FSM SUPREME COURT TRIAL DIVISION
Cite as Acker v. FSM 24 FSM R. 001 (Pon. 2022)
JOAB EDMOND, MAGILINA EDMOND, SENELY
EDMOND, RODNEY EDMOND, KENYE R. EDMOND,
RAMSIN EDMOND, and FLORA EDMOND,
Plaintiffs,
vs.
ANNA MENDIOLA, individually and in her official
capacity as the President and Chief Executive
Officer of the FSM Development Bank, PETER
ATEN, in his official capacity as Chairman of the
FSM Development Bank Board of Directors; and
FSM DEVELOPMENT BANK,
Defendants.
CIVIL ACTION NO. 2017-2002
ORDER GRANTING PARTIAL SUMMARY JUDGMENT
Larry Wentworth
Associate Justice
Decided: August 22, 2023
APPEARANCES:
For the Plaintiff:
Yoslyn G. Sigrah, Esq.
P.O. Box 3018
Kolonia, Pohnpei FM 96941
For the Defendant:
Nora E. Sigrah, Esq.
P.O. Box M
Kolonia, Pohnpei FM 96941
* * * *
When a party, either in support or in opposition to a Rule 12(b)(6) motion to dismiss for the failure to state a claim, submits matters to the court outside of the pleadings, the court has two options – it may either accept those outside matters and treat the motion as one for summary judgment under Rule 56 or it may exclude those matters and continue to treat the motion as one for dismissal for failure to state a claim upon which relief can be granted. Edmond v. Mendiola, 24 FSM R. 239, 243 (Kos. 2023).
When there is no reason to exclude the outside matters that are presented with a Rule 12(b)(6) motion, the court must treat the motion as one for summary judgment once all parties have had a reasonable opportunity to present all material made pertinent to such a motion under Rule 56. Edmond v. Mendiola, 24 FSM R. 239, 243 (Kos. 2023).
An independent action in equity to set aside a judgment must satisfy five elements: 1) a judgment which ought not, in equity and good conscience, to be enforced; 2) a good defense to the alleged cause of action on which the judgment is founded; 3) fraud, accident, or mistake which prevented the defendant in the judgment from obtaining the benefit of his or her defense; 4) the absence of fault or negligence on the defendant's part; and 5) the absence of any adequate remedy at law. The absence of any one element of an independent action will preclude relief, in particular, the failure to show a good defense. Edmond v. Mendiola, 24 FSM R. 239, 244 (Kos. 2023).
The alleged lack of personal jurisdiction over certain former defendants is not a defense available to the remaining plaintiffs in the case because a party cannot assert the rights of another (a third party) as the party's own. Edmond v. Mendiola, 24 FSM R. 239, 245 (Kos. 2023).
Fraud on the court is the most egregious misconduct directed to the court itself, such as bribery of a judge or fabrication of evidence by counsel, which must be shown by clear, unequivocal, and convincing evidence. Edmond v. Mendiola, 24 FSM R. 239, 245 (Kos. 2023).
Fraud on the court is a lawyer's or a party's misconduct so serious that it undermines or is intended to undermine the integrity of the judicial proceeding. Edmond v. Mendiola, 24 FSM R. 239, 245 (Kos. 2023).
Rule 60(b) permits an independent action for relief from a judgment to be based on fraud upon the court. A grant of relief for fraud on the court requires that: 1) the fraud be directed to the judicial machinery itself and is not fraud between the parties or fraudulent documents, false statements, or perjury; 2) the fraud involves the most egregious conduct, such as bribery of a judge or the fabrication of evidence in which an attorney is implicated; 3) the party perpetrating the fraud acted with an intent to deceive or defraud the court, and 4) the fraud must have actually deceived the court. Edmond v. Mendiola, 24 FSM R. 239, 245 (Kos. 2023).
Civil Procedure Rule 60(b) does not limit the power of a court to entertain an independent action to set aside a judgment for fraud upon the court. Edmond v. Mendiola, 24 FSM R. 239, 245 n.3 (Kos. 2023).
