Mid-Pacific Construction Co v Senda [1996] FMSC 37; 7 FSM Intrm. 371 (Pon. 1996) (17 January 1996)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as Mid- Pacifc Construction Co Inc v Senda, [1996] FMSC 37; 7 FSM Intrm. 371 (Pon. 1996)

MID-PACIFIC CONSTRUCTION CO., INC.,
on Assignment for Benefit of Creditors,
Plaintiff,

vs.

AMBROS T. SENDA,
Defendant.

CIVIL ACTION NO. 1988-099

ORDER OF DISTRIBUTION

Andon L. Amaraich
Chief Justice

Hearing: May 30, 1995
Decided: November 10, 1995
Modified: January 17, 1996

APPEARANCES:

For the Plaintiff:
Daniel J. Berman, Esq.
Rush, Moore, Craven, Sutton, Morry & Beh
2000 Hawaii Tower
745 Fort Street
Honolulu, HI 96813-3862

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

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HEADNOTES

Debtors' and Creditors' Rights; Judgments
Judgment creditors will be paid in their priority order except for those who release their claims in writing. Payment of a released judgment may be returned to the judgment debtor. Mid-Pacific Constr. Co. v. Senda, [1996] FMSC 37; 7 FSM Intrm. 371, 373-75 (Pon. 1996).

Debtors' and Creditors' Rights; Judgments
Unclaimed balances of judgments paid into court may escheat to the government. Mid-Pacific Constr. Co. v. Senda, [1996] FMSC 37; 7 FSM Intrm. 371, 375 (Pon. 1996).

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COURT'S OPINION

ANDON L. AMARAICH, Chief Justice:

On December 19, 1990, this Court awarded final judgment in favor of plaintiffs, the judgment creditors of Mid-Pac Construction Co., Inc., in the amount of $222,073.36. In order to facilitate the collection and eventual distribution of the judgment, the Court appointed a private law firm, Moon, O'Connor, Tam and Yuen, to initiate the collection process. In a subsequent order, the Court substituted Dan Berman and the law firm of Rush Moore Craven Sutton Morry & Beh in place of Moon, O'Connor. In exchange for his services, the attorney in charge of collection was to be compensated a $25 hourly fee plus expenses, as well as 25% of the total amount collected. The Order of appointment also stated that the funds collected would not be disbursed "until the Court is satisfied that funds actually generated by collections are sufficient to compensate for the hourly fees and expenses pursuant to this order."

Notwithstanding the fact that Mr. Berman has performed many actions in this case unrelated to the collection process, at the Court’s May 30, 1995 hearing in this matter, Mr. Berman stated that he interpreted the Court’s Appointment Order to mean that his services had been secured for the sole purpose of aiding the Court in the collection process. He stated further that he does not believe that he has an attorney/client relationship with the individual creditors and that his real client is the Court.

Regardless of the true nature of Mr. Berman's responsibilities in this case, his diligence and zeal with respect to collections has enabled the Court to accumulate $241,959.58.[1] Although Mr. Berman claims that defendant Senda still owes $51,400.12 in unpaid interest and principal, the Court's calculations show otherwise. Despite the amount collected, however, the only disbursements paid from the account thus far have been to the law firms in charge of collection, who have received $68,814.76 to date. This figure represents $13,296.42 in total hourly fees and expenses, and $55,518.34 in contingency fees. The balance held in the Court’s account in this case as of September 29, 1995 was $184,028.02, including accrued interest.

At the hearing held on May 30, 1995, the parties discussed the current status of the case, and offered suggestions for its final resolution. According to Mr. Berman, who presented a plan on behalf of plaintiffs, no disbursements should be made until defendant pays his judgment in full. Plaintiff suggests that the Court should collect the outstanding balance of principal and interest, and then begin disbursing the funds to the individual judgment creditors according to the order of priority already established by the Court.[2] Defendant, on the other hand, urges the Court to excuse defendant from paying the remaining amount of the judgment against him and to begin making immediate disbursements to the judgment creditors. The justification for defendant's suggestion is twofold. First, defendant argues that the judgment creditors have already waited long enough without receiving the benefit of their judgments. Second, defendant claims that, as a result of the decisions of certain judgment creditors to release their claims to their judgments, the Court already has collected sufficient funds to pay in full, with interest, all of the claims of the judgment creditors who are still making demands for payment, as well as all of the attorney's fees due Mr. Berman. According to defendant, three judgment creditors - the Bank of Guam, Island Hardware Inc., of Guam, and United Micronesia Development Association (UMDA) - all have released their claims to judgments in this case.[3] Defendant further requests that the Court refund to him any amount that may be released by the these three judgment creditors. Defendant bases his request upon FSM Civ. R. 60(b)(5), which states that "[o]n motion and upon such terms as are just, the court may relieve a party . . . from a final jut [en] the] the judgment has been satisfied, released, or discharged."

