SECURED TRANSACTIONS

Secured transactions in American Samoa are governed by common law principles except where those principles have been modified by statute or are otherwise inappropriate to local conditions. A.S.C.A. § 1.0201. Development Bank v. Reed, 5 A.S.R.2d 135.

§1(2) Common Law Pledge

A transaction may be secured by common law pledge in American Samoa. Development Bank v. Reed, 5 A.S.R.2d 135.

A common law pledge arises when a debtor transfers possession of property to a creditor in order to secure the debt but retains title to the property. Development Bank v. Reed, 5 A.S.R.2d 135.

Intangibles, such as funds in a savings account, can be the subject of a pledge provided that the pledgee can demonstrate "possession" of them, either by obtaining from the pledgor an "indispensable instrument" that stands for the right to the intangible or by otherwise establishing that pledgee had actual control over the intangible to the exclusion of the pledgor. Development Bank v. Reed, 5 A.S.R.2d 135.

Creditor bank had "possession" of funds in debtor's savings account sufficient to sustain a common law pledge where loan contract required the debtor to pay regular installments due on the loan and to maintain an additional balance in the account, within the exclusive control of the bank, as security. Development Bank v. Reed, 5 A.S.R.2d 135.

Pledgee bank's unrecorded lien on pledged funds in bank account within exclusive control of bank is not invalid since, unlike non-possessory security devices such as mortgage, creditor's exclusive possession and control of the funds provide sufficient notice to third parties that debtor may not have the absolute right to dispose of them. Development Bank v. Reed, 5 A.S.R.2d 135.

Pledgee bank did not give pledgor "constructive possession" of pledged funds and thereby forfeit its pledge by permitting pledgor to use those funds to pay off the loan secured by the pledge; this transaction amounted to a bookkeeping entry rather than a real transfer of assets, neither enriching the pledgor nor injuring his third-party creditors. Development Bank v. Reed, 5 A.S.R.2d 135.

Pledgee bank, which, after receiving notice of garnishment from third party lienholder, permitted pledgor to withdraw from his account funds that were not part of the pledge would be liable to the third party for amount of withdrawals plus remaining unpledged balance of pledgor's account. Development Bank v. Reed, 5 A.S.R.2d 135.

§ 2 Priority of Claims

As long as a pledgee retains possession of property pledged as security, he has a lien on it superior to those of judgment creditors. Development Bank v. Reed, 5 A.S.R.2d 135.

It is not clear that court has the power to alter the rank or priority of liens by approving an ex parte stipulation to which the lienholders were not parties. S.W. California Production Credit Association v. The Vessel Conquistador (Mem.), 11 A.S.R.2d 7.

Stipulated receivership order stating that vessel should be "deemed" in custodia legis, but purporting not to create any ranking or priority of liens other than that which would otherwise exist, would arguably preserve the rights of those who, in the absence of the order, would have obtained liens on the vessel during period of receivership. S.W. California Production Credit Association v. The Vessel Conquistador (Mem.), 11 A.S.R.2d 7.

Claims for costs incurred in securing vessel while it was in custodia legis prior to judicial sale are recoverable from the proceeds of the sale and have priority over the claims of the litigants. 46 U.S.C. § 31326. United Airlines Employee Credit Union v. M/V Sans End, 15 A.S.R.2d 95.

Upon judicial sale in a civil action in rem brought to enforce a preferred mortgage lien, the preferred mortgage lien has priority over all claims against the proceeds, except for (1) expenses and fees allowed by the court, (2) costs imposed by the court, and (3) preferred maritime liens, which include those for damages arising out of maritime tort. 46 U.S.C. §§ 31325, 31301(5)(B). United Airlines Employee Credit Union v. M/V Sans End, 15 A.S.R.2d 95.

Creditor who already obtained a judgment and a writ of execution and levied upon the property of judgment creditor prior to the notice of ASG's tax lien, prevails against the ASG as a judgment lien creditor with respect to such property. 26 U.S.C. § 6323(a); A.S.C.A. § 11.0401 et seq. Shantilal Brothers, Ltd. v. KMST Wholesale, 15 A.S.R.2d 115.

