FSM 6 Intrm. 430-433

THE SUPREME COURT OF THE

FEDERATED STATES OF MICRONESIA

Cite as J.C. Tenorio Enterprises, Inc. v. Sado ,

6 FSM Intrm. 430 (Pohnpei 1994)

[6 FSM Intrm. 430]

J.C. TENORIO ENTERPRISES, INC.,

Plaintiff,

vs.

HERMAN SADO,

Defendant.

CIVIL ACTION NO. 1993-075

ORDER AND MEMORANDUM OF DECISION

Andon L. Amaraich

Associate Justice

Hearing: June 16, 1994

Decided: June 22, 1994

APPEARANCES:

For the Plaintiff: Michael White, Esq.

White, Pierce, Mailman & Nutting

P.O. Box 5222

Saipan, CM 96950

For the Defendants: Pro se

* * * *

HEADNOTES

International Law; Judgments

Comity is a recognition which one nation extends within its own territory to the legislative, executive, or judicial acts of another. It is not a rule of law, but one of practice, convenience, and expediency. Under principles of comity, courts will enforce foreign judgments, but not when the foreign court lacked jurisdiction, or where enforcement of the foreign judgment would violate a public policy, or where granting comity would result in prejudice to the forum's citizens. J.C. Tenorio Enterprises, Inc. v. Sado, 6 FSM Intrm. 430, 431-32 (Pon. 1994).

Attorney, Trial Counselor and Client ) Fees; Debtors' and Creditors' Rights

In collection cases creditors must establish that the attorney's fees to be charged are reasonable in relation to the amount of the debt as well as to the services rendered. Generally, plaintiff's attorney's fees in a debt collection case, barring bad faith on the defendant's part, will be limited to a reasonable amount not in excess of fifteen percent of the outstanding principal and interest. J.C. Tenorio Enterprises, Inc. v. Sado, 6 FSM Intrm. 430, 432 (Pon. 1994).

[6 FSM Intrm. 431]

Attorney, Trial Counselor and Client ) Fees; Judgments

An FSM court may reduce the amount of attorney's fees provided for under a foreign judgment, where that judgment is unenforceable as against public policy to the extent that the attorney fees in excess of 15% of debt are repugnant to fundamental notions of what is decent and just in the FSM. J.C. Tenorio Enterprises, Inc. v. Sado, 6 FSM Intrm. 430, 432 (Pon. 1994).

Civil Procedure

A court will not limit its review of the validity of a claim for relief to the arguments presented by the parties where the claim raises public policy concerns, and the defendant is a pro se litigant. J.C. Tenorio Enterprises, Inc. v. Sado, 6 FSM Intrm. 430, 432 (Pon. 1994).

* * * *

COURT'S OPINION

ANDON L. AMARAICH, Associate Justice:

The plaintiff in this collection case is a corporation chartered in the Commonwealth of the Northern Mariana Islands ("CNMI") that has obtained a judgment from the Superior Court of the CNMI against the defendant, a citizen of the Federated States of Micronesia. The plaintiff's complaint in this Court seeks to "domesticate" the foreign judgment so that it may be enforced in this Court. The defendant is pro se and has not filed any response to the plaintiff's request. On February 1, 1994, the plaintiff moved for entry of default and default judgment. After carefully reviewing the matter the Court has determined that the foreign judgment contains an award of attorney's fees that, in the absence of a showing of bad faith on the defendant's part, far exceeds the standard of reasonableness established by this Court. Therefore, the Court has concluded that enforcing this foreign judgment would violate public policy in the Federated States of Micronesia, and the Court denies the motion for default judgment.

DISCUSSION

In a judgment dated August 4, 1993, the CNMI Superior Court awarded the plaintiff a principal amount of $360.00, attorney's fees of $875.00, and costs of $80.00, for a total of $1,315.00. That is the judgment that the plaintiff now seeks to enforce in this Court.

There is no provision in the FSM Constitution or Code that provides for the enforcement by this Court of judgments obtained in the courts of other nations. Nor are there any reported FSM decisions discussing the subject, and the plaintiff has not identified any "custom and tradition" that supports the domestication of foreign judgments. In the absence of such sources of authority it is appropriate for the Court to look to "international legal concepts" and the "law of other specific nations" for guidance. Lonno v. Trust Territory (I), 1 FSM Intrm. 53, 71 (Kos. 1982).

