Ambros acted in good faith when it relied on Lilly’s and Emmy’s representations.  The fact that Lilly and Emmy were family members may well explain why Ambros relied on those representations.  But the fact that the reliance was misplaced does not relieve Ambros of liability.  All of the checks presented for cashing contained IAC’s name and address, which would have enabled Ambros to verify that Lilly and Emmy were authorized to cash the checks, but Ambros took no steps to do so.  When Ambros cashed the checks, it did so "at its own peril."  Id. at 787.  "An actor may be liable [for conversion] where he has in fact exercised dominion or control . . . and a defendant’s intention, good or bad faith, and his knowledge or mistake are immaterial."  Peaseley Transfer & Storage Co. v. Smith, 979 P.2d 605, 616 (Idaho 1999).  Although Ambros acted in good faith, it exercised dominion and control over the UL premium checks by cashing them.  In so doing, it converted the checks.

 

Accordingly, Ambros is liable to IAC for conversion of the UL premium checks that it cashed.

 

C.  Breach of fiduciary duty

 

Thus far in the FSM, a cause of action for breach of fiduciary duty has only been recognized in the area of the relationship between a bank and its depositors, and not in the area of insurance or other context.  Phillip v. Marianas Ins. Co., 12 FSM Intrm. 301, 308 (Pon. 2004).  Phillip dealt with the question whether the relationship between an insured on one hand, and an insurance company and the insurance company’s agent on the other hand, was a fiduciary one.  The facts of Phillip are different from those at bar.  At issue here is the relationship between an insurance company and its agents, and specifically two identical written agency agreements: the one between William and Lilly and IAC, and Emmy and IAC.  By definition, the relationship between an agent and principal is a fiduciary one: "Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act."  Black’s Law Dictionary 62 (6th ed. 1990) (citing Restatement (Second) of Agency § 1 (1958) (emphasis added)).  "Fiduciary" as an adjective in turn is defined as "relating to or founded upon a trust or confidence."  Black’s Law Dictionary 625 (6th ed. 1990).

 

An agent is a fiduciary with respect to the matters within the scope of his agency.  The very relationship implies that the principal has reposed some trust or confidence in the agent, and the agent or employee is bound to the exercise of the utmost good faith, loyalty, and honesty toward his principal.

 

3 Am. Jur. 2d Agency § 210, at 713 (1986) (footnotes omitted).

 

The Iriartes and Emmy were required to exercise the "utmost good faith, loyalty, and honesty" toward IAC during the times that they acted as IAC’s agents.  By cashing the checks, and thereby failing to send the checks on to IAC, they breached this duty.

 

Accordingly, the Iriartes and Emmy are liable to IAC for breach of fiduciary duty.

 

D.  Punitive damages

 

IAC also requests punitive damages against all of the defendants.  Punitive damages are derivative, in the sense that they derive from and depend on a separate and independent cause of action.  Semwen v. Seaward Holdings, Micronesia, 7 FSM Intrm. 111, 113 (Chk. 1995).  They may be awarded when the acts complained of are wanton, reckless, malicious, and oppressive.  Primo v. Refalopei, 7 FSM Intrm. 423, 435 (Pon. 1996).  Punitive damages are not awardable for breach of contract, since only compensatory damages are allowed in contract cases.  Hartman v. Krum, 14 FSM Intrm. 526, 532 (Chk. 2007).  Punitive damages may be recovered for conversion where the defendant’s acts were accompanied by fraud, malice, recklessness, oppressiveness, or willful disregard of the plaintiff’s rights that aggravated the injury or loss inflicted by the defendant.  Bank of Hawaii v. Air Nauru, 7 FSM Intrm. 651, 653 (Chk. 1996).  A bank’s mere failure to respond to an inquiry about funds wrongfully deposited into an account at the bank is not sufficient to sustain an award of punitive damages.  Id.

