Case Title: Klein v. Wolf Run Resort

Citation: 163 Vt 506, 659 A.2d 1153

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 1995-04-14T00:00:00Z

Document:
KLEIN_V_WOLF_RUN_RESORT.93-365; 163 Vt 506; 659 A.2d 1153

[Filed 14-Apr-1995]


NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports. 
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
order that corrections may be made before this opinion goes to press. 

                                 No. 93-365

John A. Klein                                     Supreme Court

                                                  On Appeal from
     v.                                            Franklin Superior Court

Wolf Run Resort, Inc., et al.                     September Term, 1994


Merideth Wright, J.

Jesse D. Bugbee of Kissane, Yarnell & Cronin, St. Albans, for plaintiff-appellee

W. Owen Jenkins, Essex Junction, for defendant-appellant


PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


     JOHNSON, J.   Defendant Wolf Run Resort, Inc. defaulted on an agreement
with plaintiff lender and appeals from a decision of the Franklin Superior
Court declaring that plaintiff could recover the principal amount of the
loan, despite plaintiff's noncompliance with Vermont's Licensed Lender Law (8
V.S.A.  2201).  We affirm. 

     Plaintiff lent defendant $120,000 for two years, secured by two parcels
of land in Bakersfield and a security interest in certain personal property. 
Only interest was due until maturity, but early in 1989 defendant defaulted,
after paying $4,789.04 in interest, as well as a $2,400 commitment fee. 
Plaintiff commenced a foreclosure action, and defendant raised as an
affirmative defense plaintiff's failure to obtain a lender's license from the
Vermont Commissioner of Banking and Insurance pursuant to 8 V.S.A. 
2201 (FN1) before making the loan, 

 

subjecting plaintiff to the penalty provisions of 8 V.S.A.  2233.  At the
time of the loan and the commencement of the suit,  2233 stated as follows:

(a)  Any person, partnership, association or corporation and the
several members, officers, directors, agents and employees
thereof, who shall violate or participate in the violation of any of
the provisions of this chapter shall be imprisoned not more than
two years or fined not more than $500.00, or both.

(b)  Any contract of loan not invalid for any other reason, in the
making or collection of which any act shall have been done which
constitutes an offense under this section, shall be void and the
lender shall have no right to collect or receive any principal,
interest, or charges whatsoever; provided, however, in the case of
any loan or extension of credit described in 9 V.S.A.  46(1), (2)
or (4) and made for the purpose of financing inventory acquired or
held for resale by a dealer in goods, the making or collection of
which shall involve any violation of the provisions of this chapter,
the lender shall have no right to collect or receive any interest or
charges whatsoever, but shall have a right to collect and receive
principal.

(Emphasis supplied.)  Plaintiff conceded that this provision precludes
recovery of any portion of the loan, principal or interest, but had two
responses: first, that he was not "engag[ed] in the business of making
loans," and second, even if he had been,  2233(b) was amended in 1990 to
include the subject loan within the provision allowing recovery of the
principal. 

     In 1990, the Legislature replaced the phrase "in the case of any loan or
extension of credit described in 9 V.S.A.  46(1), (2) or (4) and made for
the purpose of financing inventory acquired or held for resale by a dealer in
goods" with the phrase "in the case of commercial loans," leaving the balance
of the subsection unaltered.  There is no dispute that the amended language,
if applicable, would allow plaintiff recovery of the loan principal. 

     The court ruled that the outcome was controlled by 1 V.S.A.  214(c),
which states: 

  If the penalty or punishment for any offense is reduced by the
amendment of an act or statutory provision, the same shall be
imposed in accordance with the act or provision as amended unless

 

imposed prior to the date of amendment.

The court reasoned that  214(c) was not by its terms limited to criminal
penalties or punishments, and that the "forfeiture imposed by 8 V.S.A. 
2233 is a penalty, albeit civil." On cross-motions for summary judgment, the
court entered judgment in plaintiff's favor in the principal amount of the
loan, less interest and other charges already paid.  Defendant appeals
arguing that the amended provision does not apply retroactively, leaving the
bar to recovery of principal or interest in place. 

     The main issue is whether the 1990 amendment to  2233 applies
retroactively.  In general, absent specific legislative intent to the
contrary, "a statute affecting legally existing rights should not be
construed to operate retrospectively."  Curran v. Marcille, 152 Vt. 247, 250,
565 A.2d 1362, 1364 (1989); 1 V.S.A  214(b).  Many jurisdictions, however,
have recognized an exception to this general rule when a usury statute is
amended or repealed.  Orden v. Crawshaw Mortgage & Investment Co.,