Bank of Hawaii v Dison [2012] FMSC 5; 18 FSM Intrm. 161 (Pon. 2012) (20 January 2012)

FSM SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 2009-002

BANK OF HAWAII,
Plaintiff,

vs.

WILLIAM DISON,
Defendant.
___________________________

ORDER IN AID OF JUDGMENT

Dennis K. Yamase
Associate Justice

Hearing: September 19, 2011
Decided: January 20, 2012

APPEARANCES:

For the Plaintiff: Michael J. Sipos, Esq.

P.O. Box 2069

Kolonia, Pohnpei FM 96941

For the Defendant: Salomon M. Saimon, Esq.

Micronesian Legal Services Corporation

P.O. Box 129

Kolonia, Pohnpei FM 96941

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HEADNOTES

Debtors' and Creditors' Rights - Orders in Aid of Judgment
Funds received from U.S. military retirement and U.S. Social Security benefits are not the type of property that qualify as exemptions under 6 F.S.M.C. 1414 because the U.S. statutes have no force and effect outside of U.S. territory. Bank of Hawaii v. Dison, [2012] FMSC 5; 18 FSM Intrm. 161, 164 (Pon. 2012).

Attachment and Execution; Debtors' and Creditors' Rights - Orders in Aid of Judgment
A writ of execution levied on an account in the Bank of Guam, Pohnpei branch, was directed toward funds held in a local bank, authorized to conduct banking transactions under FSM law, and did not assign, garnish, attach, execute, or levy on U.S. Social Security or military retirement benefits, but executed on funds on deposit in the FSM. Bank of Hawaii v. Dison, [2012] FMSC 5; 18 FSM Intrm. 161, 164 (Pon. 2012).

Debtors' and Creditors' Rights - Orders in Aid of Judgment
Since the statutory exemptions on judicial enforcement of judgments pertaining to U.S. Social Security and U.S. military retirement benefits are provided for by U.S. statutes and the judicial enforcement of FSM judgments is governed by FSM statutes, a judgment-debtor whose income is U.S. Social Security and U.S. military retirement benefits and who has the ability to pay will be ordered to make monthly payments toward the satisfaction of the judgment. Bank of Hawaii v. Dison, [2012] FMSC 5; 18 FSM Intrm. 161, 164 (Pon. 2012).

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COURT'S OPINION

DENNIS K. YAMASE, Associate Justice:

Hearing on Plaintiff Bank of Hawaii's (BOH) Motion for Order in Aid of Judgment filed on April 4, 2011, was held on September 19, 2011, at 9:30 a.m. Present were Michael J. Sipos, Esq., appearing on behalf of BOH and Salomon M. Saimon, Esq. appearing on behalf of Defendant William Dison (Dison). Dison also appeared and testified. Both counsel presented their arguments. The Court received testimony from Dison pertaining to his ability to pay the debt. Following the hearing, the Court issued an Order requiring the parties to submit written briefs on the issue of whether United States (U.S.) law governing U.S. military retirement benefits and U.S. Social Security payments can be used to pay an Order in Aid of Judgment issued by this Court. On October 10, 2011, Dison submitted his Brief; Motion to Return Seized Funds. On October 11, 2011, BOH filed its Brief on Exemptions for Orders in Aid of Judgment.

BOH submits that Dison is able to make monthly payments out of the excess income he testified to having. It does not matter that some of his income originates as benefits paid by from United States (U.S.) Social Security, which are not subject to any form of exemption under FSM law. Once Dison comes into possession of these funds he may use them for any purpose and he may comingle them with the money he obtains from non-exempt income including his U.S. military retirement benefits. Pl. Br. at 4. BOH contends that the enforcement of FSM judgments by this Court is controlled by FSM law. Whether an asset is subject to an exemption from judgment satisfaction under an order issued by this Court is to be decided exclusively by FSM law. Id. at 1. BOH did not provide any specific U.S. statute(s) that would restrict benefits received from U.S. military retirement and Social Security payments from being used to pay an Order in Aid of Judgment issued by this Court.

In his brief, Dison is claiming that funds from U.S. Social Security are not subject to the legal enforcement processes, citing 42 U.S.C. § 407(b). Dison fr claims thas that U.S. military retirement benefits are subject to protection from creditors, citing 31 Am. Jur. 2dExemptions§ 210.

1. Dison obtained a consumer loan from BOH on or about May 23, 2000.

2. Dison executed a Promissory Note with BOH on May 23, 2000 for a loan financed by BOH in the amount of $18,263.00, plus finance charges in the amount of $8,549.80, for the total principal sum of $26,812.80.

3. A Consumer Loan Application completed by Dison on or about May 23, 2000, indicates that he was seeking to refinance an existing loan due to unemployment. As "Other Income," Dison listed his U.S. military retirement benefits in the amount of $1,100 a month.

4. Dison made payments toward the loan up to January, 2003, and stopped making payment when the bank's Pohnpei branch closed.

