US VIRGIN ISLANDS Law and Practice Contributed by: George H.T. Dudley, G. Hunter Logan, Kurt Petri and Anna Vlasova, Dudley Newman Feuerzeig LLP
6. Enforcement 6.1 Enforcement of Collateral by Secured Lenders If the borrower or other loan party obligated to the lender defaults in its obligations, and the provisions of the mortgage and other loan documents permit declaring a default and commencing enforcement pro- cedures, then the lender may take collection action, including the foreclosure of the mortgage. Foreclosure of mortgages in the USVI is accomplished exclusively by filing and prosecuting a civil action for foreclosure. A foreclosure action is started by filing a complaint in the Superior Court of the Virgin Islands or, if there is diversity jurisdiction, in the federal US District Court of the Virgin Islands. Upon entry of a judgment of foreclosure, the mortgage and the promissory note will merge into the judgment. Upon receipt of the final judgment from the court, the creditor seeks a writ of execution enforcing the final judgment. Upon issuance of the writ of execution by the clerk, it is delivered to the marshal, who then executes it by attaching the property. Once the prop- erty is attached, the marshal will provide a sale date. Notice of the sale must then be published by the judg- ment creditor once a week for four consecutive weeks before the auction sale in a newspaper (including an online newspaper) of general circulation in the USVI. Immediately after the auction sale, the creditor can move the court for confirmation of the sale and for entry of a deficiency judgment against the borrower and guarantors, as may be appropriate depending on the amount of the high bid. Unless it can be shown that there were substantial irregularities in the pro- ceedings concerning the sale, the marshal’s sale will be confirmed by the court. In the USVI, there is a stat- utory right of redemption that allows the mortgagor to redeem up to six months after the court’s confirmation of the marshal’s sale. A foreclosure of the mortgage may take years to complete. Personal Property If the loan documents permit the lender to begin col- lection actions, including against the personal prop- erty collateral, then the lender may begin taking col-
It is possible for the holder of a prior mortgage to sub- ordinate its priority lien position to another mortgage by signing and recording a written mortgage subordi- nation agreement. Priority can be contractually varied amongst the lend- er group or two separate groups of lenders by sign- ing and recording a written agreement specifying the rights of the various lenders. Personal Property For personal property covered by the UCC, the UCC has detailed provisions concerning creating and per- fecting a security interest and the priority of more than one security in the same collateral. Different types of collateral may have different ways to perfect a security interest and priority may be affected by the method of perfection. For example, if the collateral is stock in a corporation, the preferred method to perfect a security interest is to take possession of the stock certificate. A security interest in corporate stock perfected by pos- session has priority over a security interest perfected by filing a UCC financing statement. If the collateral is the type of collateral where a security interest is only perfected by filing a UCC financing statement, then the order of filing the UCC financing statement determines priority. The US Bankruptcy Code determines whether con- tractual subordination provisions survive the insol- vency (bankruptcy) of a borrower. 5.8 Priming Liens For real property mortgages, by statute, the govern- ment’s lien for unpaid real property taxes is superior to a mortgage, even if the real property taxes are assessed and due after the mortgage is recorded. Real property taxes are levied on an annual basis. The lender needs to make sure the real property taxes are paid at the time of closing and thereafter.
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