Cite as Yoruw v. FSM Dep't of Educ., 22 FSM R. 596 (Yap 2020)
CIVIL ACTION NO. 2019-3000
Decided: July 3, 2020
APPEARANCES:
| For the Plaintiff: | Genevieve M. Mangefel |
| P.O. Box 1002 | |
| Colonia, Yap FM 96943 | |
| For the Defendants: | Robert B. LaManna, Esq. |
| Assistant Attorney General | |
| FSM Department of Justice | |
| P.O. Box PS-105 | |
| Palikir, Pohnpei FM 96941 |
The failure to oppose a motion is deemed a consent to the motion, but even when there is no opposition, the court still needs good grounds before it can grant the motion. Yoruw v. FSM Dep't of Educ., 22 FSM R. 596, 598 (Yap 2020).
FSM law prohibits (make usurious) commercial credit transactions that directly or indirectly exceed an annual interest rate of 24%, and consumer credit transactions made after October 31, 1998, that directly or indirectly exceed 24% annual interest. Yoruw v. FSM Dep't of Educ., 22 FSM R. 596, 599 (Yap 2020).
A "late fee" of 15% per month on unpaid invoices is an annual interest rate of 180%, and these "late fees" charge interest, either directly or indirectly, at a rate that is usury and that is thus prohibited. Yoruw v. FSM Dep't of Educ., 22 FSM R. 596, 599 (Yap 2020).
The penalty for charging, or trying to charge, a usurious rate, is that the person or entity charging, or trying to charge, such a rate, has no right to collect or receive any interest. It does not matter whether the other party agreed to pay the usurious rate or not or whether the interest sought is prejudgment or post-judgment. This penalty cannot be avoided by reducing the interest to a legal rate or by calling it a fee because that would defeat the statute's purpose. Yoruw v. FSM Dep't of Educ., 22 FSM R. 596, 599 (Yap 2020).
The statutory penalty is that the creditor, who charges or tries to charge a usurious interest rate, has no right to any interest whatsoever. Yoruw v. FSM Dep't of Educ., 22 FSM R. 596, 599 (Yap 2020).
When a debtor has paid a creditor's invoice that included usurious interest, the debtor is entitled to restitution of all the usurious interest "late fees" paid. Yoruw v. FSM Dep't of Educ., 22 FSM R. 596, 599 (Yap 2020).
Money paid under a mistake of fact may be recovered as restitution to the payor. Yoruw v. FSM Dep't of Educ., 22 FSM R. 596, 599 (Yap 2020).
LARRY WENTWORTH, Associate Justice:
On April 17, 2020, the defendants-counterclaimants filed their Motion to Dismiss Plaintiff's Claim; Motion for Summary Judgment on Defendants' Counterclaim. Since the Chief Justice's April 3, 2020 Emergency Court Order No. 1 automatically extended all court-ordered or rule-based filing
deadlines to at least May 22, 2020, the court gave the plaintiff-counterdefendant until May 25, 2020, to file and serve his opposition to the motion, with the movants given until June 8, 2020, to file and serve any reply thereto. No opposition was filed. Nor was an enlargement of time sought. For the reasons that follow, the court grants the pending motion and enters judgment in the defendants' favor on both the plaintiff's claim against them and their counterclaim against the plaintiff.
In November, 2017, the FSM Department of Education sought lodging for its personnel and officials during the Ninth Micronesian Games in Yap, to be held in July 2018. The Hilltop Motel, a business of which plaintiff Mike G. Yoruw is the sole proprietor, agreed, through its agents, to supply the needed lodging for $11,725. A down payment of $5,857.50 was made. Additional lodging was later requested. In July 2018, FSM Department of Education personnel occupied four rooms, with an occupancy of four persons per room, and added the rental cars they used and fuel charges to their billing. The Education Department received eight invoices for the rooms and the cars its used. Those invoices totaled $22,896. They were not paid.
