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COURT'S OPINION

ANDON L. AMARAICH, Chief Justice:

     This case comes before the Court on plaintiff E.M. Chen & Associates (FSM), Inc.'s ("E.M. Chen") Motion for Summary Judgment, and defendant Pohnpei Port Authority's ("PPA") Cross-motion for Summary Judgment. Upon consideration of the parties' filings, plaintiff's motion for summary judgment is granted, and defendant's cross-motion for summary judgment is denied as set forth below. Accordingly, judgment shall be entered in favor of plaintiff in this case.

I. Background

     On October 13, 2000, the Court granted PPA's motion to dismiss plaintiff's complaint based

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upon the statute of limitations having run, and gave plaintiff ten (10) days to file an amended complaint. [E.M. Chen & Assocs. v. Pohnpei Port Auth., 9 FSM Intrm. 551 (Pon. 2000).] On October 23, 2000, plaintiff filed its First Amended Complaint, alleging as its only cause of action that PPA breached an agreement to arbitrate all disputes arising under a written contract between the parties. As set forth in the October 13, 2000 Order, any court action on the written contract (and on associated quasi-contract theories) is time barred; however, plaintiff asserts that it timely demanded arbitration under the terms of the written contract, and accordingly seeks the Court to compel arbitration.

     On January 3, 2001, plaintiff filed a Motion for Summary Judgment on its action to enforce the arbitration agreement in the written contract. PPA filed its Opposition to Motion for Summary Judgment and Cross-Motion for Summary Judgment on January 8, 2001. Plaintiff filed an Opposition to Cross-Motion for Summary Judgment and Reply on January 30, 2001.

     In its Amended Complaint, plaintiff alleges that defendant breached an arbitration agreement contained in a written contract that the parties entered into on April 28, 1994 (the "Contract"). According to plaintiff, this contract called for plaintiff to render certain services (as set froth in Exhibit A to plaintiff's Amended Complaint), which related primarily to the creation of a Master Plan for the Pohnpei airport and port area. Plaintiff alleges that, in exchange for performing this service, defendant was to pay plaintiff $75,000, plus compensation for time and expenses incurred in performing the services in question. Plaintiff alleges that the Master Plan was completed on September 16, 1994, and accepted by the PPA Board on October 3, 1994.

     Plaintiff states that on October 3, 1994, it requested payment in the amount of $624,176.78 for the services it had rendered. Plaintiff alleges that PPA made a partial payment in the amount of $100,000 on December 23, 1994, and that PPA thereafter refused to make any further payments. Plaintiff alleges that it demanded by letter dated March 18, 1997, that PPA submit the claim to arbitration pursuant to Section 8 of the Contract.

     PPA admits most of the material allegations in the Amended Complaint related to the arbitration agreement. The parties agree that the Contract sets forth the agreement between the parties, and that plaintiff demanded arbitration in its letter dated March 17, 1997. PPA denies that it owes the amount plaintiff claims under the terms of the contract, and denies that PPA wrongfully refused to submit to arbitration. Additionally, PPA raises three affirmative defenses: (1) that the demand for arbitration was made after the date when institution of legal or equitable proceedings would have been barred by the applicable statute of limitations, and thus falls outside of the scope of the arbitration agreement in Section 8.2 of the Contract; (2) plaintiff waived arbitration by filing a lawsuit to recover under the Contract; and (3) the arbitration agreement is unenforceable because there is no statutory basis in the FSM under which plaintiff is entitled to request that the Court compel arbitration.

II. Motion for Summary Judgment

     Plaintiff seeks summary judgment on its claim to compel arbitration under the terms of the Contract. In support of its Motion for Summary Judgment, plaintiff submits (1) a copy of the Contract; and (2) the Affidavit of Bill Mann, counsel for E.M. Chen, authenticating letters exchanged between the parties regarding arbitration of disputes under the Contract.

