Killion v Nero [2012] FMCSC 3; 18 FSM Intrm. 381 (Chk. S. Ct. Tr. 2012) (24 August 2012)

CHUUK STATE SUPREME COURT TRIAL DIVISION

CSSC CIVIL CASE NO. 106-2000

REDLEY KILLION, on behalf of himself and his immediate family,
Plaintiffs,

vs.

KENRUO NERO and NENRINA LUCIO,
Defendants.
__________________________________________

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Dennis K. Yamase
Special Trial Division Justice

Trial: December 13-15, 2011
Decided: August 24, 2012

APPEARANCES:

For the Plaintiffs: Ben K. Enlet, Esq.

P.O. Box 1650

Weno, Chuuk FM 96942

For the Defendants: Michael Marco

Micronesian Legal Services Corporation

P.O. Box D

Weno, Chuuk FM 96942

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HEADNOTES

Contracts - Necessity of Writing
Chuuk does not have a statute of frauds. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 384 (Chk. S. Ct. Tr. 2012).

Contracts - Specific Performance
A common remedy for the breach of a land contract is specific performance - the transfer of the land to be acquired - since land is considered unique. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 385 (Chk. S. Ct. Tr. 2012).

Contracts - Specific Performance
Specific performance is a contract remedy that is available only when the usual measures of damages - expectancy, or reliance, or restitution money damages - are inadequate compensation or cannot be computed or when a substitute cannot be purchased. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 385 (Chk. S. Ct. Tr. 2012).

Contracts - Specific Performance
The court cannot order the specific performance that the plaintiff would receive his "expectancy" - the land that he was to have received in exchange when the defendants do not have the land to exchange. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 385 (Chk. S. Ct. Tr. 2012).

Contracts - Rescission; Remedies - Restitution
Lawyers are accustomed to seeing the word "restitution" in connection with the "rescission" or cancellation of a contract because when a contract is rescinded, each party is entitled to be restored what he gave the other, or in other words, is entitled to restitution. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 385 (Chk. S. Ct. Tr. 2012).

Contracts - Rescission; Remedies - Restitution
Rescission will normally be accompanied by restitution on both sides. It is the general rule that rescission will be granted only on the condition that the party asking it restore to the other party, substantially, the consideration received. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 385 (Chk. S. Ct. Tr. 2012).

Custom and Tradition - Chuuk; Property
Traditionally, when someone no longer had the right to reside on another's land, he would be allowed to dismantle the house he had built and take the materials to rebuild somewhere else because he owned the building materials. This is usually not feasible with modern houses. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 385 n.3 (Chk. S. Ct. Tr. 2012).

Custom and Tradition - Chuuk; Property
Chuukese custom generally follows the rule that a person who makes improvements on property has full title to these improvements even though he does not hold title to the property on which they are made. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 385 n.4 (Chk. S. Ct. Tr. 2012).

Contracts - Rescission; Remedies - Restitution
When rescinding a contract, ordering substitutionary restitution is possible - the defendant can often be made to return the money value of the property he obtained because, on rescission, a plaintiff is entitled to the return of her property or to its value if its reconveyance cannot be had. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 385-86 (Chk. S. Ct. Tr. 2012).

Equity; Remedies - Restitution
When the defendant built family residences on part of the land and has occupied them at least since sometime in the early 1990s, requiring such longtime occupants to change residence and rebuild elsewhere and take compensation for the houses is burdensome. Equity would not favor giving the plaintiff the choice of paying the defendant for his houses instead of the defendant paying for the land. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 386 (Chk. S. Ct. Tr. 2012).

Equity
Courts of equity are not bound to give any stereotyped form of relief. They readily and easily adapt themselves to the parties' situation and to the facts of the particular case, and may make such decrees as effectuate justice. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 386 (Chk. S. Ct. Tr. 2012).

Equity; Property; Remedies - Restitution
When the parties had agreed to a land exchange and the defendant has built houses on the land he received but the plaintiff did not receive any land because the defendant did not have the land to exchange, instead of returning the land to the plaintiff and having the plaintiff pay the defendant the value of the houses the defendant built the most equitable remedy (and the easiest for the court to fashion) is monetary compensation to the plaintiff for the value of the land that he did not receive in an exchange agreement that provided that he was to receive in exchange land of an equal amount to the land transferred to the defendants. To effectuate justice, the defendants should pay the plaintiff the value of the land the defendants received. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 386 (Chk. S. Ct. Tr. 2012).

Evidence - Judicial Notice; Property
When the parties neglected to put any admissible evidence of land values before the court, the Asian Development Bank valuation system, although officially adopted only for governmental transactions, is evidence of Chuuk land values of which a court may take judicial notice because it is information capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 386-87 (Chk. S. Ct. Tr. 2012).

