Kyowa Shipping Co Ltd v Wade [1995] FMSC 15; 7 FSM Intrm. 93 (Pon. 1995) (16 March 1995)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as Kyowa Shipping Co. Ltd v Wade, [1995] FMSC 15; 7 FSM Intrm. 93 (Pon. 1995)

[7 FSM Intrm. 093]

KYOWA SHIPPING CO., LTD., a corporation,
Plaintiff,

vs.

WILLIAM WADE and YASUO YAMADA,
Defendants.

__________________________________________

CIVIL ACTION NO. 1994-040

ORDER AND MEMORANDUM OF DECISION

Andon L. Amaraich
Chief Justice

Decided: March 16, 1995

APPEARANCES:

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

For the Defendants:
William C. Wade (pro se)

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HEADNOTES

Civil Procedure - Summary Judgment
Failure to file a response to a summary judgment motion constitutes a consent to the motion. But even when an opposing party consents to a motion, that motion may only be granted if it is well grounded in fact and law. Kyowa Sipping Co. v. Wade, [1995] FMSC 15; 7 FSM Intrm. 93, 95 (Pon. 1995).

Civil Procedure - Summary Judgment
A motion for summary judgment is well grounded in fact and law and shall be granted when the moving party demonstrates that there are no questions of material fact and that the moving party is entitled to judgment as a matter of law. Kyowa Sipping Co. v. Wade, [1995] FMSC 15; 7 FSM Intrm. 93, 95 (Pon. 1995).

Civil Procedure - Summary Judgment
Once the party moving for summary judgment presents a prima facie case of entitlement to judgment, the burden shifts to the non-moving party to raise some question of material fact. Kyowa Sipping Co. v. Wade, [1995] FMSC 15; 7 FSM Intrm. 93, 95 (Pon. 1995).

Civil Procedure - Summary Judgment
The standard for evaluating a motion for judgment on the pleadings is almost identical to that for evaluating a motion for summary judgment. A motion for judgment on the pleadings shall be granted only when the movant has demonstrated that there are no issues of material fact, and that the movant is entitled to judgment as a matter of law. The moving party must carry its burden by reference solely to the pleadings, and the court must evaluate all facts and inferences in the light most favorable to the non-moving party. Kyowa Sipping Co. v. Wade, [1995] FMSC 15; 7 FSM Intrm. 93, 96 (Pon. 1995).

Civil Procedure - Joinder; Corporations - Stock and Stockholders
The real party in interest in a civil action is the party who possesses the substantive right to be enforced. The mere fact that a shareholder may substantially benefit from a monetary recovery by a corporation does not make the shareholder a real party in interest entitled to seek monetary recovery in a civil action. A claim of such a shareholder will be dismissed. Kyowa Sipping Co. v. Wade, [1995] FMSC 15; 7 FSM Intrm. 93, 96-97 (Pon. 1995).

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COURT'S OPINION

ANDON L. AMARAICH, Chief Justice:

Introduction

By this action plaintiff seeks to recover $18,000 loaned to defendants for the purpose of purchasing shares in a company to be founded and jointly owned by plaintiff and defendants. Defendants have counterclaimed for $14,506.15, a sum allegedly owed by plaintiff to the newly formed corporation jointly owned by plaintiff and defendants.

On November 7, 1994, plaintiff filed a motion seeking summary judgement as to its claim for $18,000.00 and summary judgment or judgment on the pleadings on defendants' counterclaim. Defendants have not filed a response to plaintiff's motions.

Plaintiff's legal memorandum and supporting affidavits, combined with defendants' admissions, convince the Court that plaintiff is entitled to summary judgment as to defendants' liability for $18,000.00, and that plaintiff is also entitled to judgment on the pleadings as to defendants' counterclaim.

