Coca Cola Beverage Co v Edmond [1998] FMSC 20; 8 FSM Intrm. 388 (Kos. 1998) (28 July 1998)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as Coca-Cola Beverage Co v Edmond, [1998] FMSC 20; 8 FSM Intrm. 388 (Kos. 1998)

COCA-COLA BEVERAGE CO.
(MICRONESIA), INC. f/k/a
ISLAND BOTTLING CO., INC.,
Plaintiff,

vs.

RINSON H. EDMOND
d/b/a M & R LUCKY SALES CO.,
Defendant(s).

CIVIL ACTION NO. 1998-2001

ORDER AND MEMORANDUM

Martin Yinug
Associate Justice

Argued: May 12, 1998
Decided: July 28, 1998

APPEARANCES:

For the Plaintiff:
Michael A. White, Esq.
White, Pierce, Mailman & Nutting
P.O. Box 5222
Saipan, Mariana Islands MP 96950

For the Defendant:
Canney Palsis, trial counselor
Micronesian Legal Services Corporation
P.O. Box 38
Lelu, Kosrae FM 96944

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HEADNOTES

Judgments
The FSM Supreme Court will not enforce the part of a Northern Marianas' judgment imposing a CNMI statutory treble damages penalty for writing bad checks when the FSM has no similar public policy. Recovery will be limited to the outstanding principal amount of the bad checks and the plaintiff's undisputed additional costs - bank charges and court costs. Coca-Cola Beverage Co. (Micronesia) v. Edmond, [1998] FMSC 20; 8 FSM Intrm. 388, 391 (Kos. 1998).

Attorney, Trial Counselor and Client - Fees
Each party normally bears its own attorney fees. This flexible rule allows for the imposition of attorney's fees where a party acts vexatiously, in bad faith, presses frivolous claims, or employs oppressive litigation practices, or when a party's successful efforts have generated a common fund or extended substantial benefits to a class. Normally, in the absence of a statute to the contrary, a court will proceed on the assumption that the parties will bear their own attorney's fees. Coca-Cola Beverage Co. (Micronesia) v. Edmond, [1998] FMSC 20; 8 FSM Intrm. 388, 392 (Kos. 1998).

Attorney, Trial Counselor and Client - Fees
When at the early juncture of the parties' cross motions for summary judgment it appears that the defendant's writing of bad checks may have been in bad faith or it may have been negligent, an attorney's fees award is not appropriate in the absence of a finding that defendant's conduct was vexatious or in bad faith. Coca-Cola Beverage Co. (Micronesia) v. Edmond, [1998] FMSC 20; 8 FSM Intrm. 388, 392 (Kos. 1998).

Attorney, Trial Counselor and Client - Fees
The fact that a defendant prevails in a motion for summary judgment in such a way as to defeat a significant portion of a plaintiff's claim is a fact that a court should consider relative to the plaintiff's claim for attorney's fees. Coca-Cola Beverage Co. (Micronesia) v. Edmond, [1998] FMSC 20; 8 FSM Intrm. 388, 392 (Kos. 1998).

Judgments
The FSM does not have a statute which prescribes when a plaintiff may obtain prejudgment interest, but prejudgment interest has been awarded in the FSM. Coca-Cola Beverage Co. (Micronesia) v. Edmond, [1998] FMSC 20; 8 FSM Intrm. 388, 392 (Kos. 1998).

Contracts - Damages; Judgments
Generally, interest is usually included as an element of damages as a matter of right when a debtor knows precisely what he is to pay and when he is to pay it. The complaining party has been deprived of funds to which he was entitled by virtue of the contract, the defaulting party knew the exact amount and terms of the debt, and the goal of compensation requires that the complainant be compensated for the loss of use of those funds. This compensation is made in the form of interest. In the absence of statute, an award of prejudgment interest is in the discretion of the court. Coca-Cola Beverage Co. (Micronesia) v. Edmond, [1998] FMSC 20; 8 FSM Intrm. 388, 392-93 (Kos. 1998).

Contracts - Damages; Judgments
Pre-judgment interest at the statutory, judgment rate of 9% is appropriate when the defendant wrote the insufficient funds checks to plaintiff because the defendant knew precisely the amount to which he was obligating himself, and the effective date of that commitment. Coca-Cola Beverage Co. (Micronesia) v. Edmond, [1998] FMSC 20; 8 FSM Intrm. 388, 393 (Kos. 1998).

