Filed: Apr. 05, 2004
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit 4-5-2004 UMLIC VP LLC v. Matthias Precedential or Non-Precedential: Precedential Docket No. 03-1140 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "UMLIC VP LLC v. Matthias" (2004). 2004 Decisions. Paper 758. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/758 This decision is brought to you for free and open access by the Opinions of
Summary: Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit 4-5-2004 UMLIC VP LLC v. Matthias Precedential or Non-Precedential: Precedential Docket No. 03-1140 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "UMLIC VP LLC v. Matthias" (2004). 2004 Decisions. Paper 758. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/758 This decision is brought to you for free and open access by the Opinions of t..
More
Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
4-5-2004
UMLIC VP LLC v. Matthias
Precedential or Non-Precedential: Precedential
Docket No. 03-1140
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004
Recommended Citation
"UMLIC VP LLC v. Matthias" (2004). 2004 Decisions. Paper 758.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/758
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
Oswald C. Venzen,
PRECEDENTIAL
IN THE UNITED STATES COURT OF Appellants
APPEALS
FOR THE THIRD CIRCUIT ______________________
_______________
NO. 03-1239
NO. 03-1140
UMLIC VP LLC, Successor in Interest
UMLIC VP LLC, Successor in Interest and Assignee of the UNITED STATES
and Assignee of the UNITED STATES OF AMERICA (Small Business
OF AMERICA (Small Business Administration)
Administration)
v.
v.
ARETHA MATTHIAS,
ARETHA MATTHIAS, INDIVIDUALLY AND AS PERSONAL
INDIVIDUALLY AND AS PERSONAL REPRESENTATIVE OF THE ESTATE
REPRESENTATIVE OF THE ESTATE OF WESLEY MATTHIAS; CARLTON
OF WESLEY MATTHIAS; CARLTON PARSON; ELECIA PARSON;
PARSON; ELECIA PARSON; OSWALD C. VENZEN; ALICE
OSWALD C. VENZEN; ALICE VENZEN; GOVERNMENT OF THE
VENZEN; GOVERNMENT OF THE VIRGIN ISLANDS, BUREAU OF
VIRGIN ISLANDS, BUREAU OF INTERNAL REVENUE;
INTERNAL REVENUE; DEPARTMENT OF FINANCE;
DEPARTMENT OF FINANCE; UNITED STATES OF AMERICA
UNITED STATES OF AMERICA INTERNAL REVENUE SERVICE;
INTERNAL REVENUE SERVICE; MICHAEL A. MATTHIAS;
MICHAEL A. MATTHIAS; ROSEMARIE WEBSTER; BRUCE W.
ROSEMARIE WEBSTER; BRUCE W. MATTHIAS; ELIZABETH
MATTHIAS; ELIZABETH OLIVACCE; LAURIE THOM AS;
OLIVACCE; LAURIE THOM AS; CARRIE EDDY, AND ALL PERSONS
CARRIE EDDY, AND ALL PERSONS CLAIMING AN INTEREST IN
CLAIMING AN INTEREST IN REMAINDER OF PARCEL NO.7
REMAINDER OF PARCEL NO.7 SORGENFRIM a/k/a NOS. 7B AND 7C
SORGENFRIM a/k/a NOS. 7B AND 7C ESTATE SORGENFRI
ESTATE SORGENFRI;
Aretha Matthias, Michael A. Matthias,
Carlton Parson, Elecia Parson, and Rosemarie Webster, Bruce W. Matthias,
1
Elizabeth Olivacce, Laurie Thomas, and Attorney for Appellants in No. 03-1140
Carrie Eddy,
CAROL A. RICH (Argued)
Appellants Campbell, Arellano & Rich
4A&B Kongens Gade
P.O. Box 11899
Charlotte Amalie, St. Thomas,
On Appeal From The District Court Of USVI 00801
The Virgin Islands
(D.C. No. 01-cv-00098) Attorney for Appellee UMLIC VP LLC
District Judge:
Honorable Thomas K. Moore
______________________
_________________________________
OPINION
Argued December 8, 2003 ______________________
Before: NYGAARD, BECKER, and
STAPLETON, Circuit Judges.
BECKER, Circuit Judge.
