FSM SUPREME COURT TRIAL DIVISION
Cite as Bank of the FSM v. Sigrah 24 FSM R. 86 (Pon. 2023)
BANK OF THE FEDERATED STATES OF MICRONESIA,
Plaintiff/Counter-Defendant,
vs.
YOSLYN G. SIGRAH,
Defendant/Counter-Claimant.
CIVIL ACTION NO. 2018-011
ORDER GRANTING PARTIAL SUMMARY JUDGMENT
Dennis L. Belcourt
Associate Justice
Hearing: September 19, 2022
Decided: April 26, 2023
APPEARANCES:
For the Plaintiff:
Stephen V. Finnen, Esq.
P.O. Box 1450
Kolonia, Pohnpei FM 96941
For the Defendant:
Yoslyn G. Sigrah, Esq.
P.O. Box 3018
Kolonia, Pohnpei FM 96941
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The purpose of Rule 6(d) certification is that a reasonable effort be made to give prior notice, and abbreviated notice is not in the rule's spirit. Bank of the FSM v. Sigrah, 24 FSM R. 86, 90 n.2 (Pon. 2023).
Grounds exist for an enlargement requested after the relevant time period if the failure to file is due to "excusable neglect." The excusable neglect analysis begin with 1) an explanation of the movant's diligent and good faith efforts and 2) the lack of prejudice to the opposing party. Good-faith efforts and lack of prejudice are not enough to justify a finding of excusable neglect because excusable neglect does not exist when there are possible methods by which the situation may have been avoided. Bank of the FSM v. Sigrah, 24 FSM R. 86, 92 (Pon. 2023).
Public policy favors court judgments be on the merits, and a summary judgment granted due to procedural violations, would be a judgment that is not on the merits. Bank of the FSM v. Sigrah, 24 FSM R. 86, 92 (Pon. 2023).
The standard for granting a motion for summary judgment is whether the pleadings, depositions, answers to interrogatories, and admissions on file, taken together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. The burden is on the movant. The court, in reviewing a summary judgment motion, must view the facts, and any inferences deduced therefrom, in the light most favorable to the party opposing the summary judgment. Before summary judgment will be granted it must be clear what the truth is, and any doubt as to the existence of a genuine issue of material fact will be resolved against the movant. Bank of the FSM v. Sigrah, 24 FSM R. 86, 92 (Pon. 2023).
The moving party has the initial burden of showing, through the pleadings, depositions, etc., that there are no triable issues of fact. Once the moving party has done this, the burden shifts to the non-moving party. It is not enough for the non-moving party to simply disagree with the moving party and attempt to show, through affidavits or otherwise, that there is a triable issue. The party opposed to the motion must show that there is enough evidence supporting his position to justify a decision upholding his claim by a reasonable trier of fact. If the evidence, affidavits, and pleadings present a sufficient disagreement to require submission to a fact finder, then the motion should be denied. If, the evidence is so one-sided that one party must prevail as a matter of law, then the motion should be granted. Bank of the FSM v. Sigrah, 24 FSM R. 86, 93 (Pon. 2023).
On a summary judgment motion, supporting and opposing affidavits must be made on personal knowledge, must set forth such facts as would be admissible in evidence, and must affirmatively show that the affiant is competent to testify to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit must be attached thereto or served therewith. The court may permit affidavits to be supplemented or opposed by depositions, answers to interrogatories, or further affidavits. Bank of the FSM v. Sigrah, 24 FSM R. 86, 93 (Pon. 2023).
The initial burden is on the movant to substantiate with competent evidence that there are no triable issues of fact and that the movant is entitled to judgment as a matter of law. The movant's burden is not limited substantiating the allegations of the complaint or negating the allegations of the non-movant's counterclaim; it also includes addressing affirmative defenses. Bank of the FSM v. Sigrah, 24 FSM R. 86, 93 (Pon. 2023).
The elements of a breach of contract claim are: 1) a valid contract, 2) a material breach, and 3) resulting damages, and the elements of a valid contract are offer, acceptance, consideration, and definite terms. Bank of the FSM v. Sigrah, 24 FSM R. 86, 94 (Pon. 2023).
When a summary judgment movant has authenticated each of the promissory notes and the payment history through an affidavit and the non-movant did not object to the affidavit or the exhibits, the non-movant has waived objections thereto. The movant has thus put forward a prima facie basis for summary judgment as to the borrower's liability on the last promissory note. Bank of the FSM v. Sigrah, 24 FSM R. 86, 94 (Pon. 2023).
Without a showing that the borrower agreed to take out a credit life insurance policy, the lender cannot include the credit life insurance premiums it paid in calculating the borrower's liability. Bank of the FSM v. Sigrah, 24 FSM R. 86, 94 (Pon. 2023).
