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ANDON L. AMARAICH, Chief Justice:
This matter came before the court for trial beginning on January 28, 2003, on plaintiff’s claim that defendants were unjustly enriched from the purchase of outboard motors by plaintiff. The Court also heard defendant Ponape Island Transportation Company’s ("PITC") cross-claim against the other defendants for indemnity, and cross-claim against defendant Billy Jonas for conversion. Plaintiff was represented by Johnny Meippen. Defendant PITC was represented by Stephen Finnen. Defendant Billy Jonas was represented by Scott Garvey of Micronesian Legal Services Corporation. Defendant Lukner Weilbacher was represented by Joseph Phillip.1 At the close of plaintiff’s case in chief, PITC made a motion to dismiss pursuant to Rule 41 of the FSM Rules of Civil Procedure. That motion will be denied.
After carefully reviewing the evidence and legal arguments presented by the parties, the Court finds defendants PITC, Billy Jonas and Lukner Weilbacher liable to plaintiff for unjust enrichment. The Court also finds against defendant PITC on its cross-claims for indemnity and conversion.
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A. Plaintiff’s Complaint
Plaintiff alleged that sometime in 1998, plaintiff, through the Chuuk State government, ordered 282 Yamaha outboard motors for purchase from defendant PLR Company, at a price of $2,000 per unit, for a total contract price of $56,000.3 Plaintiff claimed that the money was paid and delivered to defendant PLR Company located in Pohnpei State. Keiwo William, an employee of the Chuuk State Finance Office, personally delivered the payment, via check, for the outboard motors.4
Plaintiff alleged the payment was received by defendant Weilbacher as co-owner of PLR company. Plaintiff alleged that PLR Company had to order the motors from PITC, and after receiving payment from Mr. William, delivered the payment to PITC for payment on the motors. Plaintiff contended that PITC received the money through defendant Jonas, general manager of PITC, as agent of PITC, and that Jonas deposited the money into a bank account controlled by PITC at the Bank of the FSM.
Plaintiff further alleged that, although paid to deliver 27 outboard motors to plaintiff, PLR Company only delivered 13 of the 27 motors. Plaintiff characterized PLR Company as acting essentially as a middle man between PITC and plaintiff. Plaintiff alleged that PLR was not an authorized distributor of Yamaha motors, but it represented itself in Chuuk as a distributor.
Plaintiff claimed these facts support its claims of unjust enrichment and deprivation of property against defendants.
B. PITC’s Answer and Cross-Claim
PITC denied substantially all of the allegations in plaintiff’s complaint. PITC also filed a cross-claim for indemnity against PLR Company and the other defendants who entered into the alleged transaction with plaintiff without PITC’s consent or authorization, and asserted that PITC received no benefit or consideration from this transaction.
PITC also pleaded a cross-claim for conversion against Jonas. PITC claimed that Jonas was employed at PITC in the capacity of manager until or about July 1999. PITC claimed that if Jonas received any funds on behalf of PITC from plaintiff, those funds were subsequently converted by Jonas.
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C. Answer of Lukner Weilbacher5
Defendant Weilbacher admitted to receiving a check in the amount of $54,000 from Keiwo William while William was on Pohnpei trying to locate defendant Jonas, manager of PITC. Weilbacher stated in his answer that he assisted William and personally delivered the check to defendant Jonas.
Defendant Weilbacher denied being enriched in any manner since the check was delivered to defendant Jonas. Weilbacher asserted that PITC received all of the money in the transaction.
D. Defendant Jonas’ Answer to Complaint and Answer to Cross-Claim
Jonas admitted that he received the Chuuk State government check for the outboard motors from Weilbacher, and then deposited those funds in a new account at the Bank of the FSM under the name of "PLR." Jonas further admitted that he only delivered 13 of the 27 motors ordered by plaintiff. Jonas denied that PLR was a middleman between PITC and plaintiff, and denied that he represented to plaintiff that PLR was a Yamaha distributor in Pohnpei.
As to PITC’s cross-claim, Jonas admitted he was an employee of PITC at the time alleged, but denied that he ever converted any money from PITC in connection with this matter.
