FSM Development Bank v Talley [2020] FMSC 15; 22 FSM R. 587 (Kos. 2020) (17 June 2020)

FSM SUPREME COURT TRIAL DIVISION
CIVIL ACTION NO. 2018-2003

FSM DEVELOPMENT BANK,
Plaintiff,

vs.

ARTSON S. TALLEY,
Defendant.
___________________________________

ORDER DENYING RELIEF FROM JUDGMENT

Larry Wentworth
Associate Justice

Decided: June 17, 2020

APPEARANCES:

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

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

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HEADNOTES

Judgments - Relief from Judgment; Judgments - Relief from Judgment - Default Judgments
Civil Procedure Rule 60 governs all motions to set aside a judgment or for relief from judgment including default judgments. FSM Dev. Bank v. Talley, 22 FSM R. 587, 592 (Kos. 2020).

Judgments - Relief from Judgment - Time Limits
Under Rule 60(b)(1), (2), or (3), a movant must file the motion for relief from judgment within a reasonable time not to exceed one year from the entry of judgment. Thus, when the movant filed his motion for relief well over a year after the final judgment was entered against him, he is precluded from any relief from judgment on the grounds of mistake, inadvertence, surprise, excusable neglect, newly discovered evidence, fraud, misrepresentation, or other misconduct of an adverse party. FSM Dev. Bank v. Talley, 22 FSM R. 587, 592 (Kos. 2020).

Judgments - Relief from Judgment - Grounds
Relief under Rule 60(b)(6) is reserved only for extraordinary circumstances. It is the grand reservoir of equitable power to do justice in a particular case, subject to the requirement that the provision is applicable only when the basis for relief is different from those enumerated in Rule 60(b) subsections (1) through (5), and to the requirement that extraordinary circumstances exist for justifying relief. FSM Dev. Bank v. Talley, 22 FSM R. 587, 592 (Kos. 2020).

Judgments - Relief from Judgment - Grounds; Judgments - Relief from Judgment - Time Limits
Extraordinary circumstances usually means that the movant himself was not at fault for his predicament, but if there was fault on the movant's part, the usual implication is that there are no extraordinary circumstances. Even then, a motion for relief from judgment under Rule 60(b)(6) must still be filed within a reasonable time. FSM Dev. Bank v. Talley, 22 FSM R. 587, 592 (Kos. 2020).

Judgments - Relief from Judgment - Grounds; Judgments - Relief from Judgment - Time Limits
An allegation of neglect, which, if it were shown to be excusable, would be a ground for relief under Rule 60(b)(1), but when the one-year time limit for Rule 60(b)(1) relief expired long before the defendant filed his motion for relief, the defendant cannot use Rule 60(b)(6) to circumvent the Rule 60(b)(1) time limit. FSM Dev. Bank v. Talley, 22 FSM R. 587, 592 (Kos. 2020).

Attorney and Client; Judgments - Relief from Judgment - Grounds
A client is responsible for his attorney's actions, inactions, or omissions. Rule 60(b) is not meant to relieve a party from its own carelessness and neglect, or from his counsel's carelessness and neglect. FSM Dev. Bank v. Talley, 22 FSM R. 587, 593 (Kos. 2020).

Judgments - Relief from Judgment - Grounds
Rule 60(b) relief is precluded when the injuries complained of result solely from the movant's carelessness or neglect, or from his counsel's carelessness or neglect, except when the neglect itself is excusable under FSM Civil Rule 60(b)(1). FSM Dev. Bank v. Talley, 22 FSM R. 587, 593 (Kos. 2020).

Judgments - Relief from Judgment - Time Limits
When counsel appeared for the defendant four and a half months after the court entered the default judgment and no good reason was shown why a motion for relief from judgment could not have been filed promptly thereafter instead of after eleven more months, the defendant has not shown that a motion for relief from judgment filed fifteen and a half months after judgment was entered (and eleven months after his counsel entered her appearance), was filed within a reasonable time, and, since a Rule 60(b)(6) motion for relief from judgment must be made within a "reasonable time," even if the defendant had shown extraordinary circumstances, Rule 60(b)(6) relief would still be time-barred because the motion was filed too late. FSM Dev. Bank v. Talley, 22 FSM R. 587, 593 (Kos. 2020).

