Bank of Guam v Nukuto [1994] FMSC 56; 6 FSM Intrm. 615 (Chk. 1994) (27 December 1994)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as Bank of Guam v. Nukuto, [1994] FMSC 56; 6 FSM Intrm. 615 (Chk. 1994)

BANK OF GUAM, a corporation,
Plaintiff,

vs.

FILORENTINA NUKUTO,
Defendant.

___________________________________

CIVIL ACTION NO. 1994-1036

ORDER AND MEMORANDUM

Richard H. Benson
Associate Justice

Hearing: October 6, 1994
Decided: December 27, 1994

APPEARANCES:

For the Plaintiff:
Kathleen B. Alvarado, Esq.
R. Barrie Michelsen, Esq.
Law Offices of R. Barrie Michelsen
P.O. Box 1450
Kolonia, Pohnpei FM 96941

For the Defendant:
Repeat Samuel, Trial Counselor
Micronesian Legal Services Corporation
P.O. Box D
Weno, Chuuk FM 96942

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HEADNOTES

Civil Procedure ─ Motions
Although failure to timely file an opposition to a motion is deemed a consent to the motion, proper grounds for the granting of the motion must still exist before the court may grant it. Bank of Guam v. Nukuto, [1994] FMSC 56; 6 FSM Intrm. 615, 616 (Chk. 1994).

Torts ─ Damages
One whose property is converted is entitled to interest at the legal rate from the time of conversion. Bank of Guam v. Nukuto, [1994] FMSC 56; 6 FSM Intrm. 615, 616 (Chk. 1994).

Attorney, Trial Counselor and Client ─ Fees
In the absence of statutory authority there is a general presumption against attorney's fees awards, and they should not be awarded as standard practice. Bank of Guam v. Nukuto, [1994] FMSC 56; 6 FSM Intrm. 615, 617 (Chk. 1994).

Attorney, Trial Counselor and Client ─ Fees; Torts ─ Damages
Where the defendant has breached her fiduciary duty, and converted to her own personal use funds of others, has made no claim of right to any of the funds or offered any defense, and blame thus lies wholly with the defendant, the plaintiff will be allowed to recover its attorney's fees in order to make the victim whole. This is a narrowly drawn exception to the general rule parties will bear their own attorney's fees. Bank of Guam v. Nukuto, [1994] FMSC 56; 6 FSM Intrm. 615, 617-18 (Chk. 1994).

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COURT'S OPINION

RICHARD H. BENSON, Associate Justice:

On June 6, 1994, plaintiff filed its complaint in this matter, alleging that the defendant misappropriated and converted to her own use the plaintiff bank's funds in the amount of $302,569.52. After enlargement of time, defendant answered on July 15, 1994. On September 21, 1994, plaintiff filed its motion for summary judgment, which was heard on October 6, 1994. Plaintiff asks for judgment not only for the principal sum of $302,569.52, but also for prejudgment interest at 9%, calculated from the dates of defalcation, and for attorney's fees. The defendant neither filed an opposition to the motion nor appeared at the hearing. At my request, plaintiff filed points and authorities [and a motion] for an award of attorney's fees on October 21, 1994, to which the defendant filed an opposition on November 4, 1994.

No opposition was filed to the summary judgment motion. Although failure to timely file opposition to a motion is deemed a consent to the motion, FSM Civ. R. 6(d), proper grounds for the granting of the motion must still exist before the court may grant it. Senda v. Mid-Pacific Constr. Co., [1994] FMSC 20; 6 FSM Intrm. 440, 442 (App. 1994). Here there is no genuine issue as to any material fact because the plaintiff's uncontroverted affidavits establish the facts of its case. Therefore since the plaintiff is entitled to judgment as a matter of law I must award judgment for the plaintiff for the principal sum of $302,569.52.

I. PREJUDGMENT INTEREST

There was also no opposition filed to the plaintiff's request for prejudgment interest. I am thus presented with an issue of law. "Generally speaking, in actions . . . for the coion of personalsonal property, interest is allowed from the time of the conversion." C.T. Drechler, Annotation, Interest on Damages for Period Before Judgmen Inju, or Detention, Loss, or Destruction of, Propertyperty,, 36 A.L.R.2d 337, 391 (1954). See also id. at 391-93, 395-97 (collecting cases from 42 states allowing interest from date of conversion); L. Albert & Son v. Armstrong Rubber Co., 178 F.2d 182, 188 (2d Cir. 1949). "As to interest, one whose property is converted is entitled to interest at the legal rate from the time of conversion." Colorado Bank & Trust Co. v. Western Slope Invs., Inc., 539 P.2d 501, 504 (Colo. 1975). See also Charles T. McCormack, Handbook on the Law of Damages 211, 466 (1935) (interest at the normal legal rate awarded as damages for conversion). The legal interest rate here is "nine percent a year." 6 F.S.M.C. 1401. Plaintiff is therefore entitled to judgment of 9% interest from the dates of conversion of its funds.