Evidence
Counsel's assertion in one post-trial filing that the plaintiff's land occupied by the defendant was worth $26,000 and consisted of 2,000 square meters with an annual rental value of $20 per square meter was not competent evidence because counsel's assertions in argument do not constitute evidence before the court. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 387 (Chk. S. Ct. Tr. 2012).

Property; Torts - Damages
The court will not award the plaintiff the land's rental value as well as its sale price when there was no evidence before the court that the plaintiff would have or would have been able to rent that land to someone else if the defendant was not occupying it because to recover both the sale price and the rental value would be a double recovery. Double recovery is not permissible. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 387 (Chk. S. Ct. Tr. 2012).

Property; Torts - Damages
Land does not "earn" interest. It may increase or appreciate in value, in which case, the current fair market value includes the increase or appreciation. Killion v. Nero, [2012] FMCSC 3; 18 FSM Intrm. 381, 387 (Chk. S. Ct. Tr. 2012).

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COURT'S OPINION

DENNIS K. YAMASE, Special Trial Division Justice:

This case was tried on December 13-15, 2011. Plaintiff Redley Killion, Chester Gustaf, Soichy Inos, defendant Kenruo Nero, and Irene Alaphonso Nero testified. Based on their testimony, the admitted evidence, and the parties' post-trial submissions on legal matters, the court makes the following
Findings of Fact.

In 1984, Nessa sold to the plaintiff, Redley Killion, land in Mechitiw village on Weno called Nemuar (or Nemwar). Nemuar had been surveyed on March 19, 1976, when Nessa owned it and Nessa and all the adjacent landowners had agreed on Nemuar's boundaries. Ex. 8. Nemuar's boundaries were retraced sometime around 1985. There were no houses on the land then. On November 5, 1990, Killion received a determination of ownership for the land. Ex. 1.

Sometime in 1986, defendants Kenruo Nero and Nenrina Lucio bought adjacent land called Nepuna.

Later, because defendant Kenruo Nero was occupying a small amount of Nemuar, Killion spoke to Nero's father about it. On September 25, 1991, in the presence of an assistant clerk of court, the parties executed an agreement whereby Killion would transfer to Nero a small part of Killion's land Nemuar and in return Killion would receive an equal amount (size) of land from Nero nearby. Ex. 2. This agreement was witnessed and filed by the assistant clerk of court. Id. Nero signed at the request of his father who was related to Killion's mother. When Killion went to get the part of Nepuna that he thought he had received in exchange for the land he transferred to Nero, he discovered that he could not because Peter Namio had already bought that land.

On November 27, 1996, the Land Commission, based on the parties' 1991 agreement, issued defendants Nero and Lucio a certificate of title, Ex. 5, for their part of Nepuna, consisting of 2,204 square meters. In 1997, Killion wrote Nero a letter stating that he was canceling the parties' 1991 agreement. Ex. 3.

On May 4, 1999, the Land Commission, based on Killion's 1990 determination of ownership and the earlier survey and retrace, issued a certificate of title to Killion for Nemuar consisting of 10,928 square meters. Ex. 4. In 2001, the Land Commission retraced Nemuar's boundaries again and determined that two houses built by Nero were on a part of Killion's land Nemuar. Ex. 6. Both defendants and Nero's wife Irene were present when the boundaries were retraced. Id. Killion's Nemuar and Nero's Nepuna overlapped and two of Nero's three houses were in the Nemuar overlap area. The overlap is part of Nemuar, as surveyed in 1976, and thus belonged to Killion after he bought Nemuar. This overlap was the land that Killion transferred to Nero as part of the parties' agreement. It consists of about 1,637.64 square meters.[1]

Relying on these findings of fact, the court makes the following

Conclusion of Law.

Nero[2] contends that the parties' land exchange agreement is unenforceable due to the statute of frauds. This contention is groundless since Chuuk does not have a statute of frauds. Nakamura v. Moen Municipality, [2007] FMCSC 14; 15 FSM Intrm. 213, 217 (Chk. S. Ct. App. 2007); Marcus v. Truk Trading Corp., [2001] FMSC 33; 10 FSM Intrm. 387, 389 (Chk. 2001). Furthermore, even if Chuuk had a statute of frauds, the exchange agreement would have been adequate since it was in writing and signed by the parties. Ex. 2.

