FSM SUPREME COURT TRIAL DIVISION

Cite as FSM Dev. Bank v. Arthur,16 FSM Intrm. 132 (Pon. 2008)

[16 FSM Intrm. 132]

FSM DEVELOPMENT BANK,

Plaintiff,

vs.

ROBERT C. ARTHUR, PATRICIA ARTHUR,
BETHWEL HENRY and MARIHNE HENRY,

Defendants.

CIVIL ACTION NO. 2001-007

ORDER DENYING STAY

Dennis K. Yamase
Associate Justice

Decided: September 10, 2008

APPEARANCES:

For the Plaintiff:              Michael J. Sipos, Esq.
                                       Sipos & Berman
                                       P.O. Box 2069
                                       Kolonia, Pohnpei FM 96941

For the Defendants:       Douglas F. Cushnie, Esq.
                                       P.O. Box 949
                                       Saipan, Northern Marianas MP 96950

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HEADNOTES

Appellate Review – Stay – Civil Cases

The criteria for granting a stay under Rule 62(c) are: 1) whether the appellant has shown that without the stay he will be irreparably harmed; 2) whether issuance of the stay would substantially harm other parties interested in the proceedings; 3) whether the public interest would be served by granting a stay; and 4) whether the appellant has made a strong showing that he is likely to prevail on the merits of the appeal. These criteria do not apply to appeals from a money judgment or to the denial of a motion to vacate a money judgment. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 136 (Pon. 2008).

Appellate Review – Stay – Civil Cases

While a supersedeas bond may be required for a stay of a money judgment under Rule 62(d), it is clear that no such bond is required in order to obtain a modification of an injunction pending appeal. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 136 (Pon. 2008).

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Appellate Review – Stay – Civil Cases

The irreparable injury contemplated by Rule 62(c) is that which will make the appeal moot. Thus, prospective monetary damage is not irreparable injury. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 137 (Pon. 2008).

Civil Procedure

When the court has not previously construed an FSM civil procedure rule which is identical or similar to a U.S. counterpart, the court may look to U.S. sources for guidance in interpreting the rule. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 137 n.1 (Pon. 2008).

Debtors' and Creditors' Rights – Orders in Aid of Judgment; Judgments

The court can, as an act of grace to prevent undue hardship, permit withholding from payment to the judgment-creditor any sums that might be due in taxes because of the order in aid of judgment since the court may make provision for tax payments to non-parties in its court judgments when a judgment causes a party to incur tax liability. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 137-38 (Pon. 2008).

Debtors' and Creditors' Rights – Orders in Aid of Judgment

The presence of the debtors' property in a Guam brokerage account does not affect the validity of an order in aid of judgment. While generally a court does not have jurisdiction over property in another jurisdiction because it cannot enforce its orders there, the court does have jurisdiction over the judgment-debtor's person. Thus, if the court were to order a debtor to sell property in another country and to pay or deposit the proceeds with some person or the court, and, if the judgment-debtor did not obey that order, the court could then impose sanctions on the debtor, such as, civil contempt of court to coerce the judgment-debtor's compliance or criminal contempt of court to punish the judgment-debtor's disobedience. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 138 (Pon. 2008).

Judgments – Relief from Judgment

By moving to vacate a judgment, the movants automatically raise the issue of whether they had filed their motion within a reasonable time because a motion to vacate judgment made more than ten days after judgment is entered is a Rule 60(b) motion for relief from judgment and Rule 60(b) requires that all motions for relief from judgment be made in a reasonable time. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 138-39 (Pon. 2008).

Judgments – Alter or Amend Judgment; Judgments – Relief from Judgment

A motion to reconsider or vacate a judgment filed within ten days of the judgment is a Rule 59 motion to alter or amend judgment and a motion filed after ten days is a Rule 60(b) motion for relief from judgment. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 138 n.3 (Pon. 2008).

Civil Procedure – Motions

Regardless of what a party chooses to call the papers they have filed, those papers are what they are based upon their function or the relief they seek. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 138 n.4 (Pon. 2008).

Judgments – Relief from Judgment

Rule 60(b) permits only motions for relief from judgment under that rule or independent actions. There is no such motion as one in the nature of an independent equitable action for relief filed in the original case. If a party wishes to seek relief through an independent action, it must file a separate independent action. If a party files a motion in the case in which the judgment was issued, it is a Rule 60(b) motion for relief from judgment. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 139 (Pon. 2008).

