Adams v Island Homes Construction Inc [2004] FMSC 41; 12 FSM Intrm. 541 (Pon. 2004) (7 July 2004)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as Adams v island Homes Construction Inc[2004] FMSC 41; , 12 FSM Intrm 541 (Pon.2004)

YVETTE ETSCHEIT ADAMS, d/b/a POHNPEI ACE HARDWARE
and ADAMS BROTHERS CORPORATION
Plaintiffs

vs.

ISLAND HOMES CONSTRUCTION, INC.,
JOE FELIX d/b/a ISLAND HOMES CONSTRUCTION,FSM DEVELOPMENT BANK,
PAULUS PERMAN and LORENZA PERMAN,
Defendants

CIVIL ACTION NO. 2000-012

ORDER AND MEMORANDUM

Martin Yinug
Associate Justice

Decided: July 7, 2004

APPEARANCES:

For the Plaintiffs:
Craig D. Reffner, Esq.
Law Office of Fredrick L. Ramp
P.O. Box 1480
Kolonia, Pohnpei FM 96941

For the Defendants (Island Homes, Felix):
Salomon Saimon, Esq.
Law Offices of Saimon & Associates
P.O. Box 1450
Kolonia, Pohnpei FM 96941

For the Defendant (FSM Dev. Bank):
James Woodruff, Esq.
P.O. Box M
Kolonia, Pohnpei FM 96941

For the Defendants (Permans):
Matt Mix, Esq.
P.O. Box 143
Kolonia, Pohnpei FM 96941

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HEADNOTES

Attorney, Trial Counselor and Client - Fees
Attorney’s fees that are awarded on the basis of contract become part of the plaintiffs’ damages in its case. When the one party’s wrongful act has involved him in litigation with another, and the other must pursue a legal remedy, then the attorney’s fees so incurred should be treated as damages that flow from the original wrongful act. Adams v. Island Homes Constr., Inc., [2004] FMSC 41; 12 FSM Intrm. 541, 543 (Pon. 2004).

Attorney, Trial Counselor and Client - Fees; Civil Procedure - Sanctions
As a general rule, the parties bear their own attorney’s fees unless a contract between them provides otherwise, or they are awardable under a statute or court rule. In addition, attorney’s fees may be assessed against a litigant for vexatious and oppressive litigation practices. Civil Procedure Rule 37 provides a specific mechanism for sanctioning vexatious discovery conduct. Adams v. Island Homes Constr., Inc., [2004] FMSC 41; 12 FSM Intrm. 541, 543 (Pon. 2004).

Attorney, Trial Counselor and Client - Fees; Civil Procedure - Sanctions
When, pursuant to Rule 37, the court has already assessed attorney’s fees, as well as liability on the underlying cause of action as a sanction for a party’s willful, bad faith discovery conduct, the court will award no further fees based on a claim of that party’s generally vexatious conduct in the trial court. Adams v. Island Homes Constr., Inc., [2004] FMSC 41; 12 FSM Intrm. 541, 543 (Pon. 2004).

Appellate Review; Attorney, Trial Counselor and Client - Fees
The trial court has no jurisdiction to award attorney’s fees as a sanction for frivolous appeals under FSM Appellate Rule 38. Adams v. Island Homes Constr., Inc., [2004] FMSC 41; 12 FSM Intrm. 541, 543 (Pon. 2004).

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COURT’S OPINION

MARTIN YINUG, Associate Justice:

The plaintiffs’ pending motion for an enlargement of time to file their June 11, 2004, motion for attorney’s fees is granted. The Bank’s and Island Homes’ motions for enlargement are moot in light of this order directing the plaintiffs’ to resubmit their motion for fees and costs. The plaintiffs will do so in accordance with this order on or before July 20; responses will be filed by Island Homes as provided herein.

