FSM SUPREME COURT TRIAL DIVISION
Cite as Adams v. Island Homes Constr., Inc.
12 FSM Intrm. 234 (Pon. 2003)

[12 FSM Intrm. 234]

YVETTE ETSCHEIT ADAMS, d/b/a POHNPEI
ACE HARDWARE, and ADAMS BROTHERS
CORPORATION,
Plaintiffs,
 
vs.
 
ISLAND HOMES CONSTRUCTION, INC., JOE
FELIX d/b/a ISLAND HOMES CONSTRUCTION,
FSM DEVELOPMENT BANK, PAULUS PERMAN
and LORENZA PERMAN,
Defendants.
 
CIVIL ACTION NO. 2000-012
 
FINDINGS OF FACT AND CONCLUSIONS OF LAW
 
Martin Yinug
Associate Justice
 
Trial: October 27, 2003
Decided: December 1, 2003

APPEARANCES:

For the Plaintiffs:               Craig D. Reffner, Esq.
                                           Law Office of Fredrick L. Ramp
                                           P.O. Box 1480
                                           Kolonia, Pohnpei FM 96941
 
For the Defendants:         Salomon Saimon, Esq.
(Island Homes, Felix)       Law Offices of Saimon & Associates
                                           P.O. Box 1450
                                           Kolonia, Pohnpei FM 96941
 
For the Defendant:           James Woodruff, Esq.
(FSM Dev. Bank)              Bank’s Legal Counsel
                                           P.O. Box M
                                           Kolonia, Pohnpei FM 96941
 
For the Defendants:         Matt Mix, Esq.
(Permans)                         P.O. Box 143
                                           Kolonia, Pohnpei FM 96941

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[12 FSM Intrm. 235]

HEADNOTES

Business Organizations ) Corporations; Business Organizations ) Sole Proprietorship
     When a corporation and its predecessor sole proprietorship are identical as a practical matter because the business remained essentially unchanged as a result of incorporation, both the predecessor sole proprietorship and the successor corporation are jointly and severally liable for the sole proprietorship’s debt. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 239 (Pon. 2003).
 
Contracts ) Third Party Beneficiary
     A third person may enforce a contract for his own benefit when he is a stranger to the contract if the contract shows the parties intended to benefit the third person. The question of the parties’ intent is generally one of construction of the contract, and this intention is determined by the contract terms as a whole, construed in light of the circumstances of the contract’s making and the parties’ purpose. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 239 (Pon. 2003).
 
Contracts ) Third Party Beneficiary
     When a third-party beneficiary can be ascertained from the contract, he need not be named therein. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 239 (Pon. 2003).
 
Contracts ) Third Party Beneficiary
     A claimant may enforce a loan contract and require payment by the lender if he can prove that he was a third-party beneficiary of the loan contract. He must, however, sustain the essential elements of a third party beneficiary claim. There must be a legally enforceable contract, and the parties must have intended that the third party be benefited by the contract’s performance. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 239 (Pon. 2003).
 
Contracts ) Interpretation
     The word "shall" renders the indicated procedures mandatory. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 239 (Pon. 2003).
 
Banks and Banking; Contracts ) Third Party Beneficiary
     When the lender bank was in charge of the disbursement of the loan proceeds and when the contract language provided that no loan proceeds would be disbursed until the bank had received evidence that all labor and materials have been paid for, the bank assumed the duty under the agreement not to disburse loan proceeds until it had received verification that the suppliers had been paid. When, if the bank had met its commitment in this regard, it would have been impossible for the project to be completed without the suppliers being fully paid, the suppliers were as a matter of law intended third-party beneficiaries of the loan agreement. In such a case, the third-party may enforce the contract against the promisor. The bank’s promise not to disburse loan proceeds until it had received confirmation that the suppliers had been paid, is enforceable against the bank. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 239-40 (Pon. 2003).
 
