Marshall Islands National Development Bank v Alik and Alik [1989] MHSC 12; 1 MILR (Rev) 193 (12 December 1989)

1 MILR (Rev.) 193

IN THE SUPREME COURT
REPUBLIC OF THE MARSHALL ISLANDS

S.Ct. CIVIL NO. 89-04
(High Ct. Civil No. 1987-032)

MARSHALL ISLANDS NATIONAL
Plaintiff-Appellee,

-v-

HELENA AND JIMA ALIK,
Defendants-Appellants.

APPEAL FROM THE HIGH COURT

DECEMBER 12, 1989

ASHFORD, C.J.
TENNEKONE, A.J., and PHILIPPO, A.J. (sitting by designation)

SUMMARY:

The High Court entered judgment on the complaint, answer, motions and discussions with counsel for the parties without taking testimony or admitting exhibits. The Supreme Court found the record insufficient to support the judgment and remanded the case to the High Court for proceedings as necessary to enter a judgment on the merits, consent decree, confirmation of settlement, dismissal or other appropriate disposition as the evidence or agreement of the parties might dictate.

DIGEST:

1. JUDGMENTS – In General: Judgment may be entered only upon a record sufficient to support it.

2. JUDGMENTS – Same: Absent a stipulation that an agreement is valid, the High Court must, before rendering judgment on an agreement, find that it is valid under contract law and has not been superseded by any subsequent agreement.

OPINION OF THE COURT BY ASHFORD, C.J.

This is an appeal from a judgment in favor of Plaintiff-Appellee Marshall Islands National Development Bank, Inc. ("Bank") in an action against Jima and Helena Alik ("Alik") for default on a loan.

I.

On March 2, 1987, Bank filed a complaint against Alik, alleging that Alik had executed a promissory note evidencing a loan from Bank in the amount of $107,879.56. Bank also alleged that Alik defaulted on this loan and that at the time of default the outstanding balance, including interest, was $175,740.48. Bank alleged that the terms of the note included a provision for acceleration of balance due upon default. Bank also alleged that Alik had executed and delivered to Bank two real property mortgages as security for the loan.

Bank prayed for judgment in its favor against Alik in the sum of $175,740.48 with interest thereon at the rate of 6 per cent per annum from date of judgment; attorneys' fees in the sum of $20,375.00 in addition to court costs "incurred herein"; foreclosure of all security agreements and mortgages to pay sums owed Bank; and such other and further relief as the court may deem just and proper.

Alik filed an answer admitting that the High Court had jurisdiction over the dispute and denying all other allegations of the complaint.

On October 28, 1987, Alik moved to dismiss the case. Apparently this motion was never ruled upon. The motion alleged that Bank had prevented Alik from handling the loan fund and had itself mismanaged the fund and made unnecessary expenditures. Alik also alleged that they requested copies of Bank's records concerning the management of the fund but never received any such documentation. Alik further alleged they had no responsibility for Bank's attorneys' fees because a settlement had already been made between Bank and Alik. Alik indicated a document was attached to the motion supporting the existence of a settlement but no such document is contained in the record.

Bank then filed a motion for an order restraining Alik from collecting any rental money due from four rental units and an order requiring that all such rental money collected be placed in an escrow account until all the issues in the action were fully adjudicated. Alik received notice that a hearing was scheduled for March 11, 1988, and that they were to appear. There is no record of a hearing taking place on this motion. March 11, 1988, is the date of the agreement on which the High Court based its judgment.

The written agreement between the parties dated March 11, 1988, stipulated that the outstanding balance of the account on January 31, 1988, stood at $127,078.35 and provided that tenants would pay rent directly to Bank. The agreement also stipulated that Bank would pay any insurance premiums, taxes and maintenance expenses relating to the four apartments and that Alik would not pay any legal expenses or fees in connection with the present lawsuit.

On January 16, 1989, Bank filed a motion for entry of judgment based on the March 11, 1988, agreement. Bank referred to the agreement as a "settlement agreement" and attached a copy of it to the motion.

On February 13, 1989, the High Court ordered judgment in favor of Bank in the amount of $127,078.35 with post-judgment interest accruing at a rate of 9%, and denied Bank's claim for legal expenses and fees. The Court also ordered that all other terms in the March 11, 1988, agreement be incorporated by reference and made a part of the judgment.

II.

[1] The question presented on appeal is whether it was proper for the High Court to enter judgment as it did on the basis of the record before it. For the reasons set out below this Court finds that the record is insufficient to support the judgment and remands the case to the High Court for action consistent with this opinion.

III.

A. The Record

The High Court had before it the complaint, the answer, a motion to dismiss, a motion for injunction, and a motion for entry of judgment, each with accompanying exhibits including a copy of the March 11, 1988, agreement. The High Court did not take testimony or admit exhibits at the hearing on the motion for entry of judgment, but only heard argument by Bank's counsel and Alik and representations by Alik. The following excerpt from the transcript is indicative of that argument:

Mr. Alik: We agreed with what we signed here.

