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HEADNOTES

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COURT'S OPINION

MARTIN G. YINUG, Chief Justice:

This appeal is from the trial court's June 23, 2011 amended judgment on all claims and cross-claims in Civil Action No. 2003-023 and is the second appeal of the earlier May 27, 2009 decision, Individual Assurance Co. v. Iriarte, 16 FSM Intrm. 423 (Pon. 2009), in favor of Individual Assurance Co. ("IAC"). We affirm the trial court's decisions and judgment. Our reasoning follows.

I. BACKGROUND

Starting in 1999, and continuing until May of 2003, IAC's Pohnpei agents (initially William Iriarte and Lilly-Jean Iriarte, who employed Emmy Santos; in 2001, Santos replaced them as IAC's sole Pohnpei agent) received premium checks totaling more than $400,000 that were payable to IAC. Instead of being forwarded to IAC's Kansas City office as they should have been, many of the checks were cashed in Pohnpei, principally by Emmy Santos who usually cashed the checks at a store operated by Ambros & Co. Some of the money received from cashing the checks was distributed to IAC's life insurance policy holders in Pohnpei for purposes later approved by IAC (i.e. cash advances to policy-holders whose policies were eligible for cash advances). A substantial part of the cash could not be accounted for.

IAC sued to recover the unaccounted for money and the money that was accounted for but had not been used for an IAC-approved purpose. Ambros & Co. and the Iriartes both cross-claimed against all other defendants for contribution and indemnity. After trial, the trial court found William and Lilly-Jean Iriarte and Emmy Santos liable to IAC for breach of contract and breach of fiduciary duty. All three of them, along with Ambros & Co. were also found liable to IAC for conversion. IAC's judgment (which included pretrial interest) was against William Iriarte and Lilly-Jean Iriarte jointly and severally for $30,739.63; against William Iriarte, Lilly-Jean Iriarte, and Emmy Santos jointly and severally for $8,300; against William Iriarte, Lilly-Jean Iriarte, Emmy Santos, and Ambros & Company jointly and severally for $161,366.19; and against Emmy Santos and Ambros & Co. jointly and severally for $125,834.49, for a total of $326,240.31 due IAC. Individual Assurance Co., 16 FSM Intrm. at 429, 446-49. IAC's claims for punitive damages, fraud, and attorney's fees were dismissed. Id. at 441-443, 449. All defendants timely appealed. Santos later withdrew her appeal.

The first appeal was dismissed without prejudice since it was not from a final judgment because the trial court had not either ruled on the cross-claims or instead entered judgment under Rule 54(b). Iriarte v. Individual Assurance Co., 17 FSM Intrm. 356, 359 (App. 2011). After the remand, the trial court dismissed all remaining cross-claims, and, on June 23, 2011, entered an amended judgment on all claims. Defendants William Iriarte, Lilly-Jean Iriarte, and Ambros & Company then timely appealed.

II. ISSUES PRESENTED

Appellants William Iriarte and Lilly-Jean Iriarte contend that the trial court erred when it decided

1) that the Iriartes were liable for any of IAC's loss;

2) that Lilly Iriarte authorized Emmy Santos to sign Lilly's name on IAC checks or to cash IAC checks;

3) that Emmy Santos was the Iriartes' employee, but not IAC's subagent;

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4) that the Iriartes were IAC's agents until April, 2001 and that IAC terminated the Iriartes' contract;

5) that section IV of the IAC general agency contract makes the Iriartes contractually liable for the acts of Emmy Santos, an IAC subagent employed by the Iriartes to perform IAC's work on Pohnpei, when the Iriartes were not required by their contract to handle the large sums of IAC money that Santos converted;

6) that section IV of the IAC general agency contract makes the Iriartes responsible for the acts of IAC subagent Emmy Santos when Santos acted contrary to the Iriartes' instructions;

7) that section IV of the IAC general agency contract makes the Iriartes responsible for Emmy Santos's acts when IAC knew or should have known that Santos was disregarding instructions but IAC took no steps to notify the Iriartes;

8) that section VIII of the IAC general agency contract makes the Iriartes liable for more than just the first premiums when no Administrative Agreement was signed;

9) that Lilly Iriarte herself signed some IAC checks;

10) to give less weight to Lilly Iriarte's deposition than to other witnesses' testimony because Lilly Iriarte did not travel to Pohnpei to testify; and

11) that the Iriartes were liable for breach of contract, breach of fiduciary duty, and conversion.

The Iriartes also contend that Ambros & Co. should not be permitted to seek any indemnity or contribution from them.

Appellant Ambros and Company contends that

1) the trial court's factual findings were clearly erroneous;

2) the trial court's conclusions of law were in error;

3) the damage award was not supported by equity, fact, or law;

4) the trial court abused its discretion by denying Ambros & Co.'s equitable defenses;

5) the trial court erroneously denied Ambros & Co.'s motion to dismiss at the conclusion of the plaintiff's case-in-chief;

6) Ambros & Co. had an inappropriate burden of proof placed on it when it sought to deny the allegations against it or to mitigate any damages claimed;

7) the trial court erroneously used Opet v. Mobil Oil Micronesia, Inc., 3 FSM Intrm. 159 (App. 1987) to bar Ambros & Co.'s comparative negligence defense;

8) the trial court erroneously denied the applicability of the affirmative defenses of laches and estoppel;

9) the trial court erroneously denied the applicability of the 58 Pon. C. § 3-106 statute of

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limitations defense;

10) the trial court misapplied the doctrine of ratification;

11) the trial court erroneously denied Ambros & Co.'s affirmative defense that it followed good faith commercial business standards when it followed the same procedures as the Bank of Guam;

12) that the trial court erroneously disallowed the affirmative defense of apparent authority;

13) the trial court erroneously denied consideration of the mitigation of damages defense although IAC had prior knowledge that its home office was not receiving checks or that its agents had been cashing checks to provide cash advances with the proceeds;

14) IAC was negligent or grossly negligent in its actions over four years, which should have been considered either equitably or legally concerning IAC's conversion or damage claims; and

15) the trial court should have recognized Ambros & Co.'s common law indemnity cross-claim against its co-defendants.

III. STANDARDS OF REVIEW

We review de novo issues of law. E.g., Simina v. Kimeuo, 16 FSM Intrm. 616, 619 (App. 2009). We will review de novo the trial court's contract interpretation because the interpretation of contract provisions is a matter of law to be determined by the court. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 621 (App. 1996); Nanpei v. Kihara, 7 FSM Intrm. 319, 323 (App. 1995). And, we review de novo the appellants' statute of limitations claims because an issue about a statutory provision's interpretation and application is an issue of law. See Rodriguez v. Bank of the FSM, 11 FSM Intrm. 367, 377 (App. 2003).