Contracts ) Third Party Beneficiary 
     When, if the bank had met its obligation under the loan agreement the suppliers would have been fully paid upon completion of the project, the bank is liable to the suppliers. But since the bank, not the borrowers, made the promise not to disburse the loan proceeds until proof of payment to the suppliers, it follows that the suppliers may enforce the promise against the bank but not the borrowers because, at most, the borrowers may have had an unspecified duty to participate in the verification process, which is insufficient to render them liable to the suppliers as intended third-party beneficiaries. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 240 (Pon. 2003).

[12 FSM Intrm. 236]

Contracts ) Third Party Beneficiary
     The absence of any express duty in a construction contract to insure the payment of the suppliers means that as a matter of law the parties to the construction agreement did not intend the suppliers to be third-party beneficiaries. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 241 (Pon. 2003).
 
Civil Procedure ) Discovery; Contracts ) Third Party Beneficiary
     When a party is precluded from contesting its liability on an oral agreement as a result of its willful, bad faith discovery misconduct and when the plaintiffs’ damages are also fully awardable under the plaintiffs’ third-party beneficiary claim quite apart from any liability under the agreement, the party’s contention that it is not liable under the agreement is wholly lacking in merit. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 241 (Pon. 2003).
 
Contracts ) Damages; Evidence
     When in discovery responses the amount of the plaintiffs’ damages was stated as slightly more than the amount actually proven at trial, the invoices offered and received into evidence at trial establish by a preponderance of the evidence the amount of plaintiffs’ damages. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 241-42 (Pon. 2003).
 
Contracts ) Damages
     An assignment agreement that sets forth the full amount of the open accounts due, does not preclude further liability for any goods and services purchased after the date of the assignment agreement. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 242 (Pon. 2003).
 
Contracts ) Damages; Evidence
     The court’s pretrial order did not prevent the bank from adequately defending on the question of damages when all witnesses specified in the bank’s pretrial statement whose testimony summaries indicated that they had testimony to offer relevant to the question of damages were permitted to testify. Further, when the bank did not object before trial to the court’s limitation of its damages witnesses, it waived any objection in this regard. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 242 (Pon. 2003).
 
Evidence ) Burden of Proof
     The plaintiffs’ reply to a defendant’s written closing argument will not be stricken because the plaintiffs have the burden of proof, and therefore may have the last word. Adams v. Island Homes Constr., Inc., 12 FSM Intrm. 234, 242 (Pon. 2003).

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COURT’S OPINION

MARTIN YINUG, Associate Justice:

     The court addressed pretrial matters in this case on Thursday, October 23, 2003. Trial followed on Monday, October 27, 2003. On the plaintiffs’ claims against the defendant FSM Development Bank ("the Bank"), trial was limited to damages because the court had previously imposed liability under FSM Civ. R. 37(b)(2)(A) as a sanction for the Bank’s willful, bad faith discovery misconduct.

     The court’s findings of fact and conclusions of law follow. Judgment issues herewith.

[12 FSM Intrm. 237]

I. Findings of Fact

     1. On July 16, 1996, the Bank and defendants Paulus and Lorenza Perman ("the Permans") entered into a loan agreement for a loan from the Bank in the amount of $241,122.00. The purpose of the loan was to build a six-unit apartment house in Panasang, Sokehs, Pohnpei ("the Panasang project"). Paragraph 13 of the loan agreement provides as follows: "Unless otherwise provided, loan release shall be on a drawdown basis, supported by invoice, subject to verification and evaluation of assets to be acquired/constructed and submission of evidence that all labor and materials have been paid for."