In their motion, the plaintiffs seek attorney’s fees against the Bank based on the Bank’s vexatious conduct. The December 1, 2003, findings of fact and conclusions of law awarded the plaintiffs their fees incurred against Island Homes Construction, Inc., and Joe Felix dba Island Homes ("the Island Homes defendants") on the basis of contract, specifically the credit applications which provided that legal fees in the event they were incurred in collecting amounts owed under the credit agreements. Adams v. Island Homes Constr., Inc., [2003] FMSC 57; 12 FSM Intrm. 234, 237-38 (Pon. 2003). These same fees were also assessed against the Bank on the basis that had the Bank complied with the terms of the credit agreement, the apartment project that is the subject of this suit could not have been completed without the plaintiffs receiving payment, and the instant suit would not have been necessary. In this respect the fees became part of the plaintiffs’ damages in this case. Id. at 242-43. Where the wrongful act of one party has involved him in litigation with another, and he must pursue a legal remedy, then the attorney’s fees so incurred should be treated as damages that flow from the original wrongful act. Campus Sweater & Sportswear Co. v. M. B. Kahn Constr. Co., 515 F. Supp. 64, 110 (D.S.C. 1979), aff’d[1981] USCA4 245; , 644 F.2d 877 (4th Cir. 1981).

The December 1, 2003 decision also states that "[w]hether or not plaintiffs may recover their attorney’s fees incurred in litigating against the Bank directly presents a different question. In the event that the plaintiffs seek such fees from the Bank, they should address this question." Adams, 12 FSM Intrm. at 243. As a general rule, the parties bear their own attorney’s fees unless a contract between them provides otherwise, or they are awardable under a statute or court rule. In addition, attorney’s fees may be assessed against a litigant for vexatious and oppressive litigation practices. Semes v. Continental Airlines, Inc. (II), [1986] FMSC 7; 2 FSM Intrm. 200, 208 (Pon. 1986). Rule 37 of the FSM Rules of Civil Procedure provides a specific mechanism for sanctioning the vexatious discovery conduct at issue here. Pursuant to that rule, the court has already assessed attorney’s fees, as well as liability on the underlying cause of action as a sanction for the Bank’s willful, bad faith discovery conduct. The court will award no further fees based on a claim of generally vexatious conduct by the Bank in the trial court. Plaintiffs also seek attorney’s fees against the Bank incurred in the course of the interlocutory appeals. As between the Bank and the plaintiffs, there is no contract that provides for attorney’s fees. Apart from the fact that the appellate division found that the interlocutory appeals were not frivolous, this court has no jurisdiction to award attorney’s fees as a sanction for frivolous appeals under FSM Appellate Rule 38. FSM Dev. Bank v. Yinug, 12 FSM Intrm. 437, 441 (App. 2004). No further attorney’s fees are awarded. However, provided that the plaintiffs have complied with Appellate Rule 39(d), they may apply to this court for their costs on appeal.

The only attorney’s fees at issue now are those that the plaintiffs incurred against the Island Homes defendants. The plaintiffs’ fee application includes all fees incurred in this case. Plaintiffs will therefore submit a new application, and list only the fees incurred in litigating this case against the Island Home defendants. Supporting documentation for the fees so incurred will also be submitted with the amended application. As to costs in the trial division, plaintiffs will provide a list of the costs incurred against the Bank, and a separate list of the costs incurred against the Island Homes defendants. Any costs on appeal will be shown separately for each appeal.

All costs determined to be allowable in the trial division will be assessed against the Bank. Those that the plaintiffs incurred in litigating against the Bank are taxable on their own account, while under the principle stated in Campus Sweater, the costs that plaintiffs incurred against the Island Homes defendants are taxable as part of the plaintiffs’ damages against the Bank. These latter costs will be assessed jointly and severally against the Bank and the Island Homes defendants.

The Island Homes defendants will respond substantively to the plaintiffs amended motion for fees and costs on or before July 30, 2004. After the Bank has reviewed the amended motion and supporting documentation, it may respond in substance by July 30, 2004. Or it may advise the court as soon as practical after July 20, 2004, but no later than July 30, 2004, whether it requests additional time for further evaluation of the amended motion as proposed in its June 10, 2004, response to plaintiffs’ fees motion.