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Barclays Investments, Inc. v. St. Croix Estates

March 1, 2005; as amended March 17, 2005


On Appeal from the District Court of the Virgin Islands (D.C. Civ. Nos. 90-0099 and 91-0100) District Judge: Honorable Raymond L. Finch, Chief Judge

Before: Sloviter, Fuentes, and Greenberg, Circuit Judges.

The opinion of the court was delivered by: Greenberg, Circuit Judge


Argued December 16, 2004


This dispute concerns whether a mortgage on a property located on St. Croix in the Virgin Islands secures a note made after the mortgage was satisfied. While this appeal's factual and procedural background is quite intricate, its central legal issue is straightforward: Did the district court properly classify the mortgage as a future advance mortgage? We hold that the record cannot support the district court's legal classification and therefore we will reverse.


This appeal results from the adjudication of two consolidated cases, Barclays Investments, Inc. v. St. Croix Estates, Inc., Civ. No. 90-0099 (D.V.I.) (the "Consolidated Realty" action),*fn1 and Wrobel v. Florida Raffles, Inc, Civ. No. 91-0100 (D.V.I.) (the "Wrobel" action).*fn2 In Consolidated Realty, Consolidated Realty Corp. ("Consolidated"), predecessor to Barclays Investments, Inc. ("Barclays"), sought a declaration that a deed in which it was the grantor of certain real property in St. Croix was void ab initio and also sought an order directing the recorder of deeds to strike the deed from the public records. In Wrobel, Bruce J. Wrobel sought payment on a promissory note and foreclosure of a mortgage on the real property involved in Consolidated Realty. In addition, Wrobel intervened in Consolidated Realty, asserting his claim against the property.*fn3 Wrobel was interested in Consolidated Realty because his mortgage was derived from the title that Consolidated sought to invalidate in that case.

The real property at the center of this appeal is a luxury residence in St. Croix commonly known as "The Dome." Consolidated held title to The Dome but exchanged it for an interest in commercial property in Florida, transferring The Dome to St. Croix Estates, Inc., a Delaware corporation that George Heaton controlled, by a deed dated July 7, 1989. Consolidated later claimed that Heaton fraudulently induced it to enter into this transaction.

St. Croix Estates mortgaged The Dome on September 5, 1989, to secure a loan of $500,000 from James Bouwman and Richard Mazur ("Bouwman and Mazur" or "B&M") to two other Heaton corporations, F.D.R. Steaks, Inc. and Maan, Inc. A promissory note between F.D.R. Steaks and Maan, as obligors, and Bouwman and Mazur, as obligees, accompanied this mortgage. St. Croix Estates, F.D.R. Steaks and Maan were the only mortgagors in the mortgage deed, and F.D.R. Steaks, and Maan, were the only obligors in the note. Though Heaton signed both instruments he did so only as president of the three corporations and not individually.

On October 5, 1989, following payment of the note, Bouwman and Mazur executed a satisfaction of the mortgage in favor of St. Croix Estates, F.D.R. Steaks and Maan, but this satisfaction has not been recorded. Instead, Heaton's attorney*fn4 on October 17, 1989, wrote Bouwman and Mazurs' attorney asking that the mortgage be assigned to Cramer Properties, Inc., a Texas corporation.*fn5 Bouwman and Mazur complied with this request as they assigned the mortgage to Cramer Properties, without recourse as to liability, on or about October 18, 1989. Nevertheless, on or about November 1, 1989, Bouwman and Mazur executed a second satisfaction of the St. Croix Estates mortgage which was recorded on April 19, 1990. The district court, however, held that this second satisfaction was void. After the assignment to it, Cramer Properties executed its own no recourse assignment of the St. Croix Estates mortgage in blank.

Subsequently, Heaton retained Raymond Monacelli, a loan broker, to obtain financing for yet another of his companies, Florida Raffles, Inc.*fn6 Monacelli then obtained possession of both the B&M and Cramer assignments of the St. Croix Estates mortgage. Wrobel agreed to make a loan to Florida Raffles and that company executed a 60-day promissory note in his favor on or about February 6, 1990, for the principal sum of $212,000.00 evidencing the loan. F.D.R. Holdings, Inc., yet another Heaton company, endorsed the note which Heaton personally guaranteed on a separate document. On February 8, 1990, Monacelli wrote a letter to Wrobel explaining that he was:

in possession of an Assignment of that certain mortgage in the original principal amount of $500,000.00 made by St. Croix Estates, Inc., A Delaware corporation, F.D.R. Steaks, Inc., A Florida corporation, and Maan, Inc., a Michigan corporation, mortgagor, in favor of James P. Bouwman and Richard F. Mazur, mortgagee.... I have been authorized to retain said Assignment, and will do so, until such time as that certain note made by Florida Raffles, Inc., in your favor in the amount of $212,000.00 has been paid in full and satisfied.

