FSM SUPREME COURT TRIAL DIVISION
Cite as Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258 (App. 2023)
CHRISTOPHER CORPORATION, PATRICIA (PEGGY)
SETIK, MARIANNE B. SETIK, ATANASIO SETIK,
2015)
IRENE SETIK WALTER, MARLEEN SETIK, JUNIOR
SETIK, ELEANOR SETIK SOS, JOANITA SETIK
PANGELINAN, MERIAM SETIK SIGRAH, and
CHRISTOPHER JAMES SETIK, GEORGE SETIK,
individually and d/b/a CHRISTOPHER STORE,
Appellants,
vs.
FSM DEVELOPMENT BANK,
Appellee.
APPEAL CASE NO. C2-2015
with Civil Action No. 2009-1009)consolidated with C1-2014 and C1-
with Civil Action No. 2009-1009)Civil Action No. 2007-1008
with Civil Action No. 2009-1009)consolidated
with Civil Action No. 2009-1009)
OPINION
Argued: September 21, 2021
Decided: August 31, 2023
BEFORE:
Hon. Dennis L. Belcourt, Associate Justice, FSM Supreme Court
Hon. Chang B. William, Specially Assigned Justice, FSM Supreme Court*
Hon. Mayceleen JD Anson, Specially Assigned Justice, FSM Supreme Court**
*Chief Justice, Kosrae State Court, Tofol, Kosrae
**Associate Justice, Pohnpei Supreme Court, Kolonia, Pohnpei
APPEARANCES:
For the Appellants:
Yoslyn G. Sigrah, Esq.
P.O. Box 3018
Kolonia, Pohnpei FM 96941
For the Appellee:
Nora E. Sigrah, Esq.
P.O. Box M
Kolonia, Pohnpei FM 96941
* * * *
When the court, through a single justice order, entered an order providing for a deceased appellant's personal representative to move, within 90 days, to substitute as a party, on the failing of which, the appeal may be subject to dismissal as to that appellant, and when no such motion was filed, a single justice order may dismiss her from the appeal. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 265 n.1 (App. 2023).
The standard of review of a trial division's ruling on a motion for relief from a judgment is whether the trial division abused its discretion. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 271 (App. 2023).
The standard of review on an appeal from a trial division's decision to issue an order in aid of judgment or writ of garnishment is whether the trial division has abused its discretion. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 271 (App. 2023).
To overturn a trial judge's denial of a motion to recuse, the appellant must show an abuse of discretion by the trial judge – that the trial judge clearly and indisputably abused her discretion when she denied the motion to disqualify. The appellate court will not merely substitute its judgment for that of the trial judge. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 271 (App. 2023).
The trial court abuses its discretion when its decision is clearly unreasonable, arbitrary, or fanciful; or it is based on an erroneous conclusion of law; or the record contains no evidence upon which the court could rationally have based its decision. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 271 (App. 2023).
The FSM Rules of Civil Procedure do not require amendment to the caption when a party is dismissed because a caption's contents are not part of a statement of a claim and the caption is not determinative as to the identity of the parties to the action. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 272 n.7 (App. 2023).
Someone wishing to become a party to ongoing litigation may do so subject to compliance with FSM Rule of Civil Procedure 24, which requires a timely motion by the intended intervenor. A motion to intervene not made is not a timely motion to intervene. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 272 (App. 2023).
Because the FSM Rules of Civil Procedure are construed to secure the just, speedy, and inexpensive determination of every action and because, when issues not raised by the pleadings are tried by the parties' express or implied consent, they shall be treated in all respects as if they had been raised in the pleadings, the trial division did not abuse its discretion in allowing previously dismissed defendants to intervene in the trial division below when the plaintiff did not object to the previously dismissed defendants' voluntary appearance and participation, those defendants are proper parties to the appeal. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 272 (App. 2023).
An affidavit not included in the court record but included in an appellants's appendix will not be considered by the appellate court because it has not been added to the record by proper means. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 273 n.9 (App. 2023).
If a Rule 60(b) motion falls within one of the six subparts of that rule and is timely, and it is requesting relief from a default judgment, the following criteria must be analyzed: 1) whether the default was willful, caused by the defendant's culpable conduct; 2) whether the defendant has a meritorious defense; and 3) whether setting aside the default would prejudice the plaintiff. To obtain relief from a default judgment, the defendant must have a meritorious defense – a defense that would constitute a complete defense to the action if proven at trial. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 275 (App. 2023).
Defaults and even default judgments are freely set aside in favor of hearing matters on the merits, but this principle does not apply to defaults properly ordered as discovery sanctions under FSM Rule of Civil Procedure 37(b)(2)(C). Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 275 (App. 2023).
When the alleged trial division error in granting a default judgment would at most constitute "mistake" under Rule 60(b)(1), and since the alleged error is on an appealable decision, the "reasonable time" for moving to set aside the allegedly erroneous error is 42 days, the time an aggrieved party has to appeal. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 275 (App. 2023).
Misrepresentation under Rule 60(b)(3) has a time limit of one year. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 275 (App. 2023).
Mistake, inadvertence, surprise, excusable neglect, or misrepresentation all fall under subparts (1) and (3) of Rule 60(b), and these categories all come within the one-year limitations period. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 276 (App. 2023).
A judgment or final order may be set aside as void under FSM Civil Rule 60(b)(4) if the court lacked personal jurisdiction over the party or the subject matter, or the court acted in a manner inconsistent with due process. Unlike other grounds for relief from judgment under Rule 60(b), the court does not have any discretion when the relief is sought because a judgment is either void or it is valid and if it is void the court must vacate it. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 276 (App. 2023).
For the trial court to have had personal jurisdiction over a defendant, the defendant must have been served with the complaint and summons. A court that lacks personal jurisdiction over a defendant cannot enter a valid judgment against that defendant. If a default judgment has been entered when the court lacked personal jurisdiction over the defendant, then that default judgment is void and relief can be sought under Rule 60(b)(4), for which there is no time limit to seek relief. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 276 (App. 2023).
Due process is met by notice reasonably calculated to reach interested parties. In other words, notice may be adequate even if not actual. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 276 (App. 2023).
A court may abuse its discretion by an unexplained, lengthy delay in ruling on a motion or by failure to exercise its discretion within a reasonable time. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 277 (App. 2023).
The trial court's failure to specify grounds or address whether relief from the judgment against one particular defendant was denied on procedural grounds or substantive grounds, leaves the appellate court unable to review the trial division's decision as to the validity of the judgment against that one defendant. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 277 (App. 2023).
The adequacy of service of process on a particular defendant is obviated by the fact that he was a named defendant when an attorney appeared on his behalf and thereafter did not raise the issue of deficiency of service before a judgment was entered against him. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 277 n.10 (App. 2023).
On a timely request, Rule 60(b) relief may be available from an order in aid of judgment. As with relief from other orders, the party requesting relief must show 1) that there is a basis for relief under any of the six subsections of Rule 60(b); 2) that relief is not time-barred; and 3) that relief would not be "a futile gesture," i.e. movant has a meritorious defense. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 278 (App. 2023).
If the trial division lacked subject matter jurisdiction to issue an order that a building be sold, the order selling the building would be void and must be set aside under Rule 60(b)(4). Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 279 (App. 2023).
An order in aid of judgment may provide for the sale of particular assets, such as unencumbered property that are not necessary for the debtor to meet his family and customary obligations, and payment of the net proceeds to the creditor. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 279 (App. 2023).
FSM courts have subject matter jurisdiction over probate matters insofar as there is an independent basis for jurisdiction under the FSM Constitution, such as 1) pursuant to Article XI, section 6(b) of the FSM Constitution, matters involving diversity jurisdiction and 2) pursuant to Article XI, section 6(a), matters involving the FSM or its instrumentality as a party. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 279-80 (App. 2023).
Sections 1409-10 grant broad authority to the trial division to order sale of debtor assets not exempted therein, with the objective of expeditiously satisfying the judgment. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 280 (App. 2023).
Failure on an attorney's part to act upon the notice resulting in a judgment against the clients does not in itself constitute a basis for setting aside the judgment. Generally, attorney negligence is not a basis for Rule 60(b)(1) relief. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 280 (App. 2023).
In its analysis of whether neglect is excusable, a court looks for 1) an explanation of the movant's diligent and good faith efforts and 2) the lack of prejudice to the opposing party. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 280 (App. 2023).
The trial division did not abuse its discretion in denying a Rule 60(b)(1) motion when the debtors failed to demonstrate a basis for an excuse for their failure to oppose the motion for an order in aid of judgment approving the sale of the property, or to appeal that order in a timely fashion, or to bring within a reasonable time a motion to set aside that order in aid of judgment. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 280 (App. 2023).
Due process requires that those defendants against whom there was no judgment in the matter, and who were not represented by the defendants' attorney be given the opportunity not only to contest their liability on the loan but also, if liable, to contest the post-judgment motions enforcing that liability because the sale order disposes of an asset to which they may have a claim, without affording them a right to a hearing. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 280 (App. 2023).
An attorney's post-judgment appearance on behalf of all named defendants appearance does not resolve the fact that persons who were not parties and against whom no judgment was obtained could be subjected to post-judgment orders enforcing that judgment against them. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 281 (App. 2023).
The interpretation of a written instrument, such as a power of attorney, is a question of law reviewed on appeal de novo. Powers of attorney are strictly construed. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 281 (App. 2023).
A power of attorney granting full authority to execute a loan and "any related matters pertaining to the same loan" does not extend that recognition of authority that a suit against the agent alone could bind the principals individually, jointly and severally, even without their participation. Thus, while the trial division properly ruled against all duly served defendants, it abused its discretion in ordering the sale without affording the unserved defendants a right to contest the debt and the remedy therefor. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 282 (App. 2023).
When a party moves for relief from judgment under Civil Procedure Rule 60(b)(4) on the ground that the judgment was void, there is no requirement, as is usual when a default judgment is attacked under Rule 60(b), that the movant show that he has a meritorious defense. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 282 n.13 (App. 2023).
When a person who was a party in her individual capacity was not sued as the administratrix of the estate, her presence in her personal capacity as a party to the lawsuit in her personal capacity does not cure the absence of some of the estate's heirs. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 282 n.14, 284 n.18 (App. 2023).
The failure of a person on notice of a motion to oppose the motion is generally deemed a consent to the motion, but even an unopposed motion lacking in good grounds may need to be denied because a court must have good grounds for granting even an unopposed motion. It could abuse its discretion in granting a motion for which grounds are lacking. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 283 (App. 2023).
The FSM Supreme Court has exclusive jurisdiction in cases in which the national government is a party except where an interest in land is at issue, and an interest in land is at issue when a material dispute emerges between the parties and is pled in court, but an interest in the land was not "at issue" because, while at the time of the order-in-aid-of-judgment motion, the land was owned by a debtor, and the debtors did not appear in opposition to the motion. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 283 (App. 2023).
A posthumous certificate of title raises more questions than it answers because when an owner of any interest in registered land dies, the Land Commission's duty is to cancel the original and duplicate certificates and issue new ones in the name(s) of the decedent's devisees or heirs and a certificate of title cannot be issued in the name of a person already deceased. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 284 & n.17 (App. 2023).
With the lack of personal jurisdiction over one or more of the estate beneficiaries properly before it and since that estate may own the land, the trial division lacked "good grounds" for an order in aid of judgment approving the sale of the land, and the order of sale will be vacated. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 285 (App. 2023).
A writ of garnishment may issue if 1) the garnisher has obtained a judgment against the debtor; 2) that the garnishee owes money to the debtor; and 3) the money owed to the debtor that is to be garnished is beyond what is reasonably necessary for the defendant to support himself and his dependents, such as salary and wages deemed necessary for support. The third requirement, as an exemption from collection, addresses individual defendants' ability to support themselves, and not that of corporations. FSM statutes are not unique in limiting debtors' exemptions to individual debtors, i.e., not applying them to corporate debtors. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 285 (App. 2023).