This appeal in a diversity-based
(Filed April 5, 2004) mortgage foreclosure action stemming
from a default on a loan guaranteed by the
U n i t e d S t a t e s S m a ll B u s i n e ss
ARCHIE JENNINGS, JR. (Argued) Administration (the “SB A”), which
Archie Jennings, P.C. ultimately transferred to the plaintiffs in
8A&B Bjerge Gade foreclosure, UMLIC VP LLC (“UMLIC”),
P.O. Box 442 the mortgages which secured the loans,
Charlotte Amalie, St. Thomas, presents three important questions. First,
USVI 00804 is the right to foreclose on a Virgin Islands
mortgage extinguished at the time the right
Attorney for Appellants in No. 03-1239 to collect an in personam judgment
expires? We conclude that it is not.
Second, is an action brought by a
ROBERT L. KING (Argued) successor in interest of the United States
Law Offices of Robert L. King (as UMLIC was) governed by federal
Windward Passage Hotel limitations periods or state/territorial (here,
P.O. Box 9768, Veterans Drive Virgin Islands) limitations periods? We
Charlotte Amalie, St. Thomas, hold that federal law supplies the statute of
USVI 00801 limitations in cases where the plaintiff is a
2
successor in interest to the United States. I. Facts and Procedural History
Third, is there a federal limitations period
A. The Loan
applicable to mortgage foreclosure
actions? Applying the maxim that “time The defendants in this case are the
does not run against the sovereign,” and fee owners, respectively, of three parcels
finding no federal statute to the contrary, of land on St. Thomas, and a variety of
we conclude that there is not. We lienholders on those properties. Only the
therefore affirm the District Court’s order fee owners are participating in this appeal,
for a foreclosure sale and vacate the stay and we shall refer to them as the
that this Court entered pending appeal. 1 defendants. They are Aretha Matthias and
the heirs of Wesley Matthias (Michael A.
Matthias, Rosemarie Webster, Bruce W.
1
Some appellants also claimed that the Matthias, Elizabeth Olivacce, Laurie
District Court erred in certain respects in Thomas, and Carrie Eddy); Carlton and
computing the sum owing on the Elecia Parson; and Oswald Venzen.
mortgages. Based on our independent Because the defendants rest their case
examination of the entire record before primarily on statute of limitations grounds,
the District Court, we conclude that these some chronology of the events is
issues were not timely presented to the important.
District Court—not in the pleadings, not
on counsel’s own initiative, and not even Pursuant to a federal loan guarantee
in response to UMLIC’s motion for program for small businesses, a loan was
summary judgment. “As a general rule, made on April 12, 1988 by Barclays Bank
we do not consider on appeal issues that PLC (“Barclays”) to Matthias Enterprises,
were not raised before the district court.” a corporation run by the various
Appalachian States Low-Level defendants that owned and operated a
Radioactive Waste Comm’n v. Pena, 126 bakery and convenience store on St.
F.3d 193, 196 (3d Cir. 1997) (quoting Thomas. The loan carried an interest rate
Tabron v. Grace, 6 F.3d 147, 153 n.2 (3d of 2.75% above prime, variable quarterly.
Cir. 1993)). There are exceptional The principal amount of the loan was
circumstances that call for departure $550,000, of which 85% was guaranteed
from this rule, see
id., but none are by the SBA. The loan was secured by the
present here. Thus we hold these issues personal guarantees of Aretha and Wesley
waived and will not address them.
We note too, based upon the
colloquy at oral argument, that it is lienholders who are not participating in
highly doubtful that resolution of these this appeal) on the properties so far
collateral matters in a manner favorable exceeds the probable foreclosure sale
to defendants mortgagees would make a prices of the properties that the
difference: It appears that the sum of the mortgagors have no chance of recovering
liens (both UMLIC’s and those of junior a residue from the foreclosure sale.
3
Matthias, Carlton and Elecia Parson, and instrument, and further to
Oswald and Alice Venzen.2 The secure the performance by
Matthiases, Parsons, and Venzens secured the Borrower of the terms of
their personal guarantees by granting the Loan Agreement and
mortgages in favor of Barclays on their related loan documents
own real property using the following executed of even date
language:3 herewith, and also to secure
any and all sums now or
WITNESSETH, that to
from time to time hereafter
secure the guaranty of
owing by Borrower and for
payment by MATTHIAS
which Borrower may be
E N T E R P R I S E S ,
liable, solely or jointly, the
I N C OR P O R A TE D (the
Mo rtgagor [i.e., the
“Borrower”) of an
Matthiases] hereby grants
indebtedness to the
and gives to the Mortgagee
Mortgagee to be paid with
a Second Priority Mortgage
interest according to a
in the principal sum of ONE
certain promissory note (the
HUNDRED FIFTY
“Note”), bearing even date
THOUSAND DOLLARS
herewith, executed by
$150,000.00 plus interest on
Borrower pursuant to the
[description of property
terms of a certain Loan
follows].