The United States decisions on the enforcement of foreign judgments hold that in the absence of a specific statute or compact on the subject, courts will enforce foreign judgments consistent with principles of the "comity" of nations. Hilton v. Guyot, 159 U.S. 113, 165, 16 S. Ct. 139, 144, 40 L. Ed. 95, 109 (1895). "Comity" is "`a recognition which one nation extends within its own territory to the legislative, executive, or judicial acts of another. It is not a rule of law, but one of practice, convenience, and expediency.'" Overseas INNS S.A. P.A. v. United States, 911 F.2d 1146, 1148 (5th Cir. 1990) (quoting Somportex Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 440 (3d Cir. 1971), cert. denied, 405 U.S. 1972 (1972). Although principles

[6 FSM Intrm. 432]

of comity allow foreign judgments to be enforced, those principles also require that "`[e]very nation . . . be the final judge for itself, not only of the nature and extent of the duty, but of the occasions on which it may be justly demanded.'" Hilton, 159 U.S. at 165, 16 S. Ct. at 144, 40 L. Ed. at 109 (quoting Story, Conflict of Laws §§ 33-38). What this "final judge" responsibility has meant as a practical matter is that, under principles of comity, courts will enforce foreign judgments, but not under certain circumstances, e.g., when the foreign court lacked jurisdiction, see Ma v. Continental Bank, 905 F.2d 1073, 1075-76 (7th Cir. 1990), or where enforcement of the foreign judgment would violate a public policy, see Overseas INNS, 911 F.2d at 1149, Ackermann v. Levine, 788 F.2d 830, 837 (2d Cir. 1986); Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 937 & n.104 (D.C. Cir. 1984), or where granting comity would result in prejudice to the forum's citizens, see Cunard S.S. Co. v. Salen Reefer Servs. AB, 773 F.2d 452, 459 (2d Cir. 1985).

This Court has held that in collection cases it is necessary for each creditor to establish that the attorney's fees to be charged are reasonable in relation to the amount of the debt as well as to the services rendered. Bank of Hawaii v. Jack, 4 FSM Intrm. 216, 220 (Pon. 1990). In a case where the loan agreement provided for the debtor to pay the creditors attorney's fees, this Court stated that, barring bad faith on the defendant's part, generally the fees available to the plaintiff in a debt collection case will be limited to "a reasonable amount not in excess of fifteen percent of the outstanding principal and interest." Jack, 4 FSM Intrm. at 220. This limit alleviates the Court's concern that attorney's fees will constitute a penalty, or an excuse for usurious interest, or will clearly encourage litigation and oppress the debtor. Id. at 219. In the absence of such a rule a person who temporarily lacked the ability to pay a small overdue balance could find him or herself transformed into a chronic debtor, struggling to finance litigation against his own person long after the loan amount was repaid. Permitting attorneys to obtain an unreasonably high fee award out of a small debt would encourage over litigation of small claims.

The judgment involved here contains an award of fees against the defendant that is far in excess of the 15% limit set in Jack. The total of principal and interest outstanding was $360, but the amount of attorney's fees awarded is more than twice that amount ) $875.00 Under the Court's rule in Jack reasonable attorney's fees could not exceed $54.00, i.e., 15% of $360.

Allowing attorneys for foreign entities to circumvent this Court's policy against excessive fee awards in collection cases by suing FSM citizens in a foreign court that placed no limits on fee awards would be contrary to public policy and would result in prejudice to FSM citizens. That warrants departing in cases such as this from any presumption that foreign judgments will be enforced in their entirety. In Ackermann v. Levine, 788 F.2d 830 (2d Cir. 1986), the court reached a similar conclusion. There the court reduced the amount of attorney's fees provided for under a foreign judgment, stating that "[a] judgment is unenforceable as against public policy to the extent that it is `repugnant to fundamental notions of what is decent and just in the State where enforcement is sought.'" Id. at 841 (quoting Tahan v. Hodgson, 662 F.2d 862, 864 (D.C. Cir. 1981)). See also E.H. Schopler, Annotation, Enforceability of Provision in Agreement for Attorney's Fees, Valid in State of its Execution or Performance, But Invalid under Law of Forum, 54 A.L.R.2d 1053, 1053-54 (1957) (weight of authority is that a stipulation for attorney's fees contained in a promissory note, which is valid in the jurisdiction where the contract was made or was to be performed, may not be enforced in a forum under the law of which such stipulation is invalid).

It is true that in this case the defendant has not submitted any opposition to the complaint or the motion for default judgment. However, this Court, will not limit its review of the validity of a claim for relief to the arguments presented by the parties where, as here, the claim raises public policy concerns, and the defendant is a pro se litigant.

[6 FSM Intrm. 433]

CONCLUSION

This Court wishes to cooperate with foreign courts by enforcing their judgments here, and anticipates that generally such cooperation will be possible. For the reasons discussed above, however, this Court cannot domesticate the judgment as requested by the plaintiff. Therefore, it is hereby ordered that within thirty days of the date of this order the plaintiff may file an amended complaint requesting judgment consistent with this decision. If no such amended complaint is filed, the Court will enter judgment in favor of the defendant.