[16 FSM Intrm. 134]

Judgments – Relief from Judgment

A motion to vacate a judgment filed in the original case cannot be anything other than a Rule 60(b) motion for relief from judgment. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 139 (Pon. 2008).

Judgments – Relief from Judgment

The court has no need to address the question posed by the movants in a motion to vacate judgment when the movants had to first surmount the hurdle of whether the motion to vacate judgment was filed within a reasonable time, and they could not. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 139 (Pon. 2008).

Appellate Review – Stay – Civil Cases

Rule 62(d), not 62(c), applies to stays of money judgments and awards. That rule provides that when an appeal is taken the appellant by giving a supersedeas bond may obtain a stay and the bond may be given when the notice of appeal is filed or after. The stay is effective when the court approves supersedeas bond. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 140 (Pon. 2008).

Appellate Review – Stay – Civil Cases

The purpose of requiring a supersedeas bond for a stay pending an appeal is to protect the appellee's interests. A bond protects an appellee by providing a fund out of which it may be paid if the money judgment is affirmed, and the bond also meets the appellee's concern that the appellant might flee the jurisdiction or conceal or dissipate assets so as to render itself judgment-proof. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 140 (Pon. 2008).

Appellate Review – Stay – Civil Cases

A supersedeas bond provides absolute security to the party who is affected by the appeal, but it also protects the judgment-debtor from levy while the appeal takes its course. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 140 (Pon. 2008).

Appellate Review – Stay – Civil Cases

A supersedeas bond serves three main purposes: 1) it permits the appellant to appeal without risking satisfying the judgment prior to appeal and then being unable to obtain a refund from the appellee after judgment is reversed on appeal; 2) it protects the appellee against risk that the appellant could satisfy the judgment prior to the appeal but is unable to satisfy the judgment after appeal; and 3) it provides a guarantee that the appellee can recover from the appellant the damages caused by the delay incident to the appeal, that is, the bond guarantees that the appellee can recover the interest that accrues on the judgment during appeal, and guarantees that the appellant will satisfy the judgment plus interest and costs if it is affirmed on appeal. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 140 (Pon. 2008).

Appellate Review – Stay – Civil Cases

A judgment creditor's primary concern when a judgment in his favor is stayed pending appeal is that he be secure from loss resulting from the stay of execution. Therefore, to be entitled to a stay of execution pending appeal, the defendants may either post an adequate supersedeas bond or pay the money into the court's registry (or a combination of both). If the appellants post a supersedeas bond, they are entitled to stay as of right once the court has approved the bond, but statutory post-judgment interest will continue to accrue until the judgment is paid. If the money is paid into court, interest will cease to accrue on the judgment, and if only a part of the principal is paid, then the statutory interest stops only on that part. Payments into court accrue interest for the ultimate recipient's benefit only as earned in the court's depository institution. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 140-41 (Pon. 2008).

[16 FSM Intrm. 135]

Appellate Review – Stay – Civil Cases

Usually, a full supersedeas bond is required in order to stay execution of a judgment, and the amount of the bond is calculated to include the whole amount of the judgment, costs on appeal, interest, and damages for delay, but courts in the exercise of their discretion have permitted a form of security other than a bond so long as that security is adequate and the judgment creditor's recovery is not at risk. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 141 (Pon. 2008).

Appellate Review – Stay – Civil Cases

If the appellants have a history of paying judgments of large size, the court might be able to issue a stay without a bond or equivalent security. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 141 (Pon. 2008).

Appellate Review – Stay – Civil Cases

When the appellants' ability to pay is not so plain that a bond would be a waste of money and when the appellants have not shown that a bond would put their other creditors in jeopardy, the judgment-debtor defendants must provide adequate security for the judgment-creditor appellee in order for the court to issue a stay pending appeal. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 141 (Pon. 2008).

Appellate Review – Stay – Civil Cases

A stay may be denied when the appellant is unable to post a supersedeas bond and has failed to propose alternate security. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 141 (Pon. 2008).

Appellate Review – Stay – Civil Cases

It is the appellant's burden to demonstrate objectively that posting a full bond is impossible or impracticable; likewise, it is the appellant's duty to propose a plan that will provide adequate (or as adequate as possible) security for the appellee. A supersedeas bond is essentially a judgment insurance policy, and the alternate security must serve the same basic purpose. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 142 (Pon. 2008).

