FSM SUPREME COURT
APPELLATE DIVISION
Cite as Kosrae Island Credit Union v. Obot,
7 FSM Intrm. 416 (App. 1996)

[7 FSM Intrm. 416]

KOSRAE ISLAND CREDIT UNION,
Appellant,

vs.

KALIS OBET, ELINA SIGRAH and CARON SIGRAH,
Appellees.

APPEAL CASE NO. K1-1995

OPINION

Submitted:  January 12, 1996
Decided:  March 14, 1996

BEFORE:
Hon. Andon L. Amaraich, Chief Justice, FSM Supreme Court
Hon. Richard H. Benson, Associate Justice, FSM Supreme Court
Hon. Martin G. Yinug, Associate Justice, FSM Supreme Court

APPEARANCES:
For the Appellant:     Delson Ehmes, Esq.
                                    P.O. Box 1018
                                    Kolonia, Pohnpei FM 96941

For the Appellee:      Charles Greenfield, Esq.
                                    Micronesian Legal Services Corporation
                                    P.O. Box 129
                                    Kolonia, Pohnpei FM 96941

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HEADNOTES
Appeal and Certiorari) Decisions Reviewable
     When no motion for relief from judgment was filed in the trial court and the appellant appealed from an order in aid of judgment, the appellate court cannot address the validity of the underlying judgment as the issue was never properly raised before the trial court.  Kosrae Island Credit Union v. Obet, 7 FSM Intrm. 416, 419-20 (App. 1996).

Agency
     Under the law of agency, a principal is liable not just for the expressly authorized acts and

[7 FSM Intrm. 417]

contracts of his agent, but also, with respect to third parties who deal with his agent in good faith, for actions his agent takes with apparent authority to act on behalf of the principal.  Apparent authority may be implied where the principal passively permits the agent to appear to a third person to have authority to act on his behalf.  Kosrae Island Credit Union v. Obet, 7 FSM Intrm. 416, 419 n.2 (App. 1996).

*    *    *    *

COURT'S OPINION
ANDON L. AMARAICH, Chief Justice:

Background
     This is an appeal from a Kosrae State Court decision on a motion for an order in aid of judgment.  The underlying facts are as follows.

     On October 31, 1994, plaintiffs, who are now appellees, filed a complaint for injunctive and declaratory relief against the Kosrae Island Credit Union (KICU) in Kosrae State Court.  Plaintiffs' complaint alleged that KICU had refused to allow them to withdraw their credit union shares, despite a provision in the KICU bylaws which allows for withdrawal, and despite plaintiffs' repeated oral and written requests to KICU for the release of their shares.  Plaintiffs also filed an application for a temporary restraining order, to enjoin KICU from refusing to allow them to withdraw their shares.  That application was supported with affidavits from each plaintiff, attesting to the circumstances surrounding their repeated requests for the withdrawal of their shares.

     On November 17, 1994, the parties entered into a Stipulated Judgment and Order through their respective counsel.  Charles Greenfield, of Micronesian Legal Services Corporation, signed the stipulated judgment on behalf of the plaintiffs. Akiyusy Palsis signed on behalf of KICU.  Under the terms of that Stipulated Judgment and Order, which was entered as an order of the court, KICU agreed as follows:

1.  Defendant KICU will pay plaintiffs Heinrick Jackson and Elwel Palik 100% of their remaining KICU shares no later than 5:00 p.m. on Thursday, November 24, 1994.

2.  Defendant KICU will pay plaintiffs Kalis Obet, Elina Sigrah and Caron Sigrah 50% of their remaining shares no later than 5:00 p.m. on Thursday, November 24, 1994.

3.  Defendant KICU will pay plaintiffs Kalis Obet, Elina Sigrah and Caron Sigrah all of their shares in KICU remaining after the payment listed in No. 2, above, no later than 5:00 p.m. on Thursday, December 22, 1994.