The Court appreciates the approaches suggested by the parties and concurs with their desire to finally resolvs matThe Court recognicognizes, zes, however, that this case presents unique facts and circumstances that must be considered and incorporated into any final payment plan in order for the Court to effect substantial justice. Principal among the equitable concerns in this case is the need to provide the judgment creditors the benefit of their judgments. Thus, although the Court has adopted many of the suggestions presented by the parties, the Court has elected to fashion its own approach rather than to adopt either party's plan in its entirety.

Accordingly, it is hereby ordered that the final resolution of this case will be accomplished according to the following procedure:

1. Defendant Ambros Senda's obligation to make further payments is hereby suspended until further notice of the Court. During the suspension period, the Court will begin making disbursements to Mr. Berman and the judgment creditors. Each judgment creditor will be paid in the priority order already established by order of this Court, as set forth in footnote 2 to this Order. Before any judgment creditor is paid, Mr. Berman will be paid his fees and expenses. During the disbursement period, and until notice from the Court to the contrary, no additional interest will accrue on defendant's obligation.

2. In compensation for his efforts, Mr. Berman will receive all previously paid amounts for hourly fees and expenses, as well as his agreed contingency fee. The contingency payment will be based on the full amount collected from defendant. That is, counsel will receive 25% of the $241,959.58 collected from defendant thus far. Mr. Berman has already received $15,109.03 in hourly fees, costs and expenses. He currently has pending a sixteenth motion for payment of fees and costs filed December 6, 1995. Because Mr. Berman has only received $55,518.34 in contingency fees to date, he is still due $4,951.56, based on the total collected from defendant. This balance is calculated as follows: 25% of the total amount collected ($241,959.58), which is $60,489.89, less $55,518.34, the amount already paid, equals $4,971.55, the amount left to be paid in contingency fees. Mr. Berman’s sixteenth motion for fees and costs is granted and ordered to be paid as requested. Upon payment of these fees, Mr. Berman's duties and responsibilities under the Court's earlier orders in this case shall be automatically and completely discharged.

3. The Court will serve Notices on the United Micronesian Development Association and Island Hardware Inc., of Guam, the two judgment creditors who have allegedly released their claims to judgment in this case. These Notices will require each of these two judgment creditors to indicate within 60 days in writing to the Court its intention to take part in the judgment in this case, or forever waive its claim to a judgment in this case. If either of these two judgment creditors fails to indicate its intention to collect its judgment within the allotted time period, that creditor shall be removed from the list of creditors and creditors scheduled to take at a later priority shall step up accordingly.

4. The Court will then contact or attempt to contact each of the remaining judgment creditors in order to begin satisfying each of the outstanding judgments. In the case of the defendant's former employees from the Philippines, who can no longer be located in the FSM, notice will consist of a letter sent by the Court through the appropriate diplomatic channels to the Government of the Philippines, requesting that it assist in the location of the former employees as well as requesting that it place a newspaper notice, printed once a week for three consecutive weeks, in a newspaper of wide circulation in the Philippines. The cost of newspaper announcements will be paid for out of the Court's account established for Mid-Pac judgment creditors. The letter and newspaper announcements will list the names of the Filipino employees who are entitled to judgment, the amount of the judgment available to each of those employees, and the last date on which those creditors will be permitted to come forward to collect their judgments. All other judgment creditors will be contacted individually by the Court.

5. Payment to each judgment creditor will consist of the principal amount of the final judgment originally entered in favor of the judgment creditor, together with interest accruing at the rate of nine percent (9%) from the date of the original judgment through May 18, 1995, and thereafter accruing at the rate of four percent (4%) until February 1, 1996 and thereafter at the rate of three and one half percent (3.5%)[4], through the date the judgment is paid out of the Court’s account for Mid-Pac creditors.