A lender, with its affidavit and exhibits, has established a prima facie case for partial summary judgment that a borrower is in breach of contract with respect to a promissory note when the borrower, in signing the amended and restated promissory note, accepted that offer and agreed to those restructured terms and agreed and acknowledged that their remaining indebtedness to the lender was as stated in the amended and restated promissory note and when the borrower has not alleged grounds to rewrite the promissory note through reformation. Bank of the FSM v. Sigrah, 24 FSM R. 86, 94-95 (Pon. 2023).
For purposes of summary judgment, an affirmative defense may be overcome by either disproving it or on the grounds that it is legally insufficient. An affirmative defense cannot be pled with only a conclusory statement, but must, in each instance, be tied to specific factual allegations so as to give the plaintiff notice of the defense. Bank of the FSM v. Sigrah, 24 FSM R. 86, 95 (Pon. 2023).
When pleading fraud, the pleader must state the time, place, and content of the false misrepresentation, the fact misrepresented and what was obtained as a consequence of the fraud. Misrepresentation, including negligent misrepresentation, and fraud are affirmative defenses that must be alleged with particularity. A defendant who alleges no facts to support its conclusory statement of fraud as an affirmative defense, wholly fails to satisfy the heightened pleading standard set forth in Rule 9(b), and the defense will be stricken accordingly. Bank of the FSM v. Sigrah, 24 FSM R. 86, 95 & n.5 (Pon. 2023).
Fraud and misrepresentation affirmative defenses are legally insufficient and are overcome on a summary judgment motion when the borrower asserts both misrepresentation and concealment of the contract's terms, but does not allege the specific terms that the lender misrepresented to her or intentionally prevented her from knowing and she does not allege the time or place of the misrepresentation or concealment or her reliance thereon. Bank of the FSM v. Sigrah, 24 FSM R. 86, 95 (Pon. 2023).
An estoppel affirmative defense is legally insufficient when it was pled with only a conclusory statement because facts must also be pled. Bank of the FSM v. Sigrah, 24 FSM R. 86, 96 (Pon. 2023).
To be unconscionable, the contract term must be so one-sided as to be oppressive. Bank of the FSM v. Sigrah, 24 FSM R. 86, 96 (Pon. 2023).
A restructured loan was not unconscionable and the unconscionability affirmative defense was overcome when the undisputed evidence is that the borrower asked for a restructuring because of her and her husband's financial situation and the restructuring's purpose was to enable a lower monthly payment, and the lender did so by lengthening the loan term and without changing the interest rate although the restructuring did not significantly reduce the borrower's debt burden and when the borrower failed to assert unconscionability in her opposition, thereby waiving it. Bank of the FSM v. Sigrah, 24 FSM R. 86, 96 (Pon. 2023).
A promissory note's term that payments will be applied first to any unpaid credit insurance premiums, accrued to the date of receipt of payment; then to any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any late charges is in accord with applicable law because the general rule is that in applying partial payments to an interest-bearing debt which is due, in the absence of an agreement or statute to the contrary, the payment will be first applied to the interest due. Bank of the FSM v. Sigrah, 24 FSM R. 86, 96 (Pon. 2023).
Exceeding the allowable interest rate subjects the creditor to forfeiture of interest and double liability on interest rates, and costs and reasonable attorneys' fees. Bank of the FSM v. Sigrah, 24 FSM R. 86, 97 (Pon. 2023).
A summary judgment movant has overcome a usury affirmative defense when both the contractual rate and the actual rate charged were within the statutory limits. Bank of the FSM v. Sigrah, 24 FSM R. 86, 97 (Pon. 2023).
A misrepresentation and fraud counterclaim is overcome on summary judgment when the counterclaimant fails to state the time, place, and content of the false misrepresentation, the fact misrepresented and what was obtained as a consequence of the fraud and when the allocation of interest was in accord with the promissory note's express terms. Bank of the FSM v. Sigrah, 24 FSM R. 86, 97 (Pon. 2023).
When, on summary judgment, it is shown that the borrower agreed to and was charged an annual interest rate below the maximum rate set forth in 34 F.S.M.C. 203, the borrower's usury counterclaim is overcome. Bank of the FSM v. Sigrah, 24 FSM R. 86, 97 (Pon. 2023).