Our standard of review for trial court findings of fact is whether those findings are clearly erroneous. E.g., George v. George, 17 FSM Intrm. 8, 9 (App. 2010). A trial court's findings are presumptively correct, id. at 10; George v. Albert, 17 FSM Intrm. 25, 30 (App. 2010), but when trial court findings are alleged to be clearly erroneous, we can find reversible error only: 1) if the trial court findings were not supported by substantial evidence in the record; or 2) if the trial court's factual finding was the result of an erroneous conception of the applicable law; or 3) if, after reviewing the entire body of the evidence and construing it in the light most favorable to the appellee, we are left with a definite and firm conviction that a mistake has been made. George, 17 FSM Intrm. at 9-10; Albert, 17 FSM Intrm. at 30. We cannot substitute our judgment for that of the trial court. Kimeuo, 16 FSM Intrm. at 620, 624.

IV. ANALYSIS

A. Challenges to the Findings of Fact

All appellants contend that the trial court's factual findings were clearly erroneous. Ambros & Co. does not single out any specific findings as erroneous, and, at oral argument, it asserted that the trial court's errors were not so much factual as a failure to properly apply the facts to the law. The Iriartes specifically challenge the trial court's findings that Lilly Iriarte herself signed some IAC checks and that Lilly Iriarte authorized Emmy Santos to sign Lilly's name on IAC checks or to cash IAC checks. They contend that the trial court should have found that Santos forged all Lilly Iriarte endorsements without their knowledge or authorization. The Iriartes contend that if the trial court had given Lilly

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Iriarte's deposition testimony the proper weight, they would not have been held liable to IAC. They further contend that the trial court would have found that all of the signatures were Santos forgeries if IAC had been required, as they believe the "best evidence" rule mandates, to produce all of the actual premium checks and if the court had then examined each original check.

The Iriartes contend that the trial court penalized them by ignoring Lilly Iriarte's deposition testimony because she did not appear for trial. The trial court stated that since the Iriartes "declined to appear at trial," it could not "assess their credibility, because in order to make this assessment the court must carefully observe the tone, hesitations, inflections, mannerisms, and general demeanor of a witness." Individual Assurance Co., 16 FSM Intrm. at 439. The trial court also stated that Carolyn Senda had testified at trial that Lilly Iriarte had physically appeared before her, claiming to have the authority to cash the checks, and signed at least one of the checks in her presence and that it found this testimony credible, and accepted it while, although the trial court considered it, the trial court rejected Lilly Iriarte's contrary deposition testimony, which had been admitted into evidence at trial. Id.

Although the Iriartes challenge the other witnesses' credibility, the trier of fact, whose duty it is to assess a witness's credibility, could accept as true other witnesses' testimony, Ponape Island Transp. Co. v. Fonoton Municipality, 13 FSM Intrm. 510, 519 (App. 2005), and thereby reject Lilly Iriarte's contrary deposition testimony. That the trial court found other testimony more credible than Lilly Iriarte's is not a ground for reversal. The trial court was in the best position to judge the witnesses' demeanor and credibility, Cholymay v. FSM, 17 FSM Intrm. 11, 17 (App. 2010), since the trial judge had the opportunity to observe the witness and the manner in which the witness testified, Ponape Island Transp. Co., 13 FSM Intrm. at 514. Admittedly, the trial judge did not have that opportunity with Lilly Iriarte since she testified by deposition (one reason why videotaped depositions are becoming popular), but we cannot presume that even if Lilly Iriarte had testified in person that the trial judge would have found her more credible than the other witnesses and then decided the case in the Iriartes' favor since there is substantial evidence in the record to support the trial court's findings.

Relying on FSM Evidence Rule 1002, the Iriartes also contend that IAC had to produce the original government premium checks, which would have proved that the Iriartes were not liable, but that since IAC had produced only copies, the trial court decision must be reversed. Rule 1002 provides that "[t]o prove the content of a writing . . . the original writing . . . is required, except as otherwise provided in these rules," but FSM Evidence Rule 1003 makes a duplicate "admissible to the same extent as an original unless (1) a genuine question is raised as to the authenticity of the original or (2) in the circumstances it would be unfair to admit the duplicate in lieu of the original." See also Cholymay, 17 FSM Intrm. at 22-23. The Iriartes do not contend that the checks are not authentic. They contend that the Lilly Iriarte signature endorsements are all Santos forgeries, and they invite us to examine each check and to note that the endorsements differ from Lilly Iriarte's true signature because the shape of the letter "r" is written differently.

The trial court, however, found as fact that, except for one or two or a few that she had signed herself, Lilly Iriarte had authorized Santos to sign her name on the premium checks. Individual Assurance Co., 16 FSM Intrm. at 434. Since substantial evidence in the record supports that finding we cannot conclude that it was clearly erroneous. A forgery is a "signature of a person that is made without the person's consent and without the person otherwise authorizing it." BLACK'S LAW DICTIONARY 650 (6th ed. 1990). Lilly Iriarte's signatures are thus not forgeries even if made by Santos. Having the original checks could not have altered the finding that Lilly Iriarte authorized Santos to sign her name.

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B. Breach of Contract

The Iriartes contend that they cannot be held liable to IAC under a breach of contract theory because their contract with IAC did not make them responsible for anything other than first policy premium payments. IAC asserts that the Iriartes were properly held liable to IAC under both Section IV and Section VIII of their General Agent Contract with IAC. The Iriartes also contend that the statute of limitations or laches bars IAC's suit.

1. Contract Section IV.4

Section IV of the Iriartes' general agent contract contains the following provision:

You shall be responsible to Us for the acts of the Agents and Brokers assigned to or appointed by You or Your employees and shall indemnify and hold Us harmless from any and all expenses, cost, causes of action, and/or damages resulting from or growing out of any unauthorized act by You or any of them.

General Agent Contract § IV.4 (Jan. 1, 1995). This is a hold-harmless clause. A hold-harmless agreement is a contract in which one party agrees to indemnify the other party, that is, to reimburse the other party for a loss suffered because of a third party's act or default; or to promise to reimburse the other party for such a loss; or to give another security against such a loss. Yoruw v. Mobil Oil Micronesia, Inc., 16 FSM Intrm. 360, 364 (Yap 2009). The words "indemnify" and "hold harmless" are typically interpreted to apply to third-party claims. Logically, a contract's hold-harmless or indemnification provision cannot apply when the party invoking it does not seek to be held harmless from a third-party claim but rather asserts its own claim against the other party for damage to its property or business. Id. at 364-65. In a hold-harmless agreement, one of the two contracting parties assumes any liability to third parties. Id. at 364. The hold-harmless provision thus allocates between the contracting parties the risk of liability to third parties.

