* * * *

HEADNOTES

* * * *

COURT'S OPINION

ANDON L. AMARAICH, Chief Justice:

I. Background

     The appellant seeks a stay of execution of judgment and approval of a supersedeas bond pursuant to FSM Civil Rule 62(d) and FSM Appellate Rule 8. On November 21, 2001, I issued a temporary stay so that I could review the record of the trial court concerning the denial of the supersedeas bond submitted by appellant. On November 30, 2001, appellees filed a motion for relief from the November 21, 2001 Order. Appellant filed an opposition to that motion on December 10, 2001. Appellees filed a reply on December 17, 2001.

    On February 14, 2002, the parties were notified by the Clerk of Court that the record ready certificate had been received by the Appellate Division. On February 19, 2002, the Clerk of Court issued a Notice Modifying Certification of Record. On March 6, 2002, appellant's counsel requested an enlargement of time of 30 days, or until April 25, 2002, to file appellant's brief. Appellees filed an Opposition to appellant's motion for enlargement on March 12, 2002. Appellant filed a reply on March 18, 2002.

FSM Civil Rule 62(d) states that:

FSM Civ. R. 62(d). FSM Appellate Rule 8 states in relevant part that an application for a stay of the judgment appealed from pending appeal must ordinarily in the first instance be made in the court appealed from. A motion for such relief may be made to the Supreme Court appellate division or a justice thereof, but the motion must show that: (1) application to the court appealed from for the relief sought is not practicable; (2) that the court appealed from has denied an application; or (3) that the court appealed from has failed to afford the relief which the applicant requested, with any reasons given by the court appealed from for its actions. The motion "normally will be considered by all justices of the court eligible to act with the appellate division in the case, but in exceptional circumstances where such procedure would be impracticable due to the requirements of time, the application may be made to and considered by a single justice of the Supreme Court." FSM App. R. 8.

     Appellant meets criteria (2) set forth above, because the trial court denied appellant's application for approval of a supersedeas bond. I also find that it is impracticable due to the requirements of time

[10 FSM Intrm. 561]

for this motion to be decided by an appellate panel. Currently, Chief Justice Amaraich is the only justice besides Associate Justice Yinug sitting in the FSM Supreme Court. Associate Justice Yinug heard this case in the trial court, and accordingly is disqualified from any appellate panel. To assemble an appellate panel to consider the issues raised by the proposed supersedeas bond motion would be impracticable. Accordingly, it is appropriate under the FSM Appellate Rules for appellant's motion for approval of his supersedeas bond be decided by a single justice of the FSM Supreme Court.

II. Discussion

A. Record from the Trial Court

     The record submitted by appellant from the trial division indicates that Mr. Panuelo submitted a supersedeas bond for court approval in the trial division on September 28, 2001. This supersedeas bond contained a mortgage of certain real property (the IP store and apartments) with an estimated value of $545,142.85,1 executed by Mr. Panuelo in favor of the FSM Supreme Court. The judgment against Mr. Panuelo after trial was in the amount of $388,895.50 plus costs.

     Appellees filed an opposition to appellant's motion on October 5, 2001. Appellees objected to appellant being allowed to submit a mortgage as a supersedeas bond, characterizing it as a "complex, unenforceable IOU bristling with additional possible lawsuits and complex legal issues." Instead, appellees urged the trial court to require appellant to obtain an appropriate surety from a bank or other lending institution. Appellees submit in their opposition to appellant's supersedeas filed in the trial court that a full supersedeas on this judgment would be the amount of the judgment and costs of $980.00, along with approximately two years of interest at nine percent, $70,177.50, for a total of $460,000.53. See Pl. Opp'n at 3-4 (Oct. 3, 2001).

     The trial court issued an order on October 11, 2001, holding in abeyance the motion for approval of the bond and requesting more information from the parties. [Amayo v. MJ Co., 10 FSM Intrm. 427 (Pon. 2001).] Specifically, the trial court gave the parties five days to respond to inquiries that the trial court had about (1) title to the mortgaged land, (2) whether it was possible to transfer the land to a Micronesian trustee instead of the FSM Supreme Court, (3) a requirement that, if the land were transferred to a Micronesian trustee to be held pending appeal, Mr. Panuelo also would be required to submit ten percent of the amount of the judgment in cash as part of the bond.