 

The conduct in this case does not warrant punitive damage.  While the funds were converted, they were converted in material part in the course of Lilly’s and Emmy’s efforts to expedite services to IAC policy holders.  Although a large amount of the money represented by the checks remains unaccounted for, this fact alone does not mean that unaccounted for amount was converted for the use of William, Lilly, and Emmy.  Furthermore, after Emmy told Tom Dage what she had been doing, she was cooperative in providing information to IAC so that IAC could determine, to the extent possible, where the missing premium money had gone.  Conversion by its nature involves wrongful acts that are hostile to an owner’s interest in property.  Rudolph, 13 FSM Intrm. at 128-29.  In the case at bar the actions of the Iriartes and Emmy were wrongful and showed a disregard of IAC’s property rights.  However, that disregard was not sufficient to impose punitive damages.  Thus the court will not award punitive damages against either the Iriartes or Emmy.  Nor will the court award punitive damages against Ambros.  While the actions of Ambros in cashing the checks was wrongful, Ambros’s employees relied in good faith on Lilly’s and Emmy’s representations that they were authorized to cash the checks.

 

IAC’s claim for punitive damages is accordingly denied.

 

E.  Fraud

 

IAC seeks to recover for fraud against all of the defendants.  The elements of a cause of action for fraudulent misrepresentation are: 1) misrepresentations 2) made to induce action by the plaintiff 3) with reliance by the plaintiffs upon the misrepresentation 4) to their detriment.  Pohnpei v. Kallis, 6 FSM Intrm. 460, 462 (Pon. 1994).

 

IAC cannot prevail against Ambros on the fraud count.  Ambros never made any representation to IAC concerning any aspect of the situation regarding the checks.  The record discloses no evidence that there was any communication between Ambros and IAC during the relevant period.  Had there been, the possibility exists that at that point Ambros would have stopped its practice of cashing IAC checks.

 

With respect to the Iriartes and Emmy, Emmy testified that Tom Dage would come to Pohnpei from Guam and periodically meet with the Iriartes and Emmy.  He would inquire about IAC matters generally, and to the extent that the inquiries were answered, Emmy told him that things were "going smooth  most of the time."

 

The assurance that things were "going smooth  most of the time" is the only representation that can serve as the basis of a claim by IAC for fraud against Emmy and the Iriartes.  This type of generalized opinion is not the sort of specific representation on which a hearer may reasonably rely.  Reliance must be reasonable.  The representation made was more akin to conventional responses to questions about one’s health or the state of the weather than it was a specific assessment made to a business associate in a professional context where the one asking the questions was eliciting specific information on which he intended to rely.  While a fiduciary relationship existed between IAC and the Iriartes while the Iriartes were IAC’s agents, and between IAC and Emmy while Emmy was IAC’s agent, the parties to such a relationship may certainly communicate at times on a superficial, conventional level where the statements made do not give rise to reasonable reliance.  That was the case here.  Thus, like Ambros, the Iriartes and Emmy are not liable to IAC for fraudulent misrepresentation.

 

F.  Affirmative defenses

 

The defendants offer two main defenses to IAC’s claims, those of ratification and mitigation of damages.  Generally they contend that IAC should have become aware of the conversion of the checks by the Iriartes and Emmy earlier, and that even after IAC learned from Emmy in May of 2002 what was going on, IAC should have taken more measures than it did to stop the conversion.  They contend that IAC’s lack of more vigorous action in this regard constitutes IAC’s ratification of the conduct.  Similarly, they urge that IAC’s inaction constitutes a failure to mitigate its damages.  They rely on these defenses in asserting that IAC cannot recover from them.

 

Ratification is the approval of an otherwise unauthorized act or transaction.  Asher v. Kosrae, 8 FSM Intrm. 443, 452 (Kos. S. Ct. Tr. 1998).  An implied ratification may take place if one, with full knowledge and understanding of the material facts, exhibits conduct that shows a recognition and adoption of the unauthorized act or transactions.  Id. at 452-53.