E. Default of PLR Company
On February 27, 2001, PITC obtained an entry of default on its cross-claim against defendant PLR Company.
Trial commenced on January 28, 2003. The parties stipulated to the admissibility of certain documents. These included a purchase requisition form, dated March 2, 1998 as plaintiff’s Exhibit 1; a photocopy of Chuuk State government check number 001661, dated April 13, 1998 as plaintiff’s Exhibit 2; and, a PLR Company pro forma invoice, number 001 as Exhibit 3. They also stipulated to admit a Kolonia Town Government receipt for a business license for "PLR Co. care of Billy Jonas" as PITC’s Exhibit A. The Court admitted each of these documents. The Court also admitted, over PITC’s objection, a document entitled a "Memorandum of Agreement" dated March 6, 1999 as Plaintiff’s Exhibit 4.
At the beginning of trial, plaintiff moved to dismiss its civil rights claim, and the Court granted that motion. The parties also made a stipulated motion to dismiss Rively Walter, who never was served with either the complaint or PITC’s cross-complaint, and the Court dismissed Rively Walter from the case.
At the close of plaintiff’s case in chief, defendant PITC moved for dismissal pursuant to FSM Rule of Civil Procedure 41(b). The Court denied PITC’s motion to dismiss.Testimony at Trial
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A. Mori Sally
Mori Sally testified that he is presently the Mayor of plaintiff Fonoton Municipality in Chuuk State. He testified that sometime in 1998, plaintiff entered into a contract to purchase 27 outboard motors from PLR Company for a total price of $54,000. He testified that only 14 of the 27 motors were delivered. He testified that when the balance of the motors was not delivered, plaintiff made a demand upon PLR through Billy Jonas and Lukner Weilbacher to complete delivery of the remaining motors. Sally stated that PLR admitted owing the balance of 13 motors, and requested additional time to complete the contract.
Mr. Sally testified that he understood that PITC was involved in the transaction as he was aware that Jonas was the manager of PITC at the time, and that Lukner told him that PLR was ordering the motors from PITC, but he understood that the contract was between plaintiff and PLR.
The court asked the witness, if plaintiff is successful in its claim against defendants, what damages it is seeking. The witness testified that plaintiff seeks delivery of the motors which were purchased but never delivered.
B. Lukner Weilbacher
Mr. Weilbacher testified that he was given a check in the amount of $54,000 from Keiwo William, an employee of the Chuuk State Finance Office. Weilbacher understood that his name was used as part of the company name "PLR" ("L" standing for "Lukner"), and he understood that he was a principal of that entity. He further understood that the check he received from Keiwo William was to be used to pay for those motors.
Keiwo William traveled from Chuuk to Pohnpei on a weekend, and was looking for Billy Jonas so he could deliver the check to Jonas. Keiwo William could not find Jonas, so he gave the check to Weilbacher, who received the check from William and later delivered it to Jonas.
Weilbacher testified that the motors which were to be delivered to plaintiff were to be purchased by Jonas. Weilbacher recommended that Jonas open a temporary account to accept the check to fulfill plaintiff’s order for the outboard motors. Jonas told Weilbacher that he deposited the check into the bank account which he has opened. The funds were deposited into an account opened in the name of PLR at the Bank of the FSM.
Weilbacher arranged the meetings between plaintiff, Jonas and himself regarding the delay in delivery of the motors. A document entitled "Memorandum of Agreement," dated March 6, 1999, was signed by Weilbacher as the owner of Seasky Enterprises. Jonas signed the document in his capacity as the General Manager of PITC, and William signed the document as the owner of Video Shack. In that document, PITC acknowledges receiving payment for 27 outboard motors. The President of PITC, Damian Primo, also signed the Memorandum of Agreement.
Weilbacher testified that the $54,000 check was written to PLR because plaintiff could not purchase the less expensive motors in Pohnpei directly. PITC could not sell Yamaha outboard motors in Chuuk because of its distributorship arrangement with Yamaha. Thus, a middleman was needed to purchase the motors in Pohnpei and deliver them to Chuuk. PLR was created for this purpose.
