Gallen v Moylan's Insurance Underwriters (FSM) Inc [2017] FMSC 45; 21 FSM R. 380 (App. 2017) (1 November 2017)

FSM SUPREME COURT APPELLATE DIVISION

APPEAL CASE NO. P2-2015
(Civil Action No. 2014-017)

JAYLEEN GALLEN, )
)
Appellant, )
)
vs. )
)
MOYLAN’S INSURANCE UNDERWRITERS )
(FSM) INC., )
)
Appellee. )
__________________________________________ )

OPINION

Argued: August 10, 2017
Decided: November 1, 2017

BEFORE:

Hon. Dennis K. Yamase, Chief Justice, FSM Supreme Court
Hon. Larry Wentworth, Associate Justice, FSM Supreme Court
Hon. Camillo Noket, Specially Assigned Justice, FSM Supreme Court*

*Chief Justice, Chuuk State Supreme Court, Weno, Chuuk

APPEARANCES:

For the Appellant: Salomon M. Saimon, Esq.
Micronesia Legal Services Corporation
P.O. Box 129
Kolonia, Pohnpei FM 96941

For the Appellee: Kasio Mida, Jr., Esq.
Ramp & Mida Law Firm
P.O. Box 1480
Kolonia, Pohnpei FM 96941

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HEADNOTES

Appellate Review Ä Civil Cases Ä Abuse of Discretion; Judgments Ä Relief from Judgment
An appellate court’s review of a trial court’s grant or denial of a Rule 60(b)(1) motion focuses on whether there was an abuse of discretion. An abuse of discretion occurs when 1) the court’s decision is clearly unreasonable, arbitrary, or fanciful; 2) the decision is based on an erroneous conclusion of law; 3) the court’s findings are clearly erroneous; or 4) the record contains no evidence on which the court rationally could have based its decision, and such an abuse must be unusual and exceptional. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 383-84 (App. 2017).

Appellate Review Ä Civil Cases Ä Factual Findings
A trial court’s findings are presumptively correct, and are reviewed using the clearly erroneous standard. When trial court findings are alleged to be clearly erroneous, the appellate court can find reversible error only: 1) if the trial court findings were not supported by substantial evidence in the record; or 2) if the trial court’s factual finding was the result of an erroneous conception of the applicable law; or 3) if, after reviewing the entire body of the evidence and construing the evidence in the light most favorable to the appellee, we are left with a definite and firm conviction that a mistake has been made. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 384 (App. 2017).

Appellate Review Ä Civil Cases Ä De Novo
The appellate court reviews issues of law de novo. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 384 (App. 2017).

Civil Procedure Ä Pleadings
No rule requires a defendant to wait for any specified time period before answering a complaint. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 384 (App. 2017).

Civil Procedure Ä Service of Process

The failure to make proof of service of process does not affect the validity of the service, and any defense of insufficiency of process, or insufficiency of service of process is waived if not made in the answer or in a Rule 12(b) motion to dismiss made before the answer. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 384 (App. 2017).

Judgments Ä Relief from Judgment
A party’s failure to proffer adequate evidence to identify where the judgment amount was inaccurate, fails to persuade that the party was entitled to relief from that judgment. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 385 (App. 2017).

Contracts Ä Recision
When parties bind themselves by their lawful contracts, courts are usually unable to alter these agreements even if they later seem unfair to one of the parties. Generally, a contract’s terms determine when commissions are computed and paid. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 385 (App. 2017).

Judgments Ä Relief from Judgment
Rule 60(b)’s purpose is to provide the trial court with a tool for navigating between the conflicting principles that litigation must be brought to an end and that justice be done. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 385 (App. 2017).

Judgments Ä Relief from Judgment Ä Grounds
Under Civil Rule 60(b)(1), the trial court may relieve a party from a final judgment based on mistake, inadvertence, surprise, or neglect. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 385 (App. 2017).

Judgments Ä Relief from Judgment; Judgments Ä Stipulated
Stipulated judgments, while they are judicial acts, also have many attributes of voluntarily-undertaken contracts, and when the parties have made a freely calculated, deliberate choice to submit to an agreed upon judgment rather than seek a more favorable litigated outcome (or risk a less favorable litigated outcome), the burden under Rule 60(b) is probably more formidable than had they litigated and lost. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 386 (App. 2017).

Judgments Ä Relief from Judgment
When the movant’s evidence that the judgment amount was a mistake was inadequate, the trial court’s denial of her Rule 60(b)(1) motion was not an abuse of discretion, since one of the basic tenets of our system of jurisprudence is that of finality of judgments. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 386 (App. 2017).

