Amayo v MJ Company [2001] FMSC 36; 10 FSM Intrm. 427 (Pon 2001) (11 October 2001)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION

Cite as Amayo v. M.J. Co.,
[2001] FMSC 36; 10 FSM Intrm. 427 (Pon. 2001)

[2001] FMSC 36; [10 FSM Intrm. 427]

ALFREDO AMAYO, and ELSA AMAYO, individually,
and as next friends of ALFIE AMAYO, APRIL
AMAYO, and JILLEEN AMAYO,
Plaintiffs,

vs.

MJ COMPANY, RON PANGELINAN and IOANIS
PANUELO dba IP ENTERPRISES,
Defendants.

CIVIL ACTION NO. 1999-091

ORDER AND MEMORANDUM

Martin Yinug
Associate Justice

Decided: October 11, 2001

APPEARANCES:

For the Plaintiffs:
Daniel J. Berman, Esq.
P.O. Box 1491
Kolonia, Pohnpei FM 96941

For the Defendant:
Craig D. Reffner, Esq.
Law Office of Fredrick L. Ramp
P.O. Box 1480
Kolonia, Pohnpei FM 96941

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HEADNOTES

Appeal and Certiorari ; Stay
The term "bond" in an appeal context includes more than the supersedeas bond in Civil Rule 62. One example is the bond for costs in Appellate Rule 7; another is the bond that may be required under Appellate Rule 8(b) (which does not use the word "supersedeas") when a motion for stay is brought in the appropriate circumstances in the appellate division. Regardless of the specific type of bond, the general principles applicable to appeal bonds and undertakings also apply in most cases to supersedeas bonds. Amayo v. MJ Co., [2001] FMSC 36; 10 FSM Intrm. 427, 428 (Pon. 2001).

Appeal and Certiorari ; Stay
In jurisdictions having statutory requirements for a supersedeas bond, a competent surety is ordinarily required. A surety is one who undertakes to pay money in the event that his principal fails therein, and who is primarily liable for the payment of debt or performance of the obligation of another. The appellant himself is generally not competent to stand as a surety on an appeal bond. Amayo v.

[10 FSM Intrm. 428]

MJ Co.[2001] FMSC 36; , 10 FSM Intrm. 427, 428 (Pon. 2001).

Appeal and Certiorari ; Stay
A supersedeas bond's purpose is to protect the appellees' interest by providing a fund out of which a judgment can be paid if it is affirmed on appeal. It provides absolute security to the party who is affected by the appeal. The bond also protects the judgment debtor from levy while the appeal takes its course. Amayo v. MJ Co., [2001] FMSC 36; 10 FSM Intrm. 427, 428-29 (Pon. 2001).

Appeal and Certiorari ; Stay; Attachment and Execution
In the usual case, a full supersedeas bond is required in order to stay execution of a judgment. The bond's amount is calculated to include the judgment's whole amount, costs on appeal, interest, and damages for delay. Courts in the exercise of their discretion have permitted a form of security other than a bond so long as that security is adequate and the judgment creditor's recovery is not at risk. Amayo v. MJ Co., [2001] FMSC 36; 10 FSM Intrm. 427, 429 (Pon. 2001).

Appeal and Certiorari ; Stay
Due to the lack of an established Pohnpei real estate market, a mortgage offered in lieu of a supersedeas bond does not provide absolute security to an appellee. Realistically, the lack of a ready market for property also precludes a professional surety either inside or outside the FSM from accepting the property as bond collateral. Amayo v. MJ Co., [2001] FMSC 36; 10 FSM Intrm. 427, 429 (Pon. 2001).

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COURT'S OPINION

MARTIN G. YINUG, Associate Justice:

The court has received the motion for stay of execution pending bond approval filed by defendant Ioanis Panuelo ("Panuelo") on September 21, 2001; Panuelo's motion for approval of supersedeas bond filed on September 9, 2001; plaintiffs' opposition to bond approval filed on October 3, 2001; and Panuelo's reply filed on October 8, 2001.

The motion for approval of bond is held in abeyance pending the receipt of comments and further information to be submitted within five days, on or before October 16, 2001, as set out below. Execution on the judgment is stayed in the interim.

For purposes of discussion, the following is relevant to an understanding of a supersedeas bond. Briefly, the term "bond" in an appeal context includes more than the supersedeas bond that is the subject of Rule 62 of the FSM Rules of Civil Procedure. One example is the bond for costs, discussed in Rule 7 of the FSM Rules of Appellate Procedure; another is the bond that may be required under Rule 8(b) of the FSM Rules of Appellate Procedure where a motion for stay is brought in the appropriate circumstances in the appellate division. In this connection, Rule 8(b) does not use the word "supersedeas." Regardless of the specific type of bond, "[t]he general principles applicable to appeal bonds and undertakings apply in most cases also to supersedeas bonds." 4 AM. JUR. 2D Appeal and Error § 369 (1962) (footomitted). Id). In jurisdictions having statutory requirements for a supersedeas bond, a competent surety is ordinarily required. Id. § 340. A s is "ho undertakes akes to pay money . . . in [thn [the] event that his principal fails therein," and "[a] person who is prly liable for [the] payment of debt or performance of [the] obligation of another." BLACK'SACK'S LAW DICTIONARY 1441 (6th ed. 1990). ppellimself is not comt competenpetent to stand as a surety on an appeal bond in most jurisdictions. 4 AM. JUR. 2D Appeal and Error § 341 (1962). The purof a supa supersedeas bond is to protect the appellees' interest by providing a fund out of which a judgment can be paid if it is affirmed