Agreement of even date
herew ith betw een th e Judging from an SBA document
Borrower and the captioned “Lend er’s Transcript of
Mortgagee [i.e., Barclays] Account,” Matthias Enterprises defaulted
(the “Loan Agreement”), the on the loan as early as the fall of 1988.
terms of which are hereby Matthias Enterprises was certainly in
made a part of this default when it filed a Chapter 11
bankruptcy petition in 1992. This petition
was later converted to a Chapter 7
2 liquidation. Effective February 15, 1994
The record suggests that Alice
(less than six years from the time of
Venzen no longer owns or resides on the
default, under any reading), the SBA made
parcel mortgaged by her and Oswald
good on its guarantee and repurchased the
Venzen. She is not a party on appeal.
loan from Barclays, ending Barclays’
3
This language is taken from the note involvement. Through a series of
executed by the Matthiases, but the same assignments in 1999 and 2000, the loans
language, mutatis mutandis, was used in came to rest with UM LIC, which, on April
the notes executed by the Parsons and by 28, 2000 advised the defendants that the
the Venzens. loan was in default. This proceeding
4
followed.4 held a hearing on what UMLIC’s counsel
styled as a “motion for summary judgment
B. Foreclosure Proceedings in the
of foreclosure.” The moving papers on
District Court
both sides were captioned as cross-motions
UMLIC commenced this action in for summary judgment. On December 5,
the District Court on June 1, 2001, seeking 2002, the District Court filed a
a declaratory judgment of the amount memorandum opinion and order granting
owed under the Matthias Enterprises note, summary judgment to UMLIC. On
a judgment of foreclosure on the three December 20, 2002, the District Court
properties, and an award of costs and entered a declaratory judgment and
attorneys fees. Originally, UMLIC had ordered the U.S. Marshal to conduct a
also sought an in personam judgment foreclosure sale of the properties. The
against the Matthiases, Parsons, and defendants filed a notice of appeal, and
Venzens (i.e., a deficiency judgment for moved the District Court to stay the sale.
the amount owing on the notes but The District Court refused, but this Court
unsatisfied by foreclosure on the granted the stay pending appeal.
mortgages), but later amended its
The District Court of the Virgin
complaint to drop those counts (apparently
Islands had 28 U.S.C. § 1332 diversity
because the statute of limitations had
jurisdiction under 48 U.S.C. § 1612(a).
clearly run on any in personam contract
The plaintiff, UMLIC, is a citizen of North
claims).
Carolina, and none of the defendants are
On June 4, 2002, the District Court citizens of North Carolina. The order of
the District Court was entered on
December 20, 2002. The defendants filed
4
As part of its preparation to begin timely notices of appeal. This Court has
foreclosure, UMLIC discovered that real jurisdiction under 28 U.S.C. § 1291.
property records showed that Barclays Our review of a grant of summary
had assigned its mortgage interest to judgment is plenary. See Anderson v.
Treadstone Carribean Partners LLC Conrail, 297 F.3d 242, 246-47 (3d Cir.
(“Treadstone”). This seems to have been 2002). Summary judgment must be
an error on Barclays’ part, since this granted “if the pleadings, depositions,
assignment was recorded after Barclays answers to interrogatories, and admissions
had transferred the loan to the SBA. For on file, together with the affidavits, if any,
the reasons given by the District show that there is no genuine issue as to
Court—which we need not revisit—even any material fact and that the moving party
though Barclays’ transfer to the SBA was is entitled to judgment as a matter of law.”
