FSM SUPREME COURT TRIAL DIVISION
Cite as Bank of FSM v. Hebel
10 FSM Intrm. 279 (Pon. 2001)
 
[10 FSM Intrm. 279]
 
BANK OF THE FEDERATED STATES OF
MICRONESIA,
Plaintiff,
 
vs.
 
LENSTER HEBEL and BRIGIDA HEBEL,
Defendants.
 
CIVIL ACTION NO. 2000-061
 
ORDER
 
Andon L. Amaraich
Chief Justice
 
Decided: July 3, 2001
 
APPEARANCES:
 
For the Plaintiff:                                 Stephen V. Finnen, Esq.
                                                            Law Offices of Saimon & Associates
                                                            P.O. Box 1450
                                                            Kolonia, Pohnpei FM 96941
 
For the Defendant:                            Kosaksy Phillip, Esq.
(Brigida Hebel)                                 Micronesian Legal Services Corporation
                                                            P.O. Box 129
                                                            Kolonia, Pohnpei FM 96941
 
 
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HEADNOTES
 
Civil Procedure ) Summary Judgment
     Summary judgment must be entered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of any material fact and that the moving party is entitled to judgment as a matter of law. In considering a summary judgment motion, a court must view the facts and inferences in a light that is most favorable to the party opposing the motion. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 282 (Pon. 2001).
 
Civil Procedure ) Summary Judgment
     When a summary judgment motion is made and supported, an adverse party may not rest upon the mere allegations or denials of his pleading, but must set forth specific facts, by affidavits or
 
[10 FSM Intrm. 280]
otherwise, showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, must be entered against the adverse party. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 282 (Pon. 2001).
 
Civil Procedure ) Summary Judgment
     In a summary judgment motion, the moving party has the initial burden of showing that there are no triable issues of fact. Once the moving party has done this, the burden then shifts to the nonmoving party to show that there is a triable issue. The nonmoving party must show that there is enough evidence supporting his position to justify a decision upholding his claim by a reasonable trier of fact. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 282 (Pon. 2001).
 
Civil Procedure ) Summary Judgment
     When the only issues to be decided in a case are issues of law, summary judgment is appropriate. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 282 (Pon. 2001).
 
Civil Procedure ) Summary Judgment
     Once a party moving for summary judgment has presented a prima facie case of entitlement to summary judgment, the burden shifts to the non-moving party to produce evidence showing a genuine issue of material fact. The non-moving party may not rely on unsubstantiated denials of liability to carry its burden, but must present some competent evidence that would be admissible at trial that there is a genuine issue of material fact. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 282-83 (Pon. 2001).
 
Civil Procedure ) Summary Judgment
     In order to be successful on a summary judgment motion, the plaintiff must also overcome all affirmative defenses that the defendants have raised. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 284 (Pon. 2001).
Debtors' and Creditors' Rights
     An agreement between two defendants who are jointly liable on the note, whereby one of them would assume full responsibility on the note (and thereby "releasing" the other from responsibility on the note), is not binding on the plaintiff, especially when the note's language clearly states that in the case of joint obligors, one of the obligors can only be released from liability via a signed writing, signed by an official of the plaintiff bank. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 285 (Pon. 2001).
Debtors' and Creditors' Rights
     An agreement between two defendants, jointly responsible on a loan, as to who will be responsible to pay back the loan is not binding on the creditor unless the creditor clearly assents to the agreement. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 285 (Pon. 2001).
Debtors' and Creditors' Rights
     When the parties' written agreement requires that a writing signed by a bank officer would be necessary to release one of the obligors from responsibility on the note, the presence of a bank employee at the defendants' divorce proceeding (regardless of whether that employee were an officer or agent), and his failure to object to the defendants' settlement agreement, without more, would not release one of the defendants from liability to the bank on the note. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 285 (Pon. 2001).
 
Civil Procedure ) Res Judicata
     Res judicata prevents parties to an action from relitigating an issue which has been already been fully litigated. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 285 (Pon. 2001).
 
[10 FSM Intrm. 281]
 
Civil Procedure ) Res Judicata
     Once a judgment has been issued and the appeal period has expired or the decision is affirmed on appeal, the parties are precluded from challenging that judgment or from litigating any issues that were or could have been raised in that action. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 285 (Pon. 2001).
 
