Truk Transportation Co Inc v Trans Pacific Import Ltd [1988] FMSC 1; 3 FSM Intrm. 512 (Truk 1988) (5 January 1988)

[1988] FMSC 1; 3 FSM Intrm 512 (Truk 1988)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION

FSM CIVIL ACTION NO. 1987-1007

TRUK TRANSPORTATION CO., INC.
Plaintiff

V

TRANS PACIFIC IMPORT LTD.
Defendant

BEFORE: The Honorable Richard H. Benson, Associate Justice

APPEARANCES: For the Plaintiff: R. Barrie Michelsen, Esq.;
For the Defendant: David A. Wiseman, Esq.

HEARING: 2 September 1987 - JUDGMENT: January 5, 1988

HEADNOTES

Judgment - Default
Under circumstances where the defendant has failed to set forth a meritorious defense and has exhibited culpable conduct, defendant will not succeed on a motion to set aside a judgment of default. Truk Transportation Co. v. Trans Pacific Import Ltd., [1988] FMSC 1; 3 FSM Intrm. 512, 514 (Truk S. Ct. Tr. 1988).

Judgment - Default
A motion to set aside default judgment is addressed to the discretion of the Court. In the exercise of discretion the Court is guided by the principle that cases should normally be decided after trials on the merits. Truk Transportation Co. v. Trans Pacific Import Ltd., [1988] FMSC 1; 3 FSM Intrm. 512, 515 (Truk S. Ct. Tr. 1988).

Judgment - Default
The criteria to be met in order to justify the setting aside of a default judgment are whether the default was willful, caused by culpable conduct of the defendant, whether there is meritorious defense, and whether setting aside the default would prejudice the plaintiff. Truk Transportation Co. v. Trans Pacific Import Ltd., [1988] FMSC 1; 3 FSM Intrm. 512, 515 (Truk S. Ct. Tr. 1988).

COURT'S OPINION

RICHARD H. BENSON, Associate Justice:

PROCEDURAL HISTORY

This matter came before the court on the motion of the defendant for an order setting aside the default judgment entered on July 3, 1987. After oral argument on September 2, 1987, the matter was submitted to the court for decision. The motion was denied by order dated December 31, 1987. The reasons for the denial are set out in this opinion.

ISSUE

Whether a default judgment should be set aside in a case in which the defendant's president submitted an answer on its behalf which was rejected by the court and the defendant so notified, in which no answer was timely filed (although the defendant at all times had the services of an attorney), default was entered and the defendant received a 3 day notice of the hearing on the application for default judgment, failed to appear although defendant's counsel conversed with the plaintiff's counsel one day before the hearing, in which no steps to defend the case occurred until some 35 days after the hearing when the present motion was filed, and finally in which the defendant presents only a general denial to the complaint.

HOLDING

Under the circumstances set forth above in the statement of the issue the motion is denied because of the failure to set forth a meritorious defense and because of the culpable conduct of the defendant.

FACTS

On March 23, 1987, the plaintiff filed its complaint, which alleged that the defendant was the successor corporation and alter ego of another corporation, and that the latter corporation was indebted to the plaintiff for some $100,000.00.

On the same day the plaintiff filed its application for a writ of attachment. The application was supported by an affidavit of the plaintiff's general manager which in considerable detail supported the allegations of the complaint.

The writ was entered March 23, 1987. On March 25, 1987, 16,000 bags of cement were seized pursuant to the writ.

The summons and complaint were served on the defendant on May 6, 1987. Service was made again on May 8, 1987. On this occasion the writ of attachment was also served.

On May 27, 1987, the court received an answer signed by the president of the defendant. This answer was drafted by the one of the attorneys who represents the defendant in the motion before the court.

The following day the clerk notified the president that the answer could not be filed because the president was not admitted to practice and could not represent the defendant "pro se."

The default of the defendant was entered June 19, 1987. On June 30, 1987, the defendant was served with a notice that on July 3, 1987, a hearing would be held on the plaintiff's application for a default judgment.

