joinder (¶¶ 16–18).
• Dismissal “for failure to prosecute” under Rule 41(b)(2) is a harsh sanction reserved for actual nonprosecution or serious noncompliance; on the record presented, the sanction was disproportionate (¶¶ 20–24).

The Court reinstated the foreclosure judgment and remanded, expressly declining to reach the parties’ “merger doctrine” dispute (¶ 13) and taking no position on whether a Rule 41(b) dismissal with prejudice automatically vacates a foreclosure judgment (¶ 25). Justice Cohen dissented, emphasizing the need to deter sloppy foreclosure practices and would have affirmed the dismissal.

Parties: Plaintiff-Appellant Ditech Financial LLC (successor to Green Tree Servicing LLC) and Defendant-Appellee Karen Brisson (a/k/a Karen Curavoo), pro se. The opinion arises from the Addison Unit, Civil Division (foreclosure by judicial sale), with a 2018 merits judgment for Ditech after trial.

Summary of the Opinion

• The Supreme Court held that the trial court abused its discretion by dismissing the case with prejudice and vacating the foreclosure judgment as a sanction for “failure to prosecute” (¶¶ 20–24).
• The trial court’s concern—identifying the real party in interest after post-judgment transfers—was governed by Rule 25(c), not Rule 17(a). Rule 17(a) addresses the proper plaintiff at the moment of filing (¶¶ 14–16).
• Even if interests transferred after judgment, Rule 25(c) allows the action to continue in the original plaintiff’s name absent a court order substituting another party upon motion (¶ 16). The record did not justify dismissal under Rule 25(c), and the mere fact of a corporate bankruptcy or dissolution does not, by itself, preclude continuation where state law permits corporate “survival” for litigation (¶¶ 18–19).
• On Rule 41(b)(2), the record lacked findings of delay, inaction, missed hearings, repeated noncompliance, or other indicators of nonprosecution. Plaintiff attended the hearing and presented evidence on the real-party issue; the court’s disagreement with the sufficiency of that evidence did not, without more, warrant dismissal with prejudice (¶ 24).
• Result: Reversed; foreclosure judgment reinstated; remanded for further proceedings consistent with the opinion (¶ 25).
• Issues left open: “Merger doctrine” (whether note/mortgage merged into the foreclosure judgment) (¶ 13); whether dismissal with prejudice for want of prosecution automatically vacates a foreclosure judgment (¶ 25); what law governs the post-bankruptcy “survival” of Ditech for litigation purposes (¶ 18).

Procedural Background in Brief

• 2007: Defendant obtained a mortgage loan (¶ 2).
• Assignments: To EverBank (2009) and Green Tree Servicing (2014), which became Ditech (¶ 2).
• 2018: Trial; judgment of foreclosure by judicial sale entered for plaintiff, with a six-month redemption period (¶¶ 2–3). Defendant’s request to appeal was denied under 12 V.S.A. § 4939 (¶ 4). Later, bankruptcy stayed the case (¶ 5).
• 2021: Case reopened post-bankruptcy; mediation unsuccessful (¶ 5).
• 2023–2024: Plaintiff moved to substitute after asserting post-judgment assignments. Defendant challenged, prompting reconsideration. Plaintiff acknowledged the note had been lost post-judgment and advanced a merger theory; the court vacated substitution and required proof of the “real party in interest,” warning of dismissal if not proven (¶¶ 6–11).
• August 2024: Hearing held; trial court dismissed with prejudice and vacated the foreclosure judgment for want of prosecution (¶ 11). Rule 59(e) motion denied; appeal followed (¶ 12).

