FSM 5 Intrm. 354-357

The controlling factor in the interpretation of contracts is the intention of the parties at the time of the entering into of the contract. Ponape Transfer & Storage, Inc. v. Wade, 5 FSM Intrm. 354, 356 (Pon. 1992).

When the language of a contract is ambiguous or uncertain a court may look beyond the words of the contract to the surrounding circumstances and the parties' intent without changing the writing.Ponape Transfer & Storage, Inc. v. Wade, 5 FSM Intrm. 354, 356 (Pon. 1992).

Where prior course of dealing and surrounding circumstances make it apparent that the parties' intention was that pay for unused vacation time would be an implied term the former employee is entitled to the pay for unused vacation time minus the applicable taxes. Ponape Transfer & Storage, Inc. v.

Where the express language of the contract does not unambiguously require the employer to pay a terminated employee the equivalent of the cost of shipping household goods back to point of hire when no goods are actually shipped and where there are no surrounding circumstances or prior course of dealing indicating that this was the parties' intent the Court will find that it was not the parties' intent and thus not a term of the contract that terminated employees be paid shipping costs for household goods not shipped. Ponape Transfer & Storage, Inc. v. Wade, 5 FSM Intrm. 354, 357 (Pon. 1992).

This case arises out of claims of the plaintiff against its former employee for personal expenses incurred by the employee. The former employee, the defendant William C. Wade, left the plaintiff's employ before the completion of his contract. The plaintiff's motion for summary judgment for various claims totaling $8,224.69 has been previously granted. At trial the defendant stipulated as to the validity of the plaintiff's two remaining claims for $180.00 and $523.72 respectively.

Against this sum of $8,928.41 admittedly owed the plaintiff the defendant has raised five counterclaims as an offset. One claim, $116.00, was stipulated to as valid by the plaintiff. The other four were at issue at trial. These four claims consist of the following: 1) a drum for a photocopier that the defendant says he supplied to the plaintiff and upon which he places a value of $200.00; 2) tools the defendant supplied one of the plaintiff's workmen upon which the defendant places a value of $149.00; 3) pay for accrued, but unused vacation for time equal to $1,076.80; and 4) payment, estimated by the defendant at $9,182.50, equal to what would have been the cost of shipping his household effects back to his point of hire, San Francisco, California, if he had in fact returned there. The last two claims are based upon the defendant's written employment contract with the plaintiff.

On the defendant's first two counterclaims testimony was elicited at trial that the plaintiff has retained the photocopier drum and tools. Thus the plaintiff has been enriched by a benefit that the defendant conferred upon the plaintiff. To prevent unjust enrichment of the plaintiff the defendant should be compensated for these benefits. Defendant's testimony as to the value of the photocopier drum and the tools was not rebutted at trial. Therefore the defendant's claims of $200 for the photocopier drum and $149 for the tools will be allowed.

The last two counterclaims are based upon the defendant's employment contract. Whether the defendant's counterclaims prevail turns upon the interpretation of the defendant's written employment contract. "In . . . interpretation of contracts, the . . . controlling factor, and indeed the very foundation of all the rules for . . . interpretation, is the intention of the parties." 17A Am. Jur. 2d Contracts § 350, at 364 (1991). "The intention with which the law is concerned in construing and giving effect to in a contract, is that of the parties at the time of entering into the contract." Ponape Transfer & Storage v. Federated Shipping Co., 2 P. S. Ct. R. 132, 145 (Tr. 1986).

When the language of a contract is ambiguous or uncertain a court may look beyond the words of the contract to the surrounding circumstances and the parties' actions to determine the parties' intent without changing the writing. 17A Am. Jur. 2d Contracts §§ 355-58. See also Melander v. Kosrae, 3 FSM Intrm. 324, 327 (Kos. S. Ct. Tr. 1988) ("When language in a [contract] is ambiguous, the court should interpret the document according to the parties' . . . intentions.").

