FSM SUPREME COURT
TRIAL DIVISION
Cite as Bank of FSM v. O'Sonis ,
8 FSM Intrm. 67 (Chk. 1997)

[8 FSM Intrm. 67]

BANK OF THE
FEDERATED STATES OF MICRONESIA,
Plaintiff,
 
vs.
 
MACHIME O'SONIS and RICHKO O'SONIS
Defendants.

CIVIL ACTION NO. 1996-1031
ORDER

Richard H. Benson
Associate Justice

Hearing:  March 27, 1997
Decided:  April 28, 1997
Opinion Entered:  May 15, 1997

APPEARANCE:
     For the Defendants:     Machime O'Sonis, pro se

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HEADNOTES
Civil Procedure ) Motions
     While failure to file a timely opposition is deemed a consent to the granting of the motion there still must be proper grounds for granting of motion before a court may do so.  Bank of the FSM v. O'Sonis, 8 FSM Intrm. 67, 68 (Chk. 1997).

Civil Procedure ) Motions
     Because failure to file an opposition to a motion is deemed a consent to it a party failing to file

[8 FSM Intrm. 68]

an opposition will not be allowed to argue it orally.  Bank of the FSM v. O'Sonis, 8 FSM Intrm. 67, 68 (Chk. 1997).

Agency
     A principal is bound by, and liable for the acts of its agent if done with or within the actual or apparent authority from the principal and within the scope of the agent's employment.  Bank of the FSM v. O'Sonis, 8 FSM Intrm. 67, 69 (Chk. 1997).

Agency
     An agency relationship is based upon consent by one person that another shall act in his behalf and be subject to his control.  Bank of the FSM v. O'Sonis, 8 FSM Intrm. 67, 69 (Chk. 1997).

Agency
     The existence of an agency relationship is not negated merely because the agent is named by someone other than the principal.  Bank of the FSM v. O'Sonis, 8 FSM Intrm. 67, 69 (Chk. 1997).

Agency
     A party may require another to appoint an agent as a condition to an agreement.  Bank of the FSM v. O'Sonis, 8 FSM Intrm. 67, 69 (Chk. 1997).

Agency; Banks and Banking
     When a bank requires, as a condition of the loan, that a borrower have his employer make the loan repayments out of the borrower's paycheck the borrower's employer is acting as the agent of the borrower.  Bank of the FSM v. O'Sonis, 8 FSM Intrm. 67, 69 (Chk. 1997).

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COURT'S OPINION
RICHARD H. BENSON, Associate Justice:
     This matter came before me on the defendants' Motion to Dismiss Action or in the Alternative for a Declaratory Judgment, filed February 19, 1997.  The plaintiff did not file an opposition.  While it is true that failure to file a timely opposition is deemed a consent to the granting of the motion, FSM Civ. R. 6(d), there still must be proper grounds for granting of motion before I may do so.  Senda v. Mid-Pacific Constr. Co., 6 FSM Intrm. 440, 442 (App. 1994).  I heard the defendants' oral argument on the motion on March 27, 1997.  The plaintiff was not allowed to argue because it had not filed an opposition.  Actouka v. Kolonia Town, 5 FSM Intrm. 121, 123 (Pon. 1991); FSM Civ. R. 6(d).  After the call of the case on April 28, 1997, I denied the motions and gave my reasons orally.  This memorandum sets forth my reasoning in greater detail.
 
     Defendant Machime O'Sonis took out a loan, co-signed by his wife Richko O'Sonis, from the plaintiff bank on November 4, 1993.  Repayment was to be made at the rate of $541.89 per month.  To assure itself of repayment the bank required the borrower to execute an allotment from his biweekly salary as a justice of the Chuuk State Supreme Court to be paid directly to the bank by the state. Sometime in early 1995, the State of Chuuk, because of its fiscal crisis, stopped making payments to its employees' allottees.  After a certain number of allotments were missed and no other payments were received the bank declared the loan in default.  On June 5, 1996, the bank filed suit for the outstanding loan balance due.

     The borrower raised two affirmative defenses.  One was that additional payments had been made

[8 FSM Intrm. 69]

to bank that were not credited to the borrowers in the papers on file with the court. The other defense was that the state government had acted as the bank's agent in collecting the biweekly payments due on the borrowers' loan, and that the borrowers should not be liable for the wrongful acts of the bank's agent in failing to remit to the bank the sums it withheld from the Machime O'Sonis's paycheck for that purpose.  The defendants' motion placed only the second defense before me. I denied the motion because I concluded that the state government was not the agent of the bank.  My reasoning follows.

     The borrower contended that because the bank made the execution of an allotment from the borrower's state salary a condition of the loan the state became an agent of the bank.  I cannot agree.  I conclude that for the purposes of making installment payments on the loan the state was the agent of the borrower.

     A principal is bound by, and liable for the acts of its agent if done with or within the actual or apparent authority from the principal and within the scope of the agent's employment.  Black Micro Corp. v. Santos, 7 FSM Intrm. 311, 315-16 (Pon. 1995).  Thus, if the state were the bank's agent the bank would be liable for the state's failure to pass on the borrower's allotment.  If the state were the borrower's agent then the borrower is liable.

     "An agency relationship is based upon consent by one person that another shall act in his behalf and be subject to his control."  Elfstrom v. New York Life Ins. Co., 432 P.2d 731, 738 (Cal. 1967).  The borrowers consented to the state acting on their behalf in making the payments on their loan.  The state impliedly consented to this relationship when it started making the allotment payments to the bank.

     The state was subject to the borrower's control.  All of the state judicial branch employees, including the borrower in this case, presented signed requests to the state director of finance to terminate all of their allotments other than those mandated by law (income and social security tax withholdings). The allotment for this loan was specifically listed as one of the allotments to be terminated by the borrower.  The state refused to terminate any allotments.  The judicial employees then sued the state director of finance.  During the course of that suit, to which the borrower was at first a named party and then a member of the class once the case was converted to a class action, the state conceded that the allotments were voluntary and that the employees could terminate them at any time.  Judgment was entered for the plaintiffs and the judicial employees terminated their voluntary allotments, including the allotment used by the borrower to pay the loan at issue in this action.  In re Refusal of Director of Finance to Terminate Voluntary Allotments (Powell v. Chuuk State Director of Finance), Civ. Act. No. 171-95 (Chk. St. Sup. Ct. Sept. 18, 1995).

     The borrower contended that because the bank required him to make a payroll allotment from his state salary as a condition of the loan that that made the state an agent of the bank.  "The existence of an agency relationship is not negated merely because the recipient of the authority [the agent] is named by someone other than the creator [the principal] of the authority."  3 Am. Jur. 2d Agency 17, at 522 (1986).  Nor is the existence of an agency relationship negated by the fact that the bank required the borrower to appoint the state as his agent.  A party may require another to appoint an agent as a condition to an agreement.  For example, foreign investment boards in the FSM routinely require businesses to appoint an agent for service of process as a condition of the issuance of a foreign investment permit.  That does not make the person appointed an agent of the foreign investment board.  In this case, the bank required the borrower to appoint the borrower's employer, the state, as the borrower's agent to make the loan payments.

     I accordingly denied the defendants' motion on the ground that the state was the borrower's agent, not the bank's agent.