Appellate Review – Stay – Civil Cases; Judgments

In the absence of a stay obtained in accordance with Rule 62(d), the pendency of an appeal does not prevent the judgment creditor from acting to enforce the judgment. But a person who cannot furnish a supersedeas bond does not lose the right to appeal, although he does assume the risk of getting his money back again if the judgment is reversed. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 142 (Pon. 2008).

Appellate Review – Stay – Civil Cases

When the defendants are not entitled to a stay on the terms sought; when they have not posted a supersedeas bond; and when they have not proposed alternative security for all, or any part of, the judgment they seek to appeal for the second time, the court must deny the defendants' motion for a stay pending appeal. FSM Dev. Bank v. Arthur, 16 FSM Intrm. 132, 143 (Pon. 2008).

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COURT'S OPINION

DENNIS K. YAMASE, Associate Justice:

This came before the court on the Defendants' Motion to Stay the Enforcement of Order and Writ Pending Appeal. On July 31, 2008, the motion to stay was denied on the terms it sought. Since a

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stay could still be obtained under certain conditions, the court gave the defendants an opportunity to do so. That opportunity was not successfully taken. The motion to stay is therefore denied. The court's reasoning follows.

I. BACKGROUND

On June 2, 2008, the court denied the defendants' motion to vacate judgment and granted the plaintiff's motion for an order in aid of judgment. FSM Dev. Bank v. Arthur, 15 FSM Intrm. 625, 639 (Pon. 2008). The order in aid of judgment required defendants Robert C. Arthur and Patricia B. Arthur to jointly or singly pay, within fifteen days, the plaintiff FSM Development Bank $10,000 from a Bank of Guam account; to sell, within thirty days, all of their Apple Inc. ("Apple") stock and pay to the Bank the proceeds from the sale of their Apple Computer stock (minus any amount they might need to pay the U.S. capital gains tax on that sale); and defendant Patricia B. Arthur to pay to the Bank any money she has received, or will receive, from AHPW, Inc. ("AHPW") in repayment of her loan to that corporation, and for which a writ of attachment, directed to AHPW was issued. Since it was likely that these measures would not satisfy the $504,960.15 (plus interest) judgment, an August 8, 2008 hearing was set to assess what further steps might be needed and were appropriate. Id.

On June 18, 2008, the defendants filed a notice of appeal and a motion, with supporting memorandum, to stay pending appeal the enforcement of the order in aid of judgment and writ of attachment. The Bank filed its opposition on July 2, 2008. On July 4, 2008, the defendants filed their statement of issues on appeal, which lists as assignments of error: that the trial court 1) erred in holding that the defendants' motion to vacate was not timely filed; 2) failed to address the issue raised by the motion to vacate; 3) erred in its application of Rule 60(b); 4) ordered payment of defendants' assets to a third party without legal basis; 5) erred in the consideration of the status of the loan funds at issue; 6) erred in denying the motion to vacate; 7) erred in granting the Bank's motion for an order in aid of judgment; and 8) erred in determining the status of IDF funds.

II. MOTION TO STAY

A. Requirements for a Stay

The defendants rely on Ponape Enterprises Co. v. Luzama, 6 FSM Intrm. 274, 277–78 (Pon. 1993) for the criteria that, in their view, is needed for them to be granted a stay pending appeal. Under Luzama, the criteria for granting a stay under Rule 62(c) are: 1) whether the appellant has shown that without the stay he will be irreparably harmed; 2) whether issuance of the stay would substantially harm other parties interested in the proceedings; 3) whether the public interest would be served by granting a stay; and 4) whether the appellant has made a strong showing that he is likely to prevail on the merits of the appeal. Luzama, 6 FSM Intrm. at 277–78.

The defendants overlook, or choose not to mention, that these criteria were used in Luzama to determine whether the injunction granted in Luzama would be stayed pending the appeal from the order granting it. The Luzama court noted that "while a supersedeas bond may be required for a stay of a money judgment under Rule 62(d), it is clear that no such bond is required in order to obtain a modification of an injunction pending appeal." Luzama, 6 FSM Intrm. at 277. The defendants' motion, the denial of which they now appeal, was to vacate the money judgment against them. Thus, the Luzama criteria do not apply to appeals from a money judgment.

B. Luzama Standard

Nonetheless, even if the Luzama criteria were used, the defendants would not qualify for a stay

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pending appeal. The defendants cannot make a strong showing that they are likely to prevail on appeal. Nor can they show irreparable harm. Furthermore, the stay, as proposed, could substantially harm the Bank since the defendants offer no security for the judgment. The public interest does not favor either side.