 

Ambros asserts that IAC’s reaction to the situation with which they were presented "is almost incomprehensible, unless they were simply accepting the actions of their agent and trying to cover up what had happened."  Id.  Based on the evidence presented, IAC’s conduct was understandable.  Very much a factor in the events as they transpired from May of 2002 when IAC first learned of the cashing of the checks until Emmy was fired in July of 2003 was the fact that IAC trusted Emmy.  When Sue Moses testified about her unsuccessful efforts with Emmy to resolve the question of her missing payments, she described Emmy as "very personable."  Beyond this, the court had the opportunity to observe Emmy’s demeanor during the trial.  She has a manner and demeanor that invites trust.  Even after Emmy told Tom Dage what she had been doing, she continued to be forthcoming, and actively assisted IAC in trying to account for where the missing money went.

 

IAC’s conduct was by no means prudent.  IAC should have, and could have, handled the situation better.  IAC should have begun a careful and exhaustive investigation when the very first customer complained.  But whether or not IAC made wise business decisions with regard to the check cashing problem at relevant times is immaterial.  The point that the defendants fail to realize is that IAC had no duty to the defendants, who were effectively stealing from IAC  conversion is the civil equivalent of theft  to undertake such an investigation for the benefit of defendants in order to stop the defendants from converting IAC’s property.  IAC’s property was converted by the defendants’ intentional actions.  The defendants cannot argue that because IAC should have known that the defendants were converting  stealing  IAC’s property, IAC should have stopped them, and that because IAC did not stop them from doing what they had no right to do, the defendants should not have to pay back what they took.  Ratification, after all, means approval.  IAC has sued the Iriartes and Emmy for breach of contract, and ratification can certainly be a defense to a breach of contract suit.  But the actions that constitute a breach of the agency contracts in question  failure to remit the premium checks to IAC  are the same as those that constitute the conversion.  The issue is whether IAC ever approved the Iriartes’ and Emmy’s use of the cash from the UL premium checks for non-IAC approved purposes so that neither the Iriartes or Emmy have to pay the misused money back.  IAC did no such thing.

 

What IAC did  not very successfully as it turned out  was to try to come to terms with and correct a significant problem involving the disappearance of a substantial sum of company money.  In other words, IAC was trying to clean up a big mess, one that involved well over $400,000 of IAC money.  While doing so, it was engaging in damage control, and furthermore was trying to do all of this from a distance  hundreds of miles from Pohnpei in the case of Tom Dage in Guam, and thousands of miles in the case of Kansas City.  The defendants assert that IAC tried to "cover up" what was happening.  It seems plain that after IAC learned what Emmy was doing, it was not eager to have its policy holders find out that its Pohnpei agent was not sending policy holders’ hard-earned premium dollars to Kansas City as she should have so that the policy holder’s accounts could be credited.  Emmy of course was giving an immediate benefit to those seeking cash advances, but in so doing was placing all of the employee policy holders at a disadvantage because their policy accounts were not being credited for the premiums paid.  Sue Moses testified that she terminated her policy once she discovered what had happened.  But even assuming that IAC attempted to keep this from becoming general knowledge among its policy holders  that IAC "covered up" what happened  by no stretch of the imagination does it mean that IAC approved the taking of its money for unapproved purposes in the first place.  Any "cover up" did not materially affect any right of the defendants.

 

Compounding the situation was that IAC wanted to continue its Pohnpei operation while it was sorting things out.  IAC needed an agent in Pohnpei, and it thought it had one that it could trust in Emmy.  After all, it was Emmy herself who told Tom Dage what she had been doing, and why, and that she was very upset by what she had gotten herself involved in.  But IAC’s trust in Emmy was misplaced, because even after being told by Tom Dage to stop cashing premium checks, she continued to obtain premium checks, and continued to cash them.  When IAC discovered this, it directed the employers to deposit the checks directly into its Bank of the FSM account.  Even then, Emmy managed to acquire some of the checks.  She cashed the last check in May of 2003.  IAC at last terminated Emmy in July of 2003.