II. ATTORNEY'S FEES

Plaintiff also seeks judgment for its attorney's fees. The plaintiff contends that, even in the absence of statutory authorization, the prevailing plaintiff should be awarded attorney's fees in cases of defalcation or other cases of conversion where the facts show that the defendant had no colorable claim to title and there was no good faith dispute as to title. Plaintiff seeks an extension of the reasoning in Semens v. Continental Air Lines, Inc. (II), [1986] FMSC 7; 2 FSM Intrm. 200, 208 (Pon. 1986) that, although the court was adopting the "American rule" that parties bear their own attorney's fees, the court recognized that courts in most of the world normally award attorney's fees to the prevailing party, and that in the FSM "there is flexibility to modify the rule when justice requires" and the rule "should perhaps be applied more liberally than in the United States." Plaintiff believes that this is a proper case for a more liberal application of the rule because there was no good faith dispute as to the plaintiff's right of recovery and the defendant was wholly blameworthy, and as such an award of attorney's fees would make the plaintiff-victim whole. Plaintiff also argues that a fees award would discourage defendants from filing pro forma general denials (as the defendant did here) which necessitate further legal efforts by the victim.

Defendant's opposition also relies on Semens (II). She argues that this case does not fall within any of what she calls the "flexibility exceptions" of Semens (II),^[1] and that in the absence of statutory authority there is a general presumption against attorney's fees awards, Salik v. U Corp., 4 FSM Intrm. 48, 49 (Pon. 1989), and they should not be awarded as standard practice, Bank of the FSM v. Bartolome, 4 FSM Intrm. 182, 185 n.1 (Pon. 1990).

I am not asked to abandon the general presumption against attorney's fees awards without statutory authority or to make fee awards a standard practice. I am only asked to recognize one small exception to the general rule. I am satisfied that normally the parties ought to bear their own attorney's fees.

What the defendant calls the "flexibility exceptions" recognized by Semens (II) were already judicially-created exceptions in the United States to the "American rule." Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 257-59[1977] USCA8 69; , 95 S. Ct. 1612, 1621-22, 44 L. Ed. 2d 141, 153-54 (1975) (unquestionable assertions of courts' inherent power to allow attorney's fees in particular situations unless forbidden by Congress). The private attorney general exception, which the defendant concludes might be created by a more liberal application of the rule in the FSM,^[2] is already a recognized, see, e.g., Serrano v. Priest, 569 P.2d 1303, 1313-15 (Cal. 1977); 7 Am. Jur. 2d Attorneys at Law § 239 (1980), but not universally adopted exception, Alyeska Pipeline Serv. Co.[1977] USCA8 69; , 421 U.S. 240, 95 S. Ct. 1612, 44 L. Ed. 2d 141 (federal statute barred judicial adoption of private attorney general exception), to the American rule. The plaintiff asks that another exception be created based on the wrongdoing and blameworthiness of the defendant and her lack of any colorable claim to title or defense.

Some support for this position may be found in other jurisdictions that follow the American rule. Attorney's fees are often recoverable in actions for fraud and deceit when punitive damages are also awarded. John H. Derrick, Annotation, Attorney's Fees as Recoverable in Fraud Action, 44 A.L.R.4th 776, 788-91 (1986). Also expenses incurred in preparation for litigation are allowed, despite a statute precluding an award of attorney's fees, where those expenses were incurred in trying to locate and recover the converted property prior to suit. Gladstone v. Hilel, 250 Cal. Rptr. 372 (Cal. App. 1988) (discussed at 18 Am. Jur. 2d Conversion § 120, at 23 (Supp. 1993)).

Plaintiff here has not sought punitive damages. Nor were the elements of fraud or deceit pled. Nevertheless here the defendant has breached her fiduciary duty, and converted to her own personal use, funds others had deposited with the plaintiff Bank of Guam, her employer. She has made no claim of right to any of the funds and offered no defense. There are no competing claims to judge. Blame lies wholly with the defendant. It seems only equitable that in order to make the victim whole the plaintiff be allowed to recover its attorney's fees. Although this may be a more liberal interpretation of the American rule, it is a narrowly drawn exception. It will only apply when a defendant has engaged in wrongdoing, has no colorable title or defense to the sums she has converted, and is wholly to blame.

Among the plaintiff's arguments for the award of attorney's fees was that defendant's counsel in this case filed a pro forma general denial of the allegations in the plaintiff's Complaint, necessitating a further legal efforts by the plaintiff to file a summary judgment motion to which the defendant's counsel offered no opposition and did not appear at the scheduled oral argument. It seems unfair that the defendant should bear the burden of her attorney's conduct in this regard. If the plaintiff wishes an award of attorney's fees for this "extra" legal effort it more properly should be sought pursuant to Rule 11 of the Rules of Civil Procedure.

III. CONCLUSION

Therefore, in exercise of this court's equitable powers, I conclude that an award of reasonable attorney's fees may be taxed as costs. Not to be included in the award are those fees resulting from the further legal efforts necessitated by the defendant's pro forma general denial. Judgment is hereby granted for the principal sum of $302,569.52, with interest at nine percent from the dates of defalcation. Plaintiff is requested to submit a proposed judgment, approved as to form by the defendant.

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^[1] "[A]ttorney's fees may be assessed for willful violation of a court order, when a party acts vexatiously or in bad faith, presses frivolous claims, or employs oppressive litigation practices, or when the successful efforts of a party have generated a common fund or extended substantial benefits to a class." Semens (II), 2 FSM Intrm. at 208 (citing Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, [1977] USCA8 69; 421 U.S. 240, 95 S. Ct. 1612, 44 L. Ed. 2d 141 (1975)).

^[2] The court suggested that an award under the private attorney general theory was a possible result of a more liberal application of the rule. Semens (II), 2 FSM Intrm. at 208.