Weilbacher’s wife received some money from Jonas for Weilbacher’s role in the transaction. Billy Jonas told Weilbacher that not all of the motors were delivered because some of the money deposited in the PLR account was used to fulfill prior obligations of PITC.
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C. Billy Jonas
Billy Jonas testified that he was the manager of PITC at the time of the transaction between plaintiff and PLR. He testified that he quoted plaintiff a price of $2,000 per motor for delivery of the Yamaha outboard motors to Chuuk.
Jonas stated that he obtained a short term business license from Kolonia Town Government in order to open the bank account under the name PLR Company at the Bank of the FSM. He then deposited the $54,000 Chuuk State government check received from William into that account. Of the $54,000 deposited into the PLR bank account, Jonas stated that some of it he paid to PITC, and some was sent to Japan to pay for the motors ordered by plaintiff. The money was withdrawn from the PLR account in the form of checks written to "cash." All of the money deposited into the PLR account (the entire $54,000) was withdrawn within 30 days. The entire sum was withdrawn in four to five transactions. Jonas testified that he paid Yamaha $15,000 on behalf of PITC for 13 motors. He testified that Yamaha required a deposit of 50 percent of the total purchase price of an order to begin to process that order; thus, $15,000 equaled approximately 50 percent of the purchase price for 27 Yamaha outboard motors.
Jonas testified that some of the $54,000 received from plaintiff was used to fulfill other outstanding orders of PITC. Jonas stated his use of a portion of the $54,000 on other PITC obligations was within the scope of his authority as the general manager of PITC. Jonas testified that his use of some of the $54,000 to fulfill other obligations of PITC was approved by then president of PITC, Damien Primo. Jonas stated he gave PITC $30,000 in cash from the PLR account.
Jonas testified that, of the original $54,000 received from plaintiff, around $3,500 was left over after the purchase of the motors. He gave some of this $3,500 to Weilbacher’s wife, some to Rively Walter, and kept some for himself.
Jonas stated that PLR purchased motors from PITC at a lower price than it sold them to plaintiff, and the balance would be profit to PLR. PLR purchased motors from PITC at a price of about $1,600 per motor. PLR submitted money to PITC, and PITC ordered motors from Japan. PLR was a company doing business with PITC; PLR was a middleman between PITC and plaintiff.
Jonas testified that PITC terminated him when it discovered a canceled check from PLR Company and suspected that something was wrong. PITC put Jonas on leave and performed an investigation on Jonas’ activities while manager at PITC.
D. Yashua Phillip
Mr. Phillip testified that he is the present manager of PITC. PITC is a corporation, and at present its shares are owned by Federated Shipping Company. He testified that he became the manager of PITC sometime around January, 2002.
Mr. Phillip testified that in the Memorandum of Agreement, PITC admitted receiving "payment in full" for delivery of 28 outboard motors. Further, PITC admitted it did not provide all of the motors to plaintiff.
Mr. Phillip testified that PITC was not able to find many of its records of the transaction involved in this case. PITC was able to locate a cash receipt of $10,000 from PLR, but no other deposits from PLR. PITC’s records from the time frame when the transaction occurred are not in good order, and the company was not in good shape financially.
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Findings of Fact
1. Fonoton Municipality is a municipality located in Chuuk State. Sally Mori has been the Mayor of Fonoton Municipality since 1997.
2. Lukner Weilbacher, Rively Walter, and Billy Jonas formed a company in April, 1998, known sometimes as BLR and sometimes as PLR ("PLR").
3. Billy Jonas was the manager of Ponape Island Transportation Company in March, April and May of 1998, and acted with the knowledge and authority of PITC in entering into contracts for the delivery of outboard motors and other goods to customers of PITC.
4. In March, 1998, Fonoton Municipality entered into an agreement with PLR to purchase 27 outboard motors from PLR, through PITC in Pohnpei, for $2,000 each, for a total price of $54,000.
5. On April 13, 1998, Check No. 001661 was issued from the Truk State Special Projects account at the Bank of FSM, payable to PLR, in the amount of $54,000. PLR received the full amount agreed upon for the purchase of the 27 outboard motors.