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COURT'S OPINION

MARTIN YINUG, Associate Justice:

The court has received and considered the following:

1) Motion for Summary Judgment (filed by plaintiff on April 24, 1998); and

2) Response to Plaintiff's Motion for Summary Judgment, Defendant's Motion for Summary Judgment; Memorandum of Points and Authorities and Affidavit in Support Thereof (filed by defendant on May 12, 1998).

In addition, the court heard oral argument on Tuesday, May 12, 1998.

I. Background

The complaint in this matter seeks to enforce a default judgment rendered on October 11, 1995, against the defendant in Civil Action No. 95-727 in the Superior Court of the Commonwealth of the Northern Mariana Islands. The defendant in both this case and the CNMI case is Rinson H. Edmond, doing business as M & R Lucky Sales Co; likewise, the plaintiff is the same in both cases. The judgment in the CNMI case, a copy of which is attached to the complaint in this case, provides that plaintiff "shall have Judgment over and against Defendant for the total sum of $7,792.98, together with interest thereon at the rate of 9% per annum from the date hereof." The judgment is for a lump sum, and does not indicate what part of the judgment amount is for costs, fees, or statutory damages.

Plaintiff urges in its summary judgment motion, citing J.C. Tenorio Enterprises, Inc. v. Sado, [1994] FMSC 17; 6 FSM Intrm. 430 (Pon. 1994), that it is entitled as a matter of law to sue in this court on the foreign judgment to obtain an FSM judgment for a like amount. To the extent that defendant concedes at page 2 of his cross motion for summary judgment that "[t]he facts are not disputed" (and again at page 6: "the facts in this matter are not disputed"), defendant appears to concede that plaintiff is entitled to judgment against him, but only for the amount which he admits owing, which is $1750.00. Defendant raises an issue of law, and contends that plaintiff is not entitled to enforce the foreign judgment in its entirety because the judgment includes treble damages which are permitted under the relevant CNMI statute. The FSM has no similar statute. Defendant asserts that to permit recovery in this court of treble damages allowable under a foreign statute would run counter to FSM public policy.

The court concludes that defendant's point is well taken, grants defendant's motion for summary judgment on the point of law raised, and denies plaintiff's motion for summary judgment.

II. Discussion

Between May and October of 1993, defendant wrote eight insufficient funds checks ("bad checks") to the plaintiff in the amount of $1950 for goods purchased. Plaintiff sued defendant in Superior Court in the Northern Marianas under a Northern Marianas statute, the Bad Checks Act of 1984, which provides in pertinent part at § 2442 that

[a]ny pers person, who . .&#1draws . . . a0;. any check,entymf whif which is refused or dishonored due to lack of funds . .&# and whls tothe payee thee the amount thereof together with such cuch charges as may be lawfully imposed by d by the bank within 30 days following a written dem . . shall be liable to the payee for the amount ount owing upon such check plus interest at the rate of 12 percent per annum or other damages claimed or, at the election of the payee, damages of treble the face amount of the check; provided that in no case such damages be less than $50 nor more than $750 in respect of any such instrument.

Based on calculations not presented to the court, the Marianas judgment amount of $7,792.98 apparently includes the treble damages allowed by statute. Plaintiff's counsel, in answer to questions by the court at oral argument, indicated that the Marianas judgment also included $1,000 in attorney fees, $120 in bank charges, and $72 in court costs. The CNMI judgment was rendered on October 11, 1995, and thereafter on November 7, 1995, defendant made a payment of $200 to plaintiff.

A. No stated public policy in the FSM regarding a damages multiplier for bad checks

The court in Tenorio held that under principles of comity, our courts will enforce foreign judgments, but will not do so where comity in this respect will violate a public policy, or where granting comity would result in prejudice to the forum's citizens. Tenorio, 6 FSM Intrm. at 431-32. The Commission Comments to Pub. L. No. 4-35, the Northern Marianas statute entitled "Bad Checks Act of 1984," note that "[a]ccording to PL 4-35, § 2e Commonwealth Legislatureature finds it necessary to enact legislation to protect citizens and local businesses from habitual, itious, and irresponsible individuals who pass bad checks.'" To address this concern, the Cthe CNMI legislature passed a law that imposes at the payee's election the severe sanction of treble damages. The legislative history, together with the statute itself, indicates that the CNMI legislature has implemented, by statute, a specific public policy relative to bad checks. This is not the case in the FSM. Congress has not addressed legislatively the issue of bad check writing in the FSM. It certainly has not addressed the question of allowing a damages multiplier in such cases. Hence, there is no stated public policy on this point.