5. On June 9, 20009, a Judgment was entered in this case for the principal amount of $12,678.76; accrued interest to November 20, 2008, in the amount of $11,276.82, plus accrued interest from November 20, 2008, to the date of entry of Judgment at $5.56 per day, less credit for any payment received before entry of judgment, for a total judgment amount of $25,067.58.

6. On August 14, 2009, BOH, through a Pohnpei State Public Safety Officer, executed a Writ on Defendant's asset held in an account with Bank of Guam (BOG), Pohnpei Branch for the amount of $1,455.89.

7. There have been changes to Dison's financial circumstances from the period he took out the loan in 2000. At the time Dison took out the loan, he was not receiving U.S. Social Security benefits. Dison is presently receiving U.S. Social Security benefits grossing approximately $700 a month, and netting approximately $590 a month.

8. Dison is also receiving U.S. military retirement benefits in the amount of $1,083 a month.

9. Dison is receiving a total net sum of approximately $1,673.00 a month in U.S. Social Security benefits and U.S. military retirement benefits.

10. Dison's financial obligations include a monthly payment of $200 toward a loan with the Bank of the Federated States of Micronesia (FSM Bank), 97 cents monthly payment toward an account at a military store, an open account at a shoe store, with an estimated balance of $1,000, an open account at Ray & Dors, with an estimated balance of $400 a month, toward food, clothing, and other needs of the family.

11. Dison pays approximately $80 a month for fuel, $100 for electricity, $30 for water.

12. Dison currently holds three (3) traditional titles, creating other obligations that amounts to approximately $1,000, occurring three (3) times a year, resulting in approximately $250 per month in traditional title obligations.

13. Dison's wife has been paying toward the family's home loan approximately $350 a month.

14. Dison's obligations specified above would have left an estimated $1,060.97 remaining from his monthly benefits after regular monthly expenses are paid.

15. Dison testified that he can pay $446.88 each month from the funds left of his benefits after his regular monthly expenses are deducted. He has not informed the Court or the BOH that his expenses have changed since the hearing.

16. The amount of monthly payment to BOH pursuant to the Promissory Note is $446.88 a month.

17. Dison's children are all grown and are not dependent upon him for support.

18. Dison's grandchildren sometimes reside and eat with his family. Dison is not paying for grandchildren's private school tuition.

19. Dison is presently unemployed.

20. Dison's only sources of income come from his U.S. military retirement and U.S. Social Security benefits. Because of the source of income the amount of income does not vary.

Based upon these findings, the Court makes the following determination:

1. The hearing held on September 19, 2011, satisfies the requirements set forth under 6 F.S.M.C. §§ 1nd 1410(1), specifically dlly dealing with notice, hearing, and examination of Dison's ability to pay.

2. BOH met its burden of proof, establishing a sufficient showing that Dison has the present ability to pay under Hadley v. Bank of Hawaii, [1996] FMSC 54; 7 FSM Intrm. 449, 452-53 (App. 1996). Dison did not establish his inability to pay $446.88 a month under 6 F.S.M.C. 1409.

3. The fastest manner in which Dison can reasonably pay the judgment is to resume his previous contractual payment to BOH in the amount of $446.88 a month. Id.

4. In determining the amount in which Dison can reasonably pay the Judgment, the Court allows Dison to retain a portion of his income necessary to provide the reasonable living requirement of himself and his dependents. Id.

5. Section 207 of 42 U.S.C. 407 (U.S. Social Security Act) provides that "the right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment or other legal process, or to the operation of any bankruptcy or insolvency law."

6. U.S. military retirement benefits and rights to veterans' benefits are exempted under 11 U.S.C. § 522, and is govern U.S. law. laws.

7. Funds received from U.S. military retirement and U.S. Social Security benefits are not the typeroperty qualified as exemptions under 6 F.S.M.C. 1415. The U.S. statutes have no force and and effect outside of U.S. territory.

8. The Writ of Execution levied on Dison's account with the Bank of Guam, Pohnpei Branch, on August 14, 2009, for the amount of $1,455.89, was directed toward funds held in a local banking institution, authorized to conduct banking transactions under FSM law and established by the FSM government. The writ did not assign, garnish, attach, execute, or levy on U.S. Social Security or military retirement benefits, but executed on funds on deposit in the FSM.

9. Whereas the statutory exemptions on judicial enforcement of judgment pertaining to U.S. Social Security and U.S. military retirement benefits are provided for by U.S. statutes, the judicial enforcement of FSM judgments is governed by FSM statutes.

Based on the above findings and determination by the Court and pursuant to Title 6, §§ 1409, 1410(1) and, the Cour Court hereby orders the Defendant William Dison to resume his monthly payment of $446.88 to the Plaintiff BOH toward the satisfaction of the Judgmentective on the date of service of this Order. The Defendant dant Dison shall pay over this amount to the counsel for BOH on or before every 3rd of the month, beginning on Friday, February 3, 2012.

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