6. Fonoton Municipality received delivery of 13 outboard motors. Fourteen (14) motors were not delivered as agreed upon.
7. Billy Jonas was present during meetings with the Mayor of Fonoton and Lukner Weilbacher in which it was clear that the outboard motors were to be purchased with PLR acting as middleman between Fonoton Municipality and PITC in Pohnpei. During these meetings, Billy Jonas acted as manager of PITC, with the authority to bind PITC to delivery of outboard motors. Fonoton Municipality, Lukner Weilbacher, Billy Jonas, PLR, and PITC all understood and agreed that PITC would receive the $54,000 paid by Fonoton Municipality to PLR, and that PITC would be providing outboard motors in exchange.
8. Fonoton Municipality, Lukner Weilbacher, Billy Jonas, PLR, and PITC all knew and understood that PITC was prohibited by its distributorship agreement from selling Yamaha outboard motors directly to Fonoton Municipality in Chuuk. Fonoton, Weilbacher, Jonas, PLR, and PITC agreed to the creation of PLR as a means to circumvent the Yamaha distributorship agreement and obtain the lowest retail price on the outboard motors for Fonoton Municipality. Yamaha outboard motors could be purchased more cheaply in Pohnpei than in Chuuk at the relevant time in 1998.
9. Keiwo William, an employee of the Chuuk State Finance Office, delivered Chuuk State Government Check No. 001661, in the amount of $54,000, to Lukner Weilbacher in Pohnpei, with instructions to deliver the check to Billy Jonas as general manager of PITC. Weilbacher delivered the check to Jonas as requested.
10. Even though the check was made payable to PLR, the purpose of the check, and the understanding of all parties to the transaction, was that the $54,000 was to be accepted by Jonas for PITC, and that PITC in turn was to deliver the outboard motors to Fonoton.
11. Because Check No. 001661 was made payable to PLR, it was not possible to deposit it directly into any PITC account. Billy Jonas opened a temporary bank account in the name of PLR in order to deposit the check and effect the purchase of outboard motors from Yamaha in Japan on behalf of PITC.
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12. Billy Jonas sent approximately $15,500 to Japan from the PLR account, on behalf of PITC, to initiate the order of 27 Yamaha outboard motors.
13. PLR paid $10,000 in cash to PITC on May 7, 1998.
14. Billy Jonas took $3,500 from the PLR account, kept some for himself, and gave the remainder to Lukner Weilbacher’s wife and Rively Walter.
15. PITC received all of the remaining money paid to PLR by Fonoton Municipality, and used it for the benefit of its other creditors or to fill outstanding orders for other customers.
16. On March 6, 1999, PITC acknowledged that it had received payment in full for delivery of 27 units of Yamaha outboard motors for Fonoton Municipality, that it had delivered only 13, that it had an outstanding balance of 14 outboard motors to be delivered, and that it was having difficulty delivering the order because they had converted the money received from Fonoton for use on other projects. Fonoton Municipality and PLR were not parties to this agreement; however, the agreement anticipated that PITC would forego profits from future orders of Yamaha outboard motors in order to repay its debt to Fonoton Municipality and purchase the balance of 14 outboard motors owed.
Conclusions of Law
I. Unjust Enrichment
Plaintiff has sued the defendants on a claim of unjust enrichment.6 The unjust enrichment doctrine is based on the idea that one person should not be permitted unjustly to enrich himself at the expense of another. Etscheit v. Adams, 6 FSM Intrm. 365, 392 (Pon. 1994). The generally accepted elements of a cause of action for unjust enrichment are that: 1) the plaintiff conferred a benefit on the defendant, who has knowledge of the benefit, 2) the defendant accepted and retained the conferred benefit, and 3) under the circumstances it would be inequitable for the defendant to retain the benefit without paying for it.
PITC argued that before the court can consider whether plaintiff has established, by a preponderance of the evidence, that one or more of the defendants has been unjustly enriched, the court must decide whether the doctrine of unjust enrichment applies in the FSM. PITC claims the doctrine or idea of unjust enrichment has not been expressly adopted in the FSM. PITC cites the case of Etscheit v. Adams, 6 FSM Intrm. 365, 392 (1994), in which the court stated that:
The doctrine of unjust enrichment is widely recognized in the United States, but the defendants neither cite any FSM cases adopting the doctrine nor provide any compelling reason why this court would want to adopt that doctrine. Assuming this court wanted to adopt the doctrine, this is not the appropriate case for doing so.