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DENNIS L. BELCOURT, Associate Justice:
This matter came before this Court on September 19, 2022 on a hearing1 on the motion of Plaintiff and Counter-defendant Bank of the Federated States of Micronesia (BOFSM) for summary judgment, filed on December 23, 2020, in which it sought summary judgment in its favor and against Defendant and Counterclaimant Yoslyn G. Sigrah (Ms. Sigrah) on its one cause of action in its complaint against her and on the two counts of her counterclaim against BOFSM. For reasons explained below, the motion is granted in part and denied in part as to the complaint and granted as a whole as to the counterclaim.
BOFSM initiated this action against Ms. Sigrah by filing a complaint on July 2, 2018 that Ms. Sigrah had defaulted on a promissory note she signed on December 11, 2015 to borrow the sum of $17,220.37 as a consumer loan. The complaint asserted that Ms. Sigrah executed a promissory note on or about that date as a consumer loan at 18% interest per annum. Not a new loan, it was a "rewrite" of previous loans entered into on August 22, 2012, March 18, 2013, and September 23, 2014. It further asserts Ms. Sigrah defaulted on the loan, after which it was accelerated. The complaint prays for the principal amount of $17,220.37, plus interest, reasonable attorney's fees and costs.
On September 7, 2018, Ms. Sigrah answered the complaint, alleging that the $17,220.37 loan was the restructuring of a prior loan "and that there was never any $17,330.37 loan cash proceeds given to defendant." Ms. Sigrah stated as affirmative defenses misrepresentation, unconscionability, fraud, estoppel, that the promissory note had terms that were illusory, usurious, extremely unjust, and contrary to fair business practices, and that BOFSM concealed the unfair terms of the note and the arbitrary and capricious allocations of loan repayments. She further asserts an affirmative defense of estoppel, accord and satisfaction.
In Ms. Sigrah's counterclaim, she sets forth two counts. Count one asserts misrepresentation and fraud in BOFSM's reference to the suit as on an original loan, rather than a suit on a restructuring loan; that the claim of $17,220.37 is not accurate (it does not accurately reflect the complete loan payment history) and that BOFSM allocated all payments to interest. Count two asserts a violation of the usury law by BOFSM charging interest rates that "far exceeded the usury statutory caps of 15% and 24%." Counterclaim, para. 8.
BOFSM filed a reply to the counterclaim on September 20, 2018, stating six affirmative defenses.
On December 23, 2020, BOFSM filed and served by mail its motion for summary judgment, which included an affidavit of Norbert Oliver, recovery officer for BOFSM, and eleven exhibits (A-L) in support thereof. BOFSM submits the affidavit and exhibits as its proof of the loan history with Ms. Sigrah.2
According to the affidavit and exhibits, the loan history between Ms. Sigrah and BOFSM is clear. It began with a loan of $5,000 on August 28, 2012, followed by a loan of $15,399.31 on March 13, 2018. Both these first two loans resulted in checks directly issued to Ms. Sigrah, minus loan processing fees of $25 each and, in the case of the March 18, 2013 loan, withholding of $394.31 for credit life insurance.
On September 23, 2014, Ms. Sigrah took out a third loan from BOFSM, with a maturity date of September 25, 2018, this time borrowing $16,569.28, to pay the balances of the August 28, 2012 loan ($2,643.06 of which was remaining) and the March 18, 2013 loan ($13,302.47 of which was remaining). The purpose of this loan was to consolidate the two prior loans. The amount borrowed as reflected in the promissory note for the September 23, 2014 loan (Exhibit G) exceeded the balances on the two prior loans by $623.75. Figuring in credit life insurance, a loan processing fee, and a secured filing fee, as shown on exhibit H, the balance charged against Ms. Sigrah for the September 23, 2014 loan exceeds the amount borrowed as showing in the promissory note by $25.96.
On September 1, 2015, Ms. Sigrah wrote to BOFSM to request that BOFSM restructure her loan to reduce her monthly payment. Ex. I. On December 11, 2015, Ms. Sigrah took out a fourth loan from BOFSM, signing a promissory note (Exhibit J), wherein she promised to pay $17,220.37 plus 18% interest over sixty-six months, with a maturity date of June 15, 2021. As shown on Exhibit K to the motion ("Account Snapshot"), the sum of $16,212.45 of the proceeds was used to pay off the balance on the September 23, 2014 loan. The remaining portion of the loan proceeds was allocated to credit life insurance for $977.92, the loan processing fee of $25, and the recording fee of $5. The promissory note contemplated that proceeds of the loan might be applied to credit life insurance and other costs, but the record does not include anything indicating that Ms. Sigrah was intending to buy credit life insurance as part of the transaction.