Here, IAC seeks damages, not for liability to a third-party, but for its own claim against the other contracting party – IAC's Pohnpei agents, the Iriartes [and later Santos] – for losses to IAC's business by their failure to remit IAC funds to the IAC home office. Since this is a dispute between the contracting parties – IAC and its general agents – the IAC General Agent Contract hold-harmless provision in Section IV cannot be used as a basis for the Iriartes' liability in this case. If the trial court actually used Section IV as a basis for breach of contract liability,¹ that would have been an error of law.

2. Contract Section VIII.1

However, a different contract provision allocates the liabilities and risk of loss between the contracting parties in situations such as this. Section VIII of the Iriartes' agency contract contains the following provision:

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General Agent Contract § VIII.1 (Jan. 1, 1995). The Iriartes contend that since this provision only authorized them to accept first policy premiums and not any other premiums unless there was a separate administrative agreement and since it is undisputed that no such agreement was ever executed, they cannot be held liable for the premium checks that IAC did not receive because they were contractually liable only for the first policy premiums.

The Iriartes, however, ignore the sentence, "If no such agreement has been executed, receipts for premiums must be on the forms furnished for that purpose" which clearly contemplates that IAC's Pohnpei agents might, even in the absence of an administrative agreement, receive premium payments other than the first policy payment. The Iriartes' contractual obligation to IAC is clearly spelled out in the next sentence. "You shall immediately remit to Us, all money received or collected on Our behalf, and such money shall be considered as Our funds held in trust by You." The Iriartes obviously breached this contract provision by cashing IAC premium checks on Pohnpei instead of immediately remitting to IAC's home office those checks that they had received on IAC's behalf.

Thus, the Iriartes can be held liable to IAC on a breach of contract theory under this provision (Section VIII.1), but cannot be held liable under the hold-harmless provision (Section IV.4).

3. Statute of Limitations and Laches

The Iriartes suggest that, rather than the six-year Pohnpei statute of limitation, 58 Pon. C. § 1-307, the statute of limitations for IAC's breach of contract claim should be a three-year statute of limitation borrowed from the U.S. Uniform Commercial Code ("UCC") which, if not used as the time limitation, should be used to impose a bar under laches. Borrowing a foreign statute of limitations that bars judicial relief has no basis in law when the claim arose from acts on Pohnpei and Pohnpei state law sets a limitation period. Since the breach of contract cause of action arose on Pohnpei, Pohnpei's statute of limitations should be used. The Iriartes also have not shown any grounds to use a foreign statute of limitations period to bar on a laches ground a cause of action arising on Pohnpei under Pohnpei state law.

C. Breach of Fiduciary Duty

The Iriartes also contend that they could not be held liable to IAC under a breach of fiduciary duty theory since, in their view, their fiduciary duties were limited to first policy premiums and since they maintain that they did not convert any IAC checks. In their view, since agency law makes a subagent, such as Santos, directly liable to the principal and since a principal is liable for a subagent's acts when a subagent is necessary to the performance of the agent's business, they contend that they, as agents, cannot be liable to IAC for the acts of their own agent, IAC's subagent, Emmy Santos. The Iriartes contend that since IAC's subagent Santos had a fiduciary duty to pay the principal, IAC, what IAC was owed, then the Iriartes cannot be liable for that non-payment or have any duty to make that payment.

The Iriartes rely on a passage in 3 American Jurisprudence 2d Agency § 164 that seems to

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require a principal to seek a remedy for the subagent's misdeeds only directly against the subagent.² They neglect the immediately following material, which states, "[t]he courts are not agreed as to the liability of the agent to his principal for the negligence or default of the subagent." 3 AM. JUR. 2D Agency § 164, at 670 (rev. ed. 1986). A principal is certainly liable to a third party for the acts of its subagent and a subagent is liable to the principal for the subagent's own acts. But it would be odd indeed if an agent could instruct or authorize a subagent to do something and then escape all liability to the principal because the subagent, not the agent, did the act.

The Restatement³ of Agency expresses it better. "Unless otherwise agreed, an agent is responsible to the principal for the conduct of a . . . subagent with reference to the principal's affairs entrusted to the subagent, as the agent is for his own conduct; and as to other matters as a principal is for the conduct of a[n] . . . agent." RESTATEMENT (SECOND) OF AGENCY § 406 (1958). The Comment further notes:

Id. cmt. b. In other words, the agents (the Iriartes) were responsible to their principal (IAC) for the subagent's (Santos's) derelictions or defalcations concerning the IAC premium checks.

"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)). "Fiduciary" 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 . . . and the agent . . . is bound to the exercise of the utmost good faith, loyalty, and honesty toward his principal." 3 AM. JUR. 2D Agency § 210, at 713 (rev. ed. 1986) (footnotes omitted). Since handling IAC premium checks was within the scope of their agency and since the Iriartes did not exercise the "utmost good faith, loyalty, and honesty" toward IAC when they were IAC's agents because they did not immediately remit all premium checks to IAC, the Iriartes breached the fiduciary duty they owed to IAC. They were properly found liable under a breach of fiduciary duty theory.

D. Conversion

The Iriartes contend that they cannot be held liable under a conversion theory because, in their view, except for those checks deposited into a Bank of Guam account to extract Micro Life premiums that were due the Iriartes, and not IAC, but which the government agencies had mistakenly included

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in their IAC premium checks, all of the IAC checks were cashed without their authorization by Santos who forged Lilly Iriarte's endorsement. As discussed above, that contention fails because Lilly Iriarte had authorized Santos to sign her name, thus no forgery.

Ambros & Co. contends (and to the extent applicable, the Iriartes join) that the trial court should have honored the defenses it raised and found it (and, in the Iriartes' view, the Iriartes) not liable. Its defenses were: comparative negligence, mitigation of damages, good faith commercial business standards, statute of limitations, laches and estoppel, ratification, apparent authority, and Ambros & Co. asserts that prejudgment interest should not have been awarded because IAC failed to prove the time of conversion. Ambros & Co. also contends that the trial court should have dismissed IAC's case against Ambros & Co. after IAC had presented its case-in-chief.

1. Comparative Negligence

Ambros & Co. contends that the trial court improperly held that comparative negligence is not a defense to a conversion action when it relied on Opet v. Mobil Oil Micronesia, Inc., 3 FSM Intrm. 159, 166 (App. 1987), which held that contributory negligence is not a defense to conversion. Ambros & Co. further contends that IAC was negligent or grossly negligent in its actions and that Ambros & Co. should have been permitted to use that negligence, equitably or legally, as a defense against IAC's claims.

It is irrelevant that, after Opet was decided, the contributory negligence defense was supplanted by comparative negligence. Neither contributory nor comparative negligence is a defense against a common law action for conversion. See 18 AM. JUR. 2D Conversion §§ 90-104 (rev. ed. 1985). For comparative negligence to be a defense, the plaintiff's cause of action must be one based on negligence. See PROSSER AND KEETON ON THE LAW OF TORTS §§ 65-67 (W. Page Keeton et al. eds., 5th ed. 1984). Conversion is an intentional tort and not a cause of action based on negligence and thus comparative negligence cannot be a defense to conversion. E.g., State v. McBride, 940 P.2d 539, 544-45 (Utah Ct. App. 1997). As a matter of law, no type of negligence is a defense to the intentional tort of conversion. See PROSSER & KEETON, supra, § 67, at 477-78. The trial court therefore properly denied the use of comparative negligence as a defense to conversion.