                    Section 8 of the Contract states in its entirety:

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                   one arbitrator and the third shall be chosen by the two chosen by the parties.

     Exhibit 1 to the Affidavit of Bill Mann is a letter dated March 18, 1997, from Bill Mann to Ron Moroni, then counsel for PPA. That letter states in paragraph 2: "Accordingly, pursuant to §8 of the Contract between the parties dated April 28, 1994, demand is hereby made for arbitration."

     As stated above, PPA admits that the Contract sets forth the arbitration agreement between the parties, and that this March 18, 1997 letter constitutes a written demand for arbitration.

III. PPA's Opposition and Cross-Motion for Summary Judgment

     In its January 8, 2001 Opposition to plaintiff's Motion for Summary Judgment, PPA first argues that the two year statute of limitations contained in the Pohnpei Limited Government Liability Act ("PGLA"), which this Court found applicable to PPA in its October 13, 2000 Order, had already run on March 18, 1997. Accordingly, PPA argues that the demand for arbitration was untimely and unenforceable under the terms of the parties' agreement to arbitrate, specifically Section 8.2 of the Contract.

     Next, PPA asserts that plaintiff waived arbitration by filing its complaint (which was dismissed by this Court's October 13, 2000 Order) for damages under the Contract and under quasi-contract theories of recovery. In support of its theory of waiver, PPA submits a letter dated September 8, 1997 from plaintiff's counsel to PPA's counsel. In that letter, plaintiff's counsel stated that:

Aff. of Douglas Parkinson (Jan. 8, 2001) Ex. 1. The record reflects that plaintiff thereafter filed its Complaint on November 17, 1997. According to PPA, this letter, along with the subsequent action of filing the Complaint, demonstrates plaintiff's waiver of the arbitration agreement.

     PPA's third basis for opposing summary judgment, and seeking summary judgment in favor of PPA, is that there is no statutory or other basis for the Court to enforce the arbitration agreement. PPA argues that, because there is no judicial-arbitration statute or regulation in the FSM, any arbitration, by default, must be common-law arbitration. PPA asserts that, at common law, arbitration is a voluntary act of the parties, and agreements to arbitrate are revocable by either party at any time before an

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arbitration award has been made. Accordingly, PPA argues, the Court does not have the authority to compel what is a voluntary act; it cannot order specific performance of contracts to voluntarily arbitrate.

     In opposition to PPA's Cross-Motion for Summary Judgment, plaintiff argues (1) that under the PGLA, the two year statute of limitations did not begin to run until October 2, 1995, and that the demand for arbitration on March 17, 1997 was within the statute of limitations and within the terms of Section 8.2 of the Contract; (2) arbitration was not waived, because the parties did not reach an express agreement to waive arbitration, and relevant case law requires that filing of a lawsuit constitutes a waiver of arbitration by a party only if that party "substantially invokes the litigation machinery" and the other party is prejudiced as a result; and, (3) that the arbitration agreement is enforceable, even in the absence of legislation, because the prevailing view of the common law no longer precludes the enforceability of arbitration agreements.

IV. Analysis

A. Standard for Summary Judgment

     Under FSM Civil Rule 56, a motion for summary judgment shall be granted: "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FSM Civ. R. 56(c); Kyowa Shipping Co. v. Wade, 7 FSM Intrm. 93, 95 (Pon. 1995). A moving party is entitled to summary judgment when it has demonstrated that there are no genuine issues of material fact remaining, and that it is entitled to judgment as a matter of law. See FSM Civ. R. 56(c); Kihara Real Estate, Inc. v. Estate of Nanpei, 6 FSM Intrm. 48, 52 (Pon. 1993); Alik v. Kosrae Hotel Corp., 5 FSM Intrm. 294, 295 (Kos. 1992).