Judgments - Relief from Judgment - Default Judgments
The criteria to be satisfied in order to justify setting aside a default judgment are: 1) whether the default was willful, caused by the defendant's culpable conduct; 2) whether the defendant has a meritorious defense; and 3) whether setting aside the default would prejudice the plaintiff. FSM Dev. Bank v. Talley, 22 FSM R. 587, 593 (Kos. 2020).

Judgments - Relief from Judgment - Default Judgments
To obtain relief from a default judgment, the defendant must have a meritorious defense - a defense that would constitute a complete defense to the action if proven at trial. But when the defendant has failed to set forth a meritorious defense and has exhibited culpable conduct, the defendant will not succeed on a motion to set aside a default judgment. FSM Dev. Bank v. Talley, 22 FSM R. 587, 593 (Kos. 2020).

Civil Procedure - Pleadings - Affirmative Defenses
An affirmative defense is the defendant's assertion of facts and arguments that, if true, will defeat the plaintiff's claim, even if all the allegations in the complaint are true. FSM Dev. Bank v. Talley, 22 FSM R. 587, 593 n.1 (Kos. 2020).

Banking; Civil Procedure - Pleadings - Affirmative Defenses; Judgments - Relief from Judgment - Default Judgments
Section 128, Title 30 grants the FSM Development Bank tax exemption and prohibits it from paying dividends because the bank exists and operates "solely for the benefit of the public." It does not create a private cause of action against the FSM Development Bank, and thus a borrower cannot raise it as an affirmative defense. FSM Dev. Bank v. Talley, 22 FSM R. 587, 594 (Kos. 2020).

Banking; Interest and Usury
Congress created the FSM Development Bank, and gave it the power to lend money either with or without security, and if with security upon such terms as may from time to time seem expedient. The bank's ability to set terms is, of course, limited by the usury statutes. Those statutes prohibit (make usurious) credit transactions that directly or indirectly exceed an annual interest rate of 24%. FSM Dev. Bank v. Talley, 22 FSM R. 587, 594 (Kos. 2020).

Civil Procedure - Pleadings - Affirmative Defenses
An affirmative defense cannot be pled with only a conclusory statement but must, in each instance, be tied to specific factual allegations. FSM Dev. Bank v. Talley, 22 FSM R. 587, 594 (Kos. 2020).

Judgments - Relief from Judgment - Grounds; Judgments - Relief from Judgment - Time Limits
Misrepresentation is a ground for relief under Rule 60(b)(3), and, as such, is time-barred after one year. FSM Dev. Bank v. Talley, 22 FSM R. 587, 594 (Kos. 2020).

Judgments - Relief from Judgment - Default Judgments
To invoke the equitable estoppel doctrine, the proponent must allege that 1) another party made representations or statements; 2) the party reasonably relied upon the representations; and 3) the party will be harmed if estoppel is not allowed. But when the movant does not allege any specific facts that would satisfy these elements, he does not allege a meritorious defense. FSM Dev. Bank v. Talley, 22 FSM R. 587, 594 (Kos. 2020).

Equity - Estoppel; Judgments - Relief from Judgment - Grounds; Judgments - Relief from Judgment - Time Limits
Equitable estoppel (and unclean hands) is based on the other party's alleged misrepresentation or misconduct, this ground for relief can only be sought through Rule 60(b)(3), and that rule, as noted above, has a one-year absolute time limit, and that time limit expired four and a half months before the defendant filed his motion. FSM Dev. Bank v. Talley, 22 FSM R. 587, 594-95 (Kos. 2020).

Contracts - Illegality; Judgments - Relief from Judgment - Default Judgments
The 38 U.S.C. § 5301 ban on assigning U.S. military retirement benefits does not constitute a meritorious defense because 38 U.S.C. § 530a United States statutt tutt is applicable wherever the United States is sovereign, but which has no effect in the sepe separate and distinct sovereignty of therated States of Micronesia. Since there is no similar FSM FSM statute in effect, the defendant's assignment is not an illegal contract. FSM Dev. Bank v. Talley, 22 FSM R. 587, 595 (Kos. 2020).