     After reviewing the submissions of both parties, the trial court issued a second order on October 19, 2001. [Amayo v. MJ Co., 10 FSM Intrm. 433 (Pon. 2001).] This order concluded that the mortgage submitted by Mr. Panuelo was not adequate security, and required appellant to submit a supersedeas bond from a qualified surety. The amount of the bond required by the trial court was not specifically stated; rather the order stated that Mr. Panuelo must submit a bond from a qualified surety "under rule 52 of the FSM Rules of Civil Procedure."2 Generally, a full supersedeas bond would be equal to the amount to which appellees would be entitled if the appeal were unsuccessful, which includes the amount of the judgment, costs, and interest. The trial court gave Mr. Panuelo until November 1, 2001 to submit the supersedeas bond, and ordered that 90% of any amount received up

[10 FSM Intrm. 562]

to $100,000 be placed in an interest bearing account, and the remaining 10% be paid to appellee's counsel. For any amount in excess of $100,000, 95% was to be placed in an interest bearing account, and 5% was to be paid to appellee's counsel.

      Appellant did not submit the supersedeas bond as required, and instead filed a motion in the appellate division, seeking approval of the supersedeas bond in the form of the mortgage on the IP store and apartments.

     On November 1, 2001, appellant's counsel moved for a stay of execution of judgment and approval of a supersedeas bond by the Appellate Division. Appellees filed a First Opposition to appellant's motion on November 5, 2001, and a complete Opposition on November 12, 2001. The trial court issued a writ of execution and a writ of garnishment on November 13 and 14, 2001, respectively. Appellant seeks an order approving the supersedeas bond which already was rejected by the trial court. Thus, my review of the trial court's denial of the supersedeas bond submitted by Mr. Panuelo is essentially an appeal of the trial court's decision, and I will review that decision for abuse of discretion.

      Appellant's primary argument is that supersedeas bonds are not required to be in any particular form in the FSM, and that the mortgage should be accepted by the court as a supersedeas bond because appellant is unable to obtain a cash-backed surety bond. There are a number of other arguments advanced as well, including that the appeal may be rendered moot if the judgment is satisfied, and that Mr. Panuelo may have difficulty recovering his money if it is paid out to appellee and he then is successful in his appeal.

     I find that the trial court did not abuse its discretion in rejecting the proposed supersedeas bond submitted by appellant, which consisted entirely of a mortgage on the IP store and apartments. However, I also find that the trial court failed to consider the unavailability of a cash-backed surety in the Federated States of Micronesia, as well as Mr. Panuelo's precarious financial situation, when it required Mr. Panuelo to submit the full bond or find a cash-backed surety. Accordingly, I will deny appellant's motion for approval of supersedeas bond as submitted, but I also will modify the conditions of the bond and permit appellant to submit the mortgage on his property as part of the supersedeas bond, as set forth below.

     The record of the submissions to the Appellate Division shows that appellant has outstanding loans with the Bank of Hawaii in the amount of $460,000 (secured by a certificate of deposit ("cd") of $312,000), with the Bank of the Federated States of Micronesia in the amount of $65,000 (secured by a cd of $66,000), and with the Bank of Guam in the amount of $300,000 (secured by a cd of $317,000). In addition, the appellant has a tax debt to the national government in the amount of $80,335.92, other judgments against him in the FSM Supreme Court with balances totaling approximately $173,000, and other judgments against him in state and local courts with balances totaling approximately $70,000. Aff. of Ioanis Panuelo (Ex. L to App. Motion for approval of Supersedeas Bond (Nov. 1, 2001)). Mr. Panuelo states in his affidavit that he is not liquid because of all of these debts and because of his newly constructed Ocean View Plaza facility, which is newly operational and was constructed at a cost of $1.5 million. Mr. Panuelo states that he requires capital to operate the IP store and apartments, on which he has offered a mortgage as part of his supersedeas bond. However, Mr. Panuelo also states in his affidavit that he is capable of posting $50,000 cash in addition to the mortgage that was submitted to the trial court. Id.