* * * *


	THE SUPREME COURT OF THE FEDERATED STATES OF MICRONESIA Cite as J.C. Tenorio Enterprises, Inc. v. Sado , 6 FSM Intrm. 430 (Pohnpei 1994) [6 FSM Intrm. 430] J.C. TENORIO ENTERPRISES, INC., Plaintiff, vs. HERMAN SADO, Defendant. CIVIL ACTION NO. 1993-075 ORDER AND MEMORANDUM OF DECISION Andon L. Amaraich Associate Justice Hearing: June 16, 1994 Decided: June 22, 1994 APPEARANCES: For the Plaintiff: Michael White, Esq. White, Pierce, Mailman & Nutting P.O. Box 5222 Saipan, CM 96950 For the Defendants: Pro se * * * * HEADNOTES International Law; Judgments Comity is a recognition which one nation extends within its own territory to the legislative, executive, or judicial acts of another. It is not a rule of law, but one of practice, convenience, and expediency. Under principles of comity, courts will enforce foreign judgments, but not when the foreign court lacked jurisdiction, or where enforcement of the foreign judgment would violate a public policy, or where granting comity would result in prejudice to the forum's citizens. J.C. Tenorio Enterprises, Inc. v. Sado, 6 FSM Intrm. 430, 431-32 (Pon. 1994). Attorney, Trial Counselor and Client ) Fees; Debtors' and Creditors' Rights In collection cases creditors must establish that the attorney's fees to be charged are reasonable in relation to the amount of the debt as well as to the services rendered. Generally, plaintiff's attorney's fees in a debt collection case, barring bad faith on the defendant's part, will be limited to a reasonable amount not in excess of fifteen percent of the outstanding principal and interest. J.C. Tenorio Enterprises, Inc. v. Sado, 6 FSM Intrm. 430, 432 (Pon. 1994). [6 FSM Intrm. 431] Attorney, Trial Counselor and Client ) Fees; Judgments An FSM court may reduce the amount of attorney's fees provided for under a foreign judgment, where that judgment is unenforceable as against public policy to the extent that the attorney fees in excess of 15% of debt are repugnant to fundamental notions of what is decent and just in the FSM. J.C. Tenorio Enterprises, Inc. v. Sado, 6 FSM Intrm. 430, 432 (Pon. 1994). Civil Procedure A court will not limit its review of the validity of a claim for relief to the arguments presented by the parties where the claim raises public policy concerns, and the defendant is a pro se litigant. J.C. Tenorio Enterprises, Inc. v. Sado, 6 FSM Intrm. 430, 432 (Pon. 1994). * * * * COURT'S OPINION ANDON L. AMARAICH, Associate Justice: The plaintiff in this collection case is a corporation chartered in the Commonwealth of the Northern Mariana Islands ("CNMI") that has obtained a judgment from the Superior Court of the CNMI against the defendant, a citizen of the Federated States of Micronesia. The plaintiff's complaint in this Court seeks to "domesticate" the foreign judgment so that it may be enforced in this Court. The defendant is pro se and has not filed any response to the plaintiff's request. On February 1, 1994, the plaintiff moved for entry of default and default judgment. After carefully reviewing the matter the Court has determined that the foreign judgment contains an award of attorney's fees that, in the absence of a showing of bad faith on the defendant's part, far exceeds the standard of reasonableness established by this Court. Therefore, the Court has concluded that enforcing this foreign judgment would violate public policy in the Federated States of Micronesia, and the Court denies the motion for default judgment. DISCUSSION In a judgment dated August 4, 1993, the CNMI Superior Court awarded the plaintiff a principal amount of $360.00, attorney's fees of $875.00, and costs of $80.00, for a total of $1,315.00. That is the judgment that the plaintiff now seeks to enforce in this Court. There is no provision in the FSM Constitution or Code that provides for the enforcement by this Court of judgments obtained in the courts of other nations. Nor are there any reported FSM decisions discussing the subject, and the plaintiff has not identified any "custom and tradition" that supports the domestication of foreign judgments. In the absence of such sources of authority it is appropriate for the Court to look to "international legal concepts" and the "law of other specific nations" for guidance. Lonno v. Trust Territory (I), 1 FSM Intrm. 53, 71 (Kos. 1982). The United States decisions on the enforcement of foreign judgments hold that in the absence of a specific statute or compact on the subject, courts will enforce foreign judgments consistent with principles of the "comity" of nations. Hilton v. Guyot, 159 U.S. 113, 165, 16 S. Ct. 139, 144, 40 L. Ed. 95, 109 (1895). "Comity" is "`a recognition which one nation extends within its own territory to the legislative, executive, or judicial acts of another. It is not a rule of law, but one of practice, convenience, and expediency.'" Overseas INNS S.A. P.A. v. United States, 911 F.2d 1146, 1148 (5th Cir. 1990) (quoting Somportex Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 440 (3d Cir. 1971), cert. denied, 405 U.S. 1972 (1972). Although principles [6 FSM Intrm. 