In re Burke Mountain Recreation, Inc.

• Decision Date: 12 September 1986
• Docket Number: Bankruptcy No. 85-86,Adv. No. 86-0026.
• Court: U.S. Bankruptcy Court — District of Vermont
• Parties: In re BURKE MOUNTAIN RECREATION, INC., Debtor. BURKE MOUNTAIN RECREATION, INC., Plaintiff, v. VERMONT DEVELOPMENT CREDIT CORPORATION, Defendant.

64 B.R. 799 (1986)

In re BURKE MOUNTAIN RECREATION, INC., Debtor BURKE MOUNTAIN RECREATION, INC., Plaintiff, v. VERMONT DEVELOPMENT CREDIT CORPORATION, Defendant.

Bankruptcy No. 85-86, Adv. No. 86-0026.

United States Bankruptcy Court, D. Vermont.

September 12, 1986.

A. Field, Montpelier, Vt., for Vermont Development Credit Corp. (VDCC).

C. Hickey, of Swainbank, Morrissette, Neylon & Hickey, St. Johnsbury, Vt., for Burke Mountain Recreation, Inc. (debtor).

MEMORANDUM OPINION AND ORDER

FRANCIS G. CONRAD, Bankruptcy Judge.

This adversary proceeding involves a Chapter 11 debtor who borrowed funds from a lender who was not licensed to lend by the State of Vermont. Because we find that the lender is required by statute to obtain a license, the plaintiff's cross-motion for summary judgment is granted, and the lender's motion for summary judgment is denied.

No facts are in dispute. The debtor owns and operates a ski area in northeastern Vermont. On or about October 31, 1980, the debtor, through an agent, signed a promissory note running to VDCC for $175,000.00 at fifteen percent (15%) annual interest. The promissory note is secured by a subordinate mortgage on the debtor's real and personal property. All documents are validly executed. The loan is in default, and VDCC is due the principal sum of $173,904.92, accrued interest of $119,693.93 as of April 24, 1986, and per diem interest of $71.4677 from April 24, 1986 forward.

The parties filed cross-motions for summary judgment. We reserved decision on these motions pending a pre-trial conference and the submission of pre-trial statements by the parties. At the pre-trial conference the sole contested fact, whether VDCC was in the business of making loans, was conceded by VDCC's counsel to be an accurate characterization of his client's activities. Counsel requested oral argument and the right to submit memoranda of law to the Court. After oral argument we took the matter under advisement.

The only issue we need to decide is whether the loan, dated October 31, 1980, is void because VDCC did not obtain the lender's license required by 8 V.S.A. § 2201 for loans made in the State of Vermont with an annual interest rate greater than twelve percent (12%). Under 8 V.S.A. § 2233, a loan made in violation of 8 V.S.A. § 2201 "shall be void and the lender shall have no right to collect or receive any principal, interest, or charges whatsoever."¹

The framing of the legal issue succinctly conveys the debtor's position. VDCC argues in support of its contention that it is not required to be licensed under 8 V.S.A. § 2201, et seq., as follows:

1) In a related state action against one of the individual guarantors of the same promissory note, VDCC received a summary judgment Order in its favor.

2) VDCC is specially chartered and regulated as a lending entity under 8 V.S.A. § 1801, et seq.²

3) The Vermont legislature did not intend or contemplate that VDCC should be twice subject to scrutiny for its lending activities.

4) The Vermont Banking and Insurance Department has historically considered VDCC exempt from licensing.

5) The legislative history of 8 V.S.A. §§ 2201, et seq., indicates that the purpose of the section was to bring hitherto unregulated lending entities under the purview of the Banking and Insurance Department, not entities already subject to state regulation.

This is a classical case of statutory construction. The starting point in every case involving statutory construction is the language itself. Medor v. Lamb (In re Lamb), 47 B.R. 79, 12 C.B.C.2d 475 (Bkrtcy.D.Vt.1985).

As a general rule, a statute should be read according to its literal terms, United States v. Locke, 471 U.S. 84, 93, 105 S.Ct. 1785, 1792, 85 L.Ed.2d 64, 75 (1985), unless this renders the statute ineffective or leads to irrational consequences, In re A.C., 144 Vt. 37, 470 A.2d 1191 (1984), leads to an absurd consequence, State v. Goyet, 120 Vt. 12, 132 A.2d 623 (1957), or is otherwise demonstrably at odds with the intentions of the statute's drafters, Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 73 L.Ed.2d 973 (1982).

When interpreting statutes, the Court is to give effect to the intent of the legislature, State v. Lund, 144 Vt. 171, 175, 475 A.2d 1055 (1984). It is this intent that constitutes the law, Hill v. Commissioner, 143 Vt. 91, 93, 463 A.2d 232 (1983). If the language is plain, the intent must be ascertained from the language itself, Lomberg v. Crowley, 138 Vt. 420, 415 A.2d 1324 (1980); State v. Estate of William Taranovich, 116 Vt. 1, 5, 68 A.2d 796 (1949). The primary vehicle for interpreting the meaning of a Vermont statute is the "plain meaning rule." This rule was described recently in Cavanaugh v. Abbott Laboratories, 145 Vt. 516, 529, 496 A.2d 154 (1985). The Supreme Court of Vermont, citing Heisse v. State, 143 Vt. 87, 89, 460 A.2d 444, 445 (1983), said:

The most elementary rule of statutory construction is that the plain meaning of the statute controls. If confusion or ambiguity does not appear, then the statute is not construed, but rather is enforced in accordance with its express terms.

