K & I Enterprises v Francis [2007] FMCSC 45; 15 FSM Intrm. 414 (Chk. S. Ct. Tr. 2007) (1 November 2007)

CHUUK STATE SUPREME COURT TRIAL DIVISION
CSSC CIVIL ACTION NO. 62-2007

K & I ENTERPRISES, INC.,
Plaintiff,

vs.

LINDA FRANCIS TINO KINTOKY, WON PAT ROLD,
and EDWARD K. SOS,
Defendants.
__________________________________________

ORDER SETTING ASIDE DEFAULT AND GRANTING SUMMARY JUDGMENT

Camillo Noket
Chief Justice

Decided: November 1, 2007

APPEARANCES:

For the Plaintiff: Maketo Robert
P.O. Box 1100
Weno, Chuuk FM 96942

For the Defendants: Charleston Bravo
Assistant Attorney General
Office of the Chuuk Attorney General
P.O. Box 1050
Weno, Chuuk FM 96942

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HEADNOTES

Civil Procedure  Discovery

To respond to interrogatories, requests for production or requests for admission, a party is allowed either 30 days or 45 days from service of the summons and complaint. K&I Enterprises v. Francis, [2007] FMCSC 45; 15 FSM Intrm. 414, 416 n.1 (Chk. S. Ct. Tr. 2007).

Civil Procedure  Default and Default Judgments

Courts ordinarily favor resolving cases on their merits rather than on procedural grounds. K&I Enterprises v. Francis, [2007] FMCSC 45; 15 FSM Intrm. 414, 417 (Chk. S. Ct. Tr. 2007).

Civil Procedure  Default and Default Judgments

Until a default is entered by the court clerk, a party still may appear in the action and the clerk must accept for filing the defendant's pleadings or motions even if filed outside the times prescribed by the rules. No default can be entered against a party which has either filed a response, such as a motion or an answer to the complaint, indicating its intent to defend the action, or engaged in other behavior which constitutes an active defense. Whether a party's written response or other behavior satisfies the Rule 55 requirement that the party must "plead or otherwise defend" to prevent entry of default is made on a case by case basis. K&I Enterprises v. Francis, [2007] FMCSC 45; 15 FSM Intrm. 414, 417 (Chk. S. Ct. Tr. 2007).

Civil Procedure  Default and Default Judgments

Since the standard for setting aside an entry of default under Rule 55(c) is the liberal and less rigorous "good cause" standard rather than the more restrictive standard of excusable neglect for setting aside a default judgment under Rule 60(b), the court will find good cause to set aside entry of default based on the defendants' demonstrated intent to defend in the action by their filing numerous motions, including their first motion for an enlargement, filed a day after the deadline for filing an answer to the complaint and before entry of default and their motion to set aside entry of default filed almost immediately after the default was entered. K&I Enterprises v. Francis, [2007] FMCSC 45; 15 FSM Intrm. 414, 417 (Chk. S. Ct. Tr. 2007).

Civil Procedure  Summary Judgment

Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. The court must view the facts presented and inferences made in the light most favorable to the nonmoving party, and the burden of showing a lack of triable issues of fact belongs to the moving party. K&I Enterprises v. Francis, [2007] FMCSC 45; 15 FSM Intrm. 414, 417-18 (Chk. S. Ct. Tr. 2007).

Civil Procedure  Summary Judgment

In ruling on a summary judgment motion, the court considers the pleadings, depositions, answers to interrogatories, admissions and affidavits that are present in the file although not all of these items need to be present for a court to grant summary judgment. Once the moving party has made out a prima facie case that there are no triable issues of fact and that it is entitled to summary judgment as a matter of law, the nonmoving party then has the burden to show by competent evidence that there is a triable issue of fact and cannot merely deny the summary judgment motion's allegations but must set forth specific evidence that would be admissible at trial to show that there is a genuine issue for trial. K&I Enterprises v. Francis, [2007] FMCSC 45; 15 FSM Intrm. 414, 418 (Chk. S. Ct. Tr. 2007).

Civil Procedure  Summary Judgment

If, when determining whether a triable issue of material fact exists and viewing the facts presented and the inferences drawn from them in the light most favorable to the non-moving party, a court determines that there is only one reasonable conclusion that can be drawn from the undisputed facts, there is no question of material fact and the case is ripe for disposition by summary judgment. K&I Enterprises v. Francis, [2007] FMCSC 45; 15 FSM Intrm. 414, 418 (Chk. S. Ct. Tr. 2007).

Civil Procedure  Summary Judgment; Statutes  Construction

Since the courts are the final authority on issues of statutory construction, when, based on the undisputed record and reasonable inferences drawn therefrom, the court concludes that the plaintiff is not selling imported items, the case is ripe for summary judgment on the issue of whether the tax statute applies to locally produced aggregate. K&I Enterprises v. Francis, [2007] FMCSC 45; 15 FSM Intrm. 414, 418 (Chk. S. Ct. Tr. 2007).

