FSM Development Bank v Salomon [2020] FMSC 4; 22 FSM R. 468 (Pon. 2020) (17 February 2020)

FSM SUPREME COURT TRIAL DIVISION
CIVIL ACTION NO. 2014-021
(consolidated with Civil Action No. 2014-023)

FSM DEVELOPMENT BANK,
Plaintiff,

vs.

BERYSIN SALOMON and NANCY SALOMON,
Defendants.
_________________________________________

ORDER GRANTING SUMMARY JUDGMENT

Larry Wentworth
Associate Justice

Hearing: September 10, 2019
Submitted: October 16, 2019
Decided: February 17, 2020

APPEARANCES:

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

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

* * * *

HEADNOTES

Civil Procedure Motions Unopposed
Usually, when a party fails to file a response to a written motion, that party will not be allowed to argue that motion orally. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 472 (Pon. 2020).

Civil Procedure Motions Unopposed; Civil Procedure Summary Judgment Grounds
When no opposition has been filed to a summary judgment motion, the opposing parties are deemed to have consented to the motion, but even then, a court still needs a sound basis in law and fact before it can grant the summary judgment motion, especially when the non-movant was permitted to orally oppose the motion. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 473 (Pon. 2020).

Civil Procedure Summary Judgment Grounds
Under Rule 56, a court must view the facts and any inferences drawn therefrom in the light most favorable to the nonmoving party, and then grant summary judgment only if the pleadings, depositions, answers to interrogatories, admissions on file, and any affidavits, show that there is no genuine issue about any material fact and that the moving party is entitled to a judgment as a matter of law. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 473 (Pon. 2020).

Civil Procedure Summary Judgment Grounds
Factual issues will not bar summary judgment if they are not material to the case’s controlling legal issue, and thus have no dispositive significance. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 473 (Pon. 2020).

Civil Procedure Summary Judgment Procedure
Once a summary judgment movant has made out a prima facie case which, if uncontroverted at trial, would entitle it to a judgment on the issue, the burden then shifts to the nonmoving parties to offer some competent evidence that could be admitted at trial showing that there is a genuine issue of material fact. The nonmoving parties cannot rely on mere allegations or denials in their pleadings or unsubstantiated denials to carry their burden, but must present some competent evidence, by affidavits or as Rule 56 otherwise provides, that would be admissible at trial and that sets forth specific facts showing that there is a genuine issue of fact, and if they do not so respond, summary judgment, if appropriate, will be entered against them. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 473 (Pon. 2020).

Banks and Banking; Interest and Usury
A 9% interest rate is not usurious. The court thus has no power to disregard it, or to otherwise vary it, lower it, or raise it because the parties agreed to the 9% rate the bank offered to lend the loan applicants money at 9%, and those applicants, who borrowed money, agreed to borrow it at 9%. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 474 n.1 (Pon. 2020).

Civil Procedure Summary Judgment
When a court grants a partial summary judgment, generally, that partial summary judgment will not become a final judgment until the remaining issues are resolved and a final judgment entered. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 476 (Pon. 2020).

Civil Procedure Summary Judgment Grounds
Summary judgment opponents cannot rely on mere allegations or denials in their pleadings or unsubstantiated claims or denials, but must present some competent evidence on the point. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 476-77 (Pon. 2020).

Civil Procedure Summary Judgment Grounds; Civil Procedure Summary Judgment Procedure
Regardless of whether the non-movants filed a written opposition, a plaintiff, when moving for summary judgment, must overcome all of the non-movants’ affirmative defenses must show that the affirmative defenses are insufficient as a matter of law and overcome all of the adverse parties’ counterclaims in order to be entitled to summary judgment. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 477 (Pon. 2020).

Banks and Banking
The FSM Development Bank has the statutory authority to lend money either with or without security, and if with security upon such terms as may from time to time seem expedient. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 477 (Pon. 2020).

Equity
Unclean hands is an equitable defense that can be used against actions in equity, but not in actions at law. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 477 (Pon. 2020).

Banks and Banking; Property Mortgages
Under Pohnpei law, when a bank is entitled to a foreclosure of the mortgaged land as a matter of law, and the full judgment amount is not paid into court within three months of the judgment date, the court may, order the foreclosed property sold for the mortgagee’s (the bank’s) benefit. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 478 (Pon. 2020).

Debtors’ and Creditors’ Rights Secured Transactions; Property Mortgages; Property Personal
When the defaulting borrowers had executed a chattel mortgage to help secure a loan, and when the bank registered and thereby perfected its security interests in the chattels, the bank is entitled to a judgment on its claim to foreclose its chattel mortgage. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 478 (Pon. 2020).

Banks and Banking; Debtors’ and Creditors’ Rights Secured Transactions
When the borrowers’ assignment of income and of exclusive possession was used to secure their indebtedness to the bank and the assignments allowed the borrowers to retain their income and possession of the business premises so long as the loan it secured did not go into default, the bank is entitled to a judgment on its claim to enforce the assignments once the borrowers have defaulted. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 478 (Pon. 2020).

Judgments
Since except as to a party against whom a judgment is entered by default, every final judgment must grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in the party’s pleadings, when the sum of expenses that the party is entitled to is larger than the amount sought, the court will grant judgment for the larger figure. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 479 (Pon. 2020).

