FSM Petroleum Corporation v Etomara [2017] FMSC 3; 21 FSM R. 123 (Chk. 2017) (20 January 2017)

FSM SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 2016-1013

FSM PETROLEUM CORPORATION, )
)
Plaintiff, )
)
vs. )
)
BEIKEN ETOMARA, )
)
Defendant. )
___________________________________ )

ORDER GRANTING PRELIMINARY INJUNCTION

Larry Wentworth
Associate Justice

Hearing: January 18, 2017
Decided: January 20, 2017

APPEARANCES:

For the Plaintiff: David C. Angyal, Esq.
Ramp & Mida Law Firm
P.O. Box 1480
Kolonia, Pohnpei FM 96941

For the Defendant: Bethwell O’Sonis, Esq.
P.O. Box 308
Weno, Chuuk FM 96942

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HEADNOTES

Civil Procedure Injunctions
In exercising its broad discretion to decide whether to grant a preliminary injunction, a court will consider four factors: 1) the likelihood of success on the merits of the party seeking injunctive relief, 2) the possibility of irreparable injury to the movant, 3) the balance of possible injuries or inconvenience to the parties that would flow from granting or denying the relief, and 4) any impact on the public interest. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 126 (Chk. 2017).

Civil Procedure Injunctions Irreparable Harm
The threat of irreparable harm before the litigation’s conclusion is a prerequisite to preliminary injunctive relief, and when money damages or other relief will fully compensate for the threatened interim action, irreparable harm does not exist and a preliminary injunction should be denied. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 126 (Chk. 2017).

Civil Procedure Injunctions Irreparable Harm
A harm involving land is often considered irreparable since land is unique. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 126 (Chk. 2017).

Civil Procedure Injunctions Irreparable Harm
The harm is irreparable when there is no other suitable or equivalent adjacent or adjoining property into which the movant might be able to expand its facilities and when the landowner does not have the present ability to return the lease payment. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 127 (Chk. 2017).

Contracts Formation
The general rule is that a party who signs an instrument manifests assent to it and may not later complain about not reading or not understanding it. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 127 (Chk. 2017).

Contracts Interpretation
Since the Chuuk State Supreme Court has generally, except when a Chuuk statute or constitutional provision is applicable, followed common law contract principles in deciding contract cases, the court will apply common law contract rules. Common law decisions of the United States are thus an appropriate source of guidance for the FSM Supreme Court for contract issues unresolved by statutes, decisions of constitutional courts, or custom and tradition within the FSM. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 127 n.1 (Chk. 2017).

Contracts Formation
Generally, one having the capacity to understand a written document who reads it, or one who, without reading it or having it read to him, signs it, is bound by his signature. Otherwise, no one could rely on a signed document if the other party could avoid the transaction by not reading or not understanding the document. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 127 (Chk. 2017).

Contracts Formation
A signatory to a contract has a duty to read it, or have it read to him, or a duty to understand what he is signing. The duty to read even involves a person who is blind, illiterate, or unfamiliar with the language in which the contract is written and who has signed the document without having anyone read it aloud or explaining it. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 127 (Chk. 2017).

Contracts Formation
Except possibly in the case of an emergency, a party must employ self-protection by procuring someone to read aloud, explain, or translate the contract before he signs it. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 127 n.2 (Chk. 2017).

Contracts Formation
The "duty to read" a contract before signing it applies especially when the lease was the result of long negotiations during which the signer was represented by capable counsel, fluent in his native language, who he could ask for an explanation. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 127 (Chk. 2017).

Civil Procedure Injunctions Balance of Injuries
The balance-of-possible-injuries factor favors the plaintiff when the plaintiff spent $200,000 in order to acquire a leasehold on an adjoining lot so that it may expand its operation, but is not able to actually proceed with its expansion or to have its sizeable expenditure refunded and the defendant’s potential injury is not being able to use the far end of the lot to run a small store, which if the alleged contract breach is cured, would be further ameliorated by $5,000 quarterly payments to the defendant. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 128 (Chk. 2017).

Civil Procedure Injunctions Public Interest
When the plaintiff contends that the public interest is in its favor because an expanded storage operation would allow it to lower gas and fuel prices in Chuuk and also that the public has an interest in seeing the agreements made with public entities are upheld, and when the defendant does not contend that the public interest favors denying the injunction but merely contends that the plaintiff has not proven the four factors, the public interest favors the preliminary injunction’s issuance. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 128 (Chk. 2017).

Civil Procedure Injunctions Bond
A preliminary injunction should not issue unless the applicant has given security, in such sum, if any, as the court deems proper, for the payment of such costs and damages as are incurred or suffered by any party who is found to have been wrongfully enjoined or restrained, and the parties may agree to the amount. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 128 (Chk. 2017).

Civil Procedure Injunctions
Although all four factors do not have to weigh in the applicant’s favor for an applicant to be granted a preliminary injunction, when all four factors do favor the preliminary injunction’s issuance, the preliminary injunction motion will be granted. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 128 (Chk. 2017).