not recorded, it was valid. To uncloud Fed. R. Civ. P. 56(c). In considering the
the titles, Treadstone, the SBA, and motion, “we must grant all reasonable
UMLIC executed a series of corrective inferences from the evidence to the non-
assignments recorded May 29, 2001. moving party.” Knabe v. Boury Corp.,
5
114 F.3d 407, 410 n.4 (3d Cir. 1997). The The strongest authority that the
chronology recounted above is not in defendants cite for this proposition is an
dispute. The only questions before us are Alaska case which held as they would
legal. have us hold.6 Dworkin v. First National
Bank of Fairbanks, 444 P.2d 777, 781-82
II. Discussion
(Alaska 1968), acknowledged that opinion
A. The Mortgage and the Personal was divided over whether a suit to recover
Guarantee security could be maintained even after the
statute had run on collection of the
The defendants contend that the
underlying debt. Authority is still divided
mortgages are no more than security for
today. See 55 Am. Jur. 2d Mortgages §§
their personal guarantees, and that, absent
680, 683 (2003). The Dworkin Court
an ability to sue in contract for
ultimately held that “the sounder result is
enforcement of those guarantees, UMLIC
reached by those authorities which hold
cannot recover on the mortgages. Because
that in the absence of a controlling statute
the Virgin Islands statute of limitations for
the foreclosure action is subject to the
contract claims, 5 V.I. Code § 31(3)(A),
same period of limitations as the
and the federal statute of limitations for
underlying debt.” 444 P.2d at 782. The
contract claims, 28 U.S.C. § 2415(a), both
only authority supplied by the Court was a
provide for a six-year limitations period,
discussion from a contemporary treatise on
and the lawsuit was filed outside that
real property that discussed the contrary
period, the defendants assert that
irrespective of which statute applies, a suit
on the security for the guarantees (i.e., the
of decision. Second, it appears that a
mortgages) is barred along with an in
full analysis under United States v.
personam suit on the guarantees.5
Kimbell Foods, Inc., 440 U.S. 715
(1979), would demonstrate either that
Virgin Islands law applies of its own
5
The question whether federal or force, or that federal law applies but
territorial law provides the statute of looks to local law to provide the rule of
limitations—noted in the text—is but decision.
one facet of a larger choice-of-law
6
question here. One could well ask It is not unreasonable to look to
whether federal or territorial law governs decisions from Alaska in this case,
a claim to relief on a mortgage granted because the limitations laws of the Virgin
pursuant to a federal loan guarantee Islands were borrowed from Alaska’s
program after suit on the principal laws. See James v. Henry, 157 F. Supp.
obligation is barred. We do not address 226, 227 (D.V.I. 1957) (Maris, J.). Thus,
this in detail, however, for two reasons. Alaska court decisions that postdate the
First, the papers of both parties assume Virgin Islands’ adoption of Alaska law,
that Virgin Islands law provides the rule while not binding, may be persuasive.
6
approach, and pronounced it mortgagee may proceed to
“undesireable.” foreclose, either by action
for foreclosure, or by
But there is an equally compelling
advertisement pursuant to a
rationale supporting decisions from
reserved power of sale,
jurisdictions that adopt the contrary
being barred only from the
rule—i.e., those that permit recovery on
obtaining of a deficiency
the mortgage even after the statute of
judgment.”
limitations has expired. It is this:
“The time limit set for the
c o m m e n c e ment of an Id. at 782 n.24 (quoting 3 R. Powell, The
equitable action to foreclose Law of Real Property 461, at 682-83
is frequently longer than the (1967)). This persuasive logic undermines
period prescribed for a law the position of the defendants. Accord
action on debt and, in some Bank of Nova Scotia v. St. Croix Drive-In
states, is unlimited except Theatre, Inc., 552 F. Supp. 1244, 1251
by the rule of laches. This (D.V.I. 1982) (holding that “the law is
difference interposes a clear that separate actions are available in
problem where the actions for debt and against a mortgage.”),
mortgagee has permitted the aff’d on other grounds 728 F.2d 177 (3d
time to run out within which Cir. 1984).
he could bring an action
We reject the defendants’ argument
upon the debt, yet wishes to
and endorse the view adopted by the
enforce his lien. Since the
District Court in St. Croix Drive-In.7 The
debt is not usually regarded
great benefit in using a mortgage on real
as extinguished by any
property as security is the certainty it
passage of time, but only the
affords: The property will not go away.
remedy is barred by the
The legal complement to the physical
statute of limitations, there
stability of real property is the long statute
is no application here of the
of limitations for actions on real property.
rule applied in other
Adopting the rule proposed by defendants
situations, that the mortgage
cannot stand independently
of the obligation which it
7
purports to secure. This holding, of course, has no effect
Accordingly, it is generally on UMLIC’s inability to collect a
accepted that the lien is not deficiency judgment from the
thereby destroyed, and that, defendants; as we have noted, such a
in the absence of a statute contract suit is clearly time-barred, and
providing otherwise, the UMLIC has dismissed that cause of
action.
