Cite as Senda v. Mid-Pac Construction Co. ,
5 FSM 277 (App. 1992)

[5 FSM Intrm. 277]



for Benefit of Creditors
of Civil Action No.1988-095,

FSM APP. P1-1991

Argued:  October 7, 1991

Hon. Richard H. Benson, Associate Justice, FSM Supreme Court;
Hon. Jose S. Dela Cruz, Temporary Justice, FSM Supreme Court;*
Hon. Judah C. Johnny, Temporary Justice, FSM Supreme Court**

*Chief Justice, Supreme Court of the Commonwealth of the Northern Mariana Islands
** Associate Justice, Pohnpei Supreme Court

For the Appellant:     Maketo Robert
                                    Attorney at Law
                                    P.O. Box 979
                                     Kolonia, Pohnpei  FM 96941

For the Appellees:    Daniel J. Berman
                                    Attorney at Law
                                    P.O. Box 1491
                                    Kolonia, Pohnpei  FM 96941

*    *    *    *

Appeal and Certiorari
     The standard of review on a question of the sufficiency of the evidence is whether it is clearly erroneous.  Senda v. Mid-Pac, 5 FSM Intrm. 277, 280 (App. 1992). [5 FSM Intrm. 278]

     It is mandatory for a court to take judicial notice of the amount of judgments in favor of creditors when a request has been made and the court has been given all necessary information.  Senda v. Mid-Pac, 5 FSM Intrm. 277, 280 (App. 1992).

*    *    *    *

RICHARD H. BENSON, Associate Justice:
     This matter comes before us on direct appeal from the trial division of this court which rendered a money judgment in favor of the plaintiff creditors of Mid-Pac Construction Co., Inc. against the defendant.

Issues and Holdings
     As to the judgment appealed from, the defendant's assignments of error are limited to the trial court's findings of fact and to the trial court's taking judicial notice of the judgments rendered in favor of the plaintiff creditors against Mid-Pac Construction.

     We cannot say that the findings are clearly erroneous nor can we say that there was error in taking judicial notice of the judgments.

     The judgment is accordingly affirmed.

     The facts are clearly stated in the opinion of the trial court which set forth the findings of fact and conclusions of law:

   This lawsuit originally was initiated by the Mid-Pac creditors to require Mr. Senda to pay the $25,000 subscription price for the shares referred to in the stock affidavit.  In response, he asserted that he in fact never did subscribe for any shares of the corporation stock and never did pay any amount of money into the company, but had merely signed the affidavit as an accommodation to his cousins, Herman Semes and Hatler Gallen.  Thereupon, the Mid-Pac creditors amended their complaint to assert that Mid-Pac had engaged in business in violation of the C.P.A. Regs and that Mr. Senda, as a director and incorporator of Mid-Pac, is jointly liable for the Mid-Pac debts.

The case proceeded to trial under that theory....

The court finds that Mid-Pac Construction Co. did engage in business: (1) before three-fourths of its

[5 FSM Intrm. 279]

authorized capital stock had been subscribed; (2) before ten percent of its authorized capital stock  had been paid in; (3) before $1,000.00 of its capital stock had been paid in; (4) and without filing an affidavit which complied with subpart 2.5 of the C.P.A. Regs.  Each failure was a violation of part 2.7 of the regulations.

Mid-Pac Constr. Co. v. Senda, 4 FSM Intrm. 376, 383-84 (Pon. 1990).

     Further, the trial court found that none of the stock had been subscribed and "no amount at all had been paid in before Mid-Pac began its business operation."  Id. at 383.

     The defendant was an incorporator and a director when Mid-Pac was incorporated.  As Secretary and Treasurer he signed the stock affidavit which was filed with the government in order to obtain the corporate charter.  The affidavit set forth the requirements as amount of stock subscribed, and amount of capital paid in.  The statements were not true.

     Pursuant to the provisions of regulation 2.7, the trial court found the defendant jointly and severally liable with Mid-Pac for payment of the judgments of the creditors which totaled $222,073.36.

     The judgment of the court rests upon the provisions of subpart 2.7 of the Corporations, Partnerships and Association Regulations which state,

2.7 Capital Necessary to Engage in Business; Liability of Directors.  No corporation for profit shall upon the incorporation thereof engage in  business in the Territory until three-fourths of its authorized capital stock has been subscribed for nor until ten per cent of its authorized capital stock  has been paid in by the acquisition of cash or by the acquisition of property of a value equal to ten percent of the authorized capital stock nor until the affidavit or affidavits required by subpart 2.5 of chapter I, have been filed, provided that in no case shall any corporation for profit upon the incorporation thereof engage in business in the Territory until not less than $1,000 of its  authorized capital stock has been paid in by the acquisition of cash or by the acquisition of property of a net value of not less than $1,000.  In case of any violation of this section by any corporation, the incorporators and the directors thereof at the time

[5 FSM Intrm. 280]

the corporation commences to engage in business shall in their individual and private capacities be jointly and severally liable to the corporation and the stockholders and creditors thereof in the event of its bankruptcy or insolvency or in the event of its dissolution for any loss suffered by the corporation or its stockholders or creditors.

     The trial court found that the regulations had been violated in the four particulars already quoted above. The court next found the defendant jointly and severally liable to the creditors as dictated by the final sentence of subpart 2.7.

     The defendant does not assign as error the trial court's application of the final sentence of 2.7.  Instead his contention is that the findings were in error - that the evidence does not support the findings.

     Our standard of review on a question of the sufficiency of the evidence is whether they are clearly erroneous.  FSM Civ. R. 52(a).

     We have made a careful examination of the record, in light of written and oral arguments of counsel, and cannot conclude that any finding is clearly erroneous. We note in this regard that the trial court had before it the admissions of the defendant to support its findings.

     The second assignment of error is that the trial court erred in taking judicial notice of the amount of the judgments entered in favor of each creditor against Mid-Pac.  The total of the judgments so noticed yielded the judgment amount in this case.

     The record shows that the trial court at the conclusion of closing arguments invited memoranda on three questions.  One was whether the court can take judicial notice of the amount of the judgments in favor of the plaintiff creditors. The issue was briefed and presented to the trial court.  In addition to their brief the plaintiff creditors moved the court to take judicial notice and listed the case numbers and the amounts of each judgment for which notice was requested. Thus there was no element of surprise present when the trial court took judicial notice.

     We have examined the contentions of the defendant and find that they do not establish any impropriety by the trial court in taking notice of judgments in the same court in plaintiffs' favor.  The court's procedure in the matter fully complied with FSM Rule of Evidence 201.  Having been requested to take the notice, it became mandatory upon the court after being given all necessary information. FSM Rule of Evidence 201(d).

     Further, we have also considered the concern of the defendant that he is called upon to pay more than what is fair.  The defendant points out that under the court's direction attorneys have pursued the collection of

[5 FSM Intrm. 281]

receivables owed Mid-Pac Construction Company.  As a result there are funds held by the court for the benefit of Mid-Pac's creditors.  The defendant asks that all funds so collected be accounted for and credited against the amount of the judgment.  The plaintiff does not dispute this matter, and agrees that an accounting and the crediting are proper.

     We agree with the position of the parties, and are confident that the trial court intends to make the proper credit.

     We have also considered the several other assignments of error raised by the defendant in his appeal and have found them without merit.

     For the reasons stated the judgment of the trial court is affirmed and the appeal dismissed.

*    *    *    *