Peace International Co. v. Ayuyu

Opinion

0 SUPFTV R i 3JRT

Ci F-J

IN THE SUPERIOR COURT OF GUAM

PEACE INTERNATIONAL CO. LTD., ) CIVIL CASE No. CV0099-14

P LAINTIF F, ) DECISION & ORDER: DEFENDANT'S MOTION TO DISMISS, 10 V. SET ASIDE ENTRY OF DEF AULT, it AND F OR LEAVE TO F ILE ANSWER ROMAN AYUYU, 12

14 1. 15 INTRODUCTION 16

Thi s matter cane before the Honorable Maria T. C e nzo n for a M otion Hearing on 17

is August 11, 2014. Peace International Co. Ltd. ("Plantiff') was represented by Attorney Charles

19 H. McDonald of Berman O'Connor & Mann and Roman Ayuyu ("Defendant") was present and 20 represented by Attorney Gary W. Francis Gumataotao of Gumataotao & Pole. The Court 21 entertained three of Defendant's motions: to dismiss the action; to set aside entry of Defendant's 22

23 default in this matter; and for leave of court to file an answer. The motions were presented in

24 Defendant's Motions to Dismiss, Set Aside Entry of Default & Request for Leave to File

Answer ("Defendant's Motions") filed on May 12, 2014. Plaintiff filed, in one document, an

Opposition to Defendant's Motion to Dismiss and a Non-Opposition to Defendant's Motions to

PP ACE/ AT. Co. Lra V. Annv, CV0548-09 Decision & Otdw. Defendant' s M t t o D 'u®u, Set Aside Default, and Me Amwa PageIo'8 Set Aside Entry of Default and Request for Leave to File Answer on June 9, 2014. The Court

orally granted the motion to set aside entry of default from the bench and took Defendant's two

other motions under advisement and now issues this written Decision & Order.

Upon reviewing the applicable statutes and case law, the Parties' briefings, and hearing

oral argument on the issues, the Court HEREBY GRANTS Defendant's Motions to Set Aside

Entry of Default and for Leave of Court to File Answer and HEREBY DENIES Defendant's

Motion to Dismiss. 9 H. 10 FACTUAL AND PROCEDURAL BACKGROUND 11

12 As a co ntested matter, this case is procedurally nascent as Defendant has yet to file any

13 responsive pleadings.' Plaintiff filed his Complaint for Breach of Contract ("Complaint") on 14 January 22, 2014, seeking to recover money allegedly paid to Defendant for a motor vehicle 13 which was never delivered. Defendant was served with Summons on January 30, 2014 but 16

17 failed to file any answer within twenty days as required by GRCP 12(a) or assert any defenses

1s by motion pursuant to GRCP 12(b) or otherwise make any appearance in this matter. Plaintiff

19 requested an Entry of Default from the Clerk of the Superior Court of Guam on April 10, 2014. 20 A Default Hearing was scheduled for May 22, 2014, but Defendant's Motions were filed prior to 21 that hearing on May 12, 2014. Plaintiff filed its Opposition and Non-Opposition on June 9, 2014 22

23 1 and the Court entertained Defendant's motions on August 11, 2014. The August 11, 2014

24 Motion Hearing was the first appearance of both Parties before this Court and the instant record

26 ' U n de r the Guam R.I. of Civil Procedure, a motion is distinct from a pleading (see GRCP 7) and the count's denial or 27 postponement of nding on a party' s GRCP 12 motion mandates service of their responsive pleading within ten days under GRCP 12(a)(l). 28 Pascals: Co. Lm v. Anne, CVOS4B-09 Decision & Orde: Def dant's Maim to Dismiss, Set Aside Default, and File Answer Page 2 of 8 is minimal, consisting only of these two moving papers accompanied by two exhibits each, the

Complaint, and the Entry of Default.

III.

LAw AND ANALYSIS

A. The Court Grants Motion to Set Aside the Entry of Default

Defendant's Motion to Set Aside Entry of Default was unopposed by Plaintiff and the Court

8 granted that motion from the bench. However, the GRCP 55(c) standard of "good cause shown" 9 is not attained merely by stipulation of the parties. Under Guam law, the setting aside of an 10 entry of default is subject to judicial scrutiny of the same factors as the setting aside of a default 11 judgment under GRCP 60(b). Adams v. Duenas, 1998 Guam 15 15 (citing Midsea v. HK 12

13 Engineering, 1998 Guam 14 14)). A motion to set aside entry of default should be denied if a

14 courts finds " (1) the defendant's culpable conduct led to the default; (2) the defendant has no 15 meritorious defense, or (3) the plaintiff would be prejudiced if the judgment is set aside." 16 Midsea 1 5 (citations omitted). However, the standard is less rigorously applied to a motion for 17

1s setting aside an entry of default than for one setting aside a default judgment (Adams 15) and