The contract, on its face, is silent as to whether the employee is entitled to vacation pay in lieu of time not taken. The contract is thus uncertain as to whether the defendant is entitled to pay for accrued, but unused vacation time. It is generally acknowledged that "[t]he rights to vacation pay or to pay in lieu of vacation time not taken depend upon the express or implied terms of the employment contract." 53 Am. Jur. 2d Master and Servant § 80 (1970). Uncontroverted testimony at trial indicated that the defendant's immediate predecessor as the plaintiff's general manager and at least one other of the plaintiff's employees were both paid for unused vacation time, either at the end of the year or upon termination of employment. Thus, by prior course of dealing and surrounding circumstances it is apparent that it was the parties' intention that pay for unused vacation time would constitute an implied term of the employment contract.

Vacation time is part of the defendant's pay.1 The plaintiff does not dispute that $1,076.80 is the amount of vacation pay owed if any is owed. Therefore the defendant is entitled to as an offset only that part of the $1,076.80 which he would have received if the plaintiff had withheld the applicable taxes. Plaintiff shall remit the taxes, including any employer's contribution, on the defendant's vacation pay to the appropriate governmental agencies.

The defendant's largest counterclaim is for payment equal to the cost of shipping his household effects back to San Francisco. Defendant must prove, by a preponderance of the evidence, that it was the parties' intentions that the terminated employee be paid shipping costs for his household goods even

The court finds that the evidence indicates the contrary. There was no testimony or evidence presented at trial that indicated that the parties' intent was that shipping costs should be paid even though not incurred. There was no evidence of any prior course of dealing, or surrounding circumstances that would indicate that shipment costs were to be paid even though not incurred. There was no evidence that any previously terminated employees were accorded this benefit. The defendant's immediate predecessor, who did not return to his point of hire, did not receive this benefit. Additionally, the defendant did not raise this counterclaim until a considerable amount of time had elapsed.

In further support of his interpretation of the contract defendant cites an unpublished case in which a plaintiff was awarded the cost of shipping household goods back to point of hire even though the plaintiff did not return there. The judgment entered in that case is unhelpful. There is no memorandum of decision explaining the court's reasoning. The judgment merely states that "[p]laintiff shall recover of the defendant the sum of $2,249.25, an amount equal to the costs which would be incurred for repatriation and shipping to return plaintiff to her point of hire, Saipan." Mary Berman v. Pohnpei, Civ. No. 1990-086 (Pon. Mar. 1, 1991).

Mary Berman's contract was more ambiguous than William Wade's. It allowed alternatives. "Plaintiff's contract provides for transportation home or to place of hire, plus shipping costs or reimbursement." See Plaintiff's Brief, at 6 (Jan. 18, 1991). Furthermore, in their haste to rid Pohnpei of Mary Berman, Pohnpei State actually issued her an airline ticket and travel authorization for 100 lbs. air freight and 1500 lbs. ocean freight. However, there are no such alternatives in William Wade's contract, and Ponape Transfer & Storage never authorized shipment of William Wade's household effects.

Since there is no prior course of dealing, or surrounding circumstances that would indicate that this was an interpretation of the contract that the parties intended, or any applicable precedent that the contract clause objectively meant what the defendant contended it did, this counterclaim shall be denied.

The plaintiff will receive judgment for $8,928.41. The defendant will receive judgment for the $116.00 stipulated to, and for his counterclaims for the tools and the photocopier drum ($349). The defendant shall receive judgment for that portion of his unused vacation pay to which he is entitled - $1,076.80 less the appropriate taxes. The defendant's other counterclaim, for the estimated cost of shipping household effects that were never shipped, is hereby denied.

1. Cf. "The right to a paid vacation, when offered in an employer's policy or contract of employment, constitutes deferred wages for services rendered." Suastez v. Plastic Dress-Up Co., 31 Cal. 3d 774, 647 P.2d 122, 128, 183 Cal. Rptr. 846 (1982).


