Albatross Trading Company v Aizawa [2005] FMSC 13; 13 FSM Intrm. 380 (Chk. 2005) (29 August 2005)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite case as Albatross Trading Company v Aizawa, [2005] FMSC 13; 13 FSM Intrm. 380 (Chk. 2005)

ALBATROSS TRADING CO., INC.,
Plaintiff,

vs.

SUSUMU AIZAWA d/b/a SUSUMU’S
ENTERPRISES,
Defendant.

_____________________________________

CIVIL ACTION NO. 2005-1019

ORDER CONCERNING MOTION FOR DEFAULT JUDGMENT

Dennis K. Yamase
Associate Justice

Decided: August 29, 2005

APPEARANCE:

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

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HEADNOTES

Civil Procedure - Default and Default Judgments
A defendant who has been served with a complaint and summons has twenty days after service to serve an answer or otherwise defend under Rule 12. Albatross Trading Co. v. Aizawa, [2005] FMSC 13; 13 FSM Intrm. 380, 381 (Chk. 2005).

Business Organizations - Sole Proprietorship; Civil Procedure - Parties
A d/b/a is not a party. A d/b/a is just another name under which a person operates a business or by which the person or business is known. The individual who does business as a sole proprietor under one or several names remains one person, personally liable for all his obligations. Albatross Trading Co. v. Aizawa, [2005] FMSC 13; 13 FSM Intrm. 380, 381 (Chk. 2005).

Business Organizations - Corporations
If a business enterprise is a corporation, it is a different person than the owner himself. A corporation is an artificial person created by law as the representative of persons who contribute to or become holders of shares in it. Albatross Trading Co. v. Aizawa, [2005] FMSC 13; 13 FSM Intrm. 380, 382 (Chk. 2005).

Attorney and Client - Fees
Attorney fee awards in the FSM Supreme Court are generally limited to those authorized either by statute or by contract. Albatross Trading Co. v. Aizawa, [2005] FMSC 13; 13 FSM Intrm. 380, 382 (Chk. 2005).

Attorney and Client - Fees; Civil Procedure - Default and Default Judgments
Attorney’s fees will not be awarded in a default judgment when nowhere in the pleadings does it allege or indicate that any contract between the parties makes the defendant liable for attorney’s fees. Albatross Trading Co. v. Aizawa, [2005] FMSC 13; 13 FSM Intrm. 380, 382 (Chk. 2005).

Attorney and Client - Fees
Even when attorney’s fees awards are made pursuant to contract or statute, a trial court has an obligation to see that any award it approves is reasonable, and it is an abuse of the trial court’s discretion to award fees without first determining their reasonableness. The court must carefully scrutinize and strictly construe contractual provisions relating to the payment of attorney’s fees. The court is the final arbiter of whether a court-ordered attorney fee award is reasonable. Albatross Trading Co. v. Aizawa, [2005] FMSC 13; 13 FSM Intrm. 380, 382 (Chk. 2005).

Attorney and Client - Fees
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 to exceed fifteen percent of the outstanding principal and interest. Fifteen percent is not an amount an attorney is automatically entitled to as a fee in debt collection case. It is the upper limit, or ceiling, on what the court can consider to be reasonable and beyond which a fee is presumed to be unreasonable. Albatross Trading Co. v. Aizawa, [2005] FMSC 13; 13 FSM Intrm. 380, 382 (Chk. 2005).

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COURT’S OPINION

DENNIS K. YAMASE, Associate Justice:

On July 27, 2005, the plaintiff, Albatross Trading Co., Inc., filed and had the defendant, Susumu Aizawa, served personally with the Complaint and Summons in this matter. A defendant who has been served with a complaint and summons has twenty days after service to serve an answer or otherwise defend under Rule 12. FSM Civ. R. 12(a). Aizawa has not filed anything.

On August 23, 2005, the plaintiff filed its Motion for Entry of Default; and Motion for Default Judgment. The clerk entered Aizawa’s default on August 26, 2005. FSM Civ. R. 55(a). The motion for default judgment asks that a judgment be entered in the plaintiff’s favor for the principal amount of $81,968.40, plus prejudgment interest at 13% ($24,719.21 through April 30, 2005 and $29.19 per day thereafter), and $12,295.26 in attorney’s fees (calculated at 15% of $81,968.40). The court cannot, at this time, enter a default judgment against defendant Susumu Aizawa d/b/a Susumu’s Enterprises for two reasons apparent on the pleadings’ face.