Civil Procedure Sanctions Rule 37
The Rule 37 sanctions scheme presumes that, when sanctions are imposed, the sanctions will be promptly paid, generally well before the case has gone to judgment, but once a final judgment has been entered in a matter, any unpaid Rule 37 sanctions previously imposed should be included as costs. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 479 (Pon. 2020).

Attorney and Client Attorney Sanctions; Civil Procedure Sanctions Rule 37; Judgments
Since an attorney is the real party in interest for any sanction imposed on her personally, the court cannot include the sanction, for which the attorney’s clients are not liable, in the judgment against the clients and will enter the sanction solely against the liable attorney. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 479 (Pon. 2020).

Constitutional Law Interpretation Whether Self-Executing
Not all constitutional provisions are self-executing. A constitutional provision is self-executing when no legislation is required to bring it into effect and when there is no indication that legislation is contemplated in order to render it operative. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 480 (Pon. 2020).

Constitutional Law Professional Services Clause
The Constitution’s framers recognized that legislation would be needed to achieve the Professional Services Clause’s policy goals. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 480 (Pon. 2020).

Constitutional Law Professional Services Clause
The Professional Services Clause establishes a national policy of providing the services contained in the clause as the FSM acquires the revenue necessary to implement this policy. Inevitably, some services will be provided before others, with Congress to determine the priority. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 480 (Pon. 2020).

Constitutional Law Professional Services Clause
The Professional Services Clause’s intention is to declare a policy which is to be observed by the FSM government as resources become available, and its language is phrased so as to make it clear that as a matter of policy the government is to take reasonable and necessary steps to achieve the rights stated. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 480 (Pon. 2020).

Constitutional Law Professional Services Clause
The Professional Services Clause does not require the national government to take any particular action, or refrain from doing so, at any particular time. It states a policy direction. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 480 (Pon. 2020).

Constitutional Law Interpretation
A constitutional provision that requires things to be done without prescribing the result that will follow if those things are not done is directory in character. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 480 (Pon. 2020).

Constitutional Law Professional Services Clause
The Professional Services Clause does not bar actions that may have an occasional adverse effect on the provision of a professional service. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 480 (Pon. 2020).

Constitutional Law Professional Services Clause
If the FSM Development Bank has an affirmative obligation to give special consideration to creating or expanding FSM health care services, it seems to have met that obligation when it provided the original loan so that the borrower could get his medical practice up and running since, within its scope of action (development banking), it took a step reasonable and necessary to provide needed health care services. When the bank twice restructured that loan, its effort allowed the borrowers’ clinic to continue providing health services, and had the effect of avoiding reducing health care availability. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 480-81 (Pon. 2020).

Constitutional Law Professional Services Clause; Debtors’ and Creditors’ Rights Secured Transactions; Property Mortgages
When the FSM Development Bank has a statutory right to reduce its claim to judgment and to foreclose its perfected security interest in the borrowers’ medical equipment and also has the contractual right to do the same, the Constitution’s Professional Services Clause does not make that contract illegal. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 481 (Pon. 2020).

Constitutional Law Professional Services Clause
The Professional Services Clause cannot, on one hand, encourage the FSM Development Bank to facilitate the provision of health care services by making loans that allow health care professionals to provide such services, and then, on the other hand, prohibit the bank from seeking repayment so that it will have funds to lend to others because, if the Professional Services Clause’s policy is to encourage the bank to facilitate the provision of health services, it cannot discourage the bank from facilitating the provision of health services by making such loans riskier by severely restricting the bank’s ability to compel repayment. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 481 (Pon. 2020).

Constitutional Law Professional Services Clause
At a minimum, the Professional Services Clause demands that Congress and other parts of the national government, including the court, give special consideration to these services and assure that their availability is not unreasonably or unnecessarily diminished by any national government action. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 481 (Pon. 2020).

Constitutional Law Professional Services Clause
When any part of the national government contemplates action that may be anticipated to affect the availability of education, health care, or legal services, the Constitution demands that the national officials involved must consider the people’s right to such services and make a reasonable effort to take every step reasonable and necessary to avoid unnecessarily infringing upon that right or reducing the availability of those services. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 481 (Pon. 2020).

Debtors’ and Creditors’ Rights Orders in Aid of Judgment
The court is reluctant to order the sale of land in a collection case until other methods of satisfying the money judgment have been tried and are unsuccessful because of the central importance of land in Micronesian culture, and this seems to be the general practice, even by creditors, although no law specifically mandates it. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 481 (Pon. 2020).

Debtors’ and Creditors’ Rights Orders in Aid of Judgment
The court is subject to the statutory command that the court, in aid of a money judgment, must determine the fastest manner in which the debtor can reasonably pay a judgment. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 481 n.7 (Pon. 2020).

Constitutional Law Professional Services Clause; Debtors’ and Creditors’ Rights Orders in Aid of Judgment; Debtors’ and Creditors’ Rights Secured Transactions
Since the court must make a reasonable effort to take every step reasonable and necessary to avoid unnecessarily reducing the availability of article XIII, section 1 health care services, the court will note that the FSM Development Bank is legally entitled to an order of sale for the mortgaged medical equipment and to an order enforcing the borrowers’ assignments of income and exclusive possession of the medical clinic premises, but the court will not issue such orders contemporaneously with the judgment. The court will hesitate to issue such orders until all reasonable means of satisfying the judgment by other methods have been explored and exhausted, and will thus give special consideration to health care services and assure that their availability is not unreasonably or unnecessarily diminished by any action it takes. FSM Dev. Bank v. Salomon, 22 FSM R. 468, 481-82 (Pon. 2020).