The holder of a security interest, in the form of a chattel mortgage duly registered, prevails over the tax lien of ASG with respect to the proceeds of the sale of those items covered by its mortgage on the date the tax lien became effective. 26 U.S.C. § 6323(a); A.S.C.A. § 11.0401 et seq. Shantilal Brothers, Ltd. v. KMST Wholesale, 15 A.S.R.2d 115.

The general rule of lien priorities is that first in time is first in right. Shantilal Brothers, Ltd. v. KMST Wholesale, 15 A.S.R.2d 115.

As between two judgment creditors, the one who first levies upon the property has priority, irregardless of the order in which the judgments were obtained. A.S.C.A. § 43.1523. Diocese of American Samoa Pago Pago v. K.M.S.T., Inc., 18 A.S.R.2d 67.

Inasmuch as 1) the holder of an unrecorded or deficiently recorded mortgage could acquire a lien superior to any right of prior unsecured creditors of the mortgagee by properly recording his mortgage, 2) a judgment creditor would appear to be an unsecured creditor until the moment he gives his writ of execution to the marshal, and 3) the American Samoa statute clearly seems designed to make actual knowledge a complete substitute for the constructive knowledge provided by recordation, a mortgage holder's interest would have priority over a judgment creditor the moment that the judgment creditor found out that the mortgage existed, if the deficiency in the mortgage has arisen from nonrecordation or improper recordation. A.S.C.A. § 43.1523. Diocese of American Samoa Pago Pago v. K.M.S.T., Inc., 18 A.S.R.2d 67.

§ 3 Election of Remedies Rule

Uniform Commercial Code permits a secured creditor to enforce his security interest through judicial process, to repossess the goods and resell them in a commercially reasonable manner and to recover any deficiency after resale, or to retain the goods in satisfaction of the debt. U.C.C. §§ 9-501(1), 9-503, 9-504, 9-505(2). Theo H. Davies & Co. v. Pacific Development Co., 6 A.S.R.2d 5.

Secured creditor is not required upon default to select only one of the several remedies provided by the Uniform Commercial Code, but may not pursue conflicting remedies simultaneously in a harassing or commercially unreasonable manner. U.C.C. § 9-501(1). Theo H. Davies & Co. v. Pacific Development Co., 6 A.S.R.2d 5.

Under common law "election of remedies" rule, a secured creditor could choose only one of the available remedies for default by debtor, whether or not cumulative remedies would have been fair or commercially reasonable under the circumstances. Theo H. Davies & Co. v. Pacific Development Co., 6 A.S.R.2d 5.

§ 4 Debtor Default

§4(1) General Provisions

The law favors installment payments where it would be inequitable to force petitioner to pay the whole judgment all at once, not that he should be allowed to evade payment altogether. This relief should be available even where the judgment debtor does not have "clean hands." Carpenters Fiji, Ltd. v. Pen, 29 A.S.R.2d 58.

§4(2) Acceleration Clause

Acceleration clauses, which make payment of an entire debt payable upon the debtor’s default in making installment payments, are not uncommon, and they normally create an option in the creditor whether to demand payment in full upon the debtor's default. Pago Petroleum Products, Inc. v. Ye Ahn Moolsoan, Ltd., 29 A.S.R.2d 34.

A party may exercise its option on an acceleration clause by bringing suit. The ability to demand payment by bringing suit, however, is limited by the statute of limitations, and must otherwise occur within a reasonable time. Filing suit within two years of default, where the statute of limitations is 10 years, is reasonable. Pago Petroleum Products, Inc. v. Ye Ahn Moolsoan, Ltd., 29 A.S.R.2d 34.

§4(3) Debtor Fraud

Purposes of territorial statute requiring recordation of non-possessory liens are (1) to protect those who might otherwise extend credit to others in the mistaken belief that the borrowers' possessions are likely to be available as security for any unpaid debts; and (2) to foil fraudulent assertions by judgment debtors that property in their possession actually does not belong to them but has been purchased by or hypothecated to friends or relatives. A.S.C.A. § 27.1510. Development Bank v. Reed, 5 A.S.R.2d 135.

