Adams v Island Homes Construction, Inc [2004] FMSC 12; 12 FSM Intrm. 348 (Pon. 2004) (13 February 2004)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION

Cite as Adams v. Island Homes Constr., Inc., [2004] FMSC 12; 12 FSM Intrm. 348 (Pon. 2004)

[2004] FMSC 12; [12 FSM Intrm. 348]

YVETTE ETSCHEIT ADAMS, d/b/a POHNPEI
ACE HARDWARE, and ADAMS BROTHERS
CORPORATION,
Plaintiffs,

vs.

ISLAND HOMES CONSTRUCTION, INC., JOE
FELIX d/b/a ISLAND HOMES CONSTRUCTION,
FSM DEVELOPMENT BANK, PAULUS PERMAN
and LORENZA PERMAN,
Defendants.

CIVIL ACTION NO. 2000-012

ORDER

Martin Yinug
Associate Justice

Decided: February 13, 2004

APPEARANCES:

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

For the Defendants (Island Homes, Felix):
Salomon Saimon, Esq.
Law Offices of Saimon & Associates
P.O. Box 1450
Kolonia, Pohnpei FM 96941

For the Defendant (FSM Dev. Bank):
James Woodruff, Esq.
P.O. Box M
Kolonia, Pohnpei FM 96941

[12 FSM Intrm. 349]

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HEADNOTES

Civil Procedure - Motions

Failure to respond to a motion may be deemed consent to the granting of the motion, but there still must be a basis in law and fact justifying the relief requested in order for the court to grant the motion in the absence of a response. Adams v. Island Homes Constr., Inc., [2004] FMSC 12; 12 FSM Intrm. 348, 350 (Pon. 2004).

Appellate Review - Stay

When defendants have not posted a supersedeas bond and have not stated any basis upon which the court could exercise its discretion to stay the money judgment against them in absence of a bond, they are not entitled to a stay under FSM Civil Rule 62(d). Adams v. Island Homes Constr., Inc., [2004] FMSC 12; 12 FSM Intrm. 348, 350 (Pon. 2004).

Appellate Review - Stay

That defendants claim that they owe a different amount than that for which they were found liable and thus still contest liability is not a basis for a stay pending the appeal when the plaintiffs proved by a preponderance of evidence the amount that the defendants owe to them. Adams v. Island Homes Constr., Inc., [2004] FMSC 12; 12 FSM Intrm. 348, 350 (Pon. 2004).

Appellate Review - Stay

Even assuming without deciding for the sake of a motion to stay that the FSM Development Bank is an agency of the national government, FSM Civil Rule 62(e) contains two conditions precedent that must occur in order for the requirement of an appeal bond or other security to be dispensed with: the appeal must be taken by the national government or an agency thereof, and the enforcement of the judgment must have been stayed. Only then does the waiver of the bond requirement apply. Adams v. Island Homes Constr., Inc., [2004] FMSC 12; 12 FSM Intrm. 348, 351 (Pon. 2004).

Appellate Review - Stay

Under the plain reading of Rule 62(e), the court must first determine whether the judgment against the FSM Development Bank should be stayed pending appeal. If the judgment is stayed then, and only then, may the bank avail itself of the waiver of a bond or other security provided for by Rule 62(e). Adams v. Island Homes Constr., Inc., [2004] FMSC 12; 12 FSM Intrm. 348, 352 (Pon. 2004).

Appellate Review - Stay

Ours is a developing nation, and preserving the balance among our government’s three branches established by our Constitution is of utmost importance. The FSM Supreme Court must remain sensitive to this concern. To read Rule 62 subparagraphs (d) and (e) to give the FSM national government or an agency thereof a blanket right to stay any judgment of this court, regardless of the terms of the stay and regardless of the appeal’s merit or lack thereof, would be to create a constitutional puzzle. Adams v. Island Homes Constr., Inc., [2004] FMSC 12; 12 FSM Intrm. 348, 352-53 (Pon. 2004).

Civil Procedure; Statutes - Construction

A cardinal principle of statutory construction is to avoid an interpretation which may call into question the statute’s, or the rule’s, constitutionality. Adams v. Island Homes Constr., Inc., [2004] FMSC 12; 12 FSM Intrm. 348, 353 (Pon. 2004).

