Cite as Bank of Guam v. Tuuth ,
9 FSM Intrm. 467 (Yap 2000)

[9 FSM Intrm. 467]




CIVIL ACTION NO. 1998-3001


Martin Yinug
Associate Justice

Hearing:  June 22, 2000
Decided:  July 31, 2000

[9 FSM Intrm. 468]

For the Plaintiffs:        Daniel J. Berman, Esq.
                                     P.O. Box 1491
                                     Kolonia, Pohnpei FM 96941

For the Defendant:     Benjamin D. Tured
                                     Micronesian Legal Services Corporation
                                     P.O. Box 206
                                     Colonia, Yap FM 96943

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Debtors' and Creditors' Rights
     When a judgment-debtor has unilaterally increased his indebtedness to non-judgment creditors while not increasing his payments to his judgment-creditor, it is the judgment-debtor who should bear the burden of this improvidence, and not the judgment-creditor.  The court will therefore order the allotment amounts for the new voluntary debts to be allotted to the judgment-creditor's debt instead.  Bank of Guam v. Tuuth, 9 FSM Intrm. 467, 469-70 (Yap 2000).

Debtors' and Creditors' Rights
     As between a judgment creditor and a creditor who has not instituted legal action, the judgment creditor should enjoy a priority.  Bank of Guam v. Tuuth, 9 FSM Intrm. 467, 470 (Yap 2000).

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MARTIN YINUG, Associate Justice:
     All creditors of the defendant Aloysius Tuuth ("Tuuth") are advised to read this order in its entirety, but their attention is specially directed to pages 5 and 6 [page 470 infra] of this order.

     Commencing the month of August, 2000, Tuuth will make monthly payments of $445 to the Bank of Guam ("the Bank"), plus $100 a month to plaintiff's counsel. All payments to the Bank of Guam will be made by allotment from Tuuth's biweekly paycheck as an employee of Yap state.  Since there are actually 26 pay periods a year, the biweekly allotment to the Bank of Guam to accomplish the payment of $445 on a monthly basis will be $205.38.  In the event that the Bank does not receive this allotment, it will immediately notify the court, and the court will issue an order to show cause.

     Just over one year ago, on July 5, 1999, the court entered an order in aid of judgment requiring Tuuth to make monthly payments of $490 a month ) plus an additional $100 a month to plaintiff's counsel, for a total of $590 a month ) on the judgment in this case, which exceeds over $100,000.  Such a payment plan was originally set out in the order in aid of judgment entered on December 21, 1998. Under the terms of that order, Tuuth was to start payments of $100 a month on January 1, 1999, and then increase that amount to $490 six months later in July of 1999.  Also as part of the December 21, 1998, order, Tuuth was to pay $100 a month directly to plaintiff's attorney in Guam.

     In response to the July 5, 1999, order, Tuuth filed a motion for reconsideration citing a litany

[9 FSM Intrm. 469]

of financial commitments, and asking the court to keep the payments to the Bank at $100 a month.  Partly because the court had mistakenly believed that Tuuth had been making a total of $590 a month since December 1998 when in actuality the $590 was to take effect in July of 1999, the court granted the motion for reconsideration by order of July 29, 1999.  In that order, the court noted that "[i]nstead of paying down his debts, defendant has incurred additional debts."  The court went on to state that "[t]he court fully expects that the defendant will make the most this second opportunity to better his financial position, and not to make it worse, as he did during the time from the December, 1998, order, until the July [2, 1999] review hearing."

     The next review hearing was scheduled for January 14, 2000.  After hearing on that date, the court by order of January 21, 2000, increased Tuuth's payments to $220 a month, $120 to the Bank of Guam, and $100 to the Bank's attorney.  The increase to the Bank of Guam was thus only $20 a month.  A further review hearing was set for June 22, 2000, and at the hearing the court was apprised that Tuuth had again incurred new indebtedness, but this time it is substantial.  The court was surprised to learn from Tuuth's affidavit subsequently filed on July 21, 2000, that he had decided to undertake a fairly extensive home improvement project.  In the furtherance of that plan, he had incurred new credits from Waab and EMI totalling $3,506.59 ) $3,081.69 from EMI and $425 from Waab.  There was also a large additional credit, in that Tuuth borrowed $3,000 from the Credit Union, $1,000 of which was to pay a worker on the home improvement project, and $400 of which was given to his daughter for school expenses.  According to Tuuth's avowal in his affidavit filed on July 21, 2000, the remainder went toward expenses incurred so that Tuuth could accompany his wife to the Philippines for medical treatment.

     In sum, defendant has incurred new credits totalling just over $7,500 since the last status hearing in this case.  With the exception of the medically related expenses, the court struggles to see how Tuuth ) who by training and experience must be credited with a certain degree of financial sophistication ) has done anything other than intentionally abuse the "second chance" which the court sought to give him as long ago as the July 29, 1999, order.