1. Irreparable Harm

The defendants assert that they will be irreparably harmed if the enforcement of the judgment is not stayed. The irreparable harm they assert is their having to pay the judgment and to pay taxes on the sale of Apple stock. "[T]he irreparable injury contemplated by Rule 62(c) is that which will make the appeal moot. Thus, prospective monetary damage is not irreparable injury." Stop H-3 Ass'n v. Volpe, 353 F. Supp. 14, 18 (D. Haw. 1972)1 (emphasis in original) (citing Eastern Greyhound Lines v. Fusco, 310 F.2d 632 (6th Cir. 1962); United States v. El–O–Pathic Pharmacy, 192 F.2d 62, 79 (9th Cir. 1951)).

The defendants note that if they pay the U.S. taxes on the Apple stock sale and they prevail on appeal, they cannot get a refund from the U.S. Internal Revenue Service of the taxes paid. They assert that this is irreparable harm. The Bank contends that this cannot be irreparable harm because the stock will be sold at some point and taxes would have to be paid then. The Bank further states that it risks being harmed if the stock is not sold. It notes that, in the month after the June 2, 2008 order in aid of judgment was issued, the defendants' Apple stock lost $39,000 in value.

The court can understand the defendants' concern that any tax payments to the U.S. Internal Revenue Service could not be recovered. The court can also understand the Bank's concern that the stock's value may decline or that it may be transferred to another. Therefore, if any stay were granted, the court would consider a provision whereby, if the Apple stock is not sold, control over it would be put in another's hands with the instruction that if its value dropped too low, the stock could be sold and the proceeds deposited with the court. (This is discussed further in part II.C below.)

2. Likelihood of Success

a. Order in Aid of Judgment

The defendants, in their motion to stay and their statement of issues on appeal, make two points about the order in aid of judgment itself – they assert that the ordered sale of the Apple stock is error because that property is held outside the jurisdiction of the FSM (it is held in a brokerage account in Guam) and because it ordered payment to a non–party (the U.S. Internal Revenue Service) "without legal basis."

The defendants misunderstand the court's order. The defendants were not ordered to pay taxes to the U.S. Internal Revenue Service. They were permitted, as an act of grace to prevent undue hardship, to withhold from payment to the judgment–creditor Bank any sums that might be due to the U.S. Internal Revenue Service as a result of the sale of their Apple stock. The court had no way of knowing how much, if any, U.S. tax the defendants would owe on the sale of their Apple stock although it appeared likely that some tax might be due. It is not inconceivable that, depending on the

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defendants' U.S. tax situation, there might be no U.S. tax due. The court, in the past, has made provision for tax payments to non–parties in its court judgments when a judgment causes a party to incur tax liability. See, e.g., Reg v. Falan, 14 FSM Intrm. 426, 435 (Yap 2006); Pohl v. Chuuk Public Utility Corp., 13 FSM Intrm. 550, 556 (Chk. 2005); Ponape Transfer & Storage, Inc. v. Wade, 5 FSM Intrm. 354, 356 (Pon. 1992) (payments to appropriate tax authorities to be made from back pay awards).

Nor should the Apple Inc. stock's presence in a Guam brokerage account affect the validity of the order in aid of judgment. While generally a court does not have jurisdiction over property in another jurisdiction because it cannot enforce its orders there, the court does have jurisdiction over the judgment-debtor's person. In re Panuelo, 15 FSM Intrm. 23, 27 (Pon. 2007) (although court has no jurisdiction over Hawaii real estate, court can exercise jurisdiction over debtor). Thus, if the court were to order a debtor to sell property in another country and to pay or deposit the proceeds with some person or the court, and, if the judgment–debtor did not obey that order, the court could then impose sanctions on the debtor, such as, civil contempt of court to coerce the judgment–debtor's compliance or criminal contempt of court to punish the judgment–debtor's disobedience. Id.

The other basis on which the defendants assert that they are likely to prevail on the order in aid of judgment is that, in their view, since the motion to vacate should have been granted, there should be no judgment remaining for the court to issue an order in aid of. The court therefore turns to the defendants' likelihood of success on the merits of their appeal of the denial of their motion to vacate.

b. Denial of Motion to Vacate

In appealing the denial of the motion to vacate, the defendants seek a second bite of the appellate apple. The $504,960.15 judgment against them was affirmed on September 14, 2006. Arthur v. FSM Dev. Bank, 14 FSM Intrm. 390 (App. 2006), aff'g 13 FSM Intrm. 1 (Pon. 2004). The current appeal for which they now seek a stay is from the court's denial of their recent motion to vacate that affirmed judgment.

