* * * *

[10 FSM Intrm. 190]

* * * *

COURT'S OPINION

YOSIWO P. GEORGE, Chief Justice:

     This matter was called for trial on April 25, 2001. Plaintiff was represented by Chang B. William. Defendants were represented by Steven J. Sigrah. Several witnesses testified at the trial, including the Plaintiff, Plaintiff's wife Martha Epa Kilafwakun, Alik Kephas, Defendant Paul Kilafwakun, Brine Maeka and Shrue Paul Kilafwakun.

     Several preliminary matters were taken up prior to commencement of trial. First, the Court notes that Defendants failed to file their pre-trial brief by the April 12, 2001 deadline established by this Court's Order entered March 27, 2001. Defendants also failed to request a continuance to file their

[10 FSM Intrm. 193]

pre-trial brief. The filing and service of pre-trial briefs by the deadline, as ordered by the Court, are mandatory and not optional. Parties are hereby warned that any future violation of this Court's Orders with respect to the filing of pre-trial briefs, or any other required action may result in sanctions against that party. All requests for an enlargement of time to file pre-trial briefs must be made in writing, in compliance with the KRCP.

     Defendants also raised the issue of proper service of documents by the Court, and by opposing counsel at his usual place of employment, the Kosrae State Legislature. The KRCP Rule 5(b) explicitly provides that service upon legal counsel may be made by leaving a copy of the document at his office with his clerk or other person in charge thereof. Therefore, under the KRCP, and in accordance with local practice in Kosrae, it is proper to serve a person who has an office at or is employed at the Kosrae State Legislature by leaving a copy of the document with the Administrative Secretary at the Legislature. It is the professional responsibility and duty of legal counsel to follow up with the Administrative Secretary regarding any documents that may have been served upon him at the Legislature during his absence from the Legislature. The Model Rules of Professional Conduct, Rule 1.3 requires counsel to act with reasonable diligence and promptness in representing a client. Reasonable diligence requires followup by legal counsel to determine whether any documents have been served upon him at his office, as clearly provided by this Court's Rules of Civil Procedure.

     In this case, the Court's Order entered on March 27, 2001 established the deadline for the pre-trial briefs as April 12, 2001. The Court's Order was served upon Defendants' counsel at the Kosrae State Legislature on March 29, 2001. Defendants' counsel himself, Mr. Steven Sigrah, personally accepted the Court's Order and signed the Return of Service. Therefore, Defendants' counsel had received actual and personal hand delivery of the Court's Order. Under these circumstances, Defendants' argument that he was not properly served with this document is without merit. I find that documents were properly served upon Defendants by leaving a copy of the document for Defendants' counsel at the Kosrae State Legislature.

     Based upon the evidence presented at trial, I conclude that Defendant Paul Kilafwakun is liable to the Plaintiff under the doctrines of promissory estoppel and unjust enrichment. I also conclude that Defendants Brine Maeka and Tolenoa Kilafwakun are not liable to the Plaintiff. Accordingly, judgment must be entered in favor of the Plaintiff and against Defendant Paul Kilafwakun only. This Memorandum explains the Court's reasoning for its decision and judgment.

I. Findings of Facts.

     The Plaintiff discussed with his cousin Defendant Paul Kilafwakun ("Paul") his need to build his own house. Plaintiff did not own land in Tafunsak, as claimed, therefore he approached his cousin Paul to discuss his housing problem. Paul agreed to allow the Plaintiff to build a house on a certain parcel of land. The Certificate of Title for this parcel of land was issued in the name of Defendant Brine Maeka, Paul's mother ("Brine"). However, it was understood between Paul and Brine that this parcel of land was to be transferred to Paul at a later time. Paul sought, and received permission from his mother Brine to allow the Plaintiff to build his house on the parcel. There was no written agreement between Plaintiff and Paul regarding Plaintiff's use of the parcel to build a house.

