Yamada,UDrive v. Carius

POHNPEI SUPREME COURT REPORTS

ALFRED YAMADA, U-DRIVE,

Pohnpei Civil Action No. 169-84

Trial Division of the Pohnpei Supreme Court

Action for the recovery of damages on an automobile rental contract. Default judgment having been entered by the Court against the defendant, the Court on the authority of Rule 50(b)(2) of the Pohnpei Rules of Civil Procedure, deferred assignment of liability and set hearing to establish the extent of the defendant's liability. The Trial Division of the Pohnpei Supreme Court, JUDAH C. JOHNNY, Associate Justice, held that the plaintiff was entitled to judgment in the amounts claimed for damages, rental/use of the vehicle, for refueling of the vehicle, and interest.

1. Civil Procedure - Default - Effect

A default has been held to operate as an admission of the truth of all the material allegations set forth in the complaint or declaration, and, indeed, even as an admission of the caused of action, so as to tantamount to an admission that the plaintiff is entitled to judgment.

2. Civil Procedure - Default - Damages

Although a default is sometimes regarded as an admission of record of the existence of the debt in the amount claimed, as in the case of fixed or liquidated damages or damages ascertainable by computation, the amount of damages is not always regarded as admitted by default, even though the action is founded on a contract, since in a tort action, or in any action for unliquidated damages the default of the defendant does not admit the amount of the damages, and the plaintiff must prove his damages.

3. Civil Procedure - Default Judgment - Damages

If in order to enable the Court to enter judgment or to carry it into effect it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence ...the court may conduct such hearing or order as justice requires (PNI Rules of Civil Procedure, Rule 50(b)(2)).

4. Civil Procedure - Default - Courts

Where defendant is in default and the Court invokes the provisions of Rule 50 (b) (2) of the Pohnpei Rules of Civil Procedure in his case, the concern of the Court in any hearing under the Rule is not to find the truth of liability of the defendant but to determine the extent of such liability in terms of the dollar.

5. Contracts - Bailment

Where plaintiff under a rental agreement delivers an automobile to defendant that constitutes an agreement in bailment ( 8 Am Jur. 2d; Bailments, Section 4).

6. Contracts - Bailment

Bailment is the delivery of goods or personal property by one person to another, in trust for the execution of a special object upon or in relation to such goods, beneficial either to the bailor or bailee or both, and upon a contract, express or implied, to perform the trust and carry out such object, and thereupon either to deliver the goods to the bailor or otherwise dispose of the same in conformity with the purpose of the trust ( Black's Law Dictionary, Revised Fourth Edition 1968).

7. Contracts - Bailment - Rights, Duties and Obligations of Parties

The rights, duties, and obligations of the parties to a bailment are broadly fixed by certain primary obligations imposed by law especially on the bailee (8 Am Jur.2d, Bailments, Section 132)

8. Contracts - Bailment - Rights, Duties and Obligations of Parties

The duty of the bailee to restore or account for the subject matter of bailment and to keep within the terms of the bailment are absolute obligations, and are applicable alike to all kinds of bailees. (8 Am Jur2d Bailments, Section 132)

9. Contracts - Bailment - Rights, Duties and Obligations of Parties

A bailee's general obligation is the same, whether ha has assured of the trust without hope of recompense or an the promise, or with expectation of reward (8 Am Jur. 2d, Bailments, Section 132)

10. Contracts - Bailment - Rights, Duties and Obligations of parties

Where a bailment is made pursuant to art express contract, the application of the general rules is ordinarily affected thereby, and it must be borne in mind that the measure of the rights, duties and obligations of either bailor or bailee in a particular transaction cart be ascertained exactly only by reference to the terms of the contras itself. (8 Am Jur 2d Bailments, Section 132).

11. Contracts - Bailment - Rights, Duties and Obligations of Parties

As a general rule, the terms, express or implied, of the contract of bailment determine the rights, duties, and liabilities of the parties each to the other and the nature of the contras, whether general or special, is important as to the obligations ordinarily implied in law from such contract. ( 8 Am Jur 2d, Bailments, Sedan 136.)