The defendants complain that the court's denial discussed a great deal of material that they did not raise. In particular, the defendants point to the court's conclusion that they failed to move to vacate the judgment within a reasonable time.2 Any contention that this issue was not raised is false. By moving to vacate the judgment in this case, the defendants automatically raise the issue of whether they had filed their motion within a reasonable time because a motion to vacate judgment made more than ten days after judgment3 is entered is a Rule 60(b) motion for relief from judgment.4 Rule 60(b)

[16 FSM Intrm. 139]

requires that all motions for relief from judgment be made in a reasonable time. Thus the defendants, by filing a Rule 60(b) motion raised that issue, but then failed to address it. The defendants' likelihood of success on those grounds for which relief must be sought within a reasonable time not to exceed one year is thus nil. Their likelihood of success on those grounds for which a reasonable time is not limited to one year is slight.

The defendants try to get around this by asserting that their motion was a "Rule 60(b) proceeding in the nature of an independent equitable action" for relief. Memo. in Support [] at 4 (June 18, 2008). There is no such motion. Rule 60(b) permits only motions for relief from judgment under that rule or independent actions. "The procedure for obtaining any relief from a judgment shall be by motion as prescribed in these rules or by an independent action." FSM Civ. R. 60(b). There is no motion "in the nature of an independent equitable action" for relief. If a party wishes to seek relief through an independent action, it must file a separate independent action. If a party files a motion in the case in which the judgment was issued, it is a Rule 60(b) motion for relief from judgment.

The defendants assert that they were entitled to relief from judgment because they complied with the standards of Bankers Mortgage Co. v. United States, 423 F.2d 73 (5th Cir. 1970), which was, in their view, cited with approval in Election Comm'r v. Petewon, 6 FSM Intrm. 491, 499 (Chk. S. Ct. App. 1994). In Election Comm'r, the Chuuk State Supreme Court appellate division relied on Bankers Mortgage because the Election Comm'r court was trying to determine if a trial division case trying to set aside the decisions in earlier trial division cases qualified as an independent equitable action (it did not) and thus whether a writ of mandamus should issue to prevent the prosecution of the second case. Election Comm'r, 6 FSM Intrm. at 499–500. In both Bankers Mortgage and Election Comm'r, no motion for relief was filed in the original action(s). The defendants filed their motion to vacate judgment in the original case. It cannot be anything other than a Rule 60(b) motion for relief from judgment.

Thus the defendants' likelihood of success based on their reliance on Bankers Trust, is slight. No matter how artfully the defendants try to frame their argument to ignore Rule 60(b)'s reasonable time filing requirement, by filing a Rule 60(b) motion, the defendants raised the reasonable time issue and then failed to address it.

The defendants further assert that the court has failed to address the one question they chose to pose – whether to enforce the judgment was a manifest injustice. This contention is false and does not increase their likelihood of success on the merits. The court had no need to address this question since the defendants had to first surmount the hurdle of whether the motion to vacate judgment was filed within a reasonable time, and they could not. Nevertheless, the court did address the question. The entire discussion on pages 11 through 14 of the court's June 2, 2008 Order Disposing of Pending Motions [15 FSM Intrm. at 634–35] was of the legal principles upon which the defendants based their manifest injustice argument.

The defendants also assert that the court erred in its determination of the status of IDF funds,5 which the court held were not the state's to do with as it chose, Arthur, 15 FSM Intrm. at 634. However, the defendants, in their stay memorandum, essentially concede their position on this point when, in arguing that no substantial harm will accrue to the Bank, they state, "FSMDB is merely a collection agent. The state IDF money will go back to the state IDF account. This is U.S. government grant funds, not FSM or Pohnpei tax money. It is to be used for investment only, not state operations, so there can be no harm here." Memo. in Support [] at 3 (June 18, 2008).

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Thus the likelihood of success on the merits does not favor the defendants.

3. Substantial Harm to the Appellee; Public Interest

The Bank may suffer substantial harm if the value of the defendants' Apple stock declines. Furthermore, the Bank will not have those IDF funds available for development lending. The public interest would favor that those development funds be available. The public interest would also favor the correction of a manifest injustice on a case of first impression, which, in the defendants' view, this case involves. Thus the public–interest factor favors neither side and the substantial–harm factor would favor the defendants.