 

IAC indeed ratified, or approved, the check cashing activities of both the Iriartes and Emmy to the extent that they distributed the money obtained from the checks to policy holders for legitimate IAC purposes.  That IAC gave credit to the Iriartes and Emmy for these distributions shows this conclusively.  What is equally plain is that IAC never approved the Iriartes’ and Emmy’s conversion of the funds that were not accounted for, or were not used for approved IAC purposes.  IAC’s efforts to figure out what had happened, to stop it from happening, to arrive at an accounting for the missing money, and to restore order to its Pohnpei operation manifest its disapproval of the practice of cashing premium checks initiated by Lilly and continued by Emmy.  It seems only too obvious that if IAC had either actively or passively intended to approve the cashing of the checks it 1) would not have told Emmy to stop cashing the checks after she told Tom Dage in May of 2002 what she doing; 2) would not have told the employers to deposit the UL checks directly into its Bank of the FSM account after discovering that Emmy was continuing to cash the checks; and 3) would not have fired Emmy for her continued practice of obtaining and cashing checks even after IAC had told the employers to deposit the UL checks.

 

Citing Kosrae Island Credit Union v. Obet, 7 FSM Intrm. 416, 419 n.2 (App. 1996), Ambros urges that where a principal passively allows its agent to appear to a third person to have authority to act on his behalf, apparent authority may be implied on the part of the agent, thus conferring liability for those acts on the principal.  IAC did not become aware that the checks were being cashed until May of 2002, when Emmy told Tom Dage what she was doing, and he told her to stop.  Ambros asserts that "it is clear that the inaction of IAC led to the continued ability of its agent to cash these checks."  Post Trial Br. at 6.  The "inaction" to which Ambros refers is a way of saying that IAC was negligent in failing to discover the ongoing tortious conduct  the conversion  earlier, and that IAC should therefore bear the loss.  This argument seeks to circumvent this court’s prior ruling, relying on Opet v. Mobil Oil Micronesia, Inc., 3 FSM Intrm. 159, 166 (App. 1987), that contributory negligence is not a defense to a conversion action.⁵  Ambros had an ongoing, positive duty to ascertain whether Lilly and Emmy were authorized to cash the checks.  When it failed to do so, it interfered with IAC’s ownership interest and thereby converted the checks.  Ambros cannot turn the tables on IAC and conclude that IAC was negligent for failing to detect and prevent the conversion earlier than it did.  Such a rule serves to blame the tort victim.  The court declines to adopt such a rule.

 

The defendants also assert that IAC failed to mitigate its damages.  That a plaintiff has a duty to mitigate his damages is clear.  He must take such reasonable steps to minimize those damages.  Elymore v. Walter, 9 FSM Intrm. 450, 457 (Pon. 2000).  Of the arguments made by the defendants, Ambros, for example, argues that among the steps that it was necessary for IAC to take to minimize its damages was "to notify the banks or other places where the checks are being cashed so the matter [does not] occur in the future."  Post Trial Br. at 13-14.  The problem with this contention is that Ambros should have, independently of any actions taken or not taken by IAC, confirmed that Lilly and Emmy had the authority to cash the checks.  IAC had no duty to anticipate and attempt to stop Ambros’s tortious conduct.  No matter from what perspective Ambros views the facts of this case, it remains indisputable that Ambros, when presented with checks amounting to over $400,000 over a period of approximately three-and-a-half years that were made payable to a corporate payee, nevertheless cashed the checks at the request of the individual cashing those checks without ever making any efforts to obtain independent confirmation that the individual presenting the check had authority from the corporate payee to do so.  Lilly on at least one occasion and Emmy on numerous occasions were physically present in front of the Ambros employees who handed over large sums of currency to them.  IAC’s damages resulted from the unauthorized and intentional acts of Lilly, Emmy, and Ambros.  IAC did not fail to mitigate its damages.  This argument is without merit.

 

Ambros also relies on the defenses of apparent authority and good faith commercial standards.  As just noted, Ambros had a duty to determine whether Emmy and Lilly had the authority to cash the checks.  Thus, Ambros should not have relied on the apparent authority  which is only the authority that Lilly and Emmy said they had  when Ambros cashed the checks.  Nor can it be said that Ambros used good faith commercial business standards.  It tendered cash to Emmy and Lilly on their own mere representations that they had the authority to cash the checks.