12. Contracts - Agreement In Bailment - Effect

Where parties enter into an express agreement in bailment in respect of automobile rental the terms of which provide that the lessee shall pay the lessor on demand "all Lessor's costs and expenses resulting from loss or damage to the vehicle while on rental, whether or not due to Lessee's fault", excepting damage from direct or accidental loss or damage from fire, theft, or other causes insurable under the comprehensive coverage of a standard automobile physical damage insurance policy, and the defendant fails to prove that damage caused to the automobile was within the scope of such exception, the agreement makes the lessee the insurer of the subject matter of bailment, so that he cannot escape liability for damage of the vehicle while in his possession even though such damage is through no fault of his.

13. Bailment - Bailee - Duty

An utter absence of all duty of care even on the part of a gratuitous bailee is, in the eye of the law, an impossible situation, inconsistent with the very nature of the bailment relation, which implies confidence and trust necessarily involving the exercise of some degree of care.

14. Bailment - Bailee - Liability

The liability of a bailee is for the exercise of due care in the use, custody and return of the property.

15. Bailment - Creation

To constitute a bailment, an express agreement between the parties is not always necessary for the element of lawful possession, however created, and the duty to account for the article as the property of another, is sufficient to create a bailment.

16. Torts - Conversion

Conversion of property by a bailee may be committed in two ways: (1) by acts in derogation of the bailor's title, and (2) by acts in derogation of the bailor's possessory rights.

17. Torts - Conversion

Conversion of property by a bailee may be committed by using or dealing with the property in a way unauthorized by the terms of the bailment and in defiance or derogation of the bailor's title, by an attempted sale, pledge, gift, or other transfer of the property, by delivering it to someone other than the bailor or owner in violation of the terms of the bailment and in derogation of the bailor's or owner's right to possession, or by failing or refusing to deliver the property to the bailor in accordance with the terms of the contract. (8 Am Jur 2d, Bai Invents Section 118).

18. Torts - Conversion

An absolute and unqualified refusal by a bailee, in defiance or in derogation of a bailor's title to possession, to return or redeliver the property to the bailor, unaccompanied by any explanation Justifying it on some valid legal ground, though some undisclosed legal excuse actually exists at the time, or a refusal purportedly based on reasons that in fact are false and deceptive, constitutes an actionable conversion. (8 Am Jur 2d, Bailment, Section 127).

19. Torts - Restitution

A person who has tortiously obtained, retained, used, or disposed of the chattels of another, is under a duty of restitution to the owner (Restatement of the Law, Restitution, Section 128).

20. Torts - Bailees - Time of Accountability

The time during which the recipient is accountable for the use of the subject matter of a bailment begins when he first receives it and terminates at the time when he surrenders or otherwise disposes of it or, if he still has it, at the time of the verdict or judgment (Restatement of the Law, Restitution, Sedan 157 c).

21. Equity - Unjust Enrichment - Restitution

A person who has been unjustly enriched at the expense of another is required to make restitution to the other.

22. Equity - Unjust Enrichment

A person is enriched if he has received a benefit, and is unjustly enriched if the retention of the benefit would be unjust.

23. Equity - Unjust Enrichment

A person confers a benefit upon another if he gives to the other, possession of some other interest in money, land, chattels, or choses in action, performs services beneficial to, or at the request of the other, satisfies a debt or duty of another, or in any way adds to the other's security of advantage; and the benefit is unjust 'rf the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it.

JUDAH C. JOHNNY, Associate Justice

This matter came on for hearing on December 19, 1985, in Kolonia, State of Pohnpei. In an order entered on December 3, 1985, this Court had found the defendant in default, but on authority of Rule 50 (b) (2), deferred assignment of liability and set this hearing to take evidence establishing the extent of liability of the defendant.

FINDINGS OF FACT

1. Defendant Alvino Carius obtained possession of an automobile from the plaintiff under a U-Drive rental agreement, at the agreed rate of $28.00 per day.