Facts

The majority of relevant facts in this case are undisputed. Plaintiff loaned defendants $9,000.00 each for the purpose of enabling them to buy shares in Micronesia Shipping, Inc. ("MSI"), a company to be founded by plaintiff and defendants in which all parties would be shareholders. Defendants agreed to repay the loans no later than January 4, 1994, with interest at a rate of 12% per annum. The loan proceeds were in fact used by defendants to purchase shares in MSI as agreed by the parties.

Plaintiff contends that defendants have failed to repay any of the loan amount pursuant to the terms of the loan agreement. Defendants, by their answer, deny that they have failed to repay any portion of the loans.^[1]

Defendants counterclaim alleging that plaintiff owes MSI $14,506.15 for services rendered. Plaintiff denies liability.

Plaintiff's Motion for Summary Judgment as to Defendants' Individual Liability for the $9,000.00 Loans from Plaintiff

Defendants have failed to file a response to plaintiff's motion for summary judgment as to defendants' liability for the full value of the loans advanced by plaintiff. FSM Civil Rule 6(d) provides that the failure of a party to file a memorandum of points and authorities in opposition to an adverse party's motion "constitute[s] a consent to the granting of the motion." Accordingly, defendants' failure to file any response to plaintiff's summary judgment motion constitutes defendants' consent to the motion. See Actouka v. Kolonia Town, [1991] FMSC 20; 5 FSM Intrm. 121, 123 (Pon. 1991) (granting summary judgment motion pursuant to FSM Civil Rule 6(d)). However, defendants' consent to plaintiff's motion is not, in and of itself, a sufficient basis for this Court to grant plaintiff's motion. Even when an opposing party consents to a motion, pursuant to FSM Civil Rule 6(d), that motion may only be granted if it is well grounded in fact and law. In re Parcel No. 046-A-01[1993] FMSC 30; , 6 FSM Intrm. 149, 152 (Pon. 1993).

A motion for summary judgment is well grounded in fact and law and shall be granted when the moving party demonstrates that there are no questions of material fact and that the moving party is entitled to judgment as a matter of law. FSM Civ. R. 56(c); Kihara Real Estate v. Estate of Nanpei, 6 FSM Intrm. 48, 52 (Pon. 1993). Defendants' admissions establish that plaintiff loaned each defendant $9,000.00, and that the loans were to be repaid by January 4, 1994. Based upon these admissions, the only possible question of material fact, regarding defendants' liability, is whether defendants have repaid any portion or all of the loans from plaintiff.

As part of plaintiff's motion for summary judgment, plaintiff has submitted a duly sworn affidavit stating that defendants have made no payments towards reducing their original $9,000.00 individual debts to plaintiff. Plaintiff, thus, has established a prima facie case of defendants' liability for the full loan amount by presenting competent evidence that defendants borrowed from plaintiff $9,000.00 each, and that no portion of these loans has been repaid pursuant to the terms of the loan agreement.

Once the party moving for summary judgment presents a prima facie case of entitlement to judgment, the burden shifts to the non-moving party to raise some question of material fact. Federated Shipping Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3, 11 (Pon. 1989); FSM Civ. R. 56(e). FSM Civil Rule 56(e) provides:

[w]hen a motion for summary judgment is made and supported as provided by this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided by this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

Defendants have denied in their answer the allegation that they have not repaid any portion of the loans from plaintiff. However, such a denial does not constitute competent summary judgment evidence and thus does not raise a question of material fact. In meeting their burden, defendants are not permitted to rely on unsubstantiated denials of liability, but must present some competent evidence that would be admissible at trial (e.g., an affidavit) which demonstrates that there is a genuine issue of material fact. Federated Shipping Co., 4 FSM Intrm. at 11. Defendants have presented no competent evidence which creates a question of material fact as to their liability. Accordingly, because plaintiff has presented a prima facie case of entitlement to judgment, and defendants have raised no issues of material fact, plaintiff is entitled to summary judgment in the amount of $9,000.00 against each defendant.