 

The parties offer various additional affirmative defenses.  For example, the Iriartes assert that the court should apply a three year statute of limitations found in the Uniform Commercial Code to this case.  But without a showing that this statute of limitations has been enacted into law in this jurisdiction, the court is at a loss as to what authority would permit the court to do this.  The court cannot legislate.

 

Another defense offered by the Iriartes is that IAC should have made a claim against errors and omissions policy because one of its employees, John Diebold, failed to enter into an administrative agreement with the Iriartes that would have permitted the Iriartes to handle the UL checks.  They claim that IAC suffered no damages because of the potential insurance coverage.  However, the contract expressly addresses what happens if no administrative agreement is entered into.  In that event, the agent was required to "immediately remit to Us [i.e., IAC] all money received or collected on Our behalf."  It is not apparent how failure to enter into any such agreement would serve as a basis for a claim against any errors and omissions policy maintained by IAC, even if such a policy existed.  These two affirmative defenses are without merit.

 

An issue arises as to the amount of Emmy’s liability for conversion during the Iriarte period.  Of the eight or nine checks that were deposited into account number 0209-171085 that Lilly opened in the name of IAC at the Bank of Guam, Lilly testified in her deposition that she herself deposited between two and four, which means that Emmy would have deposited between four and seven checks.  Thus the exact number of checks, or their respective amounts, that Emmy deposited is not known.  If Emmy had at some point given out the cash ultimately obtained from the checks deposited by Lilly, then she along with Lilly would be liable for conversion.  However, Emmy also testified that Lilly gave out cash advances, and if that cash came from the checks Lilly deposited, then Lilly alone converted those check.

 

What is known, however, is that the total amount of the checks cashed at Ambros by Emmy alone or together with Lilly is $405,688.85, plaintiff’s exhibit 1D-2, and that the total amount of all checks converted, excluding the checks that have no endorsement at all but were handled during the Iriarte period, is $427,565.48.  Plaintiff’s exhibit 1D-1.  The difference is $21,876.63 ($427,565.48  $405,688.85).  Of this amount, $8,300 represents the two premium checks that Emmy at Lilly’s direction converted by using them to purchase the $8,293.50 cashier’s check (plus $6.50 issuance fee: $8,293.50 + $6.50 = $8,300) that Emmy then turned around and cashed.  Subtracting the $8,300 from $21,876.63 leaves $13,576.63 for the amount of checks deposited into the IAC Bank of Guam account.  There is no way of determining what portion of this amount was converted by Emmy.  Since IAC as the plaintiff has the burden of proof, Tulensru v. Wakuk, 10 FSM Intrm. 128, 132 (App. 2001), Emmy receives the benefit of the doubt created by this question.  Accordingly, the court will reduce the conversion damages against Emmy for the time she was acting as the Iriartes’ employee by this amount, or $13,576.63, which means this sum will be subtracted from $183,242.82 ($183,242.82  $13,576.63 = $169,666.19).  As set forth in plaintiff’s exhibit 1D-1, the $183,242.82 figure is the amount of all endorsed checks handled during the Iriarte period, minus the $11,654.17 credit given to the Iriartes ($194,896.99 - $11,654.17).  Therefore the conversion damages against Emmy for the period that she worked for the Iriartes is $169,666.19.  The total conversion damages against Emmy for both the time she worked for the Iriartes, and for the time that she was IAC’s general agent herself is $295,500.68 ($169,666.19 + $125,834.49).⁶

 

