Federated States of Micronesia Development Bank v Arthur [2001] FMSC 42; 10 FSM Intrm. 479 (Pon. 2001) (3 December 2001)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION

Cite as FSM Dev. Bank v. Arthur,
[2001] FMSC 42; 10 FSM Intrm. 479 (Pon. 2001)

[2001] FMSC 42; [10 FSM Intrm. 479]

FSM DEVELOPMENT BANK,
Plaintiff,

vs.

ROBERT C. ARTHUR, PATRICIA ARTHUR,
BETHWEL HENRY, and MARIHNE HENRY,
Defendants.

CIVIL ACTION NO. 2001-007

ORDER AND MEMORANDUM

Martin Yinug
Associate Justice

Decided: December 3, 2001

APPEARANCES:

For the Plaintiff:
James Woodruff, Esq.
P.O. Box M
Kolonia, Pohnpei FM 96941

For the Defendants:
Douglas F. Cushnie, Esq.
P.O. Box 949
Saipan, Northern Marianas MP 96950

* * * *

HEADNOTES

Civil Procedure - Summary Judgment
In determining whether a genuine issue of material fact exists under Rule 56(c), a court will

[10 FSM Intrm. 480]

consider the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any. FSM Dev. Bank v. Arthur, [2001] FMSC 42; 10 FSM Intrm. 479, 480 (Pon. 2001).

Contracts - Mistake and Misunderstanding; Contracts - Parol Evidence
The parol evidence rule generally prohibits the introduction of any extrinsic evidence, whether oral or written, to vary, alter or add to the terms of an integrated written instrument, but parol evidence is generally held admissible to alter the terms of a written contract when it is shown that by reason of mutual mistake the parties' true intention is not expressed. FSM Dev. Bank v. Arthur, [2001] FMSC 42; 10 FSM Intrm. 479, 480 (Pon. 2001).

Contracts; Contracts - Parol Evidence
A parol agreement inconsistent with a written agreement made contemporaneously therewith is void and unenforceable, unless it was omitted from the written contract by fraud, accident, or mistake. FSM Dev. Bank v. Arthur, [2001] FMSC 42; 10 FSM Intrm. 479, 480 (Pon. 2001).

Civil Procedure - Summary Judgment
When factual differences in the bank and development authority loan documents and the promissory note and loan agreement raise genuine issues of material fact, summary judgment for either party is precluded. FSM Dev. Bank v. Arthur, [2001] FMSC 42; 10 FSM Intrm. 479, 480-81 (Pon. 2001).

* * * *

COURT'S OPINION

MARTIN YINUG, Associate Justice:

On September 3, 2001, the defendants filed their motion for summary judgment. On October 9, 2001, the plaintiff FSM Development Bank ("the Bank") filed its motion for summary judgment, which is a renewal of its May 1, 2001, motion for summary judgment.

In determining whether a "genuine issue of material fact" exists under Rule 56(c) of the FSM Rules of Civil Procedure, the court will consider "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any."

The Bank contends that the note on which it sues was made to the defendants in their individual capacities, while the defendants assert that in actuality the loan was to a corporation known as AHPW, Inc., and not to them individually. Defendant Robert C. Arthur is a director and officer of AHPW, Inc. Relative to the questions of mutual mistake and misrepresentation addressed in the parties' moving papers, "[t]he parol evidence rule generally prohibits the introduction of any extrinsic evidence, whether oral or written, to vary, alter or add to the terms of an integrated written instrument." Alling v. Universal Mfg. Corp., 7 Cal. Rptr. 2d 718, 731 (Ct. App. 1992). At the same time, "parol evidence is generally held admissible to alter the terms of a written contract when it is shown that by reason of mutual mistake the true intention of the parties is not expressed." 30 AM. JUR. 2D Evidence § 1037 (1(footnote omitted). ed). Further, "[a] parol agreement inconsistent with a written agreement made contemporaneously therewith is and unenforceable, unless it was omitted from the written contract by fraud, accident, or , or mistake." 17A AM. JUR. 2D Contracts § 402 (1991) (foes omitted).

Citing 30 F.S.M.C. 201-220, plaintiff states that the loan at issue was "made as part of the Investment Development Fund." Answer Brief to Motion for Summary Judgment and Motion for Summary Judgment at 11 (Oct. 9, 2001). Sections 209 and 210 of Title 30 of the FSM Code require, under specified circumstances, the approval of such loans either by the Federated Development

[2001] FMKSC 14; [10 FSM Intrm. 481]

Authority ("FDA"), § 209, or the president of the Development Bank or his designee, § 210. The FDA approved the toan to AHPW, Inc., on August 23, 1993. The defendants executed the promissory note at issue on December 10, 1993. The Bank's first default notice dated April 999, contains the notation "Borrower's Name: AHPW, Inc." un." under the current details portion of the notice. The March 10, 2000, resolution of the FDA provides in pertinent part: "It is resolved that the FSMDB is hereby empowered to charge off the loan[] issued to AHPW, Inc." The document entitled "IDF Fund Status of as June 30, 2000," bears a line item that begins "G3C-1576 AHPW." At variance with the status report is the promissory note, which shows the individual defendants as the "Promisor." In the top right hand corner of the note there appears a blank line that has been filled in with the same loan number that appears in the status report: "LOAN NO. G3C-1576." The loan agreement, which is separate from but consistent with the promissory note, shows the defendants as the "Borrower." All of the foregoing documents are attached as exhibits to the affidavit of defendant Robert C. Arthur, filed on September 3, 2001. Facts including but not limited to the foregoing raise genuine issues of material fact that preclude summary judgment in the Bank's favor.

By the same token, the note and loan agreement themselves create fact issues that preclude summary judgment favoring the defendants.

Accordingly, both summary judgment motions are denied.

* * * *