Security agreement between close relatives would not defeat the right of a judgment creditor to the proceeds of the collateral unless evidence established that the security agreement was concluded at arm's length and was not a sham transaction to defeat the interests of other creditors. Landrigan v. Opelle, 5 A.S.R.2d 155.

Court did not deprive attorney of life, liberty, or property without due process of law, either by injury to his reputation or otherwise, where (1) attorney had represented judgment debtor; (2) attorney also represented other members of judgment debtor's family; (3) after judgment, the judgment debtor and her family had agreed to changes in the record ownership of property formerly recorded as property of the judgment debtor, had arranged for the sale of the property, and had removed themselves from the territorial jurisdiction of the court; (4) attorney had in his possession the proceeds of the sale, which judgment creditor alleged to be the property of the debtor but which debtor and other family members claimed to be the property of other family members; (5) court had held the funds to be the property of the judgment debtor and subject to seizure by the judgment creditor; and (6) court ordered the funds to be deposited in the registry of the court pending further proceedings. In re Guardianship of Tedrow, 7 A.S.R. 2d 72.

Although a transfer of exempt assets generally cannot constitute a fraud upon creditors, trial court properly found that an arrangement including a transfer from a judgment debtor to her children and a subsequent resale by the children was intended to accomplish indirectly that which could not have been accomplished by the judgment debtor directly --- the sale of the property for cash without rendering the proceeds susceptible to levy by the judgment creditor --- and that the transaction as a whole was fraudulent as to the judgment creditor. Tedrow v. Manuma, 12 A.S.R.2d 51.

Where a judgment debtor caused her equitable interest in property to be conveyed to her children, who paid no consideration, and the judgment debtor apparently held no other assets to satisfy her debt and had successfully avoided her creditor's attempts at collection, there were sufficient badges of fraud to permit the trial court to find that the entire arrangement was fraudulent as to the judgment creditor. Tedrow v. Manuma, 12 A.S.R.2d 51.

§4(4) Debtor Defenses

Where debtor did not plead usury as a defense to action on debt, court need not decide whether statutory penalty of forfeiture can be invoked in a civil action. A.S.C.A. § 28.1510. Shantilal Brothers Limited v. K.M.S.T. Wholesales, Inc., 9 A.S.R. 2d 62.

The legislative aims of the usury law are best satisfied by reading the ambiguous forfeiture provision as creating a defense for debtors in civil court. Shantilal Brothers Ltd. v. Samoa Misc., Inc. 29 A.S.R.2d 207.

§ 5 Repossession of Property

§5(1) General Provisions

Foreigner does not have cause of action for debt against Samoan and therefore cannot transfer alleged cause of action to native. Toomata v. Railey, 1 A.S.R. 623.

Regulation prohibited foreigners from bringing actions against Samoans for goods or cash supplied on credit. Toomata v. Railey, 1 A.S.R. 623.

Village court must dismiss action for debt against Samoan brought by foreigner or on behalf of foreigner because it does not have jurisdiction. Toomata v. Railey, 1 A.S.R. 623.

Where Samoan wife brings action on behalf of husband, who is foreigner, for debt of another Samoan, court finds this is fraud to defeat regulation prohibiting husband from bringing such action. Toomata v. Railey, 1 A.S.R. 623.

When a judgment creditor moves to seize property of the judgment debtor and the Court has determined that the property does belong to the judgment debtor, the property should ordinarily be held by the Court rather than by the creditor, the debtor, or the person previously in possession pending judicial determination of the creditor's right to seize it. In re Guardianship of Tedrow, 7 A.S.R.2d 72.

A judgment creditor's lien attaches at the moment he gives his writ of execution, duly issued and describing specific property, to the marshal or other officer who will enforce it. A.S.C.A. § 43.1523. Diocese of American Samoa Pago Pago v. K.M.S.T., Inc., 18 A.S.R.2d 67.

§5(2) Creditor’s Retention of Repossessed Collateral

Under the Uniform Commercial Code, a secured creditor's election to retain the goods subject to the security interest results in a complete discharge of the underlying obligation. U.C.C. § 9-505. Theo H. Davies & Co. v. Pacific Development Co., 6 A.S.R.2d 5.