* * * *

COURT’S OPINION

LARRY WENTWORTH, Associate Justice:

On September 10, 2019, the court heard plaintiff FSM Development Bank’s Motion for Summary Judgment, filed February 21, 2019. No opposition had ever been filed. Usually, when a party fails to file a response to a written motion, that party will not be allowed to argue that motion orally. Chuuk v. FSM, 22 FSM R. 85, 92 (Chk. 2018); Thalman v. FSM Social Sec. Admin., 20 FSM R. 625, 627 (Yap 2016); Actouka v. Kolonia Town, 5 FSM R. 121, 123 (Pon. 1991). Nevertheless, the court permitted the Salomons’ counsel to oppose the motion orally.
At the hearing’s end, the court asked the parties to brief the effect of the Constitution’s Professional Services Clause, FSM Const. art. XII167; 1, on then the bank’s cause of action to foreclose its chattel mortgage on Dr. Berysin Salomon’s medical equipment. The bank filed its memorandum on September 24, 2019, he Sas filed theirs onrs on October 16, 2019. The court then coen considered this matter to be submitted to it for decision.

For the reasons stated below, the bank is granted summary judgment.

I. BANK’S SUMMARY JUDGMENT MOTION AND STANDARD OF REVIEW

The bank seeks summary judgment on its breach of contract claim against Berysin Salomon and Nancy Salomon ("the Salomons") for $242,561.06; plus $40.82 per day in per diem interest since February 19, 2019, until the date judgment is entered; collection costs of $4,028.27; unpaid sanctions of $560; and reasonable attorney’s fees. The bank also seeks summary judgment to foreclose its real property mortgage on Parcel No. 068-D-06, Mesihou, Madolenihmw, Pohnpei; to foreclose its chattel mortgage on listed chattels; and to enforce an assignment of income and the right of exclusive possession, which the Salomons had earlier granted the bank.

As noted above, when no opposition has been filed to a summary judgment motion, the opposing parties are deemed to have consented to the motion, FSM Civ. R. 6(d), but even then, a court still needs a sound basis in law and fact before it can grant the summary judgment motion, especially when the non-movant was permitted to orally oppose the motion. Senda v. Mid-Pacific Constr. Co., 6 FSM R. 440, 442 (App. 1994); Thalman, 20 FSM R. at 627; Aunu v. Chuuk, 18 FSM R. 467, 468 (Chk. 2012).

Under Rule 56, a court must view the facts and any inferences drawn therefrom in the light most favorable to the nonmoving party, and then grant summary judgment only if the pleadings, depositions, answers to interrogatories, admissions on file, and any affidavits, show that there is no genuine issue about any material fact and that the moving party is entitled to a judgment as a matter of law. Seiola v. FSM Social Sec. Admin., 21 FSM R. 205, 208 (Pon. 2017); FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 168-69 (Pon. 2017); see also Weno v. Stinnett, 9 FSM R. 200, 206 (App. 1999). Factual issues will not bar summary judgment if they are not material to the case’s controlling legal issue, and thus have no dispositive significance. Ambros & Co. v. Board of Trustees, 12 FSM R. 206, 212 (Pon. 2003).

Once a summary judgment movant has made out a prima facie case which, if uncontroverted at trial, would entitle it to a judgment on the issue, the burden then shifts to the nonmoving parties to offer some competent evidence that could be admitted at trial showing that there is a genuine issue of material fact. Federated Shipping Co. v. Ponape Transfer & Storage Co., 4 FSM R. 3, 11 (Pon. 1989). The non-moving parties cannot rely on mere allegations or denials in their pleadings or unsubstantiated denials to carry their burden, but must present some competent evidence, by affidavits or as Rule 56 otherwise provides, that would be admissible at trial and that sets forth specific facts showing that there is a genuine issue of fact, and if they do not so respond, summary judgment, if appropriate, will be entered against them. E.g., Jacob v. Johnny, 20 FSM R. 612, 618-19 (Pon. 2016).

II. FACTS

A. Loan History

On July 8, 2003, Berysin Salomon and Nancy Salomon borrowed $268,345 from the FSM Development Bank and executed a promissory note in the bank’s favor. This loan bore a 9% interest rate.^[1] It had a six-month grace period with the first $2,731 monthly installment payment due April 25, 2004. After the first five years, the monthly payments were to rise to $4,000, and, if all payments were made in full and on time, the final payment would be December 25, 2013. The loan was to pay for the purchase of land and a building, for the building’s renovation and furnishing as a medical clinic, and to get the medical practice up and running.

The project was delayed and the Salomons’ 2004 payments did not go as planned. They fell significantly behind. The Salomons and the bank thus, on December 2, 2004, executed a forbearance agreement, under which the loan terms were recast so that, starting December 25, 2004, the Salomons’ monthly payment would be $3,557.24, with the last payment August 25, 2014, if all payments were made on time.