C. Supersedeas Bond

Rule 62(d), not 62(c), applies to stays of money judgments and awards. That rule provides:

When an appeal is taken the appellant by giving a supersedeas bond may obtain a stay subject to the exceptions contained in subdivision (a) of this rule. The bond may be given at or after the time of filing the notice of appeal or of procuring the order allowing the appeal, as the case may be. The stay is effective when the supersedeas bond is approved by the court.

FSM Civ. R. 62(d). Thus the defendants cannot be granted a stay on the terms they seek – essentially a free ride without any security for the successful judgment–creditor that holds a judgment affirmed on the defendants' previous appeal.

The purpose of requiring a supersedeas bond for a stay pending an appeal is to protect the appellee's interests. Panuelo v. Amayo, 10 FSM Intrm. 558, 563 (App. 2002). A bond protects an appellee by providing a fund out of which it may be paid if the money judgment is affirmed, and the bond also meets the appellee's concern that the appellant might flee the jurisdiction or conceal or dissipate assets so as to render itself judgment–proof. Pohnpei v. Ponape Constr. Co., 6 FSM Intrm. 221, 223 (App. 1993).

A supersedeas bond provides absolute security to the party who is affected by the appeal, but it also protects the judgment debtor from levy while the appeal takes its course. People of Rull ex rel. Ruepong v. M/V Kyowa Violet, 14 FSM Intrm. 501, 503–04 (Yap 2006); Amayo v. MJ Co., 10 FSM Intrm. 427, 428–29 (Pon. 2001). The supersedeas bond

serves three main purposes: first, it permits the appellant to appeal without risking satisfying the judgment prior to appeal and then being unable to obtain a refund from the appellee after judgment is reversed on appeal; second, it protects the appellee against risk that the appellant could satisfy the judgment prior to the appeal but is unable to satisfy the judgment after appeal; and third, it provides a guarantee that the appellee can recover from the appellant the damages caused by the delay incident to the appeal, that is, the bond guarantees that the appellee can recover the interest that accrues on the judgment during appeal, [and] guarantees that the appellant will satisfy the judgment plus interest and costs if it is affirmed on appeal.

Morgan Guar. Trust Co. v. Republic of Palau, 702 F. Supp. 60, 65 (S.D.N.Y. 1988).

A judgment creditor's primary concern when a judgment in his favor is stayed pending appeal is that he be secure from loss resulting from the stay of execution. Therefore, to be entitled to a stay

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of execution pending appeal, the defendants may either post an adequate supersedeas bond or pay the money into the court's registry (or a combination of both). People of Rull, 14 FSM Intrm. at 504. If the defendants post a supersedeas bond, they are entitled to a stay as of right once the court has approved the bond, but statutory post–judgment interest will continue to accrue until the judgment is paid. Id. at 505. If the money is paid into court, interest will cease to accrue on the judgment, and if only a part of the principal is paid, then the statutory interest stops only on that part. Senda v. Creditors of Mid–Pacific Constr. Co., 7 FSM Intrm. 664, 670 (App. 1996). Payments into court accrue interest for the ultimate recipient's benefit only as earned in the court's depository institution. Id. at 671.

Usually, a full supersedeas bond is required in order to stay execution of a judgment, Federal Prescription Serv., Inc. v. American Pharmaceutical Ass'n, 636 F.2d 755, 760 (D.C. Cir. 1980), and the amount of the bond is calculated to include the whole amount of the judgment, costs on appeal, interest, and damages for delay, J. Perez & Cia., Inc. v. United States, 578 F. Supp. 1318, 1320 (D.P.R. 1984) (citing the predecessor to present Rule 62(d)), but courts in the exercise of their discretion have permitted a form of security other than a bond so long as that security is adequate and the judgment creditor's recovery is not at risk. Amayo, 10 FSM Intrm. at 429. The $504,960.15 judgment was entered on October 5, 2004. FSM Dev. Bank v. Arthur, 13 FSM Intrm. 1 (Pon. 2004), aff'd, 14 FSM Intrm. 390 (App. 2006). Interest on that judgment up until October 5, 2009 (assuming that the appellate proceedings would not last longer than that, but the last appeal in this case took almost two years) is $227,232.05 [$45,446.41 a year]. Assuming that costs on appeal and damages for delay will not exceed $1,000, the Bank would be entitled to security in the amount of $733,192.20 if the judgment is stayed pending appeal.