Since the motion for an order in aid of judgment, based on the outstanding unsatisfied judgment against a debtor and the showing of an ongoing financial obligation of a corporation to the debtor was thus supported by good grounds, the appellate court will affirm the order in aid of judgment, insofar as it directed the issuance of the writ of garnishment. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 285 (App. 2023).
The trial division, although lacking jurisdiction to grant a Rule 60(b) motion while the order from which relief is sought is on appeal, can consider the motion, and if inclined to grant the motion, state on the record that if the matter were before it that it would grant the motion. If the matter were thereafter remanded to it, it could give effect to its inclination and grant the Rule 60(b) motion. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 285-86 n.21 (App. 2023).
An assertion that counsel had no notice of the hearing on the motion for an order in aid of judgment that was controverted by certificates of service in the record below, and that is unsupported by reference to any evidence in the record, may not be considered. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 286 (App. 2023).
A factor to be considered in determining whether Rule 60(b) relief has been sought within a reasonable time is whether good reason has been presented for failure to act sooner. Courts have been unyielding in requiring that a party show good reason for the failure to take appropriate action sooner. Other factors that have been considered are whether the defendant was pro se and the prejudice to plaintiff of the delay. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 286 (App. 2023).
The trial division did not abuse its discretion in denying a motion for relief from judgment when the requested relief was based on what would amount to attorney negligence – failure of the attorney to communicate with the client – not excusable neglect, and, as such, relief was not warranted under Rule 60(b)(1). Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 286 (App. 2023).
Since the Chief Justice by rule may give special assignments to retired Supreme Court justices and judges of state and other courts; since judicial rules may be amended by statute; and since a statute already exists setting out the procedure for giving special assignments to retired Supreme Court justices and judges of state and other courts, the Chief Justice must follow that procedure. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 288 (App. 2023).
The Chief Justice is required by statute to give notice to the President and Congress upon the appointment of any temporary justice. While the concurrent issuance of a separate order of assignment, filed in the relevant case, is undoubtedly the better practice, no law or rule requires it. Christopher Corp. v. FSM Dev. Bank, 24 FSM R. 258, 288 (App. 2023).
* * * *
DENNIS L. BELCOURT, Associate Justice:
This matter is the consolidation of three appeals from post-judgment orders from Civil Action No. 2007-1008, which Plaintiff FSM Development Bank ("FSMDB") instituted to recover on the balance alleged to be owed it by Defendants-Appellants (hereinafter "Christopher Appellants") on a loan ("the loan" or "loan no. D4F-1800" ) taken out to complete improvements upon the premises formerly known as RS Plaza (currently known as L5). Specifically, the Christopher Appellants1 appeal from the trial division's February 14, 2014 order in aid of judgment and writ of garnishment (Appeal No. C1-2014); a July 17, 2015 order denying their July motion for relief from judgment, for stay of execution of judgment, and for injunctive relief (Appeal No. C1-2015); and an October 15, 2015 order denying Defendants' motion to set aside the July 17, 2015 order and disqualify Justice Lourdes Materne (Appeal C2-2015).
A. The Litigation
On September 3, 2007, FSMDB filed the complaint in Civil Case No. 2007-1008 alleging a breach of contract or unjust enrichment in the defendants' failure to repay loan no. D4F-1800.Named as defendants in the complaint were Christopher Corporation, Patricia (Peggy) Setik, Marianne B. Setik, the Estate of Manny Setik, Atanasio Setik, Vicky Setik Irons, Irene Setik Walter, Marleeen [sic] Setik, Junior Setik, Eleanor Setik Sos, Joanita Setik Pangelinan, Meriam Setik Sigrah, Christopher James Setik, George Setik, individually, and d.b.a. Christopher Store.
1. The Loan
The loan was made after September 11, 1997, when the wife of the late Raymond Setik, Marianne, and their children signed a document showing concurrence in naming Patricia (Peggy) Setik, one of Raymond and Marianne's daughters, as the representative of Christopher Store for the purposes of the proposed loan to be taken out from the FSMDB or on any matter related to the loan.2 On December 22, 1997, borrower Christopher Store, through General Manager Peggy Setik, executed a promissory note in the amount of $881,500.00 with interest rate of 9% annually from FSMDB for the construction of an additional two-story building on the existing three-story RS Plaza building. On the same date, Peggy Setik signed for borrower Christopher Store an assignment of income and exclusive possession wherein it transferred, assigned and delivered to FSMDB all of the rights, titles and interest to receive all daily, monthly, and yearly gross income derived from the hotel and commercial building known as Christopher Store and further assigned the exclusive right to possession of the hotel and commercial building premises, concession and operations. The agreement also included that Christopher Store would continue to operate the business and receive income from it as long as Christopher Store does not default on the loan. Moreover, the assignment of income and exclusive possession provided that in the event of default and, upon 15 days written notice to Christopher Store, FSMDB would be the sole and exclusive party entitled to possession of the hotel and commercial building and to operate the business and receive all income from it. Additionally, Vincent Irons, owner of parcel no. 011-A-19, Nenom (Part) where the RS Plaza building is constructed, also gave additional collateral of real property for the December 22, 1997 loan.
Around the time the loan was taken out, probate matters for Raymond Setik's estate were commenced in the Chuuk State Supreme Court.3 In an interlocutory order, the Chuuk State Supreme Court, sitting as probate court, determined on April 12, 2004 that "Christopher Store Properties"4 was a general partnership, in which "in the absence of evidence to the contrary," Raymond Setik had a 50% interest in Christopher Store Properties and Daniel, based on his contribution, had a 10.7% interest in the partnership. The court determined that Daniel Setik would recover $541,425.78 plus a life estate in the residence which he occupies on the property where the Christopher Store was located. In re Estate of Setik, 12 FSM R. 423 (Chk. S. Ct. Tr. 2004).
2. Default on Loan
In 2003, the Christopher Store allegedly defaulted on the loan. In 2004, the Setiks incorporated Christopher Corporation. Marianne Setik, as Chairperson/President of Christopher Corporation, informed FSMDB of its incorporation and also that the Corporation owns C-Star Apartelle, RS Plaza, Christopher Store, the land on which these businesses sit and all appurtenances. The letter further requested that, since the assets belonging to the former businesses had been pledged for two loans from FSMDB, the loans be restructured and then have the company undertake them. According to the Setiks, this meant that the restructured loans would be legal obligation of the Corporation as opposed to the heirs of Raymond Setik.
3. Litigation Defaults, Dismissals and Judgments
On September 26, 2007, Peggy, appearing pro se, filed a motion for enlargement of time to file a response to the complaint and also the answer of Christopher Corporation "et al." to the complaint. On October 1, 2007, Peggy's motion for enlargement of time was granted for her only, since the corporation can only appear by counsel, and her time was enlarged to October 11, 2007. R-24. On November 9, 2007, FSMDB filed a request for entry of default of Christopher Corporation pursuant to FSM Civil Rule 55(c). R-25 and 26. On November 9, 2007, default was entered against Marianne B. Setik individually and d.b.a. Christopher Store for failure to answer or otherwise respond within the timeframe required.
On December 4, 2007, the clerk issued a notice that if service was not effected on defendants Marianne Setik, the Estate of Manny Setik, Atanasio Setik, Vicky Setik Irons, Irene Setik Walter, Marleen Setik, Junior Setik, Eleanor Setik Sos, Joanita Setik Pangelinan, Meriam Setik Sigrah, Christopher James Setik, and George Setik by January 2, 2008, then the complaint against them would be subject to dismissal pursuant to FSM Civil Rule 4(j). On December 11, 2007, summonses were issued for Christopher James Setik, George Setik, the Estate of Manny Setik, Atanasio Setik, Vicky Setik Irons, Eleanor Setik Sos, Junior Setik, Irene Setik Walter, Joanita Setik Pangelinan, Meriam Setik Sigrah, and Marleen Setik. R-30 through R-51. Service of the summons by the Court was made on December 12, 2007 on Joanita Setik Pangelinan at her house; on Eleanor Setik Sos at her office at Susumu's Store building; on Marleen Setik at RS Plaza building; on Vicky Setik Irons through her son Rayart Irons at Skocho Mini Mart but not on George Setik because he had passed away on Weno in 1999. On December 31, 2007, FSMDB filed a motion for default judgment against Marianne Setik and Christopher Corporation.
On January 3, 2008, an order was entered dismissing the Estate of Manny Setik, Atanasio Setik, Junior Setik, Meriam Setik Sigrah, and Christopher James Setik pursuant to FSM Civil Rule 4(j) because service had not been made within the 120 days required by that rule. The Court also considered the return of service for George Setik to be a suggestion of death on the record and that if a proper motion for substitution were not made within 90 days, then the action against the deceased would be dismissed.5 On the same date, a default judgment was entered in Civil Action No. 2007-1008 against Christopher Corporation and Marianne B. Setik (individually and d/b/a Christopher Store) jointly and severally in the sum of $1,351,837.13 with interest of 9% annually. On January 28, 2008, the Court issued an order vacating dismissal of Atanasio Setik because he had been served on or before the time the dismissal was ordered (the complaint was served by certified mail, and Atanasio signed for the mail on January 3, 2008. R-67-68 and attachment). On February 18, 2008, FSMDB made a request for entry of default against Atanasio Setik and Irene Setik Walter for failing to file an answer or any response whatever, time having lapsed. On that same date, an entry of default was entered against Atanasio Setik and Irene Setik Walter.
On April 2, 2008, Counsel Johnny Meippen appeared as attorney for all of the named defendants in Civil Action No. 2007-1008.
On April 22, 2008, requests were for entry of default against Atanasio Setik (duplicating a prior request), Vicky Setik Irons, Irene Setik Walter (also a duplicate), Marleen Setik, Eleanor Setik Sos, and Joanita Setik Pangelinan were filed by FSMDB. On April 22, 2008, defaults were entered against Atanasio Setik, Vicky Setik Irons, Irene Setik Walter, Marleen Setik, Eleanor Setik Sos, and Joanita Setik Pangelinan. On the same date, a motion for default judgment was filed by FSMDB against Atanasio Setik, Vicky Setik Irons, Irene Setik Walter, Marleen Setik, Eleanor Setik Sos, and Joanita Setik Pangelinan. On April 28, 2008, because the death of George Setik had been suggested on the record and no motion for substitution was filed within 90 days thereafter, he was dismissed from the case.
On April 28, 2008, default judgments in Civil Action No. 2007-1008 were entered against Atanasio Setik, Vicky Setik Irons, Irene Setik Walter, Marleen Setik, Eleanor Setik Sos, and Joanita Setik Pangelinan, jointly and severally, for the sum certain of $1,348,793.05 with interest accruing thereafter at the rate of $234.16 per diem with post-judgment interest to accrue on the total amount of the judgment at the statutory rate of 9% annually. On July 15, 2008, FSMDB filed a complaint for breach of contract–promissory note and loan agreement––against Junior Setik, Meriam Setik Sigrah, Christopher James Setik, Daniel Setik, the Estate of Raymond Setik through its Administratrix Marianne Setik, and the Christopher Store Partnership. (Civil Action No. 2008-1060). On August 7, 2009, FSMDB filed a complaint against Christopher James Setik for breach of contract–promissory note and loan agreement and unjust enrichment. (Civil Action No. 2009-1009).
On August 13, 2009, in Civil Action No. 2008-1060, a default judgment for the sum certain of $1,458,246.04 was entered against Junior Setik, Meriam Setik Sigrah, and the Estate of Raymond Setik. Civil Action No. 2008-1060 has not been consolidated with Civil Action No. 2007-1008, the matter from which the consolidated appeals herein were taken.