Contracts - Illegality
To avoid liability under an illegal contract, the party seeking to avoid liability must return the benefit received under the illegal contract; thus, in the case of an illegal loan, a borrower seeking to avoid liability would have to return the loan principal. FSM Dev. Bank v. Talley, 22 FSM R. 587, 595 n.3 (Kos. 2020).

Civil Procedure - Pleadings; Judgments - Relief from Judgment - Default Judgments
When the court must deny a defendant's motion for relief from, or to set aside, the default judgment, the court must also deny his motion to enlarge time to file an answer. FSM Dev. Bank v. Talley, 22 FSM R. 587, 595 (Kos. 2020).

Debtors' and Creditors' Rights - Orders in Aid of Judgment
The court is required by law to hold a hearing on an application for an order in aid of judgment if either party requests one. FSM Dev. Bank v. Talley, 22 FSM R. 587, 595 (Kos. 2020).

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COURT'S OPINION

LARRY WENTWORTH, Associate Justice:

This comes before the court on (1) the Defendant's Motion to Set Aside Default Judgment and Relief from Judgment; Motion to Allow Filing of Defendant's Answer and Affirmative Defenses and to Allow Enlargement of Time, filed April 14, 2020, along with Defendant's Answer to Complaint; Affirmative Defenses; (2) Plaintiff's Request for Hearing, filed April 22, 2020; (3) the plaintiff's Correction of Defendant's Certificate of Service, filed April 30, 2020; and (4) Plaintiff's Opposition to Defendant's Motion to Set Aside Default Judgment and Relief from Judgment; Plaintiff's Opposition to Defendant's Motion to Allow Filing of Defendant's Answer and Affirmative Defenses and to Allow Enlargement of Time, filed May 8, 2020. For the reasons that follow, the defendant's motions are denied and an order in aid of judgment hearing is set.

I.

On October 25, 2020, the plaintiff, the FSM Development Bank, filed its complaint against defendant Artson S. Talley. The bank alleged that on March 18, 2016, Talley had borrowed of $25,718.17 from the bank's Kosrae office at 15% per annum, to be paid back over five years from Talley's U.S. military retirement benefits at the rate of $611.83 a month; that Talley executed a promissory note to that effect and executed an assignment of salary agreement to secure the promissory note; and that, under the assignment of salary agreement, Talley agreed that, if his loan repayments became delinquent by more than 30 days, the bank could declare a default and then it could take $611.83 a month directly from Talley's "salary" - Talley's U.S. military retirement benefits - or from his salary from any later employer.

The bank further alleged that Talley left Kosrae for Guam in June 2016, that sometime thereafter he stopped making payments, and that notices of delinquency were transmitted to him on May 4, 2017 and on later dates. The bank pled two causes of action - breach of contract and enforcement of the assignment of salary agreement. The bank alleged that as of September 28, 2018, Talley owed the bank $26,420.92 in principal and accrued interest and penalties and that interest was accruing at $8.91 a day.

The complaint and summons were served on Talley on October 25, 2018. He did not file an answer or otherwise defend. Talley's default was entered on November 19, 2018. On November 19, 2018, the bank moved for entry of a default judgment against Talley for the outstanding loan principal of $21,054.74; the $5,781.51 in accrued interest (as of November 15, 2018), which would continue to accrue at $8.65 per day until the entry of judgment; and for $25 in costs for service of the complaint and summons.

The court entered a default judgment against Talley on December 17, 2018. On January 4, 2019, the bank moved for a writ of execution to enforce this judgment. The writ was issued on January 9, 2019, to execute on all non-exempt bank accounts that the judgment debtor had at either the Bank of the FSM or the Bank of Guam, up to the amount of %27,138.05. The Bank of the FSM stated that it had no accounts for Artson Talley. The Bank of Guam's return (dated January 14, 2019 and filed January 17, 2019) stated that Talley "does not maintain any account(s) domiciled with Bank of Guam, FSM."

On April 25, 2019, the bank noticed Talley's deposition for May 6, 2019. On April 30, 2019, Yoslyn G. Sigrah filed her notice of appearance on Talley's behalf. The record does not disclose whether the deposition ever occurred. On May 14, 2019, the bank moved for an order in aid of judgment. No opposition was filed and the court did not set a hearing date. On March 12, 2020, the bank renewed its motion for an order in aid of judgment. Amid the covid-19 travel restrictions, the court did not set a hearing date.