Remedies Ä Restitution
The unjust enrichment doctrine cannot be applied when there is an enforceable contract between the parties. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 386 (App. 2017).

Judgments Ä Relief from Judgment
Even when the unjust enrichment remedy is otherwise available to a judgment-debtor claiming an inaccurate judgment amount, she would still need to first prevail on her Rule 60(b)(1) motion (based on mistake), before the unjust enrichment doctrine could become a viable remedy. Gallen v. Moylan’s Ins. Underwriters (FSM) Inc., 21 FSM R. 380, 386 (App. 2017).

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C

COURT’S OPINION

LARRY WENTWORTH, Associate Justice:

This appeal is from the trial division’s March 4, 2015 order that denied Jayleen Gallen’s motion to set aside a stipulated money judgment whose amount she claimed may have been miscalculated. That stipulated judgment was for funds that Gallen had fraudulently converted from her employer, Moylan’s Insurance Underwriters (FSM) Inc. ("Moylan’s"). Gallen claims the trial court abused its discretion because the judgment amount was inaccurate and Moylan’s was thereby unjustly enriched. We hold that there was no abuse of discretion or unjust enrichment.

I. PROCEDURAL BACKGROUND

On April 9, 2014, Moylan’s filed a complaint alleging that Gallen had converted $26,159.95 during her thirteen-month tenure with Moylan’s, where she had worked as an independent contractor subagent selling life insurance. This sum represented commissions and marketing incentives that Moylan’s had paid Gallen on policies she had supposedly sold. Moylan’s later discovered that those policyholders either did not exist or were persons who had not sought insurance coverage. Moylan’s, relying on these policies’ authenticity, had paid Gallen commissions totaling $25,557.95 and $602 in marketing incentives.

Gallen, despite Moylan’s counsel’s repeated suggestion that she obtain counsel, chose to represent herself and to readily admit her wrongdoing. On April 17, 2014, Moylan’s attorney prepared an answer, filed by Gallen, wherein she admitted her liability and all the complaint’s allegations. On June 26, 2014, the parties jointly filed a stipulated motion for a judgment on the pleadings, in which Gallen again admitted the allegations, reaffirmed her decision to forgo counsel, and acknowledged the $26,159.95 debt. The trial court entered the stipulated judgment the same day.

On August 12, 2014, Moylan’s filed a motion for an order in aid of judgment. Gallen then obtained counsel. Moylan’s motion was not heard since Gallen moved, under Rule 60(b)(1), to set aside the judgment and withdraw her answer. She questioned whether she had been credited for commissions to which she was purportedly entitled on about 24 Moylan’s policies that she had legitimately sold. Gallen claims that these genuinely earned commissions were not factored into the judgment amount.

The trial court denied her motion to set aside the judgment. Moylan’s Ins. Underwriters (FSM) Inc. v. Gallen, 20 FSM R. 3 (Pon. 2015). Gallen timely appealed.

II. ISSUES ON APPEAL

Gallen contends (1) that the judgment is infirm because her answer to Moylan’s complaint was filed the same day and because there was no affidavit showing proof of service, (2) that the amount of the money judgment against her was inaccurate so the trial court abused its discretion when it denied her motion to set the judgment aside, and (3) that leaving this judgment in place unjustly enriches Moylan’s.

III. STANDARDS OF REVIEW

Our review of a trial court’s grant or denial of a Rule 60(b)(1) motion focuses on whether there was an abuse of discretion. Panuelo v. Amayo, 12 FSM R. 365, 372 (App. 2004). An abuse of discretion occurs when (1) the court’s decision is clearly unreasonable, arbitrary, or fanciful; (2) the decision is based on an erroneous conclusion of law; (3) the court’s findings are clearly erroneous; or (4) the record contains no evidence on which the court rationally could have based its decision, Arthur v. FSM Dev. Bank, 16 FSM R. 653, 657-58 (App 2009), and such an abuse must be unusual and exceptional, Simina v. Kimeou, 16 FSM R. 616, 619 (App. 2009). We will not merely substitute our judgment for the trial court’s. Id.

Gallen submits that the trial court’s denial of her motion was based on clearly erroneous findings.