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COURT’S OPINION

LARRY WENTWORTH, Associate Justice:

On January 18, 2017, this came before the court to hear the plaintiff’s motion for a preliminary injunction. The motion is granted and the preliminary injunction issues herewith. The court’s reasons follow.

I. FACTUAL FINDINGS

The plaintiff, FSM Petroleum Corporation ("Petrocorp") has a bulk plant facility on the waterfront on Weno, Chuuk, where it stores its petroleum products and generally conducts its business. Interested in expanding its storage capacity, Petrocorp negotiated with the landowner, Beiken Etomara, of the adjoining waterfront property, Lot No. 041-A-34. On June 27, 2014, Petrocorp and Etomara executed an Option to Lease that parcel, whereby Petrocorp paid Etomara $20,000 for the exclusive right, for three years, to negotiate a lease for Lot No. 041-A-34. Etomara and his then attorney, Derensio Konman, negotiated this option contract with Petrocorp’s attorney, Kembo Mida, Jr. The option was signed by all three, as well as a Petrocorp official.

Lot No. 041-A-34, which is filled land, was surveyed by Tim McVey, a registered surveyor from Pohnpei, with the assistance of Dino Aliven, a supervisor at Chuuk Land Management. The survey was done in the presence of Etomara’s family members. The survey determined that Lot No. 041-A-34 contained 3,948 square meters, a small amount of which is still underwater. This lot size was the same as when it was measured during four other surveys at which Aliven had been present.

After further negotiations, the parties, in June 2015, executed a Contract of Lease for Lot No. 041-A-34, whereby Petrocorp leased Lot No. 041-A-34 from Etomara for 20 years for $400,000. Half of this sum, $200,000, was a "pre-payment" to Etomara, to be made at the start of the lease. By the lease’s terms, the remaining $200,000, is to be paid, starting one year later, at the rate of $5,000 per quarter until paid in full. This lease was signed by Etomara, his counsel Konman, and Mida and other Petrocorp officials. Petrocorp made the $200,000 prepayment to Etomara.

Petrocorp later hired M&R to fence in Lot No. 041-A-34 in preparation for its use of the lot. On November 4, 2016, when M&R was working there, some of Etomara’s family members appeared and told them to stop work. When M&R tried again on December 22, 2016, to work on fence construction, Etomara and his family members appeared and ordered them to stop. The fence construction has not resumed. At the end of Lot No. 041-A-34 farthest away from the existing Petrocorp facility, Etomara has built a small structure or store. Earlier, there were two structures there, but one was removed.

II. PRELIMINARY INJUNCTION MOTION

A court, in exercising its broad discretion in deciding whether to grant a preliminary injunction, will consider four factors: 1) the likelihood of success on the merits of the party seeking injunctive relief, 2) the possibility of irreparable injury to the movant, 3) the balance of possible injuries or inconvenience to the parties that would flow from granting or denying the relief, and 4) any impact on the public interest. Mailo v. Lawrence, 20 FSM R. 201, 203 (Chk. 2015).

A. Irreparable Injury to Petrocorp

The threat of irreparable harm before the litigation’s conclusion is a prerequisite to preliminary injunctive relief. Killion v. Chuuk, 19 FSM R. 539, 541 (Chk. 2014). When money damages or other relief will fully compensate for the threatened interim action, irreparable harm does not exist and a preliminary injunction should be denied. Id.; Harper v. Chuuk State Dep’t of Admin. Servs., 19 FSM R. 147, 153 (Chk. 2013).

A harm involving land is often considered irreparable since land is unique. See Killion, 19 FSM R. at 541. Here, the irreparable harm to Petrocorp is Etomara’s alleged interference with Petrocorp’s right to possession and use of Lot No. 041-A-34. There is no other suitable or equivalent adjacent or adjoining property into which Petrocorp might be able to expand its facilities. Petrocorp’s harm is therefore irreparable.

Furthermore, Etomara does not have the present ability to compensate Petrocorp. He cannot even provide to Petrocorp the $200,000 in restitution of the lease "pre-payment," let alone any further damage to Petrocorp.

Accordingly, the irreparable harm factor strongly favors issuance of the injunction.

B. Petrocorp’s Likelihood of Success on the Merits

Petrocorp’s lease is specifically for the 3,948 square meters of Lot No. 041-A-34. Etomara contends that he only leased half of this land since his certificate of title states that he owns 6,009 square meters so that therefore he still has the right to possess the southern half of Lot No. 041-A-34, which is why, in his view, Petrocorp should not be permitted to fence in the entirety of Lot No. 041-A-34. Etomara argues that although he signed the lease option and the lease, he did not read either of them and he only leased half of Lot No. 041-A-34.

The court cannot give this argument any weight. The general rule is that "a party who signs an instrument manifests assent to it and may not later complain about not reading or not understanding" it. JOSEPH M. PERILLO, CALAMARI AND PERILLO ON CONTRACTS § 9.t 392 (5th ed. 2003).[1] Generally, "one having the capacity to understand a wridocument who reads it, or, without reading it or having it read to him, signs it, is bound ound by his signature." Rossi v. Douglas, 100 A.2d 3, 7 (Md. 1953) (cited in Calamari & Perillo as a "typical case"). Otherwise, "no one could rely on a signed document if the other party could avoid the transaction by not reading or not understanding" the document. PERILLO, supra, § 9.41, at 393.