Rule 9(b) requires that in allegations of fraud, the circumstances constituting the fraud must be pled with particularity. When fraud is alleged, particularity is a pleading requirement that applies with equal force to independent actions brought under Rule 60(b). Rule 9(b)'s particularity requirement applies to allegations of fraud on the court, even if made in an independent action for relief from judgment, as well as generic fraud allegations. Edmond v. Mendiola, 24 FSM R. 239, 245 (Kos. 2023).
While the court must first look to FSM sources of law, when the court has not previously construed an aspect of an FSM civil procedure rule which is identical or similar to a U.S. counterpart, it may look to U.S. sources for guidance such as when the court has not previously considered Rule 9(b)'s application to fraud on the court claims. Edmond v. Mendiola, 24 FSM R. 239, 246 n.4 (Kos. 2023).
A fairly specific fraud allegation that a February 25, 2009 loan payment claim was false and that it was made to the court to deceive the court into believing that the statute of limitations on a loan had not expired manages the bare minimum of particularity to meet Rule 9(b)'s pleading requirement. Edmond v. Mendiola, 24 FSM R. 239, 246 (Kos. 2023).
An exhibit's existence makes it difficult for the plaintiffs to prove that the alleged fraud on the court actually deceived the court since the court could have relied on the exhibit instead of, or in tandem with, the February 25, 2009 payment allegation in an August 7, 2009 complaint because, at worst, the February 25, 2009 payment allegation would just be a false statement that did not rise to the level of fraud on the court. Edmond v. Mendiola, 24 FSM R. 239, 246 n.5 (Kos. 2023).
An ambiguous statement provides an insufficient factual basis upon which to base a grant of summary judgment. Edmond v. Mendiola, 24 FSM R. 239, 246 (Kos. 2023).
Whether a statute of limitations has expired, or has been tolled, or has started to run again, is based on factual matters, which, unless those matters are clear and unambiguous, will be unsuitable for summary judgment or motions to dismiss. Thus, when there are significant factual issues that may affect a statute of limitations defense or claim, a motion to dismiss on statute of limitations grounds will be denied. Edmond v. Mendiola, 24 FSM R. 239, 247 (Kos. 2023).
A statute of limitations defense may be raised by a Rule 12(b)(6) motion, or, if affidavits are filed with the motion, by a Rule 56 summary judgment motion, as well as by the answer, but if there is a question of fact about the defense's existence, the issue cannot then be determined on affidavits and must be raised in the answer. Edmond v. Mendiola, 24 FSM R. 239, 247 n.6 (Kos. 2023).
Actual proof of either a February 25, 2009 or a June 2006 loan payment would have been enough to grant the defendants summary judgment on both the plaintiffs' fraud allegation and their statute of limitations cause of action because if only one of the payments was proven, then not only would the plaintiffs' fraud allegation be disproved but also the statute of limitations defense to the judgment for which relief is sought would be disproved. But when the defendants did not provide actual proof of either purported loan payment within the limitations period, the court must deny the defendants summary judgment on the plaintiffs' fraud and statute of limitations causes of action. Edmond v. Mendiola, 24 FSM R. 239, 247 (Kos. 2023).
As a matter of controlling law in the FSM, Title 30 does not create any private causes of action or defenses or a viable "good defense" for an independent action or state a claim for which relief could be granted. Edmond v. Mendiola, 24 FSM R. 239, 247 (Kos. 2023).
A non-performing loan is not necessarily an uncollectible loan. A non-performing loan is an outstanding loan that is not being repaid – neither payments on interest or principal are being made. An uncollectible loan is one where, if the lender were to make every reasonable effort to obtain payment, the lender is still unable to obtain any payment or the cost of obtaining that payment greatly exceeds the amount that could reasonably be expected to be obtained. Edmond v. Mendiola, 24 FSM R. 239, 248 n.8 (Kos. 2023).
A loan that is secured by mortgaged property (either real or personal) is not uncollectible so long as the mortgage can be foreclosed and the property sold and some payment collected. Edmond v. Mendiola, 24 FSM R. 239, 248 n.8 (Kos. 2023).