Civil Procedure ) Res Judicata
     The doctrine of res judicata generally does not operate to affect strangers to a judgment, that is, to affect the rights of those who are neither parties nor in privity with a party therein. Res judicata only applies to those who were parties to a prior litigation. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 285 (Pon. 2001).
 
Civil Procedure ) Res Judicata
     A party to a prior litigation cannot use the doctrine of res judicata as a shield to prevent a party to a subsequent litigation (who was not a party to the prior action) from litigating an issue which was not litigated in the prior action. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 285 (Pon. 2001).
 
Civil Procedure ) Res Judicata; Debtors' and Creditors' Rights; Domestic Relations
     When a divorced couple is jointly responsible on a promissory note, no agreement they could make between them could possibly prevent the creditor from pursuing its claims against either or both of them, and since the issue of whether one of the defendants could have relieved himself or herself from responsibility to the creditor could not have been litigated in the divorce proceeding, the creditor cannot be precluded from litigating that issue. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 286 (Pon. 2001).
 
Debtors' and Creditors' Rights ; Domestic Relations
     A divorcing couple is free to enter into whatever agreement they choose as to who between the two of them will be responsible to repay a bank loan. However, such an agreement can have no effect on bank's right to seek repayment of the loan from either or both of them. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 286 (Pon. 2001).
 
Civil Procedure ) Summary Judgment
     When the plaintiff has presented a prima facie case of entitlement to summary judgment, the burden shifted to the defendant to produce evidence showing a genuine issue of material fact to defeat plaintiff's motion for summary judgment, and when the defendant has not shown there is a triable issue of fact which will defeat the plaintiff's summary judgment motion, the plaintiff is entitled to judgment as a matter of law. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 286 (Pon. 2001).
 
Judgments
     When the court approves a stipulation that does not adjudicate all the claims or the rights and liabilities of all the parties, the stipulation does not constitute a final judgment. Bank of the FSM v. Hebel, 10 FSM Intrm. 279, 287 (Pon. 2001).
 
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COURT'S OPINION
 
ANDON L. AMARAICH, Chief Justice:

     This matter comes before the Court on motion of plaintiff Bank of the Federated States of Micronesia for an order granting summary judgment in favor of plaintiff and against defendant Brigida

[10 FSM Intrm. 282]

Hebel only. This matter also comes before the Court on stipulation to entry of judgment on cross-claim filed by defendant Brigida Hebel and defendant Lenster Hebel. For the reasons stated below, the Court grants plaintiff's motion for summary judgment, and approves the stipulation to entry of judgment but does not enter a final judgment in favor of Brigida Hebel and against Lenster Hebel at this time.

Background

     On October 23, 2000, plaintiff filed a complaint and summons against defendants Lenster Hebel and Brigida Hebel (hereinafter collectively referred to as "defendants"). On January 17, 2001, defendant Brigida Hebel filed her answer to plaintiff's complaint, and a cross-claim against Lenster Hebel. As of the date of this order, Lenster Hebel has not filed a responsive pleading to either the complaint or the cross-claim.

     Plaintiff's motion for summary judgment was filed on February 9, 2001. Defendant Brigida Hebel filed a motion for enlargement of time on February 19, 2001. On March 6, 2001, this Court entered an order granting defendant's request for an extension of time to file a response to plaintiff's motion for summary judgment. Brigida Hebel filed her response to plaintiff's motion for summary judgment ("defendant's response") on February 22, 2001. Plaintiff filed its reply to defendant's response ("plaintiff's reply") on March 6, 2001.

I. Plaintiff's Motion fI. Plaintiffs motion for Summary Judgment

     Under Rule 56(c) of the FSM Rules of Civil Procedure, summary judgment shall be entered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of any material fact and that the moving party is entitled to judgment as a matter of law. In interpreting this rule, the Court, in considering a motion for summary judgment, must view the facts and inferences in a light that is most favorable to the party opposing the motion. See Federated Shipping Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3, 16 (Pon. 1989).