On August 31, 2009, the court in Civil Case No. 2007-1008 issued a Rule 41(b) notice indicating that all other defendants in this case either having been dismissed or having had judgments entered against them if no steps are taken to prosecute this case against Patricia Setik by October 2, 2009, then the case becomes subject to dismissal for lack of prosecution pursuant to that rule. On September 7, 2009, FSMDB filed a motion to strike Patricia Setik's answer and for entry of default judgment against her and Christopher Corporation, and also requesting for a hearing on an order to show cause against Marianne Setik regarding her failure to comply with discovery.
On September 23, 2009, the trial division in Civil Case No. 2007-1008 issued an order upon finding good cause for a default to be entered against Peggy Setik. The Court noted that in its July 7, 2009 order it gave Peggy Setik until August 4, 2009 to file and serve her discovery responses and that if she did not, FSMDB could move for her answer to be stricken and a default and default judgment to be entered against her. Moreover, because neither Peggy Setik nor Marianne Setik filed a response to the motion filed by FSMDB on September 7, 2009, default and default judgment were entered against Peggy Setik. R-135. The court also stated that once the court's travel schedule to Chuuk permitted, a hearing for Marianne Setik to show cause why she should not be held in contempt would be held. Appellee's Supp App. 88. On the same date, an amended judgment was issued for FSMDB and against Peggy Setik in the sum of $1,348,793.05 as of December 21, 2007.
On February 18, 2010, in Civil Action No. 2009-1009, a default judgment against Christopher James Setik was entered in the sum of $1,533,311.77 with 9% interest annually in Civil Action No. 2009-1009.
On October 6, 2011, in Civil Case No. 2007-1008, FSMDB filed a motion for an order in aid of judgment and for imposition of writs garnishing rent from all tenants of RS Plaza and C-Star Apartelle, against Christopher Corporation. On the same date, FSMDB also filed a request to permit entry on property for inspection of RS Plaza, the Christopher Store building and the surrounding premises, and request for production of documents and interrogatories. On April 12, 2012, an order was issued setting a status conference.
On April 26, 2012, an order was issued setting hearing and consolidating Civil Action No. 2009-1009 (FSM Dev. Bank v. Christopher James Setik) with Civil Action No. 2007-1008.
On July 4, 2012, FSMDB filed a supplement to its October 6, 2011 motion, adding a request for sale of RS Plaza building. On July 31, 2012, the Setiks, through their counsel, filed a response to the proposed order in aid of judgment stating that they opposed the proposed sale of the RS Plaza building because it belongs to a third party, the Estate of Raymond Setik. They contended that even though they–the heirs–claimed an interest and had transferred it to the Corporation, their interest had not been officially vested as a matter of law because the RS Plaza building is listed as an asset of the Estate of Raymond Setik and the state court has not distributed it through probate. Thus, according to the Setiks, because it has not been distributed and Raymond Setik is a third party–it is beyond the reach of the trial division.
Defendants stated further that "[b]ecause undersigned Counsel for the defendants have [sic] not been able to consult with the defendants on the subject matter of the proposed order in aid of judgment, due to continuing unavailability of the defendants (all of the named defendants are still out of the State of Chuuk up to the filing date of this response), Counsel hereby requests enlargement of time of three weeks allowing time for attorney-client consultation so that Counsel can fashion response with consent of the defendants." R-189-90.
On August 22, 2012, the Court issued an order enlarging time for the defendants to file and serve, no later than August 20, 2012, their stipulations, comments, agreement, suggestions or objections to plaintiff's proposed orders. R-191. The record does not show any filing by defendants by the deadline above. On September 10, 2012, the Court, noting the judgment FSMDB had against Christopher Corporation, entered an order in aid of judgment providing for the sale by auction of the RS Plaza building to the highest bidder and the method in which to conduct the auction. The order also included writs of garnishment directed to all tenants of RS Plaza and C-Star Apartelle businesses to remit all rent or other payments owed for the use of space in either building to FSMDB.
On January 17, 2013, FSMDB gave notice of cancellation of the auction due to a proposed compromise agreement having been achieved. On February 7, 2013, Nora Sigrah was substituted as counsel for FSMDB. On March 12, 2013, FSMDB filed a motion for modification of terms of sale and approval of sale, indicating that the motion is supported by the memorandum within, the judgment entered on September 23, 2009, the Order in Aid of Judgment entered on September 2, 2012, the file in this matter and an attached affidavit from FSMDB's attorney and exhibit. The motion noted the judgment against Christopher James Setik "in a related case," Civil Action No. 2009-1009, and the judgment obtained against additional defendants in Civil Action No. 2008-1060. As previously noted, Civil Action No. 2009-1009 had been consolidated with Civil Action No. 2007-1008. R-159. Civil Action No. 2008-1060 had not.
On April 5, 2013, the Court issued an order in aid of judgment for the sale of the RS Plaza building for the sum of $390,000 and issued writs of garnishment to all tenants of C-Star Apartelle to remit all rent or other payment owed for the use or occupancy of space to FSMDB. On April 8, 2013, FSMDB gave notice of completion of sale of the RS Plaza Building for the purchase amount of $390,000 to be credited to the outstanding judgment.
On August 23, 2013, FSMDB filed a motion for an order in aid of judgment to address the question of debtor Christopher Corporation's ability to pay the remaining judgment amount of $1,576,512.55. There was an order setting hearing entered on September 9, 2013, subsequently vacated on December 30, 2013 and reset for February 12, 2014.
On February 4, 2014, FSMDB filed a memorandum supplementing its motion to be heard on February 12, 2014, requesting that (1) rent owed Christopher Corporation by a tenant, BS Corporation, be garnished and (2) that a parcel, 007-A-12 (Nepon #2), on which existed a "dilapidated old building" formerly used as a hardware store, be sold in satisfaction of the judgment.
FSMDB attached as Exhibit E to its supplemental memorandum a certificate of title to Nepon #2. It is dated April 29, 2013, and shows "Raymond Setik and his immediate family" as owners of the parcel. Nevertheless, FSMDB contended that Christopher Corporation held all ownership interests in Nepon #2 and the hardware store, attaching a November 2, 2004 letter (Exhibit H) from Marianne Setik, the widow of Raymond Setik and administratrix of his estate and Chairperson and President of Christopher Corporation, which states that the land under Christopher Store, including the hardware store, is owned by Christopher Corporation.
On February 12, 2014, the trial division held a hearing on the motion for an order in aid of judgment. Counsel for FSMDB and for Vicky Irons appeared (with counsel, Kasio Kembo Mida, Jr.), but counsel for Christopher Appellants, although notified, did not appear. The motion was unopposed. The trial division found good cause for the motion.
Addressing the concern that the certificate of title for Nepon #2 remained in the name of the late Raymond Setik "and his immediate family," i.e., no certificate of title had been issued to Christopher Corporation, the trial division noted:
Marianne Setik has been appointed administratrix for the estate of Raymond Setik in the Chuuk State Court probate proceeding but no distribution of estate assets have [sic] been ordered by the Chuuk State Court since 1997. Marianne Setik, as administratrix, therefore represents the Estate of Raymond Setik in these proceedings. Damarlane v. FSM, 8 FSM Intrm 10 (Pon. 1997). Judgments have been entered against all individuals who hold an interest in Nepon #2, including Marianne Setik as administratrix for the Estate of Raymond Setik. Thus, even if the Defendants' conveyance of the interest in Nepon#2 to Christopher Corporation were insufficient, Nepon #2 would remain an asset jointly owned by all of the defendants in this matter and subject to execution in satisfaction of the judgment debt.
Having concluded that Nepon #2 was owned by Christopher Corporation or the other debtors in this owing on the same debt, the trial division also noted the outstanding amount owed by Christopher Corporation on the judgment and the fact that debtors had paid very little on the debt in the years since the judgment was entered. It thus found cause for and did issue an order in aid of judgment for the sale of the Nepon #2 real property and for net proceeds to be paid towards the outstanding judgment. On the same date, a writ of garnishment was issued for BS Distributing Co. to pay rent to FSMDB. On March 28, 2014, Christopher Appellants timely appealed this order entered on February 14, 2014.
On March 19, 2014, FSMDB provided notice to the court of the completion of the sale of Nepon #2, parcel no. 007-A-12 ,for $52,250.00.
On April 4, 2014, Christopher Appellants moved for relief from judgment, seeking to have set aside (1) the trial division's April 5, 2013 Order in Aid of Judgment (re: RS Plaza), based on pendency of the probate proceeding in the Chuuk State Supreme Court and (2) all default judgments entered in this case including the Default Judgment entered on September 23, 2009, based on various theories grounded in FSM Rules of Civil Procedure 60(b) and 55(c).
On April 10, 2014, Christopher Appellants filed a motion for relief from the judgment entered on February 14, 2014 and that the writ of garnishment be set aside. On April 14, 2014, Christopher Appellants filed a motion to stay execution of the order entered February 14, 2014, pending disposition of Rule 60(b) motions. On April 24, 2014, FSMDB filed its opposition to Defendant's motion to stay execution of judgment. On April 30, 2014, FSMDB filed its opposition to Defendants' motion for relief from judgment. On July 7, 2014, Christopher Appellants filed their reply to FSMDB's opposition to their motion for relief from judgment, which FSMDB moved to strike as untimely on July 14, 2014. On July 30, 2014, FSMDB filed a motion to show cause. On August 27, 2014, Christopher Appellants filed a motion for injunctive relief. On August 28, 2014, FSMDB filed its opposition to the motion for injunctive relief. On July 17, 2015, the court issued an order denying motions of Christopher Appellants to set aside judgment or vacate default judgment, the orders in aid of judgment, the writ of garnishment and the motion to stay. [FSM Dev. Bank v Christopher Corp., 20 FSM R. 98 (Chk. 2015).] In the same order, the court granted FSMDB's motion for an order to show cause and denied its motion for sanctions against the Defendants. On August 14, 2015, Defendants filed a motion to set aside the order of July 17, 2015 and motion to disqualify. On August 24, 2015, FSMDB filed its opposition to the motion to set aside order of July 17, 2015. On August 25, 2015, Christopher Appellants timely appealed the July 17, 2015 order.
On October 15, 2015, the court issued an order denying Defendants' motions to set aside the July 17 2015 order and disqualify the trial judge. [FSM Dev. Bank v Christopher Corp., 20 FSM R. 225 (Chk. 2015).] On November 16, 2015, Defendants timely appealed that Order.
The three appeals from three post-judgment orders issued in Civil Action No. 2007-1008 have been consolidated by the appellate division by order dated May 20, 2016. (C2-2015, C1-2014 and C1-2015).
On August 3, 2016, Marianne Setik filed a certificate of dissolution of Christopher Corporation in accordance with Title 36 of the FSM Code, Part 6 of the FSM Corporate Regulations, § 6.1 of the FSM Corporate Regulations and other related authorities. It was received by the FSM Office of the Registrar of Corporations under the FSM Department of Justice on August 5, 2016. On August 17, 2016, Mr. Samari W. Suta wrote to Marianne B. Setik through the Secretary of the FSM Department of Justice that the office had decided not to consider her submission of the Certificate of Dissolution of the Christopher Corporation because it has the authority to dissolve a corporation once it has met all the requirements pursuant to Part 6, 6.1 of the FSM Corporate Regulations; that such authority is the complete authority of the Registrar and not shared with the Incorporator; and that Part 6, 6.1 of the FSM Corporate Regulations explicitly provides for the legal procedure to follow when seeking for voluntary dissolution of a corporation.
On September 21, 2021, this appeal came before the appellate division for oral argument.
The issues identified by the parties are as follows:
By appellants:
1. The court order in aid of judgment and writ of garnishment filed February 14, 2014 was erroneous, contrary to law, and was not based on substantial evidence.
