THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA
Cite as Union Industry Co. v. Santos,
7 FSM Intrm. 242 (Pon. 1995)

[7 FSM Intrm. 242]

UNION INDUSTRY CO., LTD.,
Plaintiff,

vs.

SHADORU SANTOS,
Defendant.

CIVIL ACTION NO. 1995-048

ORDER AND MEMORANDUM OF DECISION
 
Andon L. Amaraich
Chief Justice

Decided:  September 18, 1995

APPEARANCES:
For the Plaintiff:          Martin Mix, Esq.
                                     P.O. Box 143
                                     Kolonia, Pohnpei FM 96941

For the Defendant:     Charles Greenfield, Esq.
                                     Tino Donre, Esq.
                                     Micronesian Legal Services Corporation
                                     P.O. Box 129
                                     Kolonia, Pohnpei FM 96941

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HEADNOTES
Civil Procedure ) Dismissal
     A motion to dismiss for failure to state a claim will be granted only if it appears to a certainty that no relief can be granted under any state of facts that could be proven in support of the claim, and a court must assume that the facts alleged in the complaint are true, and the facts and inferences

[7 FSM Intrm. 243]

drawn from the complaint must be viewed by the court in the light most favorable to party opposing the motion to dismiss the complaint.  Union Indus. Co. v. Santos, 7 FSM Intrm. 242, 244 (Pon. 1995).

Civil Procedure ) Dismissal; Civil Procedure ) Res Judicata
     Dismissal with prejudice of a plaintiff's prior action constitutes a judgment on the merits, which has a res judicata effect, barring the relitigation of all issues that were or could have been raised in that action.  Union Indus. Co. v. Santos, 7 FSM Intrm. 242, 244 (Pon. 1995).

Judgments ) Relief from Judgment
     In appropriate circumstances, a court will invoke its equitable jurisdiction and will permit an independent action to set aside a prior judgment.  Union Indus. Co. v. Santos, 7 FSM Intrm. 242, 245 (Pon. 1995).

Judgments ) Relief from Judgment
     Where an identical action was dismissed with prejudice, the parties were represented by competent counsel, and defendant relied upon the dismissal of the prior action as a final and unequivocal resolution of both parties' claims, it would be inequitable to allow the plaintiff to relitigate the issue.  Union Indus. Co. v. Santos, 7 FSM Intrm. 242, 245 (Pon. 1995).

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COURT'S OPINION
ANDON L. AMARAICH, Chief Justice:

Introduction and Facts
     By this action, Plaintiff Union Industry Co., Ltd., seeks to recover $104,886.17 allegedly owed by Defendant Shaduro Santos to plaintiff.  The alleged debt arises from merchandise allegedly sold by plaintiff to defendant.  Plaintiff asserted an identical claim against the same defendant in a prior action, namely Civil Action No. 1992-031.  During a hearing in that action held on September 9, 1992, both parties orally moved for dismissal, and the case was dismissed with prejudice.  This Court is now asked to consider the effect of that dismissal.

     Approximately two and one-half years later, in April of 1995, plaintiff filed the present action, seeking to set aside the Court's judgment in Civil Action No. 1992-031 and recover defendant's alleged debt to plaintiff.  On May 8, 1995, defendant filed a FSM Civil Rule 12(b)(6) motion to dismiss this action for failure to state a claim upon which relief could be granted.  Plaintiff contends that the Court's Order of dismissal with prejudice in 1992-031 constitutes a judgment on the merits of plaintiff's claim and, as such, bars this action under the doctrine of res judicata.

     Plaintiff counters defendant's motion for dismissal with two arguments.  First, plaintiff suggests that the Court's written Order of dismissal with prejudice in 1992-031 was issued in error because no party requested the dismissal of Civil Action No. 1992-031 with prejudice.  Second, plaintiff argues that even if the prior action was properly dismissed with prejudice, the equities of this case strongly favor setting aside the Court's prior judgment and permitting the instant action to go forward.  In support of its appeal to this Court's equity jurisdiction, plaintiff notes that the prior action was dismissed due to defendant's financial condition which made him virtually judgment proof at the time.  Now, plaintiff argues that defendant is able to repay the alleged debt, and dismissing this action would allow defendant to retain plaintiff's merchandise without ever having to pay for it.

[7 FSM Intrm. 244]

Standard for FSM Civil Rule 12(b)(6) Dismissal

     An FSM Civil Rule 12(b)(6) motion to dismiss for failure to state a claim will be granted only if it appears to a certainty that no relief can be granted under any state of facts that could be proven in support of the claim.  Jano v. King, 5 FSM Intrm. 388, 390 (Pon. 1992).  The Court must assume that the facts alleged in the complaint are true, and the facts and inferences drawn from the complaint must be viewed by the Court in the light most favorable to party opposing the motion to dismiss.  Mailo v. Twum-Barimah, 2 FSM Intrm. 265, 267 (Pon. 1986).  The Court may grant a 12(b)(6) motion to dismiss only if it appears to a certainty that no relief could be granted under any state of facts which could be proven in support of the complaint.  Faw v. FSM, 6 FSM Intrm. 33, 37 (Yap 1993).

Discussion

     Review of the minutes entry of the September 9, 1992 hearing in Civil Action No. 1992-031 reflects some ambiguity as to whether the parties requested that the action be dismissed with or without prejudice.1 To resolve this ambiguity, the Court has independently located and reviewed the tape recording of the September 9, 1992 hearing.  The Court's review of the tape recording indicates that plaintiff explicitly requested that Civil Action No. 1992-031 be dismissed with prejudice.2 Accordingly, there is no error in the Court's Order of September 16, 1992, dismissing Civil Action No. 1992-031 with prejudice.

