Cite as Island Homes Constr. Corp. v. Falcam,11 FSM Intrm. 414 (Pon. 2003)

[11 FSM Intrm. 414]

CIVIL ACTION NO. 2001-015

Submitted: January 23, 2003
Decided: March 14, 2003

APPEARANCES:

HEADNOTES

Contracts – Damages

Generally, damages for breach by either party to a contract may be liquidated in the agreement, but only in an amount that is reasonable in light of the anticipated or actual loss caused by the breach and of the difficulties of proof of loss. A term fixing unreasonably large liquidated damages may be

[11 FSM Intrm. 415]

unenforceable on grounds of public policy as a penalty. Island Homes Constr. Corp. v. Falcam, 11 FSM Intrm. 414, 416 (Pon. 2003).

Civil Procedure – Summary Judgment

A partial summary judgment motion will be denied when it does not address the non-movant's affirmative defenses, when there are issues of fact related to the movants' entitlement to recover, and when the movants have not established as a matter of law that the non-movants' affirmative defenses will not be successful. Island Homes Constr. Corp. v. Falcam, 11 FSM Intrm. 414, 416 (Pon. 2003).

COURT'S OPINION

ANDON L. AMARAICH, Chief Justice:

This matter came before the Court on defendants Leo and Iris Falcam's ("Falcams") motion for partial summary judgment against plaintiff. Mr. Saloman Saimon, counsel for plaintiff Island Homes Construction Corp., Inc. ("Island Homes"), and Andrea Hillyer, Esq., counsel for the Falcams, both waived argument on the motion at a status conference held on January 23, 2003, and submitted it to the Court for decision based on the parties' written submissions.

I. Background

Island Homes filed a complaint against the Falcams on April 20, 2001, claiming that the Falcams breached a construction contract with Island Homes. Specifically, Island Homes claims that the Falcams orally requested that certain changes be made to a contract for construction of their residence in Awak, U, and that they never paid for these changes. Island Homes also asserts a claim against the Falcams based on the theory of quantum meruit.

The Falcams answered the complaint on August 31, 2001, and counterclaimed against Island Homes for breach of contract. Relevant to the instant motion is that the Falcams claim that Island Homes did not timely complete construction of their residence, and thus Island Homes is liable to them for liquidated damages, to be calculated by formula set forth in the parties' written contract. On September 14, 2001, Island Homes filed an answer to defendants' counterclaim, and filed a third-party complaint against Pohnpei Transportation Authority ("PTA") for breach of contract. In its answer to defendants' counterclaim regarding liquidated damages, plaintiff asserts (1) the defense of impossibility, (2) that an "act of God" was responsible for delay in its performance of the contract, (3) that there was a failure of a condition precedent, which excused Island Homes' untimely performance, and (4) that PTA was a subcontractor of plaintiff who caused delay in the contract with defendants.

II. Defendants' Motion for Partial Summary Judgment

Currently before the Court is defendants' motion for partial summary judgment against Island Homes, filed on January 23, 2003. Island Homes filed an opposition to that motion on February 21, 2003.

The Falcams seek a ruling on their counter-claim against Island Homes that they are entitled to receive $23,400 in liquidated damages from Island Homes because of a 234 day delay in completion of the contract for construction of their residence, pursuant to the following paragraph in the contract between Island Homes and the Falcams:

[11 FSM Intrm. 416]

If the Contractor refuses or fails to complete the work within the time specified in paragraph B of this contract, or any extension thereof, the Owner may, with the approval of the Representative, terminate the Contractor's right to proceed. . . . If the Owner does not terminate the Contractor's right to proceed, the Contractor will continue the work, in which event, actual damages for delay will be impossible to determine, and in lieu thereof, the Contractor may be required to pay to the Owner the sum of $100.00 as liquidated damages for each calendar day of delay, and the Contractor will be liable for the amount thereof: Provided, however, That the right of the Contractor to proceed will not be terminated because of delays in completion of the work due to unforeseeable causes beyond the Contractor's control and without Contractor's fault or negligence.

Answer to Counterclaims, Ex. A, at 1, 3 (Aug. 31, 2001) (emphasis added). Paragraph B of the contract states that work was to begin on August 26, 1997, and to be completed by January 26, 1998.

Island Homes asserted the affirmative defenses of "act of God," impossibility, and failure of a condition precedent. Island Homes also has asserted claims against PTA, claiming that PTA is liable to Island Homes for any liquidated damages, because PTA and not Island Homes was the source of the delay.

Generally, damages for breach by either party to a contract may be liquidated in the agreement, but only in an amount that is reasonable in light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages may be unenforceable on grounds of public policy as a penalty. The Falcams do not address Island Homes' affirmative defenses in their motion. The Court finds that there are issues of fact related to the Falcams' entitlement to recover from Island Homes pursuant to the liquidated damages provision in the contract, and that the Falcams have not established as a matter of law that Island Homes' affirmative defenses will not be successful.

Conclusion

The Court finds that there are genuine issues of material fact for trial regarding defendants' claim against plaintiff for breach of contract and liquidated damages. Accordingly, defendants' motion for partial summary judgment against plaintiff is hereby denied. The Court has extended discovery in this case until the end of March, and has scheduled a pre-trial conference for April 22, 2003. The revised scheduling order issued by the Court on January 30, 2003 remains in effect.