Since Title 30 does not create any private causes of action or defenses, it follows that the by-laws or regulations adopted under the bank's statutory authority, cannot create any private causes of action or good defenses either. Edmond v. Mendiola, 24 FSM R. 239, 248 (Kos. 2023).
When all actions or inactions complained of are taken by persons in their capacities as bank officers, dismissal of them in their individual capacities is proper. Edmond v. Mendiola, 24 FSM R. 239, 248 (Kos. 2023).
When an independent action's only purpose is to obtain relief from a civil judgment in another case, and some named defendants were not parties in that case; were not judgment-creditors in that case; and neither had the power nor the authority to enforce the judgment in the other case; and none of them was a successor-in-interest to the judgment-creditor and the judgment had not been assigned to any of them, the complaint in the independent action, as a matter of law, failed to state a claim against those other defendants upon which the court could grant relief. Edmond v. Mendiola, 24 FSM R. 239, 248 (Kos. 2023).
When neither bank officer was a party to a civil action judgment; when they were not judgment creditors, or successors in interest to any judgment creditor, or assignees of the judgment from which relief is sought including monetary damages; when, if the plaintiffs are successful in not only obtaining relief from judgment but also in obtaining monetary damages, any monetary damages they obtained would come solely from the FSM Development Bank defendant since that is to whom they have been making their payments; and when, if the plaintiffs were successful in invalidating the loan documents and the deed of trust on their property, it is the FSM Development Bank that is the counter party on those instruments, the bank officer defendants will be granted summary judgment in their favor because an independent action for relief from judgment will not lie against them. Edmond v. Mendiola, 24 FSM R. 239, 248-49 (Kos. 2023).
* * * *
LARRY WENTWORTH, Associate Justice:
This case has been reassigned to the current justice. Pending before the court are 1) Defendants FSMDB and Anna Mendiola's Motion to Dismiss, filed January 15, 2018, with supporting exhibits; 2) Plaintiffs' Opposition to Defendants FSMDB and Anna Mendiola's Motion to Dismiss, filed March 6, 2018; 3) Defendant John Sohl's1 Motion to Dismiss Complaint, filed May 16, 2018, with supporting exhibit; 4) Plaintiffs' Opposition to Defendant John Sohl's Motion to Dismiss, filed June 5, 2018; 5) Defendant John Sohl's Reply; Defendants FSMDB and Anna Mendiola's Joinder, filed June 20, 2018, with supporting exhibit; 6) Defendants' Supplement; Exhibit "A," filed June 21, 2018; and 7) Defendants' Second Supplement; Exhibit A, filed August 3, 2018.
The movants are granted partial summary judgment. The reasons follow.
Although the defendants move for dismissal for the failure to state a claim for which the court can grant relief, they rely, in part, on exhibits outside the pleadings. When a party, either in support or in opposition to a Rule 12(b)(6) motion to dismiss for the failure to state a claim, submits matters to the court outside of the pleadings, the court has two options – it may either accept those outside matters and treat the motion as one for summary judgment under Rule 56 or it may exclude those matters and continue to treat the motion as one for dismissal for failure to state a claim upon which relief can be granted. Fuji Enterprises v. Jacob, 21 FSM R. 355, 363 (App. 2017).
No reason to exclude this outside matter is apparent. When there is no reason to exclude the outside matters that are presented with a Rule 12(b)(6) motion, the court must treat the motion as one for summary judgment once all parties have had a reasonable opportunity to present all material made pertinent to such a motion under Rule 56. Pohnpei Arts & Crafts, Inc. v. Panuelo, 23 FSM R. 610, 615 (App. 2022); Estate of Gallen v. Governor, 21 FSM R. 477, 486 n.9 (Pon. 2018); Palasko v. Pohnpei, 20 FSM R. 90, 93 (Pon. 2015). The parties have had that reasonable opportunity.
On August 7, 2009, the FSM Development Bank filed Civil Action No. 2009-2003, in which it sued Joab Edmond, Magilina Edmond, Alik Edmond, Senely Edmond, Rodney Edmond, Kenye R. Edmond, Randy Edmond, Karen R. Edmond, Ramsin Edmond, Flora Edmond, and Makato Edmond for the repayment of a delinquent loan, originally issued in 1994 with the original maturity date of December 2000. On December 3, 2010, the bank obtained a default judgment against all of the Edmond defendants.
