Mangold v. Wilson
Decision Date | 16 September 1988 |
Docket Number | Civ. No. 1987/70. |
Parties | Robert MANGOLD and Sharon Mangold, Plaintiffs, v. Robert G. WILSON, Defendant. |
Court | U.S. District Court — Virgin Islands |
Gerald T. Groner, Christiansted, St. Croix, U.S. Virgin Islands, for plaintiffs.
Warren B. Cole, Christiansted, St. Croix, U.S. Virgin Islands, for defendant.
Recipients of interest payments in excess of the maximum legal rate are strictly liable in the Virgin Islands to the payors for double the amount of interest paid,1 unless said payments are pursuant to a first priority mortgage greater than $100,000.2 These cross-motions for summary judgment require us to determine the applicability of various defenses involving respectively the theories of equity, estoppel, and assignment. Because we reject the viability of these defenses, and no other material facts are in dispute, judgment will be entered in favor of the payors.
The plaintiffs, Robert and Sharon Mangold, entered an "Offer to Purchase" agreement with the defendant, Robert G. Wilson, on January 23, 1985 for the purchase of real property known as No. 2 Estate Boetzberg, St. Croix, United States Virgin Islands. The purchase price was $340,000. $10,000 was paid down. $100,000 was to be paid upon closing, and the balance was due before December 15, 1985 when title would pass. Interest payments in the amounts $6,100, $8,500, $8,500 and $8,500 were respectively due on March 30, 1985, June 30, 1985, August 30, 1985 and December 15, 1985.3
Closing was scheduled for the week of February 18, 1985. However, an amendment to the Offer to Purchase was executed on January 24, 1985.4 Although it did not alter the payments, paragraph 6 stated that if the Mangolds made a payment of $130,000 upon closing, Wilson would immediately transfer title and take back a second priority mortgage.
The Mangolds closed on February 22, 1985 by making the $100,000 payment. Thereafter, they made the March 30, 1985 interest payment of $6,100 and the June 30, 1985 interest payment of $8,500.5 However, they failed to make either the August 30, 1985 interest payments or the principal or interest payment due on December 15, 1985. As a result, Wilson delivered a notice to quit and default dated December 23, 1985.6 Subsequently, the parties reached an agreement (second addendum") on March 6, 1986 for full payment.7 Reflecting the Mangolds' default, it required the Mangolds to cure the default within 60 days with additional interest payment of $13,569.64 on top of the principal and interest already owing. The Mangolds never cured, rather, on April 25, 1986, they assigned their interest in the agreement to Robert Armstrong,8 who satisfied the agreement and received a deed.9
The Mangolds then instituted this action on May 19, 1987 to recover double the amount of the two interest payments they made of $6,100 and $8,500. Their motion for summary judgment followed.
In his cross-motion for summary judgment, Wilson contests the Mangolds' standing to assert this claim given their assignment to Armstrong. He adds that even assuming Armstrong reassigned the claim to the Mangolds, it is barred by the statute of limitations.
Alternatively, Wilson suggests that the double penalty provisions of the statute ought to be read to exempt land sale contracts in excess of $100,000 since they are similar to first priority mortgages which are exempt from the maximum interest rate limitations. Wilson also asserts that in any case, the transaction originated with the Mangolds and, therefore, they are estopped from pleading usury.10
In respect to his estoppel defense, Wilson states by way of affidavit:
In response, the Mangolds refer us to Robert's affidavit in which he states:
Robert Mangold aff. at ¶¶ 6-12.12 Wilson was represented by counsel.
The statutory right to receive double the amount of interest paid upon a usurious contract in the Virgin Islands is clearly personal to the borrower.13Garcia v. Perez, 2 V.I. 119, 125 (D.V.I.1948). The majority of jurisdictions maintaining similar statutes preclude the assignment of this type of claim.14Interest and Usury, 45 Am.Jur.2d § 320 at 244 (1969); Interest and Usury, 47 C.J.S. § 244 at 410 (1982); see, e.g., General Elec. Credit Corp. v. Best Refrigerated, 222 Neb. 499, 385 N.W.2d 81, 83 (1986); Maners v. Lexington County Savings & Loan Associations, 275 S.C. 31, 267 S.E. 422 (1980); Houston Sash and Door Co. v. Heaner, 577 S.W.2d 217 (Tex.1979). But see Hammelburger v. Foursome Inn Corporations, 54 N.Y.2d, 580, 446 N.Y.S.2d 917, 431 N.E.2d 278 (1981).
This majority interpretation is based on the premise that the penalty provisions of these type statutes are to protect borrowers and not to punish lenders. Accord Zugelter v. Bank of America, 19 V.I. 561, 565 (D.V.I.1983), aff'd, 728 F.2d 218 (3d Cir.1984) (quotation omitted). It is simply inconsistent with this intent to allow borrowers to freely assign their cause of action. Thus, we will not allow it. The Mangolds have standing.15
We are well aware that this Court has applied the doctrine of equitable liens against those who received unjust enrichment upon property by mistake. See Bank of Nova Scotia v. Bloch, 19 V.I. 45, 54, 533 F.Supp. 1356, 1361 (D.V.I.1982), aff'd without published opinion, 707 F.2d 1388 (3d Cir.1982) (table) (citing Restatement of Restitution, §§ 170, 171 (1937)). Similarly, where the law allows for the application of an equitable mortgage, it does so only for the benefit of those whose interest in property is equitable. Osborne, Mortgages 32 (1970).
Yet, we believe that to apply these principles in favor of one who possessed legal title to property solely to grant an exemption to section 953 would be incongruous. Indeed, it would dilute the language of § 951(b)(6) exempting only first priority mortgages. Whatever the reason the legislature made this exclusion, we will not act to judicially amend a legislative act and expand the exception to a transaction entirely distinct from first priority mortgages.
In Gillivan v. Austin, 640 F.Supp. 1325 (D.V.I.1986), we noted that an estoppel defense is often available to a usury claim. Id. at 1329 n. 5. We pointed out, however, that representation by counsel may preclude an estoppel defense. Id. (citation omitted).
To the extent Gillivan appears to generally allow for an estoppel defense, the discussion is dicta. In any case, where as here the lender was represented by counsel who reviewed the agreement, there can be no application of the estoppel defense, usury being a strict liability offense. See, e.g., Wolfe v. Ebert, 37 B.R. 934 (D.S.C.1983) (applying South Carolina law).
We make three conclusions in the case sub judice: 1) that the right to recover double the amount of interest paid on a usurious contract is not assignable in the Virgin Islands; 2) that land sale contracts in excess of $100,000 are not exempt from the prohibition against usurious interest; and 3) that whether or not an estoppel defense is...
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