This forbearance agreement stated that it was secured by a chattel mortgage, which the Salomons had previously executed on July 8, 2003. This chattel mortgage covered medical equipment (about $39,000), office furniture (about $8,900), and other supplies (about $8,200), which were used to furnish the clinic, and which the Salomons had bought with loan funds, as provided in their loan agreement. The bank recorded its security interests in these chattels with the FSM Department of Economic Affairs Secured Transactions, on October 10, 2006, and again on March 26, 2012, and December 12, 2018.

The Salomons did not manage to keep up with the new payment schedule. Thus, the Salomons and the bank, on September 9, 2008, restructured the loan a second time. The new forbearance agreement required the Salomons to pay $2,700 a month, starting September 25, 2008, and lasting through August 25, 2011, and, after that, to pay $3,250 a month until the loan balance was paid in full. This agreement not only provided that it was secured by the chattel mortgage, but that it was also secured by a real estate mortgage and by an assignment of lease and of income. The assignment of lease and of income had been executed on July 3, 2003, and provided that the bank could, whenever the Salomons were in default on their loan, acquire all of the health clinic’s income and would be assigned any leases the clinic held. The real estate mortgage had been executed on September 2, 2008. It mortgaged land, Parcel No. 068-D-06, Mesihou, Madolenihmw, for which Nancy Salomon held a certificate of title, showing that she owned it (sole owner) in fee simple. The bank’s mortgage was registered at the Pohnpei Court of Land Tenure on September 5, 2008, and inscribed on the back of the owner’s certificate of title, which the bank retained.

Thereafter, the Salmons made frequent payments, and were significantly reducing the principal balance. They made their last payment ($4,000) on December 20, 2013.^[2] That reduced the loan balance (principal) to $165,538.20. The Salomons made no payments after that. The bank, on April 10, 2014, issued in English and in Pohnpeian, a Notice of Default Prior to Foreclosure for the mortgaged land stating that the total amount then due was $170,207.28 ($165,538.20 principal; $4,530.76 accrued interest; and $97.50 penalty).

B. Procedural History

On June 12, 2014, the bank filed suit, Civil Action No. 2014-021, seeking a judgment for the unpaid loan balance and the foreclosure of its security interests. On June 19, 2014, the Salomons filed their own lawsuit, Civil Action No. 2014-023, against the bank and three of its officers, they pled various causes of action based on the FSM Development Bank loan and promissory note and related agreements, and asked that all their loan documents and all liens on their property be voided, and that they further be awarded damages. Salomon v. Mendiola, 20 FSM R. 138, 140 (Pon. 2015).

The Civil Action No. 2014-023 defendants moved, over the Salomons’ opposition, to dismiss that action, because all the Salomons’ claims were affirmative defenses or counterclaims that were required to be made in the bank’s lawsuit, and because they did not state a claim for which relief could be granted. The court dismissed the Salomons’ claims for excessive interest and usury; for supposed violation of 30 F.S.M.C. 128(1); and for tortious interference with business relations or for lost business opportunities and profits. Salomon, 20 FSM R. at 140-41. It also dismissed the bank officers as defendants in their personal capacities. Id. at 142. Because the Salomons’ claims were all either contract defenses or counterclaims that had to be raised in the case filed first (the bank’s suit against them) and because the two cases had already been consolidated, the court did not dismiss the rest of the Salomons’ claims since those claims could proceed as affirmative defenses or counterclaims in the consolidated case. Id. at 141-42.

The bank sought fairly broad discovery from the Salomons because the Salomons’ counterclaims and defenses were quite extensive. Discovery disputes ensued. The court then ordered Nancy Salomon to file her discovery responses by June 24, 2016, or otherwise her Civil Action No. 2014-023 claims would be dismissed and her answer in Civil Action No. 2014-021 would be stricken; and ordered Dr. Berysin Salomon to file his supplementary discovery responses and permit the inspection of documents requested by the bank or otherwise the court would grant the bank’s motion to strike Berysin Salomon’s defenses in 2014-021 and his 2014-023 claims. FSM Dev. Bank v. Salomon, 20 FSM R. 431, 443 (Pon. 2016). Follow-up orders had to be issued to try to compel compliance. Full compliance was lacking. On October 6, 2017, the bank filed a Renewed Motion for Entry of Sanctions, which it supplemented May 18, 2018.

The court eventually, on December 19, 2018, granted that sanctions motion. The sanctions were based on the Salomons’ discovery compliance shortcomings and on Nancy Salomon’s failure to respond to the bank’s interrogatories, all of which the court had previously required in its orders of May 25, 2016 (FSM Dev. Bank v. Salomon, 20 FSM R. 431 (Pon. 2016)); January 4, 2017; March 28, 2017; and August 29, 2018, which all required discovery compliance. The court dismissed the Salomons’ claims for misrepresentation, unconscionability, and fraud, as it related to interest accrual, credit life insurance premiums and refund, Small Business Guaranty and Financial Corporation guaranty, conduct not authorized by law relating to credit life insurance premium refund, breach of the duty of good faith and fair dealing, negligence, vicarious liability, and respondeat superior, originally asserted in Civil Action No. 2014-023.^[3] Order Dismissing Claims, Counterclaims, and Parties at 2 (Dec. 19, 2018). The court also struck the Salomons’ affirmative defenses of misrepresentation, unconscionability, fraud and estoppel, payment, release, accord and satisfaction, violation of usury laws, and failure to join an indispensable party. Id.