We find no ambiguity in 8 V.S.A. §§ 2201, et seq. Its express provisions are clear and unequivocal. We arrive at this conclusion reading the statute in its entirety. See Philbrook v. Glodgett, 421 U.S. 707, 95 S.Ct. 1893, 44 L.Ed.2d 525 (1975) (the Court, in expounding a statute, must not be guided by a single sentence or a member of a sentence, but must look to the provisions of the whole law and to its object and policy). See also, Clarence Reed, Adm v. Rosenfield, 115 Vt. 76, 78, 51 A.2d 189 (1947).

A reading of 8 V.S.A. § 2201 reveals that "a bank, savings and loan association, credit union, pawnbroker, insurance company or seller of the merchandise or service financed" is exempted from the section. The maxim of statutory construction, expressio unius est exclusio alterius, teaches us that the expression or the inclusion of one thing is the exclusion of others. Ford v. United States, 273 U.S. 593, 47 S.Ct. 531, 71 L.Ed. 793 (1927). This maxim applies to enumerated exceptions. Where there is an express exception, it comprises the only limitation of the statute and no other exception will be implied. Andrus v. Glover Construction Co., 446 U.S. 608, 100 S.Ct. 1905, 64 L.Ed.2d 548 (1980). See also Fairbanks, Morse & Company v. Commissioner of Taxes, 114 Vt. 425, 47 A.2d 123 (1946) (an exception in a statute amounts to an affirmation of the application of its provisions to all other cases not excepted, and excludes all other exceptions). Since VDCC is not included within the exceptions, we can only infer that the legislature intended VDCC to obtain a license to lend money. We are not at liberty to supply what the lawmakers have omitted. State v. Fox, 122 Vt. 251, 255, 169 A.2d 356 (1961).

VDCC first argues that a Vermont Court has already decided the legal issue in this case. We disagree. Although a Federal Court is required to follow the established precedent of a particular state when it is interpreting that state's statutes, Standard Oil Co. v. New Jersey, 341 U.S. 428, 715 S.Ct. 822, 95 L.Ed. 1078 (1951), this case does not reach us in such a posture. No appellate court in Vermont has interpreted the relevant statutory provisions. What was presented to us as precedent by VDCC is an unpublished opinion of the Caledonia Superior Court, the trial court, granting summary judgment to VDCC against an individual guarantor of the note at issue here. This case is on appeal to the Vermont Supreme Court. In the absence of a decision by the Supreme Court or an intermediate appellate court on an issue of substantive state law, the decision of a state trial court is entitled to some weight, but does not control our decision. Harris v. Lukhard, 733 F.2d 1075 (4th Cir.1984); Carpenters Health & Welfare Fund of Philadelphia and Vicinity v. Kenneth R. Ambrose, Inc., 727 F.2d 279 (3d Cir.1983). In the absence of established precedent, we must decide this case as we understand it.

Counsel for VDCC argues next that because it is specially chartered and regulated as a lending entity under 8 V.S.A. § 1801, the Vermont legislature did not intend or contemplate that VDCC twice undergo scrutiny by the State Banking and Insurance Department. However meritorious the purpose of avoiding double scrutiny, a plain reading of the statute does not reveal this purpose on the part of the Vermont legislature. Nor may we legislate under the guise of construction, Murphy Motor Sales v. First National Bank, 122 Vt. 121, 123, 165 A.2d 341 (1960), creating an exception that does not exist. Plainly, the Vermont legislature has required other entities within the regulatory purview of 8 V.S.A. § 2201 to be doubly regulated.³

It is equally clear that the legislature has had ample time and opportunity to review and amend 8 V.S.A. §§ 2201, et seq., to include legislation adding "development credit corporations" to the specific exceptions to licensure enumerated in 8 V.S.A. § 2201. The history of 8 V.S.A. § 2201, et seq., may be traced at least to the year 1937. It is safe to assume that the concept of development credit corporations was not envisioned by the lawmakers in 1937 or in 1947, when the legislature amended 8 V.S.A. § 2201. Development credit corporations came into existence before 1969, when 8 V.S.A. §§ 1801-1804 were enacted. The Vermont legislature amended 8 V.S.A. § 2233, the penalty provision of the licensing statute, in 1969, 1979, 1980, and 1985. Having amended this statute (at least technically) four times since enacting 8 V.S.A. §§ 1801-1804, the legislature was certainly aware of VDCC and could easily have included VDCC within the enumerated-exceptions had it elected to do so. Without an expression of clear legislative intent, we are unwilling to read into the statute an exception that has not been included by the drafters. See Fairbanks, Morse & Company v. Commissioner of...