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Timestamp: 2017-09-20 09:07:41
Document Index: 112929428

Matched Legal Cases: ['§ 224', '§ 8', '§ 8', '§ 8', '§ 2727', '§ 129', '§ 129', '§ 3', '§ 129', '§ 129', '§ 773']

FSM 4 Intrm. 003-016
Cite as Federated Shipping Co. v. Ponape Transfer and Storage,
4 FSM Intrm. 3 (Pon. 1989)
[4 FSM Intrm. 3]
FEDERATED SHIPPING CO.,
PONAPE TRANSFER AND STORAGE CO.
and POHNPEI PUBLIC LANDS AUTHORITY,
FSM CIV. 1986-085
For the Plaintiff: Mr. Barrie Michelsen
For the Defendant: Mr. Daniel Berman
(Ponape Transfer Law Office of Berman & Berman
& Storage) Attorneys at Law
(Pohnpei Public State Attorney
Lands Authority) Pohnpei, FSM 96941
The FSM Supreme Court will not recognize conditions to a contract where they are not created by its express terms or by clear or necessary implication, and where no reasonable construction of the agreement when considered in light of circumstances surrounding its execution points to any intention of the parties to create conditions. Federated Shipping Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3, 10-12 (Pon. 1989).
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Where the party moving for summary judgment makes out a prima facie case which, if uncontroverted at trial, would entitle it to a directed verdict on the issue, then the burden shifts to the nonmoving party to offer some competent evidence that could be admitted at trial showing that there is a genuine issue of material fact. Federated Shipping Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3, 11 (Pon. 11989).
A statement that one party to a contract has a rental obligation to a nonparty does not constitute a promise to the other party to the contract that the specific rental will be paid to that nonparty. Federated Shipping Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3, 11-12 (Pon. 1989).
Because the interest of developing a dynamic and well reasoned body of Micronesian jurisprudence, is best served when all courts have the benefit of one another's opinions to consider and question, when the litigants are private parties the FSM Supreme Court normally should attempt to resolve all issues presented, even when matters of state law are involved. Federated Shipping Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3, 13 (Pon. 1989).
Torts - Interference with a Contractual Relationship
Relief may be granted under the law of Pohnpei for a claim of tortious interference with a contractual relationship, when an individual's economic advantages obtained through dealings with others are knowingly jeopardized out of petty or malicious motives or by the improper or unjustified conduct of a third party. Federated Shipping. Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3, 14 (Pon. 1989).
Torts - Interference with Contractual Relationship
Where a defendant's allegedly offensive actions were taken in the course of a good faith effort to protect a legally cognizable interest, such actions do not constitute tortious interference with a contractual relationship under the law of Pohnpei. Federated Shipping. Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3, 15 (Pon. 1989).
The parties in this case have filed cross-motions for summary judgment. Ponape Transfer and Storage Company, Inc. (PT&S) and the Pohnpei Public Lands Authority (PPLA) seek a ruling that a leasehold agreement executed in 1982 and amended in 1986 by the PPLA and Federated Shipping Co. Inc. (FSCO) is void. FSCO opposes those motions and requests dismissal of PT&S's counterclaims.
Each of the three previously published opinions in this case has set out
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some of the factual background. 1 However, the "facts" in this case have had a somewhat kaleidoscopic quality, presenting different patterns depending on the times and perspectives from which they are viewed. Therefore, it seems desirable to review the background in light of the current state of the record before the Court. None of the facts stated below are in dispute.
This litigation arises out of events dating back to January of 1981, when PPLA resolved to lease the Taketik Island 2 dock facility on Pohnpei Island for the purpose of having a terminal and stevedoring business operated at the site. At the time PT&S was in possession of the Taketik facility under an earlier PPLA lease. Pursuant to PPLA's regulations for the leasing of public land, the availability of the lease was advertised and applications were solicited from the public. FSCO, PT&S, and Peter Christian applied.
On March 31, 1981, PPLA notified the applicants that it had accepted FSCO's application for the lease. Immediately thereafter, PPLA, FSCO, and PT&S entered into a memorandum of understanding pursuant to which PT&S turned over the Taketik facility to FSCO.