The Salomons moved for reconsideration of that order and renewed their motion to disqualify the presiding justice.^[4] On February 6, 2019, the court denied those motions. FSM Dev. Bank v. Salomon, 22 FSM R. 175 (Pon. 2019). Two weeks later, on February 19, 2019, the bank filed this summary judgment motion. No opposition was filed.

III. ANALYSIS

A. Salomons’ Opposition

At September 10, 2019 hearing, the Salomons contended that the court’s dismissal of their defenses (originally asserted as claims in Civil Action No. 2014-023) was premature and that a genuine issue of material fact on any of their defenses would preclude summary judgment for the bank. They point to the issue of whether the bank had refunded their credit life insurance premium payment as an example of a claim or defense with a genuine factual dispute that would bar summary judgment. The Salomons are not entirely correct on this point since the court can always grant a partial summary judgment, FSM Civ. R. 56(d), but they are correct that, generally, a partial summary judgment would not become a final judgment until the remaining issue was resolved and a final judgment entered.

The Salomons complain that most of their loan payments seem to have gone toward interest instead of principal and find that to be alarming.^[5] The Salomons emphasize the great benefit that Dr. Salomon’s pediatric practice confers on Pohnpei and its people, and contend that the bank ought not to have the ability to deprive Pohnpei of that benefit by closing Dr. Salomon’s practice. They further contend that this case is not yet ripe for summary judgment, although they acknowledge that it is difficult to oppose summary judgment when the court has stricken their affirmative defenses.

B. Money Judgment

The bank moves for summary judgment on the Salomons’ loan default because the Salomons, by ceasing payments, breached their contractual obligations to the bank under the July 8, 2003 promissory note to the bank, as modified by the December 2, 2004 and September 9, 2008 forbearance agreements. The bank seeks judgment for the $165,538.20 principal and 9% interest thereon since December 20, 2013 (or $40.82 a day since then). To support its claim, the bank provides the promissory note, the two forbearance agreements, and the Salomons’ loan and loan payment history, with those documents being records normally kept by the bank’s in its usual course of business, as the motion’s supporting affidavits attest to.

The Salomons dispute this amount. But they cannot rely on mere allegations or denials in their pleadings or unsubstantiated claims or denials; they must present some competent evidence on the point. Peniknos v. Nakasone, 18 FSM R. 470, 478 (Pon. 2012). They have not. The Salomons never provided any admissible evidence in any court filing, that would show that the bank’s calculations were incorrect or that supported a different calculation or that the bank’s record of their loan payment history was inaccurate.

Regardless of whether the non-movants filed a written opposition, a plaintiff, when moving for summary judgment, must overcome all of the non-movants’ affirmative defenses must show that the affirmative defenses are insufficient as a matter of law and overcome all of the adverse parties’ counterclaims in order to be entitled to summary judgment. Isamu Nakasone Store v. David, 20 FSM R. 53, 57 (Pon. 2015). But the Salomons’ affirmative defenses and counterclaims have all been dismissed, with the possible exception of illegality and unclean hands, which were included in the Salomons’ counterclaims of conduct not authorized by law and misrepresentation and fraud. Since those defenses were included in the Salomons’ counterclaims and since the court dismissed all of the Salomons’ counterclaims and defenses that had not already been dismissed in Salomon v. Mendiola, 20 FSM R. 138 (Pon. 2015), the illegality and unclean hands defenses were also dismissed.

Even if they were not, the bank has overcome these defenses in its summary judgment motion. The bank has shown that its loan agreement and subsequent forbearance agreements are within its legal authority because the bank has the statutory authority "to lend money either with or without security, and if with security upon such terms as may from time to time seem expedient." 30 F.S.M.C. 105(10). And the Salomons’ claim that the bank employed excessive interest and usury was earlier dismissed on the merits. Salomon, 20 FSM R. at 140-41. Unclean hands is an equitable defense that can be used against actions in equity, but not in actions at law. See Iriarte v. Individual Assurance Co., 18 FSM R. 340, 362 (App. 2012); Chuuk Health Care Plan v. Pacific Int’l, Inc., 17 FSM R. 535, 538 (Chk. 2011); FSM Dev. Bank v. Gouland, 9 FSM R. 605, 607 (Chk. 2000); Conrad v. Kolonia Town, 8 FSM R. 183, 193 (Pon. 1997). The bank’s claims are all actions at law based on breach of contract claims.

The bank is therefore entitled, as a matter of law, to summary judgment on its breach of contract claim on the Salomons’ promissory note, as modified by the two forbearance agreements. It is thus entitled to summary judgment for the $165,538.20 principal plus 9% interest thereon from December 20, 2013, to February 17, 2020, or $91,799.05^[6] which totals to $257,337.25.

C. Loan Security

The bank also seeks foreclosure of its security interests in the properties used to help secure the Salomons’ loan.

1. Real Estate Mortgage

The bank seeks foreclosure of the mortgage for Parcel No. 068-D-06, Mesihou, Madolenihmw. To support this claim, the bank provides the second forbearance agreement which includes the recitation that real estate has been mortgaged to the bank as security; the real estate mortgage itself, executed by the Salomons; the certificate of title with not only the bank’s mortgage inscribed on it, but also the bank’s Notice of [the Salomons’] Default, which was registered and inscribed on April 11, 2014.