	FSM SUPREME COURT TRIAL DIVISION Cite as Ponape Transfer & Storage, Inc. v. Wade, 5 FSM Intrm. 354 (Pon. 1992) [5 FSM Intrm. 354] PONAPE TRANSFER & STORAGE, INC., Plaintiff, v. WILLIAM C. WADE, Defendant. FSM CIV. 1991-055 OPINION Before Andon L. Amaraich Associate Justice Trial: August 20, 1992 Decided: September 29, 1992 APPEARANCES: For the Plaintiff: R. Barrie Michelsen Attorney at Law P.O. Box 1450 Kolonia, Pohnpei FM 96941 For the Defendant: Maketo Robert Attorney at Law P.O. Box 979 Kolonia, Pohnpei FM 96941 *** * * * HEADNOTES Contracts - Interpretation The controlling factor in the interpretation of contracts is the intention of the parties at the time of the entering into of the contract. Ponape Transfer & Storage, Inc. v. Wade, 5 FSM Intrm. 354, 356 (Pon. 1992). Contracts - Interpretation When the language of a contract is ambiguous or uncertain a court may look beyond the words of the contract to the surrounding circumstances and the parties' intent without changing the writing.Ponape Transfer & Storage, Inc. v. Wade, 5 FSM Intrm. 354, 356 (Pon. 1992). Contracts - Interpretation; Contract - Implied Contracts Where prior course of dealing and surrounding circumstances make it apparent that the parties' intention was that pay for unused vacation time would be an implied term the former employee is entitled to the pay for unused vacation time minus the applicable taxes. Ponape Transfer & Storage, Inc. v. [5 FSM Intrm. 355] Wade, 5 FSM Intrm. 354, 356 (Pon. 1992). Contracts - Interpretation Where the express language of the contract does not unambiguously require the employer to pay a terminated employee the equivalent of the cost of shipping household goods back to point of hire when no goods are actually shipped and where there are no surrounding circumstances or prior course of dealing indicating that this was the parties' intent the Court will find that it was not the parties' intent and thus not a term of the contract that terminated employees be paid shipping costs for household goods not shipped. Ponape Transfer & Storage, Inc. v. Wade, 5 FSM Intrm. 354, 357 (Pon. 1992). * * * * COURT'S OPINION ANDON L. AMARAICH, Associate Justice: This case arises out of claims of the plaintiff against its former employee for personal expenses incurred by the employee. The former employee, the defendant William C. Wade, left the plaintiff's employ before the completion of his contract. The plaintiff's motion for summary judgment for various claims totaling $8,224.69 has been previously granted. At trial the defendant stipulated as to the validity of the plaintiff's two remaining claims for $180.00 and $523.72 respectively. Against this sum of $8,928.41 admittedly owed the plaintiff the defendant has raised five counterclaims as an offset. One claim, $116.00, was stipulated to as valid by the plaintiff. The other four were at issue at trial. These four claims consist of the following: 1) a drum for a photocopier that the defendant says he supplied to the plaintiff and upon which he places a value of $200.00; 2) tools the defendant supplied one of the plaintiff's workmen upon which the defendant places a value of $149.00; 3) pay for accrued, but unused vacation for time equal to $1,076.80; and 4) payment, estimated by the defendant at $9,182.50, equal to what would have been the cost of shipping his household effects back to his point of hire, San Francisco, California, if he had in fact returned there. The last two claims are based upon the defendant's written employment contract with the plaintiff. ANALYSIS On the defendant's first two counterclaims testimony was elicited at trial that the plaintiff has retained the photocopier drum and tools. Thus the plaintiff has been enriched by a benefit that the defendant conferred upon the plaintiff. To prevent unjust enrichment of the plaintiff the defendant should be compensated for these benefits. Defendant's testimony as to the value of the photocopier drum and the tools was not rebutted at trial. Therefore the defendant's claims of $200 for the photocopier drum and $149 for the tools will be allowed. [5 FSM Intrm. 356] The last two counterclaims are based upon the defendant's employment contract. Whether the defendant's counterclaims prevail turns upon the interpretation of the defendant's written employment contract. "In . . . interpretation of contracts, the . . . controlling factor, and indeed the very foundation of all the rules for . . . interpretation, is the intention of the parties." 17A Am. Jur. 2d Contracts § 350, at 364 (1991). "The intention with which the law is concerned in construing and giving effect to in a contract, is that of the parties at the time of entering into the contract." Ponape Transfer & Storage v. Federated Shipping Co., 2 P. S. Ct. R. 132, 145 (Tr. 1986). When the language of a contract is ambiguous or uncertain a court may look beyond the words of the contract to the surrounding circumstances and the parties' actions to determine the parties' intent without changing the writing. 