2. The court order filed July 17, 2015 was erroneous, contrary to law, and was not based on substantial evidence.
3. The court order filed October 15, 2015 was erroneous, contrary to law, and was not based on substantial evidence.
4. The court orders of February 14, 2014, July 17, 2015, and October 15, 2015 violated Appellants' constitutional due process rights.
By appellees:
1. Whether the trial court abused its discretion in issuing the February 14, 2014 order in aid of judgment.
2. Whether the trial court abused its discretion in issuing the February 14, 2014 writ of garnishment.
3. Whether the trial division abused its judgment in denying relief from judgment in its order entered July 17, 2015.
4. Whether the trial court abused its discretion in denying disqualification of Justice Materne in its order entered October 15, 2015.
The standard of review of the trial division's ruling on a motion for relief from a judgment is whether the trial division has abused its discretion. Arthur v. FSM Dev. Bank, 16 FSM R. 653, 657 (App. 2009); Senda v. Mid-Pacific Constr. Co., 6 FSM R. 440, 445 (App. 1994). Likewise, the standard of review on an appeal from a trial division's decision to issue an order in aid of judgment or writ of garnishment is whether the trial division has abused its discretion. Chuuk v. Andrew, 15 FSM R. 39, 42 (Chk. S. Ct. App. 2007); Barrett v. Chuuk, 16 FSM R. 229, 232 (App. 2009) (writ of execution or garnishment).
In order to overturn the trial judge's denial of a motion to recuse, the appellant must show an abuse of discretion by the trial judge. The appellate court will not merely substitute its judgment for that of the trial judge. Jano v. King, 5 FSM R. 326, 330 (App. 1992). The petitioner must show that the trial judge clearly and indisputably abused her discretion when she denied the motion to disqualify. Ting Hong Oceanic Enterprises v. Supreme Court, 8 FSM R. 1, 4 (App. 1997).
The trial court abuses its discretion when its decision is clearly unreasonable, arbitrary, or fanciful; or it is based on an erroneous conclusion of law; or the record contains no evidence upon which the court could rationally have based its decision. George v. Sigrah, 19 FSM R. 210, 216 (App. 2013).
A. Dismissed Defendant
As Christopher Appellants' brief on appeal points out,6 their appeal includes dismissed Defendants, as the named appellants George Setik, Estate of Manny Setik, Meriam Setik Sigrah, and Junior Setik (or his Estate) were not parties to the underlying judgment in Civil Action No. 2007-1008, having been dismissed below. The caption was not amended after these individual defendants' dismissals,7 and their names were included in the caption of each of the post-judgment orders that are on appeal herein from Civil Action No. 2007-1008, namely, the orders entered on February 14, 2014 (the subject of appeal no. C1-2014, filed March 28, 2014), July 17, 2015 (the subject of appeal C1-2015, filed August 25, 2015) and October 15, 2015 (the subject of appeal C2-2015, filed on November 16, 2015). Nor did the bodies of the orders limit the orders to those named defendants who had not been dismissed. Thus, dismissed defendants were included in the orders that were subject of the appeals at issue herein.
On April 8, 2014, a notice of appearance was filed on behalf of Defendants Christopher Corporation, Patricia (Peggy) Setik, Marianne B. Setik, the Estate of Manny Setik, Irene Setik Walter, Marleen Setik, Junior Setik, Eleanor Setik Sos, Joanita Setik Pangelinan, Meriam Setik Sigrah, Christopher James Setik, and the Heirs of George Setik, by attorneys Marstella Jack and Yoslyn Sigrah.8 R-329-30. As of that time, Defendants the Estate of Manny Setik, Junior Setik, Meriam Setik Sigrah, and George Setik had been dismissed. Having been dismissed, these defendants were no longer party to the trial division proceedings. Persons wishing to become a party to ongoing litigation may do so subject to compliance with FSM Rule of Civil Procedure 24, which requires a timely motion by the intended intervenor.
A motion to intervene not made is not a timely motion to intervene. However, there is nothing in the record of the trial division indicating that the FSMDB objected to the voluntary appearance and participation of the previously dismissed defendants Estate of Manny Setik, Junior Setik, Meriam Setik Sigrah, and George Setik. In fact, the parties proceeded to litigate issues by post-judgment motions, as described further below, and, indeed, in the appeal to this division. Rule 1 of the FSM Rules of Civil Procedure tells us that the trial division's rules "shall be construed to secure the just, speedy, and inexpensive determination of every action." Rule 15(b) embodies that same philosophy, dictating (in pertinent part) that "[w]hen issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings." In keeping with that philosophy, we cannot conclude that the trial division abused its discretion in allowing defendants Estate of Manny Setik, Junior Setik, Meriam Setik Sigrah, and George Setik to intervene in the trial division below, and they are therefore proper parties to this appeal. Cf. Mori v. Hasiguchi, 19 FSM R. 416, 419 (App. 2014) (That a nonparty cannot appeal the judgment in an action between others is well established.)
B. Judgments on Loan Liability
We next address whether the trial division abused its discretion in declining to set aside the underlying judgment against Christopher Appellants, as requested by their April 4, 2014 motion. Then we examine whether the trial division abused its discretion in ordering sales of certain assets or other enforcement remedies, in denying motions to set aside such orders, or in the appointment of Temporary Justice Lourdes Materne.
First, the judgments. A default judgment ("the Amended Judgment") was entered in Civil Action No. 2007-1008 against the following Christopher Appellants on September 23, 2009, in the amount of $1,348,793.05 as of December 21, 2007: Christopher Corporation, Patricia ("Peggy") Setik, Marianne B. Setik, Atanasio Setik, Vicky Setik Irons, Irene Setik Walter, Marleen Setik, Eleanor Setik Sos, and Joanita Setik Pangelinan (individually, and d/b/a Christopher Store) jointly and severally. Thereafter, on April 26, 2012, Civil Action No. 2009-1009, in which a default judgment had been entered against Christopher James Setik, was consolidated with Civil Action No. 2007-1008. With the addition of Christopher James Setik, these were all the remaining named defendants in Civil Action No. 2007-2008.
On April 4, 2014, four years and a little more than six months after entry of a judgment against most of the Christopher Appellants other than Christopher James Setik and four years and a little over a month after the judgment against Christopher James Setik, Christopher Appellants moved to set aside the default judgments pursuant to FSM Rules of Civil Procedure 60(b) and 55(c).
(1) Grounds Asserted by Christopher Appellants at Trial Division
The grounds contended by Christopher Appellants for setting aside the default judgments, as set forth in the April 4, 2014 motion and a reply memorandum filed July 7, 20149 are summarized as follows:
(a) the trial division's entry of a default judgment against Peggy Setik, even though she had filed an answer was a "clear mistake, inadvertence and oversight" by the court contrary to O'Sullivan v. Panuelo, 10 FSM R. 257, 260 (Pon. 2001) warranting setting aside under FSM Civil Rule 60(b)(1);
(b) FSMDB's failure to provide an evidentiary basis for a default judgment against Christopher Corporation was a misrepresentation that warrants relief under FSM Civil Rule 60(b)(3);
(c) the default judgment entered on September 23, 2009 was not based on a sum certain or supported by evidence, warranting relief under Rule 60(b)(1) or (3)–mistake, inadvertence, surprise, excusable neglect or misrepresentation;
(d) the default judgments implicate due process and therefore should be set aside by virtue of FSM Civil Rules 60 subdivision (b)(4) and (6) and 55(c), including lack of jurisdiction over Defendants due to failure to serve them, rendering the judgments "voidable for lack of jurisdiction."Specifically, Defendants state that "[s]ervices on all named defendants were not effectuated preventing the court from exercising proper jurisdiction of defendants." As further contended in the reply memorandum, the default judgments are void for lack of service of process as to Junior Setik, Meriam Setik Sigrah, Christopher Setik, the Estate of Manny Setik, George Setik, and Atanasio Setik.
(2) FSMDB's Opposition to Motion for Relief
FSMDB contended that the motion for relief with respect to the default judgments was not timely under FSM Civil Rule 60(b), not having been sought within a reasonable time, given that Defendants had been represented in the litigation for six years as of the date that the motion had been filed, Attorney Johnny Meippen having filed a Notice of Entry of Appearance for all Defendants on April 2, 2008. Specifically, the motion to set aside the judgment against Peggy Setik is barred by the one-year limitation period applicable to FSM Civil Rule 60(b)(1). FSMDB notes that the default judgment against her was pursuant to FSM Civil Rule 37(b)(2)(C) as a discovery sanction.
As to Christopher Corporation's liability, FSMDB raises the one-year bar in FSM Civil Rule 60(b)(3), based on Defendant's claimed basis of misrepresentation. FSMDB further disputes arguments by Christopher Appellants that Christopher Corporation was precluded from assuming the loan liabilities and also notes that FSMDB were Christopher Store Social Security liabilities.
FSMDB further argues that disputes as to amounts owed are time barred for failure to raise them within a reasonable time, and Christopher Appellants' dispute as to the amount owed is without merit.
(3) Trial Division's Ruling on Motion to Set Aside Default Judgments
On July 17, 2015, newly assigned Temporary Justice Lourdes F. Materne denied Christopher Appellants' motion to set aside the default judgments under that proceeding, finding the motion untimely with respect to Rule 60(b)(1)-(3) (which grounds have a one-year bar date) or within a reasonable time, as demonstrated by a showing of good reason for failure to act sooner. [FSM Dev. Bank v. Christopher Corp., 20 FSM R. 98, 102 (Chk. 2015).] She also found that the defendants did not demonstrate meritorious defenses. [Id. at 104.]
(4) Christopher Appellants' Position on Appeal
Christopher Appellants appeal from the trial division's denial of their motion for relief from the default judgments, contending(as best as can be determined) that (1) that their motion for relief was timely, including under Rule 60(b); (2) that there was a lack of a basis for holding Christopher Corporation liable for a loan obligation that preceded its existence as a corporation, and, further, Christopher Corporation has dissolved; (3)that the amount of the judgment is wrong (the principal balance of the judgment exceeds the loan principal); (4) that several of the defendants were dismissed, meaning no default judgments were entered against them; (5) that a default under FSM Rule of Civil Procedure 55(c) was inappropriate, e.g., there was no "sum certain"; and (6) various criticisms of the manner in which FSMDB operates.
(5) FSMDB's Position on Appeal
FSMDB contends (1) that Christopher Appellants' motion with respect to the judgment amount was time-barred, (2) that Christopher Appellants received notice of the proceedings through their attorney, Johnny Meippen, and (3) that Christopher Corporation had taken over ownership of the Christopher Store land and buildings and taken other measures.
(6) Analysis
Basis for Motion to Set Aside Default Judgments Pursuant to Rule 60(b)
FSM Civil Rule 60(b)authorizes relief from a final judgment or order if the request falls within one of the subparts thereof and is timely:
On motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1),(2), and (3) not more than one year after the judgment, order, or proceeding was entered or taken. A motion under this subdivision (b) does not affect the finality of a judgment or suspend its operation. This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, or to set aside a judgment for fraud upon the court. The procedure for obtaining any relief from a judgment shall be by motion as prescribed in these rules or by an independent action.
If the Rule 60(b) motion falls within one of the six subparts of that rule and is timely, and it is requesting relief from a default judgment, the following criteria must be analyzed: 1) whether the default was willful, caused by the defendant's culpable conduct; 2) whether the defendant has a meritorious defense; and 3) whether setting aside the default would prejudice the plaintiff. UNK Wholesale, Inc. v. Robinson, 11 FSM R. 118, 122 (Chk. 2002); See also Western Sales Trading Co. v. Billy, 13 FSM R. 273, 279 (Chk. 2005). To obtain relief from a default judgment, the defendant must have a meritorious defense – a defense that would constitute a complete defense to the action if proven at trial. UNK Wholesale, Inc., 11 FSM R. at 123 (when some evidence to support the defense has been produced to support the motion, more evidence may be needed to prevail at trial).