At common law, as under the Uniform Commercial Code, a secured creditor may not retain repossessed collateral indefinitely while simultaneously maintaining an action on the debt. Theo H. Davies & Co. v. Pacific Development Co., 6 A.S.R.2d 5.

Secured creditor seeking a deficiency judgment after repossessing sold goods was not entitled to the difference between the contract price and the current value of the goods when evidence showed that the goods had been severely damaged since the time the creditor had repossessed them. Theo H. Davies & Co. v. Pacific Development Co., 6 A.S.R.2d 5.

Where bus owner allowed creditor to hold his bus as security for repayment of the debt, and the creditor subsequently operated the bus at a profit equal to or greater than the amount of the debt, the debt was discharged and the creditor's continued refusal to return the bus to its owner would amount to conversion. Chan Kau v. Samasoni, 7 A.S.R.2d 21.

§ 6 Creditor Sale

Obligation to exercise good faith in the execution of contracts requires creditor who seizes and sells collateral to exercise due diligence to secure a fair price for it. Development Bank v. Ilalio, 5 A.S.R.2d 1.

Creditor bank that repossessed and sold collateral under commercially unreasonable circumstances for far less than its apparent market value would be held to have done so in full payment of the debt, either under the principle of accord and satisfaction or because in the absence of circumstances ensuring a fair appraisal of its value the thing is presumed to be worth the amount paid for it. Development Bank v. Ilalio, 5 A.S.R.2d 1.

Secured creditor who had repossessed sold goods after default and had retained the down payment was not entitled to repossess and sell additional collateral in the absence of a showing that creditor had made commercially reasonable efforts to resell the goods it had already repossessed, since court had no evidence on which to conclude that creditor's damages had not already been fully redressed. Theo H. Davies & Co. v. Pacific Development Co., 6 A.S.R.2d 5.

§ 7 Garnishment of Funds

SEE CIVIL PROCEDURE § 14 – GARNISHMENT

Where owner of mortgaged property retained the right to use and possession of the property until default, and where there was no evidence of default on the debt secured by the mortgage, garnishment by unsecured judgment creditor of rents derived from the property did not interfere with the rights of the mortgagee. A.S.C.A. § 37.1005. Landrigan v. Opelle, 5 A.S.R.2d 155.

Where evidence established that debtor retained most of the proceeds of property given to secure obligation to creditor rather than using the proceeds to repay the obligation, garnishment of those proceeds to satisfy debt to a third party judgment creditor would not interfere with the rights of the secured creditor. Landrigan v. Opelle, 5 A.S.R.2d 155.

Funds that are in the judgment debtor's possession, freely available for his personal expenses and actually used by him for such expenses, are similarly available for garnishment and the satisfaction of his debts. United Airlines v. Pritchard, 15 A.S.R.2d 56.

A judgment creditor's rights do not depend upon whether the debtor has obtained money by earning it or because it was lent or given to him. United Airlines v. Pritchard, 15 A.S.R.2d 56.

Garnishment may not be evaded by placing in the debtor's hands possession and control of a fund freely available to him but not to his creditors. United Airlines v. Pritchard, 15 A.S.R.2d 56.

§ 8 Guaranty

Consideration sufficient to support a guaranty need not flow directly to the guarantor, and may take the form of delivery of goods to a third party on the faith of the guarantor's assurance of payment. Development Bank v. Reed, 5 A.S.R.2d 135.

Trial court's conclusion that a loan guaranty from which the name of the principal debtor had been omitted was intended to secure particular loans was supported by substantial evidence where circumstances surrounding the execution of the guaranty demonstrated the intent of the parties. Pritchard v. Amerika Samoa Bank, 8 A.S.R.2d 157.

Argument that a written guaranty contract which omitted the name of the principal debtor was missing an essential term and thus was unenforceable as a matter of law was without merit, where the intention of the parties with regard to the missing term appeared from other evidence. Pritchard v. Amerika Samoa Bank, 8 A.S.R.2d 157.

A surety holds a legal but not a beneficial interest in property. Pen v. Pen, 30 A.S.R.2d 119.

A guaranty is a contract and the rights of guarantors must be determined from the language of the contract. Development Bank of Am. Samoa v. HAJ Corporation, 31 A.S.R.2d 60.