On November 21, 2017, the plaintiffs herein, Joab Edmond, Magilina Edmond, Senely Edmond, Rodney Edmond, Kenye R. Edmond, Ramsin Edmond, and Flora Edmond (collectively "the Edmonds"), and others,2 filed this action for relief from the Civil Action No. 2009-2003 judgment. They allege: 1) that their due process rights were violated when the Civil Action No. 2009-2003 default judgment was entered because two Edmond defendants (or the heirs of one) had never been served the complaint and summons; 2) that the Bank's allegation of a February 25, 2009 loan payment was fraud; 3) that the statute of limitations barred Civil Action No. 2009-2003 collection action; 4) that the collection action violated FSM Code, Title 30; and 5) that the collection action violated the duty of good faith and fair dealing because the bank did not write off their loan as uncollectible.
The Edmonds seek relief from the Civil Action No. 2009-2003 judgment, thereby vacating all collection orders in that case; general compensatory damages; punitive damages; and attorney's fees. The Edmonds also seek an order voiding the 1994 promissory note, the underlying delinquent loan, and any other loan instruments generated for Loan No. D2C-1650, and the release of all liens against the Edmonds' property used as collateral in Loan No. D2C-1650.
Since the Edmonds seek relief from the Civil Action No. 2009-2003 judgment, this is an independent action in equity to set aside a judgment. (The damages the Edmonds seek are all related to payments that have been made on that judgment.)
An independent action in equity to set aside a judgment must satisfy five elements: 1) a judgment which ought not, in equity and good conscience, to be enforced; 2) a good defense to the alleged cause of action on which the judgment is founded; 3) fraud, accident, or mistake which prevented the defendant in the judgment from obtaining the benefit of his or her defense; 4) the absence of fault or negligence on the defendant's part; and 5) the absence of any adequate remedy at law. Setik v. Mendiola, 21 FSM R. 537, 552 (App. 2018). The absence of any one element of an independent action will preclude relief, in particular, the failure to show a good defense. Id. at 558. The motions focus on this element.
A. Alleged Good Defenses (Edmonds' Causes of Action)
1. Due Process and the Default Judgment
The Edmonds contend that they have a good defense to the Civil Action No. 2009-2003 default judgment because the court never had personal jurisdiction over Aliksru Edmond and Makoto Edmond since the Civil Action No. 2009-2003 complaint and a summons were not served on either of those two. Assuming for the purpose of the pending motions that this lack of service of process is true, this alleged lack of service would not be a good defense for any Edmond other than Aliksru Edmond and Makoto Edmond themselves (or their successors in interest).
Aliksru Edmond and Makoto Edmond, or rather their unnamed heirs, were earlier dismissed as parties plaintiff in this case. See note 2 supra. The alleged lack of personal jurisdiction over Aliksru Edmond and Makoto Edmond is not a defense available to the remaining plaintiffs in this case because a party cannot assert the rights of another (a third party) as the party's own. People of Tomil ex rel. Mar v. F/V Hwa Gwo No. 6, 23 FSM R. 268, 272 (Yap 2021); Fishy Choppers, Inc. v. M/V Marita 88, 22 FSM R. 187, 200-01 (Pon. 2019); Robert v. Chuuk Public Utility Corp., 22 FSM R. 150, 154 (Chk. 2019); FSM v. Kana Maru No. 1, 14 FSM R. 368, 373 (Chk. 2006); Sipos v. Crabtree, 13 FSM R. 355, 363 (Pon. 2005); Dorval Tankship Pty, Ltd. v. Department of Finance, 8 FSM R. 111, 115 (Chk. 1997).
Thus, this due process claim is not is good defense for any current Edmond plaintiff. The court must therefore disregard it, and grant the defendants summary judgment on this claim or cause of action.