2. Alleged Inappropriate Burden of Proof

Ambros & Co. contends that the trial court placed an improper burden of proof on it since, in its view, it proved its affirmative defenses but was not allowed to prevail on any of them. Ambros & Co. objects that the trial court, although making many favorable rulings, impermissibly held it to a strict liability standard.

That is not a valid ground for objection. "In common law jurisdictions, conversion is an intentional tort giving rise to strict liability . . . ." Louisiana v. Guidry, 489 F.3d 692, 702 (5th Cir. 2007); see also First Nat'l Bank v. Southwestern Livestock, Inc., 859 F.2d 847, 850 (10th Cir. 1988) ("conversion is a strict liability tort" (emphasis in original)); United States v. New Holland Sales Stables, Inc., 619 F. Supp. 1162, 1165 (E.D. Pa. 1985); United States v. Gallatin Livestock Auction, Inc., 448 F. Supp. 616, 621 (W.D. Mo. 1978); United States v. Topeka Livestock Auction, Inc., 392 F. Supp. 944, 948 (N.D. Ind. 1975). "Conversion is a strict liability tort. The tort-feasor's intent and knowledge are irrelevant to his liability." Centerre Bank v. New Holland Div. of Sperry Corp., 832 F.2d 1415, 1423 (7th Cir. 1987); see also Kremen v. Cohen, 337 F.3d 1024, 1035 (9th Cir. 2003); Millennium Fin. Servs., L.L.C. v. Thole, 74 P.3d 57, 64 (Kan. Ct. App. 2003). Conversion "'is a strict liability tort [whereby, t]he foundation of the action rests neither in the knowledge nor the intent of the defendant.' Specifically, a defendant can be liable for conversion even where he acted in good faith, lacked

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knowledge of the conversion, or lacked motive to commit the tort." Bailey v. County of San Joaquin, 671 F. Supp. 2d 1167, 1178 (E.D. Cal. 2009) (alteration in original) (citation omitted); see also Moore v. Regents of the Univ. of Cal., 793 P.2d 479, 494 & n.38 (Cal. 1990). A conversion action "is a species of strict liability in which the defendant's good faith, due care, ignorance or mistake are irrelevant and may not be set up as a defense." Krusi v. Bear, Stearns & Co., 192 Cal. Rptr. 793, 798 (Cal. Ct. App. 1983); see also Irving Nelkin & Co. v. South Beverly Hills Wilshire Jewelry & Loan, 28 Cal. Rptr. 3d 815, 821 (Cal. Ct. App. 2005) (motive also immaterial). Accordingly, the trial court did not place an impermissible burden on Ambros & Co. and the other defendants when they opposed IAC's conversion claim.

"In a conversion suit, it is no defense that the defendant was not negligent or that the defendant acquired the plaintiff's property through the plaintiff's unilateral mistake, or that the defendant acted in complete innocence and perfect good faith." 18 AM. JUR. 2D Conversion § 90, at 208 (rev. ed. 1985). That is not to say that there are no defenses to a conversion action. A defendant may successfully defend by proving that the plaintiff consented to the defendant's taking, or that the defendant had rights in the property superior to the plaintiff's, or that the plaintiff has waived its cause of action, or that the plaintiff is estopped from asserting any right to the property. Id. at 208-09; cf. First Bank of Okarche v. Lepak, 961 P.2d 194, 200-01 (Okla. 1998) (recognizing common law conversion defenses of consent, waiver, and estoppel).

3. Apparent Authority and Good Faith Commercial Standards

Ambros & Co. contends that the Iriartes and then Santos had the apparent authority to cash IAC checks since they were IAC's agents on Pohnpei. The trial court, when it determined that they did not have apparent authority to cash IAC checks, relied, in part, on Sales Promotions Executives Association v. Schlinger & Weiss, Inc., 234 N.Y.S.2d 785 (N.Y. City Civ. Ct. 1962).

In that case, the plaintiff's employee cashed, at a grocery store, 49 checks made out to his corporate employer by signing his name under a corporate endorsement. The plaintiff sued the grocery store for conversion, using the checks as the evidence of that conversion. Id. at 787. Since checks with corporate payees are normally deposited in a corporate bank account and not negotiated for cash or endorsed over to another person, the court held that "[o]ne who pays out on such a check does so at his own peril." Id. at 786. The court also held that "it cannot be said that negligence either in hiring of the employee who stole and forged the checks or in failing to discover the larcenies at an earlier date is good as a whole or partial defense to a conversion action." Id. at 787-88. In other words, neither contributory negligence (whole defense) nor comparative negligence (partial defense) was a defense to conversion of the checks despite any apparent authority. Thus, even though the plaintiff had not been careful in hiring a person with a prior criminal record and had been lax in failing to learn of the larcenies earlier, the grocery store was liable to the plaintiff corporate payee for conversion. Id. at 788.⁴ That case is uncannily very factually close to this case, except that in the present case, the check casher,

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rather than merely being a trusted customer, is a close relative⁵ of the store's owner.

Ambros & Co. asserts that it should not be liable to IAC because it cashed the checks in good faith since, in its view, the Iriartes and Santos had the apparent authority to cash IAC checks. Ambros & Co. takes issue with the trial court's reliance on Sales Promotions Executives Association and directs the court's attention to two other cases – American National Insurance Co. v. Fidelity Bank, N.A., 691 F.2d 464 (10th Cir. 1982) and Elliot B. Black III, M.D. v. Whitney National Bank, 618 So. 2d 509 (La. Ct. App. 1993).

In American National Insurance Co., a bank accepted checks bearing unauthorized endorsements for deposit in an account controlled by the plaintiff insurance company's agents. The bank was not liable to the plaintiff because the bank had no knowledge of the trust relationship between the agent and the plaintiff; because the UCC barred recovery from a depository bank beyond what it still held on deposit when it acted in good faith in accordance with the reasonable commercial standards of the banking business; and because the plaintiff had been the party in the best position to prevent the loss. And, in Elliot B. Black III, the bank did not have to reimburse the plaintiff doctor, who had not only exercised no supervision over his office manager's actions while giving her authority over his finances well beyond the normal employer-employee relationship but also shared joint signature authority with her on his professional medical corporation's bank account and on a shared joint personal checking account, for checks the office manager had over a nine-year period forged the doctor's endorsement and deposited into her checking account because she had been given an extraordinary authority over his bank accounts, because a state statute (like the UCC provision in American National Insurance Co.) protected the bank in such cases, and because it was barred by a statutory one-year prescriptive (limitations) period for suits over checks with forged endorsements.

