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MARTIN YINUG, Associate Justice:
The court has received the summary judgment motion filed on January 11, 2002, by plaintiff Jayco International, Inc., ("Jayco"); the response filed on January 17, 2002, by defendant VCS ("VCS"); and Jayko's reply.
Jayko has moved for summary judgment based on the following agreement which was appended to a single page record of VCS's purchases from Jayko.
Interest at 1-1/2% per month will be added to above until fully paid
The first line of the foregoing is typewritten. There appears no dispute that the remaining portion, with the exception of the signature of Jose San Nicolas, is in the handwriting of Milan Kothari, president of Jayko. Nor does there appear to be any dispute that Mr. San Nicolas, the owner and general manager of VCS, signed the agreement.
In its response, VCS admits owing the sum of $42,216.92, but disputes the interest figure of $16,464.60. The interest was not computed on a declining balance basis. Rather, eleven payments totalling $78,795.50 were made on a debt of $121,012.42 over a period from October of 1998 to September of 2000. Jayko took the amount owed as of September of 2000, which was the $42,216.92, and computed interest on that amount for the 26 month period from November of 1998 through December of 2000. That interest so calculated as of January 1, 2001, was $16,464.60. As of November, 1998, which was the starting date for interest calculation, there was approximately $106,000 outstanding. Jayko has previously pointed out that the declining balance method of interest calculation with payments applied first to interest, then to principal, would have resulted in a principal of $66,900.59 and interest of $11,086.73 ) versus principal of $42,216.92 and interest of $16,464.60 ) for the 26 month period.
But VCS contends that historically no interest at all had been charged on account balances; that Jayko's manner of calculating interest is arbitrary and capricious; and that it amounts to "backdating" interest. Mr. San Nicolas asserts in his affidavit that he believed that by signing the agreement he was acknowledging that VCS owed the principal amount of $42,216.92. He also appears to contend that he did not think VCS was liable for the interest for the period prior to January 1, 2001. VCS urges that the interest question presents a fact issue precluding summary judgment.
Even assuming that Jayko did not historically charge interest on its account with VCS, nothing precludes the parties to this commercial transaction from coming to a new agreement regarding installment payments on the outstanding indebtedness that also included an interest component calculated over the prior 26 months period, so long as the interest rate charged did not contravene FSM public policy as set out in 34 F.S.M.C. 204. Since Jayko is seeking 18% interest per annum on the principal remaining after VCS's last payment, no usury issue arises, nor can the interest charged be said to be arbitrary and capricious on any other basis. Thus the interest portion of the agreement is binding.
As to Mr. San Nicolas' statements in his affidavit concerning his understanding of the agreement, the plaintiff has aptly cited to the following from Nanpei v. Kihara, 5 FSM Intrm. 342, 345 (Pon. 1992), where plaintiff was granted summary judgment:
Mr. Nanpei also asserts that he "never understood or believed" that plaintiff was going to require that the money be returned. However, contracts are not interpreted on the
[10 FSM Intrm. 505]
basis of the subjective uncommunicated views, or secret hopes of one of the parties. Instead, courts interpret and enforce agreements on an objective basis, according to the reasonable expectations of the parties based upon the circumstances known to the parties and their words and actions, at the time the agreement was entered into.
The agreement at issue specifies principal and interest in determining the amount owed as of January 1, 2001, and also indicates the prospective interest rate. The fact Mr. San Nicolas' understanding of the agreement is at variance with its express terms does not raise an issue of fact. Accordingly, Jayko's motion for summary judgment is granted.
Attorney fees of $2,740 are awarded in accordance with the fee affidavit submitted by plaintiff's counsel. Judgment issues herewith.
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