On April 14, 2020, Talley moved to set aside the default judgment, and asked that he be allowed to file an answer and assert affirmative defenses. Talley's proposed answer, with affirmative defenses, accompanied his motion. On April 22, 2020, the bank asked that an order in aid of judgment hearing date be set and noted that the Chief Justice's April 3, 2020 Emergency Court Order No. 1 expressly provided that civil hearings or proceedings could be conducted through teleconferencing or video-conferencing and further noted that the needed equipment and software had already been installed and used at the FSM Supreme Court in Kosrae.

On April 30, 2020, the bank filed its "correction" of Talley's certificate of service for his April 14, 2020 filings, showing that those filings had been postmarked as being mailed to (and thus served on) the bank on April 23, 2020 (and backstamped by the post office on April 28, 2020, as received for delivery to the bank's post office box). On May 8, 2020, the bank filed its opposition to Talley's motions. Talley did not file a reply to the bank's oppositions.

II.

Talley contends that he is entitled to relief from the default judgment and should be allowed to file an answer in which he contests the promissory note's legality and the bank's legal ability to issue such a loan. Talley further contends that the assignment of his U.S. military retirement benefits was illegal because they are exempt and nonassignable under 38 U.S.C. § 5301. Talley as that he hahe has good cause to set aside the default judgment because he always intended to file an answer but there was a bren in attorney-client communication that prevented his answer from being filed in time. Tal Talley further contends that a default judgment was improper because the amount sought was not a sum certain and no evidentiary hearing was held.

Talley's proposed affirmative defenses are that the bank is not authorized by statute to make commercial loans with rates as high as 15%; that the loan documents were usurious and unconscionable; that the bank misrepresented or failed to disclose the loan terms; that the bank had unclean hands and estoppel barred its actions; and that, under 30 F.S.M.C. 128, the bank exists, and must operate, solely for the public's benefit. Talley asserts that his affirmative defenses entitle him to a judgment invalidating the loan documents and awarding him punitive damages, attorney's fees, and costs.

III.

Civil Procedure Rule 60 governs all motions to set aside a judgment or for relief from judgment including default judgments. Setik v. FSM Dev. Bank, 21 FSM R. 505, 514 (App. 2018). Under Rule 60(b)(1), (2), or (3), a movant must file the motion within a reasonable time not to exceed one year from the entry of judgment. Ehsa v. FSM Dev. Bank, 20 FSM R. 498, 508 (App. 2016). Since Talley filed his motion on April 14, 2020, well over a year after the final judgment against him was entered on December 17, 2018, Talley is precluded from any relief from judgment on the grounds of mistake, inadvertence, surprise, or excusable neglect, FSM Civ. R. 60(b)(1); newly discovered evidence, FSM Civ. R. 60(b)(2); and fraud, misrepresentation, or other misconduct of an adverse party, FSM Civ. R. 60(b)(3).

That would leave a void judgment, FSM Civ. R. 60(b)(4); a satisfied, released, or discharged judgment, or the reversal or vacation of a prior judgment upon which it was based, or that it is no longer equitable that the judgment should have prospective application, FSM Civ. R. 60(b)(5); or any other reason justifying relief from the judgment's operation, FSM Civ. R. 60(b)(6), as possible grounds that Talley could urge for relief if he had the basis to do so. Talley does not claim that the judgment against him is void - that the court issued the judgment against him without having jurisdiction over either the subject matter or over his person. Nor does he claim that the judgment against him has already been satisfied, released, or discharged; or that it was based on a prior judgment that has been reversed or vacated; or that it is no longer equitable that the judgment should have prospective application (a principle usually not applicable to money judgments).

IV.