During July, 1981, FSCO and PT&S executed a Taketik Ocean Terminal Usage Agreement by which FSCO subcontracted all stevedoring operations at the Taketik facility to PT&S for five years, giving PT&S an option to renew that arrangement for an additional year. In that July, 1981 stevedore agreement, PT&S agreed to pay FSCO a terminal use fee of 40% of FSCO's rent obligation to PPLA.
As of July, 1981, the stage seemed set for an orderly and profitable operation among the parties. Unfortunately, sometimes even the best laid plans go awry. In this case, part of the problem was that the Pohnpei state
attorney refused to supply the formal approval of the lease which Pohnpei law required at that time. The state attorney's refusal to approve the lease apparently was related to an ongoing and fundamental dispute between the state and PPLA over who has the right to grant leases for public lands. In any event, PPLA was unable to tender to FSCO a written lease for the Taketik facility until the Pohnpei statute was amended in 1982 to enable execution of the lease without approval of the state attorney.
In the meantime, FSCO was not paying rent and was requesting a downward adjustment of the $24,000 rent originally specified by the PPLA when bids were sought.
It was not until December 27, 1982, that the Taketik dock facility lease between PPLA and FSCO was executed, effective back to May 1, 1981. The Taketik lease provided for annual rental of $16,722.80, considerably below the originally advertised rent of $24,000 per year. The lease also granted FSCO an option to extend the term fifteen years beyond the ten-year term announced by PPLA when bids were sought. There are substantial questions as to whether the differences between the terms of the lease signed, and the terms advertised, were a result of a conflict of interest of the PPLA commissioner who tendered the lease for execution. 3 FSM Intrm. at 176.
As time progressed, concern about the leasehold arrangements grew. Eventually, the Pohnpei state attorney's office was asked to review the entire matter. On February 24, 1986, state attorney Thomas Tarpley issued an opinion concluding that the 1982 Taketik lease was "unauthorized, violative of bidding procedures, illegal and therefore not binding upon the PPLA or state of Pohnpei". He recommended that a new lease be executed retroactive to May 1, 1981, calling for rental of $24,000 per year, with only a ten-year term.
PT&S originally initiated this litigation on September 30, 1986, naming FSCO and PPLA as defendants, and asserting that the 1982 lease was void. PT&S quickly moved for an injunction to prevent FSCO and PPLA from signing the proposed amended lease. That motion was denied on the grounds that such an amendment of the 1982 lease would not preclude the Court from granting appropriate relief if PT&S could later establish that the 1982 lease was void. 2 FSM Intrm. at 274.
On or about November 10, 1986, PPLA and FSCO, the parties to the original lease, did adopt an amendment providing for increased rental retroactive to May, 1981, and establishing a formula for payment of arrearages.
Subsequently, PPLA apparently decided that the Taketik lease problems were not entirely solved by the November 1986 amendment. Thus, PPLA settled its differences with PT&S and announced its intention to rebid the lease. The Court denied a motion by FSCO to prevent the rebidding. 3 FSM Intrm. 174, 176. The rebidding resulted in a new Taketik lease being granted to FSCO in December 1988. That lease award has given rise to a new legal challenge by PT&S. See Civ. No. 1989-002. [Editor's Note: now reported at 4 FSM Intrm. 37 (Pon. 1989)].
[4 FSM Intrm. 7]
PT&S's dismissal of its claim did not end this litigation, however, for FSCO countered by filing new claims. FSCO charged that PPLA had violated the 1982 lease by allowing a cold storage plant to be erected on the premises, by failing to repair or replace the warehouse on the leased premises, and by agreeing that PT&S would be performing the stevedoring at the dock.
FSCO alleged that PT&S had tortiously interfered with the contractual relationship between FSCO and PPLA by inducing PPLA to renounce the 1982 and 1986 lease arrangements.
In response, both PPLA and PT&S contend that the 1982 and 1986 leasehold arrangements were illegal and void. All parties have filed cross-motions for summary judgment on the voidness issue.
PT&S has counterclaimed that FSCO has not complied with its contractual obligations to PT&S under the stevedore agreement and also has tortiously interfered with the business dealings between PT&S and one of the shippers, Philippines, Micronesia and Orient Navigation Co. (PM&O), as to tariff rates charged by PT&S for stevedoring. FSCO has moved for summary judgment against these claims.
These motions and cross motions for summary judgment are the subject of this opinion.