17A Am. Jur. 2d Contracts §§ 355-58. See also Melander v. Kosrae, 3 FSM Intrm. 324, 327 (Kos. S. Ct. Tr. 1988) ("When language in a [contract] is ambiguous, the court should interpret the document according to the parties' . . . intentions."). The contract, on its face, is silent as to whether the employee is entitled to vacation pay in lieu of time not taken. The contract is thus uncertain as to whether the defendant is entitled to pay for accrued, but unused vacation time. It is generally acknowledged that "[t]he rights to vacation pay or to pay in lieu of vacation time not taken depend upon the express or implied terms of the employment contract." 53 Am. Jur. 2d Master and Servant § 80 (1970). Uncontroverted testimony at trial indicated that the defendant's immediate predecessor as the plaintiff's general manager and at least one other of the plaintiff's employees were both paid for unused vacation time, either at the end of the year or upon termination of employment. Thus, by prior course of dealing and surrounding circumstances it is apparent that it was the parties' intention that pay for unused vacation time would constitute an implied term of the employment contract. Vacation time is part of the defendant's pay.1 The plaintiff does not dispute that $1,076.80 is the amount of vacation pay owed if any is owed. Therefore the defendant is entitled to as an offset only that part of the $1,076.80 which he would have received if the plaintiff had withheld the applicable taxes. Plaintiff shall remit the taxes, including any employer's contribution, on the defendant's vacation pay to the appropriate governmental agencies. The defendant's largest counterclaim is for payment equal to the cost of shipping his household effects back to San Francisco. Defendant must prove, by a preponderance of the evidence, that it was the parties' intentions that the terminated employee be paid shipping costs for his household goods even [5 FSM Intrm. 357] when they were not shipped. The court finds that the evidence indicates the contrary. There was no testimony or evidence presented at trial that indicated that the parties' intent was that shipping costs should be paid even though not incurred. There was no evidence of any prior course of dealing, or surrounding circumstances that would indicate that shipment costs were to be paid even though not incurred. There was no evidence that any previously terminated employees were accorded this benefit. The defendant's immediate predecessor, who did not return to his point of hire, did not receive this benefit. Additionally, the defendant did not raise this counterclaim until a considerable amount of time had elapsed. In further support of his interpretation of the contract defendant cites an unpublished case in which a plaintiff was awarded the cost of shipping household goods back to point of hire even though the plaintiff did not return there. The judgment entered in that case is unhelpful. There is no memorandum of decision explaining the court's reasoning. The judgment merely states that "[p]laintiff shall recover of the defendant the sum of $2,249.25, an amount equal to the costs which would be incurred for repatriation and shipping to return plaintiff to her point of hire, Saipan." Mary Berman v. Pohnpei, Civ. No. 1990-086 (Pon. Mar. 1, 1991). Mary Berman's contract was more ambiguous than William Wade's. It allowed alternatives. "Plaintiff's contract provides for transportation home or to place of hire, plus shipping costs or reimbursement." See Plaintiff's Brief, at 6 (Jan. 18, 1991). Furthermore, in their haste to rid Pohnpei of Mary Berman, Pohnpei State actually issued her an airline ticket and travel authorization for 100 lbs. air freight and 1500 lbs. ocean freight. However, there are no such alternatives in William Wade's contract, and Ponape Transfer & Storage never authorized shipment of William Wade's household effects. Since there is no prior course of dealing, or surrounding circumstances that would indicate that this was an interpretation of the contract that the parties intended, or any applicable precedent that the contract clause objectively meant what the defendant contended it did, this counterclaim shall be denied. CONCLUSION** The plaintiff will receive judgment for $8,928.41. The defendant will receive judgment for the $116.00 stipulated to, and for his counterclaims for the tools and the photocopier drum ($349). The defendant shall receive judgment for that portion of his unused vacation pay to which he is entitled - $1,076.80 less the appropriate taxes. The defendant's other counterclaim, for the estimated cost of shipping household effects that were never shipped, is hereby denied. * * * * Footnote: 1. Cf. "The right to a paid vacation, when offered in an employer's policy or contract of employment, constitutes deferred wages for services rendered." Suastez v. Plastic Dress-Up Co., 31 Cal. 3d 774, 647 P.2d 122, 128, 183 Cal. Rptr. 846 (1982).