That leaves "any other reason justifying relief" from the judgment's operation under Rule 60(b)(6) as a possible avenue of relief. Relief under Rule 60(b)(6) is reserved only for extraordinary circumstances. Farata v. Punzalan, 11 FSM R. 175, 178 (Chk. 2002). It is the grand reservoir of equitable power to do justice in a particular case, subject to the requirement that the provision is applicable only when the basis for relief is different from those enumerated in subsections (1) through (5) of Rule 60(b), and to the requirement that extraordinary circumstances exist for justifying relief. Johnson v. Rosario, 21 FSM R. 7, 12 (Pon. 2016); Amayo v. MJ Co., 10 FSM R. 371, 383 (Pon. 2001). Extraordinary circumstances usually means that the movant himself was not at fault for his predicament, but if there was fault on the movant's part, the usual implication is that there are no extraordinary circumstances. Johnson, 21 FSM R. at 12; Amayo, 10 FSM R. at 383. Even then, a motion for relief from judgment under Rule 60(b)(6) must still be filed within a "reasonable time." Ehsa v. FSM Dev. Bank, 20 FSM R. 498, 508 (App. 2016); FSM Dev. Bank v. Arthur, 15 FSM R. 625, 633 (Pon. 2008).

Talley has not shown that there are any extraordinary circumstances in this case. The only circumstance that he asserts as a ground causing his need for relief is that he always intended to file an answer but there was a breakdown in attorney-client communication that prevented his answer from being filed in time. This is an allegation of neglect, which, if it were shown to be excusable, would be a ground for relief under Rule 60(b)(1), but the one-year time limit for Rule 60(b)(1) relief expired long before Talley filed his motion for relief. Rule 60(b)(6) cannot be used to circumvent the Rule 60(b)(1) time limit. Setik v. FSM Dev. Bank, 21 FSM R. 505, 515 (App. 2018); FSM Dev. Bank v. Christopher Corp., 20 FSM R. 98, 102 (Chk. 2015); FSM Dev. Bank v. Setik, 20 FSM R. 85, 88 (Pon. 2015); FSM Dev. Bank v. Arthur, 15 FSM R. 625, 634 (Pon. 2008).

Nor has Talley shown that the neglect was excusable. Talley does not describe what the circumstances or reasons were that caused the breakdown in attorney-client communication. Regardless, a client is responsible for his attorney's actions, inactions, or omissions. In re Contempt of Fujita, 21 FSM R. 634, 638-39 (Pon. 2018); FSM Dev. Bank v. Christopher Corp., 20 FSM R. 98, 103 (Chk. 2015); Saimon v. Wainit, 18 FSM R. 211, 214 (Chk. 2012); Elymore v. Walter, 10 FSM R. 267, 269 (Pon. 2001) ("clients must be held accountable for the acts or omissions of their attorneys"). Rule 60(b) is not meant to relieve a party from its own carelessness and neglect, or from his counsel's carelessness and neglect. In re Contempt of Jack, 20 FSM R. 452, 459 (Pon. 2016). Rule 60(b) relief is precluded when the injuries complained of result solely from the movant's carelessness or neglect, or from his counsel's carelessness or neglect, except when the neglect itself is excusable under FSM Civil Rule 60(b)(1).

Counsel appeared for Talley four and a half months after the court entered the default judgment. There was no good reason shown why a motion for relief from judgment could not have been filed promptly thereafter, instead of after eleven more months. Talley has not shown that a motion for relief from judgment filed fifteen and a half months after judgment was entered (and eleven months after his counsel entered her appearance), was filed within a reasonable time. Since a Rule 60(b)(6) motion for relief from judgment must be made within a "reasonable time," even if Talley had been able to show extraordinary circumstances, relief under Rule 60(b)(6) would still be time-barred - the motion was filed too late.

V.

But even if Talley had been able to show that extraordinary circumstances existed and that his motion was made within a reasonable time, the court still could not grant him relief from the default judgment. That is because the criteria to be satisfied in order to justify setting aside a default judgment are: 1) whether the default was willful, caused by the defendant's culpable conduct; 2) whether the defendant has a meritorious defense; and 3) whether setting aside the default would prejudice the plaintiff. UNK Wholesale, Inc. v. Robinson, 11 FSM R. 118, 122 (Chk. 2002); see also Western Sales Trading Co. v. Billy, 13 FSM R. 273, 279 (Chk. 2005). To obtain relief from a default judgment, the defendant must have a meritorious defense - a defense that would constitute a complete defense to the action if proven at trial. UNK Wholesale, Inc. v. Robinson, 11 FSM R. 118, 123 (Chk. 2002) (when some evidence to support the defense has been produced to support the motion, more evidence may be needed to prevail at trial). But when the defendant has failed to set forth a meritorious defense and has exhibited culpable conduct, the defendant will not succeed on a motion to set aside a default judgment. Truk Transp. Co. v. Trans Pacific Import Ltd., 3 FSM R. 512, 514 (Truk 1988).

