THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA
Cite as Wakuk v. Kosrae Island Credit Union,
7 FSM Intrm. 195 (Kosrae S. Ct. Tr. 1995)
KOSRAE ISLAND CREDIT UNION,
CIVIL ACTION NO. 6-95
ORDER AND MEMORANDUM OF DECISION
Martin G. Yinug
Decided: July 7, 1995
For the Plaintiff: Charles Greenfield, Esq.
Micronesian Legal Services Corporation
P.O. Box 38
Lelu, Kosrae, FM 96944
For the Defendant: Delson Ehmes, Esq.
P.O. Box 1018
Kolonia, Pohnpei FM 96941
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Civil Procedure ) Injunctions
Preliminary injunctions are granted or denied based on a court's consideration of four factors: a) the possibility of irreparable harm to the plaintiff, b) the balance of possible injuries to the parties, c) the movant's possibility of success on the merits, and d) the impact of any requested action upon the public interest. In arriving at a fair and equitable result a court exercises broad discretion and weighs carefully the interests of both sides. Wakuk v. Kosrae Island Credit Union, 7 FSM Intrm. 195, 196-97 (Kos. S. Ct. Tr. 1995).
Civil Procedure ) Injunctions
Where plaintiff's poverty is disputed thus not showing irreparable injury to him for failure to redeem his shares, where the balance of harms favors the credit union, where the plaintiff's likelihood of prevailing on the merits is likely but uncertain without knowing the contents of the credit union's by-laws, and where the public interest favors a sound credit union there will be no injunctive relief ordering the credit union to redeem plaintiff's shares. Wakuk v. Kosrae Island Credit Union, 7 FSM Intrm. 195, 197-98 (Kos. S. Ct. Tr. 1995).
A financial institution, such as a credit union, that holds money from depositors does have an on-going fiduciary duty to its depositors. Wakuk v. Kosrae Island Credit Union, 7 FSM Intrm. 195, 197 (Kos. S. Ct. Tr. 1995).
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MARTIN G. YINUG, Special Justice:
On January 25, 1995, Plaintiff filed a complaint against Defendant, based on Defendant's refusal to release Plaintiff's shares invested in Defendant. The complaint seeks injunctive and declaratory relief, damages, attorney's fees, and costs. Plaintiff simultaneously moved for a Temporary Restraining Order.
On February 6, 1995, Defendant answered, raising the affirmative "defenses" that Defendant did not have the money to give to Plaintiff, that Defendant's Board has not designated a time during which "payment" on shares may be made, that granting Plaintiff's request would cause a violation of a fiduciary duty to itself, and that Plaintiff would not suffer hardship by Defendant's refusal. Defendant counterclaimed that Plaintiff breached his contract with Defendant.
On May 9, 1995, Plaintiff filed motions for a preliminary injunction, consolidation with a trial on the merits, and an expedited trial.
On May 22, 1995, Defendant filed an opposition to Plaintiff's motion for preliminary injunction. Defendant did not oppose Plaintiff's motions for consolidation and expedited trial.
On July 6, 1995, Chief Justice Lyndon Cornelius issued an Order Designating Special Judge, which designated Martin G. Yinug, Associate Justice of the Supreme Court of the Federated States of Micronesia, as a Special Justice to hear this case.
This matter is now before the Court on Plaintiff's motion for preliminary injunction. The motion is denied based on the reasoning set forth in the following memorandum of decision.
Memorandum of Decision
Preliminary injunctions are granted or denied based on a court's consideration of the following four factors:
a. the possibility of irreparable injury to the plaintiff;
b. the balance of possible injuries to the parties;
c. the movant's possibility of success on the merits; and
d. the impact of any requested action upon the public interest.
Ponape Transfer & Storage v. Pohnpei State Public Lands Auth., 2 FSM Intrm. 272, 275 (Pon. 1986)
[7 FSM Intrm. 197]
(citing 11 C. Wright & A. Miller, Federal Practice and Procedure § 2948 (1973)). The trial court is required to exercise broad discretion and weigh carefully the interests of both sides in arriving at a fair and equitable result. Id.
a. Irreparable injury to the plaintiff. The possibility of irreparable injury to the Plaintiff is his inability to repair his home based on a lack of money, which redemption of his shares in Defendant would provide. Defendant disputes Plaintiff's poverty. This is a question of fact: Does Defendant's refusal to release Plaintiff's shares result in Plaintiff's inability to repair his roof? If so, is such inability an "irreparable injury"? An additional consideration is the relative lack of injury to the Plaintiff if a decision on the merits is reached within a reasonable time after a preliminary injunction would be granted or denied.
