UNK Wholesale Inc v Robinson [2002] FMSC 28; 11 FSM Intrm. 118 (Chk. 2002) (3 September 2002)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as UNK Wholesale, Inc. v. Robinson[2002] FMSC 28; , 11 FSM Intrm. 118 (Chk. 2002)

UNK WHOLESALE, INC.,
Plaintiff,

vs.

PRISCILLA ROBINSON and PIUS ROBINSON,
dba ROBINSON RETAIL STORE, ROBINSON
VIDEO STORE, and ROBINSON WATER STORE,
Defendants.

CIVIL ACTION NO. 2002-1008

ORDER CONDITIONALLY GRANTING RELIEF FROM
JUDGMENT AND MEMORANDUM

Martin G. Yinug
Associate Justice

Decided: September 3, 2002

APPEARANCES:

For the Plaintiffs:
Daniel J. Berman, Esq.
111 Chalan Santo Papa, Suite 503
Hagatna, Guam 96910

For the Defendants:
Johnny Meippen, Esq.
P.O. Box 705
Weno, Chuuk FM 96941

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HEADNOTES

Civil Procedure ; Service
When the actual defendants are natural persons, service may be accomplished by delivering a copy of the summons and of the complaint to the individual personally or by leaving copies thereof at the individual’s dwelling house or usual place of abode or of business with some person of suitable age and discretion then residing or employed therein. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 121 (Chk. 2002).

Civil Procedure ; Service
Ordinarily a person’s usual place of abode is the place where the party is actually living, except for temporary absences, at the time service is made, but it is possible for a person to have two or more dwelling houses or usual places of abode for the purpose of Rule 4(d)(1) service. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 121 (Chk. 2002).

Civil Procedure ; Service
If defendants wish to maintain that they reside at a certain address for "Department of Motor

[11 FSM Intrm. 119]

Vehicles purposes" but actually dwell elsewhere, it would seem that they cannot then contend that they should not be served process there. Certainly if they had been served traffic citations at that address, it is unlikely that their argument would prevail. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 121 (Chk. 2002).

Civil Procedure ; Default and Default Judgments
When service of process has been made outside the territorial jurisdiction of the FSM Supreme Court (that is, outside of the FSM), no default shall be entered until the expiration of at least 30 days after service. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 121 (Chk. 2002).

Civil Procedure ; Default and Default Judgments
If service in Guam was all that a plaintiff had to rely upon, then the entry of default and the default judgment 25 days after service was made on Guam, would have been premature, but when service of process has been made within the FSM as well, a default may be entered after twenty days have elapsed after service and the defendant has not answered or otherwise defended. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 121 (Chk. 2002).

Civil Procedure ; Service
Service may be made at a defendant’s usual place of business by leaving a copy with a person of suitable age and discretion employed at the place of business even though it is disputed whether the person who received the papers was employed in a managerial capacity. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 122 (Chk. 2002).

Civil Procedure ; Default and Default Judgments; Judgments ; Relief from Judgment
Even when service on the defendants was proper, they may still obtain relief from a default judgment if they qualify under Rule 60. Courts generally disfavor default judgments and will, in proper Rule 60(b) cases, readily set them aside rather than deprive a party of the opportunity to contest, and the court to resolve, a claim on its merits, instead of on procedural grounds. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 122 (Chk. 2002).

Civil Procedure ; Default and Default Judgments; Judgments ; Relief from Judgment
The criteria to be met in order to justify setting aside a default judgment are whether the default was willful, caused by the defendant’s culpable conduct, whether the defendant has a meritorious defense, and whether setting aside the default would prejudice the plaintiff. Relief from judgment is addressed to the discretion of the court, which must balance the policy in favor of hearing a litigant’s claims on the merits against the policy in favor of finality. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 122 (Chk. 2002).

Judgments ; Relief from Judgment
The determination of what sorts of neglect that can be considered excusable in order to justify relief from judgment is an equitable one. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 122 (Chk. 2002).

Judgments ; Relief from Judgment
Defendants’ failure to move for relief from judgment until after a writ of execution has been issued and their property seized was not an unreasonable delay when the plaintiff was so prompt in obtaining a default judgment, a writ of execution, and then levying on the writ. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 122 (Chk. 2002).

Judgments ; Relief from Judgment
Bad checks that, in part, gave rise to the lawsuit are not culpable conduct after the lawsuit’s inception that would bar relief from judgment, and neither are the defendants’ other instances of alleged culpable conduct (such as moving or closing other businesses) that do not appear to be related to the lawsuit. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 123 (Chk. 2002).