Ambros & Co.'s cases are not on point. First, Elliot B. Black III is a Louisiana case decided under Louisiana state law and Louisiana is not a common law jurisdiction and does not recognize the common law tort of conversion.⁶ Second, in neither case were the checks cashed. The checks were accepted for deposit only (the way corporate checks are normally handled). The defendants were not retail business establishments that cashed checks but were banks that accepted the checks (with forged corporate endorsements) for deposit and were protected from liability for amounts beyond the funds they still had on deposit by UCC provisions that, only for banks in certain circumstances, departed from the common law rule and introduced a fault or negligence defense to conversion.⁷ Ambros & Co. is not a bank, and the UCC provisions in the cases it cites have not been enacted in the FSM and, in any case, those statutes only protect banks and not stores like Ambros & Co. But it is doubtful that the UCC would protect Ambros & Co. even if it were a bank. There was no IAC endorsement, forged or otherwise, on any check cashed at Ambros & Co. The IAC checks all bore only the personal endorsements of either Lilly Iriarte or Emmy Santos. Ambros & Co. cashed IAC checks presented by Lilly Iriarte (at least once) and by Santos (most of the time) and with only the personal endorsement of one of them. Ambros & Co. did not deposit them in an IAC corporate account.

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It is not logical that any individual would have apparent authority to cash a check with a corporate payee, especially a foreign corporation. The Iriartes and Santos may have had apparent authority to perform a number of acts on IAC's behalf, but cashing checks with IAC as the payee was not one of them. The Sales Promotions Executives Association court stated it correctly: "One who pays out on such a check does so at his own peril." 234 N.Y.S.2d at 786. Courts often apportion liability on the party best able to prevent the loss. In this case, that was Ambros & Co. All it had to do was to refuse to cash the checks because they were made out to a corporation with an off-island address (IAC's address was usually on the checks' face) as the checks' payee and not made out to the individuals endorsing them and seeking to cash them. If Ambros & Co. wanted to cash any checks naming a corporation such as IAC as the payee, Ambros & Co. had a duty to determine that the corporation had authorized the person seeking to cash the check to do so. Id. at 786-87.

In a defense related to the apparent authority defense, Ambros & Co. contends that it should have been absolved of any liability to IAC on the ground that it had followed good faith commercial business standards when it had cashed the IAC premium checks. It contends that it cashed the IAC checks in the same manner as the Bank of Guam cashed similar IAC checks.

The Bank of Guam was never a party in this case. It is thus irrelevant what the Bank of Guam did or that it was not held liable or that Ambros & Co. might have acted the same way or that Santos would have cashed the IAC checks there if the lines were not so long. Besides, the Bank did not cash any IAC checks;⁸ it accepted them for deposit in an account that Lilly Iriarte opened in IAC's name. If the Bank of Guam had been sued, it too might have been held liable. We cannot say. This issue is not before us to decide. Ambros & Co. cannot use as an excuse that the Bank of Guam got away with cashing some IAC checks for the Iriartes so Ambros & Co. ought to also be able to get away with it.

Ambros & Co. is not a bank. Whatever commercial banking business standards might apply to the Bank of Guam cannot be the same as those for a retail/wholesale store such as Ambros & Co. For a retail/wholesale store to cash checks with a corporate payee, particularly a large, off-island corporate payee with an off-island address printed on the check's face, with only an individual's personal endorsement and without written authorization from the corporate payee cannot possibly be considered a good faith commercial business standard.⁹ Granted, it might be commercially reasonable for a business to cash checks for its customers (with the expectation that they will buy goods), but IAC was not an Ambros & Co. customer. Furthermore, as discussed above, good faith is not a defense to conversion. See supra part IV.D.2.

We therefore hold that, as a matter of law, no individual can ever have the apparent authority

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to cash a check that has a corporation as the payee. We further hold that, as a matter of law, any business that cashes such a check with a corporate payee is not engaged in a commercially reasonable business practice. This is especially true when, as here, the check is only endorsed by an individual and has not been endorsed by the corporation and the corporation has an off-island address.

4. Ratification

Ambros & Co. contends that the trial court erroneously applied the doctrine of ratification. Generally, any ratification of an unauthorized agreement must be in its entirety because an entity cannot accept the benefits of an unauthorized act, but reject its burdens. Marcus v. Truk Trading Corp., 11 FSM Intrm. 152, 161 (Chk. 2002). Ambros & Co. argues that since the trial court found that IAC ratified its agents' use of cash derived from IAC premium checks to pay cash advances to eligible policy-holders and thus ratified the cashing of those IAC checks that paid for the cash advances, IAC should be considered to have ratified their agents' cashing all the other IAC checks as well (and thus all defendants would escape any liability to IAC).

Ambros & Co. bases its argument on the trial court's statement that "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." Individual Assurance Co., 16 FSM Intrm. at 444. This legal conclusion is mistaken or misstated. Properly stated, it is that IAC, by its acts, ratified only the unauthorized agreements between its agents and its eligible policy-holders – the distribution of cash advances to eligible policy-holders. IAC therefore "recovered"¹⁰ those funds from its policy-holders and since IAC is not entitled to a double recovery, the defendants could not be held liable for those sums and IAC could not claim those sums from the defendants and had to give the defendants credit for them.

In other words, once IAC ratified its agents' unauthorized agreements with its eligible policy-holders, IAC was barred from "recovering" any of that money from Ambros & Co. (or any other defendant) because that would be a double recovery since IAC had already "recovered" those funds from its policy-holders. Plaintiffs are not permitted a double recovery. See, e.g., M/V Kyowa Violet v. People of Rull ex rel. Mafel, 16 FSM Intrm. 49, 63 (App. 2008); Yoruw, 16 FSM Intrm. at 365; FSM v. Koshin 31, 16 FSM Intrm. 350, 355 (Pon. 2009); Oceanic Lumber, Inc. v. Vincent & Bros. Constr. Co., 16 FSM Intrm. 222, 225 (Chk. 2008); Warren v. Pohnpei State Dep't of Public Safety, 13 FSM Intrm. 483, 493 (Pon. 2005); AHPW, Inc. v. FSM, 12 FSM Intrm. 544, 556 (Pon. 2004); Atesom v. Kukkun, 10 FSM Intrm. 19, 23 (Chk. 2001). IAC, by its acts, did not "ratify" its agents' check-cashing agreements with Ambros & Co. when it gave Ambros & Co. (and the Iriartes) credit for the cash advances to eligible IAC policy-holders. IAC merely recognized that it was not entitled to double recovery. "[A]lthough good faith and mistake are not defenses to an action for conversion, the plaintiff's damages will be reduced if the defendant returns the property or the plaintiff otherwise recovers the property." Krusi, 192 Cal. Rptr. at 798. Here, IAC recovered some of its property from its eligible insureds and so properly reduced its claim.

