FSM Development Bank v Carl [2018] FMSC 27; 21 FSM R. 640 (Pon. 2018) (9 July 2018)

FSM SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 1996-060

FSM DEVELOPMENT BANK, )
)
Plaintiff, )
)
vs. )
)
YOSILYN CARL, Interim Administrator of the Estate )
of Linda Carl, and the ESTATE OF YOSHIRO CARL, )
)
Defendants. )
_______________________________________________ )

DENYING STATEMENT OF LEGAL SUPPORT

Dennis K. Yamase
Chief Justice

Decided: July 9, 2018

APPEARANCES:

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

For the Defendant: Yoslyn G. Sigrah, Esq.
(Y. Carl) P.O. Box 3018
Kolonia, Pohnpei FM 96941

* * * *

HEADNOTES

Civil Procedure; Courts
In the interest of judicial economy, efficiency, and past precedent, the FSM Supreme Court can, in appropriate cases, request that parties submit a draft order for its consideration. The court may or may not, at its discretion, adopt the contents, or parts of the contents, of the draft order, in order to formulate a decision with a legal basis, based on legal reasoning. FSM Dev. Bank v. Carl, 21 FSM R. 640, 642 (Pon. 2018).

Civil Procedure; Courts
An order is not void simply because it was prepared by a litigant and signed by the court rather than drafted by the court itself. FSM Dev. Bank v. Carl, 21 FSM R. 640, 642 (Pon. 2018).

Debtors’ and Creditors’ Rights; Credit Life Insurance
When a borrower’s credit life insurance policy was for a four-year term and expired about eighteen years before the borrower’s death, the claim for insurance coverage to cover the borrower’s debt is invalid. FSM Dev. Bank v. Carl, 21 FSM R. 640, 642-43 (Pon. 2018).

Domestic Relations Probate; Property Mortgages
The Pohnpei State Mortgage Law provides that a deceased mortgagor’s heirs and devisees take subject to a mortgage. FSM Dev. Bank v. Carl, 21 FSM R. 640, 643 (Pon. 2018).

Banks and Banking; Debtors’ and Creditors’ Rights; Property Mortgages
FSM Development Bank loans that are determined to be no longer collectable are subject to write-off, but when the mortgaged parcel securing the loan is still generating income, in the form of monthly rent, the loan is still deemed to be capable of being paid off. FSM Dev. Bank v. Carl, 21 FSM R. 640, 643-44 (Pon. 2018).

Banks and Banking; Debtors’ and Creditors’ Rights
A borrower’s death does not automatically make an FSM Development Bank loan subject to a write-off. Rather, the death is only one criteria to be considered. FSM Dev. Bank v. Carl, 21 FSM R. 640, 644 (Pon. 2018).

Domestic Relations Probate
An administrator is a person appointed by the court to manage the assets and liabilities of an intestate decedent. FSM Dev. Bank v. Carl, 21 FSM R. 640, 644 (Pon. 2018).

Domestic Relations Probate
An estate of a deceased is the property that one leaves after death a dead person’s collective assets and liabilities. FSM Dev. Bank v. Carl, 21 FSM R. 640, 644 (Pon. 2018).

Debtors’ and Creditors’ Rights; Domestic Relations Probate
An administrator of a decedent’s estate is liable to manage the estate, including the decedent’s debts and liabilities financial or pecuniary obligations. A decedent’s debt passes down to her estate’s administrator to manage and settle. FSM Dev. Bank v. Carl, 21 FSM R. 640, 644 & n.9 (Pon. 2018).

* * * *

COURT’S OPINION

DENNIS K. YAMASE, Chief Justice:

I. BACKGROUND

As instructed by the Court during a hearing on January 18, 2018, on February 6, 2018, the plaintiff, FSM Development Bank (herein "FSMDB"), submitted a Proposed Order in this matter. On February 12, 2018, the Defendant Yosilyn Carl entered an Objection to FSMDB’s Proposed Order and Statement of Legal Support to Defendant-Decedent Linda Carl’s and Heirs Position. A response was filed by the FSMDB on March 2, 2018.