Further, FSM Civ. R. 56(e) provides that:

     When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or otherwise supported in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

     In a motion for summary judgment the moving party has the initial burden of showing that there are no triable issues of fact. Once the moving party has done this, the burden then shifts to the nonmoving party to show that there is a triable issue. The nonmoving party must show that there is enough evidence supporting his position to justify a decision upholding his claim by a reasonable trier of fact. Alik v. Kosrae Hotel Corp., 5 FSM Intrm. 294, 295 (Kos. 1992). When the only issues to be decided in a case are issues of law, summary judgment is appropriate. Etscheit v. Adams, 6 FSM Intrm. 365, 373 (Pon. 1994).

     Once a party moving for summary judgment has presented a prima facie case of entitlement to summary judgment, the burden shifts to the non-moving party to produce evidence showing a genuine issue of material fact. The non-moving party may not rely on unsubstantiated denials of liability to carry its burden, but must present some competent evidence that would be admissible at trial that there

[10 FSM Intrm. 283]

is a genuine issue of material fact. Urban v. Salvador, 7 FSM Intrm. 29, 30 (Pon. 1995); see also FSM Social Sec. Admin. v. Weilbacher, 7 FSM Intrm. 442, 444 (Pon. 1996); Kyowa Shipping Co. v. Wade, 7 FSM Intrm. 93, 95 (Pon. 1995).

Analysis

A. Plaintiff's Argument

    Plaintiff filed its motion for summary judgment against defendant Brigida Hebel only. In a nutshell, the motion states that both Lenster Hebel and Brigida Hebel entered into a contract with plaintiff by executing a promissory note with plaintiff and borrowing $15,372.32. Plaintiff filed suit to recover unpaid principal amount of $7,056.95, accrued interest of $3,124.54, late fees, attorneys fees, etc.

     Plaintiff argues there are no triable issues of fact and that judgment should be entered in favor of plaintiff as a matter of law. The documentation is clear concerning the admitted debt owed. The promissory note upon which plaintiff's action is based, attached as Exhibit "A" to plaintiff's complaint, and which was executed by Brigida Hebel, states in pertinent part:

LENDER'S RIGHTS: "Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued interest immediately due, without notice, and then I [borrower] will pay that amount."

`Default' is defined "I will be in default if any of the following happens: (a) I fail to make any payment when due."

"Lender may hire or pay someone to help collect this Note if I do not pay. I also will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit. . . . If not prohibited by applicable law, I will also pay any court costs, in addition to all other sums provided by law."

"If a payment is 16 days or more late, I will be charged 5.000[%] of the regularly scheduled payment or $5.00, whichever is less."

     In support of its motion, plaintiff establishes through the affidavit of Maria Panuelo, the Senior Collection/Recovery Officer for plaintiff, the following facts:

1. In connection with plaintiff's lending practices, plaintiff keeps records of all acts and events, including payments, concerning each loan. Payment records are made at or near the time of payment by, or from information transmitted by, a person with knowledge, and are kept in the course of a regularly conducted business, and it is the regular practice of the bank to make the reports and records.

2. Ms. Panuelo's examination of defendant's payment records on the loan which is the subject of this litigation demonstrates that defendants Lenster Hebel and Brigida Hebel executed a promissory note on May 2, 1996, agreeing that in return for a loan in the principal amount of $15,372.32, they would jointly agree to make payments of $533.72 to plaintiff each month for 35 months commencing June 5, 1996 and ending April 5, 1999, and making one last irregular payment in the amount of $533.92 on May 5, 1999. The interest on this loan was 15% per annum. A true and correct copy of this

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promissory note is attached to Ms. Panuelo's affidavit as Exhibit A.

3. A true and correct copy of the loan payment history of this note is attached to Ms. Panuelo's affidavit as Exhibit B. The loan payment history shows that defendants are in default on the loan as they failed to make the monthly payments when due. The loan was charged off by plaintiff on August 31, 1998. On the date of charge off, principal remaining on the loan was $7,056.95, and interest was owed in the amount of $890.80.

4. As of January 16, 2001, defendants owed the following sums to plaintiff:

Principal: $7,056.95

Pre-charge off interest: $890.80

Post charge off interest to January 16, 2001 $2,517.30

Bank late fees $15.00

5. Interest is accruing on the principal at $2.89 per day.

Plaintiff points out that Brigida Hebel admits that she, along with defendant Lenster Hebel, executed the above described promissory note in favor of plaintiff. Plaintiff argues that the affidavit of Maria Panuelo establishes that defendants defaulted on the note and are indebted to plaintiff in the amounts described above.