A. The Voidness Claim
PT&S and PPLA assert that the 1982 and 1986 versions of the original lease are "void and of no legal effect whatsoever." Their theory is that the leases were ultra vires, that is, beyond the power of the PPLA, because the 1982 lease was not executed in accordance with the regulations and was not approved or authorized by the board of trustees, and because both versions of the lease purported to provide rights to FSCO that were never offered to the public. FSCO seeks a ruling that the lease was valid.
In light of the substantial variances between the terms originally advertised and those set forth in the lease executed in December 1982, and the questionable circumstances under which those modifications were inserted, there is little possibility that the 1982 lease could have withstood an immediate and direct court challenge.
A public contract entered into illegally normally will not be enforced by the Courts. Falcam v. FSM, 3 FSM Intrm. 112, 121-22 (Pon. 1987). Where the purported public contract is entered into without complying with authorizing legislation, courts may, under appropriate circumstances, deny the "contractor" payment even for completed work. Truk v. Maeda Constr. Co. , 3 FSM Intrm. 489 (Truk 1988). Some courts have even gone so far as to require the contractor to return to the government any payments already made upon an invalid contract.Miller v. McKinnon, 124 P.2d 34, 140 A.L.R. 570 (Cal. 1942).
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Ultimately however, a determination as to whether an illegal contract will be enforced in any part will be made on the basis of careful examination of the surrounding circumstances. Falcam, 3 FSM Intrm. at 112. Unless a statute explicitly mandates voidness, an illegal contract is wholly unenforceable only when the interest in enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms. California Pacific Bank v. Small Business Admin., 557 F.2d 218, 223-24 (9th Cir. 1977).
Here there is no unequivocal statute, so careful consideration of surrounding circumstances would be necessary. At this juncture, however, in light of the recent intervening events, the Court is uncertain as to whether a ruling concerning validity of the 1982 and 1986 leases is necessary.
Now that the original lease, as amended in 1986, has been scuttled, and replaced through an entirely new rebidding procedure, the original goals of PT&S and the subsequently adopted aims of PPLA concerning that original lease seem to have been accomplished. PT&S has consistently argued only that the lease should be held null and void, unenforceable by FSCO. PPLA has argued that it should be permitted to cast the 1982 and 1986 leases aside and establish new arrangements for operation of the Taketik dock facility. These are the practical results of the rebidding.
Thus, PT&S and PPLA have already obtained through the flow of events the results which they sought through their pleadings in this case. There now appears no need for a ruling in response to the motions of PT&S and PPLA, except for purposes of their defenses against FSCO's claims. In light of the new lease award to FSCO, it seems possible that FSCO may be content to rely upon its new lease rather than try to enforce the earlier ones, and may consider its claims against PPLA and PT&S moot. The Court therefore will delay ruling whether the original lease was enforceable, pending further word from the parties.
B. The Stevedore Agreement Claim
If there is a need now for a ruling as to the validity of the earlier leases, it is for purposes of addressing FSCO's motion seeking dismissal of PT&S's counterclaim based upon the stevedore agreement. That counterclaim is grounded in part upon a premise that the 1982 and 1986 leases were invalid. As already indicated, a final determination as to the validity of these leases would require careful sifting and weighing of the facts. In considering any motion for summary judgment, the Court must view the facts, and inferences to be drawn therefrom, in the light most favorable to the party opposing the motion. FSM v. Ponape Builders Constr. Inc., 2 FSM Intrm. 48, 52 (Pon. 1985). Thus, for purposes of FSCO's motion seeking dismissal of PT&S's stevedore agreement counterclaim, the Court will presume that the 1982 and 1986 leases were invalid.
The PT&S counterclaim asserts that a "condition precedent" to its duty to pay FSCO a monthly use fee under the stevedore agreement was that FSCO would execute a valid lease to, or otherwise hold lawful possession of, the
[4 FSM Intrm. 9]
Taketik site. PT&S further alleges that FSCO "breached" this condition and that therefore a counterclaim for damages lies. Alternatively, PT&S relies upon the fact that the use fee payable by PT&S under the stevedore agreement was to be forty percent of FSCO's rental obligations to PPLA for the terminal. PT&S alleges that as a "condition subsequent" to PT&S's use fee obligations, FSCO was to make regular payments to the PPLA. PT&S concludes that this condition was also "breached."
