Pacific Islands Development Bank v Sigrah [2020] FMSC 7; 22 FSM R. 495 (Pon. 2020) (2 March 2020)

FSM SUPREME COURT TRIAL DIVISION
CIVIL ACTION NO. 2019-027
PACIFIC ISLANDS DEVELOPMENT BANK,
Plaintiff,

vs.

YOSLYN G. SIGRAH and JASON F.SIGRAH,
Defendants.
__________________________________________

ORDER TO ENTER A JUDGMENT

Larry Wentworth
Associate Justice

Decided: March 2, 2020

APPEARANCE:

For the Plaintiff: Maximo A. Mida, Esq.
Ramp & Mida Law Firm
P.O. Box 1480
Kolonia, Pohnpei FM 96941

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HEADNOTES

Civil Procedure - Default and Default Judgments - Sum Certain
The court clerk may enter a default judgment only if it is for a sum certain or for a sum which can by computation be made certain. Bank loans and promissory notes are classic examples of a sum certain. Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. 495, 496-97 (Pon. 2020).

Attorney’s Fees - Court-Ordered; Civil Procedure - Default and Default Judgments - Sum Certain
Any claim including attorney’s fees is not one for a sum certain, because attorney’s fees may only be awarded upon a judicial finding that the fees sought are reasonable. Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. 495, 497 (Pon. 2020).

Attorney’s Fees - Court-Ordered; Civil Procedure - Default and Default Judgments - Sum Certain
When a plaintiff requests a default judgment that includes $1,200 in legal fees (attorney’s fees), the default judgment it requests is not for a sum certain, and the clerk cannot grant it. Only the court can grant it. Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. 495, 497 (Pon. 2020).

Attorney’s Fees - Court-Ordered
A stipulation in a promissory note for attorney’s fees is valid and will be enforced, but only to the extent it is reasonable. Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. 495, 497 (Pon. 2020).

Attorney’s Fees - Court-Ordered
Except in an unusual case (such as vexatious litigation tactics by a judgment-debtor), 15% is the upward limit for, the court, in a debt collection case, to deem an attorney’s fee reasonable when it is awarded pursuant to a contractual agreement to pay attorney’s fees. Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. 495, 497 (Pon. 2020).

Attorney’s Fees - Court-Ordered
Creditors must establish that the attorney’s fees, that are to be charged to a debtor pursuant to a promissory note provision, are reasonable in relation to the amount of the debt as well as to the services rendered. Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. 495, 497 (Pon. 2020).

Attorney’s Fees - Court-Ordered
The requirement, that attorney’s fees awards will be included in a judgment only after the court has determined that the fees sought are reasonable, applies regardless of how the attorney’s fees are characterized - whether the fees are to be added on to the debt in the judgment, or capitalized as part of the debt’s principal, or are the sole subject matter of the lawsuit. Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. 495, 497 (Pon. 2020).

Attorney’s Fees - Court-Ordered
A creditor plaintiff cannot, by adding its attorney’s fees to the debt’s principal, circumvent the court’s duty to first determine those fees’ reasonableness before imposing them on a debtor defendant. It is an abuse of the trial court’s discretion to award attorney’s fees without first determining their reasonableness. Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. 495, 497 (Pon. 2020).

Attorney’s Fees - Court-Ordered
Any party seeking attorney’s fees always bears the burden of providing sufficient evidence to prove its claim. Pacific Islands Dev. Bank v. Sigrah, 22 FSM R. 495, 497 (Pon. 2020).

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COURT’S OPINION

LARRY WENTWORTH, Associate Justice:

On February 26, 2020, the plaintiff, the Pacific Islands Development Bank, filed its Request for Entry of Default Judgment, in which it asks that a default judgment for the sum of $7,869.19 be entered by the clerk, or in the alternative, by the court, against defendant Yoslyn G. Sigrah.

The bank filed this case on December 17, 2019. It seeks judgment for a loan balance not fully paid off. Defendant Yoslyn G. Sigrah was personally served with the complaint and summons on December 18, 2019. (Jason F. Sigrah has not yet been served.) Although served, Yoslyn G. Sigrah did not answer the complaint or otherwise defend. On January 28, 2020, the clerk, upon the bank’s request, entered her default.

The bank now asks that a default judgment be entered against Yoslyn G. Sigrah. It contends that the $7,869.19 it seeks is a sum certain and therefore asks that the court clerk enter the default judgment. The $7,869.19 sum includes $71.42 in accrued interest due, $97.32 in accrued late charges, and $1,200 in attorney’s fees that were added to the loan principal.