I. Debtor’s Identity

First, the pleadings allege that defendant Susumu Aizawa does business as Susumu’s Enterprises. A d/b/a is not a party. Jackson v. Pacific Pattern, Inc., [2003] FMSC 42; 12 FSM Intrm. 18, 20 (Pon. 2003). A d/b/a is just another name under which a person operates a business or by which the person or business is known. The individual who does business as a sole proprietor under one or several names remains one person, personally liable for all his obligations. Id. That being so, only Susumu Aizawa was pled as a defendant in this action and, in conformance with the complaint’s allegation about the debtor’s identity, only he was served with the complaint and summons.

However, of 26 invoices attached to the complaint eleven are made out to "Susumu Enterprises" and the other seventeen are made out to "Susumu Enterprises Corporation." If Susumu Enterprises is, in fact, a corporation, it is a different person than Susumu Aizawa himself. A corporation is an artificial person created by law as the representative of persons who contribute to or become holders of shares in it. In re Estate of Setik[2004] FMCSC 4; , 12 FSM Intrm. 423, 429 (Chk. S. Ct. Tr. 2004); see also Ponape Constr. Co. v. Pohnpei, [1993] FMSC 23; 6 FSM Intrm. 114, 127-28 (Pon. 1993) (a corporation is a person). It may be that "Susumu Enterprises Corporation" is a misnomer and that the business is a d/b/a, and Susumu Aizawa is personally liable for its debts. But if it is really a corporation, it has not been pled or served, and, on the current state of these pleadings, Susumu Aizawa cannot be held personally liable for the corporation’s debts. This point must be clarified before the court can consider entering a default judgment.

II. Attorney’s Fees

Second, attorney fee awards in this court are generally limited to those authorized either by statute or by contract. FSM Telecomm. Corp. v. Worswick, [1999] FMSC 22; 9 FSM Intrm. 6, 18 (Yap 1999) (each party will normally bear its own attorney’s fees when there is no statutory or contractual basis for an attorney fee request). Unless the court has overlooked something, nowhere in the pleadings does it allege or indicate that any contract between the parties makes Aizawa liable for attorney’s fees. The invoices attached to the complaint do indicate that the buyer is expected to be liable for 13% interest on bills unpaid after 30 days, but they do not mention liability for attorney’s fees.

Furthermore, even when attorney’s fees awards are made pursuant to contract or statute, a trial court has an obligation to see that any award it approves is reasonable, and it is an abuse of the trial court’s discretion to award fees without first determining their reasonableness. Senda v. Creditors of Mid-Pacific Constr. Co., [1996] FMSC 18; 7 FSM Intrm. 664, 673 (App. 1996). The court must carefully scrutinize and strictly construe contractual provisions relating to the payment of attorney’s fees. Bank of the FSM v. Bartolome, 4 FSM Intrm. 182, 185 (Pon. 1990). The court is thus the final arbiter of whether a court-ordered attorney fee award is reasonable. LPP Mortgage Ltd. v. Maras, [2003] FMSC 47; 12 FSM Intrm. 112, 113 (Chk. 2003).

The plaintiff seeks an attorney’s fee award of 15% of the $81,968.40 principal amount. For its entitlement to this amount, the plaintiff apparently relies on Bank of Hawaii v. Jack, which held that, 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 to exceed fifteen percent of the outstanding principal and interest. Bank of Hawaii v. Jack, [1990] FMSC 7; 4 FSM Intrm. 216, 221 (Pon. 1990). Fifteen percent is thus not an amount an attorney is automatically entitled to as a fee in debt collection case. It is the upper limit, or ceiling, on what the court can consider to be reasonable and beyond which a fee is presumed to be unreasonable.

The plaintiff shall therefore submit a statement outlining the basis for its alleged right to an attorney’s fee award, and plaintiff’s counsel shall submit his affidavit and documentation of the time spent working on this matter prior to entry of this order. Only once this has been submitted will the court consider awarding attorney’s fees.

III. Conclusion

The plaintiff’s motion for a default judgment will therefore not be decided until the above points have been addressed. The plaintiff shall file his response to this order within fifteen days of its entry.

[13 FSM Intrm. 389]

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