7 FSM Intrm. 613-623

A broadly stated affirmative defense not argued at trial and on which no evidence has been submitted and which was therefore summarily rejected by the trial court has not been preserved for appeal. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 618 (App. 1996).

The defendant has the burden of proving affirmative defenses. A defense raised for the first time in a defendant's written closing argument does not meet the burden of proof. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 619 (App. 1996).

Issues not raised in the pleadings may be tried by consent of the parties. Implied consent may be demonstrated by a party's failure to object to evidence directly pertaining to the issue or by the party against whom the issue is asserted being the first to raise the issue and submit evidence on it.Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 619 (App. 1996).

Under a statute of frauds writings are not required to make a contract, but to provide evidence that a contract has been made. A writing meets the statute of frauds if it contains the names of the parties, terms and conditions of the contract, a reasonable description of the subject of the contract and is signed by the party to be charged. It need not state the particulars of the contract so long as its substance or essential terms are stated, and it need not be a single document, but may be pieced together from separate writings. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 620 (App. 1996).

Where the existence of a contract is at issue, the trier of fact determines whether the contract did in fact exist. The standard of review for findings of fact is whether the trial court's findings are clearly erroneous. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 620 (App. 1996).

A valid and enforceable contract was formed when the state offered to permit plaintiffs to dredge if they would repair the causeway, the plaintiffs accepted the offer by starting repairs, and the material dredged formed the consideration and the terms were sufficiently definite as to the time length of contract because it was limited by the expiration of the U.S. Army Corps of Engineers dredging permit. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 620-21 (App. 1996).

Expert opinion testimony is admissible if the witness is qualified by knowledge, skill, experience, training, education, or otherwise; and that the expert's opinion will assist the trier of fact to understand the fact at issue. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 622 (App. 1996).

A trial court's qualification of a witness as an expert and the admission of his opinion testimony will not be reversed unless clearly erroneous. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 622 (App. 1996).

To be qualified as an expert witness, the witness must have skill and knowledge superior to the trier of fact, but expert opinion testimony is not restricted to the person best qualified to give an opinion. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 622 (App. 1996).

If a plaintiff cannot be compensated for the value it expected from a breached contract, it might then be compensated for its reliance expenditures and placed in as good a position as it would have been if it had not entered into the contract. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 623 (App. 1996).

The definiteness of the contract terms and the ease or difficulty of enforcement or supervision must be considered before awarding specific performance damages. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 623 (App. 1996).

Where counsel have waived the issue of reliance damages and only argued specific performance at trial and on appeal the appellate court will leave the matter where counsel have placed it. Pohnpei v. Ponape Constr. Co., 7 FSM Intrm. 613, 623 (App. 1996).

This is an action for breach of a dredging contract. The trial court found that the State of Pohnpei breached its contract with the plaintiff construction companies, appellees here, and awarded damages and specific performance against the State. This Opinion explains our reasoning in affirming the decision of the trial court.

7. Did the trial court err in its apparent failure to consider reliance damages or other limitations on its ability to grant specific performance? We conclude that the State has waived the issue we raised.

In 1988, the Dekehtik Island causeway was dangerously eroded and required extensive repairs. Resio Moses, then Governor of Pohnpei, lifted a moratorium on dredging to curb further erosion. The State retained the services of Ponape Construction Co., ("PCC"), Ace/MN Construction Co., and Caroline Islands Development Company ("CIDCO"), to perform the causeway repair. In exchange for this emergency repair work, the companies would be allowed to dredge coral along the causeway which they then could either sell or use for other commercial projects.

The parties entered an informal agreement. Each company was responsible for widening a portion of the causeway and it was up to each company to perform the repairs as it saw fit. There was no time limit to perform the repair work. No specifications were set as to the amount of coral to be used for repair work and the amount that could be taken by the construction companies. It was understood, however, that the construction companies would perform repairs and dredging under various permits issued by the State, including a United States Army Corps of Engineers Permit which expired on December 31, 1994. Public Works authorized the construction companies to proceed on September 27, 1988.

