                                                                                                                           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Precedential or Non-Precedential: Precedential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




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"UMLIC VP LLC v. Matthias" (2004). 2004 Decisions. Paper 758.
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                                                    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) (“§
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.

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