Turning to the alleged errors that form the request for relief, they are for the most part untimely asserted, as described as follows:
(i) Peggy Setik
Christopher Appellants urge that a default judgment should not have been entered against Peggy because she had answered the complaint, citing O'Sullivan v. Panuelo, 10 FSM R. 257, 260 (Pon. 2001). They also note that defaults and even default judgment are freely set aside in favor of hearing matters on the merits.
However, the rule as stated in O'Sullivan and the dictum as stated by Christopher Appellants do not apply to defaults properly ordered as discovery sanctions under FSM Rule of Civil Procedure 37(b)(2)(C). Moreover, even were relief available if sought promptly, Rule 60(b) establishes time limits in which a motion under that rule must be brought. The alleged trial division error in granting a default judgment against Peggy Setik would at most constitute "mistake" under subpart (1) of Rule 60(b). Since the alleged error is on an appealable decision, the "reasonable time" for moving to set aside the allegedly erroneous error is 42 days, the time an aggrieved party has to appeal. In re Contempt of Jack, 20 FSM R. 452, 460-61 (Pon. 2016). Insofar as the motion asserts mistake in the default judgment against Peggy Setik, it is untimely.
(ii) Christopher Corporation
Christopher Corporation asserts that FSMDB misrepresented to the trial division in failing to substantiate its claim. Misrepresentation under Rule 60(b)(3) has a time limit of one year, and Christopher Corporation is therefore also barred from relief.
(iii) September 23, 2009 Judgment Against Other Served Defendants
Christopher Appellants assert error–that the judgment was not for a sum certain and that the amount claimed owed was erroneous–and place that error in multiple categories: mistake, inadvertence, surprise, excusable neglect or misrepresentation. Falling under subparts (1) and (3) of Rule 60(b), these categories all come within the one-year limitations period, and Christopher Appellants are accordingly barred from relief based on these categories.
(iv) Rule 60(b)(4) (Void Judgments, etc.) and (6) (Other Reasons Justifying Relief)
A judgment or final order may be set aside as void under FSM Civil Rule 60(b)(4) if the court lacked personal jurisdiction over the party or the subject matter, or the court acted in a manner inconsistent with due process. FSM Dev. Bank v. Arthur, 15 FSM R. 625, 633 (Pon. 2008). Unlike other grounds for relief from judgment under Rule 60(b), the court does not have any discretion when the relief is sought because the judgment is void since a judgment is either void or it is valid and if it is void the court must vacate it. FSM Dev. Bank v. Ehsa, 18 FSM R. 608, 613 (Pon. 2013).
Christopher Setik argues that the judgment is void as against him. He was dismissed from Civil Action No. 2007-1008 (because of failure to serve him within 120 days pursuant to FSM Civil Rule 4(j)) before the September 23, 2009 judgment was entered, without his name on it, but he was later sued for the same liability in Civil Action No. 2009-1009. Subsequently, a default judgment was entered against him on February 18, 2010, in Civil Action No. 2009-1009, which then consolidated with 2007-1008. In an affidavit submitted to the trial division (filed August 27, 2014), Christopher asserts that he had not been served in "this case."
His affidavit ostensibly contradicts the certificate of service on file, in Civil Action No. 2009-1009, containing an affidavit of a process server stating that Christopher James Setik was personally served with the summons and complaint at his home in Hawaii on September 3, 2009, over two months before default was entered against him in that proceeding.
Presented with the above, on July 17, 2015, when the trial division ruled on the April 4, 2014 Motion for Relief from Judgment, it did not rule on FSMDB's Motion to Strike the Reply. It also failed to address the issue of voidness raised by the Reply.
For the trial court to have had personal jurisdiction over a defendant, the defendant must have been served with the complaint and summons. Setik v. FSM Dev. Bank, 21 FSM R. 505, 516 (App. 2018). A court that lacks personal jurisdiction over a defendant cannot enter a valid judgment against that defendant. Id. If a default judgment has been entered when the court lacked personal jurisdiction over the defendant, then that default judgment is void and relief can be sought under Rule 60(b)(4), for which there is no time limit to seek relief. Id.; Ehsa, 18 FSM R. at 614 (the court cannot give any weight to the argument that the passage of time is enough to bar vacating a void judgment).
FSM case law has followed U.S. case law in holding that due process is met by notice reasonably calculated to reach interested parties. Etpison v. Perman, 1 FSM R. 405, 424-25 (Pon. 1984). In other words notice may be adequate even if not actual. Chavis v. Heckler, 577 F. Supp. 201, 205 (D.D.C. 1983)
Christopher's affidavit is probative that he did not receive the summons and complaint, but it was not determinative of notice "reasonably calculated to reach" him, as the trial division had contrary evidence, in the form of a certificate of service by mail, that service was sufficient under the rules.
There was thus conflicting evidence before the trial division upon which to make a decision. It was incumbent on the trial division to rule on, first, whether to consider Christopher's affidavit, and, second, whether, in light of the evidence, service on Christopher was deficient process. It did not do so. A court may abuse its discretion by an unexplained, lengthy delay in ruling on a motion or by failure to exercise its discretion within a reasonable time. Bualuay v. Rano, 11 FSM R. 139, 147 (App. 2002). The trial division's July 17, 2015 Order denying Christopher Appellants' April 4, 2014 motion to set aside the trial division's September 23, 2009 and February 17, 2010 judgments, although by its terms ruling against the motion as to Christopher, failed to include any findings with respect to whether the default judgment against him was void.
The failure of the July 17, 2015 Order, nearly a year after the deadline for Christopher Appellants' reply brief, to specify grounds or address whether the judgment against Christopher was denied on procedural grounds (e.g., the delays in submission of the reply brief and the affidavits themselves) or substantive grounds, leaves this Court unable to review the trial division's decision as to the validity of the judgment against Christopher. Moroni v. Secretary of Resources & Dev., 6 FSM R. 137, 138 (App. 1993) (making findings of fact is normally the province of the trial court and not of the appellate division which is generally unsuited for such inquiries).
We therefore reverse and remand this matter to the trial division for clarification of its July 17, 2015 Order with respect to the judgment against Christopher. We affirm the trial division's denial of the motion to set aside the September 23, 2009 judgment against those Christopher Appellants named therein in all other respects.1011
C. Sale of RS Plaza Building
On April 5, 2013, the trial division entered an order in aid of judgment approving sale of the building called RS Plaza to Kasio Kembo Mida Jr. and his spouse Cherisse Irons Mida for $390,000, payment of which was to be credited to the judgment debt. The order in aid of judgment approving the sale was based on the September 23, 2009 judgment against Christopher Corporation and in favor of FSM Development Bank in the amount of $1,348,793.05, which, due to accrued interest as of July 4, 2012 and the minimal payments thereon, had increased to $1,847,619.04. The trial division had found, in an order dated September 10, 2012, that the Christopher Corporation12 possessed and controlled RS Plaza and was possessing and controlling all of the rental revenues and other use right made by building tenants. It further found that the other judgment debtor defendants in Civil Action No. 2007-1008 transferred their rights to Christopher Corporation as paid-in capital for shares of stock in that company. R-192-94.
(1) Motion for Relief
No appeal was taken from the order in aid of judgment, but on April 4, 2014, one day short of one year after the order in aid of judgment, Christopher Appellants filed a motion to set aside the order in aid of judgment, on the grounds that RS Plaza was an asset of the Estate of Raymond Setik, which was the subject of a probate proceeding before the Chuuk Supreme Court.
Christopher Appellants argue that the RS Plaza building was not exempted from the Chuuk State Supreme Court probate case, and that that court had not distributed the assets of the late Raymond Setik. According to Christopher Appellants, the sale of the RS Plaza building was illegal and based on a compromised agreement. To support this argument, Christopher Appellants discussed the procedural history leading up to the sale of the RS Plaza building: that FSMDB filed a motion for an order in aid of judgment and for writs of garnishment towards tenants of RS Plaza building and C-Star Apartelle on October 6, 2011; that a status conference was set for April 24, 2012; that on April 26, 2012, the court issued an order setting hearing to be held on July 5, 2012 and consolidating Civil Action No. 2009-1009 with this case; that on July 31, 2012, counsel for the Setiks filed their response to the proposed order in aid of judgment objecting to the proposed sale of RS Plaza that the building belonged to a third party and the Defendant's rights have not vested yet and the RS Plaza building is listed as part of the Estate of Raymond Setik that has yet to be distributed; that in the September 10, 2012 order "proposed" was stricken from the title page and there was no record of service on the Appellants or the other heirs, and other events. Appellants' Br. at 14-15.
Christopher Appellants contended that relief from the April 5, 2013 order was warranted under Rule 60(b)(1), i.e., mistake, inadvertence, surprise or excusable neglect," in the trial division's failure to defer the matter of the sale of RS Plaza building pending action by the court hearing the probate proceeding. Further, they contended that "[s]ervices on all named defendants were not effectuated, preventing the court from exercising proper jurisdiction of defendants." R-326.
(2) FSMDB's Opposition to Motion for Relief re: RS Plaza
FSMDB opposed the motion for relief from the order in aid of judgment approving the sale of RS Plaza, contending that Christopher Appellants had ample notice of the order, but failed to bring their motion within a reasonable time, as required by Rule 60(b)(1). FSMDB contends that the delay was due to their attorney's error and thus is not a basis for setting aside the judgment. FSMDB also contended that the substantive basis for setting aside the judgment, that RS Plaza was part of the probate proceeding in state court, fails, as the testimony of Peggy Setik establishes ownership of RS Plaza in Christopher Corporation. Further, FSMDB pointed to its judgments against Marianne Setik, estate administratrix, in her individual capacity in the subject proceeding and as administratrix for the Estate of Raymond Setik in a separate proceeding.
FSMDB further responded that the argument advanced by the Setiks that the RS Plaza building should not have been ordered sold because it remained a subject of the ongoing (since 1997) probate case is not supported by the record or law. FSMDB contended that those orders in aid of judgment were not appealed and the new owners have made substantial investments in renovations and operations of the building and business called L5 Hotel. FSMDB maintains that despite these arguments, Christopher Appellants had failed to provide any Chuuk state law that provides for an "automatic stay" against assignment, mortgage, transfer, sale or any other disposition of estate assets. FSMDB argued that if there were an "automatic stay" that it is Marianne Setik, Peggy Setik, and the other family members who violated the stay by giving the assignment to FSMDB and then by transferring the Christopher Store businesses to the Christopher Corporation. FSMDB concluded that the trial court correctly ruled that Christopher Appellants claim to set aside the judgment is time barred.
(3) Analysis and Conclusion
On a timely request, Rule 60(b) relief may be available from an order in aid of judgment. Setik, 21 FSM R. at 516. As with relief from other orders, the party requesting relief must show (1) that there is a basis for relief under any of the six subsections of Rule 60(b), Arthur, 15 FSM R. at 631; (2) that relief is not time-barred, id. at 631-32; and (3) that relief would not be "a futile gesture," i.e. movant has a meritorious defense; id. at 635.
First, there is the question whether the trial division had jurisdiction to order the sale of the RS Plaza building in the subject proceeding. Christopher Appellants assert that the RS Plaza building was an asset under the control of the Estate of Raymond Setik and a property in the probate action pending in Chuuk State, and therefore not a property that could be sold by the trial division in the proceeding on appeal herein. If the trial division lacked subject matter jurisdiction to issue an order that the RS Plaza building be sold, the order selling the building was void and must be set aside under Rule 60(b)(4). Ehsa v. FSM Dev. Bank, 20 FSM R. 498, 508 (App. 2016).