During the repairs, the Director of Public Works terminated Ace/MN's causeway work, claiming delay and slow progress. The Director later withdrew the termination without explanation. Due to a delay in receipt of construction equipment it ordered for the job, PCC did not begin operations until March 1989. With the State's consent, PCC switched dredging operations to the east side of the causeway to obtain the necessary material to repair the west side, which further delayed PCC's operations.

On October 16, 1990, Governor Moses instructed the Director of Land to terminate dredging by November 30, 1990, based on that concern, and due to the appearance that the construction companies had not lived up to their commitment. Governor Moses advised the construction companies to apply for alternative dredge sites. A letter from the Director of Land to Robert Etscheit reiterated the public concern for damage done to the reef but instructed the plaintiffs to "cease all further dredging in the area, except to improve the causeway as designed and agreed." Repair work and dredging along the causeway then ceased.

Steve Nix wrote Governor Moses on behalf of Ace/MN and requested that the order be reconsidered. Nix explained that his company had been performing its obligations and had completed 75 percent of its portion of the project. The Governor expressed gratitude for the causeway improvements, but did not reconsider the termination out of respect to the Nett District Government. Nix continued to request reconsideration, and in the alternative, requested the State's assistance in locating and authorizing another dredge site.

On February 20, 1991, the Governor informed the construction companies that he would re-impose the moratorium on dredging in accordance with a legislative resolution. Later, Governor Moses informed the construction companies that the State would help them locate alternate dredge sites, and directed the Director of Land to provide assistance. But the Governor confirmed cessation of causeway dredging since the State Legislature had passed a bill banning dredging in the area. No alternate dredge site was explored. Causeway repair did not resume.

The construction companies filed a complaint on December 31, 1991, asserting breach of contract, and seeking damages and specific performance. Plaintiffs also had a civil rights claim. The State answered on May 15, 1992. Among its affirmative defenses were that Article XIII, section 5 of the FSM Constitution, and that Section 24 of the Pohnpei Government Liability Act, barred plaintiffs' claims. Later, the State raised additional defenses. First, it claimed the contract was so vague and indefinite that the intent of the parties could not be ascertained. Second, the State claimed the contract was of indefinite duration and could be unilaterally terminated by either party, and was terminated by Governor Moses on November 30, 1990, after reasonable notice.

The parties made stipulations of law and fact in their November 6, 1992 Pretrial Statement. The State filed a motion to dismiss the day before trial, arguing that discovery uncovered another defense, that the contract violated the Pohnpei State Statute of Frauds, Pon. S.L. No. 2L-38-80. The motion was denied as untimely. Trial was held on March 9 and 10, 1993. At the close of trial, the trial court requested written arguments. The State filed a motion to amend its Answer to include the Statute of Frauds defense immediately after trial, then its written closing argument.

The trial court entered its judgment and order in favor of the plaintiffs on June 21, 1993. The trial court held that the arrangement to repair the causeway in return for commercial dredging rights was a valid and enforceable contract, breached by the State's unilateral termination. The trial court found the State was liable to Ace/MN for $222,400 and ordered the State to allow PCC to specifically perform the contract. 1

The State's first argument is that the trial court committed error by "summarily" dismissing its defense that the plaintiffs' claims are barred by Article XIII § 5 of the FSM Constitution. The State argued for the first time in its opening appellate brief that the dredging contract was void because it violated the constitutional prohibition on agreements for use of land for an indefinite term. Because the State first articulated the issue on appeal, the Appellees claim it was an affirmative defense that was raised and forgotten. The State counters that the failure of the trial court to even consider a defense of constitutional magnitude is plain error.