Civil Procedure ; Default and Default Judgments; Judgments ; Relief from Judgment
In order to obtain relief from a default judgment, the defendant must have a meritorious defense. A defense that would constitute a complete defense to the action if proven at trial would be a meritorious defense justifying relief from judgment when some evidence to support the defense has been produced, although more evidence may be needed to prevail at trial. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 123 (Chk. 2002).

Judgments ; Relief from Judgment
Relief from judgment may be granted only on motion and upon such terms as are just. The requirement of a bond is a just term upon which to grant relief from judgment, especially in a close case that tips in the defendants’ favor because of the court’s policy favoring resolutions on the merits over defaults. UNK Wholesale, Inc. v. Robinson, [2002] FMSC 28; 11 FSM Intrm. 118, 123 (Chk. 2002).

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COURT’S OPINION

MARTIN G. YINUG, Associate Justice:

The plaintiff, UNK Wholesale, Inc. ("UNK"), filed its complaint on March 18, 2002, alleging that the defendants ("the Robinsons") were indebted to it on the basis of an open account or an account stated. The returns of service filed, April 2, 2002, state that the complaint and summons were served at the defendants’ place of business on Chuuk on April 1, 2002, and the papers were also served at the defendants’ residence at 336 Y Seng Song Road, Dededo, Guam by leaving them with Cecilia U. Akana, defendant Pius Robinson’s mother-in-law "who resides in the same dwelling."

The Robinsons did not file an answer or otherwise defend. UNK filed its Motion for Order of Default on April 24, 2002 and served it and its Motion for a Default Judgment by mail on the Robinson’s Dededo address. On April 26, 2002, the clerk entered the defendants’ default and the court entered a default judgment against the Robinsons for the sum of $38,709.67, plus court costs of $130 ($38,839.67 total).

On May 17, 2002, UNK filed its Motion for Writ of Execution. The writ was issued on May 31, 2002. The Chuuk state police executed the writ on the Robinsons’ business on June 17, 2002, filing their return on June 19, 2002.

On June 24, 2002, the Robinsons filed a motion for a stay of the May 31, 2002 writ of execution and for relief from the April 26, 2002 default judgment. On June 26, 2002, the court granted a partial stay of the writ of execution in order to give UNK an opportunity to respond to the motion without irreparably harming the Robinsons. UNK filed its opposition on August 5, 2002. The Robinsons filed their reply to the opposition on August 14, 2002.

The Robinsons base their motion on the grounds that the complaint and summons were not properly served on them and that they have already paid UNK for the debt for which it obtained this judgment. UNK disputes both contentions, although it expressed it willingness to consider, as a partial satisfaction on the judgment, the $4,127.50 credit for allegedly damaged goods that UNK had offered in October, 1999, if the debt was promptly paid.

I. Service of Process on the Robinsons

The Robinsons contend that the service at their place of business in Chuuk was not good because, they assert, the employee, Ben Martin, there on whom service was made was not the manager, but merely a delivery truck driver. They add that Martin did not inform the Robinsons about the papers, but intended to show them to the Robinsons on their next visit to Chuuk, but that unfortunately when the Robinsons arrived on Weno, Martin was away, attending a wedding in the Mortlocks and did not return to Weno until after the Robinsons had gone back to Guam, and that Martin never transmitted the papers to them after that because he had misplaced them and still has not found them. They also contend that the service in Guam was not good because the address where it was served was not their actual residence, although they concede that that address is listed as their residence on their Guam drivers’ licenses.

The defendants’ businesses are d/b/a’s and not corporations. The actual defendants are natural persons ; Priscilla and Pius Robinson. Service may be accomplished "[u]pon an individual other than an infant or an incompetent person, by delivering a copy of the summons and of the complaint to the individual personally or by leaving copies thereof at the individual’s dwelling house or usual place of abode or of business with some person of suitable age and discretion then residing or employed therein . . . ." FSM Civ. R. 4(d)(1).

A. Service on Guam

The Robinsons contend that they do not reside at 336 Y Seng Song Road, Dededo, Guam, where Priscilla Robinson’s mother resides, but at 113 Chalan Prensepat Summer Palace, Harmon, Guam, and provide copies of power and water bills to that effect. The Robinsons contend that they maintain one address (Dededo) for Department of Motor Vehicles purposes, but actually reside at another (Harmon). "‘Ordinarily . . . a per8217;al sual place oace of abode is the place where the party is actually living, except for temporary absences, at the time seris ma8217;" Hannah v. United States Lines Co., 151 F. Supp. 122, 123 (S.D.N.Y. N.Y. 1957)1957) (quoting 2 MOORE’S FEDERAL PRACTICE 929 (2d ed.)). But it is possible for a person to have two or more dwelling houses or usual places of abode for the purpose of Rule 4(d)(1) service. See National Dev. Co. v. Triad Holding Corp., [1991] USCA2 427; 930 F.2d 253, 257 (2d Cir. 1991) (two or more dwelling houses or usual places of abode possible if each contains sufficient indicia of permanence). If the Robinsons wish to maintain that they reside at Y Seng Song Road for "DMV purposes" it would seem that they cannot then contend that they should not be served process there. Certainly if they had been served traffic citations at that address, it is unlikely then that their argument would prevail.