Statutes  Construction; Taxation

When "first sale" is defined as "the sale first made after the date of receipt in Chuuk State of taxable tangible items, a tax on first sale in the State of Chuuk of all tangible items, except gasoline and unprocessed and unpackaged items, means that in order for an item to be taxable, there must be "receipt of the item" in Chuuk. The only reasonable inference to be drawn from the definition of "first sale" is that items which have never left Chuuk, that is, locally produced goods are not subject to the statute because they have no "date of receipt" in Chuuk. K&I Enterprises v. Francis, [2007] FMCSC 45; 15 FSM Intrm. 414, 418 (Chk. S. Ct. Tr. 2007).

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COURT'S OPINION

CAMILLO NOKET, Chief Justice:

Background

1. On May 18, 2007, K & I filed its complaint and on May 22, 2007 completed service of process against Defendants.
   
2. On May 31, 2007, K & I filed and served its discovery requests.
   
3. On June 22, 2007, Defendants' filed their motion to enlarge time to file responsive pleading.
   
4. On June 26, 2007, K & I filed its motion for entry of default.
   
5. On July 2, 2007, Defendants filed their motion to enlarge time to respond to discovery received from Plaintiff on May 31, 2007. In the motion, Defendants' counsel states that he received consent from Plaintiff's to a thirty (30) day enlargement.
   
6. On July 4, 2007, K & I filed its opposition to Defendants' motion for enlargement of time to file a responsive pleading.
   
7. On August 4, 2007, the clerk of court entered a default against Defendants.
   
8. On August 6, 2007, Defendants filed and served their motion to set aside the entry of default.
   
9. On August 27, 2007, Defendants filed and served their answer to the complaint and its responses to K & I's discovery requests.
   
10. On October 3, 2007, K & I filed its motion objecting to the untimely filed of Defendants' answer and to strike the answer, motion for summary judgment, and motion for judgment by default.
    
11. On October 23, 2007, Defendants filed their opposition to motion to strike, opposition to motion for summary judgment, and opposition to motion for judgment by default.
    

Defendants' Motions for Enlargement

Service of process was effectuated on May 22, 2007. K & I served its discovery requests on May 31, 2007. Defendants filed their motion to enlarge time to file a responsive pleading on June 22, 2007, a day after their answer was due. Defendants filed their motion to enlarge time to respond to discovery on July 2, 3007, three days before they were required to respond.[1] In their motion to enlarge time for discovery, Defendants indicate that they received consent from Plaintiff to a thirty (30) day enlargement. In sum, both of Defendants' motions for enlargement were filed within days of the deadlines for a response and the Defendants have now filed their answer and their discovery responses.

Courts ordinarily favor resolving cases on their merits rather than on procedural grounds. Medabalmi v. Island Imports Co., [2001] FMSC 53; 10 FSM Intrm. 32, 35 (Chk. 2001). Because the court prefers to rule on the merits and, finding good cause, it grants both of Defendants' motions for enlargement. The court denies K & I's motion to strike as moot.

Entry of Default Against Defendants

Defendants' answer was due on June 21, 2007. Instead of timely filing their answer, Defendants requested an enlargement on June 22, 2007, the day after their answer was due. K & I's motion for entry of default was filed on June 26, 2007. No opposition to the motion was filed and, on August 4, 2007, the clerk of court entered a default against Defendants. Two days later, on August 6, Defendants filed their motion to set aside entry of default.

Until a default is entered by the court clerk, a party still may appear in the action and the clerk must accept for filing defendant's pleadings or motions, even if filed outside the times prescribed by the rules. O'Sullivan v. Panuelo, [2001] FMSC 11; 10 FSM Intrm. 257, 260 (Pon. 2001). No default can be entered against a party which has either filed a response, such as a motion or an answer to the complaint, indicating its intent to defend the action, or engaged in other behavior which constitutes an active defense. Id. Whether a party's written response or other behavior satisfies the Rule 55 requirement that the party must "plead or otherwise defend" to prevent entry of default is made on a case by case basis. Id.

In this case, the court finds that Defendants' first motion for an enlargement, filed a day after the deadline for filing an answer to the complaint and before entry of default, indicated Defendants' intent to defend the action. Indeed, by the time a default was entered, on August 4, 2007, Defendants had filed numerous motions. Further, Defendants filed their motion to set aside entry of default almost immediately after it was entered. The standard for setting aside an entry of default under Rule 55(c) is the liberal and less rigorous "good cause" standard rather than the more restrictive standard of excusable neglect for setting aside a default judgment under Rule 60(b). FSM Dev. Bank v. Gouland, [2000] FMSC 32; 9 FSM Intrm. 375, 377-78 (Chk. 2000). Based on Defendants' demonstrated intent to defend in this action, the court finds good cause to set aside entry of default.

Defendants' motion to set aside entry of default is granted. K & I's motion for default judgment is therefore moot.