Terms and concepts such as "condition precedent," "condition subsequent" and "breach" are typically employed in the law of contracts. General contract law is not identified in the Constitution as falling within the powers of the national government and therefore presumably is subject to state powers. FSM Const. art. VIII. Since the parties in this litigation do business in Pohnpei, and the pertinent lease and contract terms were directed toward activities in Pohnpei, Pohnpei law should be applied to resolve this dispute. Semens v. Continental Air Lines, Inc. (I), 2 FSM Intrm. 131, 137 (Pon. 1985).
In deciding a matter of state law, it is the task of this Court to determine, and apply, the law in the same manner that would be done by the highest state court.Edward v. Pohnpei, 3 FSM Intrm. 350, 360 n.22 (Pon. 1988). There are no existing Pohnpei state court decisions resolving the contract issues before the Court in this case, so we may look to common law decisions in other jurisdictions, especially those of the United States, for assistance. Semens (I), 2 FSM Intrm. at 142.
The memoranda and pleadings of PT&S concerning breaches and conditions do not square precisely with, but instead mix, current legal theories under the law of contracts. The modern view is that conditions to contracts are doctrinally distinct from breaches. Leading authorities and commentators agree that a condition is "an event, not certain to occur, which must occur, unless occurrence is excused, before performance under a contract becomes due." Restatement (Second) of Contracts § 224 (1977); E. Farnsworth, Contracts § 8.2 (1982). When a condition to a contract does not occur, an obligor is entitled to suspend its performance on grounds that such performance is not yet due. If it becomes too late for the condition to occur at all, an obligor is entitled to treat its duty to perform as discharged and the contract as terminated. Farnsworth, supra, § 8.3.
The concept of "breach of contract" is a different matter altogether. A breach does not excuse the non-breaching party's duty to perform, nor does it terminate the contract. Instead, a breach gives the injured party an action for damages on the contract, assuming the injured party performs its own obligations thereunder. Most important for our purposes is the understanding that the nonoccurrence of a condition to a contract is not a breach, and that breach of contract damages are not awarded on that basis. Farnsworth, supra, §§ 8.3 and 8.8.
That being said, the Court has tried to assess the facts alleged and the entire record to determine the true theory of PT&S's counterclaim based on the stevedore agreement. Two possible theories have emerged, and the following
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analysis will address both of them.
1. The Condition Theory - First, it is possible that PT&S meant to assert that (1) the acquisition by FSCO of a legal and valid lease to the Taketik facility, and (2) monthly payments made on a timely basis by FSCO to the PPLA in order to maintain such a lease, were both conditions to PT&S's own obligation to make monthly terminal use fee payments to FSCO. Under this theory, PT&S would be arguing that FSCO is liable for all use fee payments PT&S unnecessarily made, assuming the alleged conditions were never excused or waived by PT&S.
Conditions to contracts are not favored in the common law because they tend to have the effect of creating forfeitures. In some jurisdictions, courts will not construe terms in a contract as a condition unless an intention to create a condition appears "by plain and unambiguous language or by necessary implication." A.L. Pickens Co. v. Youngstown Sheet & Tube Co., 650 F.2d 118, 121 (6th Cir. 1981); In re Bubble Up Delaware, Inc., 684 F.2d 1259 (9th Cir. 1982)(requiring plain and unambiguous language); Howard v. Federal Crop Ins. Corp., 540 F.2d 695 (4th Cir. 1976) (requiring plain language).
In other jurisdictions, whether or not language in a contract creates a condition depends on the intention of the parties, to be ascertained from reasonable construction of the language used, considered in light of the surrounding circumstances. Marker v. United States, 646 F. Supp. 433, 436 (D. Del. 1986); O'Brien & Gere Engineers, Inc. v. Taleghani, 540 F. Supp. 1114, 1116 (E.D. Pa. 1982), aff'd, 701 F.2d 1394; and Appeal of Taleghani, 707 F.2d 1395 (3d Cir. 1983)(if language is not free from doubt or oral testimony is contradictory, certain conventions of contract interpretation may guide the court).