The issue of partial ratification should thus not arise. IAC ratified its agents' unauthorized

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agreements with its eligible policy-holders in their entirety. IAC did not ratify any of or any part of its agents' unauthorized agreements or acts with Ambros & Co. This is not exactly what the trial court concluded, but our legal analysis is precise and our legal conclusion fairly states why Ambros & Co.'s partial ratification argument cannot succeed although it seems plausible. To the extent that the trial court held that IAC ratified any check-cashing, it made an erroneous conclusion of law when applying the ratification principle.

We conclude that, as matter of law, IAC did not ratify any of its agents' check-cashing agreements. It ratified only each of its agents' unauthorized agreements with its eligible policy-holders. No unauthorized agreement was partially ratified. Any contrary legal conclusion by the trial court was in error.

5. Mitigation of Damages

Ambros & Co. contends that IAC should have mitigated its damages by notifying the banks and all the businesses on Pohnpei that cashed checks not to cash checks with IAC as the payee. Ambros & Co. also urges that IAC should not have continued to employ Santos after her check-cashing activities were first discovered so that Ambros & Co. should not be liable for any checks it cashed for Santos after then.

This is another negligence defense in that Ambros & Co. claims that IAC was negligent in failing to take certain steps in mitigation. Negligence, as noted above, is not a defense to conversion. See supra part IV.D.1. This includes negligence in hiring the agent who stole or negligence in not discovering the losses sooner. Sales Promotions Executives Ass'n, 234 N.Y.S.2d at 787-88.

One sound reason for the mitigation principle is that it makes commercial sense to discourage a plaintiff from sitting back and letting damages get larger instead of stemming further losses. But "an innocent party cannot be expected to take steps to mitigate damages before it was aware of the breach." Northern Ariz. Gas Serv., Inc. v. Petrolane Transport, Inc., 702 P.2d 696, 707 (Ariz. Ct. App. 1984). IAC first became aware of the breach in May 2002, when Santos revealed to Tom Dage, an IAC regional director, that she had been cashing checks to pay cash advances to policy-holders. Any inaction before that date cannot be a failure to mitigate damages [because it did not know it had any to mitigate].

IAC trusted Santos, believing that the check-cashing was the result of the Iriartes' improper instruction (with the good intentions of satisfying policy-holders' demands for cash advances) to Santos after they hired her. When, after May 2002, IAC kept Santos on as its agent, it did not foresee any possible further losses. The trial court found as fact that IAC felt that it had solved the problem and prevented any further loss (and thus mitigated any damages) by instructing Santos not to cash any more IAC checks but to send them all to IAC. The trial court found IAC's trust in Santos "understandable." It stated that it "had the opportunity to observe Emmy's demeanor during the trial. She has a manner and demeanor that invites trust." Individual Assurance Co., 16 FSM Intrm. at 443. In this circumstance, barring recovery because IAC did not warn everyplace on Pohnpei that cashed checks not to cash checks made out to IAC (something they should not be doing anyway because the checks had a corporation as a payee), would only serve to reward the tort-feasors and to penalize the tort victim.

In order to bar recovery because IAC did not fire Santos, we would have to hold as clearly erroneous the trial court finding that "based on the evidence presented, IAC's conduct was understandable" because Santos had "a manner and demeanor that invite[d] trust," a finding that the trial court came to, not only from witness testimony but also from the trial court's own observation of

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Santos's manner and demeanor during trial and while she testified, Individual Assurance Co., 16 FSM Intrm. at 443. We did not have that opportunity (to observe Santos) and since there is substantial evidence in the record to support it, we cannot hold that this finding is clearly erroneous. We do not decide factual issues de novo. E.g., In re Sanction of George, 17 FSM Intrm. 613, 616 (App. 2011). And, we decline to create a rule of law that whenever an employer discovers that its funds have been converted, it must fire everyone in sight.

When in October 2002, IAC learned that Santos was still managing to cash some IAC checks, IAC instructed the four government agencies, whose checks Santos had been cashing, to deposit all their premium checks directly into the IAC's Bank of the FSM account instead of allowing Santos to pick them up. Once again, IAC believed it had solved the problem and prevented any further loss. Individual Assurance Co., 16 FSM Intrm. at 444.

We realize that barring IAC from recovering sums for checks cashed at Ambros & Co. after October 2002, when IAC learned that Santos was continuing to cash premium checks despite IAC's explicit instructions not to, may have a certain appeal to it. We conclude, however, that, even if it were available, such a course is untenable because Santos had earlier (May 2002) admitted to Ambros Senda, her stepfather and the principal of Ambros & Co., that she had been doing something she should not have – cashing IAC checks. Ambros & Co. was thus on notice that it should not cash IAC checks any more. Yet it did.

6. Statute of Limitations

Ambros & Co. contends that IAC should be barred from recovery because the limitation in Section 3-106(5) of Pohnpei Code Title 58 sets a two-year limitation period for "[a]ctions of a depositor against a bank or similar institution for the payment of a forged or raised check which bears a forged or unauthorized endorsement." This defense fails on its face because Ambros & Co. is a retail (and wholesale) store and is not a bank or a similar [financial] institution and IAC most certainly is not a "depositor" in Ambros & Co.'s "institution."

7. Laches and Estoppel

Ambros & Co. contends that it should have prevailed on its laches and estoppel defenses. It asks that laches be applied to bar any liability before May 2002, and it further contends that IAC should be estopped from any damages for checks after May, 2002 because IAC did not ask Santos where she had been cashing the IAC premium checks.

Generally, the equitable defense of laches is only available to a defendant when the plaintiff has sought some form of equitable relief and is not available as a defense against actions at law. FSM Dev. Bank v. Gouland, 9 FSM Intrm. 605, 607 (Chk. 2000). It has two elements – "the passage of a nonspecific amount of time during which the plaintiff engages in inexcusable delay or lack of diligence in bringing suit, and resulting prejudice to the defendant." Nahnken of Nett v. Pohnpei, 7 FSM Intrm. 485, 489 (App. 1996). Conversion is an action at law and laches is thus not a defense that can be used against a conversion claim. E.g., Shonberer v. Oswell, 530 A.2d 112, 115 (Pa. Super. 1987); Herzfeld & Stern v. Freidus, 330 N.Y.S.2d 479, 480 (N.Y. Sup. Ct. 1971). Even if it were available, Ambros & Co. could not prevail on a laches defense since IAC filed suit shortly after Santos was terminated and added Ambros & Co. as a defendant in 2004 shortly after discovery revealed Ambros & Co.'s part in the check-cashing scheme. This is not inexcusable delay. Laches cannot be applied here even if it were a permissible defense.