A guaranty of payment, unlike a guaranty of collection, is an absolute promise by the guarantor to pay the debt, when due, if it is not paid by the borrower. Upon the borrower's default, the guaranty of payment enables the creditor to collect debt from the guarantor without seeking collection from the borrower. Development Bank of Am. Samoa v. HAJ Corporation, 31 A.S.R.2d 60.

§ 9 Third Party Debtor

When lending bank cancelled a certificate of deposit given by guarantor bank to secure third party's debt and "wrote off" the underlying debt, third party debtor remained liable for the debt to either the lending bank or the guarantor bank, depending upon whether the lending bank was within its rights in cancelling the certificate. Development Bank v. Pritchard, 6 A.S.R.2d 125.

§ 10 Letter of Credit Transactions

Letter of credit exists independently of the obligations of the underlying contract and must be paid when the required documents are presented, regardless of the transactions between the buyer and seller. Pacific Reliant Industries, Inc. v. Amerika Samoa Bank, 16 A.S.R.2d 57.

Letter of credit transactions contain three separate contracts: 1) between the bank who agrees to issue the letter and its customer; 2) between the customer and the beneficiary who agree to use a letter; and 3) between the issuing bank that promises to pay conforming drafts against the letter and the beneficiary. Pacific Reliant Industries, Inc. v. Amerika Samoa Bank, 16 A.S.R.2d 57.

Independence of a letter of credit from its underlying transactions preserves its usefulness as a commercial device and reflects a policy decision that disputes regarding the underlying facts should be resolved after the letter is paid. Pacific Reliant Industries, Inc. v. Amerika Samoa Bank, 16 A.S.R.2d 57.

UCC provision reducing damages for wrongful dishonor of a letter of credit by any amount realized by resale or other use or disposition of the subject matter of the transaction does not apply to situations such as guaranty letters of credit. UCC § 5-115. Pacific Reliant Industries, Inc. v. Amerika Samoa Bank, 16 A.S.R.2d 57.

Letter of credit requiring only a beneficiary's signed statement and a notice of default of invoice rather than an attached copy of the invoice for the goods for which it guaranteed payment might not be governed by UCC provision reducing damages for wrongful dishonor of a letter of credit by the amount realized by resale of the subject matter of the transaction, since the letter might not identify the goods sufficiently to enable the court to trace their resale without referring to the underlying contracts. UCC § 5-115. Pacific Reliant Industries, Inc. v. Amerika Samoa Bank, 16 A.S.R.2d 57.

Since the issuer of a letter of credit or its customer has the opportunity to draft any desired protections into the letter, a court will not infer added protections which were not clearly conveyed to the beneficiary. Amerika Samoa Bank v. Pacific Reliant Industries, 20 A.S.R.2d 102.

The distinction between a standby letter of credit and a true guaranty is that the letter of credit is a direct obligation to pay upon presentation of specified documents showing a default and the guaranty is a secondary obligation requiring proof of the fact of default. Amerika Samoa Bank v. Pacific Reliant Industries, 20 A.S.R.2d 102.

The great weight of authority requires strict compliance (rather than substantial compliance) with the terms of a letter of credit. Amerika Samoa Bank v. Pacific Reliant Industries, 20 A.S.R.2d 102.

§ 11 Mortgages

SEE ADMIRALTY § 3 – PREFERRED SHIP MORTGAGES AND MARITIME LIENS

SEE PROPERTY § 9(4) – MORTGAGES

Statute which states that no instrument shall be effective to create a security interest unless it contains a description of items to be mortgaged prevents the creation of a "general mortgage" and reinforces the statutory prohibition against mortgages on after-acquired real property and fixtures, as well as security interests in personal property. A.S.C.A. §§ 27.1510(c), 37.1003. Shantilal Brothers, Ltd. v. KMST Wholesale, 15 A.S.R.2d 115.

Chattel mortgages in American Samoa create a lien rather than pass legal title. A.S.C.A. § 37.1502. Shantilal Brothers, Ltd. v. KMST Wholesale, 15 A.S.R.2d 115.