K & I's Motion for Summary Judgment

In its motion for summary judgment, K & I contends that it was unlawfully taxed by Defendants, pursuant to Section 4 of Truk S.L. No. 5-119, for the sale of aggregates sold in the state Chuuk. First, K & I argues that Section 4 of Truk S.L. No. 5-119 is inapplicable to it because it only imposes a tax on imported items. Second, K & I argues that the sale of aggregate fits within the exception to taxation for "unprocessed" and "unpackaged" items. Third, K & I argues that even if the statute subjects it to taxation, it has been applied unconstitutionally to K & I. The court agrees with K & I's first argument and therefore finds it unnecessary to address its other arguments.

Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Sauder v. Chuuk State Legislature, [1995] FMCSC 20; 7 FSM Intrm. 358, 360, 363 (Chk. S. Ct. Tr. 1995). The court must view the facts presented and inferences made in the light most favorable to the nonmoving party, and the burden of showing a lack of triable issues of fact belongs to the moving party. Marar v. Chuuk, [2000] FMSC 27; 9 FSM Intrm. 313, 314 (Chk. 2000). In ruling on a motion for summary judgment, the court considers the pleadings, depositions, answers to interrogatories, admissions and affidavits that are present in the file. Not all of these items need to be present for a court to grant summary judgment. Mailo v. Bae Fa Fishing Co., [1995] FMSC 13; 7 FSM Intrm. 83, 85 (Chk. 1995). Once the moving party has made out a prima facie case that there are no triable issues of fact and that it is entitled to summary judgment as a matter of law, the nonmoving party then has the burden to show by competent evidence that there is a triable issue of fact. FSM Dev. Bank v. Bruton, [1995] FMSC 42; 7 FSM Intrm. 246, 249 (Chk. 1995). A defendant cannot merely deny the allegations in a motion for summary judgment but must set forth specific evidence that would be admissible at trial to show that there is a genuine issue for trial. Nethon v. Mobil Oil Micronesia, Inc., [1994] FMSC 22; 6 FSM Intrm. 451, 459 (Chk. 1994); Urban v. Salvador, [1995] FMSC 8; 7 FSM Intrm. 29, 30 (Pon. 1995). If, when determining whether a triable issue of material fact exists and viewing the facts presented and the inferences drawn from them in the light most favorable to the non-moving party, a court determines that there is only one reasonable conclusion that can be drawn from the undisputed facts, there is no question of material fact and the case is ripe for disposition by summary judgment. Nahnken of Nett v. Pohnpei, [1995] FMSC 27; 7 FSM Intrm. 171, 176 (Pon. 1995).

According to K & I, K & I was taxed by Defendants pursuant to Section 4 of Truk S.L. No. 5-119 for the sale of aggregate crushed from boulders obtained in Chuuk and sold to local customers in bulk. Motion for Summary Judgment at 5-11. Defendants do not dispute the factual bases for K & I's motion. Rather, Defendants submit that there is an issue as to whether the statute applies only to imported goods. Opp'n to Motion for Summary Judgment at 3.

Based on the undisputed record and reasonable inferences drawn therefrom, the court concludes that K & I is not selling imported items. Id.; Nahnken of Nett, 7 FSM Intrm. at 176. As the courts are the final authority on issues of statutory construction, this case is ripe for summary judgment on the issue of whether Section 4 of Truk S.L. No. 5-119 applies to locally produced aggregate. Olter v. National Election Comm'r, [1987] FMSC 16; 3 FSM Intrm. 123, 132 (App. 1987); Sauder v. Chuuk State Legislature, [1995] FMCSC 20; 7 FSM Intrm. 358, 360, 363 (Chk. S. Ct. Tr. 1995) ("Issues of statutory [. . .] coctioninterinterpretatietation are not issues of material fact but matters of law.").

Chk. S.L. No. 5-119 provides for "a tax on first sale in the State of Chuuk of all tangible items, except gasoline and unprocessed and unpackaged items." Truk S.L. No. 5-119 § 4, as amended by Chk. S.L. No.191-04, § 1, Chk. S.L. No. 2-93-06, § 1, Chk. S.L. No. 3-96-01 § 1(4), and Chk. S.L. No. 5-00-27, § 1(4), modified. "First sale" is defined as "the sale first made after the date of receipt in Chuuk State of tangible items taxable pursuant to [Chapter 29]." Truk S.L. No. 5-119, § 3(2), as amended by Chk. S.L. No. 3-96-01, § 1(4)(4)(b), modified. Thus, in order for an item to be taxable, there must be "receipt of the item" in Chuuk. The only reasonable inference to be drawn from the definition of "first sale" is that items which have never left Chuuk, that is, locally produced goods such as the aggregate sold by K & I, are not subject to the statute because they have no "date of receipt" in Chuuk. Defendants have offered no other plausible, let alone reasonable, interpretation of the definition of "first sale." The court concludes, therefore, that the locally produced aggregate sold by K & I was not subject to taxation according to section 4 of Chk. S.L. No. 5-119.

Conclusion

K & I's motion for summary judgment is granted and judgment will be entered for the Plaintiff.

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^[1]See Chuuk Civil Rules 33, 34, and 36, which allow a party 30 days to respond to interrogatories, requests for production or requests for admission or 45 days from service of the summons and complaint.