Plaintiff argues that the debt is clearly owed as the evidence plaintiff produced clearly establishes the existence of the debt. Further, Brigida Hebel has not disputed that the debt is owed, nor produced any evidence disputing the amount of the debt.

Affirmative Defenses

Plaintiff argues that in order to be successful on a motion for summary judgment, plaintiff must also overcome all affirmative defenses that have been raised by defendants. FSM Dev. Bank v. Rodriguez Corp., 2 FSM Intrm. 128, 130 (Pon. 1985). Plaintiff argues all three of Brigida Hebel's affirmative defenses are overcome.

First Affirmative Defense:

     1. In a stipulation between the defendants herein and granted by the court in PCA No. 98-2000, defendant Lenster Hebel is to assume full responsibility of the subject loan. Therefore, defendant Brigida Hebel has been released from this obligation. See PCA No. 98-2000 at pp. 6-7.

In dismantling this affirmative defense, plaintiff argues that by signing the promissory note, Brigida Hebel made the following promises:

     Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. I and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, protest and dishonor. Upon any change in the terms of this Note, and unless otherwise explicitly stated in writing, no party who signs this Note, whether as maker guarantor, accommodation maker or endorser, shall be released from liability.

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     The Court finds that that the agreement made between the defendants, who are jointly liable on the note, whereby one of them would assume full responsibility on the note (and thereby "releasing" the other from responsibility on the note), is not binding on plaintiff. The language of the note clearly states that in the case of joint obligors, one of the obligors can only be released from liability via a signed writing, signed by an official of plaintiff bank. As there is no such signed writing, Brigida Hebel has not been "released" from her obligation to plaintiff and remains liable on the promissory note. Therefore, this defense is without merit.

Second Affirmative Defense

     2. During the meeting and discussions of the defendants' wish to have defendant Lenster Hebel responsible for full payment of the loan in question, Mr. Steve Joseph, Manager of the Bank of the FSM, was present but did not raise any objections [to defendants' agreement to make Lenster Hebel fully responsible to pay back the loan]. Thus, the stipulation of the defendants was presented to the court in PCA No. 98-2000 for judgment. Therefore, plaintiff's claims against defendants are barred by the doctrine of estoppel and waiver.

     Plaintiff correctly points out that an agreement between two defendants, jointly responsible on a loan, as to who will be responsible to pay back the loan is not binding on the creditor unless the creditor clearly assents to the agreement. Black Micro Corp. v. Santos, 7 FSM Intrm. 311, 314-15 (Pon. 1995). In this case, the written agreement between the parties (the promissory note) requires that a writing signed by an officer of plaintiff would be necessary to release one of the obligors from his responsibility on the note. Even if an employee of plaintiff were present at the defendants' divorce proceeding (and regardless of whether that employee were an officer or agent), and that person failed to object to the defendants' settlement agreement, that fact, without more, would have no effect of releasing one of the defendants from their liability to the bank on the note.

     Therefore, the Court finds that Brigida Hebel's argument that plaintiff's claims are barred by estoppel and waiver is without merit.

Third Affirmative Defense

     3. Plaintiff's claims against defendant Brigida Hebel are barred by the doctrine of res judicata.

     Res judicata prevents parties to an action from relitigating an issue which has been already been fully litigated. Res judicata has been explained by the courts in the FSM as follows:

     A fundamental principle of the common law is that once a judgment has been issued and the appeal period has expired or the decision is affirmed on appeal, the parties are precluded from challenging that judgment or from litigating any issues that were or could have been raised in that action.

United Church of Christ v. Hamo , 4 FSM Intrm. 95, 106 (App. 1989).

     However, the doctrine of res judicata generally does not operate to affect strangers to a judgment, that is, to affect the rights of those who are neither parties nor in privity with a party therein. Res judicata only applies to those who were parties to a prior litigation. A party to a prior litigation cannot use the doctrine of res judicata as a shield to prevent a party to a subsequent litigation (who was not a party to the prior action) from litigating an issue which was not litigated in the prior action.