The general rule against mortgages of after-acquired real property contains an important exception for cases in which the property to be acquired is described in the mortgage document. A.S.C.A. § 37.1003. Shantilal Brothers, Ltd. v. KMST Wholesale, Inc., 16 A.S.R.2d 103.

American Samoa's chattel mortgage statute requires not just that the mortgage contain some language sufficient to put third parties on inquiry, but that it contain a "description" of the "specific" article or articles mortgaged. A.S.C.A. § 27.1510. Shantilal Brothers, Ltd. v. KMST Wholesale, Inc., 16 A.S.R.2d 103.

The general rule appears to be that notice of an unrecorded mortgage, given to a creditor who has already "fastened his lien upon the property by judgment," comes too late regardless of whether a writ of execution has issued. Shantilal Brothers, Ltd. v. KMST Wholesale, Inc., 16 A.S.R.2d 103.

In American Samoa, unlike jurisdictions which follow the Uniform Commercial Code, reference in a mortgage to all of a mortgagor's property within a certain class does not amount to a description of each item within the class, sufficient to create a mortgage interest in that property. A.S.C.A. § 43.1510. Diocese of American Samoa Pago Pago v. K.M.S.T., Inc., 18 A.S.R.2d 67.

A judgment creditor at common law who acquired knowledge of an unrecorded mortgage at any time before executing upon specific property of the debtor would have been bound by the mortgage, unless the jurisdiction had statutory judgment liens; American Samoa has no such statutory judgment liens. Diocese of American Samoa Pago Pago v. K.M.S.T., Inc., 18 A.S.R.2d 67.

Where a mortgage document does not describe with sufficient specificity the property mortgaged, no amount of knowledge that the deficient mortgage exists can cure the deficiency; subsequent creditors with knowledge of the deficient mortgage are not bound thereby. Diocese of American Samoa Pago Pago v. K.M.S.T., Inc., 18 A.S.R.2d 67.

§ 12 Uniform Customs and Practice for Documentary Credits

Under the Uniform Customs and Practice for Documentary Credits ("UCP"), a bank asked to pay a letter of credit has a reasonable time to examine the documents, but if it decides not to pay, must promptly notify the presenter or beneficiary of the discrepancies on which refusal is based and whether it is holding documents for the presenter or returning them. UCP arts. 16(c), 16(d). Pacific Reliant Industies, Inc., v. Amerika Samoa Bank, 14 A.S.R.2d 41.

UCP provisions requiring a bank which refuses to pay a letter of credit to promptly notify the presenter of the grounds for refusal promote the cure of documentary deficiencies before the letter of credit expires. Pacific Reliant Industies, Inc., v. Amerika Samoa Bank, 14 A.S.R.2d 41.

Issuing bank which has not promptly notified a party presenting a letter of credit of deficiencies in the documents and whether it is holding them for presenter or returning them may not use such deficiencies as a basis for refusing to pay the letter of credit. Pacific Reliant Industies, Inc., v. Amerika Samoa Bank, 14 A.S.R.2d 41.

"Reasonable time" to examine documents under the UCP is three banking days. Pacific Reliant Industies, Inc., v. Amerika Samoa Bank, 14 A.S.R.2d 41.

Notice to a presenter stating that a letter of credit was being refused but not specifying discrepancies in the documents or what was being done with the documents is inadequate notice under UCP. Pacific Reliant Industies, Inc., v. Amerika Samoa Bank, 14 A.S.R.2d 41.

UCP provisions are designed to deter banks issuing letters of credit from failing to timely assert any deficiencies in the related documents. UCP arts. 16(c), 16(d), and 16(e). Pacific Reliant Industies, Inc., v. Amerika Samoa Bank, 14 A.S.R.2d 41.

UCP provisions are meant to ensure that stalling and waffling of banks issuing letters of credit does not blunt the effectiveness of such important tools of international commerce. UCP arts. 16(c), 16(d), and 16(e). Pacific Reliant Industies, Inc., v. Amerika Samoa Bank, 14 A.S.R.2d 41.

UCP art. 16(d) requires a bank which refuses to pay a letter of credit to notify the party which actually submitted the documents of its refusal; it does not divest the party in whose favor the letter was issued of its rights under the UCP. UCP art. 16(d). Pacific Reliant Industies, Inc., v. Amerika Samoa Bank, 14 A.S.R.2d 41.

