FSM Development Bank v Chuuk Fresh Tuna, Inc [2009] FMSC 14; 16 FSM Intrm. 335 (Chk. 2009) (26 February 2009)

FSM SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 2007-1006

FSM DEVELOPMENT BANK,
Plaintiff,

vs.

CHUUK FRESH TUNA, INC.,
Defendant.

__________________________

ORDER GRANTING SUMMARY JUDGMENT

Ready E. Johnny
Associate Justice

Decided: February 26, 2009

APPEARANCES:

For the Plaintiff: Nora Sigrah, Esq.
P.O. Box M
Kolonia, Pohnpei FM 96941

For the Defendants: Joses Gallen, Esq.
Chuuk Attorney General
Office oft he Chuuk Attorney General
P.O. Box 1050
Weno, Chuuk FM 96942

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HEADNOTES

Civil Procedure  Summary Judgment
A court must deny a summary judgment motion unless, viewing the facts presented and inferences made in the light most favorable to the nonmoving party, it finds that there is no genuine issue as to any material fact and the that moving party is entitled to judgment as a matter of law. The movant bears the burden of showing a lack of triable issues of fact, and must go forward not only on its allegations but also on the nonmovant's affirmative defenses, since the burden of demonstrating that no triable fact issues exist encompasses affirmative defenses as well as the movant's own factual allegations. FSM Dev. Bank v. Chuuk Fresh Tuna, Inc., [2009] FMSC 14; 16 FSM Intrm. 335, 337 (Chk. 2009).

Contracts  Accord and Satisfaction
An affirmative defense of accord and satisfaction negotiations being underway fails when no accord and satisfaction has been agreed to, in other words, when the negotiations were not successful. FSM Dev. Bank v. Chuuk Fresh Tuna, Inc., [2009] FMSC 14; 16 FSM Intrm. 335, 338 (Chk. 2009).

Equity  Laches
A borrower's laches defense will fail when the borrower has had the use of a blast freezer securing the loan the whole time since 1998 without making any payment on the loan because the equitable doctrine of laches cannot be invoked when a party has failed to act properly or is said to have "unclean hands" regarding the litigation's subject matter. FSM Dev. Bank v. Chuuk Fresh Tuna, Inc., [2009] FMSC 14; 16 FSM Intrm. 335, 338 (Chk. 2009).

Statutes of Limitation
The statutory limitation period on the breach of contract claim for an unpaid bank loan is six years after the cause of action accrues since a breach of contract cause of action, or an unpaid bank loan, is not covered in the specific limitations periods set forth in FSM Code, Title 6, sections 801 to 804. FSM Dev. Bank v. Chuuk Fresh Tuna, Inc., [2009] FMSC 14; 16 FSM Intrm. 335, 338 (Chk. 2009).

Statutes of Limitation  Accrual of Action
When a promissory note is payable in instalments, each instalment is a distinct cause of action and the statute of limitations begins to run against each instalment from the time it becomes due, that is, from the time when an action might be brought to recover it. FSM Dev. Bank v. Chuuk Fresh Tuna, Inc., [2009] FMSC 14; 16 FSM Intrm. 335, 338 (Chk. 2009).

Banks and Banking; Statutes of Limitation
When the statute of limitations has expired on all loan instalment payments that became due before July 20, 2001 and when only two instalment payments were due after that date, the lender is, as a matter of law, entitled to judgment for only those two payments. FSM Dev. Bank v. Chuuk Fresh Tuna, Inc., [2009] FMSC 14; 16 FSM Intrm. 335, 338 (Chk. 2009).

Civil Procedure  Summary Judgment
When a party's motion for summary judgment has been denied as a matter of law and it appears that the nonmoving party is entitled to judgment as a matter of law, the court may grant summary judgment to the nonmoving party in the absence of a cross motion for summary judgment if the original movant has had an adequate opportunity to show that there is a genuine issue and that its nonmoving opponent is not entitled to judgment as a matter of law. FSM Dev. Bank v. Chuuk Fresh Tuna, Inc., [2009] FMSC 14; 16 FSM Intrm. 335, 338 (Chk. 2009).

