People of Rull ex rel. Ruepong v MV Kyowa Violet [2006] FMSC 35; 14 FSM Intrm. 501 (Yap 2006) (13 December 2006)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as People of Rull ex rel. Ruepong v. M/V Kyowa Violet, [2006] FMSC 35; 14 FSM Intrm. 501 (Yap 2006)

THE PEOPLE OF THE MUNICIPALITIES OF RULL AND

GILMAN, YAP STATE, by and through CHIEF

ANDREW RUEPONG, CHIEF THOMAS FALGNIN

and CHIEF JAMES LIMAR,
Plaintiffs,

vs.

M/V KYOWA VIOLET (O.N. 15005-85-CH), its

engines, masts, bowsprit, boats, anchors, chains,

cable, rigging, apparel, furniture, and all other

necessaries thereunto pertaining;
In Rem Defendant,

KYOWA SHIPPING CO., LTD., PACIFIC LINE
TRADING INC. (PANAMA), and TORITEC CO. LTD.,
In Personam Defendants.

CIVIL ACTION NO. 2003-3002

ORDER SETTING SUPERSEDEAS BOND AND GRANTING STAY

Dennis K. Yamase
Associate Justice

Hearing: December 5, 2006
Decided: December 13, 2006

APPEARANCES:

For the Plaintiffs:
Daniel J. Berman, Esq.
Berman O’Connor & Mann
111 Chalan Santo Papa, Suite 503
Hagatna, Guam 96910

James P. Walsh, Esq. (pro hac vice)
Davis Wright Tremaine LLP
One Embarcadero Center, Suite 600
San Francisco, CA 94111

For the Defendants:
David Ledger, Esq. (pro hac vice)
Carlsmith Ball LLP
134 West Soledad Avenue, Suite 401
P.O. Box BF
Hagatna, Guam 96932-5027

[2006] FMSC 35; [14 FSM Intrm. 501]

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HEADNOTES

Appellate Review - Stay - Civil Cases; Attachment and Execution
Judgment creditors have a statutory right to obtain the immediate issuance of a writ of execution unless a motion for an order in aid of judgment is pending. This statutory right is automatically stayed for ten days by court rule, and may be stayed by the court pending an appeal. People of Rull ex rel. Ruepong v. M/V Kyowa Violet, [2006] FMSC 35; 14 FSM Intrm. 501, 503 (Yap 2006).

Appellate Review - Stay - Civil Cases
A judgment-debtor who posts a satisfactory supersedeas bond is entitled to a stay pending appeal as a matter of right. People of Rull ex rel. Ruepong v. M/V Kyowa Violet, [2006] FMSC 35; 14 FSM Intrm. 501, 503 (Yap 2006).

Appellate Review - Stay - Civil Cases
The purpose of requiring a supersedeas bond for a stay pending an appeal is to protect the appellee’s interests. A bond protects an appellee by providing a fund out of which it may be paid if the money judgment is affirmed, and the bond also meets the appellee’s concern that the appellant might flee the jurisdiction or conceal or dissipate assets so as to render itself judgment-proof. People of Rull ex rel. Ruepong v. M/V Kyowa Violet, [2006] FMSC 35; 14 FSM Intrm. 501, 503 (Yap 2006).

Appellate Review - Stay - Civil Cases; Attachment and Execution
A supersedeas bond provides absolute security to the party who is affected by the appeal. It also protects the judgment debtor from levy while the appeal takes its course. People of Rull ex rel. Ruepong v. M/V Kyowa Violet, [2006] FMSC 35; 14 FSM Intrm. 501, 503-04 (Yap 2006).

Appellate Review - Stay - Civil Cases
A judgment creditor’s primary concern when a judgment in his favor is stayed pending appeal is that he be secure from loss resulting from the stay of execution. Therefore, to be entitled to a stay of execution pending appeal, the defendants must either post an adequate supersedeas bond or pay the money into the court’s registry (or a combination of both). A letter of undertaking is insufficient. People of Rull ex rel. Ruepong v. M/V Kyowa Violet, [2006] FMSC 35; 14 FSM Intrm. 501, 504 (Yap 2006).

Interest and Usury; Judgments
If the money is paid into court, interest ceases to accrue on a judgment, and if only a part of the principal is paid, then the statutory interest stops on that part. Partial payments on a judgment are first to be applied to the accrued interest and then to reduction of the principal. The subsequent statutory interest is computed only on the remaining principal. Payments into court accrue interest for the benefit of the ultimate recipient as earned in the court’s depository institution. People of Rull ex rel. Ruepong v. M/V Kyowa Violet, [2006] FMSC 35; 14 FSM Intrm. 501, 504 (Yap 2006).