According to the records provided by BOFSM, the first payment on the December 11, 2015 note was due on January 15, 2016, but Ms. Sigrah made her first payment on this new note on February 16, 2016 and thereafter made payments on March 29, 2016, July 5, 2016, and August 31, 2016, the last payment. Ms. Sigrah has since made no payments and, per the affidavit of Norbert Oliver dated December 22, 2020, she owes the principal amount of $17,220.37, interest through December 18, 2020 in the amount of $13,909.89, and late fees of $295.
The motion for summary judgment was served on Ms. Sigrah but she did not file an opposition or seek enlargement of time to do so before the deadline under FSM Rule of Civil Procedure 6(a), January 8, 2021. Ms. Sigrah instead filed a motion to enlarge the time for filing an opposition on January 27, 2021, nineteen days late. In her motion, she stated that she had received the summary judgment motion in the mail on January 13, 2021 and that same day sought opposing counsel's acquiescence to a reasonable enlargement. Inexplicably, she waited two weeks to prepare and file the two-page request for enlargement. Her motion requested the new due date be February 22, 2021, because of her "other prior commitments." Moreover, her motion to enlarge contained an oddly worded certificate, dated on January 25, 2021, two days before filing, stating not that the motion had been served, but that it "will be duly served."
Although BOFSM has not denied receiving the motion for enlargement and did not file an opposition to the motion to enlarge, this Court denied the motion. It read her motion to say that she only checked her mail on January 13, 2021. The Court found the certificate of service to be defective and, noting that the Court must rely upon and presume a certificate's accuracy, stated it could not rely on the certificate in this instance. The Court also made note that Ms. Sigrah had been admonished for lying about service of process (in the capacity as an attorney) in an appeal in a prior case.
On April 23, 2021, Ms. Sigrah filed an opposition to BOFSM's motion for summary judgment, to which BOFSM filed a reply on April 29, 2021. Her opposition claims confusion over how she took out four loans but did not get any new payouts on the latter two loans. It also challenges the need for credit life insurance on the extended loan and the accuracy of the loan figures, loan proceeds, credit insurance charges, and payments posted in the ledgers. The opposition included Ms. Sigrah's affidavit (and exhibit A) in which she listed payments of about $1,7503 that she states she made that aren't reflected on BOFSM's exhibits B, F, H, and K. She only provided backup documentation for one payment, dated on December 11, 2015, in the amount of $379.42, on the September 23, 2014 promissory note. However, Ms. Sigrah fails to note that page two of BOFSM's exhibit K shows two payments dated December 11, 2015, which, added together, equal $379.42. Ms. Sigrah did not include in her affidavit any unaccounted-for payments on the December 11, 2015 note, which is the note being sued on.
On April 29, 2021, BOFSM filed a reply brief supporting its motion for summary judgment. On May 12, 2021, this Court, the Honorable Chief Justice Dennis Yamase presiding, issued an order striking the opposition and a motion to enlarge time that Ms. Sigrah had filed afterwards, holding BOFSM's reply in abeyance. The basis for denial was that Ms. Sigrah attempted to file a motion to enlarge time submitted without a certificate of service. A subsequent certificate of service was filed on May 3, 2021, which indicates service of the motion to enlarge time was served on opposing counsel on April 27, 2021. This Court did not accept this second motion for enlargement of time, and it therefore struck the Ms. Sigrah's opposition. The order striking the opposition was without prejudice, such that Ms. Sigrah could refile a motion for enlargement of time to have her opposition considered. Ms. Sigrah did not refile the motion to enlarge time to have her opposition considered prior to the hearing on the motion for summary judgment, but at the September 2022 hearing asked for her opposition to be considered.
Grounds exist for enlargement requested after the relevant time period if Ms. Sigrah's failure to file a timely opposition is due to "excusable neglect." FSM Dev. Bank v. Neth, 17 FSM R. 131, 133 (Pon. 2010); FSM Civ. R. 6(b). Excusable neglect may also be a basis for setting aside a judgment. FSM Civ. R. 60(b)(1). The excusable neglect analysis begin with "1) an explanation of the movant's diligent and good faith efforts and 2) the lack of prejudice to the opposing party, but good-[faith] efforts and lack of prejudice are not enough to justify a finding of excusable neglect. Excusable neglect does not exist when there are possible methods by which the situation may have been avoided." Neth, 17 FSM R. at 134. On the other hand, "public policy favors court judgments be on the merits." Medabalmi v. Island Imports Co., 10 FSM R. 32, 35 (Chk. 2001). A summary judgment granted due to procedural violations, such as highlighted in this Court's May 12, 2021 order, would be a judgment that is not on the merits.