2. & 3. Fraud and the Statute of Limitations
The court will consider the fraud and the statute of limitations claims together since they are intertwined in a manner that will soon become apparent.
a. Fraud (or Fraud on the Court)
The Edmonds contend that the defendants committed fraud when the bank in the Civil Action No. 2009-2003 Complaint, paragraph 6, falsely alleged that a loan payment had been made on February 25, 2009, thus starting the six-year statute of limitations running again. The Edmonds imply that if the bank had not made this allegation, the court would have dismissed Civil Action No. 2009-2003 as being filed after the statute of limitations had run. The defendants contend that the Edmonds' fraud allegation was not pled with the particularity required by Civil Procedure Rule 9(b), and therefore does not state a claim.
This appears not to be a generic allegation of fraud or misrepresentation but instead an allegation of fraud on the court. Fraud on the court is the most egregious misconduct directed to the court itself, such as bribery of a judge or fabrication of evidence by counsel, which must be shown by clear, unequivocal, and convincing evidence. Helgenberger v. Ramp & Mida Law Firm, 22 FSM R. 4, 12 (Pon. 2018); FSM Dev. Bank v. Ehsa, 20 FSM R. 286, 291 (Pon. 2016); Arthur v. Pohnpei, 16 FSM R. 581, 600 n.14 (Pon. 2009); Ramp v. Ramp, 11 FSM R. 630, 636 (Pon. 2003). Fraud on the court is a lawyer's or a party's misconduct so serious that it undermines or is intended to undermine the integrity of the judicial proceeding. Ehsa, 20 FSM R. at 291.
Rule 60(b) permits an independent action for relief from a judgment to be based on fraud upon the court.3 Arthur, 16 FSM R. at 600 n.14. A grant of relief for fraud on the court requires that: 1) the fraud be directed to the judicial machinery itself and is not fraud between the parties or fraudulent documents, false statements, or perjury; 2) the fraud involves the most egregious conduct, such as bribery of a judge or the fabrication of evidence in which an attorney is implicated; 3) the party perpetrating the fraud acted with an intent to deceive or defraud the court, and 4) the fraud must have actually deceived the court. Panuelo v. Sigrah, 22 FSM R. 341, 361 (Pon. 2019). These requirements are strictly applied because a finding of fraud on the court is exempt from time limits and because it permits the severe consequence of allowing a party to overturn the finality of a judgment. Id.
"Rule 9(b) requires that in allegations of fraud, the circumstances constituting the fraud must be pled with particularity. When fraud is alleged, particularity is a pleading requirement that applies with equal force to independent actions brought under Rule 60(b)." Setik, 21 FSM R. at 556 (citation and internal quotation omitted). Rule 9(b)'s particularity requirement applies to allegations of fraud on the court, even if made in an independent action for relief from judgment, as well as generic fraud allegations. See, e.g., Madonna v. United States, 878 F.2d 62, 66 (2d Cir. 1989) (complaint did not plead fraud on the court with particularity, dismissal affirmed); Vance v. United States, 60 Fed. App'x 236, 239 (10th Cir. 2003) (whether action is an independent action for relief from judgment because of fraud upon the court or a request to invoke the court's inherent power to set aside a judgment procured by fraud upon the court, "in either event, when fraud is alleged, it must be pleaded with particularity"); Ellis v. Crockett, 451 P.2d 814, 823 (Haw. 1969) (plaintiffs in independent action alleging fraud on the court must show the court who made false representations to the court, what the substance of those was, and what the plaintiffs believe to be true facts); In re Marriage of Hoyt, 698 P.2d 418, 422-23 (Mont. 1985) (must plead all the elements of fraud on the court with particularity in an independent action for relief from judgment; mere suspicion of fraud is insufficient); Fraunhofer v. Price, 594 P.2d 324, 328-29 (Mont. 1979) (sufficiently detailed fraud upon the court complaint in independent action for relief satisfies Rule 9(b)'s particularity requirement).4
The doctrine of fraud upon the court is narrow and limited in scope and not every allegation of fraud rises to the level of fraud upon the court. Panuelo, 22 FSM R. at 361. In this case, the fraud allegation is fairly specific – that the allegation that there was a February 25, 2009 loan payment was false and was made to the court to deceive the court into believing that the statute of limitations on the Edmonds' loan had not expired. The Edmonds appear to have managed the bare minimum of particularity to meet Rule 9(b)'s pleading requirement.