Analysis

Precedents and Authorities Cited

• Rule 17(a) — Real Party in Interest at Commencement
  • Hilbrands v. Far E. Trading Co., 509 F.2d 1321, 1323 (9th Cir. 1975): Rule 17 addresses who must sue at the time the action begins (¶ 14).
  • Smedberg v. Detlef’s Custodial Serv., Inc., 2007 VT 99, ¶ 30: Vermont construes V.R.C.P. 17 consistent with the federal rule (¶ 14).
  • MERS, Inc. v. Saunders, 2010 ME 79, ¶ 17: Rule 17 is designed to ensure actions are prosecuted by the right party and to avoid duplicate litigation (¶ 14).
  • Advisory Committee Notes to F.R.C.P. 17: Purpose is to protect defendants from subsequent actions and to ensure proper res judicata effect (¶ 14).
  • Wells Fargo Bank Minn., N.A. v. Rouleau, 2012 VT 19, ¶ 11; U.S. Bank Nat’l Ass’n v. Kimball, 2011 VT 81, ¶¶ 13–14: Foreclosure standing is established at filing by right to enforce the note and mortgage (¶ 15).
• Rule 25(c) — Transfers of Interest During Litigation
  • V.R.C.P. 25(c): After a transfer, action may continue in the original party unless the court orders substitution or joinder (¶ 16).
  • ELCA Enters., Inc. v. Sisco Equip., 53 F.3d 186, 191 (8th Cir. 1995): Rule 25(c) allows continuation even if the original party is no longer the real party in interest (¶ 16).
  • In re Covington Grain Co., 638 F.2d 1362, 1364 (5th Cir. 1981): Rule 25(c) is not to create new relationships, but to keep the case moving when the interest changes hands (¶ 16).
  • Froning’s, Inc. v. Johnston Feed Serv., 568 F.2d 109, 110 (8th Cir. 1978); Liberty Broadcasting Sys., Inc. v. Albertson, 15 F.R.D. 121, 122 (W.D.N.Y. 1953); Singer Housing Co. v. Seven Lakes Venture, 466 F. Supp. 369, 378 (D. Colo. 1979): Unless a court orders otherwise upon motion, continuing in the original name is proper (¶ 17).
  • Defense Supplies Corp. v. Lawrence Warehouse Co., 336 U.S. 631, 634–35 (1949): Corporate entities can “survive” for litigation purposes by statute; dissolution does not necessarily end litigation capacity (¶ 18).
• Rule 41(b)(2) — Dismissal for Failure to Prosecute or Comply with Orders
  • Capital Savings Bank & Trust Co. v. Hammett, 95 Vt. 47, 50, 112 A. 360, 361 (1921): Abuse-of-discretion standard (¶ 20).
  • Bank of America, N.A. v. O’Kelly, 2018 VT 71, ¶ 11: Abuse exists when the court acts for clearly untenable reasons or to a clearly untenable extent (¶ 20).
  • Ying Ji v. Heide, 2013 VT 81, ¶¶ 5–9: Dismissal with prejudice is a severe sanction and often disproportionate absent notice, pattern of neglect, or lesser sanctions considered (¶¶ 21–22).
  • Deutsche Bank v. Pinette, 2016 VT 71, ¶ 18: Rule 41 dismissals are adjudications on the merits unless otherwise stated (¶ 21).
  • Federal parallels: Minnette v. Time Warner, 997 F.2d 1023, 1027 (2d Cir. 1993) (dismissal is harsh; use sparingly) (¶ 23); Next Millennium Telecom, 112 F.4th 481, 484 (7th Cir. 2024) (pattern of delay supports dismissal) (¶ 23); Link v. Wabash R.R., 370 U.S. 626, 633 (1962) and Drake v. Norden Systems, 375 F.3d 248, 258 (2d Cir. 2004) (consider warnings, delays, contumacious conduct) (¶ 24).
  • Hayes v. Harwood, 141 Vt. 308, 309, 448 A.2d 799, 799 (1982): Substance controls over labels (¶ 19).
  • John v. Medical Center Hospital of Vermont, 136 Vt. 517, 519–20, 394 A.2d 1134, 1135 (1978): The ultimate sanction requires willful disregard and prejudice; dismissal can serve penalty and deterrence (¶¶ 21, 33, dissent).
  • Cenlar FSB v. Malenfant, 2016 VT 93: Cited by the trial court for dismissal authority; also discussed in dissent regarding foreclosure-case sanctions (¶¶ 19, 31–32).

Legal Reasoning

The Supreme Court framed the trial court’s “real party in interest” inquiry along the correct doctrinal axes. First, Rule 17(a) is concerned with whether the plaintiff at the time of filing had the substantive right to enforce the claim (¶ 14). That issue was resolved in the 2018 merits decision: Ditech/Green Tree possessed the note and mortgage when the complaint was filed, and the trial court found standing and entitlement to foreclose (¶ 15). Defendant did not contest the original standing in 2023 and the court did not revisit it (¶ 15). Thus, Rule 17(a) was inapplicable in the post-judgment posture.

Second, to the extent any interest transferred after judgment, Rule 25(c) controls (¶ 16). That rule is designed to avoid technical dismissals and to keep the case moving notwithstanding changes in ownership or servicing—allowing the case to continue in the original plaintiff’s name unless the court, upon motion, orders substitution or joinder (¶ 16). Here, after reconsideration, no substitution motion was pending; the earlier substitution was vacated; and plaintiff withdrew the request (¶ 17). On this record, continuation in the original party’s name was permissible.