II. DISCUSSION

A. Plaintiff’s Proposed Order

In her February 12, 2018 filing, Yosilyn Carl challenges the draft Order submitted by FSMDB, arguing, in summary, that the FSMDB should not be allowed to submit its version of the facts, and objects to the use of certain terms in the draft order. Def.’s Statement of Legal Support at 1-2.

Here, the Court is not bound by the draft Order that was submitted by the plaintiff. The Court may or may not, at its discretion, adopt the contents, or parts of the contents, of the draft order, in order to formulate a decision with a legal basis, based on legal reasoning and analysis. Accordingly, in the interest of judicial economy, efficiency, and past precedent, the Court finds that it can request, in appropriate cases, parties to submit draft orders for its consideration.

Controlling precedent in this Court establishes that an order is not void simply because it was prepared by a litigant and signed by the Court rather than drafted by the Court itself. In re Colony Square Co., 60 B.R. 1003, 1020 (N.D. Ga. 1986); see Fields v. City of Tarpon Springs, [1983] USCA11 1481; 721 F.2d 318, 320-21 (11th Cir. 1983); Hamm v. Members of Bd. of Regents, [1983] USCA11 1067; 708 F.2d 647, 650-51 (11th Cir. 1983).

B. Credit Life Insurance

Yosilyn Carl argues that credit life insurance proceeds can be issued after judgment, even after default judgment. Def.’s Statement of Legal Support at 3. The FSMDB responds by submitting a copy of deposition transcripts of testimony made by Linda Carl on December 19, 1996, and a copy of Linda Carl’s insurance policy, which are attached as Exhibit A to the FSMDB’s response.

The transcript shows that Yoshiro Carl was denied credit life insurance because of a medical condition.^[1] Linda Carl applied, and was granted, credit life insurance coverage, however, the policy was in effect for a period of forty-eight (48) months, from November 28, 1995 to November 28, 1999. There is no evidence that the policy was extended or continued up until Linda Carl’s death in July of 2017.^[2]

Accordingly, since Yoshiro Carl was not eligible for credit life insurance, and Linda Carl’s credit life insurance policy expired approximately eighteen (18) years prior to Linda Carl’s death, the Defendant’s claim for insurance coverage to cover the debt in this matter is invalid.

C. Write-Off under the FSMDB Regulations and Debt Passing to Heirs

The Defendant states that as a result of the death of the borrower, the loan should be written off pursuant to § 7.10.03 o FSMDB Regulation.tion.^[3] Def.’s Statement of Legal Support at 2-3. The FSMDB contends that its security in tderlying loan is the lease and mortgage, and under 41 Pon. Pon. C. § 6-107, the encumbranceain vain valid and appurtenant through future distribution to heirs and devisees.^[4] Pl.’s Response to StatemenLegal Support at 6-7.

Here, although both YoshiYoshiro Carl and Linda Carl have since passed, their estates are being administered by duly appointed representatives, Fred Carl for the estate of Yoshiro Carl, and Yosilyn Carl on behalf of the estate of Linda Carl. The FSMDB’s security for the underlying debt in this matter is the mortgage in question. The Pohnpei State Mortgage Law provides that a deceased mortgagor’s heirs and devisees take subject to a mortgage, 41 Pon. C. § 6-107. FSM Dev. Bank v. Paul, 18 FSM R. 149, 150 (Pon. 2012).

Also, the language of § 7.10.03 of the FSegulation tion states that the death of a borrower is a criteria which should be used to determine whether an account should be mended for a write-off. In support of its response, the FSMDB submits the affidavit of Annf Anna Mendiola, President/CEO, of the FSMDB. Mendiola attests that the debt was never written off, because judgment was entered when Linda Carl was still alive, and that the bank’s Board of Directors did not write-off the loan. Aff. of Anna Mendiola.