A. Breach and Remedy

Nero's failure or inability to transfer land to Killion was a material breach of their land exchange agreement. A common remedy for the breach of a land contract is specific performance - the transfer of the land to be acquired - since land is considered unique. E. Allan Farnsworth, Contracts§ 12.4, at 821 (1984). fic peic performance is a contract remedy that is available only when the usual measures of damages - expectancy, or reliance, or restitution money damages - are inadequate compensation or cannot be computed or when a substitute cannot be purchased. FSM v. GMP Hawaii, Inc., [2009] FMSC 42; 16 FSM Intrm. 601, 606 (Pon. 2009).

Killion's "expectancy" was that he would receive part of Nepuna. But this specific performance cannot be ordered since the defendants do not have the land to exchange with Killion. And since there was no evidence that Killion expended any funds in reliance on the contract, reliance damages are also unavailable.

Killion seeks rescission of the contract - cancellation of the contract and the return of the land he transferred to Nero. "Lawyers are accustomed to seeing the word 'restitution' in connection with the 'rescission' or cancellation of a contract: when the contract is rescinded, each party is entitled to be restored what he gave the other, or in other words, is entitled to restitution." Dan B. Dobbs, Handbook on the Law of Remedies§ 4.1, at 222 (1973). "[R]sioission will normally be accompanied by restitution on both sides." Id.§ 4.3, at 2It is the general eral rule rescission will be granted, upon the condition only that the party asking it restore to thto the other party, substantially, the conation received . . . .Stanf. d vthSmithSmithh, 260 S.W. 435, 437 (Ark. 1924) (land exchange rescinded and "the value of the portion which cannot be returned may be ascertained and the equities of the parties thus adjusted"). Killion, the party asking for rescission, has no consideration to restore - he never received anything in exchange.

Nero would thus have to return to Killion the land (originally part of Nemuar) that he received in the exchange agreement. But this remedy is problematic because Nero has built two houses on the land, which are not such that they could be taken down and rebuilt elsewhere.[3] These houses were not part of what Killion gave Nero. They are Nero's property.[4] No evidence is before the court about the houses' value. The court would thus find it very difficult to order the land returned to Killion once Killion has compensated Nero for the value of his improvements on the land - Nero's two houses. SeeBank of the FSM v. Aisek, [2005] FMSC 20; 13 FSM Intrm. 162, 166 (Chk. 2005). The houses could be worth more than the land.

"Another possibility is that substitutionary restitution should be ordered; the defendant can often be made to return the money value of the property he obtained . . . ."[5]">[5]Dobbs, supra, § 4.4, at 258. "[U]escission sion [a] plaintiff is entitled . . . to the return of ropertoperty, or to its value if its reconve cann had.Campbell v. l v. MorehMorehouse, 120 N.W. 79, 80 (Iowa 1909) (land exchange rescinded, but sbut since the defendants had already sold and received in exchange, pge, plaintiff awarded money damages). In Somerville v. Jacobs, 170 S.E.2d 805 (W. Va. 1969), where an adjacent landowner mistakenly built a warehouse on the wrong lot, the court, as a court of equity, required the true owners, who insisted that they should get the warehouse without having to pay compensation, to elect between paying for the value of the improvement (the warehouse) or conveying the land (that is, selling it) for its value before the improvement.

In this case, Nero built family residences, not a warehouse, on part of Nemuar and has occupied them at least since sometime in the early 1990s. Requiring longtime occupants such as Nero to change residence and rebuild elsewhere is much more burdensome than taking the compensation and just building another warehouse. Equity would not favor giving Killion the choice of paying Nero for his houses.

In the present case, since no remedy at law is adequate, this court sits as a court of equity. "[C]ourts of equity are not bound to give any stereotyped form of relief. They readily and easily adapt themselves to the situation of the parties and to the facts of the particular case, and may make such decrees as effectuate justice." Campbell, 120 N.W. at 80. In light of the parties' situation and the facts of the case, the most equitable remedy (and the easiest for the court to fashion) is monetary compensation to Killion for the value of the land that he did not receive in exchange. The 1991 agreement provided that Killion was to receive in exchange land of an equal amount to the land transferred to Nero. Killion transferred 1,637.64 square meters - the "overlap" area. To effectuate justice, Nero should pay Killion the value of the land he received. The difficulty is how to value this land.

B. Land Valuation

Following trial, the court noted that Killion's proposed remedies could include one that would require putting a monetary value to the land, but that the parties had not introduced any evidence of land value during trial. The court therefore asked the parties to comment on whether using the 2006 Asian Development Bank Valuation Zoning System as adopted by the Governor in Executive Order No. 04-2007 could, based on its valuations, assist the court in valuing the land and calculating an appropriate amount. Both sides objected to the use of the Asian Development Bank land valuation system because this system was adopted by executive order for transactions between the state government and private individuals and by statute, Chk S.L. No. 10-10-18, for use in eminent domain proceedings. There was no requirement that these values be used for transactions between private individuals.