Civil Procedure  Summary Judgment
When a movant has been denied summary judgment because it was, as a matter of law, barred by the statute of limitations, the non-movant is entitled to summary judgment that the applicable statute of limitation bars the movant's recovery of the other unpaid loan instalment payments. FSM Dev. Bank v. Chuuk Fresh Tuna, Inc., [2009] FMSC 14; 16 FSM Intrm. 335, 338 (Chk. 2009).

Debtors' and Creditors' Rights  Secured Transactions
If a security interest has been perfected, the secured party will, by virtue of a judgment, be entitled to foreclose. This is a post-judgment remedy and the secured party may also have other post-judgment remedies available to it. FSM Dev. Bank v. Chuuk Fresh Tuna, Inc., [2009] FMSC 14; 16 FSM Intrm. 335, 339 (Chk. 2009).

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COURT'S OPINION

READY E. JOHNNY, Associate Justice:

This comes before the court on plaintiff FSM Development Bank's motion for summary judgment, filed November 25, 2008; defendant Chuuk Fresh Tuna's opposition, filed January 15, 2009; and the bank's reply, filed January 23, 2009.

On February 2, 2009, the court notified the parties that the presiding judge had, as Chuuk Attorney General, been involved in negotiations between Chuuk Fresh Tuna, Inc. and the National Fisheries Corporation, but had not been involved with the subject matter of this litigation, and invited the parties to submit their views by February 20, 2009, on whether the judge should continue to preside over this matter. On February 17, 2009, the plaintiff stated that it had no objection. The defendant made no statement. The court then proceeded to rule on the pending motion. 4 F.S.M.C. 124(5).

The motion is granted in part and judgment will be entered in the plaintiff's favor for $10,340.23. The court's reasons follow.

I. BACKGROUND

On May 22, 1995, Chuuk Fresh Tuna, Inc. ("CFT") borrowed $200,000 from the FSM Development Bank. Its promissory note for $200,000 at 7% interest, as amended by a September 21, 1995 addendum, required CFT to pay the bank $3,410 on the tenth of every month, starting October 10, 1995 and ending September 10, 2001, when the promissory note matured. To secure its $200,000 loan, CFT, on November 15, 1995, mortgaged its blast freezer to the bank. CFT's last payment on the note was on March 4, 1998.

The bank filed this case on July 20, 2007. On November 5, 2007, it amended its complaint. It seeks $282,631.79 due, as of July 12, 2007, on CFT's May 22, 1995 promissory note, with interest accruing thereafter at the rate of $32.54 per day, and to foreclose the bank's chattel mortgage on CFT's blast freezer. On April 30, 2008, CFT filed its answer, raising as its affirmative defenses: the statute of limitations, laches, and pending accord and satisfaction.

The bank now seeks summary judgment on both its promissory note cause of action and foreclosure on its blast freezer chattel mortgage. It asks for $298,720.09 principal and interest as of November 17, 2008; per diem interest accruing thereafter at the rate of $32.54; $169.03 in costs; reasonable attorney's fees; 9% interest post-judgment; and foreclosure on the blast freezer chattel mortgage.

II. ANALYSIS

A court must deny a summary judgment motion unless, viewing the facts presented and inferences made in the light most favorable to the nonmoving party, it finds that there is no genuine issue as to any material fact and the that moving party is entitled to judgment as a matter of law. Luzama v. Ponape Enterprises Co., [1995] FMSC 11; 7 FSM Intrm. 40, 48 (App. 1995). The movant bears the burden of showing a lack of triable issues of fact. Nanpei v. Kihara, [1995] FMSC 49; 7 FSM Intrm. 319, 323 (App. 1995). A summary judgment movant must go forward not only on its allegations but also on the nonmovant's affirmative defenses, since the burden of demonstrating that no triable fact issues exist encompasses affirmative defenses as well as the movant's own factual allegations. FSM Social Sec. Admin. v. Fefan Municipality, [2007] FMSC 4; 14 FSM Intrm. 544, 546 (Chk. 2007).

It is undisputed that, with accrued interest, $298,720.09 was due on the CFT loan as of November 17,2008. It is also undisputed that a chattel mortgage on CFT's blast freezer secured CFT's indebtedness to the bank.