The court clerk may enter a default judgment only if it "is for a sum certain or for a sum which can by computation be made certain." FSM Civ. R. 55(b)(1). "Bank loans and promissory notes are classic examples of a sum certain." Setik v. FSM Dev. Bank, 21 FSM R. 505, 515 (App. 2018) ("parties have agreed to the loan’s terms and, when the loan remains unpaid, the amount due can be made certain by computation according to the loan’s agreed terms").

But "[a]ny claim including attorney’s fees is not one for a sum certain," George v. Albert, 17 FSM R. 25, 30 (App. 2010) (citing Bank of the FSM v. Bartolome, 4 FSM R. 182, 184 (Pon. 1990)), because "[a]ttorney’s fees may only be awarded upon a judicial finding that the fees sought are reasonable," FSM Social Sec. Admin. v. Lelu Town, 13 FSM R. 60, 62 (Kos. 2004). Since the bank requests a default judgment that includes $1,200 in legal fees (attorney’s fees), the default judgment the bank requests is not for a sum certain. The clerk cannot grant it. Only the court can grant it.

The attorney’s fees request is based on provisions in the Sigrahs’ loan agreements. The bank prefers to refer to paragraph 14 in its Security Agreement with the Sigrahs. But that document is a chattel mortgage, and the bank is not asking to foreclose that mortgage. The bank seeks to enforce the Sigrahs’ promissory note. That note provides that "all reasonable attorney’s fees and collection costs shall be paid by the Borrower [the Sigrahs] or shall be added to the principal of this note." Amended & Restated Promissory Note, para. 4 (Oct. 17, 2014). This stipulation in the promissory note for attorney’s fees is valid and will be enforced, but only to the extent it is reasonable. See Dole v. Wade, 510 S.W.2d 909, 911-12 (Tenn. 1974).

Except in an unusual case (such as vexatious litigation tactics by a judgment-debtor), 15% is the upward limit for, the court, in a debt collection case, to deem an attorney’s fee reasonable when it is awarded pursuant to a contractual agreement to pay attorney’s fees. LPP Mortgage Ltd. v. Maras, 12 FSM R. 112, 113 (Chk. 2003); Bank of Hawaii v. Jack, 4 FSM R. 216, 221 (Pon. 1990); see also FSM Dev. Bank v. Adams, 14 FSM R. 234, 244 n.4 (App. 2006) (under FSM Supreme Court case law, 15% is the usual maximum allowed for attorney’s fees in a collection case); Mobil Oil Micronesia, Inc. v. Benjamin, 10 FSM R. 100, 103 (Kos. 2001) (attorney’s fees in a debt collection case will be limited to a reasonable amount not to exceed 15% of the amount due on the loan at the time of default). Creditors must establish that the attorney’s fees, that are to be charged to a debtor pursuant to a promissory note provision, are reasonable in relation to the amount of the debt as well as to the services rendered. Bank of Hawaii v. Jack, 4 FSM R. 216, 220 (Pon. 1990).

The requirement, that attorney’s fees awards will be included in a judgment only after the court has determined that the fees sought are reasonable, applies regardless of how the attorney’s fees are characterized - whether the fees are to be added on to the debt in the judgment, or capitalized as part of the debt’s principal, or are the sole subject matter of the lawsuit. See Saimon v. Wainit, 16 FSM R. 143, 147-48 (Chk. 2008) (even when enforcing a fee contract, the attorney’s fee must still be reasonable or the court will reduce it). A creditor plaintiff cannot, by adding its attorney’s fees to the debt’s principal, circumvent the court’s duty to first determine those fees’ reasonableness before imposing them on a debtor defendant. It is an abuse of the trial court’s discretion to award attorney’s fees without first determining their reasonableness. Albatross Trading Co. v. Aizawa, 13 FSM R. 380, 382 (Chk. 2005) (court is the final arbiter of an attorney fee award’s reasonableness).

Twelve hundred dollars not only exceeds 15% of the loan amount - principal (not including the $1,200 legal fees), interest, and late fees - due when the Sigrahs’ loan was sent to collection, but it also seems unreasonable for the work that the filings have shown to have been performed (a demand letter). "[A]ny party seeking attorney’s fees . . . always beae burden of prof providing sufficient evidence to prove its claim." Saimon, 16 FSM R. at 148 (citing People of Rull ex rel. Ruepong v. M/V Kyowa Violet, 15 FSM R. 53, 63 (Yap 20re17;d on other gror grounds, 16 FSM R. 49 (App. 2008)). And nothing was submitted about fees for filing the complaint and the default judgment request.

Accordingly, the court will set the attorney’s fees at $200. There being no just cause for delay, the clerk is directed to enter a judgment against defendant Yoslyn G. Sigrah for $6,869.19.

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