The parties are correct that use of the Asian Development Bank valuation system is mandatory only when the state government or one of its subdivisions is involved and that this case involves only private parties. What the parties overlook is that they neglected to put any admissible evidence of land values before the court. The Asian Development Bank valuation system is thus evidence of Chuuk land values of which a court may take judicial notice because it is information capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned. Chk. Evid. R. 201(b).

Counsel's assertion in one post-trial filing that Killion's land occupied by Nero was worth $26,000 and consisted of 2,000 square meters[6] with an annual rental value of $20 per square meter was not competent evidence because counsel's assertions in argument do not constitute evidence before the court. Livaie v. Weilbacher, [2005] FMSC 19; 13 FSM Intrm. 139, 144 (App. 2005) ("evidence" first introduced during defendant's closing argument was not properly in evidence before the trial court as it was made during the closing arguments; was not made under oath; was not subject to cross-examination; and was not subject to any rebuttal testimony by any witness). The court will not award Killion the land's rental value. There was no evidence before the court that Killion would have or would have been able to rent that land to someone else if Nero was not occupying it. Furthermore, to recover both the sale price and the rental value would be a double recovery. Double recovery is not permissible. See, e.g., Atesom v. Kukkun, [2001] FMSC 51; 10 FSM Intrm. 19, 23 (Chk. 2001) (when damage award for the civil rights violation fully compensates plaintiff for his personal injury, court cannot award additional damages for the battery since such an award would constitute double recovery and would be a windfall).

Killion also proposes that the current fair market value of the land, which he asserts is $20 per square meter (with an estimated 2,000 square meters = $40,000) plus 9% interest per year since 1986 ($54,000) equals his damages - $94,000. Land does not "earn" interest. It may increase or appreciate in value, in which case, the current fair market value includes the increase or appreciation. The 2006 Asian Development Bank Valuation Zoning System was a determination of the current fair market values in 2006 and is thus the best evidence available to the court of the land's fair market value then, although that figure probably includes an increase in the land's value since 1991.

The area in which Nepuna and Nemuar are situated is classified as residential/mountain slopes with the fair market value of $7 per square meter. That would make the land that Killion transferred to Nero worth $11,463.48 ($7 × 1,637.64 square meters). The land that Killion was to receive in exchange was to be nearby land of the same size and thus have about the same value. Although this sum accurately reflects the land's 2006 value, which presumably was an increase over its 1991 value, in the lack of other evidence, this value will have to suffice. Based on the parties' situation and the attendant facts, payment of this sum to Redley Killion will, as an exercise in equity, effectuate justice between the parties.

Conclusion

Accordingly, the clerk shall enter judgment for the plaintiff, Redley Killion, against the defendants, Kenruo Nero and Nenrina Lucio, in the amount of $11,463.48.

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^[1] This area is calculated from the measurement of the Land Commission’s drawn-to-scale survey sketch of Lot 61575 showing the overlap area, Ex. D2, and a determination from that measurement that the overlap area constitutes 74.303% of Lot 61575, the total area of which is 2,204 square meters, as noted on the survey sketch and on the defendants’ 1996 certificate of title, Ex. 5.

^[2] Nenrina Lucio’s default was entered on February 23, 2011. She did not participate in trial.

^[3] Traditionally, when someone no longer had the right to reside on another’s land, he would be allowed to dismantle the house he had built and take the materials to rebuild somewhere else because he owned the building materials. See, e.g., WARD H. GOODENOUGH, PROPERTY, KIN AND COMMUNITY ON TRUK 34 (2d ed. 1978). This is usually not feasible with modern houses.

^[4] This is consistent with Chuukese custom, which generally follows "the rule that a person who makes improvements on property has full title to these improvements even though he does not hold title to the property on which they are made." WARD H. GOODENOUGH, PROPERTY, KIN AND COMMUNITY ON TRUK 34 (2d ed. 1978).

^[5] Yet another possibility is that part of the land can be returned and the balance made up in money restitution. DOBBS, supra, § 4.4, at 258. In tesent cast case, that would mean that Nero would return some of the land transferred to him and pay money for the part (presumably the part with the houses) ret. Because the court lacks knowledge of this option’s217;s feasibility, this remedy is probably best left to an agreement by the parties.

^[6] Two thousand square meters would constitute 90.1% of the 2,204 square meters in Lot 61575. The overlap area is definitely smaller than 90.1% of Lot 61575.