Pohnpei state law provides for the foreclosure of a mortgage and the sale of the mortgaged property after the property owner has defaulted on the required payments. 41 Pon. C. §§ 6-121(2), 6- Mortgagors muss must be given the notice of default at least 30 days before the mortgagee files suit to foreclose. 41 Pon. C. § 6-122. That was donApril200, 2014. This suit was filed June 12, 2014. The bahe bank is therefore entitled to a foreclosure of the mortgaged land as a r of law. If the full judgment amount is not paid into court within three months of the juhe judgment date in this case, 41 Pon. C. § 6-125(4), the court rder ther the foreclosed property sold for the mortgagee’s (the bank’s) benefit, 41 Pon. C. § 6-125(5) ("[w]henmortgagor agor . . . fails y thecirincipal andl and interest, and costs, and attorney’s fees incident thereto . . .&#").

2

2. C Chattel Mortgage

The bank also seeks forece of hattel mortgage oage on then the Salomons’ office furniture and medical equipment, which were purchased with loan funds. The Salomons executed a chattel mortgage for goods purchased with loan funds. The bank compiled a list of furniture and equipment that was bought with loan funds, and the bank later recorded its security interests in those chattels with the secured transactions filing office. Because the Salomons defaulted on their loan, because the Salomons had executed a chattel mortgage to help secure that loan, and because the bank registered and thereby perfected its security interests in the chattels, the bank is entitled to a summary judgment on its claim to foreclose its chattel mortgage. 33 F.S.M.C. 1047(2). The bank also seeks, under 33 F.S.M.C. 1054, an order of sale for the mortgaged chattels. For the reasons stated below in part III.F., the court will not issue one at this time, but may do so in the future.

3. Income and Exclusive Possession (Lease) Assignment

And the bank seeks the enforcement of the Salomons’ assignment of income and of exclusive possession, which was also used to secure the Salomons’ indebtedness to the bank. This assignment granted the bank the right to the exclusive possession of the medical practice’s daily, monthly, and yearly gross business income and to the exclusive possession of the medical practice’s business premises. The assignment allowed the Salomons to retain their income and possession of the business premises so long as the loan it secured did not go into default. Since the Salomons executed this document to secure their loan and since that loan has gone into default, the bank is entitled to a summary judgment on its claim to enforce the assignment of income and of exclusive possession.

The bank also seeks the entry of an order enforcing both the assignment of income and of exclusive possession. The court, for the reasons stated below in part III.F., will not issue one at this time, but may do so in the future.

D. Costs of Collection

The bank also asks that it be awarded its costs of collection, which it calculates at $4,028.27. To support this figure, it provides the affidavit of counsel, numerous bills and payments, and a summary sheet of the costs.

The bank directs the court’s attention to a promissory note clause that provides that in the event of a loan default and the note being placed with an attorney for collection, "then such collection fees, and all reasonable attorney’s fees and collection costs shall be added to the principal of this note." Promissory Note para. 4 (July 8, 2003). The bank was therefore entitled to have these collection costs added to the judgment amount of $257,337.25 in part III.B above.

The court reviewed the bills and payments against the summary sheet and found two discrepancies. One cost (dated 10/11/2017) was listed at 60¢ higher than the actual invoice and payment and one $31.25 service (dated 10/28/2016) was listed twice. The court then added the adjusted figures. The result was $4,073.37. This sum, which the court had expected would be lower than the bank’s requested $4,028.27, is instead a bit higher. Since "[e]xcept as to a party against whom a judgment is entered by default, every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in the party’s pleadings," FSM Civ. R. 54(c), the court will add the $4,073.37 figure to the judgment amount of $257,337.25, which now equals $261,410.62.

E. Unpaid $560 Sanction

The bank also asks that the unpaid $560 sanction imposed by the court’s June 5, 2015 Order Granting Reconsideration and Awarding Expenses be added to the judgment. That sanction was for discovery abuse. The Rule 37 sanctions scheme presumes that, when sanctions are imposed, the sanctions will be promptly paid, generally well before the case has gone to judgment, but once a final judgment has been entered in a matter, any unpaid Rule 37 sanctions previously imposed should be included as costs. Adams v. Island Homes Constr., Inc., 14 FSM R. 473, 475 (Pon. 2006).

The $560 sanction was imposed on and made "payable by counsel Yoslyn G. Sigrah." Order Granting Reconsideration and Awarding Expenses at 2 (June 5, 2015). The $560 sanction was thus not imposed on the Salomons. An attorney is the real party in interest for any sanction imposed on her personally. Heirs of George v. Heirs of Dizon, 16 FSM R. 100, 107 (App. 2008). The court therefore cannot include the $560 sanction, for which the Salomons are not liable, in the judgment against the Salomons. The $560 sanction was imposed on their attorney, personally. The court will therefore enter the $560 sanction solely against the liable attorney.

