Hartman v Krum [2007] FMSC 1; 14 FSM Intrm. 526 (Chk. 2007) (8 January 2007)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526 (Chk. 2007)

LINDA HARTMAN and GEORGE HARTMAN,
Plaintiffs,

vs.

ROGER KRUM,
Defendant.

CIVIL ACTION NO. 2006-1000

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Dennis K. Yamase
Associate Justice

Trial: November 9, 2006
Decided: January 8, 2007

APPEARANCES:

For the Plaintiffs:
George and Linda Hartman, pro se
P.O. Box 44
Weno, Chuuk FM 96942

For the Defendant:
Roger Krum, pro se
P.O. Box 1141
Weno, Chuuk FM 96942

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HEADNOTES

Choice of Law
State law controls in the resolution of contract and tort issues. When the FSM Supreme Court, in the exercise of its diversity jurisdiction decides a matter of state law, its goal is to apply the law the same way the highest state court would. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 530 (Chk. 2007).

[14 FSM Intrm. 525]

Contracts
In deciding contract cases, the Chuuk State Supreme Court has generally followed common law contract principles except when a Chuuk statute or constitutional provision is applicable. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 530 (Chk. 2007).

Contracts
A contract is a promise between two parties for the future performance of mutual obligations. For the promise to be enforceable, there must be an offer, acceptance, consideration, and definite terms. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 530 (Chk. 2007).

Contracts - Formation
No contract was created when the plaintiff’s offer was not communicated to the defendant, thus no offer was ever made to the defendant, and there never was an acceptance of an offer by the defendant. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 530 (Chk. 2007).

Agency
A principal is liable not just for his agent’s expressly authorized acts and contracts, but also, with respect to third parties who deal with his agent in good faith, for actions his agent takes with apparent authority to act on the principal’s behalf. Apparent authority may be implied where the principal passively permits the agent to appear to a third person to have authority to act on his behalf. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 530 (Chk. 2007).

Agency
When an agent had neither the actual nor the apparent authority to bind the principal to make rental payments since the principal did not give the agent actual authority to agree to rental payments for a cement mixer’s use, and since the agent informed the plaintiffs that he would have to discuss their proposed rental amount with the principal, the agent did not have the apparent authority to agree to rental payments and bind the principal. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 530 (Chk. 2007).

Agency; Contracts - Formation
A principal is bound by, and liable for his agent’s acts if done with or within the actual or apparent authority from the principal and within the scope of the agent’s employment, but when agreeing to pay rent for a cement mixer was not within the scope of the agent’s "employment" as the principal’s agent, no contract was formed between the principal and the plaintiffs through agency. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 530-31 (Chk. 2007).

Remedies - Restitution
When the parties have failed to make an enforceable contract due to the lack of definite terms, the court may use its equity power to grant a remedy under the doctrine of restitution. Restitution is a remedy which returns the benefits already received to the party who gave those benefits. Once a claimant’s entitlement to damages is established, the amount of damages is an issue of fact for the finder of fact. The trial court has wide discretion in determining the amount of damages in quasi-contract and contract cases involving equitable doctrines, such as restitution. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 531 (Chk. 2007).

Remedies - Restitution
When a plaintiff makes a claim for damages, he has a duty to mitigate those damages, which means that a plaintiff who has taken reasonable steps to minimize the amount of his damages may recover the amount of those expenses. A court will not compensate an injured party for a loss that he could have avoided by making appropriate efforts, in the eyes of the court, to the circumstances. Under the general principle of mitigation of damages, a plaintiff is not encouraged to maximize his recovery by siting on his rights. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 531 (Chk. 2007).

[2007] FMSC 1; [14 FSM Intrm. 526]

Remedies - Restitution
When the defendant is responsible for returning a cement mixer to the plaintiffs in a similar condition as when he took it, but it would be too difficult to have the cement mixer fixed, the court must look at an alternative and award the plaintiffs an amount for the replacement of their used cement mixer. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 531 (Chk. 2007).

Costs
POL and transportation costs for the plaintiffs in their efforts to meet with the defendant to come to a resolution of this matter is a type of cost that is not normally recoverable. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 532 (Chk. 2007).

Attorneys’ Fees
No attorneys’ fees can be awarded to plaintiffs that have acted pro se. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 532 (Chk. 2007).

Attorneys’ Fees
Attorney fee awards are generally limited to those authorized either by statute or contract. Otherwise, parties bear their own attorney’s fees. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 532 (Chk. 2007).