CFT's affirmative defense of accord and satisfaction negotiations being underway fails since no accord and satisfaction has been agreed to; in other words, the negotiations were not successful. CFT's laches defense fails because the equitable doctrine of laches cannot be invoked when a party has failed to act properly or is said to have "unclean hands" regarding the litigation's subject matter, Kosrae v. Skilling, [2003] FMSC 2; 11 FSM Intrm. 311, 318 (App. 2003); Nahnken of Nett v. Pohnpei, [1996] FMSC 3; 7 FSM Intrm. 485, 491 (App. 1996); Ponape Transfer & Storage v. Federated Shipping Co., [1987] FMSC 14; 3 FSM Intrm. 174, 178 (Pon. 1987), and the borrower, CFT, has had the use of the blast freezer the whole time since 1998 without making any payment on the loan.

The statutory limitation period on the breach of contract claim for an unpaid bank loan is "six years after the cause of action accrues," 6 F.S.M.C. 805 (catchall statute of limitation), since a breach of contract cause of action, or an unpaid bank loan, is not covered in the specific limitations periods set forth in FSM Code, Title 6, sections 801 to 804. A cause of action accrues, and the statute of limitations begins to run, when the plaintiff could have first maintained the action to a successful conclusion. Skilling, 11 FSM Intrm. at 315.

When a note, such as the CFT promissory note, is payable in instalments, each instalment is a distinct cause of action and the statute of limitations begins to run against each instalment from the time it becomes due, that is, from the time when an action might be brought to recover it. Waguk v. Kosrae Island Credit Union, 6 FSM Intrm. 14, 17 (App. 1993). The statute of limitations has therefore expired on all CFT loan instalment payments that became due before July 20, 2001 (six years before the bank filed suit).

Only two $3,410 instalment payments were due after that date  one on August 10, 2001, and the other on September 10, 2001. That CFT owes the bank these two instalment payments is undisputed. The bank is entitled to judgment for these two payments as a matter of law. Accordingly, judgment will be entered for the bank against CFT for $6,820 plus $3,623.66 in accrued interest (as of February 26, 2009) on those two instalments. The total is $10,443.66.

Thus, the bank's summary judgment motion is thus granted in part (for the August and September 2001 instalments and accrued interest thereon) and denied in part (for all other instalments) as a matter of law. When a party's motion for summary judgment has been denied as a matter of law and it appears that the nonmoving party is entitled to judgment as a matter of law, the court may grant summary judgment to the nonmoving party in the absence of a cross motion for summary judgment if the original movant has had an adequate opportunity to show that there is a genuine issue and that his nonmoving opponent is not entitled to judgment as a matter of law. Western Sales Trading Co. (Phils) v. B & J Corp., [2006] FMSC 29; 14 FSM Intrm. 423, 425 (Chk. 2006); Phillip v. Marianas Ins. Co., [2004] FMSC 21; 12 FSM Intrm. 464, 470 (Pon. 2004); Truk Continental Hotel, Inc. v. Chuuk, [1994] FMSC 35; 6 FSM Intrm. 310, 311 (Chk. 1994). CFT is therefore entitled to summary judgment that the applicable statute of limitation bars the bank's recovery of the other unpaid loan instalment payments.

Since the bank is obtaining a judgment on the last two instalments on CFT's promissory note, it is entitled, as per the promissory note, to reasonable attorney's fees and costs. The costs sought, $169.03, for service of process and deposition transcripts, are reasonable and will be awarded. The bank is also entitled to reasonable attorney's fees. The bank shall file and serve its attorney's fees request by March 27, 2009.

The bank also asks that its security interest in the blast freezer be foreclosed. The bank claims its security interest in the blast freezer has been perfected by its compliance with the Secured Transactions Act, FSM Code, Title 33, chapter 10. If the security interest is perfected, the bank will, by virtue of this judgment, be entitled to foreclose. This is a post-judgment remedy. The bank also has other post-judgment remedies available to it against CFT. The bank shall file and serve its proposal for post-judgment procedure by March 27, 2009.

III. CONCLUSION

The FSM Development is granted summary judgment against Chuuk Fresh Tuna, Inc. for $10,443.66 plus $169.03 in costs and the rest of its monetary claim against Chuuk Fresh Tuna, Inc. are denied. The clerk shall enter judgment accordingly. The bank shall file and serve, by March 27, 2009, its attorney's fees request and its proposal about foreclosure on Chuuk Fresh Tuna, Inc.'s blast freezer and other post-judgment remedies.

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