Talley asserts as affirmative defenses^[1] that the bank is not authorized by statute to make commercial loans with rates as high as 15%; that the loan documents were usurious and unconscionable; that the bank misrepresented or failed to disclose the loan terms; that the bank had unclean hands and estoppel barred its actions; and that, under 30 F.S.M.C. 128, the bank exists, and must operate, solely for the public's benefit and has not done so in his case. Talley also contends that he knew that in the past the bank had made loans for 5% and 7% and that he expected that he would get a similar rate and also that, under 38 U.S.C. § 5301, his U.S. military retirement benefits are unassignable, which made the assignment he signed an illegal contract. None of these defenses are meritorious. The court considers them in turn.

Section 128, T30 grants the bank tax exem exemption and prohibits it from paying dividends because the bank "shall exist and operate solely for the benefit of the public." It does not create a private cause of action against the FSM Development Bank. Setik v. Mendiola, 21 FSM R. 537, 556 (App. 2018) ("Title 30, which governs the FSM Development Bank, does not give rise to a private cause of action for borrowers or others"); Salomon v. Mendiola, 20 FSM R. 138, 141 (Pon. 2015) ("claims based on Title 30 violations do not state a claim on which relief may be granted"). It is thus not a defense Talley can raise.

Talley contends that the bank was not authorized by law to make commercial loans with 15% interest rates and that the loan terms were usurious and unconscionable. These are not meritorious defenses. "Congress created the FSM Development Bank, and gave it the power 'to lend money either with or without security, and if with security upon such terms as may from time to time seem expedient.'" Setik v. FSM Dev. Bank, 21 FSM R. 505, 519 (App. 2018) (quoting 30 F.S.M.C. 105(10)). The bank's ability to set terms is, of course, limited by the usury statutes. Those statutes prohibit (make usurious) commercial credit transactions that directly or indirectly exceed an annual interest rate of 24%, 34 F.S.M.C. 204, and consumer credit transactions made after October 31, 1998, that exceed 24% annual interest, 34 F.S.M.C. 203(3). Talley does not explain how his loan^[2] with a 15% interest rate could, directly or indirectly, exceed 24% per annum. Talley's usury affirmative defense is therefore not meritorious.

Talley asserts, as an affirmative defense, that the bank misrepresented or failed to disclose the loan terms. Talley does not allege any facts in support of that defense. An affirmative defense cannot be pled with only a conclusory statement, but must, in each instance, be tied to specific factual allegations. See Macayon v. FSM, 22 FSM R. 544, 555 n.10 (Chk. 2020); Senda v. Semes, 8 FSM R. 484, 493-94 (Pon. 1998). Accordingly, this defense is not meritorious. Moreover, misrepresentation is a ground for relief under Rule 60(b)(3), and, as such, was time-barred after one year.

Furthermore, the documents that Talley signed clearly state the loan terms as 15%. Thus, if Talley was expecting a 5% or 7% loan, he could have refused the terms offered him and not signed the loan documents, and sought to borrow money elsewhere. He did not. Instead, he agreed to the terms. A party who signs an instrument manifests assent to it and may not later complain about not reading or not understanding it. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 127 (Chk. 2017). "A signatory to a contract has a duty to read, or have it read to him, or a duty to understand what he is signing," id., and relief will be denied when the aggrieved party's misunderstanding was caused by his unexplained failure to read the necessary documents, Melander v. Kosrae, 3 FSM R. 324, 329 (Kos. S. Ct. Tr. 1988).