7
would sap real property in the Virgin apply to it as they would if the United
Islands of its appeal as a security under States itself brought a foreclosure action.
certain guarantee structures, and would We agree, and join every other appellate
likely deter offshore real estate investment. court to consider the issue. Three cases in
Moreov er, w e believe that this particular command our attention: Tivoli
interpretation is in line with the settled Ventures, Inc. v. Bumann, 870 P.2d 1244
expectations of parties that have entered (Colo. 1994); United States v. Thornburg,
into transactions secured by mortgages on
82 F.3d 886 (9th Cir. 1996); and FDIC v.
real property in the Virgin Islands. Bledsoe,
989 F.2d 805 (5th Cir. 1993).
We briefly discuss each of them.
We also think the rule we adopt is
superior because it can be applied In Tivoli Ventures, the question
uniformly to this situation, and to the arose in the context of whether an assignee
situation where a mortgage stands alone could sue on the U nited States’
without a personal guarantee, while the (unexpired) cause of action, or was limited
rule that defendants propose cannot. See to an antecedent (and now-expired) cause
Hilpert v. Commissioner, 151 F.2d 929, of action. There, the FDIC as receiver of
932 (5th Cir. 1945). Finally, the Virgin a failed bank had assigned to a private
Islands Legislature is free to overrule by party a note held by the bank. The parties
statute this part of our decision. Indeed, did not dispute that the FDIC’s cause of
one treatise notes that the rule barring action accrued only when the bank was
foreclosure when the statute of limitations placed in receivership, not when the note
has run on the secured note is “frequently first came overdue, hence the FDIC’s
the result of express statutory provision.” claim expired later. The private party sued
55 Am. Jur. 2d Mortgages § 683 (2003). to collect on the note, and was met with
Thus we conclude that UMLIC may the argument that the action was barred by
foreclose on the mortgages irrespective of Colorado’s six-year limitations period,
whether it may sue in personam to enforce which started to run from the date the note
the defendants’ personal guarantees. was overdue. The private party plaintiff
argued that as the assignee of the FDIC, it
B. Federal Versus Virgin Island
was entitled to the six-year limitations
Limitations Period
period in 28 U.S.C. § 2415 that started to
Having settled that mortgage run from the time the bank was put into
foreclosure is an independent action under receivership. The Colorado Supreme
Virgin Islands law, we must determine the Court agreed, holding that the private-
statute of limitations applicable to such an party assignee of the FDIC stood in the
action when it is brought by an assignee of shoes of the United States.
the United States. UMLIC claims that an
Like the case before us, Thornburg
assignee stands in the shoes of the
involved the guarantor-mortgagor’s
assignor— here the United States—and
liability when a corporation defaulted on
thus that the federal limitations periods
8
an SBA-backed loan. The guarantee and UMLIC.
mortgage were first assigned to a private
Bledsoe’s facts are between Tivoli
party, and then assigned back to the SBA
Ventures and Thornburg. Like Tivoli
which brought the case. The mortgagor
Ventures, Bledsoe involved a note that first
argued that the state statute of limitations
came to the United States as receiver (the
ran out on the note while it was in the
FSLIC) in an S&L insolvency. The note
hands of the private party, and thus that the
was assigned to a private party (unlike
action by the SBA was time barred as well
Thornburg, this seems to have been a true
because a transfer (back) to the United
sale, and not a consignment) and then (via
States cannot revive a time-barred cause of
another insolvency) back to the United
action. See FDIC v. Hinkson, 848 F.2d
States as receiver. Like Thornburg, the
432, 434 (3d Cir. 1998) (“If the state
defendant asserted that the four-year state
statute of limitations has expired before
statute of limitations ran on the note while
the government acquires a claim, it is not
it was in private hands, and could not
revived by transfer to a federal agency.”).8
thereafter be resuscitated by transfer to the
The Court of Appeals for the Ninth Circuit
United States. The Court of Appeals for
held that the federal statute applied. After
the Fifth Circuit held that the six-year
discussing (and approving) cases that hold
federal statute applied to the note while it
that an assignee of the United States stands
was in the hands of the assignee of the
in the shoes of the United States, the
United States, and thus concluded that the
Thornburg Court ultimately rested its
cause of action had not expired.