Contracts - Damages; Torts - Damages - Punitive
Generally, punitive damages are not a contract remedy, because only compensatory damages are allowed for breach of contract. Nor can punitive damages be awarded under non-contract (i.e., tort) causes of action unless the defendant’s actions were alleged and proven to be willful, wanton, and malicious or with deliberate violence. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 532 (Chk. 2007).

Torts - Damages
When the plaintiffs asked for $5,000 for the raising of plaintiff’s blood pressure and $5,000 for physical, mental, and emotional distress and for $5,000 for pain and suffering, but no evidence was placed before the court regarding these damage claims and no manifestation of physical injury was placed into evidence, these damages cannot be awarded. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 532 (Chk. 2007).

Costs
Prevailing plaintiffs cannot be awarded $1,000 for bringing the law suit since this type of cost is not normally awarded and no evidence of what was included in the $1,000 was provided. Hartman v. Krum, [2007] FMSC 1; 14 FSM Intrm. 526, 532 (Chk. 2007).

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COURT’S OPINION

DENNIS K. YAMASE, Associate Justice:

This matter went to trial on November 9, 2006. Both plaintiffs, George and Linda Hartman and defendant, Roger Krum acted pro se.

Plaintiff’s witnesses included Martin Asenis and plaintiff George Hartman. Defendant’s witness was himself, Roger Krum.

[14 FSM Intrm. 527]

Findings of Fact

1. Defendant Roger Krum is the leader and Pastor of the Paata Seventh Day Adventist (SDA) Church on Paata Island. In October, 2004, the Paata SDA Church wanted to construct a school building on Paata Island.

2. To carry out the school construction project on Paata defendant Krum and Martin Asenis, an elder of the SDA Church, searched for a cement mixer. They looked at ASA store (ASA), but did not want to use what ASA had available, since ASA was asking $20 per day to rent it.

3. Mr. Asenis recommended approaching plaintiff Linda Hartman, who is his relative, for the use of the Hartmans’ cement mixer. Pastor Krum authorized Mr. Asenis to meet with Mrs. Hartman and discuss the possibility of using the Hartman’s cement mixer.

4. At the meeting between Mr. Asenis and Mrs. Hartman, Mrs. Hartman mentioned a rental rate of $300 per month for the cement mixer and Mr. Asenis said that he would discuss the rental of the cement mixer with Pastor Krum.

5. Mr. Asenis reported back to Pastor Krum that the Hartmans were willing to lend the cement mixer to them for the Paata school construction project, but did not mention to Pastor Krum the proposed $300 per month rental rate to Pastor Krum.

6. No direct negotiations between either of the plaintiffs Hartmans and defendant Krum took place. No written contract was ever executed between the parties.

7. Mr. Asenis, defendant Krum, and others got a truck and took the cement mixer from the Hartman’s property. Defendant Krum and the others found the cement mixer without a cover, gas cap, and tires. They removed the cement mixer whose support was buried in the ground, brought the machine to Paata, had an engineer from Guam work on it to get it running, and began to use the machine for the school construction. The cement mixer worked some times, but at other times they would mix cement by hand because the machine’s engine broke down.

8. Pastor Krum received a number of messages from Mrs. Hartman to return the cement mixer, because the Hartmans needed it for their own projects. The Hartmans were engaged in making cement hollow blocks and were scheduled to work on a construction project for which the cement mixer was needed. Pastor Krum asked Mr. Asenis to request the use of the cement mixer until the completion of the project and continued to use the machine. It is unclear when defendant Krum received the first message asking for the cement mixer’s return or how long the defendant continued to use the cement mixer after the Hartmans asked for its return.

9. Pastor Krum had difficulty finding a boat to transport the cement mixer back to Weno and realized that he could not use his own boat because it would not be safe. When Pastor Krum transported the cement mixer back to Weno he had the holding tank part of the mixer removed. When the cement mixer was put back together the holding tank would not properly fit back together with the remaining part.

10. When the cement mixer arrived back in Weno in October, 2005, after about a year in Paata, it was no longer in working condition and the holding tank was partially filled with hardened cement. Pastor Krum had most of the hardened cement removed from the holding tank after getting the cement mixer back to Weno and had his engineer look at the machine but the engineer could not fix it.

11. The holding tank bearing was broken. Pastor Krum made inquiries regarding parts for the cement mixer in order to fix it, but determined that it would be too difficult to fix.

[14 FSM Intrm. 528]

12. The Hartmans had bought the cement mixer new for approximately $18,000, plus shipping from Guam. When Pastor Krum borrowed it, the cement mixer was approximately three years old and had been used by the Hartmans.

13. ASA had a used reconditioned machine for sale at approximately $5,800. There was testimony that a new cement mixer could be bought there for $3,000. The capacity, type, and other information regarding the reconditioned and new cement mixers was not provided. Nor was information provided concerning how comparable these cement mixers were to the Hartmans’.