The trial court rejected that approach because it believed the original plaintiff “does not exist.” The Supreme Court cautioned that corporate dissolution or bankruptcy does not automatically bar continuation—corporate “survival” statutes may preserve litigation capacity (¶ 18, citing Defense Supplies). The effect of Ditech’s bankruptcy and what law governs survival were not developed below and could not support dismissal on this record (¶ 18).

Third, the Court addressed the sanction: dismissal with prejudice for failure to prosecute under Rule 41(b)(2). Although the trial court warned of dismissal if plaintiff failed to “prove” the real party in interest at the hearing, the Supreme Court emphasized the absence of record findings of nonprosecution, prolonged inaction, missed hearings, or repeated noncompliance (¶¶ 21, 24). Plaintiff complied by attending the hearing and providing evidence; the court’s disagreement with the persuasiveness of that evidence did not convert this into “failure to prosecute” warranting the harshest sanction (¶ 24).

In short, the trial court employed the wrong procedural lens (Rule 17 instead of Rule 25) and imposed a disproportionate sanction untethered to the purposes of Rule 41(b)(2). That was an abuse of discretion (¶¶ 20–24). The Supreme Court reversed, reinstated the foreclosure judgment, and remanded (¶ 25), leaving the merger doctrine and the automatic-vacatur question unresolved (¶¶ 13, 25).

The Dissent

Justice Cohen would have affirmed the dismissal, emphasizing deterrence of “slipshod” foreclosure practices. In her view, plaintiff’s shifting representations (assignments post-judgment, then asserting the note was lost, then locating the note), inadequate proof on who could enforce the judgment, and confusing communications to the homeowner justified dismissal as a proportionate response under Rule 41(b)(2) (dissent ¶¶ 27–33). Drawing on lessons from the post-2008 foreclosure crisis and this Court’s prior foreclosure-sanctions jurisprudence (e.g., Cenlar; Pinette), the dissent would send a “clear message” that repeated procedural failings will not be rewarded.

Practical Impact

• Procedural Clarity in Transferred-Interest Cases:
  • Trial courts confronting post-judgment assignment disputes should proceed under Rule 25(c), not Rule 17(a), and may continue with the original plaintiff absent a properly supported motion to substitute or joinder that the court grants (¶¶ 16–17).
  • Litigants should recognize that real-party challenges tied to post-filing transfers are not jurisdictional standing issues. The right question is procedural management under Rule 25(c).
• Guardrails on Dismissal for “Failure to Prosecute”:
  • Rule 41(b)(2) dismissal with prejudice is a last resort. Courts should make findings of actual dilatory conduct, repeated noncompliance, missed appearances, or contumacious behavior—and consider lesser sanctions—before imposing dismissal (¶¶ 21–24).
  • Disagreement over sufficiency of evidence on a discrete issue, where the party complied with an order and attended a hearing, is not itself “failure to prosecute.”
• Corporate Survival and Enforcement:
  • Bankruptcy or dissolution of a plaintiff entity does not automatically halt enforcement if governing law allows survival to prosecute or defend actions (¶ 18).
  • Future cases may need to develop the governing survival statutes and the effect of bankruptcy plans on litigation capacity; this case flags but does not decide those issues (¶ 18).
• Foreclosure Practice:
  • The foreclosure judgment was reinstated; post-judgment administration (sale scheduling, redemption, confirmation) can proceed, subject to any further trial court management on remand.
  • The Court did not decide whether a Rule 41(b) dismissal with prejudice automatically vacates a foreclosure judgment (¶ 25)—a question that may recur at the intersection of sanctions and final foreclosure decrees.
  • The Court also did not reach whether Vermont’s foreclosure law recognizes a “merger” of the note/mortgage into the foreclosure judgment (¶ 13). That issue awaits a case with a developed record and necessary briefing.