     2. On January 10, 1997, defendant Joe Felix d/b/a Island Homes Construction ("Felix"), as contractor, and Paulus Perman, as owner, signed a contract for the construction of the Panasang project. Article 7(b) provides that "all materials furnished for the project shall have clear title and be free from defects." Article 7(d) provides that the contractor’s work "shall be free of any and all liens, claims, demands and encumbrances whatsoever." Article 13 (N.B.: It is fortuitous that relevant provisions of the loan agreement and the construction agreement are paragraph 13 and article 13 respectively ) they should not be confused.) provides that

no final payment shall become due until Contractor delivers to Owner a complete release, in form satisfactory to Owner, of all claims or liens arising out of this contract, executed by all parties who, in the Owner’s opinion, are lienors or may become lienors or may have some lien or claims against the Work, Contractor, or Owner.

     3. On February 12, 1997, Felix personally entered into a charge account agreement with plaintiff Adams Brothers Corporation ("Adams Brothers") under which Felix agreed to pay for goods and services purchased within 30 days of the date of the invoice. The agreement provides for interest at the "maximum rate allowed by law." Adams Brothers charged interest at the rate of one percent a month. Felix did not object to the rate of interest charged, and paid invoices that included interest. The charge account agreement provides for attorney’s fees in the event that action is necessary to recover the amounts owed under the agreement.

     4. On February 18, 1997, Felix entered into a credit agreement with plaintiff Yvette Etscheit Adams d/b/a Pohnpei Ace Hardware ("Ace Hardware") under which Felix agreed to pay for goods purchased on a monthly basis. The statement of account was to be issued monthly, with payment due by the fifteen of the following month. The credit application shows Island Homes Construction Company to be a "proprietorship" owned by Joseph E. Felix. The agreement provides for interest, but the blank provided for the amount is not filled in. Ace Hardware charged interest at one percent per month, compounded monthly. Felix did not object to rate of interest or the interest calculations, and made payments to the plaintiffs that included interest. The agreement also provides for attorney’s fees in the event that the amounts due are not paid.

     5. Felix took delivery of, and the plaintiffs invoiced him for, goods and services to be used in the Panasang project. The invoices included interest. The total outstanding for those goods and services for the Panasang project is $34,317.77. Interest as of October 31, 2003, was $35,241.25, for a total of $69,559.02.

     6. Under the February 12, 1997 and February 18, 1997 credit agreements, Felix received, and the plaintiffs invoiced him for, goods and services that he used in the Enipein Elementary School project. The total outstanding amount, together with interest, is $62,436.76.

     7. On October 8, 1997, the plaintiffs and Joe Felix entered into an assignment agreement in

[12 FSM Intrm. 239]

which Felix agreed to assign to the plaintiffs any amounts due him either from the Permans or the loan proceeds for the Panasang project. The funds assigned were to be applied to the amounts that Felix owed the plaintiffs on the Panasang project as of the date of the assignment.

     8. After entering into the credit agreements with the plaintiffs, Joe Felix incorporated his sole proprietorship, known as Island Homes Construction. The incorporated entity was Island Homes Construction, Inc. The business of Island Homes Construction remained essentially unchanged as a result of the incorporation.

II. Conclusions of Law

     1. Felix is personally liable for the amounts incurred under the credit agreements that he had with plaintiffs. On the Panasang project, Felix is liable to the plaintiffs for the sum of $69,559.02 as of October 31, 2003, which includes $34,317.77 in principal and $35,241.25 in interest. Of this amount, $43,334.53 is owed to plaintiff Yvette Etscheit Adams d/b/a as Pohnpei Ace Hardware, and $26,224.49 is owed to Adams Brothers Corporation ($43,334.53 + $26,224.49 = $69,559.02). He is also liable to the plaintiffs for attorney’s fees. On the Enipein Elementary School project Felix is liable to the plaintiffs for the sum of $62,436.76 as of October 31, 2003, which includes principal and interest. He is also liable for attorney’s fees. Felix agreed to pay the specific interest rate charged by the plaintiffs by making payments that included interest, and by not objecting to the interest charged.

     2. Joe Felix and Island Homes Construction, Inc., are jointly and severally liable for the amounts that Felix owes the plaintiffs.