Under either approach, the stevedore agreement does not yield the conditions PT&S asserts it does. The agreement states at page 2, paragraph 5, that "In consideration for FSCO's promises, PT&S agrees that it will pay FSCO 40% (forty percent) of its terminal rental obligation, prorated on a monthly basis...due and payable in advance on the first day of the month."
"FSCO's promises" are set out in paragraphs 1 to 4 of the agreement. Summarizing those promises, FSCO agreed to: (1) permit PT&S to utilize the Taketik facility for stevedoring purposes, (2) enforce and protect the exclusivity of PT&S's use rights, and (3) provide warehouse space for PT&S at the facility.
The only statement that "FSCO is the lessee of certain premises at Taketik Dock" appears in the recitation of "facts" at the beginning of the agreement. The "facts" segment of the agreement also contains numerous other explanations of background information which plainly were not intended as conditions to the duties of either party. For example, there is the statement that PT&S is the former operator of the terminal, as well as recitations of the particular places of incorporation and the desire of each corporation to
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accomplish stated goals through entering into the stevedore agreement. There is no indication that any provisions in the "facts" section of the stevedore agreement were intended as conditions.
Indeed, nowhere in the stevedore agreement is there any indication, in either express terms or arising by clear or necessary implication, that PT&S's duty to make monthly use fee payments was conditioned either upon the legal validity of the Taketik lease agreement between FSCO and PPLA or upon FSCO itself actually making the monthly lease payments owing to PPLA. Neither does any reasonable construction of the stevedore agreement when considered in the light of the circumstances surrounding its execution, point to any intention of the parties to create the conditions PT&S asserts control this case. FSCO's memorandum in support of its motion for summary judgment makes this point abundantly clear. FSCO, therefore, has made out a prima facie case which, if uncontroverted at trial, would entitle it to a directed verdict on this issue. As a result, the burden on this motion is shifted to PT&S to offer some competent evidence that could be admitted at trial showing that this is a genuine issue of material fact. 10A C. Wright, R. Miller & M. Kane, Federal Practice and Procedure § 2727, at 143 (1983).
PT&S has failed, in its responsive papers and at the hearing on this motion, to demonstrate the existence of such an issue of fact. It has not offered an affidavit, nor a citation to a deposition, nor any other document that might shed a different light on the stevedore agreement. Instead, PT&S steadfastly asserts in conclusory terms that its payment obligation under the stevedore agreement was simply to pay 40% of whatever amount FSCO actually paid to the PPLA as rent for the Taketik site, and also was conditioned upon the legal validity of FSCO's leasehold rights. That position, unsupported by the contractual language and stated with no supporting documentation after years of discovery and motions in this case, is now quite simply untenable. 3
2. The Implied Covenant Theory - Alternatively, PT&S might be seen as asserting a counterclaim on a theory that FSCO breached implied covenants that it had a valid lease with PPLA, and would make timely lease payments to the PPLA. Under this theory, this implied covenant was designed to insure that PT&S's use fee payments would eventually find their way to the PPLA, a result PT&S allegedly bargained for when it negotiated the stevedore agreement with FSCO.
For the reasons stated in rejecting the conditions theory, FSCO's motion for summary judgment as to a counterclaim by PT&S for breach of an implied covenant in the stevedore agreement must also be granted. Just as the reference to the existing lease in the portion entitled "facts" of the
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stevedore agreement did not constitute a condition to the duty of PT&S to perform its obligations, that reference also did not constitute a promise by FSCO that its lease with PPLA was legally valid. As to PT&S's claim that FSCO breached its obligations to PT&S by failing to make timely rental payments to PPLA, the only reference in the stevedore agreement is to FSCO's terminal rental obligation, not to payments. Moreover, this reference, in paragraph 5, was apparently included only to illustrate the method of calculating PT&S's obligation to pay FSCO a use fee, which was to be forty percent of FSCO's rental obligation. There is no reference anywhere in the agreement to the timing or amounts of rental payments to be made by FSCO to PPLA and no promise by FSCO to make such payments.
PT&S simply has not responded to FSCO's burden-shifting argument that the stevedore agreement speaks for itself and places upon FSCO no obligation either to establish that its lease with PPLA is legally valid, or to show that FSCO has paid PPLA a prescribed amount of rent. PT&S has received the use rights, stevedoring opportunities and warehouse space.