Granting credence to Ms. Sigrah's implied representation that the motion for summary judgment did not reach her post office box until January 13, 2021, I find her subsequent conduct, in which she engaged in prolonged delays and disregarded the rules of civil procedure, not to be excusable neglect. She is an experienced litigator, so her pro se status does not excuse her lack of adherence to the rules. Her lack of diligence, manifested in her failure to avail herself of opportunities to correct mistakes brought to her attention by this Court, including neglecting to renew her motion to enlarge for more than a year, only doing so orally at the hearing on September 19, 2022, are substantial. On the other side of the equation, BOFSM has not raised contentions that it has suffered prejudice, and there is the concern that Ms. Sigrah's issues be aired and given due consideration. A final, determinative factor is that hearing Ms. Sigrah's views can serve to aid this Court's understanding of the issues and therefore its decision-making process.
I therefore grant Ms. Sigrah's request that her opposition be considered.
The standard for granting a motion for summary judgment is whether "the pleadings, depositions, answers to interrogatories, and admissions on file, taken together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FSM Civ. R. 56(c). See also Bank of Guam v. Island Hardware, Inc., 2 FSM R. 281, 284 (Pon. 1986). Moreover, the burden is on the movant, and the Court, in reviewing a motion for summary judgment, must view the facts, and any inferences deduced therefrom, in the light most favorable to the party opposing the summary judgment. Id. Of course, before summary judgment will be granted it must be clear what the truth is, Poller v. Columbia Broadcasting Sys., Inc., 368 U.S. 464, 82 S. Ct. 486, 7 L. Ed. 2d 458 (1962), and any doubt as to the existence of a genuine issue of material fact will be resolved against the movant
Berman v. Santos, 7 FSM R. 231, 235 (Pon. 1995).
The order of burdens in a motion for summary judgment is as follows:
[T]he moving party has the initial burden of showing, through the pleadings, depositions, etc., that there are no triable issues of fact. Once the moving party has done this, however, the burden shifts to the non-moving party. It is not enough for the non-moving party to simply disagree with the moving party and attempt to show, through affidavits or otherwise, that there is a triable issue. The party opposed to the motion "must show that there is enough evidence supporting his position to justify a decision upholding his claim by a reasonable trier of fact. If the evidence, affidavits, and pleadings present a sufficient disagreement to require submission to a fact finder, then the motion should be denied. If, however, the evidence is so one-sided that one party must prevail as a matter of law, then the motion should be granted."
Alik v. Kosrae Hotel Corp., 5 FSM R. 294, 295-6 (Kos. 1992) (citations omitted).
FSM Rule of Civil Procedure 56(e) requires as follows:
Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith. The court may permit affidavits to be supplemented or opposed by depositions, answers to interrogatories, or further affidavits.
The initial burden is thus on the movant, in this case BOFSM, to substantiate, with competent evidence that there are no triable issues of fact and that movant is entitled to judgment as a matter of law. The scope of the burden on movant is not limited to BOFSM substantiating the allegations of the complaint or negating the allegations of Ms. Sigrah's counterclaim; it also includes addressing affirmative defenses. Andrew v. Heirs of Seymour, 19 FSM R. 331, 340 (App. 2014) (In order to be entitled to summary judgment, a movant, even when the motion is unopposed, must overcome all of the adverse parties' affirmative defenses and counterclaims. In order to succeed in a summary judgment motion, a movant who is plaintiff must also overcome all affirmative defenses that the defendant has raised).
A. Has BOFSM Established a Prima Facie Cause of Action?
On July 2, 2018, BOFSM brought this lawsuit to collect on the December 11, 2015 promissory note executed by Ms. Sigrah, contending that Ms. Sigrah owed $17,220.37 in principal, accrued interest in the sum of $6,174.90 as of June 21, 2018, and interest thereafter at the rate of 18%, or $8.49 per day, and late charge fees, less credit for all payments received before entry of judgment. BOFSM's one cause of action in its complaint asserts that Ms. Sigrah had borrowed the sum of $17,220.37, with specific terms of repayment (monthly, over 65 months), with the final payment to take place on June 15, 2021. Attaching to the complaint, as an exhibit, a record of Ms. Sigrah's repayment history, BOFSM asserts that Ms. Sigrah defaulted on her obligations as spelled out in the note, making her last payment either on December 11, 2015 or August 31, 2016.4 In its motion for summary judgment filed December 23, 2020, BOFSM seeks an award of the loan principal payment in the amount of $17,220.37, interest through December 18, 2020 in the amount of $13,909.89, late charge fees in the amount of $295.00, and attorneys' fees as set forth in the December 11, 2015 promissory note.