6. Should the Court later determine that the current balance paid by defendant as of May 18, 1995, is sufficient to make payment to each judgment creditor in the requisite amount stated above, defendant will be released from any further obligation to make additional payments in satisfaction of the judgment in this action.

7. The Court required the defendant to pay sanctions to plaintiffs in a Court order dated December 4, 1992, in the amount of $3,446.00, and a Court order dated March 12, 1993, in the amount of $750.00. Following the above disbursements, these sanctions, totaling $4,196.00, will be paid to plaintiffs through their counsel out of the Court's account established for the benefit of defendant's creditors.

8. If there are sufficient funds in the Court’s account for Mid-Pac creditors to satisfy all non-releasing judgment creditors, and to pay all sanctions and costs, the Court shall then return any funds representing judgments that have been released or which may be released by Bank of Guam, United Micronesian Development Association or Island Hardware Inc., of Guam, to the judgment debtor, together with all securities of any type held by the Court in this case.

9. Any balance thereafter remaining in the Court's account for Mid-Pac judgment creditors shall remain on deposit with the Court for one year from the date of this Order, or until every non-releasing creditor’s judgment has been satisfied, whichever comes first. If at that time there is an account balance remaining with the Court, that amount shall escheat to the general revenue fund of the FSM government.

10. In view of the foregoing all other pending motions are now moot.

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^[1] According to figures prepared by Peter Lohn, the Special Master appointed to this case on March 29, 1993, the total amount collected by the Court to date (excluding interest), can be broken down as follows:
Sale of Mid-Pac assets $ 14,046.97
Collections paid into the account for Civil Action 1988-099 $226,412.61
Biweekly allotments from Defendant Senda $ 1,500.00

TOTAL $ 241,959.58
^[2] This priority was specified in In re Mid-Pac Construction Co.[1988] FMSC 12; , 3 FSM Intrm. 292 (Pon. 1988). By Order dated October 5, 1993, the Court appointed Peter Lohn, the National Justice Ombudsman, to Act as Special Master. The Court assigned him the task of preparing a report to assist the Court in confirming the Mid-Pac account. See Order (Oct. 5, 1993). Peter Lohn’s report was issued on July 25, 1995.

The Court has now independently verified the figures contained in this report against the Court’s Ledger. The Court accepts these figures with four minor and two substantive corrections. First, on Attachment B to that report, actual interest accrued as of 3/30/94 should have been reported as $1,718.88 rather than $1,718.85. Second, the 1/27/94 $1,000.00 payment, which is listed on Mid-Pac’s account, reflects sanctions paid by the Bank of Guam pursuant to Mid-Pac Construction Co. v. Senda, [1993] FMSC 25; 6 FSM Intrm. 135 (Pon. 1993). These sanctions were paid to the Court, and then paid by the Court to the FSM Treasury. They do not reflect a payment by the defendant on his outstanding judgment and therefore they must be deleted from the report’s listing of defendant’s payments. Third, on Attachment C, the first payment of attorney’s fees occurred on 2/22/90, rather than on 5/27/90. Fourth, the payment of attorney’s fees listed for 5/16/94 should have been in the amount of $1,748.27, rather than $1,753.27. The $5.00 difference reflects a $5.00 cashier’s check charge, which should not have been credited to attorney’s fees paid. Fifth, attorney’s fees paid on 12/25/93 were paid in the amount of $40,518.34, rather than $40,518.00. Sixth and finally, on 9/6/93 the Court made a payment of $1,906.14 in attorney’s fees to Mr. Berman’s firm, which is not reflected in the Attachment C. The Court has adjusted all totals contained in the July 25, 1995 Special Master’s Report to reflect the above changes, and has relied on these revised figures in this Order.

^[3] The Court, after a review of its file, finds that only the Bank of Guam has unambiguously expressed its intention not to participate in the proceeds of any judgment. A filing by the Bank of Guam so stating is on the record. The only indication that Island Hardware of Guam or UMDA has released its claims is found in statements and filings of the defendant.

^[4] The rate at which the funds were invested with the Court’s depository institution (Bank of FSM) after May 18, 1995.