This is everything promised by FSCO in the stevedore agreement. PT&S has suffered no loss through invalidity of the Taketik lease or failure of FSCO to pay the Taketik rentals originally contemplated.
PT&S's counterclaims based on alleged violations of the stevedore agreement will be dismissed. Any necessary adjustments reflecting overpayments by PT&S in relation to rentals actually paid by FSCO to PPLA may be made in connection with distribution of the use fees paid into the Court pursuant to the earlier injunction.
C. The Tortious Interference Counterclaim
PT&S alleges that FSCO intentionally and maliciously interfered with its business relationship with Philippines, Micronesia and Orient Navigation Co. (PM&O), a shipping company for which PT&S had performed stevedoring services, by communicating a "potent" and "erroneous" opinion that PT&S's tariff schedule was illegal. PT&S claims it was damaged when PM&O, on the basis of those communications, held back upwards of $34,000 in tariff payments it owed to PT&S. The counterclaim asserts that FSCO intended to drive a wedge between PT&S and PM&O, and seeks damages in the amount of the payments withheld by PM&O plus the costs PT&S incurred in settling the dispute. PT&S also asks for punitive damages in the amount of $100,000.00.
FSCO does not deny that it communicated with PM&O on the subject of the PT&S tariff. Nonetheless, FSCO has moved for summary judgment in part on grounds of an affirmative defense that those communications were made in the course of a good faith effort to protect a reasonably cognizable legal interest FSCO believed it possessed with regard to the legal right to set tariffs at the Taketik facility.
Before analyzing the arguments of the parties, it must first be determined whether an action for tortious interference with a contractual relationship can lie at all in the state of Pohnpei. Primary lawmaking power in tort law lies with the states.Edward v. Pohnpei, 3 FSM Intrm. 350, 359
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(Pon. 1988). This Court is always prepared to follow the pronouncements of the state courts with regard to whether a specific tort is recognized in a particular jurisdiction.Amor v. Pohnpei, 3 FSM Intrm. 519, 529 (Pon. 1988). This is the duty of the national courts absent issues of constitutional significance.
At the same time, however, the Court appreciates that the Federated States of Micronesia is a young nation with a legal system that is relatively undeveloped. Under the circumstances it is unavoidable that this Court will often be presented with state law issues of first impression. This Court has recognized that considerations of federalism dictate that certain types of issues ought presumptively to be certified to a state court when a state is a named defendant in a monetary damages case before this Court. Edward v. Pohnpei, 3 FSM Intrm. at 362. Yet this Court may not use the certification procedure to avoid deciding each and every state law issue of first impression. Panuelo v. Pohnpei, 2 FSM Intrm. 150 (Pon. 1986). To do so would create enormous delays in the disposition of cases on our docket. Intolerable inefficiency and unfairness would result.
Moreover, the interest of developing a dynamic and well reasoned Micronesian body of jurisprudence is best served when all courts have the benefit of one another's opinions to consider and question. Therefore, when the litigants are private parties, the Court normally should attempt to resolve all issues presented, even when matters of state law are involved. Mailo v. Twum-Barimah, 2 FSM Intrm. 265 (Pon. 1986). That is the duty of the Court in this case.
Common law decisions of the United States have been recognized as an appropriate source of guidance for tort issues unresolved by the Constitution, statutes, decisions of court, or custom or tradition within the Federated States of Micronesia. Semens v. Continental Airlines Inc., 2 FSM Intrm. 131, 142 (Pon. 1985).
Numerous relationships, both economic and personal, enjoy protection under the common law of torts in the United States. Many of these protections, such as the torts of libel, slander, and injurious falsehood, are erected to protect against damage from false statements. Liability also may be imposed for interfering with either personal or business relations, if the means of interference are tortious in themselves, as in the case of interference with economic interests through violation of antitrust laws, misuse of trade secrets, or confidential information, and unfair competition generally. W. Keeton, D. Dobbs, R. Keeton, D. Owen, Prosser and Keeton on Torts § 129, at 978-79 (5th ed. 1984)(hereafter "Prosser, Torts").
However, tort law protection extends further than that. The common law also recognizes another tort generally known as interference with contractual relations, which does not necessarily involve either falsehood or an independent tort. It may be sufficient to impose liability for this tort that the defendant has acted intentionally to interfere with a known contract or prospect of economic advantage, that he has caused harm in so doing, and that
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he has acted in pursuit of some purpose considered improper. Prosser, Torts § 129, at 979.
