THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA
Cite as Aggregate Sys., Inc. v. FSM Dev. Bank ,
9 FSM Intrm. 569 (Chuuk 2000)
AGGREGATE SYSTEMS, INC., MANUEL D.
CRISOSTOMO and CESAR A. CRISOSTOMO,
FSM DEVELOPMENT BANK and ESTATE OF
CIVIL ACTION NO. 1994-1002
FEDERATED STATES OF MICRONESIA
LOUIS FAMILY, INC.,
CIVIL ACTION NO. 1994-1008
Richard H. Benson
Decided: November 15, 2000
For the Plaintiff: James P. Woodruff, Esq.
(FSM Dev. Bank) P.O. Box M
Kolonia, Pohnpei FM 96941
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Attorney, Trial Counselor and Client ) Fees; Judgments
Attorney fee awards that are part of money judgments are entitled to bear interest at the judgment rate until satisfied. Aggregate Sys., Inc. v. FSM Dev. Bank, 9 FSM Intrm. 569, 570 (Chk. 2000).
Unsatisfied judgments accrue nine percent simple interest from date of entry because the statute does not authorize compounding. Aggregate Sys., Inc. v. FSM Dev. Bank, 9 FSM Intrm. 569, 570
Judgments; Statutes ) Construction
The generally recognized rule is that interest should not bear interest, but compound interest may be awarded if authorized by statute. When the statute reads "nine percent a year" it is not an express authorization to compound interest annually, but is instead, without more, merely a statement of the rate of simple interest. Aggregate Sys., Inc. v. FSM Dev. Bank, 9 FSM Intrm. 569, 570 (Chk. 2000).
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RICHARD H. BENSON, Associate Justice:
I have before me the FSM Development Bank's Motion for Payment of Legal Fees, filed October 23, 2000. Notice of the motion was given to all parties, the court-appointed Receiver, and to one of the Bank's previous counsel. The motion seeks an order directing the Receiver to disburse funds to pay the attorney's fees awarded to the Bank's first attorney in the above two cases. That earlier attorney has also submitted his own request to the Receiver asking that the sums of $2,412.89 in Civil Action No. 1994-1008 (Louis Family) and $12,683.93 in Civil Action No. 1994-1002 (Estate of Haruo) be disbursed to him in payment of the attorney fee awards. His calculations of the amounts due appear to include 9% interest compounded annually.
In Civil Action No. 1994-1002, the Stipulated Judgment entered on March 19, 1996, awarded the attorney's fees of $8,520. On March 14, 1996, in Civil Action No. 1994-1008, the court entered an order, amending the judgment of March 30, 1995, awarded attorney's fees of $1,601. Since both these attorney fee awards are part of money judgments they are entitled to bear interest at the judgment rate until satisfied.
"Every judgment for the payment of money shall bear interest at the rate of nine percent a year from the date it is entered." 6 F.S.M.C. 1401. "Unsatisfied judgments must accrue nine percent interest from date of entry. This nine percent is simple interest because the statute does not authorize compounding." Senda v. Creditors of Mid-Pacific Constr. Co., 7 FSM Intrm. 664, 670 (App. 1996); see also 45 Am. Jur. 2d Interest and Usury § 57 (1999) ("the generally recognized rule is that interest should not bear interest, but . . . compound interest may be awarded if authorized by statute" (footnotes omitted)). Consequently, the attorney is entitled to only 9% simple interest on his awards. In the absence of an express Congressional authorization, it cannot be compounded annually. When the statute reads "nine percent a year" it is not an express authorization to compound interest annually, but is instead, without more, merely a statement of the rate of simple interest.
The difference between simple and annually compounded interest is important over time. For example, a $100 money judgment unsatisfied for one year would then be worth $109. If the $100 judgment remained unsatisfied and were compounded after two years it would be worth $118.81, instead of the $118 at 9% simple interest. After three years it would be $129.50, instead of $127. After four years it would be $141.16, instead of $136, and after five years it would be $153.86, instead of $145. The $153.86 after five years with annual compounding is almost equal to the $154 that would be due with six years' simple interest. In other words, with annual compounding you would accrue almost six years' interest in five years ) a extra year of interest not authorized by the statute. Another example of the effect of compounding is that with 9% simple interest it would take eleven years before an unsatisfied $100 money judgment would equal $199 ) or almost double the original amount. With annual compounding it would be $199.22 after only eight years ) three extra years of
interest by then. This mathematical exercise should make apparent why a court cannot order payment of compound interest when it has not been expressly authorized.
The order in Civil Action No. 1994-1008 adding $1,601 attorney's fees to the judgment was entered on March 14, 1996. One years' interest at 9% equals $144.09, which multiplied by 4 equals $576.36 interest for the four years from March 14, 1996 through March 13, 2000. $144.09 multiplied by the 246 days since then and divided by 365 (the number of days in the year from March 2000 to March 2001) equals $97.11 interest from March 14, 2000 to date. Total interest due on the $1,601 award is thus $673.47. Similar calculations for the $8,520 award included in the March 19, 1996 judgment in Civil Action No. 1994-1002 yield an annual interest amount of $766.80; $3,067.20 for four years and $506.30 for the 241 days from March 19, 2000 to date, for total interest of $3,573.50. The attorney is therefore entitled to disbursement of $2,274.47 for the attorney fee award in Civil Action No. 1994-1008 (Louis Family) and $12,093.50 for the attorney fee award in Civil Action No. 1994-1002 (Estate of Haruo).
Now therefore it is hereby ordered that the Receiver shall disburse the amounts of $2,274.47 and $12,093.50 from the appropriate funds in his possession to the FSM Development Bank's prior attorney, R. Barrie Michelsen, Esq., to satisfy the attorney's fees awarded in these cases.