Plaintiff's Motion for Summary Judgment or Judgment on the Pleadings with respect to Defendants' Counterclaim

Plaintiff also seeks summary judgment or judgment on the pleadings with respect to defendants' counterclaim. Plaintiff contends that defendants are not the real parties in interest to the rights asserted in defendants' counterclaim, and, thus, defendants' counterclaim is barred by FSM Civil Rule 17(a). The Court agrees with plaintiff's contention and will grant plaintiff's motion for judgment on the pleadings pursuant to FSM Civil Rule 12(c).

The standard for evaluating a FSM Civil Rule 12(c) motion for judgment on the pleadings is almost identical to that for evaluating a motion for summary judgment. A motion for judgment on the pleadings shall be granted only when the movant has demonstrated that there are no issues of material fact, and that the movant is entitled to judgment as a matter of law. National Fidelity Life Ins. v. Karaganis, [1987] USCA7 89; 811 F.2d 357, 358 (7th Cir. 1987). The moving party must carry its burden by reference solely to the pleadings, and the Court must evaluate all facts and inferences in the light most favorable to the non-moving party. Id.

To evaluate the merits of plaintiff's motion, the Court must address only one issue of law, that is whether defendants are the real party in interest as required by FSM Civil Rule 17(a). FSM Civil Rule 17(a) requires that "[e]very action shall be prosecuted in the name of the real party in interest." The real party in interest in a civil action is the party who possesses the substantive right to be enforced. Illinois v. Life of Mid-America Ins., [1986] USCA7 882; 805 F.2d 763, 764 (7th Cir. 1986) (instructing that the real party in interest is the party that possesses the right to be enforced).

Defendants by their counterclaim seek to recover funds allegedly owed by plaintiff to MSI for services rendered. Because MSI is the alleged creditor, MSI possesses the substantive legal right to enforce the alleged obligation of plaintiff, and, therefore, MSI, not defendants, is the real party in interest.^[2] While defendants are shareholders of MSI, their status as shareholders does not make defendants real parties in interest. Thompson v. Thomas, 680 F. Supp. 1, 3 (D.D.C. 1987) (striking shareholders' names from pleadings pursuant to Rule 17(a) because corporation, not its shareholders, is real party in interest in litigation in which corporation seeks monetary recovery). The mere fact that a shareholder may substantially benefit from a recovery by a corporation does not make a shareholder a real party in interest. Farrell Constr. Corp. v. Jefferson Parish, [1990] USCA5 491; 896 F.2d 136, 140 (5th Cir. 1990) (instructing that "[t]he real party in interest is the person holding the substantive right sought to be enforced, and not necessarily the person who will ultimately benefit from the recovery").^[3]

Accordingly, it is clear from the pleadings that plaintiff is entitled to judgment as a matter of law because defendants are not the real parties in interest with regard to the allegations in their counterclaim. Plaintiff's motion for judgment on the pleadings with regard to defendants' counterclaim will be granted.

Conclusion

Accordingly, it is hereby ordered that plaintiff's motion for summary judgment as to defendants' liability is granted. Judgment is for the plaintiff for $18,000.00, with each defendant individually liable for $9,000.00 of the total judgment. It is further ordered that plaintiff's motion for judgment on the pleadings as to defendants' counterclaim is granted.

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^[1] Defendants' denial does not make clear whether defendants' position is that they have repaid the loans in full or that they have repaid only a portion of the loans.

^[2] Defendants state in their counterclaim that plaintiff owes MSI for services rendered. Defs.' Answer and Counterclaim at 3 (July 26, 1994). Defendants, in the next sentence, go on to state that "[t]his money has never been paid, and is still owed, to Micronesia Shipping and the Defendants." Id. Because defendants admit, by their answer, that the entire alleged debt is owed for services allegedly rendered by MSI, and, therefore, admit that MSI is the only real party in interest regarding this claim, the Court assumes that defendants' position is that defendants are also real parties in interest because of their status as shareholders of MSI.

^[3] This opinion in no way addresses or is intended to impact upon the right of shareholders to bring shareholder derivative actions pursuant to and in accordance with FSM Civil Rule 23.1.