A trial court’s findings are presumptively correct. We review findings of fact using the clearly erroneous standard. When trial court findings are alleged to be clearly erroneous, we can find reversible error only: 1) if the trial court findings were not supported by substantial evidence in the record; or 2) if the trial court’s factual finding was the result of an erroneous conception of the applicable law; or 3) if, after reviewing the entire body of the evidence and construing the evidence in the light most favorable to the appellee, we are left with a definite and firm conviction that a mistake has been made.

George v. Albert, 17 FSM R. 25, 30 (App. 2010) (citations omitted). In order "’[t]o be clearly erroneous, a decision must strike us as more than just maybe or probably wrong; it must . . . strike wronh with the fohe force of a five-week-old unrefrigerated dead fish.’" Smith v. Nimea, 19 FSM R. 163, 173 (App. 2013) (quoting Parts & Elec. Motors, Inc. v. Sterling Elec., Inc., 866 F.2d 228, 233 (7th Cir. 1988)).

Finally, Gallen argues that the trial court relied on the wrong law in determining the judgment amount. We review issues of law de novo. Nanpei v. Kihara, 7 FSM R. 319, 323-24 (App. 1995).

IV. ANALYSIS

A. Service of Process and Gallen’s Answer

Gallen contends that the judgment should have been vacated as infirm because she filed her answer the same day the complaint was served and the rules give a defendant twenty days to answer and because no affidavit was filed showing the service of the complaint and summons (service of process) on her.

We summarily reject this contention. While a plaintiff may seek a default judgment if a defendant has not answered (or otherwise defended) within twenty days of the service of process, see FSM Civ. R. 4(b), no rule requires a defendant to wait for that, or any other, specified time period before answering a complaint. Since the "[f]ailure to make proof of service [of process] does not affect the validity of the service," FSM Civ. R. 4(g); see also Medabalmi v. Island Imports Co., 10 FSM R. 32, 34 (Chk. 2001); National Fisheries Corp. v. New Quick Co., 9 FSM R. 120, 124-25 (Pon. 1999), and since any defense of "insufficiency of process, or insufficiency of service of process is waived" if not made in the answer or in a Rule 12(b) motion to dismiss made before the answer, FSM Civ. R. 12(h)(1); see also Lee v. Lee, 13 FSM R. 252, 257 (Chk. 2005); Kosrae v. Worswick, 9 FSM R. 536, 539 (Kos. 2000), Gallen’s answer makes this contention meritless.

B. Alleged Erroneous Judgment Amount

Gallen asserts that the trial court abused its discretion when it denied her motion to set aside the judgment. She contends the stipulated judgment amount was erroneous because it failed to take into account, or setoff, the legitimate commissions on actual life insurance policies sold, to which her employment contract entitled her. Despite the spreadsheet affixed to Moylan’s complaint, Compl. Ex. A at 6-21 (Apr. 9, 2014), which listed the fictitious policies, Gallen failed to identify a fixed amount for commissions due her. She did not proffer any evidence to bolster her argument that the judgment did not setoff the commissions to which she was entitled.

Noting this, the trial court commented: "no further evidence was produced to support Gallen’s claim that the Judgment amount was inaccurate." Gallen, 20 FSM R. at 6. Except for marking the spreadsheet to note which policies were fabricated, Gallen never adduced evidence of the legitimate commissions she had earned, but for which she had neither been paid nor credited. She merely asserted a "concern" that these amounts had not been setoff in calculating the judgment amount. Gallen’s failure to proffer adequate evidence to identify uncredited, legitimate commissions earned during her employment, thus fails to persuade. See Congress v. Pacific Food & Servs., Inc., 18 FSM R. 76, 77 (App. 2011).

Moylan’s asserts that some commissions were factored into the judgment amount. Moylan’s also argues that even if Gallen had calculated the uncredited or unpaid commissions earned on genuine policies and claimed a fixed amount, her termination was for cause (based on fraud) constituted a material breach of her employment contract, justifying its nonperformance. Regardless, Moylan’s counsel, during oral argument, acknowledged that if any legitimately earned commissions came due, they could be setoff against the judgment. Thus, we do not have to decide this point.

When parties bind themselves by their lawful contracts, courts are usually unable to alter these agreements even if they later seem unfair to one of the parties. Generally, a contract’s terms determine when commissions are computed and paid.