14. Numerous meetings between plaintiffs and defendant took place to discuss possible resolution of this matter, but nothing was resolved. Mr. Asenis made statements to the Hartmans that Pastor Krum would pay for the cement mixer’s use. Pastor Krum made one payment to the Hartmans of $500.

Conclusions of Law

State law controls in the resolution of contract and tort issues. When this court, in the exercise of its diversity jurisdiction decides a matter of state law, its goal is to apply the law the same way the highest state court would. Pohnpei v. M/V Miyo Maru No. 11[1998] FMSC 10; , 8 FSM Intrm. 281, 294-95 (Pon. 1998).

There is no directly applicable Chuuk state law or Chuuk State Supreme Court decisions on most of the issues arising in this case. A review of the reported cases, shows that in deciding contract cases, the Chuuk State Supreme Court has generally followed common law contract principles except when a Chuuk statute or constitutional provision is applicable. Cf. Truk Shipping Co. v. Chuuk, [1995] FMCSC 19; 7 FSM Intrm. 337 (Chk. S. Ct. Tr. 1995). The court has, therefore, looked to decisions in other FSM states applying common law contract principles.

A contract is a promise between two parties for the future performance of mutual obligations. For the promise to be enforceable, there must be an offer, acceptance, consideration, and definite terms. Livaie v. Weilbacher, [2005] FMSC 19; 13 FSM Intrm. 139, 143 (App. 2005); George v. Alik, [2004] FMKSC 6; 13 FSM Intrm. 12, 14 (Kos. S. Ct. Tr 2004).

While there was an offer made by Mrs. Hartman to Asenis to lease the cement mixer for $300 per month, this offer was not communicated to defendant Krum. Therefore no offer was ever made to the defendant. Nor was there ever an acceptance of an offer by defendant Krum. No contract was created.

In some respects, Mr. Asenis acted as Pastor Krum’s agent in securing the cement mixer’s use. A principal is liable not just for his agent’s expressly authorized acts and contracts, but also, with respect to third parties who deal with his agent in good faith, for actions his agent takes with apparent authority to act on the principal’s behalf. Apparent authority may be implied where the principal passively permits the agent to appear to a third person to have authority to act on his behalf. Kosrae Island Credit Union v. Obet, [1996] FMSC 49; 7 FSM Intrm. 416, 419 n.2 (App. 1996). Mr. Asenis had neither the actual nor the apparent authority to bind Pastor Krum to make rental payments. Pastor Krum did not give Asenis actual authority to agree to rental payments for the cement mixer’s use, and since Asenis informed the Hartmans that he would have to discuss their proposed rental amount with Pastor Krum, Asenis did not have the apparent authority to agree to rental payments either. A principal is bound by, and liable for his agent’s acts if done with or within the actual or apparent authority from the principal and within the scope of the agent’s employment. Bank of the FSM v. O’Sonis, 8 FSM Intrm. 67, 69 (Chk. 1997). Agreeing to pay rent for the cement mixer was not within the scope of Asenis’s "employment" as Pastor Krum’s agent. Thus no contract was formed between Pastor Krum and the Hartmans through Asenis’s agency.

[14 FSM Intrm. 529]

While no contract for the cement mixer’s rental or use can be found, even if the cement mixer was lent to defendant Krum for free, he would still have certain responsibilities with regard to the Hartmans and their cement mixer. First, defendant Krum would be obligated to return the cement mixer at a reasonable time after demand was made by the Hartmans for it to be returned. Second, Krum would be obligated to return the cement mixer in the same condition that he received it, minus normal wear and tear. Since the cement mixer is no longer operational and cannot be fixed he has not done this.

When the parties have failed to make an enforceable contract due to the lack of definite terms, the court may use its equity power to grant a remedy under the doctrine of restitution. Restitution is a remedy which returns the benefits already received to the party who gave those benefits. Livaie v. Weilbacher, [2003] FMKSC 7; 11 FSM Intrm. 644, 648 (Kos. S. Ct. Tr. 2003). The plaintiffs are entitled to damages equal to the cement mixer’s value in the condition it should have been returned in – a used, but functional cement mixer – and the value of the plaintiffs’ loss of the cement mixer’s use between the time when it should reasonably have been returned and when it was returned.

Once a claimant’s entitlement to damages is established, the amount of damages is an issue of fact for the finder of fact. Kosrae v. Langu, [1999] FMSC 37; 9 FSM Intrm. 243, 250 (App. 1999). The trial court has wide discretion in determining the amount of damages in quasi-contract and contract cases involving equitable doctrines, such as restitution. Kilafwakun v. Kilafwakun, [2001] FMKSC 1; 10 FSM Intrm. 189, 196 (Kos. S. Ct. Tr. 2001).

