The legalese used in the opinion made the decision almost incomprehensible, and would have made Bryan Garner throw a fit. But, the Supreme Court of the Virgin Islands nevertheless got it right in Cornelius v. Bank of Nova Scotia, 2017 WL 3412202, at *6–8 (V.I., 2017), when it held that an unperfected lender who erroneously filed a termination statement still held a security interest as against the customer and could still repossess the vehicle.
As delineated below, because Appellee’s December 24, 2009 letter to appellants erroneously informing them that the loan had been repaid and further informing them that the lien on the Vehicle had been released did not invalidate the terms of the loan and security agreement, Appellee stated a valid cause of action for breach of contract in its counterclaim, and Appellants were liable for the amount the parties agreed upon under that loan and security agreement. Preliminarily, it will assist in clarifying the analysis if one understands what law is applicable to this case and why. Accordingly, a brief discussion of the contract formation process is imperative. Here, Appellants contracted to purchase the Vehicle from Community Motors. It was a contract between Appellants and Community Motors for the sale of consumer goods and was thus governed by 11A V.I.C. § 2–204. However, Appellants could not afford the full purchase price at the time of the purchase of the Vehicle. Therefore, they applied to Appellee for financing and received a loan. Once Appellee, on behalf of Appellants, paid Community Motors the purchase price of the vehicle, the contract for sale of consumer goods between Appellants and Community Motors was completed. . . .Unless agreed otherwise, title to consumer goods passes to the debtor despite a security interest in the same personal property held by a third party, in this instance the Appellee. 11A V.I.C. § 2–401(2). Therefore, Appellants held title to the Vehicle on the day it was repossessed. See J.I. Case Credit Corp. v. Foos, 717 P.2d 1064, 67 (Kan. Ct. App. 1986) (noting the debtor held title subject to an unperfected security interest upon the erroneous filing of a termination statement); Home Bank & Trust, 959 P.2d at 939. At the time of the repossession, the only operative contract was the loan and security agreement between Appellants and Appellee, which provided both the terms for repayment of the loan and the terms upon which the loan was secured. Therefore, the determination of the lawfulness of Appellee’s repossession of the Vehicle is governed by the UCC as adopted by the Legislature of the Virgin Islands. “The UCC does not require that a security interest be perfected by filing or otherwise in order to be valid.” Kan. State Bank v. Overseas Motosport, Inc., 563 P.2d 414, 417 (Kan. App. 1977) (collecting cases). Indeed, the requirements of enforceability of a security interest are listed in subsection 9–203(b), and conspicuously absent from these requirements is perfection. 11A V.I.C. § 9–203(b); see Turbinator, Inc. v. Superior Court, 39 Cal. Rptr. 2d 342, 345 (Cal. Ct. App. 1995) (“[A]n unperfected security interest is enforceable against all parties unless the holder of a later-acquired interest qualified under some other provision.”); cf. Roberge v. Bankers Trust Co., 446 N.Y.S.2d 443, 444 (N.Y. App. Div. 1981) (explaining that sections 9–501 and 9–503 of the Uniform Commercial Code as adopted in New York, which are analogous to former 11A V.I.C. §§ 9–501 and 9–503, impose no requirement that a financing statement be filed in order to enable the creditor to effect physical repossession of the property that would otherwise qualify as the collateral). A security interest attaches when it becomes enforceable against the debtor. 11A V.I.C. § 9–203(a). Therefore, a secured party may take possession of collateral pursuant to a security agreement if the property may be repossessed from the defaulting debtor without a “Breach of Peace.” 11A V.I.C. § 9–609(b) (“A secured party may proceed under subsection (a): … (2) without judicial process if it proceeds without breach of the peace.”). Those portions of Article 9 of the UCC in the form enacted in the Virgin Islands, 11A V.I.C. § 9–201 et seq., are devoid of any language indicating that a security agreement is only effective if perfected. See In re Drewry, 966 F.2d 236, 243 (7th Cir. 1992) (“A security agreement is generally effective according to its terms between parties even when it is unperfected.”); United States v. Agnello, 344 F. Supp. 2d 360, 370 (E.D.N.Y. 2004) (“A security agreement is not invalid between the parties merely because it was not perfected. Perfection of an interest is important only to insure priority of the lien over intervening third-parties[.]” (citation and internal quotation marks omitted)); Roberge, 446 N.Y.S.2d at 444 (Article 9 “do[es] not require that the secured interest of the creditor be perfected in order to foreclose”). No language in title 11A as implemented in the Virgin Islands provides that a loan for the purchase of consumer goods is considered satisfied simply because the holder of the note erroneously sent a notice of repayment and release of lien/security interest. Further, there is no common law principle that has been identified that would dictate such an outcome. Appellants admitted that they entered into the contract and that they only made two payments pursuant to that contract. Thus, the amount of the loan and the financing fees are indisputable. Further, a contract is only formed or modified to the extent there is mutual assent and mutual consideration. Therefore, it is undeniable that the full balance of the loan plus financing fees were owed to Appellee once Appellants signed all the loan documents and took possession of the Vehicle. Indeed, they admitted these facts. A mistake by a lender that misinforms a debtor that the balance of his or her loan is satisfied is of no legal significance in a breach of contract analysis where there is no dispute, in fact, as to the amount owed. See Peoples Bank of S.C., Inc. v. Robinson, 249 S.E.2d 784, 786 (S.C. 1978) (holding that the erroneous return of a promissory note and security agreement marked “Paid and Satisfied” did not “constitute a discharge under [the UCC]”); Richardson v. First Nat’l Bank of Louisville, 660 S.W.2d 678, 679–80 (Ky. Ct. App. 1983) (“[A] clerical error does not have the legal effect of cancelling an existing debt or discharging an instrument.” (citations omitted)). Considering the above, it is incontestable that the loan contract was breached when, after making only two payments, Appellants failed to make any further payments on the loan. See generally Overseas Motosport, 563 P.2d at 417–18. Therefore, Appellee was entitled to repossess the Vehicle pursuant to 11A V.I.C. § 9–609(b)(2) so long as doing so could be done without a Breach of Peace, and the trial court committed error when it concluded that Appellee had wrongfully repossessed the Vehicle.