KICU met its November 24, 1994 payment obligations, but failed to make the payments required on December 22, 1994.

     According to an affidavit filed by Canney Palsis, a trial counselor with the Micronesian Legal Services Corporation, on December 22, 1994, Canney Palsis had a conversation with defendant's counsel, Mr. Akiyusi Palsis.  At that time, he was informed that the KICU Board of Directors had decided not to effect the remaining payments to the plaintiffs required by the November 17, 1994 Order. Canney Palsis spoke on that day and the next day with members of the KICU Board of Directors, who confirmed KICU's position.

[7 FSM Intrm. 418]

     On December 27, 1994, plaintiffs moved the Kosrae State Court for an order holding KICU, its Board of Directors and Acting Manager in contempt for failure to comply with the terms of the November 17, 1994 Stipulated Judgment and Order. Prior to the scheduled hearing on this motion, the parties agreed to convert plaintiffs' motion to show cause into a motion for an order in aid of judgment.

     On January 26, 1995, after hearing the testimony of the parties, the trial court granted plaintiffs' motion for an order in aid of judgment, and ordered KICU to pay $1,757.36 to counsel for plaintiffs no later than February 28, 1995.  This sum represented the amount still owed to Kalis Obet, Elina Sigrah and Caron Sigrah. The Court entered a written order on February 3, 1995, and on February 28, 1995, KICU completed its payments in satisfaction of the November 17, 1994 Stipulated Judgment.  On March 16, 1995, defendant filed a notice of appeal from the trial court's February 3, 1995 Judgment and Order.

      Appellant KICU raises a single issue on appeal:  whether the Kosrae State Court wrongly held, based on the law of agency, that KICU was bound by the Stipulated Judgment and Order entered into by its counsel and entered as an order of the court, even though its counsel had not been specifically authorized to enter into that stipulation.1

     Appellees take the position that the issue of KICU's counsel's authority or lack of authority to consent to judgment was never properly raised before the trial court, and therefore this Court has no jurisdiction to address the issue on appeal.

Discussion
     The Court has carefully reviewed the record in this appeal, paying particular attention to the transcript of the hearing on plaintiffs' motion for an order in aid of judgment, and the February 3, 1995 Judgment and Order issued by the Kosrae State Court.  It is clear to this Court that KICU raised the issue of its counsel's lack of authority to enter into the Stipulated Judgment only in an effort to obtain a postponement of payments required under that judgment until KICU could build up its cash reserves.  See Transcript (Jan. 26, 1995) (hereinafter "Tr.") at 56-57. Counsel did not raise the issue in an effort to have the November 17, 1995 Stipulated Judgment and Order set aside in its entirety.  Id.  Counsel for defendant essentially argued that if KICU's Board of Directors had been aware of the terms of the proposed stipulation before it was signed, the Board would not have authorized Akiyusi Palsis to commit KICU to its terms.  KICU's bylaws require it to maintain certain cash reserves, and there might not have been sufficient cash reserves available to make the proposed payments, on the proposed payment dates.  See id. at 55-57.

     The Kosrae State Court appropriately recognized that whether Akiyusi Palsis had been specifically authorized to consent to judgment was not an issue that was before the trial court:

Defendant KICU submits that the stipulated judgment was entered by former counsel Akiyusy Palsis without any authority.  Defendant further argues that the Board was not

[7 FSM Intrm. 419]

aware of such stipulation.

Whether or not former counsel Akiyusy Palsis' contract had expired during November 1994 is not an issue before this Court.  Such issue is a matter between defendant and its former counsel, which is not relevant to defendant's obligations under the stipulation.  Defendant would be well-advised to study the law of agency on this issue. (emphasis added)

Judgment and Order at 3 (Feb. 3, 1995).