2. Defendant was negligent in two different incidents of damage to the automobile when in his possession.

3. While defendant returned the automobile two days after taking possession and after the chattel had been damaged for the first time, repaired and paid for, he did not raise the agreed rental price.

4. Defendant was liable for the damage and use of the automobile for the entire period that he had possession of the chattel.

[1-2] The question of liability in this matter has been resolved by the finding of default on December 3,1985. By that finding, the defendant is liable for damage and use of the automobile.

"A default has been held to operate as an admission of the truth of all the material allegations set forth in the complaint or declaration, and, indeed, even as an admission of the cause of action, so as to tantamount to an admission that the plaintiff is entitled to judgment." Harshman v. County Ct. 122 US 306, 30 L Ed 1152, 7

S Ct. 1171; 8 ALR 3rd 1070, 1073, Sec. 3 (a); Camacho v. Gardner, 435 P2d 719; Fox v Hoyt, 15 ALR 3d 582.

There is therefore no need for the Court to discuss the merit of the case to determine liability of the defendant.

"Although a default is sometimes regarded as an admission of record of the existence of the debt in the amount claimed, as in the case of fixed or liquidated damages or damages ascertainable by imputation, the amount of damages is not always regarded as admitted by default, even though the action is founded on a contract. In a tort action, or in any action for unliquidated damages, the default of the defendant does not admit the amount of the damages, and the plaintiff must prove his damages." Camacho v. Gardner, supra also 47 Am. Jur.2d, Judgments, Section 1186.

[3] Rule 50 (b) (2) of the Rules of Civil Procedure of this Court conforms to that provision.

"If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence ...the Court may conduct such hearing or order as justice requires.'

[4] Thus, the concern of this Court in this hearing is not to find the truth of liability of the defendant, but to determine the extent of such liability in terms of the dollar. Here, the plaintiff contends that the defendant is liable, based on three reasons:

First, for damage of the automobile. The facts of the transaction show that the defendant obtained possession of the automobile and while he had possession of the chattel, two

incidents of damage were made to it. The first damage was repaired and paid for by the defendant. The second damage took place several months after having taken possession. When the automobile was in the repair shop following repairs, the plaintiff paid the repair cost and repossessed the vehicle. Plaintiff introduced an exhibit showing that he had paid the amount of $283.10.

Second, for use of the automobile. The facts show that the defendant rented the automobile on August 14, 1984, for an intended period of two days, at $28.00 per day. A day following possession, while parked in front of the Kolonia Consumers Cooperation Association, the automobile was damaged. The defendant turned the vehicle into a repair shop, got it repaired, paid the repair cost and returned it to the lessor the following day. On return of the vehicle, defendant could not pay for the rental. Absent the rental fee, the plaintiff refused acceptance of the rented vehicle, but indicated to the defendant that he would accept the vehicle when the defendant paid the entire rental fee. The defendant therefore kept possession of the automobile.

When the automobile was in possession of the defendant, he

continued to use it for his own needs. The plaintiff repeatedly demanded payment for rental and use, and the return of the vehicle. Despite plaintiff's demand, the defendant kept she vehicle and continued to use it. At one or two points the defendant indicated to the plaintiff that he was buying the vehicle. No payment was made, until the vehicle was damaged again, which damage was caused by the negligence of the defendant. The defendant placed the vehicle in a repair shop, where it was repaired. Upon completion of repairs, the defendant could not pay the repair cost. Therefore, the plaintiff intervened, paid the cost of repairs, and took possession of the vehicle. This whole affair started when the defendant took possession of the vehicle for the first time, on August 14, 1984, and ended on December 10, 1984, some 118 days thereafter.

Third, for refueling. On repossession of the vehicle, the plaintiff refilled the tank with 9.5 gallons of gasoline.

Therefore, plaintiff contends that the defendant is liable in the following distributed amounts:

Rental /Use $ 3,304.00

I hold the defendant liable to the plaintiff in damages, rental and use of the automobile and refueling. Reasons are as discussed below:

[5] First, as to damages: The delivery of the automobile in question by the plaintiff to the defendant constitutes an agreement in bailment. 8 Am Jur2d, Bailments, Section 4. The plaintiff is the bailor, the defendant is the bailee, and the automobile is the property or subject of bailment.