Customer for whose benefit a bank issued a letter of credit can waive any nonconformities in the related documents. Pacific Reliant Industies, Inc., v. Amerika Samoa Bank, 14 A.S.R.2d 41.

UCP art. 12(e) does not provide a basis for awarding attorney's fees. Pacific Reliant Industies, Inc., v. Amerika Samoa Bank, 14 A.S.R.2d 41.

UCC provision reducing damages for wrongful dishonor of a letter of credit by the amount realized by resale or other use or disposition of the subject matter of the transaction did not apply to a letter governed by the Uniform Customs and Practice for Documentary Credits (UCP) where: 1) the UCP was unambiguous (though not explicit) regarding damages since it clearly implied that the dishonoring party was liable for the face amount of the letter; 2) the UCC provision was not an apparent rule of general law since no cases construed it to reduce damages below the face amount of the letter; and 3) reducing damages below the face amount would reduce the commercial utility of such letters since disputes concerning the fact and amount of resale could obscure the exact amount owed and hinder prompt payment. Pacific Reliant Industries, Inc. v. Amerika Samoa Bank, 16 A.S.R.2d 57.

UCC provision reducing damages for wrongful dishonor of a letter of credit by the amount realized by resale or other use or disposition of the subject matter of the transaction would not apply to a letter governed by the UCP which may not have identified the goods in enough detail to enable the court to trace their resale without referring to the underlying contracts. UCC § 5-115. Pacific Reliant Industries, Inc. v. Amerika Samoa Bank, 16 A.S.R.2d 57.

The Uniform Customs and Practice for Documentary Credits embodies an effort by international bankers at consensual regulation. Amerika Samoa Bank v. Pacific Reliant Industries, 20 A.S.R.2d 102.

The Uniform Customs and Practice for Documentary Credits (UCP) 16(e) addresses only notice, and does not limit the issuing bank's liability to the party which actually presents the documents. Amerika Samoa Bank v. Pacific Reliant Industries, 20 A.S.R.2d 102.

§ 13 Banking and Loans

§13(1) General Provisions

Territorial statute providing that no debtor can be charged interest in excess of 6% unless the amount "is in writing and is signed by the party to be charged" precluded court from holding debtor liable to pay interest at a higher rate in the absence of a signed agreement, even when debtor knew bank would charge creditor a higher rate of interest on amounts not timely paid by debtor. A.S.C.A. § 28.1501(a). Meridian Breckwoldt Samoa, Ltd., v. Max Haleck, Inc., 7 A.S.R. 2d 95.

Since in the absence of a written agreement specifying the rate of interest applicable to a promissory note the statutory rate of 6% will apply, where a note specified an interest rate of 12.5% "until maturity" the rate after maturity was 6%. A.S.C.A. § 28.1501. Pritchard v. Amerika Samoa Bank, 8 A.S.R. 2d 157.

Under statute providing that interest on business loans may not exceed 18 per cent annually, creditor whose contract specified 20 per cent interest would have judgment for only 18 per cent. A.S.C.A. § 28.1503. Shantilal Brothers Limited v. K.M.S.T. Wholesales, Inc., 9 A.S.R. 2d 62.

The statutory rate of six percent interest is presumed on overdue debts for which no contractual interest rate is specified. A.S.C.A. § 28.1501(a). Ghiselli Bros., Inc. v. Ryan, Inc., 22 A.S.R.2d 57.

The maximum interest rate for business purposes is 18 percent, pursuant to A.S.C.A. 28.1503, but interest rates greater than six percent must be in writing to be enforceable, pursuant to A.S.C.A. § 28.1501. Jessop v. Histake, 25 A.S.R.2d 12.

The relationship of a bank to its general depositors is that of debtor to creditor. Passi v. Amerika Samoa Bank, 28 A.S.R.2d 130.

An assignment passes title from the assignor to the assignee, so that the latter is normally the real party in interest for purposes of T.C.R.C.P. 17(a). American Samoa Gov’t Employees Federal Credit Union v. Mailo, 29 A.S.R.2d 163.