Banks and Banking

The stated purpose of the FSM Development Bank under 30 F.S.M.C. 104(1) is to assist in the

[12 FSM Intrm. 350]

Federated States of Micronesia’s economic advancement. Adams v. Island Homes Constr., Inc., [2004] FMSC 12; 12 FSM Intrm. 348, 353 (Pon. 2004).

Appellate Review - Stay
The court is disinclined to exercise its discretion to grant a stay in the appellant’s favor pending the appeal when that party unsuccessfully attempted to evade the discovery process by refusing, willfully and in bad faith, to disclose a document that the court has found established its liability to the plaintiffs as a matter of law, when its conduct generated a mountainous court file that resulted in the waste of the time of all involved, as well as increased costs to the other litigants, and when it could engage in such conduct with impunity without concern for whether its conduct made economic sense in terms of legal expenses incurred since it employs house counsel. Adams v. Island Homes Constr., Inc., [2004] FMSC 12; 12 FSM Intrm. 348, 353 (Pon. 2004).

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COURT’S OPINION

MARTIN YINUG, Associate Justice:

On December 11, 2003, Island Homes Construction, Inc., and Joe Felix d/b/a Island Homes Construction ("Island Homes and Felix") filed their notice of appeal of this court’s December 1, 2003, judgment. On that date they also filed their motion to stay the judgment pending the appeal. On December 29, 2003, the plaintiffs filed their response to Island Homes and Joe Felix’s motion. The motion is denied.

Also on December 11, 2003, the defendant FSM Development Bank filed its motion to stay the December 1, 2003, judgment. The plaintiffs did not file a response. Under FSM Civil Rule 6(d) failure to respond to a motion may be deemed consent to the granting of the motion. However, there still must be a basis in law and fact justifying the relief requested in order for the court to grant the motion in the absence of a response. Senda v. Mid-Pacific Constr. Co., [1994] FMSC 20; 6 FSM Intrm. 440, 442 (App. 1994). Those requirements are absent here. The Bank’s motion for a stay pending appeal is denied.

The plaintiffs’ January 30, 2004, motion for enlargement of time is granted according to its terms.

A. Island Homes and Joe Felix’s motion to stay

Island Homes and Joe Felix have not posted a supersedeas bond. Therefore, they are not entitled to a stay under FSM Civil Rule 62(d).

Nor have Island Homes and Joe Felix stated any basis upon which the court could exercise its discretion to stay the money judgment against them in absence of a bond. Citing to Ponape Enterprises Co. v. Luzama, [1993] FMSC 50; 6 FSM Intrm. 274, 277-78 (Pon. 1993), they point to certain factors that the court may consider in granting or denying a stay. However, those factors apply to the appeal of an injunction. They are not apposite here.

Island Homes and Joe Felix also claim that they owe a different amount than that for which they were found liable. That Island Homes and Joe Felix still contest liability is not a basis for a stay pending the appeal. The plaintiffs proved by a preponderance of evidence the amount that Island Homes and Joe Felix owe to them.

[12 FSM Intrm. 351]

Accordingly, Island Homes and Joe Felix’s motion to stay is denied.

B. The Bank’s motion for stay

In moving for a stay, the Bank relies on FSM Civil Rule 62, subparagraphs (d) and (e). Subparagraph (d) provides in pertinent part that "[w]hen an appeal is taken the appellant by giving a supersedeas bond may obtain a stay [of execution of the judgment]. Subparagraph (e) further provides that "[w]hen an appeal is taken by the national government of the Federated States of Micronesia or an officer or agency thereof . . . and the operation or enforcement of the judgment is stayed, no bond, obligation, or other security shall be required from the appellant." The Bank asserts that it is an agency of the national government. It further contends that if these two provisions are read together, then the Bank is entitled to a stay of execution of the judgment as a matter of right without posting any bond. The court assumes without deciding for the sake of the instant motion that the Bank is an agency of the national government. Cf. FSM Dev. Bank v. Nanpei, [1986] FMSC 8; 2 FSM Intrm. 217, 221 (Pon. 1986) (holding that the FSM Development Bank was to be treated like the national government for jurisdictional purposes under FSM Const. art. XI, § 6(a)).

