Bank of Nova Scotia v. Christian

THE BANK OF NOVA SCOTIA, Plaintiff, v. ALPHONSO CHRISTIAN a/k/a ALPHONSO P. CHRISTIAN,RAYMOND JAMES, LYSTRA JAMES, and DIRECTOR OF THE VIRGIN ISLANDSBUREAU OF THE INTERNAL REVENUE OF THE GOVERNMENT OFTHE VIRGIN ISLANDS, Defendants.

Civil Action No. 2012-0006

DISTRICT COURT OF THE VIRGIN ISLANDS DIVISION OF ST. CROIX

July 30, 2015

Attorneys:

Johanna Harrington, Esq.,

St. Thomas, USVI

For Plaintiff Bank of Nova Scotia

Pedro K. Williams, Esq.,

St. Thomas, USVI

For Defendants Raymond and Lystra James

Ariel Marie Smith-Francois, Esq.,

St. Thomas, USVI

For Defendant Virgin Islands Bureau of

Internal Revenue

MEMORANDUM OPINION

Lewis, Chief Judge

THIS MATTER comes before the Court on the Motion for Default Judgment and Summary Judgment (Dkt. No. 19) and the Amended and Renewed Motion for Default and Summary Judgment (Dkt. No. 25), filed by Plaintiff Bank of Nova Scotia ("Scotiabank"). By these Motions, Scotiabank seeks default judgment against Defendant Alphonso Christian a/k/a Alphonso P. Christian ("Christian") and summary judgment against Defendants Raymond Jamesand Lystra James (the "Jameses") and Defendant Director of the Virgin Islands Bureau of the Internal Revenue of the Government of the Virgin Islands ("VIBIR"). For the reasons discussed below, the Court will grant the Amended and Renewed Motion for Default Judgment against Christian and will grant the Amended and Renewed Motion for Summary Judgment against the Jameses and VIBIR. The Court will deny Scotiabank's initial Motion for Default and Summary Judgment as moot.

I. BACKGROUND

On January 17, 2012, Scotiabank filed a Complaint against Christian, the Jameses, and VIBIR, alleging causes of action for debt and foreclosure of real property mortgage. (Dkt. No. 1). Scotiabank asserts that Christian owned certain real property, mortgaged to Scotiabank, and that he purported to grant and convey that property (the "Property") to the Jameses via "Corrective Deed of Gift" without the knowledge or consent of the Scotiabank. Id. ¶ 3. The Property is described in the Corrective Deed as:

Plot No. 88-U Estate La Grande Princesse, Company Quarter, Christiansted, St. Croix, U.S. Virgin Islands, consisting of approximately 0.287 U.S. acres, more or less, as more fully shown on Drawing No. 4364 dated April 6, 1987.

(Dkt. No. 21-1). The Complaint further alleges that the Jameses are the ostensible grantees and present owners of record of the Property. (Dkt. No. 1, ¶ 4). VIBIR was named as a Defendant because it claims tax liens against the Property for unpaid taxes of the Jameses, recorded on May 24, 2007 and May 25, 2010. Id. ¶ 5.

The Complaint further states that, on October 29, 1993, Christian executed a Construction Mortgage Note (the "Note"), in which he promised to repay Scotiabank the principal sum of $144,000.00, together with interest at the rate of 9.0% per annum. Id. ¶ 6. The Complaint refers to a "Construction Loan Agreement," which provides that "the day followingthe last day of the Construction Period, the Note automatically converted to a five (5) year installment mortgage note continuing to bear interest on the principal sum outstanding at the rate per annum set forth above, payable in sixty (60) consecutive monthly installment payments of principal and interest." Id. The repayment of Christian's indebtedness to Scotiabank was secured by a First Priority Mortgage (the "Mortgage") on the Property, executed by Christian on October 29, 1993 by power of attorney. Id. ¶ 8.

The Complaint alleges that Christian defaulted under the terms and conditions of the Note and Mortgage by failing to pay principal and interest when due, and by purporting to convey the Property without Scotiabank's consent. Id. Pursuant to the terms of the Note and Mortgage, Scotiabank elected to declare the entire unpaid principal, interest, and late charges due and payable, and claimed that $207,731.50 was due as of October 12, 2011, plus interest accruing at the rate of $34.30 per diem. Id. ¶ 9. Scotiabank seeks judgment against Christian for unpaid principal and interest due and payable; a declaration that it holds a first priority mortgage; a determination of the priority of liens; foreclosure of the Mortgage and sale of the Property to pay Christian's indebtedness to it; a judgment against Christian for any deficiency if the judgment is not satisfied after sale; and any costs and fees it incurred in protecting its rights in the Property. Id. at 4.

Christian was personally served with the Summons and Complaint on January 23, 2012. (Dkt. No. 10). The process server's affidavit states that Christian "responded to service in a normal manner and did not appear to be mentally disabled or have diminished capacity to understand what was happening," and "[a]t the time of service defendant was asked whether he/she is in active military service for the United States or for the Virgin Islands in any capacity whatsoever and gave a negative reply." Id. The Jameses were personally served on April 23,2012 (Dkt. Nos. 9, 11); and the Director of the VIBIR was served on January 20, 2012. (Dkt. No. 8).