b. Balance of possible injuries to the parties. Even if Plaintiff is not absolutely prevented from repairing his roof, he is nevertheless injured by his inability to use his own money. This injury is not as great as the potential injury to Defendant, however, which argues that it does not have the money to give to Plaintiff. Presumably, a demand by Plaintiff could only be satisfied by further judicial action to attach Defendant's assets. a further drastic step.
c. Movant's possibility of success on the merits. The likelihood of Plaintiff's success on the merits is difficult to assess without reading the deposit agreement between Plaintiff and Defendant. The Court has not received copies of Defendant's By-Laws, as amended, and of the deposit agreement between Defendant and Plaintiff.
Nevertheless, Defendant's arguments are unpersuasive. Defendant asserts that it does not have a fiduciary duty to Plaintiff, but rather, to itself. Def.'s Answer at 2, para. 8 (Feb. 6, 1995) (denying Plaintiff's assertion that Defendant credit union owes Plaintiff shareholder a fiduciary duty); Id. at 2, para. 13. This is incorrect. A "fiduciary duty" is similar to a trusteeship; a financial institution that holds money from depositors is a definitional example of a "fiduciary." Black's Law Dictionary 563 (5th ed. 1979). Defendant does have an on-going fiduciary duty to Plaintiff.
Defendant further argues that, because it did not "designate" any days when "payment on shares may be made," Plaintiff has no right to redeem his shares. Def.'s Answer at 2 (Feb. 6, 1995). It is difficult to comment without knowing the context of "payment on shares" in the contract between Plaintiff and Defendant. If depositors have the power to redeem shares only upon a designation by the Board of days for . payment," then Defendant may be correct. It seems more likely, however, that the language cited by both Plaintiff and Defendant refers only to Defendant's authority to require up to 60 days written notice before a shareholder withdraws money; this would not affect the shareholder's right to withdraw his shares.
Defendant argues that credit unions are "treated specially" because they are non-profit organizations. Def.'s Memorandum at 2-3 (Feb. 7, 1995) (citing 36 F.S.M.C. 106 and K.C. § 15.105). Neither the FSM nor Kosrae codes specially restrict the handling of withdrawals of monies to or from credit unions; each requires, instead, that entities using the term "credit union" comply with the provisions of the respective chapters on incorporation. Indeed, Chapter 6 of 36 F.S.M.C. is "reserved". the FSM Congress has not promulgated special rules for credit unions. Importantly, defendant implies that credit unions must be treated differently from savings and loans. Unless a specific contractual ambiguity arises, however, this is beside the point. The relevant issues are determined according to what is specified in:
1. the agreement between Plaintiff and Defendant; and
2. Defendant's By-Laws.
Also, Defendant notes that "some [requested withdrawals] have been granted." Def.'s Memorandum at 3 (Feb. 7, 1995). It is a relevant question of fact why some requests have been granted and Plaintiff's request has not, particularly since Defendant argues that it does not have sufficient funds to redeem Plaintiff's shares. When any financial institution becomes insolvent. for whatever reason. its assets are held for liquidation and distribution to account holders, creditors, and owners. Although this case has not yet raised these issues directly, the Court can, at least, raise the issue of insolvency for the protection of all shareholders, as well as joinder of parties, if the facts that are presented to the Court so warrant.
The effect of these issues is to make the movant's possibility of success on the merits strong, but by no means overwhelming. And, importantly, potential issues of class action joinders would directly affect the proper outcome of this case and the legal rights and obligations of the parties.
d. Impact of any requested action upon the public interest. This final point relates to the fourth part of the test for injunctions: the impact on the public interest. Here, the public is served by a sound credit union, operating to the benefit of its shareholders, to potential borrowers, and, generally, to the public good. However, the interest of the public is ill-served by a financially weak credit union that is unable to meet its obligations. If this is the case, the public's interest is best served by State or other intervention, or by orderly dissolution. With regard to Plaintiff's motion, however, the interests of the public are not best served by granting the motion; this would, without doubt, result in a severely worsened financial condition of Defendant, to the detriment of all other parties and against the public interest.
For the foregoing reasons, Plaintiff's motion for preliminary injunction is denied. Consequently, there is no need to consider, at this time, Plaintiff's two related motions.
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