19 the Court's review reflects the public policy "that the rule is meant to be remedial in nature and

20 should be applied liberally, and that a default judgment is considered to be a drastic measure, 21 only appropriate in extreme circumstances because, whenever possible, cases should be decided 22 on their merits." Midsea 1 6 (citing Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)). 23

24 Applying the Midsea test to this matter, the Court does not find Defendant's conduct

25 culpable in the default when he was actively discussing settlement terms with and making 26 payments towards the debt until Plaintiff requested Entry of Default. Declaration o f Michael J. 27 Berman114-6, 8 (June 9, 2014). Secondly, Defendant has mentioned several possible defenses 28 Puce t M . Co. Lim V. Awn'.CV0548M9 Davim & Oda. Defendants Moliun to Disn,ias. Se[ Aside Default and File Answer Page 3 of 8 0

in his Motions, including the running of the statute of limitations, a discharge of the debt

through bankruptcy, and Plaintiff's lack of a business license. While these matters have not been

fully briefed, the Court cannot characterize these defenses as without merit given the record and

alleged facts before it. Finally, Plaintiff's non-opposition to setting aside the entry of default is a

clear indication that Plaintiff will not be prejudiced or has waived any objections to such

prejudice.

B. The Court Denies Dismissal under GRCP 12(b)(6)

Defendant moves to dismiss the Complaint as defective on its face. Specifically, 10 Defendant asserts the facts as stated in the Complaint do not remove the action from the it statutory time bar for a breach of contract. The argument is properly characterized as arising 12

13 under GRCP 12(b)(6), since Defendant argues the time and date of the facts stated are such that

14 Plaintiff would be unable to recover relief due to operation of the applicable statute of 15 limitations and Plaintiff has failed to plead facts to support tolling or excuse. 16 Although the Court finds no exact date of the alleged breach of contract explicitly stated 17 in the Complaint, that does not render the Complaint legally insufficient. The facts as stated in 18

19 the Complaint permit an inference of the alleged breach occurring within the statute of

2D limitations when the Parties entered into their agreement on July 30, 2010, the Complaint 21 requests damages in the amount of $79,474 for principal as of February 21, 2013, and Plaintiff 22 made a final demand for payment on January 13, 2014. These last two dates are clearly within 23

the three- or four-year statute of limitations for actions upon a contract and would warrant an 24

25 inference that the alleged breach occurred on or about those dates. Therefore, it does not 26 "appear[] beyond doubt that the plaintiff can prove no set of facts in support of his claim which 27 would entitle him to relief." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 561 (2007) (quoting 28 Puce Ax: Co. ran v. Anrcu,Cv0548-09 Deci ioe & Oeden DNmdaot's Motim to Dismiss, Set Aside Ddiselt, end File Assewer Paee4 of8 0

Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). This inference is especially justified when it is

the Court's duty to 'lake all allegations of material fact as true and construe them in the light

most favorable to the nonmoving party." Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir.

2009).

To further compound the ambiguity of when the alleged breach occurred, although not

fatally so, is the fact that neither Plaintiff 's Complaint nor Defendant's motion to dismiss has

8 presented this Court with clear legal authority on the applicable statutes of limitation which

9 would apply in this action. 10 Defendant asserts that under 7 GCA §§ 11303-11305 and 11403, a three-year statute of �

limitations for an action upon an unwritten contract controls. However, the law governing 12

13 contracts for the sales of goods is distinct from that which covers services and labor. MElectric

14 Corp. v. Phil-Gets ( Guar ) Intl. Trading Corp., 2012 Guam 23 113 and 13 GCA § 2102. Upon

15 this Court's review of the Complaint, which states the Parties entered into an "agreement" for 16 the sale of "new Automobiles" which Defendant was to ship to Japan (Complaint at 1-2), 17 Guam's Uniform Commercial Code Sales, as statutorily codified at 13 GCA Div. 2, could 18

19 reasonably apply.

20 Under the Uniform Commercial Code at 13 GCA § 2725(1): "an action for breach of 21 any contract for sale must be commenced within four years after the cause of action has 22 accrued." By that standard the Complaint is not barred on its face when no more than three 23 years and five months had lapsed: "On [sic] about July 30, 2010, the Defendant Ayuyu entered 24

25 into an agreement with Plaintiff whereby in exchange for monies..." Complaint at 1 (Jan. 22,

26 2014). 27

28 PE4cS In. Co. Lm V.Anne, CV0548-0� 9 . ( � �� �� �� ��

Decision & Omer. Defeodam's Maim to DismS as AsWe DefaW1, and FileeWwer Pages ofS Even if, as Defendant asserts, the shorter three-year statute of limitations for a contract

not founded in writing at 7 GCA § 11305(h) controls, the Court still cannot deem the Complaint

barred on its face when the Guam Supreme Court has found persuasive California's recognition

of at least four different constructions of their equivalent statute and "California courts have

consistently upheld that the determination of an applicable statute of limitations is a question of

fact." Guam Police Dept. v. Superior Ct. of Guam, 2011 Guam 8 $ 11.2 This issue of fact