Here, the Court will also consider other relevant sections of the FSMDB regulations. § 7.10.01 states that loant ahat are determined to be no longer collectable are subject to write-off.^[5] The facts show that the parcel in quesis still generating income, in the form of monthly rent. Tt. Thus, the loan is still deemed to be capable of being paid off.

The bank’s legal counsel shall advise the bank’s management as to any debts that would qualify under a write-off, pursuant to § 7.10.02.^[6] Also, the bank’s Board of Directors would have the final approval based on the recommendation of the management, under § 7.10.4.^[7] The affidavit of Anna Mendiola states that no write-off was approved by the Board. Aff. of Anna Mendiola.

In the present matter, based on a review of the regulation, the death of the borrower does not automatically make the loan subject to a write-off. Rather, the death is only a criteria to be considered. Because rental payments are still being made by Kazuhiro Fujita, the loan would not be subject to a write-off, because the debt is still capable of being satisfied.^[8]

Finally, Yosilyn Carl contends that the financial obligation of a deceased borrower does not pass down to the borrowers’ survivors. Def.’s Statement of Support at 3. An "administrator" is defined as "A person appointed by the court to manage the assets and liabilities of an intestate decedent." BLACK’S LAW DICTIONARY 18 (2d pocket ed. 2001). An "estate" of a deceased is defined as "The property that one leaves after death; the collective assets and liabilities of a dead person." Id. at 245.

Here, an Order in Civil Action No. 2017-050 entered on January 17, 2018, appointed Yosilyn Carl as the administrator for the estate of Linda Carl. As a result, Yosilyn Carl is liable to manage Linda Carl’s estate, which includes her liabilities and debts.^[9] Therefore, the Court finds that Linda Carl’s debt in this matter passes down to the administrator of her estate to manage and settle.

III. CONCLUSION

The Defendant’s Objection to FSMDB’s Proposed Order and Statement of Legal Support to Defendant-Decedent Linda Carl’s and Heirs Position is reviewed, considered, taken into consideration, and for the aforementioned reasons is HEREBY DENIED.

* * * *

---

^[1] During the deposition, Linda Carl testified that Yoshiro Carl had diabetes, which is why he was denied insurance coverage.

^[2] In FSM Development Bank v. Estate of Manney Setik, Civil Action No. 2007-008 and 2010-006, the defendant claims that the FSMDB applied credit life insurance proceeds ten (10) years after the passing of Manney Setik. The FSMDB argues that the Setik matter is factually dissimilar from the present matter, because Manney Setik died during the term of the loan, however, the certificate of death was submitted several years after judgment was entered.

^[3] § 7.10.03: "The following criteria should be used in determining whether an account should be recommended for write-off: (A). When a borrower is deceased . .㼠."
^[4] 41 Pon. C. § 6-107:

Whenproperty which is subject to a mortgage passes by successioession or devise, the successor or devisee is not entitled to have the dec’s personal representesentative satisfy the mortgage out of the decedent’s estate unless there is an express provision in the decedent’s will that his estate is to satisfy the mortgage. Unless the mortgage is so satisfied out of the decedent’s estate the heir or devisee takes the property subject to the mortgage.

^[5] § 7.10.01: "The Ba to write-oite-off those loans where collection is determined to be no longer possible. The file shall be removed from the charged-off category to another group of written-off loans."

^[6] § 7.10.02: "The Bank’s legal counsel shall advise the management with regards to event leading to a loan write-off for consideration. It shall take the form of a resume of experience with the account in question, summary of steps taken to collect arrearage, shortfall on realization, possibility of further recover after write-off, etc."

^[7] § 7.10.4: The Board shall have the final approval for accounts to be written-off considering the recommendation of the Bank’s President/CEO.

^[8] Kazuhiro Fujita is subject to a Writ of Garnishment to make monthly payments to the FSMDB for rental space subject to the mortgage in question.

^[9] Liability is defined as "A financial or pecuniary obligation." BLACK’S LAW DICTIONARY 416 (2d pocket ed. 2001).