     This Court observes that if KICU had seriously sought to challenge the validity of the November 17, 1994 Stipulated Judgment and Order, that challenge should have been raised by an appropriate motion to the trial court, prior to the trial court's hearing on plaintiffs' motion for an order in aid of judgment.  Yet KICU never requested that the trial court set aside the Stipulated Judgment on the basis of its former counsel's alleged lack of authority.  In fact, at the hearing on plaintiffs' motion for an order in aid of judgment, counsel for the defendant specifically stated in reference to the November 17, 1994 Stipulated Judgment and Order, "I'm not trying to set it aside but if necessary I may be filing motion for relief from judgment before I leave today."  Tr. at 57.  Defendant never filed such a motion.

     If the issue of Akiyusi Palsis's authority to act on behalf of KICU had been squarely raised before the trial court in the context of a motion to set aside the judgment, the Appellate Division would have the benefit of a full record and briefing on the issue of counsel's authority or lack of authority to enter into the November 17, 1994 Stipulated Judgment and Order.  We would also have the benefit of a reasoned decision on the issue by the trial court.  See Loch v. FSM, 2 Intrm. 234, 236 (App. 1986).  However, because defendant made no such motion to the trial court, the parties did not fully brief and argue the issue, and the trial court did not rule on whether KICU had specifically authorized Mr. Palsis to consent to judgment. The trial court merely assisted in the enforcement of the November 17, 1994 Stipulated Judgment and Order, which had been signed by counsel for both parties, each ostensibly with apparent authority to sign on behalf of his client.2

     This Court cannot address an issue on appeal which was never properly raised before the trial court.  See Nena v. Kosrae (I), 6 FSM Intrm. 251, 254 (App. 1993) ("[t]he general rule [is] that one cannot raise on appeal a ground not presented in the trial court . . ."); Paul v. Celestine, 4 FSM Intrm. 205, 210 (App. 1990) ("on appeal a party is bound by the theory advanced in the trial court, and

[7 FSM Intrm. 420]

cannot urge a ground for relief which was not presented there"); Loch, 2 FSM Intrm. at 236 ("[t]he appellate process contemplates that any issue brought before an appellate court will first have been ruled upon by a trial judge").

Conclusion
     This Court finds that the issue of whether KICU specifically authorized Akiyusi Palsis to consent to judgment in this action was never properly presented to the trial court, and therefore the issue has not been preserved for appeal.  For this reason, this appeal is hereby dismissed.

1. The additional issues raised in appellant's notice of appeal have been narrowed to this one issue in appellant's brief.  The Appellate Division, on its own motion, raised the issue of mootness, and asked the parties to brief whether this appeal should be dismissed because KICU has completed the payments required under the trial court's February 3, 1995 Judgment and Order.  Because this Court now finds that the issue appellant has raised on appeal was not properly raised before the trial court, and dismisses this appeal on that basis, the Court does not need to address the issue of mootness.

2. At the hearing, Edison Nena, a member of the Board of KICU and Acting Manager of KICU, testified that in November 1994 he provided Akiyusi Palsis with the legal pleadings in this case and asked him and Jorim Mike to assist the Board with the case.  Tr. at 13-15.  Mr. Nena also testified that he believed Mr. Palsis's contract expired in November 1994.  Id. at 14.  These facts suggest that Mr. Palsis had apparent authority to act on KICU's behalf, even if he did not have actual authority.

Under the law of agency, a principal is liable not just for the expressly authorized acts and contracts of his agent, but also, with respect to third parties who deal with his agent in good faith, for actions his agent takes with apparent authority to act on behalf of the principal.  See 3 Am. Jur. 2d Agency 78 (1986).  Apparent authority may be implied where the principal passively permits the agent to appear to a third person to have authority to act on his behalf.  Id. 79.

Regardless of whether Mr. Palsis's actions were taken with actual authority, apparent authority, or even no authority, the factual issue of his authority to consent to judgment on behalf of KICU was not properly before the trial court for decision on plaintiffs' motion for an order in aid of judgment.