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Under the doctrine of equitable estoppel, a person may sometimes be precluded by his act or conduct, or silence when he has a duty to speak, from asserting a right which he otherwise would have had, and this equitable doctrine will apply only when justice demands intervention on behalf of a person misled by the conduct of the party estopped. Etpison v. Perman, 1 FSM Intrm. 405, 417 (Pon. 1984). A party seeking to invoke the equitable estoppel doctrine must prove that 1) another party made representations or statements; 2) the party reasonably relied upon the representations; and 3) the party will be harmed if estoppel is not allowed. John v. Chuuk Public Utility Corp., 16 FSM Intrm. 226, 228 (Chk. 2008). Ambros & Co., the party seeking to invoke equitable estoppel, did not rely on any statement made by IAC or on any action IAC took. One essential element of equitable estoppel "so far as the party to be estopped is concerned, is that he should have intended, or at least expected, that his conduct on which it is sought to predicate the estoppel should be acted upon by the other party or by other persons." 28 AM. JUR. 2D Estoppel and Waiver § 46, at 476 (rev. ed. 2000). Ambros & Co. did not show and does not contend that IAC ever had such an intent or expectation. "The burden of proof is on the party alleging and relying on estoppel. Equitable estoppel is based on fraudulent conduct or fraudulent result. One must knowingly take a position with intention that it be acted upon, and reliance thereon by another to his prejudice." Ames Trust & Sav. Bank v. Reichardt, 121 N.W.2d 200, 204, 7 A.L.R.3d 900, 906 (Iowa 1963) (citations omitted). That does not describe IAC's conduct. "The application of the doctrine of equitable estoppel generally requires an express representation made by the party estopped and relied upon by another party who changes his position to his detriment." 28 AM. JUR. 2D Estoppel and Waiver § 49, at 477-78 (rev. ed. 2000). IAC made no express representations that Ambros & Co. relied upon.

Ambros & Co. apparently seeks to estop IAC by relying on IAC not informing Ambros & Co. and all other businesses on Pohnpei not to cash checks made payable to IAC. But IAC is not required to warn businesses not to cash checks with it as a payee since those business should not be cashing checks payable to a large, off-island corporation, anyway. It was Ambros & Co. that had a duty to determine whether the person seeking to cash a check with a corporate payee (IAC) was authorized by the corporation (IAC) to do so, if it was going to cash IAC checks. Sales Promotions Executives Ass'n, 234 N.Y.S.2d at 786-87. IAC did not owe Ambros & Co. a duty to stop it (or its co-defendants) from converting IAC property. "Estoppel is to be applied against wrongdoers, not the victim of a wrong." 28 AM. JUR. 2D Estoppel and Waiver § 30, at 459 (rev. ed. 2000).

Since estoppel is an equitable remedy that may be invoked only by parties who themselves have acted properly concerning the subject of the litigation, Phillip v. Marianas Ins. Co., 12 FSM Intrm. 301, 307 (Pon. 2004), Ambros & Co. cannot prevail on this defense. It behaved improperly by cashing IAC checks without IAC's express authorization and it did not reasonably rely on any IAC statement. Equitable estoppel has been "defined simply as 'the familiar principle that where one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss, must sustain it.'" Morgan Guar. Trust Co. v. Third Nat'l Bank, 400 F. Supp. 383, 391 (D. Mass. 1975) (quoting National Safe Deposit, Sav. & Trust Co. v. Hibbs, 229 U.S. 391, 394, 33 S. Ct. 818, 819, 57 L. Ed. 1241, 1246 (1913)). In this case, that would be Ambros & Co. which enabled Santos to occasion the loss.

8. Failure to Prove the Time of Conversion

Ambros & Co. correctly notes that when prejudgment interest is awarded in a conversion case, the interest starts running on the date of the conversion. Bank of Guam v. Nukuto, 6 FSM Intrm. 615, 616 (Chk. 1994). Ambros & Co. contends that since the trial court failed to follow this principle it should not have to pay pre-judgment interest because the exact dates of the conversions were not

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proven.

The trial court, when faced with the daunting task of sorting out the separate conversions and relevant dates of the countervailing credits, chose instead to use, in each set of IAC claims, the last possible date any of the IAC checks could have been converted. Individual Assurance Co., 16 FSM Intrm. at 448-49. Ambros & Co. (and the Iriartes) thus got the benefit of every doubt when it came to calculating interest liability. If, as Ambros & Co. suggests, exact dates for each conversion and each credit were used and calculated, the defendants' prejudgment interest liability could only be higher than that the trial court actually imposed. If Ambros & Co. prevailed on this claim and we remanded it to the trial court to determine the precise dates for each conversion, it would be to Ambros & Co.'s detriment.

9. Failure to Dismiss Case after Plaintiff's Case-in-Chief

Ambros & Co. contends that the trial court erred by not granting its motion to dismiss the case after IAC had presented its case-in-chief. This issue is baseless since we are affirming the trial court decision on its merits. Only if Ambros & Co. had prevailed on this appeal would we need to consider this point.

E. Ambros & Co.'s Equitable Indemnification Cross-Claim

Ambros & Co. contends that the trial court erred because it should have recognized Ambros & Co.'s common law indemnity cross-claim against its co-defendants, and the Iriartes contend that they should not be subject to a contribution or an indemnification claim from Ambros & Co. because Santos cashed the IAC checks there without their permission.

1. Contribution

The Iriartes assert that we should not hold that they are liable to Ambros & Co. for contribution. Ambros & Co. does not challenge on appeal the trial court ruling that any claim for contribution is premature since statutorily the "right of contribution exists only in favor of a tort feasor who has paid more than his pro rata share of the common liability, and his total recovery is limited to the amount paid by him in excess of his pro rata share." 6 F.S.M.C. 1202(2). Ambros & Co. has not yet paid IAC anything on the judgment.

We cannot rule on whether the Iriartes would be liable for contribution to Ambros & Co. since there can be no actual case or dispute until Ambros & Co. has paid more than its pro rata share. Anything we say now would be an advisory opinion and we do not have any jurisdiction to give advisory opinions. See, e.g., Allen v. Kosrae, 15 FSM Intrm. 18, 23 (App. 2007) (court need not, and indeed should not, engage in rendering advisory opinions); Fritz v. National Election Dir., 11 FSM Intrm. 442, 444 (App. 2003) (court does not sit to render advisory opinions).