b. Statute of Limitations
The Edmonds allege that the statute of limitations expired before the bank filed Civil Action No. 2009-2003. The defendants contend that even if there were no February 25, 2009 loan payment, any loan payment within the six-year period before Civil Action No. 2009-2003 was filed would suffice for them to prevail on this cause of action. As evidence of such a payment, the defendants ask the court to take judicial notice of Exhibit D, attached to the Civil Action No. 2009-2003 complaint. That exhibit is a "Notice of Default Deed of Trust" in both English and Kosraean, dated September 26, 2008, and filed with the Registrar at the Kosrae Land Court on October 1, 2008, as Document #13140. It states that "Joab Edmond and/or Magilina Edmond have failed to make any payments on the loan since June 2006."5 The defendants ask the court to infer from this averment that an Edmond made a loan payment sometime in June, 2006, and thus Civil Action No. 2009-2003 was filed within the six-year statute of limitations period.
However, this averment could mean either of two things. It could mean that someone actually made a loan payment in June 2006. Or it could mean that the bank's records were only searched that far back and there was no record of a loan payment in that time period. If the Notice of Default had affirmatively stated that the last loan payment was made on a certain day in June, 2006, then the statement would have been clear and unambiguous. Since it is not, it provides an insufficient factual basis upon which to base a grant of summary judgment. Berman v. Pohnpei, 22 FSM R. 377, 381 (Pon. 2019) (when the court cannot find an adequate factual basis for summary judgment on certain claims, the court cannot grant summary judgment on those claims); Iwo v. Chuuk, 18 FSM R. 252, 255 (Chk. 2012) (when court cannot determine when the statute of limitations for the plaintiff's claim started to run or if it was tolled, there is an inadequate factual basis to grant the defendant's summary judgment motion on a statute of limitations defense); Rudolph v. Louis Family, Inc., 13 FSM R. 118, 127 (Chk. 2005) (summary judgment will be denied when a sufficient factual basis to support it has not been developed); Marcus v. Truk Trading Corp., 10 FSM R. 387, 390 (Chk. 2001) (summary judgment denied when questions must be resolved before the movant can present a sufficient factual basis for summary judgment); FSM Dev. Bank v. Ifraim, 10 FSM R. 342, 346 (Chk. 2001) (no proper grounds to grant summary judgment motion when a factual basis was lacking).
Whether a statute of limitations has expired, or has been tolled, or has started to run again, is based on factual matters, which, unless those matters are clear and unambiguous, will be unsuitable for summary judgment or motions to dismiss.6 Thus, when there are significant factual issues that may affect a statute of limitations defense or claim, a motion to dismiss on statute of limitations grounds will be denied. Tilfas v. Kosrae, 21 FSM R. 81, 91 (App. 2016); Aunu v. Chuuk, 18 FSM R. 48, 51 (Chk. 2011) See also Pacific Fin. Corp. v. David, 21 FSM R. 5, 6 (Chk. 2016) (cannot be shown that there are no genuine issues as to any material fact on the defendant's statute of limitations affirmative defense when no admissible evidence was submitted to prove the last item alleged in the borrower's account – an alleged payment that would have restarted the six-year limitations period).
c. Fraud and Statute of Limitations Claims Not Dismissed
Actual evidence of either a February 25, 2009 or a June 2006 loan payment7 would have been enough to grant the defendants summary judgment on both the Edmonds' fraud allegation and the Edmonds' statute of limitations cause of action. If only a February 25, 2009 payment was proven, then not only would the Edmonds' fraud allegation be disproved but also the statute of limitations defense to Civil Action No. 2009-2003 would be disproved because a February 25, 2009 loan payment would show that Civil Action No. 2009-2003 was brought within the limitations period. If only a June 2006 loan payment was proven, then not only would the Edmonds' statute of limitations claim be disproved but the Edmonds' fraud allegation would also fail because the Edmonds would be unable to prove that the bank's allegation of a February 25, 2009 loan payment actually deceived the court into believing that Civil Action No. 2009-2003's August 7, 2009 filing was within the limitations period since Exhibit D to the Civil Action No. 2009-2003 complaint implied the existence of a June 2006 loan payment.