     3. The court had previously imposed liability against the Bank as a sanction for its willful, bad faith refusal to produce the loan agreement as part of the discovery in this case. The language of paragraph 13 of the July 16, 1996, loan agreement as a matter of law evidences the parties’ intent to benefit the plaintiffs as third-party beneficiaries of that agreement. The Bank is the "promisor" under paragraph 13, of the loan agreement, and as such is liable to the plaintiffs for their damages on the Panasang project in the sum of $69,599.02, plus the plaintiffs’ attorney’s fees incurred in pursuing their claims against Felix and Island Homes Construction, Inc.

     4. Although the Permans are parties to the July 16, 1996, loan agreement, they are not "promisors" with regard to the Bank’s specific promise to insure that no loan disbursements would be made until the Bank had received proof of the payment of the suppliers. Therefore, the Permans are not liable to the plaintiffs on their third-party beneficiary claim, and the plaintiffs’ claim against the Permans is dismissed with prejudice.

     5. The plaintiffs are not third-party beneficiaries of the January 10, 1997 construction agreement between the Permans and Joe Felix because, unlike the loan agreement, the construction agreement does not show the parties’ intent to make the plaintiffs the third-party beneficiaries of the construction agreement.

     6. Although the October 8, 1997 assignment agreement between the plaintiffs and Felix referred to amounts owed to the plaintiffs under the February 12, 1997 and February 18, 1997 credit agreements, the assignment did not alter the terms of those two agreements. Plaintiffs may recover in this case all amounts owed under the terms of those two agreements.

     7. The liability of the Bank, Felix, and Island Homes Construction, Inc., is joint and several.

[12 FSM Intrm. 239]

III. Discussion

A. The joint and several liability of Felix and Island Homes Construction, Inc.

     The relationship between Felix’s sole proprietorship Island Homes Construction and Island Homes Construction, Inc., presents a situation where "the corporation and its predecessor [sole proprietorship] are identical as a practical matter." Irby v. Davis, 311 F. Supp. 577, 583 (E.D. Ark. 1970) (holding that the "ultimate question is one of continuity" where it was undisputed that the defendant’s business remained "essentially unchanged as a result of incorporation." Here, the essential business of Island Homes Construction remained unchanged as a result of its incorporation. In such a case, both the predecessor sole proprietorship and the successor corporation are jointly and severally liable for the debt of the sole proprietorship. Id. Accordingly, Felix and Island Homes Construction, Inc., are jointly and severally liable for the amounts that Felix incurred while he was doing business as Island Homes Construction.

B. The plaintiffs’ third-party beneficiary claims

     A third person may enforce a contract for his own benefit where he is a stranger to the contract if the contract shows the parties intended to benefit the third person. Mailo v. Penta Ocean Inc., 8 FSM Intrm. 139, 141 (Chk. 1997). The question of the parties’ intent is generally one of construction of the contract, and this intention is determined by the contract terms as a whole, construed in light of the circumstances of the contract’s making and the parties’ purpose. Id. When a third-party beneficiary can be ascertained from the contract, he need not be named therein. Id.

     The plaintiffs brought third-party beneficiary claims against the Bank and the Permans based on paragraph 13 of the July 16, 1996, loan agreement between the Bank and the Permans. They also brought third-party beneficiary claims against the Permans, Felix, and Island Home Construction based on the January 10, 1997 construction agreement between the Permans and Felix.

1. The loan agreement third-party claims

     The court had previously imposed liability against the Bank on the plaintiffs’ third-party beneficiary claim under the loan agreement as a result of the Bank’s willful, bad faith failure to disclose that agreement through discovery. However, a discussion of the Bank’s substantive liability is appropriate here because plaintiffs have also brought a third-party claim against the Permans under the same provision of the loan agreement upon which liability against the Bank was based.