We agree that the issue was not preserved for appeal. Loney v. FSM, 3 FSM Intrm. 151, 154 (App. 1987). Although Article XIII, section 5 was asserted as the State's first affirmative defense, the State did not argue at trial how this contract was affected by that constitutional provision. The State's first affirmative defense is stated broadly, that the plaintiffs' claims are barred. It was not until appeal that the State explained its defense, that the plaintiffs' claims are barred because the contract was void under the Constitution. Further, the State submitted no evidence on this issue at trial. Aware of the difficulty of proof of a negative proposition, we find it all the more important for the State to argue the issue at trial.

The appellate process anticipates that any issue brought before an appellate panel will have first been ruled upon by the trial judge. Loch v. FSM, 2 FSM Intrm. 234, 236 (App. 1986). The State attempts to evade this straightforward standard by arguing that the trial court's statement that it rejected this defense "summarily" meant that it committed error by failing to consider a self-evident argument. This holds no water. It was the State's failure to even touch on the issue at trial that led the trial court to reject the defense in its judgment and order.

In this context, the term "summarily" is not a term of art. It has no more significance here than its ordinary meaning. "Summarily" means without ceremony or delay. Black's Law Dictionary 1435 (6th ed. 1990). Because the State put on no evidence on this defense, and made no argument on it at trial, it was no error to "summarily" reject the defense. 2

The State also argues that the trial court erred by not dismissing the suit for the plaintiffs' failure to exhaust their administrative remedies. In enacting the Government Liability Act, Pohnpei State provided a limited waiver of its sovereign immunity. Pon. S.L. No. 2L-192-91. Under the Liability Act, no action may be maintained against the State unless the claimant first presented the claim to the appropriate government agency and the claim was denied in writing. Id. § 24. The trial court ruled on this defense on the merits, finding that the numerous letters written by the plaintiffs were requests for agency action and the State did not provide an administrative hearing. Ponape Constr. Co., 6 FSM

The State pleaded the Government Liability Act as the third affirmative defense in its Answer, a correct designation because application of the Liability Act raises matters outside the scope of the plaintiffs' prima facie case for breach of contract.See 2A James W. Moore et al., Moore's Federal Practice ¶ 8.27[3] (1981). Although failure to exhaust administrative remedies is not among the examples listed in FSM Rule of Civil Procedure 8(c), it is an affirmative defense. Just as a plaintiff has the burden of proof of a cause of action, the defendant has the burden of proving affirmative defenses. 29 Am. Jur. 2d Evidence § 160 (1994); see Nimeisa v. Department of Public Works, 6 FSM Intrm. 205, 212 (Chk. S. Ct. Tr. 1993). The State thus had the burden of proving the affirmative defense of the Government Liability Act.

The State did not address the defense before trial. It was not listed as a defense in the Stipulated Pretrial Statement. The State did not submit evidence or argument of the defense at trial. The Government Liability Act defense was raised for the first time in the State's written closing argument. We therefore find that the State did not meet its burden of proving its affirmative defense. In affirming, we do not address the merits of the Government Liability Act. We find simply that the defense was waived and affirm the result. See Nahnken v. United States, 7 FSM Intrm. 581, 589 (App. 1996).

The State asserts error in the trial court's refusal to consider the defense of the Statute of Frauds. Pohnpei State has enacted a Statute of Frauds requiring that certain contracts ) in particular, contracts to be performed in more than one year ) be in writing or ascertainable from written memoranda. Pon. S.L. No. 2L-38-80. The Statute of Frauds is an affirmative defense. FSM Civ. R. 8(c). The State did not assert the Statute of Frauds in its Answer or the Stipulated Pretrial Statement.

The State first raised the defense in a Motion to Dismiss, denied as untimely, filed the day before trial. The State argued that because the agreement was not to be performed within a year of its making, the contract violated the Statute of Frauds.3 After trial, the State filed a Motion to Amend its Answer, asserting that it was entitled to add the defense of the Statute of Frauds to conform to the evidence adduced at trial. The post-trial motion did not refer the trial court to any evidence adduced at trial. The trial court denied the motion to amend, ruling that the issue was not tried by the implied consent of the parties, and that the State lost the opportunity to raise the defense by omitting it from the Stipulated Pretrial Statement.Ponape Constr. Co., 6 FSM Intrm. at 120-21.