While BOFSM's complaint does not categorize its cause of action, at oral argument BOFSM characterized it as a breach of contract action. The elements of a breach of contract claim are: 1) a valid contract, 2) a material breach, and 3) resulting damages. FSM v. GMP Hawaii, Inc., 17 FSM R. 555, 570 (Pon. 2011). The elements of a valid contract are offer, acceptance, consideration, and definite terms. Pohnpei Transfer & Storage, Inc. v. Shoniber, 21 FSM R. 14, 17 (Pon. 2016).
The record before this Court, including the parties' exhibits, establishes, prima facie, the elements of a valid contract (the December 11, 2015 promissory note) and breach thereof, with damages due to the breach of contract. BOFSM authenticated each of the promissory notes and the payment history through the affidavit of Norbert Oliver. Ms. Sigrah did not object to his affidavit or the exhibits, and thus waived objections thereto. United States v. Dibble, 429 F.2d 598, 602 (9th Cir. 1970) (concurring opinion); Brown v. Ohio Cas. Ins. Co., 409 N.E.2d 253, 256 (Ohio Ct. App. 1978); United States ex rel. Austin v. Western Elec. Co., 337 F.2d 568, 574-75 (9th Cir. 1964) (failure to object is a waiver of objections). BOFSM has thus put forward a prima facie basis for summary judgment as to Ms. Sigrah's liability on the December 11, 2015 promissory note.
One issue remains concerning BOFSM's prima facie case affecting the amount. That issue is whether the loan proceeds were properly charged when BOFSM deducted for credit life insurance. Ms. Sigrah questions why she was charged for the credit life insurance repeatedly. She provided as exhibit C to her opposition a copy of an application dated December 11, 2015, covering the loan obligation commencing the same date. The copy she provided was apparently signed by the agent for the insurance company, but not by her. The premium amount, which is also reflected on BOFSM's exhibit K, was $977.82. The total net life insurance premiums she paid covering the three loan periods, from March 18, 2013 to the maturity date of her last loan, June 15, 2021, was $1,600.41.
While the December 11, 2015 promissory note that Ms. Sigrah signed (exhibit J) provided for deduction of unpaid credit life insurance, it did not by its terms mandate that she obtain or agree to coverage. That there was an obligation on the part of Ms. Sigrah for credit life insurance is part of BOFSM's prima facie case as to the amount of her liability. Without a showing that Ms. Sigrah agreed to take out a policy, BOFSM cannot include the credit life insurance premiums it paid in calculating her liability.
BOFSM has established a prima facie case for Ms. Sigrah's liability as established in the Affidavit of Norbert Oliver and exhibits thereto, less the amount withheld for the credit life insurance premium on December 11, 2015, and interest attributable thereto.
B. Has Ms. Sigrah Set Forth Evidence Supporting a Genuine Issue of Material Fact as to Her Liability?
While Ms. Sigrah states flatly in her memorandum of points and authorities that there was "no 2015 loan," she does not swear to such in her affidavit nor counter Mr. Oliver's affidavit authenticating the promissory notes and payment histories. Rather, the Court finds that what she is saying is that the December 11, 2015 promissory note does not include new money—it is, as she and BOFSM agree, a rewriting or restructuring of the earlier agreements. In fact, in her affidavit submitted in opposition to the motion for summary judgment, Ms. Sigrah admits that she took out loans, and states that she paid more than $15,423.72 to BOFSM between September 13, 2012 and December 11, 2015 on the loans. Even if the $19,975 in loans she received were interest-free and carried no fees, she would owe nearly $3,000 to BOFSM, without adding in interest and fees she has incurred since the first loan. Effectively, Ms. Sigrah admits that she owes money to BOFSM. Given that she ceased making payments in 2016 while still owing money, I find that she was and is in default on her obligation to repay the amount owed by her.
While Ms. Sigrah has in effect conceded that she owes BOFSM money on the loans, the question remains whether she has nonetheless raised a genuine issue as to the amount of her loan obligation based on her dispute as to her payment history on the earlier promissory notes. In her affidavit and in exhibit "A" to her opposition to the motion for summary judgment, Ms. Sigrah contests the payment histories on the promissory notes dated March 18, 2013 and September 23, 2014, provided in BOFSM's Exhibits F and H. The point that needs to be resolved is whether Ms. Sigrah can assert, as a genuine issue of material fact, payments she claims to have made on antecedent promissory notes without being duly credited in calculating the loan proceeds on the December 11, 2015 promissory note.