UNK contends that its process server left a copy of the complaint and summons at the Y Seng Song Road address, while the Robinsons contend that he did not. Both sides provide an affidavit in support of their position. The court considers it unlikely that a professional process server would fail to leave a copy of the complaint and summons at an address at which he is attempting to make service and at which he believes the defendants to reside. The service on Guam would appear to be valid.

But when service of process has been made outside the territorial jurisdiction of the FSM Supreme Court (that is, outside of the FSM), "[n]o default shall be entered until the expiration of at least 30 days after service." 4 F.S.M.C. 204(3); see also Kosrae v. M/V Voea Lomipeau, [2000] FMSC 31; 9 FSM Intrm. 366, 373 n.3 (Kos. 2000). If service in Guam was all that UNK had to rely upon, then the entry of default and the default judgment on April 26, 2002, 25 days after service was accomplished on Guam, would have been premature. But when service of process has been accomplished within the FSM Supreme Court’s territorial jurisdiction (within the FSM), a default may be entered after twenty days have elapsed after service and the defendant has not answered or otherwise defended. FSM Civ. R. 12(a); 55(a).

B. Service on Chuuk

The Robinsons were also served in Chuuk at their usual place of business. The parties disagree whether the person who received the papers was employed in a managerial capacity. UNK provided an affidavit from the Chuuk police officer who served the papers that he, at counsel’s direction, had observed the business over a period of time before serving the papers and that Ben Martin appeared to be in charge. Pius Robinson’s affidavit states that Martin is their delivery driver and that it is not a part of his job to be responsible for receiving court papers. The Robinsons do not seem to dispute that Martin was a person of suitable age and discretion employed at their place of business. As such, it seems that service on Martin at the Robinson’s store on Chuuk was satisfactory service.

II. Relief from a Default Judgment

But even if service on the Robinsons was proper, they may still obtain relief from the default judgment if they qualify under Rule 60. Courts generally disfavor default judgments and will, in proper [Rule 60(b)] cases, readily set them aside rather than deprive a party of the opportunity to contest, and the court to resolve, a claim on its merits, rather than on procedural grounds. O’Sullivan v. Panuelo, [2001] FMSC 11; 10 FSM Intrm. 257, 260 (Pon. 2001); Medabalmi v. Island Imports Co., [2001] FMSC 53; 10 FSM Intrm. 32, 35 (Chk. 2001); Lonno v. Trust Territory (III), [1983] FMSC 4; 1 FSM Intrm. 279, 281 (Kos. 1983).

The criteria to be met in order to justify the setting aside of a default judgment are whether the default was willful, caused by the defendant’s culpable conduct, whether the defendant has a meritorious defense, and whether setting aside the default would prejudice the plaintiff. See, e.g., College of Micronesia-FSM v. Rosario, [2001] FMSC 3; 10 FSM Intrm. 175, 180 (Pon. 2001); Truk Transp. Co. v. Trans Pacific Import Ltd., [1988] FMSC 1; 3 FSM Intrm. 512, 515 (Truk 1988). Relief from judgment is addressed to the discretion of the court, which must balance the policy in favor of hearing a litigant’s claims on the merits against the policy in favor of finality. Walter v. Meippen, [1996] FMSC 5; 7 FSM Intrm. 515, 518 (Chk. 1996).

The Robinsons contend that Martin’s failure to transmit the papers to them or to inform them of their service was excusable neglect under the circumstances, and that, therefore, the default was not the result of their culpable conduct. "[T]he court may relieve a party or a party’s legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect . . .&#16FSM C. 60(. 60(b). UNK. UNK contends that Martin’s failure to inform the Robinsons of and to transmit the papers to them and his apparent loss of them are not excusable. "The determination of what sorts of neglect that can be considered ‘excusable’ is . . . an equitable" Medabalmabalmi v. Island Imports Co., [2001] FMSC 7; 10 FSM Intrm. 217, 219 (Chk. 2001). While this is a close case and in another case Martin’s neglect might not be excusable, under the equitf thie, a court may beay be able able to find it excusable.