Examination of the record does not support the trial court's ruling. Issues not raised in the pleadings may nevertheless be tried by the consent of the parties. FSM Civ. R. 15(b). Implied consent to try an issue not raised in the pleadings is demonstrated by a party's failure to object to evidence directly pertaining to the issue. Wito Clan v. United Church of Christ, 6 FSM Intrm. 129, 133 (App. 1993). Implied consent is shown where, as here, the party against whom the issue is asserted was the first party to raise the issue and submit evidence on it at trial. Id. at 134. Examination of the record reveals that plaintiffs' counsel was first to raise the issue of the Statute of Frauds. Transcript at 76-77. We conclude that the issue was tried by the implied consent of the parties.

In applying the Statute of Frauds, written memoranda are required not in order to make a contract but to provide written evidence that a contract has been made. 72 Am. Jur. 2d Statute of Frauds § 285 (1974).4 Generally, a memorandum in writing meets the requirements of a statute of frauds if it contains the names of the parties, the terms and conditions of the contract, and a reasonable description of the subject of the contract, and is signed by the party or an agent of the party to be charged. Id. § 295. The memorandum need not state the particulars of the contract so long as its substance or essential terms are stated. Id. § 339. The memorandum need not be a single document, but may be pieced together out of separate writings, including writings referred to in the memorandum. Id. § 371.

Upon review of the record we find that the letters exchanged were sufficient memoranda to satisfy the Pohnpei Statute of Frauds. In so ruling we rely on the following documents: (1) the June 30, 1988 letter signed by Finale Henry, Acting Director of Public Works, to the Chief Sanitarian, enclosing the U.S. Army Corps of Engineers dredging permits, and referring to Executive Order 3-88, signed by Governor Moses on April 19, 1988; (2) the September 27, 1988 letter signed by Largo Edwin, Director of Public Works, to the FSM Environmental Protection Board, with cross copies to PCC and Ace/MN; (3) the January 12, 1989 letter signed by Director Edwin, to Ace/MN; (4) the October 16, 1980 letter by Governor Moses to the Director of Land, with cross copies to officers of Ace/MN, CIDCO, and PCC; (5) the December 3, 1990 letter by Governor Moses to Ace/MN, which refers to Ace/MN's November 27, 1990 letter to Governor Moses; and (6) the nearly identical February 20, 1991 letters from Governor Moses to Ace/MN and PCC.

We rule that there were sufficient memoranda to avoid application of the Statute of Frauds, and affirm on different grounds the decision reached by the trial court.Nahnken v. United States, 7 FSM Intrm. at 589.

The State assigns errors in the trial court's ruling on the validity and enforceability of the dredging contract. The State argues that no valid contract was formed. It also claims that even if a contract was formed, it was void for illegality, or it could not be enforced because its terms were vague and indefinite, especially as to time. We find no error in the trial court's determination of a valid, enforceable contract.

The State argues that there was no valid contract by asserting that the material terms of the contract were not clearly defined. We affirm the trial court's ruling that a valid contract was formed. Where the existence of a contract is at issue, the trier of fact determines whether the contract did in fact exist. 17A C.J.S. Contracts § 611, at 1225 (1963). The standard of review for findings of fact is whether the trial court's findings were clearly erroneous. Kinere v. Kosrae, 6 FSM Intrm. 307, 309 (App. 1993).

The trial court found that the State offered to permit the plaintiffs to dredge if they would perform repairs to the causeway. The plaintiffs accepted the State's offer by starting repairs. The material dredged was a consideration, and the intent of the parties in making this arrangement was

The State asserts that other terms were indefinite so as to make the dredging contract unenforceable, or even voidable for illegality. One alleged indefinite term was that there was no designation of the amount of coral that could be taken. The State also makes two arguments based on the lack of a clear termination date. First, the State claims that because there was no termination date, the contract was void, in violation of Article XIII, Section 5 of the FSM Constitution. Absent application of the constitution, the State claims the lack of a definite termination date made the contract unenforceable because either party could therefore terminate the contract at will.