This Court was faced with a similar circumstance, coincidentally involving the same defendant (and her spouse), in Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. 600 (Pon. 2020). In that case, the defendants moved to have set aside a default judgment against them on an amended and restated promissory note, and, as here, asserted that the bank was missing payments from a previous promissory note, which was restructured into the version that was before the Court. The Court denied the motion, determining that in signing the amended and restated promissory note, the defendant "accepted that offer and agreed to those 'restructured' terms and agreed and acknowledged that their remaining indebtedness to the bank was" as stated in the amended and restated promissory note. Id. at 607. In this instance, Ms. Sigrah has not alleged grounds to rewrite the promissory note through reformation. Cf. FSM Dev. Bank v. Arthur, 13 FSM R. 1, 10 (Pon. 2004) (When a loan agreement and promissory note that were the writings memorialized an agreement are reformed to accurately reflect the parties' agreement, the court is not creating an obligation where none currently exists by reforming the writings. The court is merely reforming the writings to reflect an obligation that already exists.).
I find that the affidavit and exhibits submitted by BOFSM establish a prima facie case for partial summary judgment that Ms. Sigrah is in breach of contract with respect to the December 11, 2015 promissory note and that she thereby has an unsatisfied loan obligation. A remaining triable issue of fact exists whether Ms. Sigrah was correctly charged for credit life insurance.
C. Has BOFSM Overcome Ms. Sigrah's Affirmative Defenses?
1. Misrepresentation, Unconscionability, Fraud and Estoppel and Fraud
For purposes of summary judgment, an affirmative defense may be overcome by either disproving it or on the grounds that it is legally insufficient. FSM Dev. Bank v. Carl, 22 FSM R. 365, 371 (Pon. 2019). An affirmative defense cannot be pled with only a conclusory statement, but must, in each instance, be tied to specific factual allegations so as to give the plaintiff notice of the defense. Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. at 605 (Pon. 2020). When pleading fraud the pleader must state the time, place, and content of the false misrepresentation, the fact misrepresented and what was obtained as a consequence of the fraud. Pacific Agri-Products, Inc. v. Kolonia Consumer Coop. Ass'n, 7 FSM R. 291, 293 (Pon. 1995).
Misrepresentation5 and fraud are affirmative defenses that must be alleged with particularity. A defendant who "alleges no facts to support its conclusory statement of "fraud" as an affirmative defense, wholly fails to satisfy the heightened pleading standard set forth in Rule 9(b), and it will be stricken accordingly." Macayon v. FSM, 22 FSM R. 544, 555 (Chk. 2020).
Ms. Sigrah alleges that BOFSM misrepresented the purpose and terms of the December 11, 2015 promissory note, which she calls a restructuring agreement, and she states that BOFSM concealed arbitrary and capricious allocation of loan payments. She also states that the terms of the December 11, 2015 promissory note were "illusory, usurious, and extremely unjust."
Ms. Sigrah asserts both misrepresentation and concealment of the terms of the contract, but does not allege the specific terms that BOFSM misrepresented to her or intentionally prevented her from knowing. Nor does she allege the time or place of the misrepresentation or concealment or her reliance thereon. The fraud and misrepresentation affirmative defenses are therefore legally insufficient and are overcome.
Ms. Sigrah also asserted a defense that the December 11, 2015 promissory note is unconscionable and subject to estoppel. The estoppel defense is legally insufficient, as "[a]ffirmative defenses cannot be pled with only a conclusory statement; facts must also be pled. Macayon v. FSM, 22 FSM R. at 555 n.10 (Chk. 2020)."
To be unconscionable, the contract term must be so one-sided as to be oppressive. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 180 (Pon. 2017). The undisputed evidence in this regard is that Ms. Sigrah asked for a restructuring because of her and her husband's financial situation. BOFSM's Ex. I. The purpose of the "restructuring" was to "enable a lower monthly payment." Id. BOFSM did so by lengthening the loan term and without changing the interest rate. Compare, BOFSM Exs. I and J.
Objectively, the restructuring did not significantly reduce Ms. Sigrah's debt burden to address her change of circumstances in the manner she seems to have wished for, but it certainly alter the relationship to be grossly one-sided, oppressive, or "such as no man in his senses and not under delusion would make on the one hand, and as no honest or fair man would accept, on the other." FSM Dev. Bank v. Gilmete, 21 FSM R. at 180. Moreover, Ms. Sigrah failed to assert unconscionability in her opposition, and she therefore waived it. Macayon v. FSM, 22 FSM R. at 555.
2 Payment, Release, Accord and Satisfaction
Ms. Sigrah briefly elaborates on these affirmative defenses, claiming that she made payments. As evidenced by BOFSM's exhibit K, after Ms. Sigrah's one-month-late first payment on the December 11, 2015 Promissory note, she made three additional payments before ceasing in June of 2016, thus making only four of the sixty-five scheduled payments, all of which are reflected in BOFSM's motion. She complains that her payments have been allocated first to interest, not principal. However, Ms. Sigrah expressly agreed to this, in that the December 11, 2015 promissory note, which she signed, spells out the order in which payments are applied:
Payments include principal and interest. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid credit insurance premiums, accrued to the date of receipt of payment; then to any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any late charges.
