KOSRAE STATE COURT TRIAL DIVISION

Cite as George v. Albert, 15 FSM Intrm. 323 (Kos. S. Ct. Tr. 2007)

[15 FSM Intrm. 323]

WEBSTER GEORGE,

Plaintiff,

vs.

JOHNSTON S. ALBERT,

Defendant.

CIVIL ACTION NO. 38-06

MEMORANDUM OF DECISION: JUDGMENT

Aliksa B. Aliksa

Chief Justice

Trial: May 24, 2007

Decided: October 2, 2007

APPEARANCES:

For the Plaintiff:        Snyder H. Simon, Esq.

                                 P.O. Box 1017

                                 Tofol, Kosrae FM 96944
 

For the Defendant:   Canney L. Palsis, Esq.

                                  Micronesian Legal Services Corporation

                                  P.O. Box 38

                                  Tofol, Kosrae FM 96944

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HEADNOTES

Civil Procedure ) Default and Default Judgments

      A motion for entry of default will be denied when there is insufficient proof of service of notice of the complaint. George v. Albert, 15 FSM Intrm. 323, 325 (Kos. S. Ct. Tr. 2007).

Contracts ) Formation

      When the plaintiff exchanged goods with the defendant in exchange for the defendant agreeing to make payments on the account and the defendant indicated her acceptance of this exchange by making payments, their actions created an enforceable contract. George v. Albert, 15 FSM Intrm. 323, 326 (Kos. S. Ct. Tr. 2007).

Contracts; Remedies ) Restitution

      When the court concludes that there was a contract between the plaintiff and the defendant, it will do not address the plaintiff’s alternative claims under unjust enrichment and promissory estoppel. George v. Albert, 15 FSM Intrm. 323, 326 (Kos. S. Ct. Tr. 2007).

[15 FSM Intrm 324]

Civil Procedure ) Default and Default Judgments

      Kosrae Civil Rule 55(b)(2) provides that a party is entitled to at least three days written notice before a hearing on a motion for default. An entry of default will be denied when the plaintiff had six months in which to make the motion but waited until discovery had been completed and it was the day before trial; when both parties had already participated in discovery and were prepared to proceed with trial and had submitted pre-trial briefs and subpoenaed witnesses; and since, 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 hearings as it deems necessary even if a default judgment had been granted, a hearing would have been necessary to determine the amount of damages and that hearing would have produced the same evidence and the same outcome as the trial. George v. Albert, 15 FSM Intrm. 323, 327 (Kos. S. Ct. Tr. 2007).

Evidence ) Burden of Proof

      In a civil case, a plaintiff must prove the allegations by a preponderance of evidence in order to prevail. Preponderance of the evidence is not evidence to a moral certainty or clear and convincing evidence. As a standard of proof, preponderance of the evidence means that the facts asserted by the plaintiff are more probably true than false. But, if the plaintiff’s evidence is less convincing than that offered in opposition, then the defendant’s version of events is the more likely, and the plaintiff fails to meet its burden of proof. George v. Albert, 15 FSM Intrm. 323, 327 (Kos. S. Ct. Tr. 2007).

Evidence ) Burden of Proof

      When the receipts did not support the amount stated in the ledger and claimed by the plaintiff even though the plaintiff’s witness testified that the receipts would support the full amount; when the plaintiff was specifically ordered to produce at trial the original of all receipts, ledgers, and any other documents pertaining to the defendant’s account but failed to submit receipts supporting the amount in the ledger produced and failed to submit the full ledger for the defendant’s account; and when the defendant acknowledged owing some amount and did not dispute the receipts signed by him, the court will award the plaintiff the amounts shown in the receipts and ledger with credit for the defendant’s payments. George v. Albert, 15 FSM Intrm. 323, 327 (Kos. S. Ct. Tr. 2007).

Interest and Usury; Judgments

       A court has the discretion to award pre-judgment interest, but it is not a matter of right unless the debtor knows precisely what he is to pay and when payment is due. The purpose of awarding interest is to compensate the complaining party for losing use of the funds. George v. Albert, 15 FSM Intrm. 323, 328 (Kos. S. Ct. Tr. 2007).

Contracts ) Damages; Interest and Usury

       When the parties have a written agreement stating that interest would be added to the unpaid balance, an award of pre-judgment interest will be upheld. George v. Albert, 15 FSM Intrm. 323, 328 (Kos. S. Ct. Tr. 2007).