Interpretations of contract terms are matters of law to be determined by the court as trier of law, and are reviewed on appeal de novo. Nanpei v. Kihara, 7 FSM Intrm. 319, 323-24 (App. 1995). We rule that the end date of the dredging contract was coterminous with the expiration date of the Army Corps of Engineers Dredging Permit, December 31, 1994. The only evidence that the State suggests indicates a different conclusion is in the trial court's recitation of the facts. The trial court said that the parties' agreement did not specifically set a time limit for performance of the repair work. Ponape Constr. Co., 6 FSM Intrm. at 117. But in the very next sentence the trial court specifically found that the parties' understanding was that both the dredging and repair work would be done under the dredging permit that terminated on December 31, 1994. Id.

The State also argues that the trial court's conclusion that the dredging contract would end on December 31, 1994, was inconsistent with the testimony of plaintiffs' witness, Steve Nix. Nix testified that he expected the dredging to continue until possibly 1997. But this testimony was in response to a question regarding his intent in the initial discussion of the dredging contract with State officials. While such intent is relevant to construction of the entire contract it is by no means dispositive. Rarely are contracts formed completely consistent with the parties' beginning positions.

We rule, as did the trial court, that the dredging contract would terminate on December 31, 1994. As such, the dredging contract was neither void for violation of the prohibition on indefinite contracts for the use of land, nor wholly indefinite as to time.

The State also argues that the terms of the contract were indefinite as to the amount of coral to be dredged and that there were no specifications of how much coral was to be used for repair and how much could be used for the plaintiffs other projects. We rule, again agreeing with the trial court, that the subject of the contract was the repair of the causeway. Permission to dredge coral was consideration. The amount of consideration was limited by the end of contract. The plaintiffs could take coral until the expiration of the U.S. Army Corps of Engineers permit. The dredging contract was enforceable.

The State argues that the trial court committed error by admitting the opinion testimony of a witness who was not qualified as an expert. The plaintiffs offered Wayne Bricknell as an expert witness in preparing estimates and determining costs associated with various construction projects. Bricknell testified about the cost of dredging work performed by the plaintiffs. The State objected that Bricknell had no experience in dredging, while acknowledging his experience in the general field of construction.

The two conditions for the admissibility of expert opinion testimony are: (1) that the witness is qualified by knowledge, skill, experience, training, education, or otherwise; and (2) that the expert's opinion will assist the trier of fact to understand the fact at issue. FSM Evid. R. 702. Although there are other reported FSM cases regarding expert testimony, see e.g., Setik v. Sana, 6 FSM Intrm. 549, 553-54 (Chk. S. Ct. App. 1994), we have located none that suggest a standard of review. We look to decisions interpreting the United States Federal Rules of Evidence, from which our rules derive. See Senda v. Mid-Pacific Constr. Co., 6 FSM Intrm. 440, 444 (App. 1994).

Review of the trial court's qualification of a witness as an expert and the admission of his opinion testimony is highly deferential. Such a ruling will not be reversed unless it was clearly erroneous. 11 James W. Moore et al., Moore's Federal Practice § 702.10[3] (2d ed. 1982). Bricknell testified from his opinion as an expert in construction. The State objected that his admitted experience had no application because he had never before estimated a dredging job. But the fact that the expert had little actual experience in dredging did not disqualify him from expressing his opinion based on the principles within his related field of expertise.Baumhoser v. Amax Coal Co., 630 F.2d 550, 551 (7th Cir. 1980).