2. Equitable Indemnification

Ambros & Co. contends that the trial court should have recognized that it has an equitable right to indemnification. The trial court has in the past recognized a right to indemnity when, in a contract between the parties, an indemnification clause's language provides for it with precise clarity. FSM v. Bartolome, 4 FSM Intrm. 182, 185 (Pon. 1990); Semens v. Continental Air Lines, 2 FSM Intrm. 131, 136-37 (Pon. 1985). But the trial court has so far declined to recognize a common law (equitable) indemnity claim. Fonoton Municipality v. Ponape Island Transp. Co., 12 FSM Intrm. 337, 347 (Pon. 2004); Primo v. Semes, 11 FSM Intrm. 324, 329 (Pon. 2003); Joy Enterprises, Inc. v. Pohnpei Utilities

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Corp., 8 FSM Intrm. 306, 311 (Pon. 1998). We have not considered the issue before. Ambros & Co. contends that the time has come for equitable indemnity to be recognized and that, under the circumstances, Ambros & Co. should be allowed that remedy because, according to a legal treatise, indemnity should be allowed when the indemnitee [Ambros & Co.] incurred tort liability by performing an act not manifestly wrong at the direction of or for the benefit of, and in reliance upon, an indemnitor [Ambros & Co.'s co-defendants].

While we are not bound to adopt common-law doctrines, we may, under 1 Pon. C. § 1-123 and 1 F.S.M.C. 203, use the Restatements of the Law as the rules of decision¹¹ to determine and apply the common law in the absence of written law while keeping in mind the suitability of any given common law principle for the FSM. See Pohnpei v. AHPW, Inc., 14 FSM Intrm. 1, 24 (App. 2006); FSM v. GMP Hawaii, Inc., 17 FSM Intrm. 555, 580 n.14 (Pon. 2011); Senda v. Semes, 8 FSM Intrm. 484, 495 (Pon. 1998); Pohnpei v. M/V Miyo Maru No. 11, 8 FSM Intrm. 281, 293-94 (Pon. 1998); Rauzi v. FSM, 2 FSM Intrm. 8, 14-15 (Pon. 1985). Thus, if we were to recognize an equitable indemnity cause of action, its elements would be those set forth in the Restatement. The Restatement of Torts states:

RESTATEMENT (SECOND) OF TORTS § 886B (1979). An equitable indemnity cause of action thus accrues only once a party (the indemnitee) has "discharge[d] the liability of both." Case law supports this. "A prerequisite to an equitable indemnity claim is that the party seeking it (indemnitee) have discharged the liability for the party against whom it is sought (indemnitor)." District of Columbia v. Washington Hosp. Ctr., 722 A.2d 332, 341 (D.C. 1998); see also Grinnell Mut. Reinsurance Co. v. Center Mut. Ins. Co., 658 N.W.2d 363, 381 (N.D. 2003). Neither Ambros & Co. (seeking indemnity from all co-defendants) nor the Iriartes (seeking indemnity from Santos) have discharged any of their liability to IAC.

Thus, even if the cause of action were recognized, no equitable indemnity claim has yet accrued. Since it has not, any opinion we express about whether equitable indemnity ought to be recognized would only be an advisory opinion. We hereby neither recognize equitable indemnity as a cause of action nor foreclose that possibility. Our opinion here will not bar the future filing of an equitable indemnity action in the trial court if and when the circumstances warrant. By this opinion, we inform the trial court that, if such an action is filed, it may then take a fresh look at the issue and develop a record and determine 1) whether equitable indemnity should be recognized in this jurisdiction; 2) whether the contribution statute would affect or preclude the recognition of equitable indemnity; and 3) whether, if the principle is recognized, equitable indemnity can be applied to the case before it after considering whether the indemnitee's acts were manifestly unlawful or reasonablely believed to be lawful or were induced by a misrepresentation on which an indemnitee justifiably relied.

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V. CONCLUSION

Accordingly, we affirm the trial court's May 27, 2009 decision and its June 23, 2011 amended judgment.

Footnotes:

¹ Whether the trial court actually used Section IV.4 as a basis of liability is unclear because, although the trial court quoted Section IV in its findings of fact, Individual Assurance Co., 16 FSM Intrm. at 430, it only cited Section VIII in its discussion of breach of contract liability, id. at 437. That would usually lead us to conclude that the trial court breach of contract decision was based only on Section VIII. But since both the Iriartes and IAC have briefed and argued this appeal as if Section IV was also a basis for the trial court decision, we have addressed the issue.

² This presumes that they manage to overturn the trial court's factual finding that they authorized Santos to cash IAC premium checks, which they have not.

³ We are statutorily authorized to consider the common law as expressed in the ALI Restatements of Law. 1 Pon. C. § 1-123 ("The rules of the common law, as expressed in the restatements of the law approved by the American Law Institute . . . shall be the rules of decision in the courts of the state of Pohnpei in applicable cases, in the absence of written law applicable to the state of Pohnpei . . . ."); see also 1 F.S.M.C. 203 ("The rules of the common law, as expressed in the restatements of the law approved by the American Law Institute . . . shall be the rules of decision . . . in applicable cases . . . .").

⁴ The courts in Simmons v. Lennon, 773 A.2d 1064 (Md. Ct. Spec. App. 2001) and Aritor Corp. v. Chase Manhattan Bank, 240 N.Y.S.2d 615, 615 (N.Y. Sup. Ct. 1963) noted the Sales Promotions Executives Association decision but did not follow it because in both cases the plaintiff was the drawer of the check, not the payee and in Simmons the drawer was even suing the payee.

⁵ Both Lilly Iriarte and Santos are related to the Ambros & Co. owners. Santos is the step-daughter of the Ambros & Co. principal.

⁶ See Dual Drilling Co. v. Equipment Invs., Inc., 721 So. 2d 853, 857-58 (La. 1998); Snow v. Weyant, 923 So. 2d 34, 37-38 (La. App. Ct. 2005) for discussion of the difference between common law tort of conversion and the civil law delict or civilian tort of conversion present in Louisiana law.

⁷ See Menici v. Grant, 995 F.2d 1224, 1233-34 (3d Cir. 1993) for a discussion of the Uniform Commercial Code's departure from the common law in creating this statutory protection.

⁸ On only one occasion, Santos managed to get almost $8,300 in cash from the Bank of Guam through a devious method of depositing premium checks, using the deposit to obtain a certified check payable to IAC, and then later returning the certified check for a cash refund. Individual Assurance Co., 16 FSM Intrm. at 434.

⁹ For instance, we do not think that anyone could reasonably argue that a business should be considered blameless if it readily gave out cash to a Telecom employee who presented a check from the national or state government made out to FSM Telecommunications Corporation. It should be the same with any check with a corporation, particularly a large corporation, as a payee. We do not see why it should be any different for IAC.

¹⁰ IAC had already "recovered" those funds because cash advances are deducted from the cash value of a policy and if the insured dies before repaying it that amount (plus interest) is deducted from the death benefit. There is thus no eventual loss to the insurer, IAC, of advances credited to the policy-holders, and contrary to Ambros & Co.'s belief, it was to everyone's benefit, IAC and Ambros & Co. included, to credit as many advances as could be substantiated as that would also lower the defendants' liability.

¹¹ See supra note 3.