This court is reluctant to impose so severe a sanction as treble damages on an FSM citizen where our Congress has not spoken on the suitability of such a penalty. In the copy of the defendant's handwritten settlement proposal included with the documents plaintiff's counsel tendered to the court at oral argument, defendant proposes to make increased monthly payments on the outstanding amount of the checks "depending on the change in financial position of the debtor." Where a financially strapped debtor writes a bad check, an unacceptable practice under any circumstances, the imposition of treble damages will only make matters worse. In a developing economy such as ours, the decision to impose so severe a sanction, with all of the implications that such a decision may have for developing and sometimes struggling business concerns, is one that should rest with the legislature. Principles of comity do not dictate that this court give effect to Northern Marianas' public policy imposing a penalty of treble damages for bad checks where our legislature has not spoken to this point.

The court will not permit the recovery of treble damages in this case. Plaintiff's recovery is limited to the outstanding principal amount of the bad checks. The court will also permit recovery of the bank charges of $120, and court costs of $72, undisputed additional costs incurred by plaintiff.

B. Attorney's fees

Plaintiff's counsel avowed to the court at oral argument that of the $7,792.98 CNMI judgment amount, $1,000 is attorney's fees. It appears that these fees were awarded pursuant to § 2442(b) of the Cad Checks Acks Act of 1984, which provides that payee "shall be entitled to reasonable attorney's fees as the court may deem sattory; provided that attorney's fees awarded in respect of each such check shall be not less less than $125 nor more than $250 with respect to each instrument."

In Tenorio, which also deals with a CNMI judgment, the CNMI Superior Court had awarded plaintiff attorney's fees in the amount $875.00 on a principal amount of $360, as well as court costs of $80.00, for a total judgment amount of $1315.00. The basis for the award of fees, whether statutory or pursuant to contract, is not recited in the report of the case. Plaintiff then brought suit in the Pohnpei trial division of this court, and requested judgment in a like amount, $1315.00. In concluding that the CNMI award of $875 was excessive in relation to the principal amount of $360.00, the court held that the attorney's fee award could not exceed $54.00, or 15%, of the principal amount. Tenorio, 6 FSM Intrm. at 432. The Tenorio court looked to Bank of Hawaii v. Jack, [1990] FMSC 7; 4 FSM Intrm. 216, 221 (Pon. 1990) ("Except in unusual circumstances, the amount awarded pursuant to a stipulation for the payment of attorney's fees in debt collection cases in the FSM will be limited to a reasonable amount not in excess of fifteen percent of the outstanding principal and interest.")

It is a point well worth noting that were the court to follow Tenorio and Jack, the fee award in the instant case, as a function of 15% of the $1950 principal amount, would be $292.50, not $1,000, a significant difference reflective of two decidedly different policies in regard to attorney's fees. However, the court has a predicate concern - whether attorney's fees are awardable in this case in the first instance. The fee award in the CNMI judgment that is the sole basis for the complaint in this action was awarded pursuant to a CNMI statute expressly permitting fees. In the Federated States of Micronesia, each party normally bears its own attorney fees. Semens v. Continental Air Lines, Inc. (II), [1986] FMSC 7; 2 FSM Intrm. 200, 208 (Pon. 1986). This is a flexible rule that allows for the imposition of attorney's fees where "a party acts vexatiously, 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." Id. Normally, in the absence of a statute to the contrary, a court will proceed on the assumption that the parties will bear their own attorney's fees. Bank of Guam v. Nukuto, [1994] FMSC 56; 6 FSM Intrm. 615, 617 (Chk. 1994).

Plaintiff points to no FSM statute similar to the CNMI statute which would permit an award of attorney fees in a lawsuit brought in this court to recover the face amount of bad checks. Just as this court is reluctant to award treble damages in the absence of legislation permitting them, it is reluctant to award attorney's fees where, had the plaintiff proceeded ab initio in this court on a cause of action based on the writing of bad checks, plaintiff would have had no statutory basis for recovery of attorney fees. While under the flexible approach enunciated in Semens, the court may award attorney's fees in the case of vexatious conduct, or bad faith, Semens, 2 FSM Intrm. at 208, plaintiff does not allege conduct of this nature. Although the record in this regard is scant, it appears that the parties had an on-going business relationship, and that, based on the defendant's September 1995 letter to plaintiff's counsel, defendant's business was in financial difficulty. Defendant's conduct may have been in bad faith; it may also have been negligent. The record as it stands at this early juncture on the parties' cross motions for summary judgment does not admit of a finding on this point, and in the absence of such a finding, attorney's fees are not appropriate.