The "Commission Schedule" in Gallen’s employment contract indicates that after a policy was sold, a 50% commission was to be paid during the policy’s first year and lesser amounts (12% to 2%) in years two through ten). Compl. Ex. A at 5 (Apr. 9, 2014). The contract provides that the "[c]ommission is payable monthly upon receipt of insured’s premium payment," id., and while Subsection (c) states that "[t]his agreement may be terminated with or without cause," id., no contract provision speaks to an agent’s post-termination right to commissions. Since the employment agreement is silent about whether an agent who makes sales during the agent’s tenure is able to receive commissions based on those sales after the agent has left Moylan’s employ, we can offer no conclusion about what commissions were earned and credited.

Gallen is vague about what amounts may be due her. Since the order in aid of judgment hearing was never held, Gallen never provided evidence showing, with the requisite particularity, any amount due her or pursued a setoff. Her evidence was inadequate, calculations were lacking, and there was no contract provision concerning post-termination remuneration. The trial court’s findings were therefore not clearly erroneous.

C. Civil Rule 60(b)(1)

Rule 60(b)’s purpose is to provide the trial court with a tool for navigating between the conflicting principles that litigation must be brought to an end and that justice be done. Mid-Pacific Constr. Co. v. Senda, 7 FSM R. 129, 133 (Pon. 1995). Under Civil Rule 60(b)(1), the trial court may relieve a party from a final judgment based on mistake, inadvertence, surprise, or neglect. None of these provide Gallen relief in the present case.

On April 17, 2014, Gallen filed her answer, admitting to all allegations set forth in the complaint and acknowledging a $26,159.95 debt to Moylan’s. On June 25, 2014, Gallen and Moylan’s stipulated to a judgment on the pleadings, in which Gallen, once again, acquiesced to the $26,159.95 amount. Only once post-judgment enforcement proceedings started, did Gallen express some misgiving over the judgment amount. While being deposed on November 6, 2014, Gallen vacillated between reaffirming the $26,159.95 figure as accurate and stating that the amount might be in error. She said she was "not sure." Depo. Tr. at 19 (Nov. 6, 2014). Her uncertainty was whether the $26,159.95 figure credited her with the commissions she claimed were due on 24 legitimate policies she sold for Moylan’s. Gallen failed to cite specific irregularities in not crediting her with these commissions.

[S]tipulated judgments, while they are judicial acts, also have many attributes of voluntarily-undertaken contracts, and when the parties have made a freely calculated, deliberate choice to submit to an agreed upon judgment rather than seek a more favorable litigated outcome (or risk a less favorable litigated outcome), the burden under Rule 60(b) is probably more formidable than had they litigated and lost.

Farata v. Punzalan, 11 FSM R. 175, 178 (Chk. 2002). Gallen did not meet that burden. Mere misgivings hardly rise to a level warranting the relief sought, namely that the whole judgment be set aside because the judgment amount was mistaken. Given the inadequacy of Gallen’s evidence that that amount was a mistake, we cannot rule that the trial court’s denial of her Rule 60(b)(1) motion was an abuse of discretion. Since "[o]ne of the basic tenets of our system of jurisprudence is that of finality of judgments," Ehsa v. FSM Dev. Bank, 20 FSM R. 498, 507 (App. 2016), and since Gallen did not provide any evidence that the judgment should not be final, the trial court did not abuse its discretion.

D. Unjust Enrichment

Gallen also claims, that since the judgment did not account for commissions owed her, Moylan’s should, under an unjust enrichment theory, be required to disgorge those funds. The unjust enrichment doctrine cannot be applied when there is an enforceable contract between the parties. See Ponape Island Transp. Co. v. Fonoton Municipality, 13 FSM R. 510, 515 (App. 2005); Johnny v. Occidental Life Ins., 19 FSM R. 350, 360 (Pon. 2014). Because of the employment contract between the parties, Gallen cannot avail herself of this equitable remedy.

But even if the unjust enrichment remedy were otherwise available to her, Gallen would still have needed to first prevail on her Rule 60(b)(1) motion (based on mistake), before the unjust enrichment doctrine could become a viable remedy. As set forth above, her arguments in that vein fail to persuade.

V. CONCLUSION

Gallen’s challenge to the sufficiency of process is meritless. The record is devoid of facts that the judgment amount was inaccurate. Gallen failed to proffer adequate evidence of mistake to support relief from judgment. Accordingly, the trial court did not abuse its discretion by denying her Rule 60(b)(1) motion. Finally, relief for unjust enrichment is unavailable, not only because of the existence of a Gallen’s employment contract but also because this remedy would be contingent upon a grant of relief from the judgment. It thus also fails.

ACCORDINGLY, we hereby affirm the trial court’s March 4, 2015 Order Denying Motion to Set Aside the Judgment.

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