However, in Mauricio v. Phoenix of Micronesia, Inc., 8 FSM Intrm. 248 (Pon. 1998), the Court found in favor of plaintiff and against defendant on a claim of unjust enrichment. In Mauricio, the court found defendant was unjustly enriched when it used a photograph of plaintiff’s image, without compensating plaintiff for such use, on postcards it sold for profit. Id. at 262.
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Unjust enrichment is an equitable remedy, and generally requires that the party who accepted and retained a benefit pay that benefit back to the party who conferred it. A court exercising equity jurisdiction has plenary power to fashion an order in such a manner as to recognize and maintain the equities of the parties involved. The relief granted in equity is dictated by the equitable requirements of the situation at hand and must be adapted to the facts and circumstances of each particular case. More simply stated, the underlying concept is the prevention of injustice, when a legal remedy may not be available to a party because of a technicality.
While the doctrine of unjust enrichment has not been explicitly discussed or adopted, the Court finds that the law of Pohnpei State, and Micronesian custom and tradition, dictate that a party who has benefitted unjustly from another should be made to repay that benefit under certain circumstances. See FSM Const. art. XI, § 11.
This case is distinguishable from Etscheit v. Adams, 6 FSM Intrm. 365 (1994), cited above. In that case, heirs of a landowner (Carlos Etscheit) claimed that they should be compensated for the efforts of their ancestor to retain ownership of the land in question. The court found that there was no benefit conferred by Carlos with the expectation of receiving anything in return. The court found that the benefit conferred was thrust upon those who received it, and that Carlos would have undertaken the same efforts on his own behalf to retain his ownership interest in the land, regardless of any compensation from the other family members.
Unlike Etscheit, the facts and circumstances of this case are appropriate for the Court to apply the doctrine of unjust enrichment. In this case, the Court sees no impediment to plaintiff in recovering for unjust enrichment against the defendants, because plaintiff has proven that one or more of the defendants knowingly accepted a benefit from plaintiff and were unjustly enriched at plaintiff’s expense. Unlike the claimant in Etscheit, Fonoton Municipality undoubtedly was wronged ) it paid $54,000 for 27 outboard motors, and only received 13 of the motors. The defendants received this money and converted it to other purposes, and it would be unjust to permit them to retain that benefit. Even though there is evidence of a contract between Fonoton and PLR, this case demands that the equitable remedy of unjust enrichment be applied to permit Fonoton to recover from PITC, when it is apparent that PLR was created only to circumvent PITC’s obligations under its distributorship agreement. Ultimately PITC was the party that received the bulk of the money from Fonoton. It would be unjust indeed to permit PITC to retain a benefit it received, merely because it received the benefit through a shell company that was created merely so that the check from Fonoton could be cashed and the money paid over to PITC.
The issue then is which defendant or defendants received a benefit from plaintiff’s payment for these motors.
II. Claims of the Parties
A. Plaintiff v. Billy Jonas and Lukner Weilbacher
The Court finds that Billy Jonas and Lukner Weilbacher were unjustly enriched by plaintiff in the amount of $3,500.00. Plaintiff elected to sue on an equitable claim of unjust enrichment, rather than to sue Jonas and Weilbacher for breach of the contract for purchase of 27 Yamaha outboard motors. By their own testimony, defendants Jonas and Weilbacher made money personally on the transaction with plaintiff, even when plaintiff received only one-half of the motors it purchased. The Court believes it would be inappropriate to not hold defendants Billy Jonas and Lukner Weilbacher responsible, as individuals and as principals of PLR Company, for their dealings with plaintiff which resulted in damage to plaintiff. Jonas and Weilbacher collectively benefitted in the amount of $3,500.00, and judgment
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in that amount will be entered against them.