A final, equitable consideration militates against an award of attorney fees in this case. The only thing of substance to transpire in this case after the answer was the filing of the parties' cross motions for summary judgment. As between those motions, it is the defendant who has prevailed, and prevailed substantially. In his motion, defendant admits owing the sum of $1,750.00, and raises a meritorious issue with respect to the enforceability of a foreign judgment which has a treble damages component. Plaintiff had sought judgment of $7,644.86, plus interest, while the court finds that plaintiff is entitled to judgment in a principal sum of approximately one quarter that amount, plus interest at the statutory rate. The fact that a defendant prevails in a motion for summary judgment in such a way as to defeat a significant portion of plaintiff's claim is a fact that a court should consider relative to a plaintiff's claim for attorney's fees. In this case, it is additional reason why the court should leave the parties as it found them, with each party to bear its own fees.

C. Interest

Plaintiff also seeks interest on the CNMI judgment at 9%, which is expressly provided for by the CNMI judgment. Nine percent is also the rate at which judgments in the FSM bear interest. 6 F.S.M.C. 1401. This court hclined toed to permit enforcement of the CNMI judgment pursuant to its terms, and has entered judgment based on the undisputed f This constitutes a de novo determination not dependent on the CNMI judgment. Hence, any inny interest that this court may award is neither post judgment interest under the terms of the CNMI judgment, nor under 6 F.S.M.C. 14ut, relative to the judgmjudgment in the instant case, pre-judgment interest. The issue is whether plaintiff is entitled to prejudgment interest under the undis facts of this case.

The FSM does not have a st a statute which prescribes when a plaintiff may obtain prejudgment interest. However, prejudgment interest has been awarded in the FSM. Nukuto, 6 FSM Intrm. at 616 (holding that an award of prejudgment interest at the judgment rate of 9% pursuant to 6 F.S.M.C. 1401 was appropriate where defendant breached her fiduciary duty and converted funds from plaintiff bank for her own use). Generally,

[i]nterest is usually included as an element of damages as a matter of right when a debtor knows precisely what he is to pay and when he is to pay it. The complaining party has been deprived of funds to which he was entitled by virtue of the contract, the defaulting party knew the exact amount and terms of the debt, and the goal of compensation requires that the complainant be compensated for the loss of use of those funds. This compensation is made in the form of interest.

22 Am. Jur. 2d Damages § 657 (1988) (footnotes omitted). In the absence of statute, an award of prejudgment interest is in the discretion of the court. United States v. Californiae Bd. of Equalization, [1981] USCA9 1031; 650 F.2d 1127 (9th Cir. 1981), aff'd[1982] USSC 82; , 456 U.S. 901, 102 S. Ct. 1Ct. 1744, 72 L. Ed. 2d 157, reh'g denied, 456 U.S. 985, 102 S. Ct. 2261, 72 L. Ed. 2d 864 (1982); Payne v. Panama Canal Co., [1979] USCA5 1820; 607 F.2d 155 (5th Cir. 1979).

When defendant wrote the insufficient funds checks to plaintiff, he committed to pay in unambiguous terms, and on the date indicated, the sum specified in each check. Defendant knew precisely the amount to which he was obligating himself, and the effective date of that commitment. Pre-judgment interest is therefore appropriate. Taking into account the $200.00 payment which plaintiff received from defendant on November 7, 1995, plaintiff will submit a form of judgment to the court which specifies pre-judgment interest, and which computes that interest on each of the insufficient funds checks from the date of issuance of the checks to the date of the judgment which issues herewith. Interest will be computed at the statutory, judgment rate of interest of 9% pursuant to 6 F.S.M.C. 1401.

III. Conclusion

The motion for summary judgment of defendant is granted, while that of plaintiff is denied. Since the net effect of this order is a judgment for money damages in plaintiff's favor, plaintiff shall submit a form of judgment in accordance with this order.