The starting place for analyzing the trial division's jurisdiction to order sale of the RS Plaza building to satisfy a money judgment is 6 F.S.M.C. 1409-10. 6 F.S.M.C. 1409 governs application of an order in aid of judgment:
At any time after a finding for the payment of money by one party to another and before any judgment based thereon has been satisfied in full, either party may apply to the Court for an order in aid of judgment. Thereupon the court, after notice to the opposite party, shall hold a hearing on the question of the debtor's ability to pay and determine the fastest manner in which the debtor can reasonably pay a judgment based on the finding. In making this determination the Court shall allow the debtor to retain such property and such portion of his income as may be necessary to provide the reasonable living requirements of the debtor and his dependents, including fulfillment of any obligations he may have to any clan, lineage, or other similar group, in return for which obligations he, or his dependents, receive any necessary part of the food, goods, shelter, or services required for their living.
6 F.S.M.C. 1410 governs orders in aid of judgment–Hearings, and it states that:
(1) At the hearing provided by section 1409 of this chapter, the debtor may be examined orally before the Court, or the Court may refer the examination to a single judge of the Court or to a master to take evidence and report his findings. In either case any evidence properly bearing on the question may be introduced by either party or by the Court, the single judge or master in the same manner as at the trial of a civil action. Upon having heard the evidence or having received the report of the single judge or master, the Court shall make such order in aid of judgment as is just for the payment of any judgment based on the finding.
(2) This order in aid of judgment may provide for the transfer of particular assets at a price determined by the Court, or for the sale of particular assets and payment of the net proceeds to the creditor, or for payments, in specified installments on particular dates or at specified intervals, or for any other method of payment which the Court deems just.
Under 6 F.S.M.C. 1410(2), an order in aid of judgment may provide for the sale of particular assets, such as unencumbered property that is not necessary for the debtor to meet his family and customary obligations, and payment of the net proceeds to the creditor. Davis v. Kutta, 8 FSM R. 338, 343 (Chk. 1998).
As stated earlier in this opinion, some, but not all, of the Christopher Appellants had against them a valid judgment in this action that they owed FSMDB money totaling well in excess of the $390,000 the sale of the RS Plaza building brought in. Relying on the loan documents and subsequent representations by Marianne and Patricia Setik, FSMDB contends that the RS Plaza building was owned by Christopher Corporation, having been assigned as paid-in capital the interests of the Christopher Store partnership. In other words, per FSMDB, the RS Plaza building is not under probate administration.
This Court has held that FSM courts have subject matter jurisdiction over probate matters insofar as there is an independent basis for jurisdiction under the FSM Constitution, such as (1) pursuant to Article XI, section 6(b) of the FSM Constitution, matters involving diversity jurisdiction and (2) pursuant to Article XI, section 6(a), matters involving the FSM or its instrumentality (such as FSMDB) as a party. FSM Dev. Bank v. Estate of Edmond, 19 FSM R. 425, 431-33 (App. 2014).
Sections 1409-10 grant broad authority to the trial division to order sale of debtor assets not exempted therein, with the objective of expeditiously satisfying the judgment. Reading the authority granted in those sections and Edmond together, there was no jurisdictional obstacle to ordering the sale of assets or that permission of the probate court was needed in order to do so.
Christopher Appellants claim they were not notified concerning the sale. The record affirmatively shows that the Christopher Appellants who were not dismissed were served through their attorney, Johnny Meippen, Esq., with the notices concerning the motions and hearings regarding the proposed sale of the RS Plaza building. See, e.g., Supp. App. 122 and 124. Failure on the part of the attorney to act upon the notice resulting in a judgment against the clients does not in itself constitute a basis for setting aside the judgment. Saimon v. Wainit, 18 FSM R. 211, 214 (Chk.2012). Generally, attorney negligence is not a basis for Rule 60(b)(1) relief. Amayo v. MJ Co., 10 FSM R. 371, 381-82 (Pon. 2001).
In its analysis of whether neglect is excusable, a court looks for 1) an explanation of the movant's diligent and good faith efforts and 2) the lack of prejudice to the opposing party. Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. 600, 604 (Pon. 2020). What the record shows is that as of July 31, 2012, the attorney for Christopher Appellants was unable to consult with his clients because they were out of country, and, while tentatively expressing a concern that the property was listed as an asset in a probate proceeding, he requested more time to obtain a decision from the clients on a response to the proposed sale. Time was granted, and, hereafter, the attorney went silent. Meanwhile, the sale order was finally approved on April 5, 2013, and Christopher Appellants remained silent for another year.
Our review of the record therefore leads us to conclude that Christopher Appellants failed to demonstrate a basis for an excuse for their failure to oppose the motion for an order in aid of judgment approving the sale of RS Plaza, to appeal said order in a timely fashion, or to bring within a reasonable time a motion to set aside the April 5, 2013 order. Thus, the trial division did not abuse its discretion in denying the motion based on Rule 60(b)(1).
Christopher Appellants also contend that relief could be based on what they assert to be a misrepresentation by FSMDB, because the draft order FSMDB's counsel claimed a lack of opposition to the motion even though Counsel Meippen had voiced a tentative opposition, pending consultation with his clients. That tentative opposition was made without his clients' buy-in, and Counsel Meippen had represented to the trial division that a response informed by consultation with the clients would be foregoing, based upon which the trial division enlarged his time. No such follow-up response was made. Thus, a reasonable observer would conclude that those Christopher Appellants who were represented by Attorney Meippen were not in opposition. Therefore, we find that the trial division did not abuse its discretion in declining to set aside the order in aid of judgment as to those Christopher Appellants who were represented by Attorney Meippen based on misrepresentation.
There remains, however, the matter of those Christopher Appellants–Junior, Meriam, Estate of Manny, and George–who were not served with the complaint in Civil Action No. 2007-1008, against whom there was no judgment in this matter, and who were not represented by Mr. Meippen. The sale order on the RS Plaza building disposes of an asset to which they as heirs of Raymond Setik may have a claim, without affording them a right to a hearing. Due process requires that they be given the opportunity not only to contest their liability on the loan but also, if liable, the post-judgment motions enforcing that liability.
FSMDB's Contentions as to Dismissed Defendants
In its appellate brief, FSMDB counters this due process issue by contending that (1) when Attorney Meippen filed his notice of entry of appearance on April 2, 2008, he appeared to be representing all defendants and did not raise the defense of insufficiency of process; thereby waiving it; and (2) Peggy Setik had been designated an authorized representative and was served in the lawsuit as such. Neither of these arguments is availing.
Meippen Appearance
Mr. Meippen's Notice of Entry of Appearance on April 2, 2008 was "as counsel for all of the named defendants." R-90. The notice does not specify who were the named defendants at that time. According to the court file, the Estate of Manny Setik, Junior Setik, Meriam Setik Sigrah, and Christopher James Setik had been dismissed from the action on January 3, 2008 and thus were not parties as of April 2, 2008. Atanasio Setik, concerning whom a dismissal was entered on January 3, 2008, had his dismissal vacated on January 25, 2008, after it was learned that he was served in a timely manner pursuant to FSM Rule of Civil Procedure 4(j), and he was thus a named defendant when Mr. Meippen appeared on behalf of all named defendants.
Mr. Meippen's appearance on April 2, 2008 on behalf of all "named" defendants thus was an appearance on behalf of only defendants Christopher Corporation, Patricia (Peggy) Setik, Marianne B. Setik, Atanasio Setik, Vicky Setik Irons, Irene Setik Walter, Marleen Setik, Junior Setik, Eleanor Setik Sos, Joanita Setik Pangelinan, and George Setik. It does not undo the dismissal of the Estate of Manny Setik, Junior Setik, and Meriam Setik Sigrah. Nor did Meippen's appearance on behalf of George Setik have any effect on George's subsequent dismissal, on April 28, 2008, pursuant to FSM Rule of Civil Procedure 25.
In summary, Meippen's appearance does not resolve the fact that persons who were not parties––against whom no judgment was obtained in Civil Action No. 2007–1008––could be subjected to post-judgment orders enforcing that judgment entered against them.
Peggy Setik's Agency
FSMDB contends that it sued Patricia "Peggy" Setik as the authorized representative of her immediate family members for the subject loan and on any related matters, pursuant to a notarized memo signed on September 11, 1997 stating that the signatories, immediate family members of the late Raymond Setik, "have formally endorsed this document as evidence of concurrence for Miss Patricia (Peggy) Setik to represent Christopher Store on the proposed loan being sought for at the FSM Development Bank or any related matters pertaining to the same loan." FSMDB's contention appears to be that the notarized memo not only authorized Peggy to sign the promissory notes, loan agreements, agreement for assignment of income and exclusive possession on behalf of Christopher Store, but if the loan defaulted, she could be sued in her own name and on behalf of the other family members.
The notarized memo, to the extent its purpose is to confer authority on Peggy to act on behalf of other family members to take out a loan for the Christopher Store, is a power of attorney. 3 AM. JUR. 2d Agency § 23 (rev. ed. 1986). The interpretation of a written instrument, such as a power of attorney, is a question of law reviewed on appeal de novo. Helgenberger v. Bank of Hawaii, 19 FSM R. 139, 143 (App. 2013) (since interpretation of contract provisions is a matter of law to be determined by the court, an appellate court will review de novo the interpretation of contract provisions); Estate of Irons ex rel. Springer v. Arcadia Healthcare, L.C., 66 So. 3d 396, 398 (Fla. Dist. Ct. App. 2011). Powers of attorney are strictly construed. Id.; 3 AM. JUR. 2d Agency § 31 (rev. ed. 1986).
We are not convinced that the one-paragraph notarized memo is intended to be as broad as contended by FSMDB. Its language, (formally endorsing this document as evidence of concurrence for Peggy to represent Christopher Store) does not read as a grant of full authority to bind the family in litigation. The inclusion of "any related matters pertaining to the same loan" does not extend that recognition of authority that a suit against her alone could bind them individually, jointly and severally, even without their participation.
Thus, we find that although the trial division properly ruled against Peggy and the other duly served defendants on one hand, on the other hand, it abused its discretion in ordering the sale without affording defendants Estate of Manny Setik, Junior Setik, Meriam Setik Sigrah, and George Setik a right to contest the debt and the remedy therefor.
The trial division thus should have set aside the sale of RS Plaza based on Rule 60(b)(4).1314 The order denying the motion for relief from the sale of the RS Plaza building is therefore vacated and this matter remanded to the trial division for further proceedings consistent herewith.15
D. Sale of Nepon #2
On August 13, 2013, after completion of the sale of the RS Plaza building, FSMDB filed a new motion for an order in aid of judgment, requesting a hearing to address the question of Christopher Corporation's ability to pay the judgment. On February 4, 2014, FSMDB filed a supplement to that motion requesting, among other things, sale of Nepon #2, a parcel of land (parcel no. 007-A-12), to apply towards the further outstanding balance of principal and interest on the sale. The supplement had attached to it numerous exhibits, including, among other things, a letter from Marianne Setik dated November 2, 2004 to FSMDB President Mendiola referencing incorporation of the Christopher Corporation and ownership by that corporation of various properties, including RS Plaza, C-Star Apartelle, Christopher Store appurtenances and land (see exhibit H), and a certificate of title for Nepon #2 dated April 29, 2013 showing Raymond Setik and his immediate family as fee simple owners of that parcel.
(1) Trial Division's Ruling
On February 14, 2014, the trial division granted an order in aid of judgment approving the sale of Nepon #2, on the grounds (a) that counsel for Christopher Appellants failed to appear at the hearing or oppose the motion for an order in aid of judgment, (b) that the outstanding debt owed by defendants as of the time was over $1.6 million, (c) that the sale would be for $52,500, which was a reasonable amount based on available information, (d) that ownership of Nepon #2 was conveyed by the individual defendants to Defendant Christopher Corporation, and (e) that, although the certificate of title had not been transferred to Christopher Corporation and was therefore still formally in the name of the late Raymond Setik and his immediate family, Mr. Setik having passed away in 1997, Marianne Setik, the administratrix of the estate of Raymond Setik, and all other individuals who hold an interest in Nepon #2, had judgments against them, and, finally, that (f) claims to the estate were in the hands of "defendants in this matter and subject to execution in satisfaction of the judgment debt." Appellants' Appx, 30-36.