Appellate Review - Stay - Civil Cases; Interest and Usury
If appellants post a supersedeas bond, they are automatically entitled to stay once the court has approved the bond. Statutory post-judgment interest, however, will continue to accrue until the judgment is paid. People of Rull ex rel. Ruepong v. M/V Kyowa Violet, [2006] FMSC 35; 14 FSM Intrm. 501, 505 (Yap 2006).

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[14 FSM Intrm. 502]

COURT’S OPINION

DENNIS K. YAMASE, Associate Justice:

This came before the court on December 5, 2006, for hearing on the plaintiffs’ Motion for Posting of Supersedeas Bond by Defendants or Writ of Execution on Assets of Defendants, filed November 13, 2006, and the defendants’ opposition and a cross-motion to stay enforcement of the judgment, filed on November 15, 2006. The plaintiffs filed their response on November 17, 2006, and on November 22, 2006, the defendants filed James Baker’s supporting affidavit.

I.

On September 21, 2006, the court entered a $2.95 million judgment in the plaintiffs’ favor. People of Rull ex rel. Ruepong v. M/V Kyowa Violet, [2006] FMSC 53; 14 FSM Intrm. 403 (Yap 2006). The defendants filed their Notice of Appeal on October 27, 2006. On November 1, 2006, the plaintiffs filed a cross-appeal.

The plaintiffs then moved for either a court order requiring the defendants to post a supersedeas bond in the form of a stand-by letter of credit deposited in the Bank of the Federated States of Micronesia, Colonia, Yap, or, in the alternative, or if no bond is posted, that the court issue a writ of execution that the plaintiffs can use to levy upon the defendants’ property when it is present in the Federated States of Micronesia. The defendants offered as security an increase in their insurance carrier’s letter of undertaking from $2.8 million to $6 million. The plaintiffs contend that this is wholly inadequate because, while a letter of undertaking was adequate to secure in rem jurisdiction over the defendant vessel, M/V Kyowa Violet, it would not provide security since, should the judgment be affirmed and the defendants or their insurance carrier balk at payment, they would not be able to execute on the judgment without lengthy proceedings in foreign courts in either Bermuda or London. The plaintiffs also contend that for their judgment to be secure, the bond should be for $10 million. They arrive at this figure by multiplying the judgment and interest to date and their estimate of their attorneys’ fees and costs (not yet awarded) by 1½ times to cover any further fees, costs, and interest that is likely to accrue while the appeal is pending.

II.

Judgment creditors have a statutory right to obtain the immediate issuance of a writ of execution, 6 F.S.M.C. 1407; In re Island Hardware, Inc.[1991] FMSC 23; , 5 FSM Intrm. 170, 173 (App. 1991); UNK Wholesale, Inc. v. Robinson, [2003] FMSC 11; 11 FSM Intrm. 361, 366 (Chk. 2003), unless a motion for an order in aid of judgment is pending, 6 F.S.M.C. 1413(1) (once a motion for an order in aid of judgment is filed a writ of execution cannot be issued except under an order in aid of judgment); In re Engichy[2003] FMSC 79; , 11 FSM Intrm. 520, 528 (Chk. 2003). This statutory right is automatically stayed for ten days by court rule, FSM Civ. R. 62(a); In re Pacific Islands Distrib. Co.[1988] FMSC 31; , 3 FSM Intrm. 575, 584 (Pon. 1988) (creditors with judgments more than 10 days old are entitled to writs of execution upon request), and may be stayed by the court pending an appeal. A judgment-debtor who posts a satisfactory supersedeas bond is entitled to a stay pending appeal as a matter of right. FSM Civ. R. 62(d).

The purpose of requiring a supersedeas bond for a stay pending an appeal is to protect the appellee’s interests. Panuelo v. Amayo, [2002] FMSC 45; 10 FSM Intrm. 558, 563 (App. 2002). A bond protects an appellee by providing a fund out of which it may be paid if the money judgment is affirmed, and the bond also meets the appellee’s concern that the appellant might flee the jurisdiction or conceal or dissipate assets so as to render itself judgment-proof. Pohnpei v. Ponape Constr. Co., [1993] FMSC 35; 6 FSM Intrm. 221, 223 (App. 1993). A supersedeas bond protects 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

[14 FSM Intrm. 503]

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).