One commentator notes as follows:

A claimant may enforce the loan contract and require payment by the lender if he can prove that he was a third-party beneficiary of the loan contract. He must, however, sustain the essential elements of a third party beneficiary claim. There must be a legally enforceable contract, and the parties must have intended that the third party be benefited by performance of the contract.

Construction and Design Law § 9.6a.2, at 12-13 (National Institute of Construction Law, Inc. ed. 1999). Paragraph 13 of the loan agreement between the Permans and the Bank provides as follows: "Unless otherwise provided, loan release shall be on a drawdown basis, supported by invoice, subject to verification and evaluation of assets to be acquired/constructed and submission of evidence that all labor and materials have been paid for." (emphasis added) (footnote omitted). The word "shall" renders the indicated procedures mandatory. The Bank, as the lender, was in charge of the

[12 FSM Intrm. 240]

disbursement of the loan proceeds. The purpose of the loan was for the construction of the Panasang project. The language further provides that no loan proceeds would be disbursed until the Bank received "submission of evidence that all labor and materials have been paid for." Thus the Bank assumed the duty under the agreement not to disburse loan proceeds until it had received verification that the suppliers had been paid. If the Bank had met its commitment in this regard, it would have been impossible for the project to be completed without the plaintiffs, who were suppliers, being fully paid. Hence as a matter of law this language means that the plaintiffs were intended third-party beneficiaries of the loan agreement. In such a case, the third-party may enforce the contract against the promisor. Mailo, 8 FSM Intrm. at 142. The Bank made the promise not to disburse loan proceeds until it had received confirmation that the suppliers, i.e., the plaintiffs, had been paid. Accordingly, the promise is enforceable against the Bank.

     In Kreimer v. Second Federal Savings & Loan Ass’n of Pittsburgh, 176 A.2d 132, 132-33 (Pa. Super. Ct. 1961), a supplier was held to be a third-party beneficiary of a construction loan agreement where the agreement provided that the savings and loan association making the loan would pay funds in its possession "directly to those furnishing labor and for materials." In the case at bar, paragraph 13 of the loan agreement did not provide for direct payment to the plaintiffs. The assumption appears to have been that Felix had sufficient working capital or access thereto such that he could pay for the materials obtained from the plaintiffs as the project progressed; that the Bank would confirm the payment; and that the Bank would then disburse loan proceeds to the Permans, who would then make the incremental payments to Felix specified in Schedule C to the construction contract. Irrespective of what the parties’ assumptions may have been, however, the practical net effect of paragraph 13's requirement that the Bank obtain confirmation that the plaintiffs were paid before disbursing loan proceeds is the same as the direct payment requirement in Kreimer. If the savings and loan association in Kreimer, or the Bank in this case, had met its obligation under the loan agreement, then upon completion of the project, the suppliers would have been fully paid. In either case, abiding by the stated terms of the loan agreement equals payment of the suppliers upon project completion. The project here has been completed but the plaintiffs, who are suppliers, have not been paid. Accordingly, the Bank is liable to the plaintiffs. The promise not to disburse the loan proceeds until proof of payment of the suppliers was made by the Bank, not the Permans. It follows that the plaintiffs may enforce the promise against the Bank, but not the Permans. Mailo, 8 FSM Intrm. at 142. At most the Permans under paragraph 13 may have had an unspecified duty to participate in the verification process, but this is an obligation of a different stripe from the Bank’s express, unequivocal, and mandatory obligation not to disburse loan funds until the verification was received. Any promise of the Permans under paragraph 13 is insufficient to render them liable to the plaintiffs as intended third-party beneficiaries.

2. The construction contract third-party claim

     Article 7(b) of the construction contract provides that "all materials furnished for the project shall have clear title and be free from defects." Article 7(d) provides that the contractor’s work "shall be free of any and all liens, claims, demands and encumbrances whatsoever." Article 13 provides that

no final payment shall become due until Contractor delivers to Owner a complete release, in form satisfactory to Owner, of all claims or liens arising out of this contract, executed by all parties who, in the Owner’s opinion, are lienors or may become lienors or may have some lien or claims against the Work, Contractor, or Owner.