holding on the fact that the assignment to
the private party was only for collection Thornburg lists as adhering to this
purposes (referred to by some courts as a rule a number of state courts and federal
“consignment”), and the United States district courts, in addition to the Courts of
never divested itself of the note. See Appeal for the Fifth and Ninth Circuits; it
Thornburg, 82 F.3d at 891-92. This may notes only one contrary decision, Wamco,
make Thornburg a more compelling case III, Ltd. v. First Piedmont Mortgage Corp.,
for application of federal limitations law
856 F. Supp. 1076 (E.D. Va. 1994). See
than this case, because in the case before
Thornburg 82 F.3d at 890-91. Since 1996,
us now, title to the mortgage has passed to when Thornburg was decided, the Court of
Appeals for the Tenth Circuit has joined
this group. See UMLIC-Nine Corp. v.
8
Hinkson does not apply here because Lipan Springs Dev. Corp., 168 F.3d 1173
the earliest date of default was late 1988, (10th Cir. 1999). We too now join the
and the note was transferred to the SBA majority view.
in early 1994, a period of less than six
years. No party proposes as pertinent to In view of the thorough discussions
this case any statute of limitations, in Tivoli Ventures, Bledsoe, and
federal or Virgin Islands, shorter than six Thornburg, we simply summarize what we
years. regard as the best doctrinal and public
9
policy reasons for the rule that the assignee limitations period (or preempt any existing
of the United States stands in the shoes of state limitations period). Rather it seems
the United States and is entitled to rely on to clarify that the other subsections of §
the limitations periods prescribed by 2415—w hich we shall come to
federal law. Doctrinally, an assignee stood shortly—do not extend to certain actions
in the shoes of the assignor at common involving real property. That said, we do
law, and the Uniform Commercial Code not think § 2415(c) applies to this action.
provides that “[t]ransfer of an instrument
At common law, a mortgage was
. . . vests in the transferee any right of the
“title to . . . real . . . property,” § 2415(c),
transferor to enforce the instrument.”
because under the common law, a
UCC § 3-203(b). Moreover, the
mortgage granted an estate in land. See
Restatement (Second) of Contracts § 336
Black’s Law Dictionary 1009-10 (6th ed.
cmt. b, ex. 3 explains that “A lends money
1990):
to B and assigns his right to C. C’s right is
barred by the Statute of Limitations when Mortgage. . . . At common
A’s right would have been.” We see no law, an estate created by a
reason that the inverse should not hold as conveyance absolute in its
well. In public policy terms, affording form, but intended to secure
assignees of the United States the same the performance of some
rights as the United States is desirable act, such as the payment of
because it improves the marketability of money . . . and to become
instruments held by the United States, void if the act is performed
thereby giving the United States greater . . . . The mortgage operates
flexibility in monetizing its claims. as a conveyance of the legal
title to the mortgagee, but
C. The Applicable Federal Limitations
such title is subject to
Period
defeasance on payment of
Having settled that federal law the debt . . . .
should govern the limitations period in this
The Virgin Islands, however, is a “lien
case, the question now becomes what that
theory” jurisdiction. See BA Props. v.
limitations period is. We start with 28
Gov’t of V.I., 299 F.3d 207, 218-20 (3d
U.S.C. § 2415(c), which concerns
Cir. 2002) (citing Royal Bank of Canada v.
“action[s] to establish . . . title to . . . real .
Clarke, 373 F. Supp. 599, 601 (D.V.I.
. . property.” That section provides:
1974)); see also 28 V.I. Code § 290 (“A
“Nothing herein shall be deemed to limit
mortgage of real property shall not be
the time for bringing an action to establish
deemed a conveyance so as to enable the
the title to, or right of possession of, real
owner of the mortgage to recover
or personal property.” At the threshold,
possession of the real property without a
we note that the literal language of §
foreclosure and sale according to law, and
2415(c) does not affirmatively establish a
a judgment thereon.”). As Black’s Law
10
Dictionary explains, “in many . . . states, a upon any contract express or
mortgage is regarded as a mere lien, and implied in law or fact, shall
not as creating a title or estate. It is a be barred unles s the
pledge or security of particular property complaint is filed within six
for the payment of a debt . . . but is not years after the right of
now regarded as a conveyance in effect.” action accrues or within one
Black’s Law Dictionary at 1010 (citations year after final decisions
omitted). have been rendered in
applicable administrative
The implication of all this is that an
proceedings required by
action to foreclose on a mortgage in the
c o n tr a c t o r b y l a w ,
Virgin Islands would not be “an action to
whichever is later. . . .