[6] Bailment is the delivery of goods or personal property by one person to another, in trust for the execution of a special object upon or in relation to such goods, beneficial either to the bailor or bailee or both, and upon a contract, express or implied, to perform the trust and carry out such object, and thereupon either to redeliver the goods to the bailor or otherwise dispose of the same in conformity with the purpose of the trust. Black's Law Dictionary Revised Fourth Edition, 1968.

[8-10] The rights, duties, and obligations of the parties to a bailment are broadly fixed by certain primary obligations imposed by law especially on the bailee. Certain of these are sometimes called duties of absolute obligation, such as restoring or accounting for the subject matter of bailment, and keeping within terms of the bailment, and are applicable alike to all kinds of bailees. A bailee's general obligation is the same, whether he has assumed the trust without hope of recompense or on the promise, or with expectation of reward. Where the bailment is made pursuant to an express contract, the application of the general rules is ordinarily affected thereby, and it must be borne in mind that the measure of the rights, duties and obligations of either bailor or bailee in a particular transaction can be ascertained exactly only by reference to the terms of the contract itself. 8 Am Jur 2d, Bailments, Section 132.

[11] As a general rule, the terms, express or implied, of the contract of bailment determine the rights, duties, and liabilities of the parties each to the other, and the nature of the contract, whether general or special, is important as to the obligations ordinarily implied in law from such contract. 8 Am Jur 2d, Bailments, Section 136.

[12-13j Here, the parties entered into an express agreement in bailment. The terms of the agreement provide that the lessee shall pay the lessor on demand "all Lessor's costs and expenses resulting from loss or damage to the vehicle while on rental, whether or not due to Lessee's fault." Exceptions provided are damages from direct or accidental loss or damage from fire, theft, or other causes insurable under the comprehensive coverage of a standard automobile physical damage insurance policy. The defendant failed to go forward to prove that the damage was within the scope of such exception. The agreement is too plain to be construed in any other way than as making the lessee the insurer of the subject matter of bailment, so that he could not escape liability for the damage of the vehicle while in his possession, even though such damage was no fault of his. The law imposes on a bailee certain obligations with respect to care of the bailed property while in his possession. An utter absence of all duty of care even on the part of a gratuitous bailee is, in the eyes of the law, an impossible situation, inconsistent with the very nature of the bailment relation, which implies confidence and trust necessarily involving the exercise of some degree of care.

[14] The liability of a bailee is for the exercise of due care in the use, custody and return of the property. In the United States, many courts have held that an agreement by the bailee to return the property in as good condition as when received, ordinary or normal wear and tear excepted, does not, in the absence of some express additional obligation, enlarge the bailee's liability over that implied from the fact of the bailment, and does not make the bailee responsible for damage to the property caused without his fault. Palacios v. Ngiraked, 4 TTR 98. Here, the defendant failed to prove that the damage to the vehicle is without his fault.

Second, as to use. As mentioned above, the initial rental of the vehicle was for two days. On the second day, when the defendant returned the vehicle, he had caused damage to the vehicle, and did not meet his promised obligation to pay the rental on demand by the plaintiff, for which reason, the plaintiff refused to accept the vehicle until the defendant properly accounted for the damage and paid the agreed rent.

[15) The defendant contends that the extent of his rental or use liability is limited to two days as originally agreed, since it was on the plaintiff's refusal to accept the vehicle when he returned it

after two days, that he had kept possession of it. I cannot agree. To constitute a bailment, an express agreement between the parties is not always necessary. The element of lawful possession, however created, and the duty to account for the article as the property of another, is sufficient to create a bailment. See Johnson vs. Willey, 351 P2d 840.

Here, the defendant implied his agreement in repossessing the vehicle in bailment by driving it back to his place, and in renting it again for his benefit, by his not leaving it unused until he found money to pay the two-day rent, but further by his continuing to use the vehicle until prevented from doing so due to its damage and placement in a repair shop.