Talley also asserts equitable estoppel (and unclean hands) as a defense. To invoke the equitable estoppel doctrine, the proponent must allege "that 1) another party made representations or statements; 2) the party reasonably relied upon the representations; and 3) the party will be harmed if estoppel is not allowed." Iriarte v. Individual Assurance Co., 18 FSM R. 340, 363 (App. 2012) (citing John v. Chuuk Public Utility Corp., 16 FSM R. 226, 228 (Chk. 2008)). But Talley does not allege any specific facts that would satisfy these elements. He therefore does not allege a meritorious defense. Furthermore, since equitable estoppel (and unclean hands) is based on the other party's alleged misrepresentation or misconduct, this ground for relief can only be sought through Rule 60(b)(3), and that rule, as noted above, has a one-year absolute time limit, and that time limit expired four and a half months before Talley filed his motion.

Nor does the 38 U.S.C. § 5301 ban on assi his U.S. m.S. military retirement benefits constitute a meritorious defense. While Talley's statement of that law's provisions is accurate, 38 U.S.C. §&#301 is a United States statute that is applicable wherever ever the United States is sovereign, but which has no effect in the separate and distinct sovereignty of the Federated States of Micronesia. Dison v. Bank of Hawaii, 19 FSM R. 157, 162 (App. 2013). Since a growing number of Micronesians are retiring from the U.S. military, the FSM Congress may want to consider whether it should enact a similar statute with similar protections for the retirees who return to the FSM. But since no such FSM statute was in effect when Talley signed the loan documents, the assignment that Talley signed is not an illegal contract.^[3]

Accordingly, the court must deny Talley's motion for relief from, or to set aside, the default judgment. Since, for the foregoing reasons, the court cannot set aside the default judgment, it must also deny the motion to enlarge time to file an answer.^[4]

VI.

Since Talley's motion(s) for relief have been denied, that leaves, as the remaining pending matter, the bank's request(s) that an order in aid of judgment hearing be set. The court is required by law to hold a hearing on an application for an order in aid of judgment if either party requests one. 6 F.S.M.C. 1409. The bank has asked for one and asked that it be held through video-conferencing on equipment that has already been installed and used at the FSM Supreme Court courthouses for that purpose. Talley did not file an opposition.

The court has, in the past, found that telephonic hearings with witnesses often leave something to be desired, especially if there is more than one witness. The hearing sought by the bank will be conducted by video-conferencing, not by telephone, and, unless either party wishes to call other witnesses, the court presumes that only the judgment debtor, Talley, will be examined on the witness stand.

The court is therefore willing to try video-conferencing for the order in aid of judgment hearing in the expectation that it will prove more effective than a telephonic hearing.

NOW THEREFORE IT IS HEREBY ORDERED that the order in aid of judgment hearing is set for Monday, July 13, 2020, at 12:00 noon, at the FSM courtroom in Kosrae. Counsel shall make the necessary arrangements.

VII.

Accordingly, Artson S. Talley's motion for relief from, or to set aside, the default judgment against him and his motion to enlarge time to file an answer, are denied. At the judgment creditor's request, an order in aid of judgment hearing will be held by video-conferencing on July 13, 2020, at 12:00 noon.

Since Talley has indicated that there have been breakdowns in attorney-client communications, the clerk shall serve this order not only on both counsel and but also on Artson S. Talley personally.

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^[1] An affirmative defense is the defendant’s assertion of facts and arguments that, if true, will defeat the plaintiff’s claim, even if all the allegations in the complaint are true. Estate of Gallen v. Governor, 21 FSM R. 477, 482 n.2 (Pon. 2018).

^[2] Although Talley alleges that it was a commercial loan, the bank and the loan documents state that it was a consumer loan. Since the usury rate for either is 24%, it does not matter whether the loan was for commercial or consumer purposes.

^[3] To avoid liability under an illegal contract, the party seeking to avoid liability must return the benefit received under the illegal contract; thus, in the case of an illegal loan, a borrower seeking to avoid liability would have to return the loan principal. Arthur v. Pohnpei, 16 FSM R. 581, 599 n.13 (Pon. 2009).

^[4] Usually, a motion to enlarge time to file an answer is superfluous when it accompanies a motion to set aside, or for relief from, a default judgment. This is because, if a motion for relief from a default judgment is granted, then the time to file an answer or otherwise defend is automatically enlarged, and, if the motion for relief from a default judgment is denied, the defendant cannot file an answer since it would be a nullity.