Complex Concepts Simplified

• Real Party in Interest (Rule 17(a)) vs. Standing:
  • “Standing” in Vermont foreclosure requires the plaintiff to have the right to enforce the note and mortgage at the time the complaint is filed. That is a threshold merits and justiciability inquiry (¶ 15).
  • “Real party in interest” under Rule 17(a) also focuses on who, at filing, holds the substantive right being enforced. It protects defendants from duplicate suits and ensures judgments have res judicata effect (¶ 14).
  • Once established at filing, later transfers typically do not retroactively unsettle standing or Rule 17(a).
• Transfers During Litigation (Rule 25(c)):
  • When the claim, judgment, or related interests move to a new entity, Rule 25(c) allows the case to continue in the name of the original plaintiff unless the court orders substitution or joinder upon motion (¶ 16).
  • It is a managerial tool: to keep litigation efficient and avoid do-overs simply because the underlying asset changed hands (¶ 16).
• Dismissal for Failure to Prosecute (Rule 41(b)(2)):
  • This sanction applies when a plaintiff truly abandons or unduly delays the case, fails to attend hearings, or disobeys orders. It is “harsh” and generally requires a pattern of noncompliance and consideration of lesser sanctions (¶¶ 21–24).
  • Dismissal “with prejudice” ends the case on the merits and precludes re-filing. Because of its severity, courts must be careful and make adequate findings.
• Merger Doctrine (Foreclosure Context):
  • Some jurisdictions treat the note and mortgage as “merged” into the foreclosure judgment, such that enforcement proceeds through the judgment rather than the note. The Vermont Supreme Court expressly did not decide this question here (¶ 13).
• Corporate Survival for Litigation:
  • Statutes often allow dissolved or reorganized entities to sue or be sued to wind up affairs, including enforcing judgments. Whether such survival applies depends on the governing law and record—a question open in this case (¶ 18).

Guidance for Courts and Practitioners

• For Trial Courts:
  • Anchor “real party in interest” analysis at the filing date (Rule 17(a)); manage post-judgment ownership changes through Rule 25(c).
  • When contemplating Rule 41(b)(2) dismissal, make explicit findings of delay/noncompliance, consider proportional alternatives, and provide clear notice tailored to the conduct at issue.
  • Where a plaintiff entity’s legal existence is in question, identify the governing survival statutes (state of incorporation, bankruptcy plan), and develop the record before imposing dispositive sanctions.
• For Plaintiffs/Creditors and Servicers:
  • Maintain a clean, contemporaneous chain of title and servicing authority documentation—especially after judgment. If seeking substitution, be prepared with admissible evidence of transfers and authority.
  • Be consistent in representations to the court and the borrower. Mixed messages from servicers or trustees can invite skepticism and sanctions.
  • If relying on a power of attorney or corporate survival, supply the operative documents, governing law, and evidence that the authority remains in force.
• For Borrowers:
  • Challenges to standing or “real party in interest” must be targeted to the point in time that matters. Standing at filing is the key for Rule 17(a) and foreclosure standing; later transfers are addressed under Rule 25(c).
  • If confused by conflicting communications from servicers or trustees, compile the notices and raise the issue promptly; courts are sensitive to borrower confusion, as reflected by the dissent’s concerns.

Unresolved Questions Flagged by the Court

• Does a dismissal with prejudice for failure to prosecute automatically vacate a previously entered foreclosure judgment? The Court reinstated the judgment and expressly took no position (¶ 25).
• What law governs a bankrupt or dissolved servicer’s post-judgment capacity to maintain the action, and what record is required to establish survival authority? The issue was not preserved or developed (¶ 18).
• Does Vermont recognize robust “merger” of the note/mortgage into a foreclosure judgment, and with what consequences for post-judgment assignments or “lost note” scenarios? The Court declined to reach the merger doctrine (¶ 13).

Conclusion

Ditech Financial LLC v. Brisson refines Vermont’s procedural playbook for foreclosure and other cases where ownership or enforcement rights evolve after suit is filed. The Court confirms that the identity of the “real party in interest” is fixed for Rule 17(a) purposes at the moment of filing, while Rule 25(c) permits cases to continue in the original plaintiff’s name after transfers, absent a court-ordered substitution or joinder. It also tightens the standard for Rule 41(b)(2) dismissals: without evidence of actual nonprosecution or serious, repeated noncompliance, the ultimate sanction of dismissal with prejudice is an abuse of discretion.

Although the Court leaves open questions about the merger doctrine, the automatic vacatur of foreclosure judgments upon dismissal, and the legal survival of defunct lenders or servicers, its central holdings provide immediate guidance: use the right rule for the right problem, and reserve harsh sanctions for truly egregious cases. The dissent’s call for stronger deterrence underscores the ongoing tension in foreclosure practice between efficiency, accuracy, and fairness—an equilibrium this decision seeks to restore by insisting on proportionality and procedural precision.

Case Metadata

• Court: Supreme Court of Vermont
• Term: June Term, 2025
• Date: September 19, 2025
• Citation: 2025 VT 54, No. 25-AP-001
• Author: Carroll, J. (for the Court); Cohen, J., dissenting
• Disposition: Reversed; foreclosure judgment reinstated; remanded