[10 FSM Intrm. 429]

on appeal. Pohnpei v. Ponape Constr. Co., [1993] FMSC 35; 6 FSM Intrm. 221, 223 (App. 1993). It is said that a bond provides "absolute security" to the party who is affected by the appeal. 4 AM. JUR. 2D Appeal and Error § 323 (1962). The bond also protects the judgment debtor from levy while the appeal takes its course. In re Norman, 13 B.R. 894, 897 (Bankr. W.D. Mo. 1981). In the usual case, a full supeas bond is required in order to stay execution of a judgmendgment. Federal Prescription Serv., Inc. v. American Pharmaceutical Ass'n, [1980] USCADC 322; 636 F.2d 755, 670 (D.C. Cir. 1980). The amount of the bond is calculated to include the whole amount of the judgment, costs on appeal, interest, and damages for delay. J. Perez & Cia., Inc. v. United States, 578 F. Supp. 1318, 1320 (D.P.R. 1984) (citing former Rule 73(d) of the Federal Rules of Civil Procedure, the predecessor to present Rule 62(d)). Finally, courts in the exercise of their discretion have permitted a form of security other than a bond so long as that security is adequate and the judgment creditor's recovery is not at risk. 12 JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE § 62.03[1] (. 1999).

It would be stating the obvious to say that the economic climate in Micronesia is different from that e United States. An important disparity is the lack of an established commercial market fort for land throughout Micronesia generally. Underscoring this point, Mr. Aaron Palik, the manager of the Pohnpei Bank of Hawaii branch, when testifying at trial about the value of Panuelo's business assets, including the construction at the Ocean View Plaza where the accident occurred, stated that there was a question about how marketable those assets were. Given the market in Pohnpei, Mr. Palik said that as to "professional appraised value it becomes quite a tricky subject because as you know out here there's no means of us putting a real price tag to these assets." Trial Tape B, counters 2890-2901 (Feb. 5, 2001).

Due in material part to this lack of an established market, the proposed mortgage offered in lieu of a supersedeas bond does not provide "absolute security" to the plaintiff in this case. Realistically, and although the court stands to be corrected on this point if it is not accurate, the lack of a ready market for the property also precludes a professional surety either inside or outside the FSM from accepting the property as bond collateral. This is not to say that the property does not have substantial value; realizing on the value presents the challenge. Short of depositing cash in the full amount of the judgment, costs, and interests, "absolute security" for the judgment creditor pending the appeal in this case is an elusive goal.

The question at hand is how, taking into account prevailing economic realities, to provide the plaintiffs with an acceptable level of security sufficient to stay the execution on the judgment during the appeal. The mortgage on the property as proposed would confer a right of foreclosure on this court, which is designated as the mortgagee. Various practical and procedural difficulties, which the court will not visit, emanate from such a proposal. In contrast, transferring the property to a qualified Micronesian trustee with instructions to immediately begin the process of realizing on the property in the event the judgment of this court is affirmed on appeal would seem to provide greater security to plaintiffs because it is a more direct, and practically speaking a more potent, remedy than a mortgage. But in order to consider a transfer of the property to the trustee, the court requires more information.

First are concerns about the state of title to the property. Specifically, Panuelo should address whether his father has a certificate of title to the property which he has quitclaimed to his son. What assurances can Panuelo give that only he, his wife, and his father had or have interests in, or claims to the property? If the property offered by Panuelo as security is realistically subject to claims by others outside his family, then the security Panuelo offers is illusory.

Second, the parties should address whether transferring the property to a qualified Micronesian trustee with directions to act for the benefit of non-citizen beneficiaries presents any problems under the property title restriction provision of Article XIII, Section 4 of the FSM Constitution.

[2002] FMSC 9; [10 FSM Intrm. 430]

Third, as a precondition to any discussion about accepting the property as security under a trustee arrangement, and as a counterweight to the property valuation problem, the court would require as an additional condition of stay that Panuelo deposit 10 percent of the total judgment amount with the clerk of court to be held in an interest bearing account during the pendency of the appeal. If the decision of this court is affirmed on appeal, the clerk will turn over the money so held to the judgment creditors to be applied to the interest on the judgment. At the same time, the judgment creditors could direct the trustee to begin realizing on the property.

The parties should respond to the concerns expressed and provide any additional comments to the court within five days hereof, or by October 16, 2001. Execution on the judgment is stayed in the interim.

As a final matter, the party designation "MJ Construction Company" is incorrect. There is no "Construction" in the name of this corporate party. The caption on this order reflects this correction. The parties are requested to make this correction in the captions of future submissions.

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