B. Applicable Law

      The FSM Constitution requires that "[c]ourt decisions . . . be consistent with this Constitution, Micronesian customs and traditions, and the social and geographical configuration of Micronesia. In

[10 FSM Intrm. 563]

rendering a decision, a court shall consult and apply sources of the Federated States of Micronesia." FSM Const. art. IX, § 11. The FSM Supreme Court can and should consider decisions and reasoning of United States courts and other jurisdictions in arriving at its own decisions. It is not, however, bound by those decisions and must not fall into the error of adopting reasoning of those decisions without independently considering suitability of that reasoning for the FSM. Alaphonso v. FSM, 1 FSM Intrm. 209, 212-13 (App. 1982). The judicial guidance clause requires that, in searching for legal principles to serve the FSM, courts must first look to sources of law and circumstances here within the FSM rather than begin with a review of cases decided by other courts. Etscheit v. Santos, 5 FSM Intrm. 35, 38 (App. 1991).

     Rule 62(d) of the FSM Rules of Civil Procedure states that, "when an appeal is taken the appellant by giving a supersedeas bond may obtain a stay . . . . The stay is effective when the supersedeas bond is approved by the court." FSM Civ. R. 62(d). No direction is provided in the rules as to what constitutes an appropriate supersedeas bond. Cases in the FSM recognize that the purpose of a supersedeas bond is to protect the prevailing party below pending the appeal. See Pohnpei v. Ponape Constr. Co., 6 FSM Intrm. 221, 223 (App. 1993). The FSM Rules of Civil Procedure also state that the power of the appellate division, or a single justice thereof, to stay proceedings during the pendency of an appeal is not limited by the provisions of FSM Civil Rule 62: the appellate division, or a justice thereof, may "make any order appropriate to preserve the status quo." 6 FSM Intrm. at 222; FSM Civ. R. 62(g).

     Because there is very little FSM law governing supersedeas bonds, I will consult the laws of the United States for guidance, as the Rules of Civil Procedure in the United States district courts related to supersedeas bonds are similar to those in the FSM. However, as stated above, I also must take into account the circumstances in the FSM, and independently consider suitability of the reasoning adopted by the United States courts for application in the FSM. United States law generally recognizes that, because the purpose of the supersedeas bond is to preserve the status quo, while securing the appellee from loss resulting from the stay of execution, a full supersedeas bond should be the requirement in normal circumstances. 5 Am. Jur. 2d Appellate Review § 474 (1995). The amount of the supersedeas bond typically takes into account the amount needed to satisfy the judgment appealed from, as well as costs, interest, and any damages which may be caused by the stay pending appeal. Id. § 441.

     Trial courts in the United States have inherent discretionary authority in setting supersedeas bonds, and may provide for a form and amount of security which differs from a full supersedeas bond. The burden is placed on the appellant to demonstrate objectively the reasons for a departure from the usual requirement of a full security supersedeas to suspend the operation of an unconditional money judgment. See 5 Am. Jur. 2d Appellate Review § 475 (1995). In general, in cases found in the United States, alternative security will be appropriate (1) where the appellant's ability to pay the judgment is so plain that the cost of the bond would be a waste of money,3 or (2) where the requirement of a bond, as here, would put the appellant's other creditors in undue jeopardy.

     I find that reference to United States law is helpful in enunciating general principals regarding posting of supersedeas bonds, but that the reality of the financial markets in the Federated States of Micronesia requires that the established requirement of posting of a full supersedeas bond in the United States, in cash or by a cash-backed surety, receive additional scrutiny. In this case, while the

[10 FSM Intrm. 564]

acknowledged purpose of the supersedeas bond is to protect the prevailing party below while this case is pending on appeal, this objective is not met by driving the appellant into financial ruin during the pendency of the appeal. Given the general unavailability of cash-backed sureties in the FSM, it appears that appellant essentially would be required to liquidate his several businesses in order to post a full cash bond. This would work irreparable harm against appellant. In the absence of a stay, writs of execution will be enforced against appellant's property before his appeal is resolved.