Since the defendants did not provide actual proof of either purported loan payment within the limitations period, the court denies the defendants summary judgment on the Edmonds' fraud and statute of limitations causes of action.
4. Alleged Title 30 Violations
The Edmonds allege that they are entitled to relief because Title 30, the statute creating and governing the FSM Development Bank, requires the bank to operate for the public's benefit, 30 F.S.M.C. 128, and therefore the bank, in their view, is not authorized to make a "profit" but must instead assist small businesses.
As a matter of controlling law in the FSM, Title 30 does not create any private causes of action or defenses. Setik v. Mendiola, 21 FSM R. 537, 556 (App. 2018). Thus, the Edmonds' Title 30 allegations do not provide them with a viable "good defense" for an independent action or state a claim for which relief could be granted. The defendants are therefore granted summary judgment on this claim.
5. Good Faith and Fair Dealing
The Edmonds allege that the defendants violated their duty of good faith and fair dealing because the bank did not write off their 1994 loan as uncollectible8 and cease all collection efforts. The Edwards contend that the bank's by-laws or regulations concerning loan write-offs create a cause of action in their favor and are a good defense to bank's Civil Action No. 2009-2003 collection efforts.
Since Title 30 does not create any private causes of action or defenses, Setik, 21 FSM R. at 556, it follows that the by-laws or regulations adopted under the bank's statutory authority, 30 F.S.M.C. 105(2), cannot create any private causes of action or good defenses either. The defendants are therefore granted summary judgment on this claim as well.
B. Individual Capacity
The Edmonds sue Anna Mendiola in both her individual and her official capacities. Mendiola moves that she be dismissed in her individual capacity, because the Edmonds' complaint does not allege any claims against her in that capacity.
A review of the Edmonds' complaint indicates that all of Mendiola's acts or omissions complained of were taken in the bank's interest and in Mendiola's capacity as the bank's Chief Executive Officer. When all actions or inactions complained of are taken by persons in their capacities as bank officers, dismissal of them in their individual capacities is proper. Setik, 21 FSM R. at 556. The dismissal of Anna Mendiola in her personal or individual capacity is granted.
C. Official Capacity
The defendants also moved to dismiss defendants Mendiola and Sohl (now replaced by Aten), who are being sued in their official capacity, since this is an independent action for relief from the judgment in Civil Action No. 2009-2003 and they were neither parties to nor judgment creditors in that case.
In Arthur v. Pohnpei, 16 FSM R. 581, 594-95 (Pon. 2009), the court ruled that when an independent action's only purpose is to obtain relief from a civil judgment in another case, and some named defendants were not parties in that case; were not judgment-creditors in that case; and neither had the power nor the authority to enforce the judgment in the other case, and none of them was a successor-in-interest to the judgment-creditor and the judgment had not been assigned to any of them, the complaint in the independent action, as a matter of law, failed to state a claim against those other defendants upon which the court could grant relief.
In this case, neither Mendiola nor Aten (or Sohl) was a party to Civil Action No. 2009-2003. Nor were they judgment creditors, or successors in interest to any judgment creditor, or assignees of the judgment in Civil Action No. 2009-2003. The Edmonds seek relief from the Civil Action No. 2009-2003 judgment and monetary damages. If the Edmonds are successful in not only obtaining relief from the Civil Action No. 2009-2003 judgment but also in obtaining monetary damages, any monetary damages they obtained would come solely from the FSM Development Bank defendant since that is to whom they have been making their payments. And if the Edmonds were successful in invalidating the loan documents and the deed of trust on their property, it is the FSM Development Bank that is the counter party on those instruments.
Therefore Mendiola and Aten, as defendants in their official capacities as bank officers, are hereby granted summary judgment in their favor because an independent action for relief from judgment will not lie against them.