UNK also contends that the delay was unreasonable, in part because the Robinsons did not move for relief from judgment until after the writ of execution had been issued and their property seized. The Robinsons contend that their motion was prompt because they were unaware of the suit until their property was seized. UNK states that the Robinsons are experienced litigants, having been defendants in 23 other debt collection lawsuits, and 18 judgments, in Guam, and that it believes that the only reason the Robinsons moved for relief from judgment was that their property was levied by the writ of execution.

Because UNK was so prompt in obtaining a default judgment, a writ of execution, and then levying on the writ, the court cannot say that the time that elapsed after the judgment was entered, or even after the case was filed, and before the Robinsons filed these motions, was unreasonable.

UNK also contends that the Robinsons should not be granted the relief they seek because of their culpable conduct shows a lack of good faith as evidenced by the multiple lawsuits against them, the dishonored checks they tendered, their multiple residential addresses and frequent travel, and closing or moving their businesses on Guam with little or no notice. The bad checks are conduct that, in part, gave rise to this lawsuit, not conduct after the lawsuit’s inception. The multiple residences work to the Robinson’s detriment because they are liable to service of process at more than one dwelling house or place of abode. Their other instances of alleged culpable conduct (such as moving or closing their Guam businesses) do not appear to be related to this lawsuit.

In order to obtain relief from a default judgment, the defendant must also have a meritorious defense. The Robinsons contend that the account has been paid off in full. They concede that checks given to UNK (and which UNK produces copies of) bounced, but contend that the charges in the invoices for goods UNK shipped to them were later paid off by other checks and by cash. They concede that they have so far been unable to locate the canceled checks and receipts for most of these payments, but do provide a copy of one document, signed by UNK’s principal, that appears to be a receipt, dated October 6, 1999, for payment of $3,500 cash for the invoices that gave rise to this debt, and it states that it is a final payment for those invoices. UNK points out that the document is confusing and internally inconsistent in that the document also lists the $4,127.50 credit adjustment and another $1,698 "Credits Adjusted for reduced price." But the defense that the Robinsons raise would, if proven at trial, constitute a complete defense to the action and would thus be a meritorious defense. See Irons v. Ruben, [1999] FMCSC 12; 9 FSM Intrm. 218, 219 (Chk. S. Ct. Tr. 1999). And they have produced some evidence to support the defense, although more evidence may be needed to prevail at trial.

Furthermore, the complaint contained only one cause of action ; for an open account or an account stated. It now appears that the open account included not only $37,209.67 for goods sold on credit but also $1,500 in charges for statutory damages under Guam Code § 6104 for dishonored checkst Whether liability for those damages may be sought in a civil action in an FSM court has not been directly addressed before, but this court has previously declined to enforce the portion of aign judgment that included uded treble damages levied under a Northern Marianas statute for bad checks. Coca-Cola Beverage Co. (Micronesia) v. Edmond, [1998] FMSC 20; 8 FSM Intrm. 388, 391 (Kos. 1998). It may be that UNK’s only recourse for these statutory damages would normally be in a suit in a Guam court under Guam law.

UNK contends that it would be prejudiced if the Robinsons were relieved from judgment. Relief from judgment may be granted only "[o]n motion and upon such terms as are just." FSM Civ. R. 60(b). UNK asks that if the Robinsons’ motion is granted that it must be with the condition that the Robinsons post a bond with the court in the amount of $48,210.53. The court agrees that UNK would be severely prejudiced if relief from judgment were granted and if, after resolution of the case on its merits, it obtained a new judgment but by then the Robinsons no longer had any ready assets that could be used to satisfy the new judgment. The requirement of a bond is therefore a just term upon which to grant relief from judgment, especially since this is a close case that tips in the defendants’ favor because of the court’s policy favoring resolutions on the merits over defaults. The court determines that a reasonable bond would be $34,712.17 ; the judgment amount of $38,839.67 minus the $4,127.50 credit that UNK was willing to allow.

III. Conclusion

NOW THEREFORE IT IS HEREBY ORDERED that the Robinsons’ motion is denied unless the Robinsons post, no later than October 12, 2002, a bond with the court in a form acceptable to the plaintiff for the amount of $34,712.17. (Money on deposit in bank accounts currently frozen by the writ of execution may be used in meeting this bond requirement.) If such bond is posted with the court, then the Robinsons’ motion is granted; the writ of execution is vacated; the Robinsons are relieved from the judgment; the entry of default is set aside; and the following scheduling order is put in effect: the Robinsons shall file their answer within ten days of posting bond, all discovery must be requested within 75 days of the answer’s filing and shall be completed within 90 days of the answer’s filing, and all pretrial motions must be filed no later than 21 days of the completion of discovery.

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