[10 FSM Intrm. 286]

     Defendants Lenster Hebel and Brigida Hebel could not have litigated the issue of whether one of them would be relieved from their responsibility to plaintiff. Since they are jointly responsible on the promissory note, no agreement they could make between them could possibly prevent plaintiff from pursuing its claims against either or both of them. Since the issue of whether one of the defendants could have relieved himself or herself from responsibility to the plaintiff could not have been litigated in the divorce proceeding, plaintiff cannot be precluded from litigating that issue in this case.

     Therefore, the Court finds this affirmative defense similarly without merit.

B. Brigida Hebel's Response to Plaintiff's Motion for Summary Judgment

     Brigida Hebel argues that she and defendant Lenster Hebel had a settlement meeting related to their divorce litigation in which both Lenster Hebel and Brigida Hebel agreed and stipulated that Lenster Hebel was to assume full liability of promissory note which both signed in favor of plaintiff. And, during the settlement meeting Mr. Steve Joseph, a manager of the plaintiff bank, was present but did not raise any objection or comments regarding the stipulation of the defendants as to the transfer of liability of the loan. Ms. Hebel argues that since Mr. Joseph did not object to defendants' agreement whereby Lenster Hebel would assume full responsibility to pay back the loan, plaintiff has thereby consented to releasing Brigida Hebel from her responsibility on the note.

     As explained above, defendants are free to enter into whatever agreement they choose as to who will be responsible between the two of them to pay back the loan to the bank. However, such an agreement can have no effect on plaintiff's right to seek repayment of the loan from either or both of them.

     Brigida Hebel also argues that in the interests of judicial economy and fairness, it would be most appropriate if plaintiff's motion for summary judgment is decided simultaneously with the merits of defendant Brigida Hebel's cross-claim. While this may be most beneficial to Brigida Hebel, it would be unfair to plaintiff. Since Brigida Hebel is fully liable on the debt to plaintiff, plaintiff may not be interested in pursuing its claims against Lenster Hebel. And the promissory note signed by both defendants gives plaintiff the absolute right to seek repayment from one of the defendants and not the other, no matter what agreement the defendants enter into between themselves.

C. Conclusion

     The Court finds plaintiff has presented a prima facie case of entitlement to summary judgment. Therefore, the burden shifted to Brigida Hebel to produce evidence showing a genuine issue of material fact to defeat plaintiff's motion for summary judgment. Since Brigida Hebel has not shown there is a triable issue of fact which will defeat plaintiff's motion for summary judgment, plaintiff is entitled to judgment as a matter of law.

II. Stipulation to Entry of Judgment on Cross-Claim

     On May 25, 2001, Defendants Brigida Hebel and Lenster Hebel filed a stipulation to entry of judgment on [Brigida Hebel's] cross-claim against Lenster Hebel. The parties stipulate as follows:

     1. Cross-defendant Lenster Hebel shall be liable for all claims asserted against cross-claimant Brigida Hebel by plaintiff.

     2. That in the event Brigida Hebel is held liable to plaintiff in any amount, including costs of suit and reasonable attorney's fees, Brigida Hebel be awarded judgment

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                    against Lenster Hebel.

3. That a judgment consistent with the above terms be entered by the Court.

Analysis

Rule 54(b) of the FSM Rules of Civil Procedure provides as follows:

     (b) Judgment Upon Multiple Claims or Involving Multiple Parties. When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.

Id. (emphasis added).

     It appears that defendants have entered into an agreement whereby Lenster Hebel will indemnify Brigida Hebel for any and all liability she is adjudged to have to plaintiff. Since approval of the stipulation does not adjudicate all the claims or the rights and liabilities of all the parties, this does not constitute a final judgment in favor of Brigida Hebel and against Lenster Hebel. Therefore, although the Court will approve the stipulation between defendants, it will not enter judgment in favor of Brigida Hebel and against Lenster Hebel at this time.

     Therefore, it is hereby ordered that:

     (1) Plaintiff's motion for summary judgment is hereby granted.

     (2) The Court approves the Stipulation to Entry of Judgment filed by Brigida Hebel and Lenster Hebel but does not issue judgment in favor of Brigida Hebel and against Lenster Hebel at this time.

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