     Once the moving party has presented a prima facie case of entitlement to summary judgment, the burden shifts to the non-moving party to produce evidence showing a genuine issue of material fact. Alik, 5 FSM Intrm. at 295; Urban v. Salvador, 7 FSM Intrm. 29, 31 (Pon. 1995); Kyowa Shipping Co., 7 FSM Intrm. at 95; FSM v. Ponape Builders Constr., Inc., 2 FSM Intrm. 48, 52 (Pon. 1985). The non-moving party may not rely on unsubstantiated denials of liability to carry its burden; it must present some competent evidence that would be admissible at trial which demonstrates that there is a genuine issue of fact. Urban, 7 FSM Intrm. at 31; Federated Shipping Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3, 16 (Pon. 1989). The non-moving party must show that there is enough evidence supporting its position to justify a decision upholding his claim by a reasonable trier of fact. Federated Shipping Co., 4 FSM Intrm. at 16; Alik, 5 FSM Intrm. at 296. In considering a motion for summary judgment, the facts and the inferences to be drawn from those facts must be viewed by the Court in the light most favorable to the party opposing the motion. Alik, 5 FSM Intrm. at 295.

B. Statute of Limitations

     PPA and E.M. Chen agree that they entered into a Contract for E.M. Chen to perform certain services, and that plaintiff has not been paid the full amount that it believed it was entitled to receive under the terms of that Contract. The first issue is whether the demand for arbitration was served within the statute of limitations for suit upon the Contract, as required by the arbitration agreement contained in Section 8.2 of the Contract.

     It is clear that plaintiff's claim for payment arose, for purposes of determining when the statute of limitations ran, at the time that the payment became due. See E.M. Chen & Assocs. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 556-57 (Pon. 2000) (citing Mid-Pacific Constr. Co. v. Semes (I), 6 FSM

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Intrm. 171, 176 (Pon. 1993) (a cause of action arises when the right to bring suit on a claim is complete: the true test in determining when a claim arose is based upon when the plaintiff first could have maintained the action)). In its October 13, 2000 Order, the Court found that the statute of limitations ran, at the latest, on October 4, 1997. However, that Order was a ruling on PPA's Motion to Dismiss, and assumed that all of the allegations in plaintiff's Complaint were true. Significantly, the Court accepted plaintiff's assertion that payment under the Contract was due within twelve months from the date on which the Master Plan was accepted by the PPA Board. Plaintiff incorporates the same allegations regarding when payment under the Contract became due into its Amended Complaint. However, PPA denies that payment was due within twelve months under the terms of the Contract. Section 3.3.1 of the Contract states that:

     The parties do not dispute that the Master Plan was accepted by the PPA Board on October 3, 1994. PPA asserts that, because it did not notify plaintiff in writing within 30 days that it would exercise its option to make payment within twelve months, plaintiff's cause of action arose 30 days after PPA accepted the Master Plan, or on November 2, 1994. Thus, PPA argues, the statute of limitations on plaintiff's contract claim ran two years later on November 2, 1996, and the demand for arbitration on March 17, 1997 was untimely.

     Plaintiff argues that it is clear that PPA exercised the deferred payment option under the Contract. In support of this argument, plaintiff provides a series of correspondence between E.M. Chen and PPA which plaintiff alleges demonstrates PPA's exercise of the deferred payment option, and PPA's awareness that plaintiff was entitled to collect interest on the sum owed by PPA due to PPA's decision to exercise the deferred payment option.

     The Court agrees with plaintiff, that the uncontroverted evidence establishes that PPA exercised the option to pay within twelve months. On September 21, 1994, the President of E.M. Chen wrote to PPA requesting assurances from PPA that they would pay for the Master Plan, and requesting PPA to elect one of the agreed payment schedules set forth in the Contract. On September 28, 1994, the Chairman of PPA responded that "[w]e are not able at this time to make a firm commitment that we will be able to pay your billings but we can assure you that we have instructed our staff to identify sources of funds that may be utilized. . . ." On September 30, 1994, the President of E.M. Chen again wrote to PPA, and stated that: "[w]e understand that [PPA] is still yet going to look for sources of funds. We also understand that [PPA] may choose to pay us within 12 months. . . ."