(2) Christopher Appellants' Position
In the brief on appeal of the motion, Christopher Appellants argue that the sale of Nepon #2 was illegal and in violation of their due process rights since it was listed as an asset of the Estate of Raymond Setik pending before the Chuuk State Court, but FSMDB did not receive state court approval. Christopher Appellants further contend that the family was not part of the illegal sale, and that it was a product of a compromised agreement between FSMDB and the buyer.
(3) FSMDB's Position
FSMDB responded that Christopher Appellants failed to respond to the motions and appear at the hearing despite notice provided to them through the moving papers and orders setting hearings. According to FSMDB, the trial court did not abuse its discretion in issuing the order in aid of judgment based on Christopher Appellants' failure to oppose and appear at the hearing. Moreover, FSMDB contends that the order in aid of judgment was based on extensive evidentiary support for ownership and control of the Nepon #2 property, the deteriorated condition of the old building and its fire hazard to the adjacent newly built L5 building, the lack of access road, and the Chuuk State Finalized Base Valuation adopted by Executive Order No. 04-2007. FSMDB's Br. at 13. Finally, FSMDB contends that Christopher Appellants are estopped from raising lack of Christopher Corporation's ownership as a basis for finding that the trial division could not (i.e., lacked good grounds to) order sale of the property.
(4) Analysis and Conclusion
The Christopher Appellants, except Junior/his estate, Meriam, Estate of Manny, and George/his estate, were on notice of FSMDB's motion for an order in aid of judgment. The failure of a person on notice of a motion to oppose the motion is generally deemed a consent to the motion, but even an unopposed motion lacking in good grounds may need to be denied. Berman v. Pohnpei, 17 FSM R. 360, 374 (App. 2011) (trial court denied unopposed cost request on ground of inadequate factual showing); FSM Social Sec. Admin. v. Chuuk Public Utility Corp., 16 FSM R. 333, 334 (Chk. 2009) (failure to assert meritorious defense as grounds for denial of motion to vacate an entry of default); Pacific Fin. Corp. v. David, 21 FSM R. 5, 6 (Chk. 2016) (motion for summary judgment failed to overcome statute of limitations defense); In re Parcel No. 046-A-01, 6 FSM R. 149, 152 (Pon. 1993) (unopposed motion that fails to comply with Civil Rule 7(b) is denied).
Thus, a court must have good grounds for granting even an unopposed motion, and it could abuse its discretion in granting a motion for which grounds are lacking. It is against this test that we analyze whether to reverse the trial division's February 14, 2014 Order re: Nepon #2.
Jurisdictional Issue
It is obvious that a court lacks good grounds to grant even an unopposed motion if it lacks jurisdiction. The FSM Supreme Court has exclusive jurisdiction "in cases in which the national government is a party except where an interest in land is at issue." FSM Const. art. XI, § 6(a). An interest in land is at issue when "a material dispute emerges between the parties and is pled in court." Estate of Edmond, 19 FSM R. at 433 (citation omitted).
At the time the trial division granted the motion on Nepon #2, an interest in the land was not "at issue" because, while at the time of the motion, FSMDB contended Nepon #2 was owned by Christopher Corporation, Christopher Appellants did not appear in opposition to the motion. Therefore, the trial division did not lack jurisdiction under Article XI, section 6(a) to grant the motion.16
Nepon #2 as Property Available for Satisfying the Judgment
Implicitly, any assets sold under 6 F.S.M.C. 1410(2) must be assets of debtors. The trial division determined that the motion seeking sale of Nepon #2 to satisfy the judgment had merit on two alternate theories: either (1) the individual defendants had conveyed their interests in Nepon #2 to Christopher Corporation or (2) "even if the Defendants' conveyance of their interests in Nepon #2 to Christopher Corporation were insufficient, Nepon #2 would remain an asset jointly owned by all of the defendants in this matter and subject to execution in satisfaction of the judgment debt." App. 35.
The first theory is cast into doubt because, as of April 29, 2013, the Chuuk State Land Commission had not issued a certificate of title for Nepon #2 to Christopher Corporation and instead issued a certificate of title in the name of Raymond Setik and his immediate family. The trial division was aware of that fact because, as part of the record, there is a certificate of title for Nepon #2 in the name of Raymond Setik and his immediate family, dated April 29, 2013, included by FSMDB as an exhibit to its motion. A posthumous certificate of title raises more questions than it answers.17 Absent any additional information, however, the existence of the certificate serves as prima facie evidence refuting the contention that title in Nepon #2 belonged to Christopher Corporation.
The trial division's second theory also falls short as a basis for granting the motion, for the following reasons. First, it remains to be determined whether the judgment against Christopher Setik is valid, as the matters are remanded herein to ensure due process was observed, as set forth above. Second, there are heirs or successors to Raymond Setik who were not served in this action, i.e., the estate of Manny, Meriam, Junior, and George. With the lack of personal jurisdiction over one or more of the estate beneficiaries properly before it,18 the trial division lacked "good grounds" for the February 14, 2014 order in aid of judgment approving the sale of Nepon #2. The order of sale is hereby vacated and the matter is remanded to the trial division for further action consistent herewith, including affording an opportunity to Christopher, Meriam, Junior, George, and the Estate of Manny to be heard on the sale of Nepon #2.19
E. Garnishment, BS Corporation
(1) Appeal from the February 14, 2014 order issuing a writ of garnishment.
In its motion for order in aid of judgment seeking the sale of Nepon #2,20 FSMDB also sought a writ garnishing amounts owed to Christopher Corporation by its tenant, BS Corporation, of a warehouse in Iras Village, Weno Municipality pursuant to a lease agreement between BS Corporation and Christopher Corporation, rent in the amount of $500 per month for a term ending February 2018.
In its February 4, 2014 supplement to its motion for order in aid of judgment, FSMDB noted that the outstanding balance of the judgment (interest and principal) was $1,603,147.19. FSMDB requested that the order provide for the garnishment of rental income received by judgment debtor Christopher Corporation from BS Corporation. FSMDB attached a copy of the lease agreement between BS Corporation and Christopher Corporation and excerpts of a 2008 transcript of the deposition of Peggy Setik, in which she testified to "BS Distributing" paying $500 per month in rent to Christopher Corporation.
Christopher Appellants did not oppose FSMDB's motion for an order in aid of judgment. Failure to oppose a motion is generally deemed a consent to the motion, but even an unopposed motion lacking in good grounds may need to be denied. FSM Social Sec. Admin. v. Chuuk Public Utility Corp., 16 FSM R. at 334; Berman v. Pohnpei, 17 FSM R. at 374; Pacific Fin. Corp. v. David, 21 FSM R. at 6; In re Parcel No. 046-A-01, 6 FSM R. at 152.
The order in aid of judgment granting the motion was entered, and the writ of garnishment directed to BS Distributing Company, also called BS Corporation, was issued, both on February 14, 2014. A writ of garnishment may issue if (1) the garnisher has obtained a judgment against the debtor; (2) that the garnishee owes money to the debtor; and (3) the money owed to the debtor that is to be garnished is "beyond what is reasonably necessary for the defendant to support himself and his dependents, such as salary and wages deemed necessary for support." Bank of Guam v. Elwise, 4 FSM R. 150, 152 (Pon. 1989); 6.F.S.M.C. 1405 and 1409.
Given that the third requirement, as an exemption from collection, addresses individual defendants' ability to support themselves, and not that of corporations, we find it inapplicable to the debtor herein. We note that FSM statutes are not unique in limiting debtors' exemptions to individual debtors, i.e., not applying them to corporate debtors. See also Schumacher & Seiler, Inc. v. Fallston Plumbing, Inc., 605 A.2d 956, 958 (Md. Ct. Spec. App. 1992) (citing 3 King, COLLIER ON BANKRUPTCY § 522.05[3] (1992)) ("right to claim exemptions belongs only to an individual debtor;" corporation may not claim exemptions).
The motion for an order in aid of judgment, based on the outstanding unsatisfied judgment against Christopher Corporation and the showing of an ongoing financial obligation of BS Corporation to debtor Christopher Corporation was thus supported by good grounds. Therefore, the Order in Aid of Judgment dated February 14, 2014, insofar as it directed issuance of the writ of garnishment, is affirmed.
(2) Appeal from order denying motion to set aside order granting writ of garnishment.
On March 28, 2014, Christopher Appellants filed a notice of appeal from the February 14, 2014 order in aid of judgment. On April 10, 2014, Christopher Appellants filed with the trial division a motion for relief from the order issuing the writ of garnishment.21 The trial division denied Christopher Appellants' request for relief from the garnishment order, stating as grounds that the relief was sought based on negligence of their prior attorney. FSM Dev. Bank v Christopher Corp., 20 FSM R. 98, 103 (Chk. 2015).
In their brief on appeal, Christopher Appellants argue that the trial court ruled in error that the motion to set aside the February 14th order granting the writ of garnishment was untimely.22
Christopher Appellants also asserted that Counsel Meippen had no notice of the hearing on the motion for the order in aid of judgment. Were that assertion substantiated, it would be significant. However, besides being controverted by certificates of service in the record from below, the assertion is unsupported by reference to any evidence in the record, and may not be considered. Nakamura v. Bank of Guam(I), 6 FSM R. 224, 228 (App. 1993) (Parties to an appeal must reference properly and clearly in their briefs the parts of the record containing material in support of their arguments, and unless the court has waived an appendix under Appellate Rule 30(f), references should be to the appropriate pages of the appendix).
As to whether a party has acted within a reasonable time to bring a motion to set aside, this Court has stated:
A factor to be considered in determining whether Rule 60(b) relief has been sought within a reasonable time is whether good reason has been presented for failure to act sooner. Courts "have been unyielding in requiring that a party show good reason for the failure to take appropriate action sooner."
FSM Dev. Bank v. Arthur, 15 FSM R. 625, 633 (Pon. 2008) (citation omitted). Other factors that have been considered by this court are whether the defendant was pro se and the prejudice to plaintiff of the delay. Moylan's Ins. Underwriters (FSM), Inc. v. Gallen, 20 FSM R. 3, 6 (Pon. 2015).
The Christopher Appellants' justification for their delay is, unfortunately, conclusory, stating only that they filed the motion at "the earliest possible date" without explaining their timeline in factual detail. See, e.g., Robert v. Simina, 14 FSM R. 257, 261 (Chk. 2006).
We need not make a determination whether Christopher Appellants acted within a reasonable time, as we find sufficient the trial division's other basis for denying the Rule 60(b) motion. We conclude that the trial division did not abuse its discretion in denying the motion, since Christopher Appellants' requested relief was based on what would amount to attorney negligence–failure of the attorney to communicate with the client – not excusable neglect. As such, relief was not warranted under Rule 60(b)(1). Amayo, 10 FSM R. at 381-82.
The trial division's order for the garnishment of the BS Corporation's lease payments is affirmed.
F. Temporary Justice Materne
In the trial division, Christopher Appellants sought to disqualify Justice Materne from presiding over this case, asserting her appointment was improper given the absence of an "order of assignment." The trial division found based upon FSM Constitution, FSM laws and FSM case precedent that this claim is misplaced. According to the trial court, Congress has given the Chief Justice of the FSM Supreme Court the authority to appoint temporary justices and according to FSM laws the Chief Justice makes the appointment by giving notice to the President and Speaker of such appointment. Thus, the trial division concluded that an "order of assignment" was not necessary and its absence does not invalidate the appointment of the temporary justice.