The attorney of the defendant was in telephonic contact with the attorney for the plaintiff the day prior to the scheduled hearing on the application for a default judgment. The two agreed to a time later that day for a telephonic hearing at which the attorney for the defendant would apply to the court for a continuance. The attorney for the defendant failed to telephone to the court at the agreed time, and never subsequently reached the court or offered an explanation.

The hearing was held as scheduled. No one appeared for the defendant. The default judgment was entered.

On August 7, 1987, counsel representing the defendant came to the court's office in Truk, were admitted for purposes of this case and filed the present motion to set aside the default judgment. The motion was supported by a memorandum of points and authorities and an affidavit.

REASONING

The authority of the court to relieve a party from a default judgment is found in the Rules of Civil Procedure for the Trial Division of the Supreme Court of the Federated States of Micronesia:

For good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b). Rule 55(c).

On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect;...or (6) any other reason justifying relief from the operation of the judgment. Rule 60(b).

Motions are addressed to the discretion of the court. Altman v. Connally, [1972] USCA2 132; 456 F.2d 1114, 1116 (2d Cir. 1971). In the exercise of discretion the court is guided by the principle that cases should normally be decided after trials on the merits. Lonno v. Trust Territory (III), [1983] FMSC 4; 1 FSM Intrm. 279, 281 (Kos. 1983).

The motion of the defendant asks that the default judgment be set aside because of unavailability of counsel to represent it. This ground is supported by the affidavit of the president of the defendant dated July 29, 1987. The affiant says that he "sought the services of attorneys practicing in the Federated States of Micronesia," [namely] "the services of George Butler, Esq., Senator Fritz, and Michael Bermon (sic) who were unable to represent" the defendant.

The affidavit is remarkable in its failure to make a single specific statement as to the reason or reasons why the lawyers could not represent the defendant. At no time prior to the filing of the motion on August 7, 1987, was the court notified that the defendant was unable to secure counsel. The ground of this motion is also troubling because it makes no reference to the circumstance that counsel who filed this motion drafted the "answer," and was apparently in regular association with the defendant. The rules of this court allow for counsel not admitted to practice before it to apply and be admitted for purposes of a particular case. Rule IV(A) of the Rules for Admission to Practice. This is a common court procedure. In this Court, admission is liberally granted. This procedure was followed when counsel were admitted on August 7, 1987.

A common statement of the criteria to be met in order to justify the setting aside of a default judgment is whether the default was willful, that is, caused by culpable conduct of the defendant, whether there is a meritorious defense, and whether setting aside the default judgment would prejudice the plaintiff. Keegal v. Key West & Caribbean Trading
Co., [1980] USCADC 142; 627 F.2d 372, 373 (D.C. Cir. 1980).

The failure of the defendant to act in this matter is without explanation. At all times the defendant had an attorney available for advice. The court finds that the defendant acted in such a way as to cause the default. The case was not one easily overlooked: A large judgment was at issue while the case was pending and a very large and obviously valuable shipment of cement passed out of the control of the defendant because of the writ which was issued the day the civil action commenced.

More defeating to the defendant's motion is the failure to specify a meritorious defense. The answer is in effect a general denial. Counsel for the defendant made a general contention in argument that a meritorious defense existed. No authority was given that such a generality suffices to invoke the discretionary power of the court.

In Gomes v. Williams, [1970] USCA10 10; 420 F.2d 1364, 1366 (10th Cir. 1970) the attorney for the defendant said, "We do have a good defense to the claim itself, but especially we have a good defense to any allegation of fraud." The Court of Appeals held that, "[s]uch a bald allegation, without the support of facts underlying the defense, will not sustain the burden of the defaulting party under Rule 60(b). In an attempt to determine the meritorious nature of a defense, the trial court must have before it more than a mere allegation that a defense exists." Gomes, 420 F.2d at 1366.

As to the third criterion, it is true that the plaintiff would suffer little prejudice if the motion were granted. It will not be granted, however, because of the failure of an adequate showing by the defendant as to the other two grounds, and because, while trial on the merits is desired, so is finality of legal proceedings a desirable goal. In addition, if there were a trial, there is no showing as to the issue upon which the defendant relies in order to prevail.

For the reasons stated the motion was denied.