F. Professional Services Clause

The court asked the parties to brief whether the Constitution’s Professional Services Clause affected the court’s ability to enter a judgment on the bank’s cause of action to foreclose on its chattel mortgage since that mortgage covered Dr. Salomon’s medical equipment. It now seems to the court that, if the Professional Services Clause affects the chattel mortgage foreclosure, it would also affect the enforcement of the assignment of exclusive possession of the medical clinic and the assignment of the clinic’s gross income. The court will proceed on that assumption.

The Professional Services Clause provides that "[t]he national government of the Federated States of Micronesia recognizes the right of the people to education, health care, and legal services and shall take every step reasonable and necessary to provide these services." FSM Const. art. XIII, ҈1.

1. Parties’ Positions

The bank contends that the duty to implement this clause lies with Congress and that Con has implemented this clause, at least as far as health carh care is concerned, through its enactment of Title 41 (Public Health, Safety, and Welfare) and Title 52, chapter 4 (National Government Employees’ Health Insurance Plan). The bank argues that Congress, when it created the bank, gave it broad authority to take all manner of collateral and did not exclude medical equipment. The bank also argues that Congress, when it enacted the Secured Transaction Act, 33 F.S.M.C. 1001 et seq., considered and did provide special treatment for certain types of collateral, but not for medical equipment. Nor was medical equipment excluded from the types of property in which a creditor could acquire a perfected security interest.

The bank asserts that it has a statutory right to foreclose its perfected security interest in the Salomons’ medical equipment. The bank further argues that there are a number of medical providers on Pohnpei and that if Dr. Salomon’s medical equipment is sold at auction, it is likely another medical provider would acquire the equipment and use it to provide health care services on Pohnpei. The bank also reasons that denying it the right to foreclose on its chattel mortgage on Dr. Salomon’s medical equipment would have a negative effect on the future provision of health care in the FSM because if the bank (or another lender) were denied its statutory and contractual right to foreclose a chattel mortgage on medical equipment whose purchase was funded by the lender, then lenders would be unable or unwilling to finance future medical equipment purchases unless the borrower pledged additional (and possibly unavailable) collateral. The bank concludes that the Professional Services Clause should have no effect on its foreclosure of its chattel mortgage.

The Salomons contend that the bank, as a national government instrumentality, is bound by the Professional Services Clause and thus must, whenever it contemplates any action that might affect health care availability, consider the people’s right to health care and must take every step reasonable and necessary to avoid unnecessarily reducing the availability of health care services. The Salomons argue that, because the Constitution is the supreme law of the land, the people’s right to obtain health care from Dr. Salomon’s clinic is a constitutional right that the bank cannot override using the Secured Transaction Act or the bank’s contractual rights to foreclose its chattel mortgage and sell the clinic’s medical equipment at auction, thus closing the clinic. The Salomons emphasize that FSM people need more health care providers, not fewer, and since Dr. Salomon’s clinic is one of the best, the bank should not be permitted to close it.

2. The Professional Services Clause’s Application Herein

Not all constitutional provisions are self-executing. See Hartmann v. Department of Justice, 21 FSM R. 468, 476 (Chk. 2018) (constitutional provisions are presumed to be self-executing and are construed as such, rather than as requiring further legislation, unless the contrary clearly appears). "A constitutional provision is self-executing when no legislation is required to bring it into effect and when there is no indication that legislation is contemplated in order to render it operative." Id. at 475 (citing Panuelo v. Pohnpei, 3 FSM R. 76, 82 (Pon. S. Ct. App. 1987)). The Constitution’s framers recognized that legislation would be needed to achieve the Professional Services Clause’s policy goals. The Professional Services Clause "establish[es] a national policy of providing the services contained in this [clause] as the new nation acquires the revenue necessary to implement this policy. Inevitably, some services will be provided before others, with the priority to be determined by the national legislature." SCREP No. 52, II J. of Micro. Con. Con. 881, 882. The Professional Services Clause’s intention is "to declare a policy which is to be observed by the Government of the Federated States of Micronesia as resources become available," and its language was rephrased "so as to make it clear that as a matter of policy the Government is to take reasonable and necessary steps to achieve the rights stated . .&# ." SCREP No. 61, 61, II J. of Micro. Con. Con. 887.

The Professional Services Clause does not require the national government to take any particular action, or refrain fromg so,ny particular timr time. It states a policy direction. It. It is directory in nature. A constitutional provision that requires things to be done without prescribing the result that will follow if those things are not done is directory in character. Mailo v. Chuuk Health Care Plan, 20 FSM R. 18, 25 (App. 2015). The Professional Services Clause also does not bar actions that may have an occasional adverse effect on the provision of a professional service.

The court cannot conclude that the bank has violated either the letter of, or the spirit of, the Professional Services Clause. If the bank has an affirmative obligation to give special consideration to creating or expanding FSM health care services, it seems to have met that obligation. It provided the original loan to the Salomons so that Dr. Salomon could get his practice up and running. It thus, within its scope of action (development banking), took a "step reasonable and necessary to provide" needed health services in the FSM. It twice restructured that loan. That effort allowed Dr. Salomon’s clinic to continue providing health services, and had the effect of avoiding reducing health care availability. The second loan restructuring appeared to be successful until the Salomons stopped making payments.