Subparagraph (e) of FSM Civil Rule 62 contains two conditions precedent that must occur in order for the requirement of an appeal bond or other security to be dispensed with. First, the appeal must be taken by the national government or an agency thereof, and the enforcement of the judgment must have been stayed. Only then does the waiver of the bond requirement apply. To read this paragraph in any other way would be to render nugatory the rule’s stated condition, "and the operation or enforcement of the judgment is stayed." An extended discussion on this point in relation to identical Rule 62 of the U.S. Federal Rules of Civil Procedure is found in In re Westwood Plaza Apartments, Ltd., 150 B.R. 163, 166 (Bkrtcy. E.D. Tex. 1993). As the Westwood court noted,

[s]ubdivision (e) is complete and not dependent on subdivision (d). The second condition of subdivision (e) is not worded as to provide an appeal as a matter of right as the first sentence to subdivision (d) does. It only states that a bond need not be posted if a stay is granted in favor of the United States. If subdivision (e) is read together with subdivision (d), the second condition of (e) becomes superfluous. The second condition would be repetitive of (d) because (d) would have already granted the United States the stay. For HUD [the party seeking the stay] to be correct that the United States [is entitled as] a matter of right to a stay without posting a bond, Congress would have drafted subdivision (e) without the second condition. Therefore, there would have been no superfluous second condition and subdivision (e) would have to be read with subdivision (d).

Id. at 166. The Westwood court concluded the HUD was not entitled to a stay as a matter of right. Id. at 167 ("Lest it be argued that the government’s exemption from the obligation to post a bond or furnish security implies that the mere filing of a notice of appeal operates as a stay, the fallacy of such argument is plainly revealed by Rule 62(e), Fed. R. Civ."; HUD ordered to pay judgment creditor $618,015.88 plus costs and attorneys fees) (quoting C.H. Sanders Co. v. BHAP Housing Dev. Fund Co., 750 F. Supp. 67, 73 (E.D.N.Y. 1990)).[1]

[12 FSM Intrm. 352]

The Westwood court’s interpretation of subparagraphs (d) and (e) reflects the general principle that the plain meaning of a statute or rule should be given effect whenever possible. Setik v. FSM, [1992] FMSC 19; 5 FSM Intrm. 407, 410 (App. 1992). To depart from this rule here would be to ignore the second condition precedent set out in subparagraph (e), that the court must stay the operation of the judgment against the FSM or its agent before the waiver of the bond or other security comes into play. In Bualuay v. Rano, [2002] FMSC 30; 11 FSM Intrm. 139, 147 (App. 2002), the court construed FSM App. R. 4(a)(5), which provides that the court appealed from may extend the time for filing the notice of appeal "upon a showing of excusable neglect or good cause." Various United States courts have interpreted the similar U.S. Rule of Federal Civil Procedure to mean that a motion for an extension of time filed before the expiration of the original period specified in the rule is subject to the good cause standard, while a motion filed thereafter is subject to an excusable neglect standard. 20 James Wm. Moore et al., Moore’s Federal Practice § 304.14[2][b], at 304-57 (3d ed. 1999), and cases cited therein. However, the court in Bualuay stated that "under a plain reading of the rule, the good cause standard applies both to motions to extend filed after the initial appeal period has passed as well as those filed before." Bualuay, 11 FSM Intrm. at 147. Under the plain reading of subparagraph (e) of FSM Civil Rule 62, the Bank is not entitled to a stay as a matter of right in the case at bar. Rather, the court must first determine whether the judgment against the Bank should be stayed pending appeal. If the judgment is stayed then, and only then, may the Bank avail itself of the waiver of a bond or other security provided for by subparagraph (e).

In addition to its analysis of the language of Rule 62, the Westwood court identified a larger issue arising from the contention that reading subparagraphs (d) and (e) together confers a stay as a matter of right pending appeal. As the court noted, a

[c]ardinal rule of construction is that a court "should avoid an interpretation of a federal statute that engenders constitutional issues if a reasonable alternative interpretation poses no constitutional question." The Court’s reading of (e) avoids a possible constitutional puzzle. HUD’s interpretation of (e) would create a separation of powers problem between the legislature, executive and judicial branches. It would subject a court’s decision to the dictate and control of the United States or its agencies by giving them a categorical per se right to a stay upon appeal. Another branch of the government would be able to manipulate the judiciary in an era when judicial resources are extremely scarce (i.e., by demanding an automatic stay during the pendency of an appeal even though the basis for appeal might be meritless or in bad faith.) The control over the judiciary by another branch of the government violates our political scheme. The Constitution mandates that "each of the three general departments of government [must remain] entirely free from the control or coercive influence, direct or indirect, of either of the others." Accordingly, the Court holds that subdivision (d) and (e) are not to be read together. Therefore, the court will use its discretionary powers to determine whether HUD is entitle to a stay.