App. at 187. The letter did not say that Wrobel's note would be secured by a lien on the property represented by the mortgage and did not even state what would happen to the mortgage and the assignment if Florida Raffles defaulted on the loan. In fact, the letter did not indicate that Monacelli had the mortgage.

Florida Raffles, F.D.R. Holdings, and Heaton all defaulted on the Wrobel loan. Following the default, Monacelli delivered the B&M and Cramer assignments to Wrobel and the blank Cramer assignment was completed to reflect its assignment to Wrobel. Thereafter it was recorded on August 15, 1990. Neither of the parties on this appeal suggests that Monacelli acted improperly in delivering the assignments to Wrobel.

While Wrobel was confronted with a default on his note, Consolidated pursued its own grievances against Heaton and his companies. Consolidated sued St. Croix Estates on May 11, 1990, and eventually others, seeking to rescind the real property transaction conveying The Dome from Consolidated to St. Croix Estates, alleging that Heaton by fraudulent representations induced Consolidated to make the conveyance. This complaint marked the beginning of the Consolidated Realty action. As we have indicated, Wrobel later intervened in this action, asserting a claim against The Dome resulting from the default on his loan and the security he believed that the St. Croix Estates mortgage provided him. Wrobel sued Florida Raffles and other defendants on April 18, 1991, seeking payment on his loan and also seeking foreclosure on The Dome, arguing that his rights to that real property were superior to those of Consolidated. This complaint marked the start of the Wrobel action. In Wrobel, the district court, on October 9, 1992, granted partial summary judgment in Wrobel's favor for $212,000 plus interest against Florida Raffles, F.D.R. Holdings and Heaton but not against St. Croix Estates. App. at 185-86. That judgment reserved for later proceedings a determination of the priority of the claims of Wrobel, St. Croix Estates and Consolidated Realty to the Dome.

The disputes partially were resolved when Consolidated entered into an agreement with St. Croix Estates and other parties that we need not list on or about March 20, 1995. Through the agreement the parties recognized a $6,779,588.79 judgment Consolidated had obtained against Heaton in the United States District Court for the Middle District of Florida,*fn7 agreed to void the deed for The Dome from Consolidated to St. Croix Estates, and also agreed that "the 'Heaton Group' hereby transfers, quit claims and conveys to Consolidated Realty Corp. any and all right, title and interest they may have in and to [The Dome] in fee simple forever." App. at 199.

At this point, Wrobel held a judgment for the amount of the promissory note which he sought to satisfy via foreclosure of the St. Croix Estates mortgage of The Dome, even though the monetary judgment was not against St. Croix Estates, and Consolidated held a judgment against Heaton and an interest in The Dome that it obtained via its agreement with St. Croix Estates. The parties turned to the district court to define and prioritize their interests in The Dome. On September 27, 2002, following a bench trial on a paper record, the district court issued a memorandum opinion in the consolidated action and on October 7, 2002, the district court issued a judgment of foreclosure in favor of Wrobel against St. Croix Estates and Consolidated.

In its memorandum opinion the district court concluded that Wrobel held a valid and enforceable future advance mortgage on The Dome and that he thus held a title superior to Consolidated's in the property. Consolidated filed an appeal of the October 7, 2002 order to this court on October 22, 2002, but later filed a motion on notice to Wrobel's attorney seeking an order dismissing the appeal on the basis that it was premature.*fn8 Consolidated extensively briefed its motion. Wrobel did not oppose the motion or suggest, at least in a document on record in this court, that the appeal was not premature and the clerk of this court dismissed the appeal on May 7, 2003. In view of Wrobel's failure to object to the motion for dismissal the clerk acted without referring the motion to a panel of this court.

On May 19, 2003, Consolidated filed a motion in the district court for entry of certain orders. Consolidated asked the district court to enter orders for the purposes of entering a final judgment in Consolidated Realty rescinding the conveyance of The Dome from Consolidated to St. Croix Estates and to substitute Barclays, as successor to Consolidated, as a party in its place. Wrobel opposed Consolidated's motion, arguing that the district court's October 7, 2002 order and accompanying September ...

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