     Significantly, the Chairman of the Board of PPA agreed that PPA would continue to look for funding sources, and that it might choose to pay E.M. Chen within 12 months. The September 30, 1994 letter from E.M. Chen to PPA bears the signature and endorsement of the Chairman of the Board of Directors of PPA, Bismarck A. Wielbacher, dated October 3, 1994. The Court finds that the concurrence by PPA to the statements made in E.M. Chen's letter of September 30, 1994 is a sufficient written election of the deferred payment option. Also, subsequent correspondence reveals that the parties renegotiated the terms of payment for the elected twelve month period. This subsequent correspondence clearly presumes on the part of both parties that PPA had elected the deferred payment option in the Contract. See Exs. 4, 5 to Pl. Opp'n (Jan. 30, 2001).

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     Accordingly, payment became due on October 4, 1995, and the statute of limitations ran on October 4, 1997. Thus, E.M. Chen's March 1997 letter demanding arbitration was within the statute of limitations for the action on the Contract, and the demand for arbitration was in accordance with Section 8.2 of the Contract.

C. Waiver of Arbitration

     PPA also asserts that plaintiff waived its right to enforce the arbitration agreement between the parties by filing its original Complaint in this matter. According to PPA, a series of correspondence between the parties makes it clear that plaintiff intended to waive arbitration when it filed its Complaint. In support of this argument, PPA refers to (1) plaintiff's March 18, 1997 letter demanding arbitration; (2) a June 9, 1997 reply from PPA; (3) a June 10, 1997 letter from plaintiff to PPA; and, finally, (4) a September 8, 1997 letter from plaintiff to PPA's counsel.

     The correspondence reveals that plaintiff submitted its demand for arbitration, and that PPA's counsel then submitted the arbitration demand to the PPA Board of Directors. See Letters from E.M. Chen to PPA (Mar. 18, 1997) and from PPA to E.M. Chen (June 9, 1997). Upon hearing that the demand had been submitted to the PPA Board of Directors, plaintiff stated to PPA its position that the Contract required arbitration and that the PPA Board could not decide not to arbitrate. See Letter from E.M. Chen to PPA (June 10, 1997).

     PPA also relies on a letter that plaintiff's previous counsel, Ron Moroni, Esq., sent to PPA on September 8, 1997. The last paragraph states:

     According to PPA, the fact that plaintiff made this statement, and subsequently filed suit in the FSM Supreme Court without seeking to compel arbitration, constitutes a waiver of arbitration by plaintiff. The Court does not agree.

     An agreement to waive a contractual provision is itself a contract. The same offer and acceptance are required. While it appears that, at different times both parties may have been amenable to waiving arbitration, the uncontroverted evidence is that PPA never responded to the statement in plaintiff's letter proposing that the parties waive arbitration. Thus, this offer by plaintiff to waive arbitration was never accepted by PPA. No binding agreement to waive arbitration was ever entered into by the parties.

      PPA also argues that E.M. Chen waived arbitration by filing its lawsuit alleging breach of contract and other quasi-contract claims against PPA, without seeking to compel arbitration. Plaintiff, in response, submits relevant case law which requires that filing of a lawsuit constitutes a waiver of arbitration by a party only if that party "substantially invokes the litigation machinery" and the other party is prejudiced as a result. The Court agrees that this is the relevant inquiry in determining whether judicial action by a party should result in a finding that that party waived arbitration.