Contracts ) Damages; Interest and Usury

      When the defendant agreed to make regular payments but there was no written agreement to pay interest on the defendant’s open account; when the ledger page showing payments contains a 25-cent charge at the time of each payment but this does not correspond to an interest calculation; and when there is no evidence to show interest was discussed or agreed to by the defendant, the plaintiff is not entitled to pre-judgment interest. George v. Albert, 15 FSM Intrm. 323, 328 (Kos. S. Ct. Tr. 2007).

Attorney’s Fees

      When an attorney’s fee award is sought, the retainer agreement is not relevant; it is not even

[15 FSM Intrm 325]

discoverable because there is generally no relationship between the attorney’s fees and the subject matter of a pending action. The retainer agreement will therefore not be considered in deciding an attorney fee request. George v. Albert, 15 FSM Intrm. 323, 328 (Kos. S. Ct. Tr. 2007).

Attorney’s Fees

      Attorneys fees are allowable against the opposing party if a party acts vexatiously, in bad faith, presses frivolous claims, or employs oppressive litigation practices, or when a party’s successful efforts have generated a common fund or extended substantial benefits to a class. George v. Albert, 15 FSM Intrm. 323, 328 (Kos. S. Ct. Tr. 2007).

Attorney’s Fees

      Normally, in the absence of a statute to the contrary, a court will proceed on the assumption that the parties will bear their own attorney’s fees because the usual rule is that each party pays its own attorney’s fees. George v. Albert, 15 FSM Intrm. 323, 328 (Kos. S. Ct. Tr. 2007).

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COURT’S OPINION

ALIKSA B. ALIKSA, Chief Justice:

      Plaintiff first filed a Complaint on April 12, 2006 asking for a judgment against the Defendant in the amount of $5,993.93, plus interest on the judgment, counsel fees and costs. He amended his Complaint on May 23, 2006 to increase the amount to $10, 987.88. Snyder Simon represents Plaintiff. Canney Palsis represents Defendant.

       Plaintiff then moved for entry of default after Defendant failed to Answer. The motion for entry of default was denied because there was insufficient proof of service of notice of the Complaint. The Court also issued an Order establishing deadlines to Answer by October 25, 2006, to complete discovery and for trial. Defendant failed to file an Answer by the deadline and requested permission to file a late Answer on November 17, 2006. On November 23, 2006, this Court denied leave to file a late Answer due to the failure to properly serve Plaintiff. The Court stated that the request to file a Late Answer could be renewed with proper service. If the request was not renewed, Plaintiff could re-file the request for entry of default. The parties proceeded with discovery. Trial was then set for April 26, 2007. Defendant asked for and received an enlargement of time. The matter was again set for trial on May 24, 2007.

       On May 23, 2007, Plaintiff renewed his Motion for Default. Trial was held on May 24, 2007 with testimony from Joani Sigrah, Reickson George, and Defendant, Johnston Albert. After testimony, the Court ordered counsel to submit written argument and supplemental exhibits no later than June 30, 2007 and took the matter under advisement.

       Defendant submitted written argument on June 29, 2007 and questioned the ledger submitted by Plaintiff because it did not show the information that Plaintiff’s bookkeeper, Joani Sigrah, testified was kept on the ledger when she worked for Plaintiff. He also noted that Plaintiff’s other witness, Reickson George, testified other documentary evidence would show the figure requested by Plaintiff.

      On July 6, 2007, based on Defendant’s argument, this Court ordered Plaintiff to produce the documents pertaining to Defendant’s account within five days of service of the Order. Defendant was to inspect the document and submit an affidavit about the amount due, the date of the last payment, and objections, if any to admitting the documents as evidence. Defendant’s affidavit stated that some

[15 FSM Intrm 326]

of the receipts were not signed or acknowledged by Defendant, some were signed by another person, and that the receipts did not match the ledger. He objects to the receipts not properly transacted and that were without signature.

      Plaintiff did not file his written argument until July 7, 2007.

I.  Findings of Fact.

      Plaintiff exchanged goods with Defendant in exchange for Defendant agreeing to make payments on the account. Defendant indicated her acceptance of this exchange by making payments. I find that their actions created an enforceable contract.

      I also find that Defendant stopped making payments and that this failure to make payments constituted a breach of the contract.