     Appellant's counsel states that he personally contacted the Bank of Hawaii, the Bank of the Federated States of Micronesia, and Moylan's Insurance Co., to inquire about the possibility of issuing appellant a surety bond, and that he was informed that "none of these institutions would provide bonds or a suretyship of any type in connection with an appeal of a civil case regardless of the individual seeking such assistance." Ex. B to Def. Reply to Pl. Opp'n to Approve Supersedeas Bond ¶ 4 (Oct. 8, 2001). Appellees' counsel counters that appellant has supplied the Court with no certified financial records, and has not requested guarantees from the other primary lending institution in the FSM, the Bank of Guam, because, appellees assert, appellant has extensive financial holdings in the Bank of Guam. Appellees provide no evidence to support their assertion that appellant has such extensive holdings.

      There are few financial institutions in the Federated States of Micronesia, and I find very persuasive the fact that appellant's counsel received unequivocal statements from two banks and one prominent insurance company in Pohnpei that they do not provide bonds or suretyship of any kind, regardless of who is requesting it.

     The public interest also is served by allowing appellant the opportunity to provide alternative security in this case. Appellant runs several businesses in Pohnpei, providing important economic activities and services to the public, and employing a large number of people. Pohnpei has a small, insular economy and little private sector employment compared to jurisdictions in the United States. Allowing appellees to execute on their judgment while appellant's appeal is pending would adversely affect the public as well a very large number of families who depend upon appellant's businesses for their support.

      My examination of the supersedeas bond submitted by appellant in the trial court reveals that it was inadequate. Thus, the trial court did not abuse its discretion in refusing to accept appellant's supersedeas bond as submitted. However, I also find that the trial court should have provided for at least some alternative security to be posted. The record demonstrates that the trial court entertained such a possibility, and that the trial court asked the parties to submit additional briefs on the issue of whether a mortgage should be accepted and placed in trust pending resolution of the appeal. Based on the record before me, it appears that the trial court ultimately required appellant to obtain a surety, post a full cash bond, or face execution of the judgment against him. I find that modifications of the trial court's requirement that appellant post a full cash bond, or obtain a cash backed surety, are necessary to afford the appellant any real opportunity to provide security to appellees and at the same time maintain financial stability to pay other creditors, to continue to operate his businesses, and ultimately to pay any judgment in this case in the event that appellant's appeal is unsuccessful.

     I also find that appellant should be required to post at least a portion of the supersedeas bond in the form of cash before I will approve appellant's mortgages as a portion of the security to be posted. Requiring appellant to post a $50,000 cash bond with the Clerk of the Appellate Court, with 40 percent of this cash bond to be distributed to appellees upon my approval of the bond, will provide

[10 FSM Intrm. 565]

appellees with approximately the same immediate relief as the trial court's proposed supersedeas,4 and at the same time will prevent appellant from unnecessarily liquidating his businesses before his appeal is resolved.

     Accordingly, I will extend the temporary stay issued on November 21, 2001, for forty (40) days from the date of this Order, and will require appellant to provide the following within thirty (30) days of the date of this Order, to give me time to review appellant's compliance with the modifications of the supersedeas bond contained herein. I will require, as a condition of accepting appellant's supersedeas bond, the following:

      Upon submission of these materials to the Appellate Division within thirty days of the date of this Order, I will either accept or reject the submission before the expiration of the temporary stay. The temporary stay shall dissolve upon the expiration of forty (40) days from the date of this Order. If, by that time, no supersedeas bond has been approved, appellees may proceed with their writs of execution, and I will make all orders necessary to enforce them.

III. Appellant's Motion for Enlargement

     Appellant also has requested an enlargement of time until April 26, 2002 to prepare his brief in this case. I find that there is good cause to grant such an extension. FSM App. R. 26(b). Accordingly, appellant shall have until April 26, 2002, to file his brief.

IV. Conclusion

     It is hereby ordered that appellant's motion for approval of supersedeas bond is denied, and appellant shall have thirty (30) days from the date of this Order to submit another supersedeas bond to the Appellate Division which complies with the terms and conditions set out herein. I also hereby order that the temporary stay of execution originally issued in this case on November 21, 2001, is extended until forty (40) days from the date of this Order. Accordingly, appellees' motion for relief from the November 21, 2001 Order granting the temporary stay is hereby denied. Additionally, appellant's Motion for Enlargement to file his brief in this appeal is hereby granted. Appellant shall have until April 26, 2002 to file his brief.

* * * *

____________________________________________________

Footnotes: