KOSRAE STATE COURT TRIAL DIVISION

Cite as Heirs of Tulenkun v. Simon, 16 FSM Intrm. 636 (Kos. S. Ct. Tr. 2009)

SMALL CLAIM NO. 52-09

Trial: October 19, 2009
Decided: December 10, 2009

APPEARANCES:

HEADNOTES

COURT'S OPINION

ALIKSA B. ALIKSA, Chief Justice:

    The Heirs of Edmund Tulenkun filed a small claim action against Snyder Simon for $510.00 on October 5, 2009. The nature of their claim is that of Snyder Simon representing them as counsel and the contract they had with counsel. The Defendant filed his answer on October 9, 2009 denying the claim and also a motion to dismiss, motion for summary judgment and/or judgment on the pleadings as well as a counterclaim for breach of contract.

    The procedure for small claims cases is set out in the Kosrae Rules of Civil Procedure Rule 87 and GCO's that apply. Any civil action under $3,000 is considered under Rule 87 and the purpose of the procedure "is to enable small claims to be justly decided and fully disposed of with less formality, paper work, and expenditure of time than is required by the ordinary procedure for larger claims." Kos. Civ. R. 87(b). A docket card is kept showing the pleadings, actions of the court, payments, or other reports and this docket card ordinarily constitutes the entire record. See id. In this case, the plaintiff stated the nature and amount of the claim to the clerk who noted this on the docket card and the plaintiff signed this which, under the Small Claims Rules, constitutes the complaint. No other written pleading is required unless the court orders otherwise. See Kos. Civ. R. 87(c).

    On October 12, 2009 this Court held a hearing on this matter with Snyder Simon appearing pro se and Joab A. Edmond as a representative for the Plaintiffs. The Court heard the claims by the Plaintiff and the Defendant and recessed the matter to review the parties' claims. The Court called a trial on the matter on October 19, 2009. After hearing from the parties and reviewing the motions by the Defendant, this Court found that the Defendant breached his contract with the Plaintiff by not representing the Plaintiff and failing to file a brief which caused the Plaintiff to lose their appeal and lose any interest in the land they were appealing. This Court announced its decision in Court and this written decision explains the Court's decision.

ANALYSIS AND DISCUSSION

    The Plaintiffs' claim can be examined under either attorney malpractice claim or a breach of contract claim. The Plaintiffs' claim that the Defendant did not do the work that he promised and because of his failure as an attorney, they lost their appeal. The Plaintiffs asked this Court for the

$500.00 that they paid the Defendant in legal fees and $10.00 filing fee for the case.

    The Defendant states that during May and June 2008, the Plaintiffs approached him in order for him to provide legal assistance with an appeal case in the FSM Supreme Court. The Plaintiffs had filed the case pro se and now were seeking an attorney. The Defendant claims he stated he would not perform the duties and told the Plaintiff that he should seek other counsel. However, the Defendant assisted the Plaintiff with a motion for enlargement and also helped fax the enlargement. This occurred around May 26 or 27 and the Defendant did not sign the pleadings. The Defendant states "Following the granting of the motion for enlargement, the Joab Edmond once again approached the undersigned attorney." In fact the motion that the Defendant helped write did not even help the Defendant as the FSM Court had already granted Plaintiffs' Motion to Enlarge before this motion was filed. At this point there was no discussion of a contract or that the Plaintiff would pay the Defendant for this work. The Plaintiff continued to seek other counsel however they were still unable to secure counsel.

    Finally, on July 3, 2008 a contract was entered into between the Plaintiff and the Defendant where the Plaintiffs retain and employ Snyder Simon as their attorney to handle their appeal case. The contract states that a "minimum non-refundable retainer fee of $5,000 is required, and this account will be charged at the rate of $100.00 per hour . . . ." The contract also states that if the matter requires attention beyond the thirty days from opening of the file, periodic billings will be made and credited against the retainer. The contract also states that the retainer will be replenished in an amount determined by the attorney.

    The Defendant asks this court for a motion to dismiss as it is a frivolous claim. The Plaintiffs' claim is one for breach of contract and there are factual allegations that are in dispute. The parties entered into a contract for legal services and the Plaintiffs claim that the Defendant did not perform what he promised to do. The Defendant claims that the Plaintiffs brought suit against the Defendant knowing that they were in breach of contract. This is not a valid legal argument and the Plaintiff was not aware they were in breach of contract; rather they felt that Defendant was in breach. There are issues in this case that are in dispute and the claim is not frivolous. Therefore, this motion is denied because the claim is not frivolous. Defendant further asks this Court for sanctions stating they are appropriate because the suit is frivolous. Counsel cites Rule 11 of the Kosrae Rules of Civil Procedure. This Rule was amended by GCO 2002-5 which the Defendant does not cite. This rule states in part that "[t]he signature of an attorney or trial counselor constitutes a certificate by the signer that the signer has read the pleading, motion or other paper; that to the best of the signer's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith . . . ." The Plaintiff believed in good faith that a claim existed and this claim fell under the existing law of contracts. The small claims lawsuit was not used to harass or cause unnecessary delay and is grounded in fact. Therefore, the Defendant's claim for sanctions is denied as the claim is not frivolous.

    The Defendant also asks for a dismissal for breach of contract. This is actually not a claim for dismissal, rather a counterclaim as the Defendant argues that the Plaintiff breached the contract. The counterclaim issue will be discussed with the Plaintiffs' claim for breach of contract.

    The Defendant next claims the Plaintiffs failed to state a claim upon which relief may be granted. There is a basis to the Plaintiffs' suit and this claim by Defendant shall be denied. A motion to dismiss for failure to state a claim for which relief can be granted brought under Kosrae Civil Rule 12(b)(6) will be granted only if it appears to a certainty that no relief can be granted under any state of facts which could be proven in support of the claim. See Asumen Venture, Inc. v. Board of Trustees, 12 FSM Intrm. 84, 91 & n.2 (Pon. 2003). In making its determination the court is to assume the allegations in the complaint to be true and give the plaintiff the benefit of all reasonable inferences. Jano v. King,

5 FSM Intrm. 388, 390 (Pon. 1992); see also Union Indus. Co. v. Santos , 7 FSM Intrm. 242, 244 (Pon. 1995) (stating a motion to dismiss for failure to state a claim will be granted only if it appears to a certainty that no relief can be granted under any state of facts that could be proven in support of the claim, and a court must assume that the facts alleged in the complaint are true, and the facts and inferences drawn from the complaint must be viewed by the court in the light most favorable to party opposing the motion to dismiss the complaint); Dorval Tankship Pty, Ltd. v. Department of Finance, 8 FSM Intrm. 111, 114 (Chk. 1997); Reg v. Falan, 11 FSM Intrm. 393, 399 (Yap 2003). If matters outside the pleadings are referred to or presented and not excluded by the court, a motion to dismiss for failure to state a claim upon which relief can be granted, it shall be treated as one for summary judgment under Rule 56. Rudolph v. Louis Family, Inc., 13 FSM Intrm. 118, 125 (Chk. 2005). Many documents were presented by the Defendant and it has been held that regardless of intent, if a document is presented that is outside the pleadings, the court will treat the motion to dismiss as one for summary judgment under Rule 56 as provided in Rule 12(b) of the Kosrae Rules of Civil Procedure. See Dai Wang Sheng v. Japan Far Seas Purse Seine Fishing Ass'n, 10 FSM Intrm. 112, 114 (Kos. 2001). Rule 56 provides for summary judgment in a movant's favor if the pleadings and facts properly before the court 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. Kos. Civ. R. 56(c). For purposes of a summary judgment motion, the court views all facts in the light most favorable to the nonmovant. See, e.g., Dai Wang Sheng, 10 FSM Intrm. at 114. In examining the case under a summary judgment standard, in viewing all facts in light most favorable to the Plaintiffs, there is a genuine issue as to material facts in the case. There is a controversy over the contract and services rendered and in viewing the evidence in the light most favorable to the Plaintiffs, the Defendant is not entitled to a judgment as a matter of law. Therefore the Defendant's motion to dismiss that the Plaintiffs failed to state a claim upon which relief may be granted is denied.

    The Defendant also claims the Plaintiffs failed to join an indispensable party. The Defendant does not cite any legal authority applicable for his claim. The Defendant cites two cases, Kinere v. Kosrae Land Comm'n, 13 FSM Intrm. 78, 80 (Kos. S. Ct. Tr. 2004) and Segal v. National Fisheries Corp., 11 FSM Intrm. 340, 342 (Kos. 2003). Neither case discusses indispensable parties; rather they deal primarily with statute of limitations. One case discusses attorney discipline and sanctions for ghostwriting, which it appears the Defendant did in this case and this will be discussed later. There is no legal basis for this claim as the Defendant states that the suit must be dismissed because the claim fails to name Joab Edmond as a real party in interest. In fact, Joab Edmond is a party as he is one of the Heirs of Edmond Tulenkun. The Defendant states that the Plaintiff should have also named Moureen Andrew as a party because she funded the $500.00 in issue. This again is not correct as this person was not a party to the contract and further the Defendant fails to cite any pertinent authority.

    Next, the Defendant seeks a motion for summary judgment and/or motion for judgment on the pleadings. A motion for a judgment on the pleadings is governed by Rule 12(c) of Kosrae Rules of Civil Procedure and it states that "[i]f, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56." As a result, this motion will be treated as one for summary judgment. Summary judgment must 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." Kos. Civ. R. 56(c). In considering a summary judgment motion, this Court must view the facts and inferences in a light that is most favorable to the party opposing the motion. Sigrah v. Kosrae State Land Comm'n, 11 FSM Intrm. 169 (Kos. S. Ct. Tr. 2002). The burden of showing a lack of triable issues of fact belongs to the moving party. Kihara Real Estate, Inc. v. Estate of Nanpei (I) , 6 FSM Intrm. 48, 53 (Pon. 1993). As discussed supra, there are genuine issues of material fact in the case. Therefore, the Defendant's Motion for Summary Judgment is denied.

    Finally, the Defendant also brings a counterclaim and cross action against the Plaintiff. The Defendant misuses or misunderstands what a cross action is and this is not appropriate in this case. A cross-claim is where one party can bring a claim against a co-party. However, the counterclaim is a valid claim as it is a compulsory counterclaim since the claim is arising out of the same transaction or occurrence that is the subject matter of the opposing party's claim. This counterclaim for breach of contract will be discussed with the Plaintiffs' claim for breach of contract.

    The final issue is thus the Plaintiffs' small claim action and the Defendant's counterclaim of breach of contract. This action was filed as a small claim case and as so, the plaintiff is only required to state the nature and amount of his claim to the clerk who then reduces it to writing very briefly on the docket card under the date the statement is made and then it is signed. See Kos. Civ. R. 87(c). The docket card which is signed by the plaintiff in an action constitutes the complaint and no other written pleading is required. Id. In this case the nature of the claim is about the Defendant's legal services provided and the amount of the claim is $510.00. After reviewing the docket card and upon questioning the Plaintiff, the nature of the complaint is that of breach of contract or of legal malpractice. This Court could not find any cases on point in the Federated States of Micronesia that deal with legal malpractice claims. The FSM Supreme Court has stated that the "common law decisions of the United States are an appropriate source of guidance for this Court for contract and tort issues unresolved by statutes, decisions of constitutional courts here, or custom and tradition within the Federated States of Micronesia." Semens v. Continental Air Lines, Inc. (I), 2 FSM Intrm. 131, 142 (Pon. 1985). This Court will look to common law decisions of the United States for guidance on the contract issues raised in this lawsuit "against the background of pertinent aspects of Micronesian society and culture." Id.

    Legal malpractice is a generic term for at least three distinct causes of action available to clients who suffer damages because of their lawyers' misbehavior. Clients wronged by their lawyers may sue for damages based on breach of contract, breach of fiduciary duty, or negligence. See Roy Ryden Anderson & Walter W. Steele, Jr., Fiduciary Duty, Tort and Contract: A Primer on the Legal Malpractice Puzzle, 47 SMU L. REV. 235 (1994) (arguing for careful distinctions between contract, tort, and fiduciary duty causes of action for legal malpractice); see also Dunn v. McKay, Burton, McMurray & Thurman, 584 P.2d 894, 904 (Utah 1978) (Maughan, J., dissenting) (stating "an action for legal malpractice may be framed conceptually as either a tort or a breach of contract"). Regardless of whether the cause of action is based on negligence, breach of contract, or breach of fiduciary duty, the central purpose of the law of legal malpractice is to guard against and to remedy exploitation of the power lawyers possess over their clients' lives and property. See Anderson & Steele, supra, at 236. An attorney has a duty to provide competent legal advice and representation. Abramson v. Wildman, 964 A.2d 703, 711 (Md. Ct. Spec. App. 2009). Action against an attorney for malpractice may be brought in contract or in tort. Id.; RESTATEMENT (THIRD) OF LAW GOVERNING LAWYERS ' 55 cmt. c ("Ordinarily, a plaintiff may cast a legal-malpractice claim as a tort claim, a contract claim, or both . . . ."). A contract action for lawyer malpractice is of ancient vintage. In Wilcox v. Plummer's Ex'rs, 29 U.S. (4 Pet.) 172, 182, 7 L. Ed. 821, 824 (1830), an assumpsit action for legal malpractice, the Supreme Court said that "[w]hen the attorney was chargeable with negligence or unskillfulness, his contract was violated . . . ." The Plaintiffs in this case did not specify under what theory of action they were bringing their claim. The Plaintiffs are seeking to recover damages in the amount they paid the Defendant to handle their appeal. The Plaintiffs are not seeking to recover the amount of the land that was at issue in the appeal. Therefore, this Court will look at the Plaintiffs' claim as one for breach of contract and not legal malpractice. As this Court stated in its oral decision, the Plaintiffs, by filing this small claim action, are not barred from filing a lawsuit based on legal malpractice or other claims for the amount of land or other damages involved in the appeal.

    Therefore this Court is not looking at negligence in this case or the manner in which the brief was written as there was no brief written or submitted to the FSM Supreme Court Appellate Division.

In this case the Defendant did not guarantee a specific result, promise, warranted or specified an outcome in the appeals case. The present case is a "do nothing" case where the promisor-attorney had promised or stated to perform a certain activity, to represent the Plaintiffs in handling of an appeal, and the failure to complete that action exposed the promisor-attorney to liability for breach of contract.

    The parties entered into a "contract for legal services" on July 3, 2008. The contract states, in part:

    There was no contract for any work conducted before July 3, 2008 as the contract was not signed until this date. The Defendant billed the Plaintiff for $500.00 for work done before July 3, 2008. This consisted of a two motion for enlargements, a notice of appearance and a meeting with the client. According to the Defendant's bill, there is $2,600 worth of work completed after this date with work consisting of case discussion, case review, legal research, brief drafting, and a motion for enlargement allegedly taking place between July 3, 2008 and August 9, 2008. There was also three hours of work billed for an opposition to a motion to dismiss billed on November 28, 2009.

    In this case, the first question is whether there is a valid contract. The plaintiff has the burden of proving each element of a claim by a preponderance of evidence. Tulensru v. Wakuk, 10 FSM Intrm. 128, 132 (App. 2001). A contract is a promise between two parties for the future performance of mutual obligations which the law will enforce in some way. Livaie v. Weilbacher, 13 FSM Intrm. 139, 143 (App. 2005). For the promise to be enforceable there must be an offer, acceptance, consideration, and definite terms. Id.; Isaac v. Palik, 13 FSM Intrm. 396, 399 (Kos. S. Ct. Tr. 2005); Ponape Constr. Co. v. Pohnpei, 6 FSM Intrm. 114, 123 (Pon. 1993); George v. Alik, 13 FSM Intrm. 12, 14 (Kos. S. Ct. Tr. 2004).

    The contract here is for the attorney to provide legal assistance for the Plaintiffs' appeal case. The terms are stated that the attorney will represent the Plaintiffs and the Plaintiffs will pay the Defendant at a rate of $100.00 per hour. In the present case, there is a promise between the two parties with an offer of performing legal services and the acceptance on the Plaintiffs' behalf. There was mutual assent between the Plaintiffs and the Defendant where the parties reached a meeting of the minds with the Defendant making the offer and the Plaintiffs accepting the offer. There also was the presence of consideration for the promise as the Defendant offered to give his legal services to the Plaintiffs in exchange for the money from the Plaintiffs. There was a bargained-for exchange between the parties and what was bargained for was considered of legal value. The terms of the contract were definite and therefore there was a contract between the two parties. Thus, the contract is a valid written contract for the performance of legal services for a fee.

    The next issue is whether either party breached the contract. If a party fails to perform, then the contract is breached and damages may be awarded. See, e.g., O'Byrne v. George, 9 FSM Intrm. 62 (Kos. S. Ct. Tr. 1999); Youngstrom v. Mongkeya, 11 FSM Intrm. 550 (Kos. S. Ct. Tr. 2003); Livaie v. Weilbacher, 11 FSM Intrm. 644 (Kos. S. Ct. Tr. 2003); Malem v. Kosrae, 9 FSM Intrm. 233, 236 (Kos. S. Ct. Tr. 1999) (holding that when one party fails to perform their promise, there is a breach of contract). A breach of contract which is material justifies a halt in performance under the contract by the injured party. George, 13 FSM Intrm. at 15.

    The Defendant had promised to handle the appeal case for the Plaintiffs. The Defendant failed to file a brief in the case resulting in the appeal case to be dismissed. Because of the Defendant=s failure, the appeal was dismissed. The Defendant breached the contract with the Plaintiffs when he failed to file a brief and caused the case to be dismissed.

    In a contract case, the trial court has a wide discretion in determining the amount of damages. Isaac, 13 FSM Intrm. at 401. In a breach of contract case, the non-breaching party is entitled to damages that will put the party in the position he would have been if not for the breach. George, 13 FSM Intrm. at 15; Kihara Real Estate, Inc. v. Estate of Nanpei (III) , 6 FSM Intrm. 502, 505 (Pon. 1994); Isaac, 13 FSM Intrm. at 402. The Plaintiffs must therefore be put in the position they would have been in if not for the breach.

    When the Defendant failed to perform his duties as an appellant lawyer to the Plaintiffs, he breached the contract. The Defendant did not complete what he stated he would do which was to provide legal representation, the "handling of an appeal," in which the Plaintiffs were appellants. The Defendant never filed a brief in the case and because of this, the case was dismissed. The Defendant did, however, bill the Plaintiffs for 20 hours, $2,000, for legal research, case review, case discussion, and drafting the brief. Yet, a brief was never filed. Also, there was no indication or proof that the Plaintiffs ever received this bill. Because the brief was never filed and FSM Appeal Case K10-2007 was dismissed, the Defendant breached his contract. The services promised were not performed and because no brief was filed, the Defendant cannot bill the Plaintiffs for hours he worked on the brief as there was no brief filed or evidence of work.

    The Defendant also billed the Plaintiffs for three Motion for Enlargements, a notice of appearance, and an Opposition to a Motion to Dismiss totaling eleven hours of work. The only evidence the Defendant provides of any work is his bill and Exhibit 5 which is a Motion for Enlargement of Time. This Motion, however, was not signed by the Defendant. The Defendant does state that he assisted the Plaintiffs with this motion and this would be considered "ghostwriting" and a possible ethical violation as the Defendant did not sign the Motion. In total, three Motions for Enlargements were billed totaling 8 hours of work and $800 in fees. Also, three hours were billed for an opposition to a motion for dismissal at $300.00. There was no indication or proof that the Plaintiffs ever received this bill. Further, this Court does not believe that all services billed for are an accurate representation as all the services are billed at an exact hour increment. The contract provided that the services would be billed in one-tenth units and it is unlikely everything the Defendant stated he did came to an exact hour showing. The Defendant does not provide any proof of these eleven hours of work, or $1,100 in fees. Thus, the Defendant cannot prove these fees and the Plaintiff should not have been charged for these. Therefore, the Court does not find evidence to prove the Defendant's counterclaim for breach of contract based on a preponderance of the evidence.

    Because the Defendant has not proved beyond a preponderance of evidence his breach of contract claim, it is dismissed. The Plaintiffs did have a contract with the Defendant. The appeal case was dismissed without the Plaintiffs getting their day on court due to the Defendant's failure to file required materials with the appellate court. Therefore, the Plaintiffs are entitled to a refund of their

$500.00 that they paid the Defendant as a retainer in this case. In addition, this Court also requires the Defendant to pay the $10 filing fee to the Plaintiffs. Accordingly, this Court finds for the Plaintiffs and requires the Defendant to pay damages in the amount of $510.00 to them. This is the amount to put the non-breaching party, the Plaintiffs, in a position they would have been in but-for the breach. See George, 13 FSM Intrm. at 15.

    In the contract the Plaintiffs were required to give a non-refundable retainer fee of $5,000. The Defendant appears to have waived this requirement because he only required $500.00, altering the contract. Even if he has not, a court may order the refund of an unearned portion of any retainer fee, even a fee designated as "nonrefundable." See, e.g., Jennings v. Backmeyer, 569 N.E.2d 689 (Ind. Ct. App. 1991); Cincinnati Bar Ass'n v. Shultz, 643 N.E.2d 1139 (Ohio 1994). Nonrefundable retainers are disfavored on public policy grounds. See, e.g., Provanzano v. National Auto Credit, Inc., 10 F. Supp. 2d 44 (D. Mass. 1998); Wong v. Michael Kennedy, P.C., 853 F. Supp. 73 (E.D.N.Y. 1994) (only when retainer paid solely for lawyer's availability may it be called "general retainer" and made nonrefundable; when client contracts for specified services, agreement is "special retainer" and, under In re Cooperman, 591 N.Y.S.2d 855 (App. Div. 1993), must be refundable); In re Cooperman, 591 N.Y.S.2d 855 (App. Div. 1993) (nonrefundable retainer interferes with client's right to discharge lawyer at any stage of proceeding and would, if enforced, allow lawyer to retain unearned fees; absolutely nonrefundable retainer unethical and unenforceable). Thus, the Defendant is required to return the retainer fee of $500.00 in this case.

    This court is also very concerned about a number of possible ethical violations committed by the Defendant in handling of the Plaintiffs' case. Among others, it appears Model Rules of Professional Conduct Rules 1.1 Competence, 1.3 Diligence, and 1.4 Communication may have been violated. These possible violations were in the handling of Appeal Action K10-2007 in the Supreme Court of the Federated States of Micronesia, Appellate Division and not the Kosrae State Court. Therefore, this Court will not address these ethical rules but has a duty to inform the FSM Supreme Court of the possible violations.

CONCLUSION

    The Plaintiffs and the Defendant entered into a valid contract on July 3, 2008. The contract was for the Defendant to handle the appeal case of K10-2007 and for the Plaintiffs to pay for the Defendant's legal services. The Defendant breached the contract when he failed to provide legal services and file a brief in the case, causing the case to be dismissed. The Defendant alleges that he did provide legal services but only provides as evidence a bill and one motion for enlargement, completed before the contract was signed and not signed by the Defendant. There is also no evidence that the Plaintiffs ever received the bill or any evidence that the Defendant performed the services billed for in the case. Accordingly, the Defendant's counterclaim is dismissed. Based on the information provided by the parties, applicable law and rules, and Model Rules of Professional Conduct, this Court finds in favor of the Plaintiffs. The Defendant breached the contract. Plaintiffs paid the Defendant a $500.00 retainer fee and the Plaintiffs are entitled to reimbursement of that fee. Furthermore, as the prevailing party, the Plaintiffs are also entitled to reimbursement of the Court's filing fee of $10.00. Accordingly, judgment is entered in favor of the Plaintiffs and against the Defendant in the total amount of $510.00.