     Construction began in late 1997, after the Plaintiff was approved for a loan from Bank of Hawaii. Plaintiff purchased building materials, rented machinery and hauled landfill materials from the loan proceeds. The Plaintiff, Paul, carpenter Alik Kephas ("Alik"), and others assisted in the construction of the house. Paul was not compensated for his labor. There was no evidence presented regarding what, if any, compensation was given to Alik or the other workers. Plaintiff, Paul, Alik, and others constructed and completed the building foundation, the walls, and some of the beams. Construction

[10 FSM Intrm. 194]

had continued on the beams of the building, in 1998, when Plaintiff made certain statements to Paul, which caused Paul to become angry with the Plaintiff.

     Plaintiff stated to Paul, in the presence of his brothers, information regarding Paul's fiancee, Shrue. Plaintiff told Paul that he had a relationship with Shrue in the past, and suggested to Paul that he carefully consider his future plans with Shrue. These statements angered and embarrassed Paul. Paul then told Plaintiff to stop the construction and to take his construction materials off the parcel. Brine did not object to Paul's decision to require the Plaintiff to stop construction and remove his materials. Following Paul's demand, Plaintiff did stop the construction of the house. However, Plaintiff did not remove the unused building materials from the parcel. These unused building materials were abandoned by the Plaintiff on the parcel. The abandoned materials were later removed from the parcel by unknown persons.

     After Plaintiff stopped construction and left the parcel, Defendants did not use the partially constructed building. Some time later, Brine invited Plaintiff back to complete his construction, but Plaintiff refused, claiming that he would not have peace of mind to live there. Both Paul and Brine testified that they would prefer to have the partially constructed building removed from the parcel, because they did not need it.

     In about July 1999, Defendant Tolenoa Kilafwakun, Paul's brother ("Tolenoa"), met with the Plaintiff and asked Plaintiff to submit the estimated costs expended for his house. Plaintiff provided to Tolenoa a written listing, which included the costs of materials used, equipment rental, raw materials, labor costs, food and drink. The written listing included total housing costs at $5,992.84. At trial, Plaintiff also submitted into evidence receipts for the payment of equipment lease, purchase of lumber, cement, rebar and blocks. The amounts listed on some of the invoices and receipts did not match the amounts stated on the written list. I find, based upon the evidence presented at trial, that the written listing is the more accurate listing of costs expended by the Plaintiff for his house.

II. Analysis .

A. Breach of Contract.

     Paul allowed Plaintiff to build his house on a particular parcel of land. Plaintiff claims that there was a contract between the parties for Plaintiff to build his house on Defendants' land. A contract is a promise between two parties for the future performance of mutual obligations, which the law will enforce in some way. For the promise to be enforceable, there must be an offer and an acceptance, definite terms, and consideration for the promise. Ponape Constr. Co. v. Pohnpei, 6 FSM Intrm. 114 (Pon. 1993). Further, in order for an agreement to be binding an agreement must be definite and certain as to its terms and requirements, and it must identify the subject matter and spell out the essential commitments and agreements with respect thereto. Etscheit v. Adams, 6 FSM Intrm. 365, 388 (Pon. 1994). When the existence of a contract is at issue, the trier of fact determines whether the contract did in fact exist. Tulensru v. Utwe, 9 FSM Intrm. 95, 98 (Kos. S. Ct. Tr. 1999).

     In this case Paul promised to Plaintiff the use of a parcel of land on which to build Plaintiff's house. There was no promise made by Plaintiff in exchange for Paul's promise. Consequently, there was nothing of value exchanged for Paul's promise of land and therefore there was no consideration for Paul's promise. Consideration for a promise is required for the promise to be enforceable as a contract. Here, there was no consideration given by the Plaintiff in exchange for Paul's promise. The parties did not have an enforceable contract. Plaintiff's claim for breach of contract fails.

[10 FSM Intrm. 195]

B. Promissory Estoppel and Detrimental Reliance.

     Where no contract exists, the court may use its inherent equity power to fashion a remedy under equitable doctrines. See generally Jim v. Alik, 4 FSM Intrm. 198, 200 (Kos. S. Ct. Tr. 1989). Here, Plaintiff claims that he detrimentally relied upon the Defendant Paul's promise to allow him to use Paul's land. The doctrine of promissory estoppel allows enforcement of promises that induce reliance. The doctrine of promissory estoppel, also referred to as detrimental reliance, is summarized as follows: "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee, and which does induce such action or forbearance is binding" if justice requires "enforcement of the promise. The remedy for breach may be limited as justice requires." Restatement of Contracts § 90(1) (1981). Under the doctrine of promissory estoppel, a person's reliance upon a promise may create rights and duties. The finding of detrimental reliance does not depend upon finding any agreement or consideration.