The bank has a statutory right to reduce its claim to judgment and to foreclose its perfected security interest in the Salomons’ medical equipment. 33 F.S.M.C. 1047(1). And the court so holds. The bank also has the contractual right to do the same, and the Constitution’s Professional Services Clause does not make that contract illegal. The Professional Services Clause cannot, on one hand, encourage the bank to facilitate the provision of health care services by making loans that allow health care professionals to provide such services, and then, on the other hand, prohibit the bank from seeking repayment so that it will have funds to lend to others. If the Professional Services Clause’s policy is to encourage the bank to facilitate the provision of health services, it cannot discourage the bank from facilitating the provision of health services by making such loans riskier by severely restricting the bank’s ability to compel repayment.

The appellate court has previously held that "article XIII, section 1 . . . at a um de thds that Cong Congress and other parts of the national government, including this Court, give special consideration to these services and assure that theailab is not unreasonably or unnecessarily diminished shed by anby any action taken by the national government." Carlos v. FSM, 4 FSM R. 17, 30 (App. 1989) (legal services). The Carlos court further noted that

when any part of the national government contemplates action that may be anticipated to affect the availability of education, health care[,] or legal services, the Constitution demands that the national officials involved must consider the right of the people to such services and make a reasonable effort to take "every step reasonable and necessary" to avoid unnecessarily infringing upon that right or reducing the availability of the article XIII, section 1 services.

Carlos, 4 FSM R. at 30.

In seeking briefing on the Professional Services Clause, the court was looking to the future and how the Professional Services Clause might affect it. The court has usually been reluctant to order the sale of land in a collection case until other methods of satisfying the money judgment have been tried and were unsuccessful because of the central importance of land in Micronesian culture.^[7] This seems to be the general practice, even by creditors, although no law specifically mandates it. In this case, however, the Professional Services Clause suggests that the court must take a different approach and be reluctant to take a course of action that would reduce the availability of health care services.

The court must thus make a reasonable effort to take "every step reasonable and necessary" to avoid unnecessarily reducing the availability of the article XIII, section 1 health services. Accordingly, the court will grant the bank judgment on all four of its causes of action, including its chattel mortgage and the Salomons’ assignments of income and exclusive possession. The court will note that the bank is legally entitled to an order of sale for the mortgaged chattels and to an order enforcing the Salomons’ assignments of income and exclusive possession, but the court will not issue such orders contemporaneously with the judgment. The court will hesitate to issue such orders, except possibly for an assignment of some of the clinic’s net income, until all reasonable means of satisfying this judgment by other methods have been explored and exhausted. In this way, the court, in obedience to the Carlos court’s instruction, will give special consideration to health care services and assure that their availability is not unreasonably or unnecessarily diminished by any action it takes.

IV. CONCLUSION

Accordingly, the FSM Development Bank is entitled to recover $261,410.62 from Berysin Salomon and Nancy Salomon, jointly and severally, and $560 from attorney Yoslyn G. Sigrah. These judgments will bear 9% interest. The bank is also entitled, in the circumstances described above, to the foreclosure of its real estate mortgage and to reduce to judgment and to foreclose its chattel mortgage, and to reduce to judgment and to enforce the Salomons’ assignments of income and exclusive possession. Berysin Salomon and Nancy Salomon shall take nothing on their counterclaims. The clerk shall enter judgment accordingly.

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^[1] The court is a bit puzzled, or maybe just curious, about this 9% interest rate. Before sometime around 2000, the loans in the bank’s collection cases all had interest rates under 9%. But now, the loans for which the bank seeks collection always bear 9% interest. Normally, a lending institution might vary its lending rate depending on a number of factors, such as the borrower’s creditworthiness, the loan security provided by the borrower, the proposed venture’s riskiness, the current inflation rate and outlook, and, when a development bank is the lender, the social or economic desirability of the borrower’s proposed development project.

A 9% rate is not usurious. See Setik v. Mendiola, 21 FSM R. 537, 556-57 (App. 2018). The court thus has no power to disregard it, or to otherwise vary it, lower it, or raise it. This is because the parties agreed to the 9% rate Ä the bank offered to lend the loan applicants money at 9%, and those applicants, who borrowed money, agreed to borrow it at 9%.

^[2] As per the July 8, 2003 promissory note, if the Salomons had been able to make all of their monthly payments in full and on time, this would have been their last payment.

^[3] By dismissing all of the Salomons’ claims against counter-defendants Anna Mendiola, Brandon Tara, and John Sohl, the court thereby also dismissed them as parties.

^[4] This was the Salomons’ fourth motion to disqualify a judge presiding over this case. Each disqualification motion seems to have been made after an unfavorable court ruling.

^[5] The court is also alarmed by the interest, but not by the amount of interest that the Salomons paid up through December 2013. What alarms the court is the interest that has accumulated since 2013 while the Salomons have contested the bank’s collection efforts. The Salomons have been ill-served by protracting this litigation this long. Nine per cent of $165,538.20 for six years adds up to a very substantial sum.

^[6] This was figured as $165,538.20 x 9% x 6 years = $89,390.69 plus $2,408.36 ($40.82 x 59 days) = $91,799.05.

^[7] The court is also subject to the statutory command that the court, in aid of a money judgment, must "determine the fastest manner in which the debtor can reasonably pay a judgment." 6 F.S.M.C. 1409. The court notes, that as a practical matter, the Salomons may have no other income stream than the medical practice from which to generate funds that could be used towards satisfying the bank’s judgment.