      Because I find that there was a contract between Plaintiff and Defendant I do not address the alternative claims under unjust enrichment and promissory estoppel.

      Defendant had an open account with Plaintiff until Plaintiff’s store closed. Defendant acknowledges that he owes Plaintiff some money, but disagrees with the amounts claimed in the various complaints and disagrees with the amount shown on Plaintiff’s ledger, as relied on by Plaintiff’s witnesses.

      Joani A. Sigrah worked as a bookkeeper for Plaintiff and testified about the ledger kept by the business. Purchases were supported by receipts and entered into the ledger. The receipts would show the date, amount, and what was purchased. The ledgers showed the date of transaction, the amounts of payments and purchases and the balance after each entry onto the ledger.

      The ledger submitted into evidence does not show the same information that is shown on the receipts. The beginning balance on the ledger is $5,087.76 as of December 28, 2000. The receipts provided show, at most, an amount due of $1,567.43 with some receipts undated, some receipts unsigned, some receipts initialed by an unidentified person, and the last purchase on January 28, 1998. The amount due shown on receipts signed or initialed by Defendant or his wife total $950.40. There are no receipts for the time between January 28, 1998 and December 28, 2000. The ledger shows payments beginning on January 15, 2001 through April 18, 2002 totaling $850.00 with charges of 25 cents deducted at the time of each payment. The balance after the payments is shown as $4,246.25.

II.  Analysis

Arguments of the Parties

      Plaintiff argues that a contract exists between parties and that Defendant breached that contract by failing to pay for goods received on her open account. In the alternative, he argues that, if there is no contract, then he is entitled to be paid under the legal theories of unjust enrichment or promissory estoppel. Plaintiff requests damages of principal in the amount of $4,246.25, interest in the amount of $6,741.53 calculated at 24% per annum, $5.00 in costs, and $1,684.18 in attorney fees.

      Defendant argues that Plaintiff failed to prove he owes either $10,987.66 or $4,246.25 by a preponderance of evidence. He also argues that there is no basis to calculate pre-judgment interest and no grounds to award attorney fees. He states in his affidavit that he owes the amount shown on the properly transacted receipts, less the payments reflected in the ledger.

[15 FSM Intrm 327]

Motion for Entry of Default

      Plaintiff renewed his motion for entry of default judgment one day before trial, about six months after the previous order denying entry of default. Rule 55(b)(2), Kosrae Rules of Civil Procedure provides that a party is entitled to at least three days written notice before a hearing on such a motion. Plaintiff had six months in which to renew the motion. Instead, he waited until discovery had been completed and it was the day before trial. That Rule also states, in part:

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 or to make an investigation of any other matter, the court may conduct such hearings or order such references as it deems necessary and proper and shall accord a right of trial to the parties when and as required by any law of the State of Kosrae.

      Both parties had already participated in discovery and were prepared to proceed with trial, having submitted pre-trial briefs and subpoenaed witnesses for the trial date. Taking this into consideration along with the lateness of Plaintiff’s motion, an entry of default is denied.

      The Court notes that even if a default judgment had been granted, a hearing would have been necessary to determine the amount of damages. That hearing would have produced the same evidence and the same outcome as the trial.

Burden of Proof

      In a civil case, a Plaintiff must prove the allegations by a preponderance of evidence in order to prevail. See generally Chipen v. Reynold, 9 FSM Intrm. 148, 149 (Chk. S. Ct. Tr. 1999). Preponderance of the evidence is not evidence to a moral certainty or clear and convincing evidence. As a standard of proof, preponderance of the evidence means that the facts asserted by the plaintiff are more probably true than false. But, if the plaintiff’s evidence is less convincing than that offered in opposition, then defendant’s version of events is the more likely, and the plaintiff fails to meet its burden of proof. FSM Telecomm. Corp. v. Worswick, 9 FSM Intrm. 6, 12 (Yap 1999) (referred to as Worswick).