If the defendants had a history of paying judgments of this size, the court might be able to issue a stay without a bond or equivalent security. See Dillon v. City of Chicago, 866 F.2d 902, 904–05 (7th Cir. 1988) (stay without bond ordered when city had record of paying employment discrimination judgments and demonstrated existence of sufficient appropriated funds designed to pay such awards); see also Avirgan v. Hull, 125 F.R.D. 185, 186 (S.D. Fla. 1989) (posting a bond to secure a stay pending appeal is inappropriate: 1) when the defendant's ability to pay is so plain that the cost of a bond would be a waste of money, or 2) when the requirement would put the defendant's other creditors in undue jeopardy); cf. Pohnpei v. Ponape Constr. Co., 6 FSM Intrm. 221, 223 (App. 1993) (fiscal security concerns not raised when the appellant is the State of Pohnpei). But that is not the case here. The defendants' ability to pay is not so plain that a bond would be a waste of money. Nor have the defendants shown that a bond would put their other creditors (assuming there are some) in jeopardy. In order for the court to issue a stay in this case, the judgment–debtor defendants must provide adequate security for the judgment–creditor appellee.

Since the defendants have considerable property outside the FSM (primarily the Apple stock), they might have been able to obtain a supersedeas or appeal bond from an insurance company in Guam or elsewhere. If they could not, the court was willing to explore alternative security for some or all of the judgment, including the payment into court of the sums ordered paid from the writ of attachment directed to AHPW and from their Bank of Guam account (or the Bank of Guam passbook could be deposited with the court), which would then be deposited into an interest–bearing account, and an arrangement whereby the Apple stock could not be sold except by court order with a stop–loss provision ordering an immediate sale if the stock declines in value below a certain point. Other provisions would need to be made to give the Bank as near the full security they are entitled to.

The scheduled August 8, 2008 hearing was to determine what further sources of payment were needed to satisfy the judgment and from what sources they might come. Any further funding sources identified at that hearing can be handled in similar fashion – any cash sums ordered paid could be paid

[16 FSM Intrm. 142]

into court and other security could be treated similar to the Apple stock. The parties, particularly the defendants, were encouraged to discuss possible arrangements beforehand. Bank of Nova Scotia v. Pemberton, 964 F. Supp. 189, 192 (D.V.I. 1997) (stay denied when defendant unable to post supersedeas bond and failed to propose alternate security).

"It is the appellant's burden to demonstrate objectively that posting a full bond is impossible or impracticable; likewise, it is the appellant's duty to propose a plan that will provide adequate (or as adequate as possible) security for the appellee." United States v. Kurtz, 528 F. Supp. 1113, 1115 (E.D. Pa. 1981), aff'd, 688 F.2d 827 (3d Cir. 1982); accord Poplar Grove Planting & Ref. Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1191 (5th Cir. 1979); Bank of Nova Scotia, 964 F. Supp. at 192. "[A] supersedeas bond is essentially a judgment insurance policy,' and th[e] alternate security must serve the same basic purpose." Bank of Nova Scotia, 964 F. Supp. at 192 (quoting Townsend v. Holman Consulting Corp., 881 F.2d 788, 797 (9th Cir. 1989)).

D. Opportunity to Propose Alternative Security

The court's July 31, 2008 order therefore gave the defendants an opportunity to objectively demonstrate that posting a full bond is impossible or impracticable, and to propose a plan that will provide the Bank with adequate security at the scheduled August 8, 2008 hearing. That hearing was then to consider two main subjects: 1) whether the defendants would provide a supersedeas bond or some other alternative adequate form of security so that execution of the judgment could be stayed pending appeal and 2) what further order in aid of judgment should issue so that further sums could be paid the judgment–creditor bank. The second subject was to be part of the hearing because "[i]n the absence of a stay obtained in accordance with Rule 62(d), the pendency of an appeal does not prevent the judgment creditor from acting to enforce the judgment. But a person who cannot furnish a supersedeas bond does not lose the right to appeal, although he does assume the risk of getting his money back again if the judgment is reversed." 11 CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 2905, at 524–25 (2d ed. 1995).