     In this case, the Plaintiff relied upon Paul's promise to let Plaintiff use the land to build his house. Paul should have reasonably expected the Plaintiff to take action on his promise, such as obtaining financing through a loan, leasing equipment, and purchasing materials and labor to build his house. Plaintiff did in fact rely upon Paul's promise and took action to secure financing through a loan from the Bank of Hawaii. Plaintiff continued to rely upon Paul's promise and took action to lease equipment, purchase construction materials and arrange for labor to build his house. The doctrine of promissory estoppel is applicable here and Paul's promise to the Plaintiff is enforceable. Justice requires the enforcement of Paul's promise. Plaintiff is entitled to recover from Paul, the amount expended in reliance of his promise, based upon the doctrine of promissory estoppel.

C. Unjust Enrichment and Restitution.

     Where no contract existed, the court may use its inherent equity power to fashion a remedy under the doctrine of restitution. Jim, 4 FSM Intrm. at 200. The doctrine of unjust enrichment generally applies where there is an unenforceable contract. The doctrine of unjust enrichment requires a party to either return what has been received or pay the other party for it. The unjust enrichment doctrine is based on the idea one person should not be permitted unjustly to enrich himself at the expense of another. Etscheit, 6 FSM Intrm. at 392. Restitution is a remedy which returns the benefits already received by a party to the party who gave them where the court can find no contract. Jim, 4 FSM Intrm. at 201.

     Here, the doctrine of unjust enrichment is applicable because there is no contract between the parties. Defendant Paul has been unjustly enriched because he now has possession, control and use of a half-completed building, financed by the Plaintiff's funds. Paul obtained possession, control and use of the building by his actions in stopping the construction and demanding the Plaintiff to leave the parcel. Paul's action in breaking his promise to Plaintiff resulted in enrichment to Paul. Although Defendant Paul claimed that he has not used and does not plan to use the half-constructed building, the building does have value and as an improvement the building does add value to the parcel. Paul, who has control and possession of the parcel may utilize the building in the future. Paul has been unjustly enriched by his own actions in breaking his promise to the Plaintiff. Paul is liable to the Plaintiff under the equitable doctrine of unjust enrichment. Plaintiff is entitled to recover restitution from Paul, which returns the benefits of the house to the Plaintiff.

D. Affirmative Defenses.

     Defendants presented two affirmative defenses to Plaintiff's claim. Defendants first claimed that Plaintiff illegally obtained construction materials through the T-3 Program without cost to Plaintiff.

[10 FSM Intrm. 196]

However, Defendants did not submit any proof at trial in support of this defense. There were no witnesses called, nor any documentary proof submitted by the Defendants to support this defense. Defendants did not carry their burden of proof to show that Plaintiff improperly obtained his building materials without cost.

     Defendants also presented the defense that the Plaintiff had an affair with Paul's wife Shrue and that this conduct by the Plaintiff was an adequate legal reason for Paul to stop the construction and remove Plaintiff from the land. The evidence at trial showed that sometime before Defendant Paul's marriage to Shrue, the Plaintiff did have some limited intimate contact on one occasion with Shrue. However, there was no evidence presented showing that the Plaintiff was having a relationship with Shrue at the time of construction. Indeed, Shrue testified as a witness for the Defendants, but she was not questioned about her past relationship with the Plaintiff. Plaintiff's statements to Paul regarding Shrue did anger and embarrass Paul, but these statements do not serve as a defense to Paul's actions in stopping construction of Plaintiff's house. Both affirmative defenses presented by the Defendants fail.

E. Damages.

     Plaintiff claimed damages in the amount of $5,992.84 for costs of building materials, equipment rental, raw materials, labor, food and drink. Plaintiff also requested pre-judgment interest at the rate of 2 % per month. The trial court has wide discretion in determining the amount of damages in contract and quasi-contract cases involving equitable doctrines, such as promissory estoppel and restitution. See O'Byrne v. George, 9 FSM Intrm. 62, 65 (Kos. S. Ct. Tr. 1999). The plaintiff may be compensated for the injuries by awarding compensation for the expenditures made in reliance on the promise. See Kihara Real Estate, Inc. v. Estate of Nanpei (III), 6 FSM Intrm. 502, 505 (Pon. 1994).