A sign signatory to a contract has a duty to read, or have it read to him, or a duty to understand what he is signing. The duty to read even "involves a person who is blind, illiterate or unfamiliar with the language in which the contract is written and who has signed a document without having anyone read it aloud or explaining it." Id. § 9.42, at 397;^[2] cf. Melander v. Kosrae, 3 FSM R. 324, 329 (Kos. S. Ct. Tr. 1988) (relief will be denied when the aggrieved party’s misunderstanding was caused by his unexplained failure to read the necessary documents). Although there are exceptions to this general rule about the "duty to read," none seem to apply here. This is especially true since the Lot No. 041-A-34 lease was the result of long negotiations during which Etomara was represented by capable counsel, fluent in his native language, who he could ask for an explanation.

Furthermore, Lot No. 041-A-34 consists of 3,948 square meters. Etomara’s certificate of title is for Lot No. 041-A-00, which is a larger land area that would include Lot No. 041-A-34.

For all these reasons, Etomara is therefore unlikely to prevail on his assertion that he still has the right to possess half of Lot No. 041-A-34. And conversely, Petrocorp is likely to succeed on the merits. Accordingly, the likelihood-of-success factor favors the issuance of a preliminary injunction.

C. Balance of Possible Injuries to the Parties

The court must also consider the balance of possible harms to the opposing parties. If the injunction does not issue, Petrocorp has spent $200,000 in order to acquire a leasehold on an adjoining lot so that it may expand its operation, but is not able to actually proceed with its expansion or to have its sizeable expenditure refunded.

These potential injuries, when balanced against Etomara’s potential injury of not being able to use the far end of Lot No. 041-A-34 to run a small store, favors the injunction’s issuance. Furthermore, the $5,000 quarterly payments to Etomara that Petrocorp will make to Etomara if Etomara’s alleged contract breach is cured, should further ameliorate any injury to Etomara caused by his inability to use any part of Lot No. 041-A-34.

Accordingly, the balance-of-possible-injuries factor favors the issuance of a preliminary injunction.

D. Public Interest

Petrocorp contends that the public interest is in its favor because an expanded storage operation on Weno would allow it to lower gas and fuel prices in Chuuk. Petrocorp also contends that the public has an interest in seeing the agreements made with public entities, such as Petrocorp, are upheld. Etomara does not contend that the public interest favors denying the injunction. He contends that Petrocorp has not proven the four factors.

The court therefore concludes that the public interest weighs in Petrocorp’s favor. Accordingly, the public interest favors the issuance of a preliminary injunction.

E. Injunction Bond

Under Civil Procedure Rule 65(c), a preliminary injunction should not issue unless the applicant has given security, in such sum, if any, as the court deems proper, for the payment of such costs and damages as are incurred or suffered by any party who is found to have been wrongfully enjoined or restrained. Luen Thai Fishing Venture, Ltd. v. Pohnpei, 18 FSM R. 563, 568 (Pon. 2013). During the hearing, the parties agreed that the sum of $5,000, an amount equal to the first quarter’s payment under the lease, would be an appropriate bond amount.

Accordingly, the court sets the injunction bond at $5,000, which shall be paid into the court within fourteen days of this order, and which sum the clerk shall place in an interest-bearing account.

III. CONCLUSION

Although all four factors do not have to weigh in the applicant’s favor for an applicant to be granted a preliminary injunction, in this case all four factors do favor the preliminary injunction’s issuance. Accordingly, the FSM Petroleum Corporation’s preliminary injunction motion is granted.

The preliminary injunction will take effect on February 6, 2017, fourteen days from issuance of this order, in order to allow Beiken Etomara time to remove his structure and any property from Lot No. 041-A-34 before it is fenced in. After that date, February 6, 2017, the defendant, Beiken Etomara, his family, agents, successors, employees, attorneys, assigns, and all persons acting in concert or in cooperation with him or at his direction are enjoined and restrained from taking any action preventing or interfering with FSM Petroleum Corporation’s possession and occupation of all or any part of Lot No. 041-A-34, and in particular are prohibited from preventing or interfering with the construction of a fence around Lot No. 041-A-34. A preliminary injunction to that effect issues herewith.

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^[1] Since, 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, 14 FSM R. 526, 530 (Chk. 2007), the court will apply common law contract rules because common law decisions of the United States are an appropriate source of guidance for the FSM Supreme Court for contract issues unresolved by statutes, decisions of constitutional courts, or custom and tradition within the FSM, Pacific Skylite Hotel v. Penta Ocean, 19 FSM R. 265, 275 (Pon. 2014).

^[2] "[E]xcept possibly in the case of an emergency, the party must employ self-protection by procuring someone to read aloud, explain, or translate the [contract]." JOSEPH M. PERILLO, CALAMARI AND PERILLO ON CONTRACTS § 9.42, at 397 (5th ed. 2003).