The hearing was continued when the defendants' counsel stated that he would not appear for the August 6, [sic] 2008 hearing because the fees and costs involved did not justify a thirty–minute appearance and his further indication that two of the defendants would not be present on Pohnpei at that time. On August 14, 2008, the defendants filed a Memorandum re: Order Concerning Stay, which asserted that it was obvious that the defendants could not post a full bond and assumed that the Bank would not accept anything less than full payment. On August 22, 2008, the Bank filed its Proposed Hearing Date on Order in Aid, stating that it was willing to delay to early October the hearing on the follow up order in aid of judgment but that it wanted to conclude the stay/bond hearing as soon as possible because the delay was creating a de facto stay and it is thus facing a risk of loss and inability to recover a substantial portion of its judgment. The Bank further stated that its counsel had been in contact with the defendants' counsel and defendants' counsel had stated that the defendants were still considering the possibility of a bond and he would provide an answer by August 19, 2008, but had not.

The court then ordered that, if the parties had not agreed on security arrangements, the defendants were to file a notice or motion 1) stating whether they are willing and able to provide an supersedeas appeal bond, or 2) demonstrating objectively that posting a full bond is impossible or impracticable and proposing alternative security that will provide adequate (or as adequate as possible) security for the appellee bank, or 3) demonstrating objectively that posting a full bond is impossible or impracticable and further demonstrating objectively their inability to provide alternative adequate security and why.

On September 3, 2008, the defendants filed their notice about posting bond or other security.

[16 FSM Intrm. 143]

In that notice, they asserted that they were unable to produce assets that would cover the $700,000 plus that was needed and that they had considered transferring their Apple and U Corporation stock but that their certified public accountant had determined that large and serious tax consequences would arise for them if the stock were transferred. They therefore declined to offer any security for all or part of the judgment.

Accordingly, since the defendants are not entitled to a stay on the terms sought; since they have not posted a supersedeas bond; and since they have not proposed alternative security for all, or any part of, the judgment they seek to appeal for the second time, the court must deny the defendants' motion for a stay pending appeal. Bank of Nova Scotia, 964 F. Supp. at 192 (utter failure to propose plan to provide adequate alternative security requires denial of stay); Kurtz, 528 F. Supp. at 1115–16 (cannot waive bond requirement when financially unable to pay, no bond posted, and no alternative arrangement proposed).

III. CONCLUSION

The defendants' motion to stay enforcement of the judgment and of the writ of attachment pending appeal is denied on the terms sought – a complete absence of any security for the appellee whose judgment has already been affirmed upon appeal once before. The defendants, having been given the opportunity post a supersedeas bond or to propose alternative security, have done neither. Accordingly, their motion to stay enforcement of the judgment and of the writ of attachment pending appeal is denied.

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Footnotes:

1 When the court has not previously construed an FSM civil procedure rule which is identical or similar to a U.S. counterpart, the court may look to U.S. sources for guidance in interpreting the rule. E.g., Primo v. Pohnpei Transp. Auth., 9 FSM Intrm. 407, 413 n.3 (App. 2000); Tom v. Pohnpei Utilities Corp., 9 FSM Intrm. 82, 87 n.2 (App. 1999); Senda v. Mid-Pacific Constr. Co., 6 FSM Intrm. 440, 444 (App. 1994).

2 They may also have included the court's comment that they had not addressed their contractual waiver of AHPW's defenses. By raising the State of Pohnpei's actions toward AHPW as a defense to their liability on the judgment and as their ground to vacate the judgment, the defendants necessarily put at issue their previous contractual waiver of AHPW's defenses, but did not address it.

3 A motion to reconsider or vacate a judgment filed within ten days of the judgment is a Rule 59 motion to alter or amend judgment and a motion filed after ten days is a Rule 60(b) motion for relief from judgment. See Berman v. College of Micronesia-FSM, 15 FSM Intrm. 582, 588 (App. 2008).

4 Regardless of what a party chooses to call the papers they have filed, those papers are what they are based upon their function or the relief they seek. See, e.g., Neth v. Kosrae, 14 FSM Intrm. 228, 231 (App. 2006); McIlrath v. Amaraich, 11 FSM Intrm. 502, 505-06 (App. 2003); Robert v. Simina, 14 FSM Intrm. 257, 259 (Chk. 2006); McVey v. Etscheit, 14 FSM Intrm. 207, 212 (Pon. 2006); Lee v. Han, 13 FSM Intrm. 571, 575 & n.1 (Chk. 2005).

5 The court ruled on the status of IDF funds when it addressed the legal principles underlying the defendants' manifest injustice argument.

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