B. Plaintiff v. PITC
PITC also is liable to plaintiff under the theory of unjust enrichment. The evidence shows that PLR acted as a middleman between plaintiff and PITC, purchasing motors from PITC and selling them at a higher price to plaintiff. However, the evidence also shows that, ultimately, PITC received all of the money from plaintiff, knew it was responsible for providing the outboard motors to plaintiff, and did not do so.
Defendant PITC, in the March 6, 1999 Memorandum of Agreement (MOA), admitted that it had been "paid in full" for the 277 outboard motors purchased by plaintiff. The MOA was signed by its then president Damian Primo. Since PITC admitted receiving payment in full for all of the 27, and it only delivered 13 of the motors, the court believes that PITC has been unjustly enriched in the amount paid by plaintiff for 14 of the 27 motors, minus the amount that was converted by Jonas and Weilbacher.
The evidence establishes that plaintiff paid in full $54,000.00 for 27 outboard motors. The evidence also establishes that plaintiff received only 13 outboard motors. There is no evidence supporting PITC’s assertion that defendants Billy Jonas and Lukner Weilbacher benefitted from payment of 14 motors which were not provided to plaintiff. However, Jonas testified that he paid all money received from plaintiff to PITC, except for: (1) the $3,500 he split with Weilbacher and his wife, and (2) the $15,000 he sent to Japan for purchase of 13 outboard motors. The evidence shows that $2,000 per motor was the price paid by plaintiff; accordingly, $28,000, minus $3,500, or $24,500 is the amount that the Court finds PITC was unjustly enriched when failed to deliver the 14 outboard motors to plaintiff.8
C. PITC v. Billy Jonas
PITC sued Billy Jonas on causes of action for indemnity and conversion. As for indemnity, in Joy Enterprises, Inc. v. Pohnpei Utilities Corp., 8 FSM Intrm. 306 (Pon. 1998), the court stated that, although it previously had recognized claims for indemnity based on contractual provisions between two parties, in the absence of a contractual provision the court would not create a common law indemnity claim. 8 FSM Intrm. at 311. Since there was no contractual provision for indemnity between PITC and Billy Jonas regarding this transaction, the court finds that PITC’s claim of indemnity against Billy Jonas must fail.
As for conversion, the court finds that although there were inferences that Billy Jonas converted money from PITC, or at least that he may not have provided PITC all of the money to pay for the outboard motors, the court finds that PITC has not established, by a preponderance of the evidence, that Billy Jonas converted property of PITC. Therefore, the court will find in favor of Billy Jonas on PITC’s conversion claim.
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For the foregoing reasons, the court determines that defendant PITC was unjustly enriched in the amount of $24,500, and defendants Billy Jonas and Lukner Weilbacher were unjustly enriched in the amount of $3,500. Therefore, the court will enter judgment in that amount concurrently with this order. The court also finds in favor of Billy Jonas and against PITC on its claims for indemnity and conversion, and judgment in favor of Billy Jonas and against PITC also will be entered.
1. Defendant Rively Walter never was served with process and was dismissed by the Court at the beginning of trial.
2. The evidence adduced at trial shows that the true number of motors ordered was 27.
3. The evidence adduced at trial shows that the contract price for the 27 motors was $54,000. All further references will show the correct number of motors purchased as 27, with a contract price of $54,000.
4. Plaintiff presented some evidence that William had a relationship with Rively Walter, and may have been involved in this transaction in some way other than in his capacity as an employee of the Chuuk State Finance Office, but that connection was never fully developed.
5. Weilbacher never answered PITC’s cross-claim, and default was entered on PITC’s cross-claim against Weilbacher on December 29, 2000. At trial, Weilbacher made a motion to set aside the default, which was granted by the court.
6. The only other cause of action plead by plaintiff, a civil rights violation claim, was dismissed by plaintiff at the commencement of trial.
7. The memorandum actually references 28 outboard motors, but the contract documents show that the true number was to be 27 motors. The court believes it is appropriate to find that PITC was paid in full for 27 motors, not 28 motors.
8. The Court notes that PITC advanced seven affirmative defenses in its answer to plaintiff’s complaint. PITC did not produce sufficient evidence at trial to sustain its burden of proving any of these affirmative defenses.