The court has limited evidence before it regarding specific damages in this case. The defendant Krum did make a payment of $500 to the Hartmans. The court will consider this payment as covering the loss of the use of the cement mixer after a reasonable time had elapsed after the plaintiffs made a demand for its return.

The Hartmans provided no evidence of any steps taken to mitigate damages caused by Krum’s failure to return the cement mixer within a reasonable time after they asked for it, nor did they provide any evidence that such steps were not possible. When a plaintiff makes a claim for damages, he has a duty to mitigate those damages, which means that a plaintiff who has taken reasonable steps to minimize the amount of his damages may recover the amount of those expenses. Elymore v. Walter, [2000] FMSC 38; 9 FSM Intrm. 450, 457 (Pon. 2000). A court will not compensate an injured party for a loss that he could have avoided by making appropriate efforts, in the eyes of the court, to the circumstances. Panuelo v. Pepsi Cola Bottling Co. of Guam, [1991] FMSC 36; 5 FSM Intrm. 123, 129 (Pon. 1991). Under the general principle of mitigation of damages, a plaintiff is not encouraged to maximize his recovery by siting on his rights. Pohnpei v. AHPW, Inc., [2006] FMSC 1; 14 FSM Intrm. 1, 24 (App. 2006).

Defendant Krum is also still responsible for returning the cement mixer back to the Hartmans in a similar condition as when he took it. Since defendant Krum has determined that it would be too difficult for him to have the cement mixer fixed, the court must look at an alternative. The only evidence before the court is that a refurbished cement mixer was available at ASA for $5,800. There being no other evidence before the court, the court will award the amount of $5,800 to the plaintiffs for the replacement of their cement mixer which was also used.

[14 FSM Intrm. 530]

Other Damages

The plaintiffs, in their complaint, also asked for $200 for POL and transportation costs in their efforts to meet with the defendant Krum to come to a resolution of this matter. This type of cost is not normally recoverable and is denied.

The plaintiffs asked for $5,000 in attorneys fee for legal advice and research. The plaintiffs acted pro se in this case and therefore no attorney was engaged and no attorney fees can be granted. Hauk v. Lokopwe, [2006] FMSC 2; 14 FSM Intrm. 61, 66 (Chk. 2006). Furthermore, even if an attorney’s services had been used, no fees could have been awarded. Attorney fee awards are generally limited to those authorized either by statute or contract. Albatross Trading Co. v. Aizawa, [2005] FMSC 13; 13 FSM Intrm. 380, 382 (Chk. 2005). Otherwise, parties bear their own attorney’s fees. Phillip v. Marianas Ins. Co., [2004] FMSC 21; 12 FSM Intrm. 464, 472 (Pon. 2004).

The plaintiffs asked $5,000 in punitive damages. Generally, punitive damages are not a contract remedy, because only compensatory damages are allowed for breach of contract. Kelly v. Lee, [2002] FMSC 27; 11 FSM Intrm. 116, 117 (Chuuk 2002). Nor can punitive damages be awarded under non-contract (i.e., tort) causes of action unless the defendant’s actions were alleged and proven to be willful, wanton, and malicious or with deliberate violence. Zion v. Nakayama, [2005] FMSC 36; 13 FSM Intrm. 310, 313 (Chk. 2005); Phillip v. Marianas Ins. Co., [2004] FMSC 8; 12 FSM Intrm. 301, 309 (Pon. 2004). No punitive damages can be granted in this case.

The plaintiffs asked for $5,000 for the raising of plaintiff’s blood pressure and $5,000 for physical, mental, and emotional distress. The plaintiffs asked for $5,000 for pain and suffering. No evidence was placed before the court regarding this damage claim and no manifestation of physical injury was placed into evidence. Therefore these damages cannot be awarded. Narruhn v. Aisek, [2004] FMCSC 3; 13 FSM Intrm. 97, 99 (Chk. S. Ct. App. 2004).

The plaintiffs asked for $1,000 for bringing this law suit. This type of cost is not normally awarded and no evidence of what was included in the $1,000 was provided. This relief is also denied.

Conclusion

Defendant Krum failed to return the plaintiffs Hartmans cement mixer in a timely manner after demand was made for its return and also did not return the cement mixer in the same condition as when it was taken. Judgment will therefore issue in the plaintiffs’ favor for $5,800 in order to replace their cement mixer with a used, refurbished one.

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[14 FSM Intrm. 531]