The foregoing language is materially different from that of the loan agreement. The phrases "all materials furnished for the project shall have clear title and be free from defects" and "shall be free of any and all liens, claims, demands and encumbrances whatsoever" warrants the quality of the work to be provided. Neither specifies the suppliers, as does the loan agreement, and neither imparts ) unlike

[12 FSM Intrm. 241]

the loan agreement ) an express duty to insure payment of the suppliers. Nor does article 13 of the construction contract create such a duty. It states a precondition that needs to occur before payment to the contractor is due, and requires the contractor to provide lien or claim releases. However, a lien or claim release extinguishes the claim or lien, and in this regard benefits the owner, not the lienor or claimant. Although a lien or claim release would generally presuppose the compromise, in some fashion, of the lien or claim, the contract language does not require either the Permans or Felix to undertake this. This is a material consideration in determining whether the parties intended the suppliers to be third-party beneficiaries. (The court need not decide whether the suppliers were incidental beneficiaries within the meaning of the Restatement (Second) Contracts § 302(2) (1981).) The absence of any express duty in the construction contract to insure the payment of the suppliers leads to the conclusion that as a matter of law the parties to the construction agreement did not intend the plaintiffs to be third-party beneficiaries. In short, the language of the construction agreement, unlike that of the loan agreement, is not specific enough to create third-party beneficiary liability.

C. The plaintiffs’ claim against the Bank based on the September 27, 1997 oral agreement

     As a sanction for the Bank’s willful, bad faith refusal to produce the loan document between the Bank and the Permans through discovery, the court had also previously deemed admitted the allegations of the plaintiffs’ claim that the Bank had agreed orally on September 27, 1997, to pay the plaintiffs directly the amounts owed by Felix in return for the plaintiffs’ promise to continue supplying materials for the Panasang project. That agreement was alleged in the amended complaint (Nov. 19, 2002, ¶ 17), and also in the original complaint (Mar. 24, 2000, ¶ 15). Trial was limited to damages on both the September 27, 1997 agreement, and the plaintiffs’ third-party beneficiary claim.

     The Bank urges in its written closing argument in some detail at 5-8 that the September 27, 1997 agreement did not create the reasonable expectation on the part of the plaintiffs that the Bank would pay for the materials in full. But this is to argue liability. Again, the Bank is precluded from contesting its liability on the oral agreement as a result of its willful, bad faith discovery misconduct. Further, the plaintiffs’ damages are also fully awardable under the plaintiffs’ third-party beneficiary claim quite apart from any liability under the September 27, 1997 agreement. Accordingly, the Bank’s contention that it is not liable under the September 27, 1997 agreement is wholly lacking in merit.

D. The plaintiffs’ damages against the Bank

     As a result of the failure of the Bank to insure that plaintiffs were paid before the Bank disbursed loan proceeds, and also as a result of the Bank’s failure to pay the plaintiffs directly under the September 27, 1997 oral agreement as alleged, the plaintiffs incurred damages in the amount of goods sold to Felix, plus interest and attorney’s fees under the agreements that they had with Felix. The Bank contends that it is not responsible for interest because the loan agreement does not mention interest. This contention misapprehends the nature and extent of the plaintiffs’ damages that flow directly from the Bank’s failure to insure payment under paragraph 13 of the loan agreement, and to meet its commitment under the September 27, 1997 agreement as alleged. In addition to not receiving payment for the goods supplied to Felix, the plaintiffs also sustained damages in the form of interest and attorney’s fees in their attempts to obtain payment from Felix. Thus, both the interest and the attorney’s fees incurred in pursuing Felix are recoverable as part of the plaintiffs’ damages against the Bank.

