Gov. Charles W. Turnbull announced Monday he has signed into law two of three bills amending the Uniform Commercial Code, and vetoed a third one. One attorney close to the issue said the veto was based on a misreading of the law and could hurt the territory's economy.
"I am encouraged by the governor's adoption of articles one through five," said Tom Bolt, "but I am disappointed in his veto of articles six, seven, eight and nine."
His veto "will jeopardize commerce in the territory. It will dry up the credit pool of money available to Virgin Islands businesses," said Bolt, chairman of the V.I. Uniform Law Commission.
Specifically, Article 9 concerns secured transactions between creditors and debtors, and 1999 revisions to the article by the National Conference of Commissioners on Uniform State Laws have already been enacted in at least 27 states, with an effective date of July 1, 2001. The conference has urged all U.S. states and territories to enact the revisions by that date lest "horrendous complications" ensue for that jurisdiction.
Turnbull said the vetoed bill contains provisions for nonjudicial enforcement of mortgages. He said the provisions could involve foreclosure without benefit of the judicial process, which would be a "significant departure from our existing system . . . affecting thousands of individuals."
But Bolt said the governor is mistaken. "Nothing could be further from the truth," he said. "Article 9 doesn't apply to real property, and that's why there is no way that you can construe that you would get nonjudicial real estate foreclosure from Article 9."
He added, "I am disheartened the governor would veto the most important sections of the bill because of this one misinterpretation." He said the commission had provided the governor with an "immense amount of information."
Paul L. Giminez, Turnbull's legal counsel, defended the veto, claiming the revised articles aren't merely an "update," as Bolt claimed, but change existing law.
According to the Uniform Law Commission, "Article 9 is … the crankshaft for the American economic engine. It is absolutely necessary to economic function in the U.S. Trillions of dollars of commercial and consumer credit are granted each year in secured transactions under Article 9, which provides a statutory framework that governs secured transactions — transactions which involve the granting of credit secured by personal property."
The 1999 Article 9 Revisions are also endorsed by the American Bar Association. According to the National Conference of Commissioners on Uniform State Laws, U.S. jurisdictions that fail to enact the revisions by July 1 may lose investment opportunities, see an increase in bankruptcies and a decrease in some state revenues, and its debtors may have higher transaction costs.
Giminez said the Uniform Commercial Code is the most complex legal document ever devised for the business community. It has been under constant revision for 30 years, he said, and lets the legal and business communities know what the rules are from jurisdiction to jurisdiction.
"In the ordinary course of reviewing changes in the UCC, the Legislature would have public hearings to examine the changes and the drafters of those changes could offer alternative provisions," Giminez said.
"I can understand why attorney Bolt would be perturbed," he said. "The vetoed section is one of three voluminous bills which provided for updating. However, this particular article had no appropriation in it, so it wasn't possible to line-item veto it."
Giminez said the measure also appears to be contradictory, in some instances providing for nonjudicial enforcement of mortgages.
He said the section in question provides that if a secured party meets certain requirements, it could proceed with nonjudicial enforcement of mortgages, including repossession of property. That is a situation, Giminez said, where a bank or other lending institution could be the secured party, and the secured property could include homes as well as businesses.
"It basically provides for the process to take place without going into a courtroom," Giminez said. The advantage of the process would be to save time and court costs.
He said in his reading of the article, it is not clear in some areas and needs to be examined more thoroughly. He said the governor was not being "anti-business" but was trying to protect "thousands of home and business owners."
Bolt said no further action is needed other than for the Legislature to override Turnbull's veto or re-introduce the bill and assign it to the Finance Committee.