432] of comity allow foreign judgments to be enforced, those principles also require that "`[e]very nation . . . be the final judge for itself, not only of the nature and extent of the duty, but of the occasions on which it may be justly demanded.'" Hilton, 159 U.S. at 165, 16 S. Ct. at 144, 40 L. Ed. at 109 (quoting Story, Conflict of Laws §§ 33-38). What this "final judge" responsibility has meant as a practical matter is that, under principles of comity, courts will enforce foreign judgments, but not under certain circumstances, e.g., when the foreign court lacked jurisdiction, see Ma v. Continental Bank, 905 F.2d 1073, 1075-76 (7th Cir. 1990), or where enforcement of the foreign judgment would violate a public policy, see Overseas INNS, 911 F.2d at 1149, Ackermann v. Levine, 788 F.2d 830, 837 (2d Cir. 1986); Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 937 & n.104 (D.C. Cir. 1984), or where granting comity would result in prejudice to the forum's citizens, see Cunard S.S. Co. v. Salen Reefer Servs. AB, 773 F.2d 452, 459 (2d Cir. 1985). This Court has held that in collection cases it is necessary for each creditor to establish that the attorney's fees to be charged are reasonable in relation to the amount of the debt as well as to the services rendered. Bank of Hawaii v. Jack, 4 FSM Intrm. 216, 220 (Pon. 1990). In a case where the loan agreement provided for the debtor to pay the creditors attorney's fees, this Court stated that, barring bad faith on the defendant's part, generally the fees available to the plaintiff in a debt collection case will be limited to "a reasonable amount not in excess of fifteen percent of the outstanding principal and interest." Jack, 4 FSM Intrm. at 220. This limit alleviates the Court's concern that attorney's fees will constitute a penalty, or an excuse for usurious interest, or will clearly encourage litigation and oppress the debtor. Id. at 219. In the absence of such a rule a person who temporarily lacked the ability to pay a small overdue balance could find him or herself transformed into a chronic debtor, struggling to finance litigation against his own person long after the loan amount was repaid. Permitting attorneys to obtain an unreasonably high fee award out of a small debt would encourage over litigation of small claims. The judgment involved here contains an award of fees against the defendant that is far in excess of the 15% limit set in Jack. The total of principal and interest outstanding was $360, but the amount of attorney's fees awarded is more than twice that amount ) $875.00 Under the Court's rule in Jack reasonable attorney's fees could not exceed $54.00, i.e., 15% of $360. Allowing attorneys for foreign entities to circumvent this Court's policy against excessive fee awards in collection cases by suing FSM citizens in a foreign court that placed no limits on fee awards would be contrary to public policy and would result in prejudice to FSM citizens. That warrants departing in cases such as this from any presumption that foreign judgments will be enforced in their entirety. In Ackermann v. Levine, 788 F.2d 830 (2d Cir. 1986), the court reached a similar conclusion. There the court reduced the amount of attorney's fees provided for under a foreign judgment, stating that "[a] judgment is unenforceable as against public policy to the extent that it is `repugnant to fundamental notions of what is decent and just in the State where enforcement is sought.'" Id. at 841 (quoting Tahan v. Hodgson, 662 F.2d 862, 864 (D.C. Cir. 1981)). See also E.H. Schopler, Annotation, Enforceability of Provision in Agreement for Attorney's Fees, Valid in State of its Execution or Performance, But Invalid under Law of Forum, 54 A.L.R.2d 1053, 1053-54 (1957) (weight of authority is that a stipulation for attorney's fees contained in a promissory note, which is valid in the jurisdiction where the contract was made or was to be performed, may not be enforced in a forum under the law of which such stipulation is invalid). It is true that in this case the defendant has not submitted any opposition to the complaint or the motion for default judgment. However, this Court, will not limit its review of the validity of a claim for relief to the arguments presented by the parties where, as here, the claim raises public policy concerns, and the defendant is a pro se litigant. [6 FSM Intrm. 433] CONCLUSION This Court wishes to cooperate with foreign courts by enforcing their judgments here, and anticipates that generally such cooperation will be possible. For the reasons discussed above, however, this Court cannot domesticate the judgment as requested by the plaintiff. Therefore, it is hereby ordered that within thirty days of the date of this order the plaintiff may file an amended complaint requesting judgment consistent with this decision. If no such amended complaint is filed, the Court will enter judgment in favor of the defendant. * * * *