      In Worswick, one of Telecomm’s customers disputed charges to her phone bill. This case presents some similarities. The dispute was about an open account. A number of years had passed since the time the charges were placed on the account, making the testimony of witnesses less reliable. The customer acknowledged that she owed some, but not all, of the amount claimed to be due and owing. In that case, the court noted that an open account is not self-proving; it must be supported by enough evidence to show the accuracy of the account. Worswick, 9 FSM Intrm. at 15. Here, the receipts did not support the amount stated in the ledger and claimed by Plaintiff even though Plaintiff’s witness testified that the receipts would support the full amount. Plaintiff was specifically ordered to produce the original of "all receipts, ledgers, and any other documents pertaining to Defendant’s account." (emphasis added). But, Plaintiff failed to submit receipts supporting the amount in the ledger produced at trial and failed to submit the full ledger for Defendant’s account. However, Defendant acknowledges owing some amount and does not dispute the receipts signed by him. Based on the amounts shown in the receipts and ledger, the Court awards Plaintiff the principal amount of $950.40, with credit for the payments and the unidentified 25-cent charge made at the time of each payment, for a total of $108.90.

[15 FSM Intrm 328]

Pre-judgment Interest

      Plaintiff requests pre-judgment interest in his complaint. The Court has the discretion to award pre-judgment interest, but it is not a matter of right unless the debtor knows precisely what he is to pay and when payment is due. The purpose of awarding interest is to compensate the complaining party for losing use of the funds. Coca-Cola Beverage Co. (Micronesia) v. Edmond, 8 FSM Intrm. 388, 392-93 (Kos. 1998).

      For example, in Kilafwakun v. Kilafwakun, 10 FSM Intrm. 189 (Kos. S. Ct. Tr. 2001), this Court did not award pre-judgment interest. In that case, the plaintiff relied on his brother’s promise to transfer land to him. He purchased materials and began building a house on the land. Before the house was finished, they had a disagreement. The plaintiff never finished the house and sued the brother for the amount spent on materials and beginning construction. The Court ordered defendant to pay plaintiff and held that pre-judgment interest was not appropriate. The reasons were that there was no contract between the parties to pay money and the amount of damages was not based on a contract. 10 FSM Intrm. at 197.

      When the parties have a written agreement stating that interest would be added to the unpaid balance, the FSM Court has upheld an award of pre-judgment interest. Jayko Int’l, Inc. v. VCS Constr. & Supplies, 10 FSM Intrm. 502, 504 (Pon. 2002). In Jayko, the Court held that the written agreement for 18% per annum on an unpaid balance was not usury and was not arbitrary and capricious.

      Here, Defendant agreed to make regular payments, but there was no written agreement on payment of interest on Defendant’s open account. The ledger page showing payments contains a 25-cent charge at the time of each payment, but this does not correspond to an interest calculation and there is no evidence to show interest was discussed or agreed to by Defendant. In addition, the amount due and owing was not clear. Under these circumstances, I hold that Plaintiff is not entitled to pre-judgment interest.

Costs and Attorney fees

      One final issue remains to be addressed. Plaintiff requests attorney fees and costs be awarded based on the retainer agreement between the Plaintiff and his attorney. The retainer agreement is not relevant; it is not even discoverable because there is generally no relationship between the attorney’s fees and the subject matter of a pending action. Mailo v. Twum-Barimah, 3 FSM Intrm. 179, 181 (Pon. 1987). The retainer agreement is therefore not being considered in this decision.

      When a plaintiff prevails, then a post-judgment motion for costs and attorney’s fees may be made. Attorneys fees are allowable against the opposing party if a party acts vexatiously, in bad faith, presses frivolous claims, or employs oppressive litigation practices, or when a party’s successful efforts have generated a common fund or extended substantial benefits to a class. Normally, in the absence of a statute to the contrary, a court will proceed on the assumption that the parties will bear their own attorney’s fees. Coca-Cola Beverage Co. (Micronesia) v. Edmond, 8 FSM Intrm. 388, 392 (Kos. 1998); Semens v. Continental Air Lines, Inc. (II), 2 FSM Intrm. 200, 208 (Pon. 1986). The usual rule is that each party pays its own attorney’s fees. Semens v. Continental Air Lines, Inc. (II), 2 FSM Intrm. 200, 208 (Pon. 1986). See also Bank of Guam v. Nukuto, 6 FSM Intrm. 615, 617 (Chk. 1994).

      Plaintiff’s counsel has repeatedly been advised that this issue is to be raised in a post-judgment motion. These issues will only be considered if Plaintiff makes a post-judgment motion for costs and attorney’s fees.

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III.  Judgment.

      Judgment is entered in favor of the Plaintiff in the amount of $108.90 with post-judgment interest at the statutory rate.

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