An issue also arises with respect to the conversion damages against Ambros.  The total amount of checks cashed at Ambros was $405,688.85.  IAC gave a credit of $11,654.17 to the Iriartes for the checks cashed while they were general agents, and a credit of $106,834.00 to Emmy for the checks cashed while she was IAC’s agent.  In its computations set out on plaintiff’s exhibit 1D-1, IAC deducts the credit amount from the total of all converted endorsed checks.  This is appropriate in determining total damages.  However, in determining the amount of conversion damages against Ambros, the starting point is the total of the checks cashed there.  The next question is how to apply the credits.  The possible options are to distribute the credits in some combination to the checks cashed at Ambros ($405,688.85); the six unendorsed checks totaling $17,163.00 that the Iriartes’ handled while they were IAC’s agents; the checks that were deposited into the Bank of Guam account that Lilly opened in IAC’s name ($13,576.63); and the $8,300 that represents the two premium checks that were exchanged for the $8,293.50 cashiers check.  If the credits were applied to the last three items, which total $39,039.63 ($17,163.00 + $13,576.63 + $8,300 = $39,039.63), that would still leave $79,448.54 ($118,488.17 - $39,039.63 = $79,488.54) to be applied to the $405,688.85 amount of checks cashed at Ambros.  But there is nothing in the evidence that precludes the possibility that the total credit of $118,488.17 is properly assignable to the checks cashed at Ambros.  Again, since the IAC has the burden of proof, Ambros is entitled to the benefit of this uncertainty.  IAC did not show precisely to what amounts the credits apply.  Thus, the entire $118,488.17 will be deducted from the $405,688.85, which yields $287,200.68.  This is the total amount of conversion damages awarded against Ambros for the checks that Ambros cashed at its store.

With regard to the Iriartes’ liability of $200,405.82, William and Lilly alone are jointly and severally liable for $17,163.00 in unendorsed premium checks that they handled during their time as agents, since there is no showing that either Emmy or Ambros participated in the handling of those checks.  William and Lilly alone are also jointly and severally liable for the $13,576.63 in checks that were deposited into the Bank of Guam account opened by Lilly, since the court cannot determine what portion of those may have been deposited by Emmy.  Emmy is liable jointly and severally with Lilly and William for the $8,300.00 amount that represents the premium checks that she used to purchase the cashier’s check for $8,293.50 (plus the check issuance fee of $6.50) that Emmy then turned around and sold back to the bank for cash.  Subtracting these amounts from the Iriartes’ total liability ($200,405.82 - $17,163.00 - $13,576.63 - $8,300.00 = $200,405.82 - $39,039.63 = $161,366.19) leaves $161,366.19 that represents checks that Emmy cashed at Ambros while she was William and Lilly’s employee, and for which William and Lilly are liable.

 

Emmy’s total liability of $295,500.68 includes the $8,300.00 amount for which she is liable jointly and severally with William and Lilly.  Subtracting this from the $295,500.68 ($295,500.68 - $8,300.00 = $287,200.68) leaves $287,200.68 that represents Emmy’s total liability for the checks cashed while she was the Iriartes’ employee and while she herself was IAC’s agent.  Although arrived at by a different calculation, this amount is identical to Ambros’s liability, since both Emmy and Ambros receive the benefit of the $11,654.17 credit that IAC gave to the Iriartes, and the $106,834.00 credit that IAC gave to Emmy.  The Iriartes’ liability of $161,366.19 is joint and several with Emmy’s and Ambros’s liability of $287,200.68 for the checks cashed at Ambros, but in the Iriartes’ case that liability is only to the extent of $161,366.19.  In other words, the maximum amount that IAC can recover from the Iriartes for the checks cashed at Ambros is $161,366.13.

 

Regardless of the different components of each defendant’s liability, IAC’s total recovery is $326,240.31, which is the total amount of its loss pursuant to exhibit 1D-2.  Taking into account the two credits, the $326,240.31 amount is composed of the $287,200.68 for the checks cashed at Ambros (assessed in part against the Iriartes and in whole against both Emmy and Ambros); the $17,163.00 for the six unendorsed checks the Iriartes handled while they were IAC’s agents (assessed against Lilly and William alone); the $13,576.63 for the checks deposited into the account Lilly opened at the Bank of Guam (assessed against Lilly and William alone); and $8,300 for the two premium checks that Emmy at Lilly’s direction used to buy the $8,293.50 cashier’s check (assessed jointly and severally against the Iriartes and Emmy).