A.S.C.A. § 28.1501(a), establishing an interest rate of 6% in the absence of a writing stating otherwise, applies to business loans, and does not permit the imposition of a rate of 18% as otherwise allowed by A.S.C.A. § 28.1503. Shantilal Brothers Ltd. v. Samoa Misc., Inc. 29 A.S.R.2d 207.

Where no written agreement accompanies a loan, a 6% interest rate is inferred. Johnson v. Coulter, 30 A.S.R.2d 130.

The forfeiture provision of A.S.C.A. § 28.1510 creates a defense for debtors in civil court, not third parties not in privity with the creditor. Pacific N. Marine Fuels, Inc. v. M/V Clover #7, 30 A.S.R.2d 152.

The maximum reasonable interest rate on an oral contract for indebtedness is 6%. Pacific N. Marine Fuels, Inc. v. M/V Clover #7, 30 A.S.R.2d 152.

A debt incurred as a regular part of debtor’s business activities may fall squarely within the ambit of debt incurred "for the purpose of . . carrying on or acquiring a business," A.S.C.A. § 28.1503, and as such a maximum 18% rate of interest to such loans is statutorily allowed. However, this rate is still subject to the requirement of § 28.1501(a) that agreements for an interest rate higher than 6% be documented by a writing signed by the party to be charged. Donovan v. Coffin, 31 A.S.R.2d 70.

§13(2) Suits Against Bank

The general rule for recovery when a bank is negligent in collecting a draft is that the bank is liable for the actual loss suffered by the owner of the commercial paper as a result of the negligent misconduct of the bank; however, only nominal damages are recoverable when it appears that the paper remains collectible. Ghiselli Bros., Inc. v. Ryan, Inc., 22 A.S.R.2d 57.

In order for a depositor to recover deposited funds against a bank, he must make a prima facie showing that he deposited the money in question with the bank and demanded the same from it. If a depositor has met this burden or if no controversy between the parties exists over the fact that a depositor placed funds to his credit with the bank, then the bank, seeking to avoid recovery by the depositor, is charged with the burden of proving payment to the depositor by a preponderance of the evidence. Passi v. Amerika Samoa Bank, 28 A.S.R.2d 130.

The Federal Depositor's Insurance Act requires federally insured banks to retain records since the information may be valuable in litigation. It is not a mandate to banks to destroy records in order to avoid liability or relax a burden of proof. Passi v. Amerika Samoa Bank, 28 A.S.R.2d 130.

In actions by depositors to recover funds from a bank, the statute of limitations does not accrue until the depositor has made a demand and the bank has refused to pay. Passi v. Amerika Samoa Bank, 28 A.S.R.2d 130.

Actions to recover bank deposits evidenced by entries in a depositor's account passbook are governed by statutes relating to actions on oral contracts, and not on written contracts, unless the passbook is signed by an authorized bank employee and contains a definite promise to pay. Passi v. Amerika Samoa Bank, 28 A.S.R.2d 130.

§13(3) Student Loans

Requirement of federally insured student loan program that local lending institutions make loans without security and without binding third parties as sureties except under particular circumstances defeated lending bank's attempt to recover defaulted student loan debt from borrower's wife, even though she cosigned loan application and promissory notes. 20 U.S.C. §§ 1071 et seq.; 34 C.F.R. 682.509. Development Bank v. Fa'alevao, 6 A.S.R.2d 81.

§ 14 National Credit Union Administration Board

The National Credit Union Administration Board determines the interest rates charged by federal lending institutions. ASG Employees Federal Credit Union v. Galea`i, 26 A.S.R.2d 74.

The Board of the National Credit Union Administration has exclusive authority to regulate terms of federal credit union loans, and this authority preempts any American Samoan laws affecting such interest rates. Therefore, the ceiling of 15% provided for in A.S.C.A. § 28.1501 is preempted by the federal rate established by the NCUA. ASG Employees Federal Credit Union v. Galea`i, 26 ASR2d 74.

Once the National Credit Union Administration Board become a conservator, it stands in the shoes of the mortgagee. ASG Employees Federal Credit Union v. Gurr, 26 A.S.R.2d 87.

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