....

Mrs. Alik: During that time we made that settlement it was with another Counsel. And the Counsel informed us that he was going to drop this case.

....

Mr. Michelsen

[Bank's Counsel] .....the fact of the matter is, the matter wasn't dropped obviously. What did Dennis [Bank's counsel at the time of the agreement] want is the matter to be dismissed and not be brought back and not pay.

....

Mrs. Alik: We were all present with Mr. [Dennis] Reeder, at that time in his office while Mr. Reeder, himself called the Courthouse and informed that the settlement has been made and the case be dropped.

....

Court: Well, I don't know why that one wasn't included in that agreement, and normally that was – but in any case, it doesn't mean that you don't have to pay anything. They did file a suit against you based on his notes, do you understand?

....

Court: ...Are you saying that this agreement is not good?

....

Court: ....The question is, you did sign these documents you agreed that you owed the money.

....

Mr. & Mrs.: Yes

....

Mr. Michelsen: ...I can't imagine Mr. Reeder had been presented in his way to make this settlement in his office. I can't imagine Mr. Reeder called in Court and informed that Court that there is going to be a trial concerning this settlement. But I would not be sure that Mrs. Alik would be able to specifically remember or if she ever heard Mr. Reeder talking over the phone exactly what he said to Court in English a year later.

....

Mrs. Alik: ....Mr. [Dennis] Reeder informed us that nobody will have to show up in Court because of the case has already been dismissed.

....

Court: Mr. Michelsen, this matter has not been brought to the attention of this Court after this agreement was signed on March 11, there is inference that this matter was – this case was settled, will you agree? Which means that the inference or intent was to dismiss the case, but if you have an option to bring the new case again based on this agreement.

....

Mr. Michelsen: Your Honor, I don't know what has been dropped because there was following up paper work was done at that time, the point is that this agreement is the resolution of the underlying issues in this case.

In addition, during the hearing Plaintiffs counsel refers to an "August agreement" and Jima Alik refers to an agreement entered into "last summer" but the only agreement before the court is the one dated March 11. It is not clear from the High Court's order what evidence its judgment is based upon or whether the court intended a judgment on the merits or something else.

B. Judgment on the Merits

[2] Aside from the fact that the March 11, 1988 agreement was subsequent to and not mentioned in the complaint and answer, unless the parties have stipulated that the agreement is valid, the High Court must before rendering judgment on the agreement find that the agreement is valid under contract law and that it has not been superseded by any subsequent agreement. There does not appear to have been any stipulation nor was any evidence taken as to whether there was a valid contract. For example, was dismissal of the lawsuit, allegedly relied upon by Alik, a condition precedent to or consideration for the contract?

C. Alternative to Judgment on the Merits

If the agreement did not amount to a resolution of all the issues in dispute, it may nevertheless end the lawsuit if that is the intention of the parties. It was made on the same day a hearing was scheduled on a motion to enjoin Alik from receiving rent from tenants and to have the rent paid directly to Bank. The fact that the agreement provided for this result, but did not establish a rate of interest or schedule for repayment, suggests that it was intended to obviate the motion for injunction and not the entire lawsuit. To the contrary are the facts that Bank has urged judgment and Aliks have urged dismissal on the basis of the agreement. If there was an intent to end the suit, that intent may have been to end it by dismissal through settlement or novation, to have a settlement approved or confirmed by the court, or to have the court enter a consent decree.

D. What is the Nature of the Judgment?

Not only is it impossible for this Court to determine from the record what the parties intended, but also the record leaves this Court in doubt as to what the High Court intended.

In order to determine whether the judgment was proper, this Court must know whether the High Court's judgment was a consent decree, an approval or confirmation, an order to enforce a settlement, or something else entirely. A review of the transcript of the hearing indicates that the High Court may even have viewed its judgment as a dismissal:

Court: Mr. Michelsen, I think I agree with you. I think what they're asking for is that because this agreement which you entered into we'll make upon the record so that the case can be dismissed.

....

Court: ...The reason why Mr. Michelsen is here, is to have these agreements entered on the record and the case will be dismissed, and the Court so Ordered. The Court Orders these agreements entered into voluntarily liable of which you agreed – which you admitted made upon of the record and make an Entry of Judgment is Ordered based upon the agreement of March 11, 1988[.]

The Court did not take evidence for an adjudication on the merits nor did the admissions in argument provide an adequate basis for that adjudication.

The judgment entered by the High Court is reversed and the cause is remanded for such proceedings as are necessary to render a judgment on the merits or consent decree, confirmation of settlement, dismissal or other appropriate final order as the evidence or the mutual agreement of the parties may dictate.

Decided on the record and briefs submitted by:

Jima J. Alik for Defendants-Appellants

R. Barrie Michelsen for Plaintiff-Appellee.