This tort of interference with contractual or economic relations, then, is a part of the larger body of tort law generally aimed at upholding the right of individuals to be secure against harm and interference from others, not only as to their physical integrity, their freedom to move about and their peace of mind, but even to the extent of protecting opportunities for economic gain, and for pleasant and advantageous relations with others. Prosser, Torts § 3, at 16.
There is no reason to doubt that Pohnpeians share with those in other societies which have adopted or inherited the common law, a view that an individual's economic advantages obtained through dealings with others, ought not to be jeopardized knowingly out of petty or malicious motives or by any improper or unjustified conduct of a third party. Such protection through the law of torts seems well suited to encourage and support the economic development so crucial to this state and the Federated States of Micronesia in general. The Court therefore holds that relief may be granted under the law of Pohnpei for a claim of tortious interference with a contractual relationship.
This tort carries with it certain dangers because of its hazy and ill-defined scope, and also because fear of being charged with the tort of interference with contractual relations may have a chilling effect upon persons who otherwise would engage in legitimate economic competition or in the candid expression of opinions. Prosser, Torts § 129.
Thus, while the tort seems generally consistent with the societal and economic aspirations of the people of Pohnpei and the Federated States of Micronesia, this inherently broad and blunt weapon of tort law must be employed with care. Defenses generally available at common law to defendants charged with this tort should be made available to defendants here.
Under the common law in the United States, a party charged with having tortiously interfered with the contractual relationship of another may plead as an affirmative defense that the actions, alleged to have constituted the offensive interference, were taken in the course of a good faith effort to protect a reasonably cognizable legal interest. Prosser, Torts § 129, at 984-89; Restatement (Second) of Torts § 773 (1979). The Court holds that this defense should be available to defendants charged with the tort of interference with contractual relationships in Pohnpei as well.
Having set out the elements of the tort and an affirmative defense thereto, it is left to determine whether FSCO has met its burden on this summary judgment motion to establish that no genuine issue of fact exists on the basis of the record before us. The record reflects that FSCO has made a prima facie showing of its affirmative defense by showing that it was asserting the right to control setting of tariffs long before the complained of correspondence with PM&O.
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Most compelling in that regard is a letter dated March 23, 1982, from FSCO's president, Mr. Yosuo Phillip, to Freddie Aquillizan, then the general manager of PT&S. That letter reveals that as far back as 1982 FSCO and PT&S disagreed as to which party possessed the legal right under the stevedore agreement to set tariff rates for stevedoring at the Taketik facility. In his letter, Mr. Phillip set out FSCO's position that it controlled that right. The dispute apparently was settled sometime in 1982 with the parties agreeing that FSCO did in fact have the exclusive right to set tariff rates at Taketik.
The record also reveals that in May of 1985, Mr. Phillip corresponded with Mr. Crawford H. Bates, PT&S's vice president and general manager, responding to PT&S's demand that the issue of who controlled the right to set tariffs at the Taketik facility be litigated or submitted to arbitration.
The correspondence PT&S points to as the basis of its tortious interference claim was generated by a reoccurrence of the 1982 dispute between FSCO and PT&S. Specifically, the record shows that on July 9, 1986, PM&O's agent in Pohnpei, Peter Christian, informed FSCO that PT&S was charging PM&O a separate and higher tariff. One week later, on July 17, 1986, FSCO responded to Mr. Christian's letter by writing to PT&S's president, Mr. Uriel Hadley. In its response, FSCO once again set out its long standing position that it had the exclusive right to set tariffs at the Taketik facility.
Based on all of this correspondence, the Court is satisfied that FSCO has made out an affirmative defense that its communications with PM&O were merely part of its long-term, good faith efforts to protect what FSCO reasonably perceived to be its own pre-existing legal interest, the right to set tariffs at the Taketik facility. The defense shifts the burden of proof of this motion to PT&S.
One response of PT&S is that there should be no good faith defense to a claim of tortious interference with a contractual relationship. That contention has already been rejected in this opinion.
