On Appeal from the United States District Court for the District of Virgin Islands (D.C. No. 83-0343)
BEFORE: HUNTER, GARTH, and BECKER, Circuit Judges
This appeal requires us to review Virgin Islands statutes, one of which prescribes the legal rate of interest, the other of which proscribes usury. We hold that the defense of usury was properly asserted by Tonn, the defendant/appellant here.
On March 20, 1978, appellant Bernard Tonn purchased sliding glass doors and windows from appellee Foreign Commerce, Inc. for a total purchase price of $1,640.20. When Tonn failed to pay the balance of the purchase price within the ten-day period provided by the purchase agreement, his account was assessed a 1-1/2 percent monthly service charge on the outstanding balance. Over a four-year period, Tonn made only sporadic payments totaling $800 on this debt. As of March 28, 1982, Tonn's debt, including principal and the assessed monthly "service charges," totaled $2,172.76.
On March 28, 1982, Foreign Commerce instituted an action for debt against Tonn in the Virgin Islands Territorial Court. In his answer and counterclaim, Tonn alleged that the monthly 1-1/2% service charge violated the Virgin Islands' usury laws. 11 V.I.C. §§ 951 et. seq. On September 30, 1983, the Territorial Court held that Tonn could not rely on the usury defense. Accordingly, on January 5, 1984, the court entered judgment against Tonn for the full amount of the debt.
Tonn appealed the Territorial Court judgment to the District Court of the Virgin Islands. On December 28, 1984, that court affirmed the Territorial Court's order. We reverse.
The sole issue before us is whether the 1-1/2 percent monthly "service charge"*fn1 applied to Tonn's outstanding debt by Foreign Commerce violated the Virgin Islands usury statutes.
Those statutes provide in pertinent part:
§ 951 Legal rate of interest
(a) The rate of interest shall be nine (9%) per centum per annum on -
(1) all monies which have become due;
(2) money received to the use of another and retained beyond a reasonable time without the owner's consent, either express or implied;
(3) money due upon the settlement of matured accounts from the day the balance is ascertained; and
(4) money due or to become due where there is a contract and no rate is specified.