     The Bank takes issue with the amount of the plaintiffs’ damages by citing to a letter from plaintiffs’ counsel and also to discovery responses in which the amount sought was stated as slightly more than the amount actually proven at trial. Both of these figures were from an evidentiary standpoint conclusory in nature. Neither was established by an evidentiary foundation consisting of

[12 FSM Intrm. 242]

the invoices upon which the claim was based. At trial the invoices were offered and received into evidence. The invoices thus established by a preponderance of the evidence the amount of plaintiffs’ damages.

E. Additional issues

     Felix urges in his written closing argument that the amounts stated in the October 8, 1997 assignment agreement serves as a cap on the amount that plaintiffs may recover in this lawsuit. The agreement at ¶ 1 applies to the "full amount of the open accounts set forth above." However, nothing about this language leads to the conclusion that Felix would not be liable under the February 12, 1997 and February 18, 1997 credit agreements for any goods and services he purchased from the plaintiffs after the date of the assignment. The court rejects this contention.

     The Bank urges that it was hampered at trial by the court’s pretrial orders. As previously noted, this resulted from the sanction imposed as a result of the Bank’s willful, bad faith refusal to produce a document during discovery that provides for the Bank’s liability to the plaintiffs as a matter of law. Thus the Bank’s contention that it was limited in its trial presentation is not persuasive.

     The Bank also asserts that the court’s pretrial order prevented it from adequately defending on the question of damages because it limited the witnesses that the Bank was entitled to call on that issue. It urges that it could have called additional witnesses to testify on this point, although it does not indicate specifically either whom it would have called or what the subject of testimony would have been. The court relied specifically on the testimony summaries set out in the Bank’s pretrial statement in determining what witnesses it could call on damages. All witnesses specified in the pretrial statement whose testimony summaries indicated that they had testimony to offer relevant to the question of damages were permitted to testify. Further, the Bank did not object before trial to the court’s limitation of its damages witnesses, and thus waived any objection in this regard.

     The Bank claims it was limited in its defense by not being able to call Yvette Etscheit Adams as a witness. As the court has ruled previously, the Bank waived its right to call her as a witness.

The Bank asserts that at the time the facts necessary to establish the plaintiffs’ third-party beneficiary claim were deemed admitted, the plaintiffs had not yet made a third-party beneficiary claim against the Bank. Again, this is to lose sight of the fact that the court permitted the filing of the amended complaint containing the third-party beneficiary claim and also deemed admitted the facts necessary to establish that claim only after the loan agreement containing paragraph 13 was disclosed by court order, and the Bank’s willful, bad faith conduct in attempting to prevent disclosure of the loan agreement came to light. The Bank cannot now complain that there was no third-party beneficiary claim pending at the time the relevant facts were deemed admitted when that state of affairs stemmed from its own willful, bad faith attempts to evade disclosure of the loan document.

     The Bank asks that the plaintiffs’ reply to the Bank’s written closing argument be stricken. The plaintiffs have the burden of proof, and therefore may have the last word. The motion is denied.

     Any other contentions or issues raised in the parties’ written closing arguments that are not specifically addressed herein are either moot in light of these findings of fact and conclusions of law, or are without merit.

     Plaintiffs may submit a request for attorney’s fees consistent with this order no later than 30 days from the date of the entry of judgment which issues herewith. The attorney’s fees incurred in pursuing Felix are awardable against the Bank as part of the plaintiffs’ damages flowing from the Bank’s

[12 FSM Intrm. 243]

breach of the loan agreement. Whether or not plaintiffs may recover their attorney’s fees incurred in litigating against the Bank directly presents a different question. In the event that the plaintiffs seek such fees from the Bank, they should address this question.

     Any party against whom the plaintiffs seek fees will respond to the plaintiffs’ request no later than 10 days after the plaintiffs file their fee request.

     The plaintiffs are awarded their costs. Application for costs will be made along with the plaintiffs’ request for an award of attorney’s fees.

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