8 persists unless the Court' s review of the Complaint is "susceptible of only one legitimate

9 inference." Id. (quoting Lee v. Fid. Nail Title Ins. Co., 115 Cal. Rptr. 3d 748,761 (Cal. Ct. App. 10 2010)). As the Court fords that the facts stated in the Complaint support multiple inferences of 11 when the statute of limitations would have begun to run, the issue of fact persists and dismissal 12

13 under GRCP 12(b)(6) is unjustified.

14 One essential fact which remains unknown in this matter is if the agreement at issue was

15 memorialized in any writing. Defendant's assertion that the agreement only existed orally 16 (Defendant's Motion at 5), assumed a fact never stated in the Complaint, rendering it outside the 17 scope of the motion and an intrusion upon the role of the finder of fact. Defendant also did not 18

19 present any evidence to support this conclusion. See Defendant's Motion, Exhibit A: Affidavit

20 of Defendant which is also silent on this question. This is yet another example of how the Court, 21 at this stage in the proceedings, has no basis for applying one legal standard over another. 22 Without knowing if the agreement was based upon a writing or if it was between two merchants 23

for the sale of goods, the Court would have no basis for examining the Complaint under the 24

25 four-year statute of limitation in 7 GCA § 11303 instead of the three-year statute of limitation in

27 2 Title 7 GCA § 11305(8) is cited therein, but the Compilers Now confirms that the change is to the codification scheme and not substantive. 28 PmCEIM. Co. Lm v.AYUy/, CV0548-09 Decision & Drda: Defmdsnl's M.O. to Dismiss, Se[ Aside Default, cod Fie Answer Page 6018 7 GCA § 11305; or indeed, determining whether those provisions are wholly inapplicable and

the Court should instead apply the statute of limitations found in the Uniform Commercial Code

at 13 GCA § 2725. This threshold determination, the basis of Defendant's motion to dismiss, is

impossible to make at this stage in the proceedings. Dismissal at this time, under GRCP

12(b)(6) would be premature and contrary to the public policy that favors "giving Parties their

day in Court" as noted by Defendant in his Motion at 3.

As the above discussion on just two factual issues bearing on the statute of limitation

issue reveals, a just adjudication requires that the Court deny Defendant's motion to dismiss and 10 allow the action to proceed, so the Parties may have an opportunity to engage in discovery. It is 11 enough to find, for the purposes of Defendant ' s motions to dismiss, that Plaintiff has met its 12

13 burden of pleading " more than labels and conclusions [] and a formulaic recitation of the

14 elements of a cause of action ..." and has stated enough facts in the Complaint to "raise a right

15 to relief above the speculative level." Core Tech q9[ 52-53. 16 C. Plaintiff May Amend Their Complaint As a Matter of Course and Defendant Is 17 Granted Leave to He Responsive Pleadings. 18

19 Having noted herein that no responsive pleading has been filed in this matter, Rule 15(a)

20 of the Guam Rules of Civil Procedure permits an amendment of the Complaint " once, as a 21 matter of course at any time before a responsive pleading is served." The Court fords that 22 granting Plaintiff leave to amend, without dismissal, is in the interest of judicial economy. Upon 23 service of the amended Complaint, Defendant is granted leave to file an Answer within twenty 24

25 days pursuant to GRCP 12.

28 Pe4CeIVr. Co. Lan v. Anne,CV0548-09 DeciMaa & Oit, Defmdmt 's Maim to Dismiss, Set AsideDefault, and File Answer P W 7." 9 9

IV. 1

2 CONCLUSION

3 For the foregoing reasons, the Court hereby issues the following orders: 4 1) GRANTS Defendant's Motion to Set Aside Entry of Default;

2) DENIES Defendant 's Motion to Dismiss under GRCP 12(b)(6);

3) GRANTS Plaintiff leave to file an amended Complaint as permitted by GRCP 15(a) a and ORDERS the amended Complaint be filed within twenty days; and 9 4) GRANTS Defendant's Motion for Leave to File Answer or other responsive pleading 10

11 within twenty days of service of Plaintiff 's amended Complaint pursuant to GRCP 12. 12 The Court will hold a Scheduling Conference in this matter on November 5, 2014 at 3:30 13 PM. 14 SO ORDERED this 11 day of September, 2014. 15

19 HONORABLE MARIA T. C E N Z O N Judge, Superior Court of Guam 20

23 SERVICE VIA COURT BOX Ie l,Medge that a napy of Me o.Wins heretowas placed In tl,e 24 of

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