The Jameses answered the Complaint on February 14, 2012. (Dkt. No. 13). VIBIR filed an answer on March 9, 2012 in which it also asserted a Cross-Claim against Christian and the Jameses. (Dkt. No. 14). The VIBIR attached an Affidavit of Tax Debt to its Answer, which set forth that Christian owed taxes from 2004-2007 in the amount of $4,967.10, and the Jameses owed taxes for 2005 and 2008 in the amount of $13,974.73. (Dkt. No. 14-1). Also attached was a tax lien recorded on May 25, 2010 by VIBIR against the Jameses in that amount. Id.

The Jameses answered the Cross-Claim. (Dkt. No. 15). Christian never answered the Complaint nor has he appeared in this action. On May 24, 2012, Scotiabank filed an application for entry of default against Christian (Dkt. No. 16), and the Clerk of Court entered default against him on July 12, 2012. (Dkt. No. 18).

Two weeks later, on July 25, 2012, Scotiabank filed its initial "Motion for Default and Summary Judgment," seeking default judgment against Christian and summary judgment against the Jameses and VIBIR. (Dkt. No. 19). In its Memorandum of Law in support of its motion, Scotiabank contended that it was undisputed that Christian, through his attorney-in-fact, executed the Note and Mortgage on October 29, 1993; that Christian failed to comply with the terms of those documents and was in default for failing to pay principal and interest when due; that Scotiabank elected to declare the entire principal sum due, with all accrued interest and late charges; and that as of July 20, 2012, the total amount due was $224,216.08, comprised of $97,191.28 in principal, $64,650.58 in interest, $58,644.39 in add-on charges, and $3,729.73 in late fees, with interest continuing to accrue at the rate of $20.28 per diem. (Dkt. No. 20 at 3-4). The Memorandum of Law further stated that the Note and Mortgage provide that, upon default,Scotiabank had the right to foreclose, proceed with sale of the Property, and recover from the proceeds of sale all money owed to Scotiabank, including money expended for real property taxes, insurance premiums or other expenses incurred prior to sale of the Property. Id. at 4. It added that Scotiabank's entitlement to a judgment of foreclosure is not contested. Id.

Scotiabank's attached to its Statement of Undisputed Material Facts the Corrective Deed of Gift, dated March 11, 2004, between Alphonso Christian and Raymond James and Lystra James. (Dkt. No. 21-1). The Corrective Deed provided, inter alia, that the Property that Christian was granting to the Jameses was "free from encumbrances." Id. at 2. Christian's affidavit attached to the Deed indicated that the transfer was an "intra-family transaction intended as an inter-vivos gift." Id. at 4. Also attached to the Statement of Undisputed Facts was an Affidavit from Bank Manager Hugh C. Brown, in which he attested to the $224,216.08 total amount due Scotiabank on the loan as of July 20, 2012. (Dkt. No. 21-5). He attached a one-page loan history to support his assertions. (Dkt. No. 21-6).

Scotiabank's counsel at the time, Attorney Matthew J. Duensing, attached an Affidavit to the Memorandum of Law in which he averred that his firm was retained to represent the Bank; that his billing rate was $200.00 per hour; Sandra LaPlace's billing rate was $185.00 per hour; Georgina Nicholas' billing rate was $125.00-$135.00 per hour; and Brenda Gib's flat fee for foreclosure searches was $175.00, and her hourly billing rate was $150.00. (Dkt. No. 20-2). He attached billing records showing that the total time spent on this matter from October 12, 2011 through July 21, 2012 was 37.80 hours; that the total amount of attorney's fees incurred was $7,104.00; and that the total amount of costs expended was $1,037.22. (Dkt. No. 20-3).

VIBIR filed a "Response to Plaintiff's Motion for Summary Judgment" in which it acknowledged the priority of the Mortgage held by Scotiabank. (Dkt. No. 22). VIBIR alsorequested that the final judgment entered by the Court "specifically incorporate the order of priority status held by VIBIR and also enter judgment in favor of VIBIR for outstanding tax debt owed by co-Defendants, Alphonso Christian, Raymond James and Lystra James along with the statutory rate of interest." Id. The Jameses did not file a response.

On March 20, 2014, Scotiabank filed an "Amended and Renewed Motion for Default and Summary Judgment" ("Renewed Motion"). (Dkt. No. 25). The Renewed Motion stated that the July 2012 Motion seeking default and summary judgment "did not properly address Defendants James and [VIBIR's] interest in these proceedings." Id. at 1, n.1. The Statement of Undisputed Material Facts in support of the Renewed Motion attached the affidavit of Karen Stair, Senior Paralegal at Scotiabank, who updated the amounts due on the debt as of February 27, 2014. (Dkt. No. 27-5). Ms. Stair averred that Christian owed a total of...