On December 21, 2018, the Hilltop Motel sent the Education Department an invoice for $34,443.33, and demanded payment. This sum included a December 2018 "late fee" of $3,563.11 at a stated rate of 15%. This 15% was calculated on a base figure or principal of $23,754, and the $34,443.33 December invoice obviously included two other monthly 15% "late fees" of $3,563.11 on top of the supposed $23,754 principal to reach the $34,443.33 total. This invoice was not promptly paid.
The Hilltop Motel continued to press the Education Department for payment while adding further 15% monthly "late fees." By August 2019, the invoice total had reached $62,948.21. On August 26, 2019, the Hilltop Motel received a $34,443.33 payment from the Education Department.
These facts are undisputed.
On August 30, 2019, Mike G. Yoruw, doing business as the Hilltop Motel, filed suit against the FSM Department of Education and three of its officials seeking the $28,504.88 difference between the August 2019 invoice figure and the $34,443.33 payment, plus another $5,000 for expenses and fees incurred in its collection efforts.
On September 25, 2019, the defendants filed their answer, in which they raised the defenses of failure to state a claim for which relief could be granted, fraud, illegality, payment, and release, and asserted a counterclaim for fraud, illegality, and usury, in which they sought the return of the alleged excess payment of $11,547.33.
On April 17, 2020, the defendants filed a motion to dismiss Yoruw's claims and to grant them summary judgment on their counterclaim. The defendants contend that the plaintiff does not state a claim because there is no allegation or evidence that they agreed to pay the 15% monthly late fees they were charged, and even if they had agreed, that rate is usurious and unenforceable. The defendants further contend that they are entitled to summary judgment on their counterclaim for the same reasons and therefore Yoruw must return the "late fees" they did pay.
No opposition was filed. The failure to oppose a motion is deemed a consent to the motion, FSM Civ. R. 6(d), but even when there is no opposition, the court still needs good grounds before it can grant the motion. Senda v. Mid-Pacific Constr. Co., 6 FSM R. 440, 442 (App. 1994); People of Tomil ex rel. Mar v. M/C Jumbo Rock Carrier III, 16 FSM R. 633, 634 (Yap 2009); Yoruw v. Ira, 16 FSM R. 464, 465 (Yap 2009).
Yoruw charged a "late fee" of 15% per month on the Hilltop Motel's unpaid invoices. This is an annual interest rate of 180%.
FSM law prohibits (make usurious) commercial credit transactions that directly or indirectly exceed an annual interest rate of 24%, 34 F.S.M.C. 204, and consumer credit transactions made after October 31, 1998, that directly or indirectly exceed 24% annual interest, 34 F.S.M.C. 203(3). Yoruw's "late fees" charge interest, either directly or indirectly, at a rate that is usury and that is thus prohibited.
The penalty for charging, or trying to charge, a usurious rate, is that the person or entity charging, or trying to charge, such a rate, "shall have no right to collect or receive any interest." 34 F.S.M.C. 206(1). It does not matter whether the Education Department agreed to pay a 15% per month late fee or not or whether the interest sought is prejudgment or post-judgment. Walter v. Damai, 12 FSM R. 648, 649-50 (Pon. 2004). Yoruw has no right to collect or receive any interest. Id. at 650. This penalty cannot be avoided by reducing the interest to a legal rate or by calling it a fee. That would defeat the statute's purpose. The statutory penalty is that the creditor, who charges or tries to charge a usurious interest rate, has no right to any interest whatsoever.
Accordingly, Yoruw has no right to any payment above the $22,896 total of the eight invoices the Education Department received. Therefore, Yoruw's claim for damages above the $34,443.33 that he was paid is dismissed for the failure to state a claim, or, in the alternative, judgment is rendered that he take nothing on those claims. And the Education Department is accordingly granted summary judgment against Yoruw for the $11,547.33 in usurious interest that Yoruw received above the $22,896 that he was entitled to. Money paid under a mistake of fact may be recovered as restitution to the payor. Bank of Hawaii v. Air Nauru, 7 FSM R. 651, 653 (Chk. 1996). The Education Department is entitled to restitution of its $11,547.33 overpayment to Yoruw.
The clerk shall enter judgment accordingly.