Accordingly, the defendants are granted summary judgment in their favor on all of the plaintiffs' causes of action except the two based on fraud (on the court) and the statute of limitations. Anna Mendiola, in her individual capacity, and Anna Mendiola and Peter Aten, in their official capacities, are dismissed with prejudice as parties. Henceforth, the FSM Development Bank is the only party defendant and the case caption shall reflect that. Defendant FSM Development Bank has ten days to file its answer to the two remaining causes of action. FSM Civ. R. 12(a).
_______________________________Footnotes:
1 The plaintiffs named John Sohl as a defendant in his official capacity as Chairman of the FSM Development Bank Board of Directors. The bank suggested Sohl's death on the record on December 30, 2020. Since Sohl was sued in his official capacity, his successor in office, Peter Aten, was automatically substituted for him. FSM Civ. R. 25(d)(1).
2 The complaint's case caption also named the Heirs of Alik Edmond, the Heirs of Aliksru Edmond, and the Heirs of Makoto Edmund as plaintiffs. The court dismissed those plaintiffs, subject to reinstatement within 30 days, because the actual persons who were the plaintiffs were not named and because lawsuits must be brought in the name of the real parties in interest. Order Denying Recusal; Order Correcting Caption at 4-5 (May 4, 2020) (citing FSM Civ. R. 10(a); FSM Civ. R. 17(a); Setik v. Mendiola, 21 FSM R. 537 (App. 2018)). No action was ever taken to name these "heirs" or to "reinstate" them as plaintiffs.
3 Civil Procedure Rule 60(b) "does not limit the power of a court to entertain an independent action to . . . set aside a judgment for fraud upon the court." FSM Civ. R. 60(b).
4 While the court must first look to FSM sources of law, FSM Const. art. XI, § 11, when the court has not previously construed an aspect of an FSM civil procedure rule which is identical or similar to a U.S. counterpart, it may look to U.S. sources for guidance, see, e.g., Arthur v. FSM Dev. Bank, 14 FSM R. 390, 394 n.1 (App. 2006); Primo v. Pohnpei Transp. Auth., 9 FSM R. 407, 413 n.3 (App. 2000); Tom v. Pohnpei Utilities Corp., 9 FSM R. 82, 87 n.2 (App. 1999). The court has not previously considered Rule 9(b)'s application to fraud on the court claims.
5 Exhibit D's existence makes it difficult for the Edmonds to prove that the alleged fraud on the court actually deceived the court since the court could have relied on Exhibit D instead of, or in tandem with, the February 25, 2009 payment allegation in the August 7, 2009 complaint. Then, at worst, the February 25, 2009 payment allegation would just be a false statement that does not rise to the level of fraud on the court.
6 A statute of limitations defense may be raised by a Rule 12(b)(6) motion, or, if affidavits are filed with the motion, by a Rule 56 summary judgment motion, as well as by the answer, but if there is a question of fact about the defense's existence, the issue cannot then be determined on affidavits and must be raised in the answer. John v. Chuuk Public Utility Corp., 15 FSM R. 169, 172 (Chk. 2007).
7 Actual proof of any loan payment made after August 7, 2003, six years before Civil Action No. 2009-2003's filing date, would probably be sufficient to prove that Civil Action No. 2009-2003 was filed within the applicable six-year statute of limitations, 6 F.S.M.C. 805, and to therefore grant the defendants summary judgment on the Edmonds' fraud and statute of limitations causes of action.
8 Just because a loan is non-performing does not necessarily mean that it is an uncollectible loan. A non-performing loan is "[a]n outstanding loan that is not being repaid, i.e. neither payments on interest or principal are being made." BLACK'S LAW DICTIONARY 937 (6th ed. 1990). An uncollectible loan is one where, if the lender were to make every reasonable effort to obtain payment, the lender is still unable to obtain any payment or the cost of obtaining that payment greatly exceeds the amount that could reasonably be expected to be obtained. A loan that is secured by mortgaged property (either real or personal) is not uncollectible so long as the mortgage can be foreclosed and the property sold and some payment collected.
* * * *