"A judgment creditor’s primary concern when a judgment in his favor is stayed pending appeal is that he be ‘secure . . . from lesultrog from the sthe stay of execution.’" Texaco Inc. v. Penzoil Co., 784 F.2d 1133, 1154 (2d Cir. 1986) (quoting Federal Prescription Servs. v. American Pharmaceutical Ass’n, 636 F.2d 755, 760 (D.C. Cir. 1980)), rev’d on other grounds[1987] USSC 51; , 481 U.S. 1, 107 S. Ct. 1519, 95 L. Ed. 2d 1 (1980). The defendants contend that a letter of undertaking will provide the plaintiffs with adequate security. For this proposition they rely on Martima Antares, S.A. v. Vessel Essi Camilla, 633 F. Supp. 694 (E.D. Va. 1986). They assert that the $6 million letter of undertaking is sufficient for the current judgment and interest and that if more security is needed once the attorneys’ fees and costs award is fixed, it can be determined at that time and a further letter of undertaking provided.

The defendants’ reliance on Martima Antares, S.A. is misplaced. In that case, the court held that the judgment-creditor could not, absent fraud or misrepresentation, obtain a writ of execution against the defendant vessel or new security from the defendant by the vessel’s re-arrest because the letter of undertaking, as a substitute for the res of the vessel, had the effect of transferring the maritime lien from the vessel to the security fund. Martima Antares, S.A., 633 F. Supp. at 695-96. The Martima Antares court did not address whether a letter of undertaking was adequate security to entitle a judgment-debtor to a stay pending appeal.

This court, in its own research, has found only one case that held that appellants could be granted a stay based on a letter of undertaking and no supersedeas bond. In Silvanch v. Celebrity Cruises, Inc., No. 95 Civ. 0374 (JCF), 2002 WL 319644 (S.D.N.Y. Feb. 28, 2002), the court, acknowledging that the plaintiffs had a legitimate concern about the difficulty of pursuing the U.K. P & I Club issuing the letter of undertaking should it fail to honor it but noting that the defendants were a multi-billion dollar company with hundreds of millions in net income and the P & I Club issuing the letter was the largest in the world and itself "double-A" rated, ruled that it would grant a stay only if, in the letter of undertaking, the P & I Club 1) consented to the court’s jurisdiction for all purposes relating to the execution of the judgment; 2) appointed local counsel with authority to accept service of process; and 3) conceded liability, jointly and severally with the defendant, for any attorneys’ fees and costs incurred by the plaintiffs in the event that the judgment was not promptly paid to the extent affirmed on appeal. 2002 WL 319644 at *1. It is unknown whether the P & I Club consented to those conditions and issued such a letter of undertaking.

In the present case, this court has no information about the defendants financial status. The P & I Club issuing the letter of undertaking offered appears to be the same as in Silvanch, but it is unknown whether similar conditions would be acceptable to the P & I Club and whether such conditions would be feasible here. The court therefore concludes that to be entitled to a stay of execution pending appeal, the defendants must either post an adequate supersedeas bond or pay the money into the court’s registry (or a combination of both).

If the money is paid into court, interest ceases to accrue on a judgment, and if only a part of the principal is paid, then the statutory interest stops on that part. Senda v. Creditors of Mid-Pacific Constr. Co., [1996] FMSC 18; 7 FSM Intrm. 664, 670 (App. 1996). Partial payments on a judgment are first to be applied to the accrued interest and then to reduction of the principal. Id. The subsequent statutory interest is computed only on the remaining principal. Id. at 670-71. Payments into court accrue interest for the benefit of the ultimate recipient as earned in the court’s depository institution. Id. at 671.

If appellants post a supersedeas bond, they are automatically entitled to stay once the court has approved the bond. Statutory post-judgment interest, however, will continue to accrue until the judgment is paid.

[14 FSM Intrm. 504]

III.

Now therefore it is hereby ordered that the plaintiffs’ motion for posting a supersedeas bond is granted and that the amount of the bond is set at $8.1 million. (This sum includes security for the undetermined award of fees and costs.) Issuance of a writ of execution is stayed until January 5, 2007 to allow the defendants enough time to either arrange for a stand-by letter of credit in a form acceptable to the plaintiffs and approved by the court or to deposit into the court’s registry the judgment amount with accrued interest (and later the fees and costs once determined). If the defendants either post a supersedeas bond approved by the court or pay the appropriate sum into the court’s registry, execution on the September 21, 2006 judgment will be stayed during the pendency of the appellate proceedings.

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