     In this case, plaintiff did not substantially invoke the litigation machinery, and there was no prejudice to defendant related to the filing of this case in Court. The record in this case demonstrates that plaintiff's initial Complaint, which did not seek any order compelling arbitration, was ordered

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dismissed for failure to comply with the statute of limitations for contract actions. PPA never answered the Complaint, but merely filed a motion to dismiss. Significantly, the Court never addressed any of the substantive issues raised in the Complaint. Thus, compelling arbitration in this matter will not subject either party to duplicative litigation of the issues in dispute in this case. Rather, compelling arbitration in this matter is equitable, because to hold otherwise would deny plaintiff the opportunity to recover any amount under the contract, when PPA clearly had notice of the dispute, and its obligation to arbitrate the dispute, within the statute of limitations. No prejudice to PPA can be demonstrated, when it has not ever been required to litigate the substance of its dispute with plaintiff. Accordingly, the Court finds that plaintiff did not waive its right to arbitrate disputes under the contract merely by filing this action

D. Common Law Arbitration

     PPA's third basis for opposing summary judgment, and seeking summary judgment in favor of PPA, is that there is no statutory or other basis for the Court to enforce the arbitration agreement. PPA argues that, because there is no judicial-arbitration statute or regulation in the FSM, any arbitration, by default, must be common law arbitration. PPA asserts that, at common law, arbitration is a voluntary act of the parties, and agreements to arbitrate are revocable by either party at any time before an arbitration award has been made. Accordingly, PPA argues, the Court does not have the authority to compel what is a voluntary act; it cannot order specific performance of contracts to voluntarily arbitrate.

     Plaintiff responds that the arbitration agreement is enforceable, even in the absence of legislation, because the prevailing view of the common law no longer precludes the enforceability of arbitration agreements.

     The Court agrees with plaintiff. The prevailing modern view of arbitration, even in the absence of a statute, is that arbitration is generally favored by the courts, and every reasonable presumption will be indulged to uphold arbitration proceedings. See, e.g., Wetzel v. Sullivan, King & Sabom, P.C., 745 S.W.2d 78, 80 (Tex. Ct. App. 1988). Agreements to arbitrate need not even be in any particular form, as long as the parties have agreed to do so by clear language, and it appears that the intent of the parties was to submit their dispute to arbitrators and be bound by the arbitrators' decision.

     In this case, the parties entered into a written agreement which states that: "[c]laims, disputes, or other matters in question between the parties to this Agreement arising out of or related to this Agreement or breach thereof shall be subject to and decided by arbitration." Contract § 8.1 (emphasis added). It was the clear intention of the parties to both submit any disputes to arbitration, and be bound by the decision of the arbitrators.

     This Court also has the authority to compel arbitration by the parties. It generally is held that an agreement to arbitrate future contractual disputes is specifically enforceable, even if one party attempts to revoke the agreement. Requiring parties to resolve their disputes outside of court does not in any way replace the role of the judiciary in resolving disputes; rather, it complements judicial proceedings by allowing the parties to freely contract to resolve their disputes in other forums, with the confidence that such agreements will be enforced by the Court. When, as here, the clear language of a contract evidences the intent of the parties to submit disputes to arbitration, the Court will hold them to their agreement and specifically enforce the arbitration provisions in the contract.

     The FSM Constitution requires that our Court decisions be consistent with Micronesian customs and traditions. The Court finds that non-judicial settlement of disputes is entirely consistent with Micronesian customs and traditions, whether it be by arbitration or some other form of alternative

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dispute resolution. The time and expense of judicial proceedings can make them prohibitive for some people. The less confrontational atmosphere of non-judicial proceedings may be attractive to parties for many reasons.

      Also, beyond customary considerations, international commercial disputes may best be resolved by private individuals, selected by the parties, who are knowledgeable in the trade and industry in which the commercial enterprises operate.

     All of these factors dictate that this Court adopt the modern view of common law of arbitration and specifically enforce the parties' contract to arbitrate.

V. Conclusion

     For the reasons set forth above, the plaintiff's Motion for Summary Judgment is hereby granted. The defendant's Cross-Motion for Summary Judgment is hereby denied. It is hereby ordered that judgment be entered in favor of plaintiff and against defendant in this case.

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