Additionally, it should be noted that the defendant had in several instances when the plaintiff demanded the return of the vehicle and payment of the rent, refused to so return it and indicated that he would buy the vehicle.

[16-20] I hold the defendant by his act is liable to the plaintiff in conversion. Generally speaking, conversion of property by the bailee may be committed in two ways: (1) by acts in derogation of the bailor's title, and (2) by acts in derogation of the bailor's

possessory rights. Christiansen v. Pugh, 36 P2d 100; 95 ALR 608. More especially, conversion of property by a bailee may be committed by using or dealing with the property in a way unauthorized by the terms of the bailment and in defiance or derogation of the bailor's title, by an attempted sale, pledge, gift, or other transfer of the property, by delivering it to someone other than the bailor or owner in violation of the terms of the bailment grad in derogation of the bailor's or owner's right to possession, or by failing or refusing to redeliver the property to the bailor in accordance with the terms of the contract. 8 Am Jur. 2d, Bailments, Section 118. Here, the bailor had made repeated demands for the return of the vehicle and the bailee had at each time, failed to return the vehicle. In fact, the bailee never did return the vehicle - the bailor took possession of it from a repair shop, after he had paid the cost of damage caused to it. An absolute and unqualified refusal by the bailee, in defiance or in derogation of a bailor's title to possession, to return or redeliver the property to the bailor, unaccompanied by any explanation justifying it on some valid legal ground, though some undisclosed legal excuse actually exists at the time, or a refusal purportedly based on reasons that in fact are false and deceptive, constitutes

an actionable conversion. Section 127supra. The defendant here for nearly four months, had been making promises which were not honored, and had been deceptive in his relation to the plaintiff. A person who has tortiously obtained, retained, used, or disposed of the chattels of another, is under a duty of restitution to the other. See Restatement of the Law, Restitution, Section 128. The time during which the recipient is accountable for the use of the subject matter of a bailment begins when he first received it and terminates at the time when he surrendered or otherwise disposed of it or, if he still has it, at the time of the verdict or judgment. Section i57c, supra.

[21-23] Even if the defendant is not liable for conversion as discussed above, prudence dictates that one shall not enrich himself unjustly at the expense of another. He is bound by the principle of unjust enrichment, and must restitute the plaintiff for the loss of income he suffered from the unjust undertakings of the defendant. A person who has been unjustly enriched at the expense of another is required to make restitution to the other. A person is enriched if he has received a benefit. He is unjustly enriched if the retention of the benefit would be unjust. A person

confers a benefit upon another if he gives to the other possession of some other interest in money, land, chattels, or choses in action, performs services beneficial to, or at the request of the other, satisfies a debt or duty of another, or in any way adds to the others security of advantage. The benefit is unjust if the circumstances of its receipt or retention are such that as between the two persons, it is unjust for him to retain it. Section 1, supra. I do not find throughout the entire proceedings, any instance that tends in any way, to show how defendant's retention and use of the vehicle would be justified. Thus, the defendant is even liable under this doctrine of unjust enrichment.

Third, as to reimbursement for refueling. Item 2 of the terms and conditions of the rental agreement provides that if the mileage rate does not include gasoline, and the vehicle is returned with less gasoline than when rented, an additional charge to compensate lessor for such deficiency will be paid by lessee on demand. Plaintiff's exhibit A, which is the rental agreement shows that at the time the vehicle was taken by defendant, the fuel tank was reading "F" or full. Exhibit B shows that when the vehicle was repossessed by the plaintiff on December 10,1985, at his expense, he filled the

tank with 9.5 gallons of gasoline, costing him the amount he herein claims. That constitutes what the defendant had used from the capacity of the fuel tank at the time plaintiff repossessed the vehicle. ! find this reimbursement claim legitimate.

It is Ordered, Adjudged and Decreed, that plaintiff has judgment against the defendant as follows:

1. For damages in the amount of $ 283.10

2. For rental/use of the vehicle for 118 days at $28.00. per day - $ 3, 304.00

3. For refueling in the amount of $13.25.

4. Interest of 9% per annum is assessed from date of judgment.

5. Each party will bear his own costs.