establish the title to . . . real . . . property”
under § 2415(c), because Virgin Islands Every Court of Appeals to consider the
law would recognize no interest in real question whether § 2415(a) sets a
property from the mortgage.9 Since § limitations period on mortgage foreclosure
2415(c) does not apply to this action, we actions has concluded that it does not.
next consider whether the six-year This has been the consistent result in both
limitations period provided in § 2415(a) lien theory and title theory jurisdictions,
applies. Our inquiry is guided by the rule and has held irrespective of how the court
of construction that “[s]tatutes of has interpreted § 2415(c). See Westnau
limitations sought to be applied to bar Land Corp. v. SBA, 1 F.3d 112, 114-16 (2d
rights of the Government, must receive a Cir. 1993) (§ 2415(a) does not apply)
strict construction in favor of the (citing cases); FmHA v. Muirhead, 42 F.3d
G o v er nm ent.” Badaracco v. 964 (5th Cir. 1995) (neither § 2415(a) nor
Commissioner,
464 U.S. 386, 391 (1984) (c) applies); United States v. Omdahl, 104
(quoting E.I. Dupont de Nemours & Co. v. F.3d 1143, 1145-46 (9th Cir. 1997) (Ҥ
Davis,
264 U.S. 456, 462 (1924)). 2415(c) applies to a mortgage foreclosure
action”); United States v. Ward, 985 F.2d
Section 2415(a) provides:
500 (10th Cir. 1993) (Oklahoma is a lien
(a) [Subject to exceptions theory state; § 2415(a) does not apply);
not pertinent here,] every United States v. Alvarado, 5 F.3d 1425,
action for money damages 1429 (11th Cir. 1993) (§ 2415(a) does not
brought by the United States apply).
or an officer or agency
We join these courts in holding that
thereof which is founded
§ 2415(a) does not apply to mortgage
foreclosure actions. Two related
rationales—one or both of which is present
9
We express no view on the in each of the cases cited above—convince
applicability of § 2415(c) in a title theory us of this. First, foreclosure was a
jurisdiction.
11
historically equitable remedy. Since § UMLIC’s action, and the District Court
2415(a) speaks in terms of “damages,” a was correct to rule again st the
traditionally legal remedy, foreclosure defendants.10
actions are not encompassed by § 2415(a).
The order of foreclosure will be
Second, foreclosure is an in rem
affirmed, and the stay will be vacated.
proceeding, and money damages are not
acquired through in rem proceedings.
Since no party contends that any of
the other limitations periods in other 10
We note that the use of a federal
subsections of § 2415 apply, we are left limitations period in federal lending
with the result that there is no federally transactions has been subject to forceful
provided statute of limitations for criticism. In Muirhead, Judge Edith
mortgage foreclosure actions. Like the Jones wrote:
Muirhead, Alvarado, Westnau, and Ward [W]e are troubled by
Courts, we turn to federal common law to the federal government’s
fill the gap. insistence that it may
The gap is filled by what the Court enforce ancient mortgages
of Appeals for the Tenth Circuit outstanding in numerous,
characterized as: long-lived and often
default-prone federal
[t]he maxim, time does not lending programs
run against the sovereign, essentially forever. The
combined with the principle continued existence of
that the United States is not these mortgages may cloud
bound by a statute of titles to property all over
limitations unless Congress the country, and in so
has explicitly expressed one, doing will engender
United States v. John confusion, higher real
Hancock Mut. Life Ins. Co., property transaction costs,
364 U.S. 301 (1960) and commercial instability.
Ward, 985 F.2d at 502; see also United If federal agencies simply
States v. Kimbell Foods, Inc., 440 U.S. conformed their lending
715, 725 (1979) (federal law governs practices to the dictates of
issues involving the rights of the United state law, as every private
States arising under nationwide federal lender must, they would act
programs, though absent Congressional more promptly upon
directives to the contrary, state law can defaulted mortgages and
provide the federal rule of decision). Thus would not prejudice the
there is no statute of limitations on alienability of reality [sic].
Muirhead, 42 F.3d at 967.
12
13