 

One whose property is converted is entitled to recover interest at the legal rate from the time the property is converted.  Bank of Guam v. Nukuto, 6 FSM Intrm. 615, 616 (Chk. 1994).  The present legal rate, or judgment rate, of interest in the FSM is nine percent per annum.  The court is presented with the problem of determining how interest should be determined, since the conversions occurred over a period about three and a half years in amounts ranging from several hundred dollars to several thousand.  There was a running balance of converted funds complicated by the fact of the credits.  The evidence does not allow a precise determination of when interest would begin to accrue on the many individual amounts involved.  The exception is the $8,300.00 used to purchase the cashier’s check of $8,293.50 (plus issuance fee of $6.50).  The cashier’s check bears a date of October 29, 1999.  Thus interest will begin to run on this amount from that date.

 

The evidence provides two dates applicable to the bulk of IAC’s claim.  The Iriartes terminated their agency agreement at the end of April, 2001, and Emmy became general agent as of May 1, 2001.  All of the amounts converted during the Iriartes’ time as agents, with the exception of the cashier’s check, will begin to accrue interest as of that date.  Since Emmy was terminated as IAC’s general agent on July 1, 2003, interest will begin to accrue on the amounts converted during her time as general agent as of that date.  Thus, IAC’s damages against the Iriartes in the amount of $192,105.82 ($200,405.82 – $8,300) will bear interest at the statutory rate of nine percent per annum beginning May 1, 2001.  Of the damages awarded against Emmy, $161,399.19 ($169,666.19 – $8,300.00) will accrue interest at the statutory rate as of May 1, 2001.  The remaining damages of $125,834.49 against Emmy will accrue interest as of July 1, 2003.  Similarly with Ambros, interest will accrue on $161,366.19 from May 1, 2001, and from July 1, 2003, on $125,834.49.

 

IAC is entitled to no damages on either its claim for attorney’s fees or its claim for punitive damages, since it did not prevail on these claims.

 

H.  Attorney’s fees

 

IAC seeks its attorney’s fees in this action.  Generally, a party bears its own attorney’s fees, and this "rule is the proper foundation upon which the system here [in the FSM] should be built."  Semes v. Continental Airlines, Inc. (II), 2 FSM Intrm. 200, 208 (1986).  However, there are exceptions to this general rule.  For example, attorney’s fees have been awarded for a breach of fiduciary duty in the FSM.  Nukuto, 6 FSM Intrm. at 618.  However, in Nukuto, that award was made under a narrowly drawn exception that relied on the specific facts of that case.  Id.  The court in Nukuto first emphasized that it was "not asked to abandon the general presumption against attorney’s fees awards without statutory authority or to make fee awards a standard practice."  Id. at 617.  The defendant had breached her fiduciary duty as a bank employee by converting funds held on deposit by the Bank.  Id. at 618.  The defendant had no claim to the funds, and had no defense.  Id.  The trial court concluded that the narrowly drawn exception to the rule that the parties bear their own attorney’s fees would "only apply when a defendant has engaged in wrongdoing, has no colorable title to defense to the sums she has converted, and is wholly to blame."  Id.

 

Similarly, in the case at bar the court considers the issue of attorney’s fees in the context of the general rule that parties are to bear their own attorney’s fees.  The question is whether the facts of this case dictate a departure from that principle.  Unlike Nukuto, which involved simple theft of Bank funds, in this case the conversion arose as part of the efforts of IAC’s agents to address customer concerns about the time it took for policy holders to receive their checks for loans taken out on their policies, or for the partial or full surrender value of their policies.  A substantial amount of the cash obtained from the premium checks was distributed to policy holders.  Further, when the problem was identified, Emmy was cooperative in helping IAC determine what sums were missing.  Thus attorney’s fees are not appropriate with respect to either the Iriartes or Emmy.  Nor are attorney’s fees awarded against Ambros, since it acted in reliance on Lilly’s and Emmy’s representations when its employees cashed the checks in question.

 

                                         IV.  Conclusion

 

The defendants are liable to IAC for the reasons and in the amounts set forth above.  The clerk shall enter judgment accordingly.

 

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