Bricknell testified that he had worked in the construction industry for more than sixteen years, and had progressed from a skilled laborer to contractor, project manager, and estimator. As a contractor, Bricknell prepared bids for other companies. Bricknell testified that he never lost money on any project he bid on as an estimator. Some of his projects ) including the construction of a flood wall a mile and a half in length ) were larger than the causeway repair project. Bricknell testified that he had worked in Pohnpei as manager for a number of construction projects, including bridges, dam walls, and buildings. He thus had experience both in construction and for projects in Pohnpei.

The State argues repeatedly that the trial judge ruled erroneously by stating that Bricknell provided the "best evidence" of estimated costs. Expert opinion testimony is not restricted to the person best qualified to give an opinion. 31A Am. Jur. 2d Expert and Opinion Evidence § 59 (1989). Generally, all that is required is that the expert have skill and knowledge superior to that of the trier of fact. Id. Thus, when the trial court observed that Bricknell's testimony was the "best evidence" available, it was likely expressing that principle. There may be better experts at estimating dredging projects, but Bricknell was the best available on Pohnpei. We do not find the qualification of Wayne Bricknell as an expert, or the admission of his opinion testimony, to be clearly erroneous.

After the case was submitted to us for decision we informed the parties of "the apparent failure of the trial court to consider reliance damages or the other limitations on the ability of the court to grant specific performance." We invited a memorandum from PCC "on the appropriateness of the court considering this on its own pursuant to FSM Rule of Civil Procedure 61 and on the validity of the judgment in light of the apparent failure ) in other words authority in support of the judgment." We invited a memorandum in response from the State. A review of the record and of the memoranda lead us to conclude that the State has waived the issue that we raised.

Because of our exceptional step in inviting memoranda on the two points, we believe it appropriate to discuss this matter. The trial court based its award of specific performance on its conclusions that an enforceable contract existed, Ponape Constr. Co., 6 FSM Intrm. at 123, that it had been breached, id. 124, and "a reliable computation of expectation damages [was] impractical," id. at 126.

1. After the contract was awarded PCC had expended money to purchase the equipment necessary to perform the work. Id. at 117. Although PCC had begun work, it was not substantially completed. If PCC could not be compensated for the value it expected from the contract, then it might have been compensated for its reliance expenditures and placed in as good a position as it would have been had it not entered into the contract.

2. The definiteness of the terms of the contract and the ease or difficulty of enforcement or supervision must be considered before awarding specific performance. E. Allan Farnsworth, Contracts 832 (1982). As to the dredging contract, the trial court found no specification on the amount of coral to be used to repair the causeway and the amount PCC could take away. Ponape Constr. Co., 6 FSM Intrm. at 117. The plaintiffs were given wide discretion on how to perform the repairs. Id.

2. In the plaintiff's opening statement, PCC set forth inter alia, its claim for specific performance. The very brief opening statement of the State asserted only that the plaintiffs could not prove any damages.

6. Most importantly, the State's memorandum in response fails to fairly address our concern. The State's position on our Rule 61 inquiry is that the award of specific performance was an issue on appeal. We are referred to its brief on appeal. Reliance damages are not mentioned. A proper respect for our role requires that we leave the matter where counsel have placed it: the issue we raised has been waived by the State.

We acknowledge that we affirm an award of extraordinary relief. Supervision of an open-ended dredging contract could have been extremely difficult. Enforcement of its terms could have proved problematic for either party. We state this in addition to the obvious danger to the environment and in concern to subsistence fishing affected by the dredging. We wish to confirm that we were compelled to rule this way.

2. Given our finding that the trial court was correct in determining that the contract had a definite term, even if the issue were properly and timely raised at trial, we would still affirm on this issue.

3. On appeal, the State argued a new ground for applying the Statute of Frauds, that the dredging contract involved the sale of an interest in land. We do not consider this argument. It was not preserved for appeal. Loney, 3 FSM Intrm. at 154.

4. Other than citations to the Pohnpei statute itself, the parties have relied upon U.S. cases in their Statute of Frauds arguments. We may consult foreign authorities in aid of interpretation when there is no applicable Micronesian authority on point.