     Out of his annual salary of $26,000, or $1,000 biweekly, defendant now has $405 allotted to his creditors.  A further $122.61 is allotted biweekly for insurance and FSM withholding.  He also has been paying $105 directly to the court on a biweekly basis as restitution in Criminal Action 1997-501, where there is a balance remaining of $3,220.  He pays $100 a month (or $46.11 reduced to a biweekly basis) directly to plaintiff's attorney in this case.  He has also been paying $120 to the Bank on a monthly ($55.38 on a biweekly) basis.  These sums add to $734.14, and when subtracted from his $1,000 gross biweekly salary, leave $265.86.

     These numbers reflect the fact that since the January hearing, Tuuth unilaterally increased the allotment amount to EMI from $100 to $200 to cover the recent credits.  That additional $100 biweekly (or $216.67 on a monthly basis) could have, and should have, gone to the Bank.  More, had he not incurred these additional credits, the balance to EMI would now be $742.77.  At biweekly payments of $100 ($216.67 a month), that debt could have been retired in four months, freeing up an additional amount to be applied to the Bank's judgment.

     As to Waab, the January 12, 2000, list of debts showed nothing owed to Waab.  Now the figure for Waab shows a balance of $379.25, with $25 allotted biweekly.  If this debt had not been incurred, then an additional $54.17 a month would have been available toward the Bank's debt.  The same is true for the Credit Union.  The balance on the January debt list was the de minimis sum of $80, now it is a surprising $2,700.  Whereas in January, Tuuth was allotting $55 biweekly to the Credit Union, he is now allotting $50 biweekly, and had he not incurred the new debt, $50 biweekly or $108.22 monthly would now be available to pay towards the Bank's debt.

[9 FSM Intrm. 470]

     The court is faced with, at best, imprudent conduct on Tuuth's part in incurring these new credits.  It is Tuuth who should bear the burden of this improvidence, and not the Bank.  Hence, the court will proceed as if Tuuth had behaved prudently since the last review hearing in January of this year.

     Adding up the $100 biweekly increase to EMI, the $25 biweekly to Waab, and the $50 biweekly to the Credit Union yields $175, or $350 every four weeks, which by rights should now be available to pay towards the Bank's debt.  Allowing $25.00 to be allotted biweekly on that portion of the new Credit Union debt which was medically related, that leaves an additional $150 biweekly ($325 monthly) that will now be paid toward the Bank's judgment.  Tuuth was previously paying $120 a month to the Bank.  Beginning August of 2000, he will pay 445.00 month ($325 + $120.00) by allotment to the Bank of Guam.  The biweekly allotment amount to accomplish a monthly payment of $445 is $205.38.  He will also continue to make the $100 payment directly to defendant's counsel.  Plaintiff will apprise the court's justice ombudsman, Fidelis Thiyer, in the event that Tuuth fails to make the allotment, in which event an order to show cause shall issue. Defendant has been given the benefit of every doubt, but has abused the court's consideration.  After considering the factors and making the determinations required by 6 F.S.M.C. 1409, the court issues the instant order accordingly.

     The creditors of the defendant Aloysius Tuuth are put on notice that Tuuth is a heavily indebted individual.  The court directs the clerk to endorse the instant order to all of the creditors shown on the statement of debts filed on June 21, 2000.  This order, which speaks only to the present relationship between the Bank and Tuuth, does not diminish any legal recourse that any creditor may have against Tuuth, nor does it relieve Tuuth in any way from paying his recently incurred credits to EMI, Waab, and the Credit Union.  At the same time, the Bank is a judgment creditor, and as between a judgment creditor and a creditor who has not instituted legal action, the judgment creditor should enjoy a priority.  See In re Island Hardware, 3 FSM Intrm. 332, 349-50 (Pon. 1988).

     Lastly, this is a hard case made even more difficult by Tuuth's recent conduct. The court cannot ) as can none of the parties ) derive any satisfaction from ordering Tuuth to make payments where those payments will not even cover the accruing interest on the debt, which by now is well over $100,000.  However, Congress has not seen fit to enact any legislation directed toward debtor/creditor situations like Tuuth's.  Nor has Tuuth proposed an assignment for the benefit of creditors.  In the absence of either, and on the present facts of this case, the court is constrained by 6 F.S.M.C. 1409 to enter the instant order, however unsatisfactory that order may be from all perspectives.  Section 1409 of Title 6 provides in pertinent part that the court shall determine "the fastest manner in which the debtor can reasonably pay a judgment."  The irony of the situation is that as applied to the facts, the court must enter an order calculated to cause Tuuth's ever-mounting debt to the Bank to increase at the slowest possible rate, versus an order calculated to reduce it at the fastest possible rate.

     This matter is set for a further review hearing on January 5, 2001, at 2:00 o'clock p.m.  Plaintiff's counsel may appear telephonically, and will initiate the call to the court.