## Facts

- L. Paul Dieffenbach, Jr. bought Vermont real estate in 1974 using a $10,000 mortgage from First National Bank of Orwell, Inc.; the mortgage lacked a power-of-sale clause.
- Vermont then permitted strict foreclosure, under which a mortgagee obtaining title after the redemption period need not remit any later resale surplus to the mortgagor.
- After Dieffenbach defaulted, the Bank filed a foreclosure action in Vermont superior court in January 1976 and obtained summary judgment on foreclosure; the court set a redemption period.
- Dieffenbach did not redeem; after the redemption period expired, the Bank acquired full legal title and later sold the property for about $20,000, nearly twice the debt.
- Dieffenbach attempted to appeal in the Vermont Supreme Court but failed to obtain trial-court leave required by 12 Vt. Stat. Ann. § 4601; the appeal was dismissed for lack of jurisdiction.
- Dieffenbach filed a pro se federal action against the Vermont Attorney General, a deputy clerk of the Vermont Supreme Court, and private parties connected to the foreclosure, asserting constitutional violations.
- The federal district court granted summary judgment to defendants; Dieffenbach appealed.

## Issues

1. Whether Vermont’s strict-foreclosure scheme, allowing a mortgagee to keep any post-foreclosure resale surplus, violates the Due Process or Equal Protection Clauses.
2. Whether a federal court may adjudicate Dieffenbach’s constitutional challenge to 12 Vt. Stat. Ann. § 4601’s leave-to-appeal requirement after state-court proceedings addressing the appeal dismissal.
3. Whether allegedly inadequate notice from a state supreme court clerk regarding a hearing on a motion to dismiss an appeal constitutes a federal procedural due process violation when dismissal rests on a jurisdictional defect.

## Decision

- The Second Circuit affirmed the district court’s summary judgment for all defendants.
- Vermont’s strict-foreclosure rules were upheld as constitutional under rational basis review.
- The challenge to § 4601 was barred by preclusion based on prior state-court litigation concerning the appeal’s dismissal.
- The notice-based due process claim failed because the state appeal was dismissed for lack of jurisdiction and could be decided without a hearing; any notice defect caused no constitutional deprivation.

## Legal Principles

- State foreclosure rules allocating economic interests in mortgaged property are reviewed under rational basis scrutiny absent a suspect classification or burden on a fundamental right.
- A strict-foreclosure regime may constitutionally allow a mortgagee who acquires title after the redemption period to retain any subsequent resale surplus if the scheme is rationally related to legitimate state interests (including encouraging mortgage lending and structuring the mortgage market).
- Federal courts must give state-court judgments the same preclusive effect they would receive in state court; a litigant generally cannot relitigate in federal district court issues already resolved in state proceedings.
- Procedural due process requires a meaningful opportunity to be heard, but an alleged notice defect does not establish a federal violation where the challenged state action rests on an independent jurisdictional ground that compels the same result.

## Conclusion

The Second Circuit held that Vermont’s strict foreclosure system did not violate due process or equal protection, and it rejected Dieffenbach’s federal collateral challenges to state appellate procedures because the issues were precluded and, in any event, the state appeal’s jurisdictional defect made the complained-of notice irregularities constitutionally immaterial.


Dieffenbach v. Att’y Gen. of Vt., 604 F.2d 187 (2d Cir. 1979)