Exhibit J at 1.
The foregoing term of the promissory note is in accord with applicable law. "The general rule is that '[i]n applying partial payments to an interest-bearing debt which is due . . . in the absence of an agreement or statute to the contrary, the payment will be first applied to the interest due.'" Salomon v. Mendiola, 20 FSM R. 138, 140 (Pon. 2015) (citation omitted).
3. Violation of Usury Laws
Ms. Sigrah asserts usury as a defense, contending that BOFSM charges in excess of the statutory caps on interest.
As of the time of the loans at issue, the maximum annual percentage rate for consumer loans (such as Ms. Sigrah's) had been increased to 24 percent. 34 F.S.M.C. 203(3). Exceeding that interest rate subjects the creditor to forfeiture of interest and double liability on interest rates, and costs and reasonable attorneys' fees. 34 F.S.M.C. 206.
The agreed rate on the December 11, 2015 promissory note is eighteen percent (18%) per annum. Ex. J. A review of her loan payment history, Exhibit L, shows that she was not charged in excess of 18%. For example for the thirty-three days from May 30, 2018 to July 2, 2018, she was charged as follows:
| Outstanding Principal Balance | Number of days in period/days in year | Interest charged | Interest charge as a % of principal for period | Annual rate |
|---|---|---|---|---|
| $17,220.37 | 33/365 | $280.24 | 1.627375% | 17.999754% |
Both the contractual rate and the actual rate charged are within the statutory limits. The usury claim is overcome.
D. Has BOFSM Overcome Ms. Sigrah's Counterclaims?
1. Misrepresentation and Fraud
This counterclaim is overcome for the same reasons as is the related affirmative defense. For example, Ms. Sigrah failed to state the time, place, and content of the false misrepresentation, the fact misrepresented and what was obtained as a consequence of the fraud. Pacific Agri-Products, Inc., 7 FSM R. at 293. Furthermore, the allocation of interest was in accord with the express terms of the promissory note.
2. Violation of the Usury Law
As stated with respect to the usury affirmative defense, Ms. Sigrah agreed to and was charged an annual interest rate below the maximum rate set forth in 34 F.S.M.C. 203. This counterclaim is overcome.
BOFSM's motion for summary judgment is granted in part and denied in part on its complaint and as a whole on the counterclaims. BOFSM has shown through affidavit and exhibits that it is entitled as a matter of law to summary judgment to its damages as requested, less the amount it charged for credit life insurance and associated interest. Denial of that amount is without prejudice. BOFSM shall submit a supplemental brief with regard to damage totals, including attorney's fees, within thirty (30) days. Ms. Sigrah will have thirty (30) days to file a responding brief.
_______________________________Footnotes:
1 BOFSM was (and is) represented by Stephen Finnen, Esq. Yoslyn Sigrah, a member of the bar at this moment under temporary suspension, represented herself.
2 BOFSM's moving papers note that Defendant was emailed on December 21, 2020 to alert her of the impending filing of the motion--in other words two days before filing. This Court has previously held that 24-hour notice is insufficient compliance with the certification requirement of FSM Rule of Civil Procedure 6(d). O'Sullivan v. Panuelo, 9 FSM R. 589, 599 (Pon. 2000). Counsel is reminded of the purpose of the Rule 6(d) certification, i.e., that a reasonable effort be made, and counseled that its abbreviated notice is not in the spirit of that rule.
3 The $1750 in payments that Ms. Sigrah includes in her list that do not show on the BOFSM's exhibits are as follows: 1. on the March 18, 2013 promissory note, a payment on December 27, 2013 in the amount of $515, a payment on April 4, 2014 in the amount of $165, and a payment on May 30, 2014 in the amount of $350; and 2. on the September 23, 2014 promissory note, a payment on February 13, 2015 in the amount of $287.11, and payments on October 28, 2015 in the amount of $60 and $403.09.
4 Paragraph 7 of the complaint has December 11, 2015 as the last payment date, while exhibit B to the complaint has the last payment date as August 31, 2016.
5 Misrepresentation includes negligent misrepresentation. See, e.g., Phillip v. Marianas Ins. Co., 12 FSM R. 301, 308 (Pon. 2004). See also Glen Holly Entertainment, Inc. v. Tektronix, Inc., 100 F. Supp. 2d 1086, 1093 (C.D. Cal.1999) ("Claims for fraud and negligent misrepresentation must meet the heightened pleading requirements of Rule 9(b)").
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