PT&S has failed to demonstrate that there is a genuine issue of fact with regard to FSCO's case, putting forward only the affidavit of Mr. Bill Wade, its manager since March 15, 1988. That affidavit does nothing to challenge FSCO's assertion that it was protecting a reasonably cognizable legal interest. Instead, the Wade affidavit merely elaborates the allegations in PT&S's pleadings by stating that FSCO had an interest in "bringing about the financial failure of PT&S." This is unresponsive to the evidence in support of FSCO's stated affirmative defense. Granting for purposes of analysis that FSCO could benefit from PT&S's demise, this does not erase the possibility that FSCO had a perfectly legitimate reason for communicating with PM&O as it did.
PT&S has not made a colorable attempt to attack FSCO's argument head on. Instead, it has stated in conclusory terms that FSCO's intentions were evil without offering any evidence to support that assertion. Merely
[4 FSM Intrm. 16]
asserting, by affidavit or otherwise, that a genuine issue exists for trial is not enough to carry out one's burden on a motion for summary judgment. The nonmoving party must show that there is enough evidence supporting his position to justify a decision upholding his claim by a reasonable trier of fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202, 214 (1986); Washington Post Co. v. Keogh, 365 F.2d 965 (D.C. Cir. 1966); cf. Heirs of Mongkeya v. Heirs of Mackwelung, 3 FSM Intrm. 92, 99-101 (Kos. S. Ct. Tr. 1987).
PT&S's only effort to highlight specific documents has been made in an attempt to establish that FSCO initiated the contacts it had with PM&O. Apparently, PT&S means to imply by this evidence that FSCO's motives were bad. Even if FSCO had approached PM&O first, that would not be sufficient to show either that FSCO had bad motives or that it lacked a legitimate interest of its own.
Yet, even on this limited point, there is not the requisite factual basis in support of PT&S's claim to raise a genuine issue of fact. The earliest documentary indication in the record of contact between FSCO and PM&O about tariff rates is the letter from Peter Christian to FSCO dated July 9, 1986. Peter Christian was PM&O's agent; he was not an officer or employee of FSCO. There is no representation or indication that there was communication between PM&O and FSCO concerning PT&S's tariff rates prior to the Christian letter.
In light of the history of the tariff-setting dispute, PT&S has failed to raise a genuine issue of fact regarding FSCO's asserted defense that it was pursuing a good faith effort to protect a reasonably cognizable legal right. FSCO's motion for summary judgment as to PT&S's counterclaim for tortious interference with its contractual relationship with PM&O is granted. PT&S's counterclaim must be dismissed.
FSCO's motions for summary judgment against PT&S's contract and tort counterclaims are granted and the counterclaims are dismissed. A ruling on the motion for summary judgment as to the validity of the 1982 and 1986 leases is delayed pending further proceedings in this case.
So ordered the 13th day of February, 1989.
1. The earlier decisions were Pohnpei Transfer & Storage v. Pohnpei State Public Lands Authority, 2 FSM Intrm. 272 (Pon. 1986) (granting injunctive relief to PT&S); Pohnpei Transfer & Storage v. Federated Shipping Co., 3 FSM Intrm. 174 (Pon. 1989) (denying FSCO's motion to dissolve the injunction and to prevent PPLA from initiating rebidding procedures); Federated Shipping Co. v. Pohnpei Transfer & Storage, 3 FSM Intrm. 256 (Pon. 1987) (denying FSCO's motion to dismiss for lack of jurisdiction). (Back to opinion)
2. The name for this island is derived from a combination of the Pohnpeian words for island, commonly spelled "deke," and for small, "tikitik." There is no apparent agreement as to the proper spelling. The stevedore agreement signed by Pohnpei State calls the island Takatik. A 1986 Pohnpei legislative resolution, LR 185-86, uses the term Nandekehtik. The island has also been variously referred to in this case as Taketik and Deketik. Perhaps none of these differences is of any importance so long as it is understood that all of these spellings, including Taketik used in this opinion, refer to the island joined to Kolonia by the causeway and upon which the Pohnpei dock and airport are located. (Back to opinion)
3. Had the Court found that PT&S's duties under the stevedore agreement were conditional, it would then have been necessary to analyze whether or not PT&S had waived or excused such conditions by virtue of its conduct over the years. While that inquiry is now unnecessary, the Court notes that on this record it is probable that PT&S would indeed have been found to have waived or excused those conditions. (Back to opinion)