150 B.R. at 167-68 (citations omitted) (footnote omitted).

All of these considerations apply with special force to the case at bar. Ours is a developing nation, and preserving the balance among the three branches of our government established by our

[12 FSM Intrm. 353]

Constitution is of utmost importance. This court must remain sensitive to this concern. To read subparagraphs (d) and (e) to give the FSM national government or an agency thereof a blanket right to stay any judgment of this court, regardless of the terms of the stay and regardless of the appeal’s merit or lack thereof, would be to create, in the Westwood court’s words, "a constitutional puzzle." A cardinal principle of statutory construction is to avoid an interpretation which may call into question the statute’s - in this case, the rule’s - constitutionality. Edwards v. Pohnpei, [1988] FMSC 6; 3 FSM Intrm. 350, 359 (Pon. 1988). Thus the constitutional - or more precisely, the unconstitutional - implications of adopting the Bank’s reading of subparagraphs (d) and (e) of FSM Civil Rule 62 militate against that construction.

The court now turns to the question whether a stay should be granted in favor of the Bank in this case. This determination requires an exercise of the court’s discretion. Westwood, 150 B.R. at 168.

In pursuing this litigation, the Bank conducted itself in a way that brings no credit to an institution established under national law. The stated purpose of the Bank under 30 F.S.M.C. 104(1) is to "assist in the economic advancement of the Federated States of Micronesia." The instant litigation arose because the Bank failed to abide by the terms of its own loan agreement. Then, the Bank unsuccessfully attempted to evade the discovery process by refusing, willfully and in bad faith, to disclose the loan document, a document that the court has found established the Bank’s liability to the plaintiffs as a matter of law. Its conduct generated a mountainous court file that resulted in the waste of the time of all involved, as well as increased costs to the other litigants. It would further seem that the Bank could engage in such conduct with impunity, which is to say without concern for whether its conduct made economic sense in terms of legal expenses incurred, since it employs house counsel. On these facts, the court is disinclined to exercise its discretion to grant a stay in favor of the Bank pending the appeal.

Accordingly, the Bank’s request for a stay is denied.

The plaintiffs have filed a second request for an extension of time to file its statement of attorney’s fees and costs. They request postponing the filing of the statement until 30 days after the mandates in all of the Bank’s appeals taken throughout the course of this litigation have issued. If the court understands the plaintiffs’ position correctly, they are requesting a future, single award of fees covering, where appropriate, the instant action as well as related appeals. In response the Bank complains of delay. Given that the Bank’s willful, bad faith conduct in this case has resulted in delays out of any proportion to the issues presented by the facts, the Bank’s objection is not well-taken.

The court further observes that granting the plaintiffs’ request would seem to result in a delay to the plaintiffs in receiving their fees and costs incurred in this case. Conversely, the time value of money means that the plaintiffs’ request would redound to the Bank’s benefit. Yet, the Bank opposes the request.

The plaintiffs’ January 30, 2004, motion for an extension is granted according to its terms.

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^[1] The Westwood court takes Wright and Miller to task for "appear[ing]" to support HUD’s interpretation without providing any authority or analysis, and Professor Moore for "impl[ying]" that subparagraphs (d) and (e) should be read together. 150 B.R. at 166. The Westwood court cites the 1990, second edition of Prof. Moore’s treatise. Any implication in this regard is obviated by the unequivocal statement in his subsequent, 1999 third edition of his treatise, where Prof. Moore states that "Rule 62(e) applies in cases where an appeal is made by the United States [or agency thereof]. In such a case, if the court grants a stay of judgment, no bond or other form of security will be required." 12 James Wm. Moore et al., Moore’s Federal Practice § 62.30 (3d ed. 1999).

With respect to Wright & Miller, the Westwood court cites to the 1973 edition. The court does not have access to any subsequent edition.