On appeal, Christopher Appellants dispute the legality of the appointment of Temporary Justice Materne and whether she was vested with the legal authority to issue a substantive order in this country–potentially resulting in the loss of real property–absent an order of assignment. Christopher Appellants contend that an order of assignment would have given them notice and opportunity to move for disqualification when there is conflict or other grounds. Because there was no such order, Christopher Appellants argue that they did not have sufficient time to move for disqualification of the Justice prior to the July 17, 2015 order. Christopher Appellants are also concerned that Justice Materne only took 4 weeks to deliberate on the motions given the voluminous record of the Chuuk trial division cases. Appellants Christopher Appellants believed that the handling and processing of their cases were different from others which amounts to severe prejudice to them.
FSMDB argues that the designation of Temporary Justice Materne was proper as Acting Chief Justice Johnny gave notice to the President and Speaker. FSMDB maintains that no grounds for disqualification were ever presented by the Setiks to the trial court even in this appeal. FSMDB contended that there is no FSM law, Court Rule or General Court Order requiring a separate "order of assignment" of a temporary justice to be entered in a case beyond the FSM Supreme Court Communication and the public FSM Congress Order of the Day. Moreover, because there is no FSM law, court rule or general court order, non-issuance of an "order of assignment" does not disqualify Justice Materne nor invalidate her orders. According to FSMDB, to reach a different conclusion would cause chaos in our judicial system because every order issued without an order of assignment would be subject to invalidation including this appeal.
Furthermore, FSMDB averred that under the "de facto doctrine" Justice Materne, as an Associate Justice of the Supreme Court of the Republic of Palau, held the constitutional and statutory qualifications for designation of a temporary justice to preside over the trial court cases and her cases would be issued under the color of authority derived from the notices provided by Acting Chief Justice Johnny to the President and Congress. Additionally, FSMDB argues that the orders were entered by the clerks pursuant to the usual procedures confirming her proper appointment and service as temporary justice for the trial court case. FSMDB found the trial court's denial of the disqualification motion to be proper since there was no accompanying affidavit to establish the factual basis for the disqualification.
Analysis and Conclusion
The Chief Justice may assign judges among the divisions of a court and give special assignments to retired Supreme Court justices and judges of state and other courts. FSM Const. art. XI, § 9(b).
Section 104 of Title 4 of the FSM Code, governs special assignments, states:
The Chief Justice may give special assignments pursuant to article XI, section 9(b) of the Constitution. In the case of temporary Justice's appointment pursuant to this authority:
(1) The person appointed shall meet the qualifications of section 10723 of this chapter.
(2) The Congress may by resolution disapprove of the continued service of any temporary Justice whose cumulative service exceeds three months, and the disapproved person shall thereafter be ineligible for further service as a temporary Justice for one year, unless the Congress shall sooner revoke its disapproval.
(3) The Chief Justice shall give notice to the President and the Congress upon the appointment of any temporary Justice.
Since the Chief Justice by rule may give special assignments to retired Supreme Court justices and judges of state and other courts; since judicial rules may be amended by statute; and since a statute already exists setting out the procedure for giving special assignments to retired Supreme Court justices and judges of state and other courts, the Chief Justice must follow that procedure. Setik v. FSM Dev. Bank, 21 FSM R. 505, 517 (App. 2018). The Chief Justice is required by statute to give notice to the President and Congress upon the appointment of any temporary justice. While the concurrent issuance of a separate order of assignment, filed in the relevant case, is undoubtedly the better practice, no law or rule requires it. Id.
We thus affirm the trial division's order dated October 15, 2015 denying the motion to disqualify Temporary Justice Materne from serving as a temporary justice in Civil Action No. 2007-1008.24
As set forth above, we vacate the order denying the motion to set aside the judgment against Christopher Setik, the order denying relief from the order approving sale of the RS Plaza building, and the order denying relief from the order approving sale of Nepon #2, for further action in the trial division in accordance herewith. We affirm in all other respects.25
_______________________________Footnotes:
1 Appellant Marianne B. Setik passed away on September 1, 2022. On filing of a suggestion of her death on September 22, 2022 by FSMDB, this Court, through a single justice order dated November 7, 2022, entered an order providing for her personal representative to move to substitute as a party, within 90 days, on the failing of which, the appeal may be subject to dismissal as to Ms. Setik. On April 3, 2023, no such motion having been filed and, a single justice order was issued dismissing Ms. Setik from this appeal.
2 The signers were Marianne B. Setik, George Setik, Junior Setik, Atanasio Setik, Eleanor S. Sos, Vicky S. Irons, Manney [sic] Setik, Irene S. Walter, Joanita S. Pangelinan, Meriam S. Sigrah, Marleen Setik, and Christopher James Setik. On September 22, 2022, FSMDB filed a "Suggestion of Death on the Record" concerning Defendant Marianne Setik.
3 CSSC Probate Nos. 48-97,50-97 and 4-98, consolidated. At oral argument on this appeal, September 21, 2021, counsel to the Christopher Appellants, who represented that she was also counsel for the estate in the probate matters, stated that these proceedings had not concluded.
4 "Christopher Store Properties" include the Christopher Store in Tunnuk, Christopher Inn, Roof Garden Steak House, Rainbow Coffee Shop, the Stop & Shop, a warehouse, a hardware store, a car rental agency, and other business, but, "by stipulation of the parties, not the C-Star Apartelle or the RS Plaza in Weno." In re Estate of Setik, 12 FSM R. 423, 425, n. 1, (Chk. S. Ct. Tr. 2004). The record before this Court does not indicate whether Christopher Store Properties in the probate is the same as Christopher Store the borrower under the loan.
5 FSM Civil Rule 25(a)(1).
6 App. Br. at 34.
7 Neither Rule 10(a) (pleadings) nor Rule 7(b)(2) of the FSM Rules of Civil Procedure require amendment to the caption when a party is dismissed. Hoemke v. Macy's West Stores LLC, 2020 WL 5229194 (2020); the contents of a caption are not part of a statement of a claim and "the caption is not determinative as to the identity of the parties to the action." 5A CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1321 (3d ed. 2004).
8 After Ms. Jack withdrew as counsel for defendants, Ms. Sigrah continued active representation on their behalf.
9 This filing was the subject of a motion to strike by FSMDB, on the grounds that it was filed after the June 30, 2014 deadline set by the trial division, which motion does not appear to have been ruled upon by the trial division. (A further filing was a cover entitled "Affidavits of Defendants Patricia Setik, Junior Setik, and Meriem Setik in support of their Reply" (R-597-598), which was filed on July 22, 2014, but the affidavits are not in fact in the trial division record, although they are in Christopher Appellants' appendix.) Additional affidavits on the same subject (by Atanasio and Christopher) were filed August 27, 2014. R-577. Another affidavit on the same subject (Irene), is not included in the court record but is included in Christopher Appellants's appendix (App. 156-57) submitted to this Court. As it has not been added to the record by the proper means (see FSM Appellate Rule 10(e)), this Court declines to consider Irene's affidavit.
10 Atanasio Setik also submitted an affidavit that disputed service on him. However, the adequacy of his service is obviated by the fact that he was a named defendant when, on April 2, 2008, Attorney Meippen appeared on his behalf and thereafter did not raise the issue of deficiency of service before a judgment was entered against him. FSM Civ. R. 12(h)(1); Lee v. Lee, 13 FSM R. 252, 257 (Chk. 2005).
11 As noted above, there is no judgment against defendants Estate of Manny Setik, Junior Setik, Meriam Setik Sigrah, and George Setik.
12 According to testimony of Peggy Setik given at deposition on April 7, 2008, excerpts at Supp. App. 54-65, the building called RS Plaza belonged to Christopher Corporation (while the land underneath was in the name of the late Raymond Setik). Peggy identified herself as a secretary and officer of Christopher Corporation
13 When a party moves for relief from judgment under Civil Procedure Rule 60(b)(4) on the ground that the judgment was void, there is no requirement, as is usual when a default judgment is attacked under Rule 60(b), that the movant show that he has a meritorious defense. Lee v. Lee, 13 FSM R. 252, 256 (Chk. 2005).
14 Marianne Setik, administratrix of the Estate of Raymond Setik, was a party below in her individual capacity. Her presence in her personal capacity as a party to the lawsuit in her personal capacity does not cure the absence of heirs. RESTATEMENT (SECOND) OF JUDGMENTS § 36 (1982).
15 FSMDB argues that, by virtue of the judgment in Civil Action No. 2008-1060 (in which a default judgment was entered in its favor against Junior, Meriam, and the Estate of Raymond Setik (by Marianne, administratrix)), dismissed defendants have already had this liability determined. Supp App. 91-101. The appellate division may take judicial notice of the court records in that matter. Welson v. FSM, 5 FSM R. 281, 284 (App. 1992). As we are remanding this matter to the trial division to accord those defendants an opportunity to be heard on the sale of RS Plaza, we include in that remand for the court to determine the issue of claim preclusion with respect to those Christopher Appellants.
16 See also Ehsa v. FSM Dev. Bank, 20 FSM R. 498, 516 (App. 2016) (diversity jurisdiction over suit with FSMDB based on Chuuk and Kosrae shares, "assuming arguendo, FSMDB is not the functional equivalent of the national government or an instrumentality thereof").
17 When an owner of any interest in registered land dies, the Land Commission's duty is to cancel the original and duplicate certificates and issue new ones in the name(s) of the decedent's devisees or heirs. A certificate of title cannot be issued in the name of a person already deceased. Enengeitaw Clan v. Heirs of Shirai, 16 FSM R. 547, 555 (Chk. S. Ct. App. 2009).
18 Marianne Setik, administratrix of the Estate of Raymond Setik, was a party below in her individual capacity. Her presence in her personal capacity as a party to the lawsuit in her personal capacity does not cure the absence of heirs. RESTATEMENT (SECOND) OF JUDGMENTS § 36 (1982).
19 Christopher Appellants also filed a 60(b) motion to set aside the February 14, 2014 Order re: sale of Nepon #2. Since we are reversing and remanding the matter based on the appeal, we do not address the 60(b) motion.
20 The motion was filed on August 23, 2013 and supplemented on February 4, 2014.
21 By their filing a notice of appeal from the order granting the writ of garnishment, the trial division no longer had jurisdiction over the substance of the matter from which the appeal was taken. Department of the Treasury v. FSM Telecomm. Corp., 9 FSM R. 465, 466-67 (App. 2000). As this Court has previously held, the trial division, while lacking jurisdiction to grant a Rule 60(b) motion while the order from which relief is sought is on appeal, it could consider the motion, and if inclined to grant the motion, state on the record that if the matter were before it that it would grant the motion. If the matter were thereafter remanded to it, it could give effect to its inclination and grant the Rule 60(b) motion. Walter v. Meippen, 7 FSM R. 515, 518 (Chk. 1996); FSM Dev. Bank v. Ehsa, 20 FSM R. 286, 289 (Pon. 2016). Alternatively, the trial division could deny the motion. Meippen, 7 FSM R. at 518.
22 Appellants noted that the motion was filed 54 days after the order, which the Christopher Appellants contended was "the earliest date possible for Defendants-Appellants and their new counsel." App. Br. at 22.
23 4 F.S.M.C. 107.
§ 107. Qualifications of Supreme Court Justices.
A person nominated to the position of Chief Justice or Associate Justice of the Supreme Court shall:
(1) be at least thirty years of age at the time of nomination; and
(2) be a graduate from an accredited law school and be admitted to practice law in any jurisdiction, or be a person of equivalent and extraordinary legal ability obtained through at least five years of experience practicing law.
24 Based on this ruling, we conclude it is unnecessary to decide whether Justice Materne's actions might be validated under the de facto judge doctrine.
25 We dismiss the appeal of the denial of the stay motion as moot. We find the remaining asserted grounds for appeal to be without merit.
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