     Here, the Plaintiff made expenditures in reliance of Paul's promise to allow Plaintiff to build his house on the parcel. The Court awards the Plaintiff the total amount of $3,971.10 for Plaintiff's expenditures made in reliance of Paul's promise. The total damages award of $3,971.10 is based upon the following components: $3,378.10 for construction materials, $493.00 for equipment rental and $100.00 for raw materials. The Court does not award damages for claimed expenditures for food and beverages, as the purchase and consumption of these items are not dependent upon Paul's promise.

     Plaintiff also claimed labor costs in the amount of $1,712.24, an estimate based upon 40% of the construction materials costs. At trial, there was no evidence presented that the Plaintiff paid any person a specific sum of money for labor. Defendant Paul was not paid for his labor. There was also no evidence presented that Alik Kephas or any other persons were paid any specific amount for their labor. Consequently, Plaintiff's claimed labor cost was not supported by the evidence presented at trial. Plaintiff's claim for labor costs are denied.

     Plaintiff also claimed pre-judgment interest at the rate of 2% per month. Generally, pre-judgment interest is only included as an element of damages as a matter of right when a debtor knows precisely what he is to pay and when he is to pay it. This occurs when a party has been deprived of funds to which he was entitled by virtue of the contract, and the defaulting party knew the exact amount and terms of the debt. In those types of cases, the goal of compensation requires that the complaining party be compensated for the loss of use of those funds. This compensation is made in the form of interest. In the absence of a statute, an award of prejudgment interest is in the discretion of the court. See Coca-Cola Beverage Co. (Micronesia) v. Edmond, 8 FSM Intrm. 388, 392-93 (Kos. 1998). Furthermore, if pre-judgment interest is awarded, the statutory, post-judgment interest rate of 9% per annum is appropriate. Id.

[10 FSM Intrm. 197]

     In this case, there was no agreement involving a promise to pay money. The Plaintiff was not deprived of funds that he was entitled to, because there was no contract made between the parties to pay money. Instead, the Plaintiff is awarded damages based upon the equitable doctrine of promissory estoppel for expenditures made by Plaintiff in reliance of Paul's promise. Pre-judgment interest is not appropriate in this case and Plaintiff's claim for pre-judgment interest is denied.

F. Defendants Brine Maeka and Tolenoa Kilafwakun.

     There was no evidence presented at trial that Defendant Brine Maeka made any promise to the Plaintiff. Therefore, Brine Maeka was not a party to any agreement or promise with the Plaintiff. Plaintiff did not present any evidence of any claim against Brine Maeka. Plaintiff has not carried his burden of proof with respect to claims made against Defendant Brine Maeka.

     Defendants should have moved to dismiss Brine Maeka as a party from this suit long before trial. However, Defendants failed to move to dismiss Defendant Brine Maeka from this matter. Accordingly, based upon the evidence presented in the trial, justice requires that the Complaint against Brine Maeka be dismissed.

     There was no evidence presented that Defendant Tolenoa Kilafwakun made any promise to the Plaintiff. Therefore, Tolenoa Kilafwakun was not a party to any agreement or promise with the Plaintiff. Plaintiff did not present any evidence of any claim against Tolenoa Kilafwakun. Plaintiff has not carried his burden of proof with respect to claims made against Tolenoa Kilafwakun.

     Defendants should have moved to dismiss Tolenoa Kilafwakun as a party from this suit long before trial. However, Defendants failed to move to dismiss Defendant Tolenoa Kilafwakun from this matter. Based upon the evidence presented at trial, justice required that the Complaint against Tolenoa Kilafwakun be dismissed.

III. Judgment.

     Judgment is entered in favor of the Plaintiff and against Defendant Paul Kilafwakun only, in the amount of $3,971.10. Defendants Brine Maeka and Tolenoa Kilafwakun are not liable to the Plaintiff, and the Complaint against these two Defendants is dismissed with prejudice.

* * * *