     The Court's dismissal with prejudice of plaintiff's prior action constitutes a judgment on the merits in Civil Action 1992-031.  46 Am. Jur. 2d Judgments 482, at 645 (1969) (stating that "[t]he term `with prejudice,' expressed in a judgment of dismissal, has a well recognized legal import . . . indicat[ing] an adjudication on the merits").  A judgment on the merits in any action has res judicata3 effect, barring the relitigation of all issues that were or could have been raised in that action.  Ittu v. Charley, 3 FSM Intrm. 188, 191 (Kos. S. Ct. Tr. 1987) (stating that under res judicata principles, an order of dismissal with prejudice precludes the reassertion of the dismissed claim); 46 Am. Jur. 2d Judgments 482, at 645 (1969) (stating that "an adjudication of the merits, operates as res judicata, concluding the rights of the parties, terminating the right of action, and precluding subsequent litigation of the same cause of action").  Accordingly, because plaintiff's claim in this action is identical to its claim in the prior action, which was dismissed with prejudice, the present action is barred by the doctrine of res judicata.

[7 FSM Intrm. 245]

     In appropriate circumstances, the Court will invoke its equitable jurisdiction and will permit an independent action to set aside a prior judgment.  See Election Commissioner v. Petewon, 6 FSM Intrm. 491, 499, 1 CSR 5, 11 (Chk. S. Ct. App. 1994).  Plaintiff argues that this action, where defendant allegedly received substantial merchandise without paying for it, constitutes an appropriate case for the exercise of this Court's equitable jurisdiction.  The Chuuk State Supreme Court and the United States federal courts have adopted a five-part test to evaluate whether an independent action should be permitted to set aside a prior judgment.4  However, plaintiff, recognizing that it cannot meet this test, see Def.'s Opp'n to Motion to Dismiss at 6 (June 15, 1995), argues that the Court should not adopt it, but, instead, should adopt a broader equitable analysis to determine whether an independent action to set aside a prior judgment should be permitted.  Plaintiff, of course, argues that under such an analysis this action should be permitted to go forward.

     This Court has never addressed the question of what is the appropriate standard for determining whether an independent action should be permitted to set aside a prior judgment.  However, at this point in time, the Court need not address this question because under either the five-part test utilized by the Chuuk State Supreme Court and by the United States federal courts or the broad equitable analysis propounded by plaintiff, the Court must find that the equities of the instant action strongly favor dismissal.

     An action identical to the present action was dismissed with prejudice almost three years ago at the explicit request of plaintiff.  Both plaintiff and defendant were represented by competent counsel and must be assumed to have understood the import of a dismissal with prejudice.  Accordingly, defendant relied on the dismissal of the prior action as a final and unequivocal resolution of both parties' claims.  To permit the identical action to be relitigated almost three years after defendant believed he had fully and finally resolved these claims would be unfair to defendant. Furthermore, the Court must be concerned with the finality of judgments and the efficient utilization of Court resources.  Except in exceptional circumstances, none of which exist here, the Court cannot permit the redundant use of Court resources or allow the creation of uncertainty regarding the finality of this Court's judgments. Simply put, it is not only inequitable to permit this action to go forward, almost three years after plaintiff requested dismissal with prejudice of an identical action, but also an improper use of Court resources.  Accordingly, because this Court will not set aside its prior judgment in Civil Action No. 1992-031, this action is barred by the doctrine of res judicata, and plaintiff has failed to state a claim upon which relief could be granted.

CONCLUSION
 
     Accordingly, it is hereby ordered that defendants FSM Civil Rule 12(b)(6) Motion to Dismiss is granted.
 
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Footnotes:
 
1.  In relevant portion the minutes entry from the September 9, 1995 hearing reads as follows: "Counsel for plaintiff moved for dismissal of the case.  Without any objection, Counsel for the defendant asked for dismissal of the counterclaim.  Court having heard from counsel granted the plaintiff's motion to dismiss with prejudice, and also granted the defendant's motion to dismiss the counterclaim."

2.  A review of the tape recording of the September 9, 1992 hearing indicates that counsel for plaintiff moved for dismissal of its claims without specifying whether the motion for dismissal was with or without prejudice. Counsel for defendant then moved for dismissal of its counterclaim and stated, "I understand the motions are for dismissal with prejudice."  Counsel for plaintiff responded by expressing agreement, stating, "[t]hat's correct your honor."

3.  Res judicata is a fundamental common law principal which holds that once a judgment has been issued and the appeal period has expired, the parties are precluded from challenging that judgment or from litigating any issues that were or could have been raised in that action.   United Church of Christ v. Hamo, 4 FSM Intrm. 95 , 106 (App. 1989).

4.  The Chuuk State Supreme Court and the United States federal courts require a plaintiff to show the following five elements before a court will entertain an independent action to set aside a judgment: (1) a judgment which ought not, in equity and good conscience, to be enforced; (2) a good defense to the alleged cause of action on which the judgment is founded; (3) fraud, accident, or mistake which prevented the defendant in the judgment from obtaining the benefit of his defense; (4) the absence of fault or negligence on the part of the defendant; and (5) the absence of any adequate remedy at law.   Election Commissioner v. Petewon, 6 FSM Intrm. 491 , 499, 1 CSR 5, 11 (Chk. S. Ct. App. 1994); Bankers Mortgage Co. v. United States, 423 F.2d 73, 79 (5th Cir. 1970), cert. denied, 399 U.S. 927 (1970).