THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA
KOSRAE STATE COURT TRIAL DIVISION
Cite as Asher v. Kosrae ,
8 FSM Intrm. 443 (Kos. S. Ct. Tr. 1998)

[8 FSM Intrm. 443]

KUN ASHER and SHRUE ASHER, for themselves
and on behalf of KIM ASHER, a Minor,
Plaintiffs,

vs.

STATE OF KOSRAE and KOSRAE UTILITIES
AUTHORITY,
Defendants.


CIVIL ACTION NO. 33-95

MEMORANDUM OF DECISION; JUDGMENT
 
Aliksa B. Aliksa
Acting Chief Justice

Trial:  July 2-3, 1998
Decided:  September 10, 1998

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

[8 FSM Intrm. 444]

For the Defendant:     Richard C. Martin, Esq.
( State of Kosrae)       Kosrae Attorney General
                                     Office of the Kosrae Attorney General
                                     P.O. Box 870
                                     Tofol, Kosrae FM 96944

For the Defendant:     Ron Moroni, Esq.
(Kosrae Utilities)        P.O. Box 1618
                                     Kolonia, Pohnpei FM 96941

*    *    *    *

HEADNOTES
Torts ) Duty of Care
     Everyone has a duty of care to act in such a way that other people are not harmed.  Duties of care differ according to the circumstances.  The exact parameters of each person's responsibilities towards others will be defined through time by judicial decisions and statutes.  Asher v. Kosrae, 8 FSM Intrm. 443, 449 (Kos. S. Ct. Tr. 1998).

Torts ) Duty of Care
     There is a duty to take precautions in installing a telephone pole and wires to avoid foreseeable harm, for example, a child or another person walking into the dangling wire and causing injury.  Asher v. Kosrae, 8 FSM Intrm. 443, 449 (Kos. S. Ct. Tr. 1998).

Torts
     A tort is a wrong for which the harm that resulted is capable of being compensated in an action at law.  The purpose is to afford compensation for injuries sustained by one person as the result of the unreasonable or socially harmful conduct of another.  Generally, one person may be liable in tort to another only if the first intentionally or negligently violates a duty owed to the other, and the other is injured as a result.  Asher v. Kosrae, 8 FSM Intrm. 443, 449 (Kos. S. Ct. Tr. 1998).

Torts ) Duty of Care
     Generally, a breach of duty is proven by the testimony of a witness who describes what a reasonable person, acting in compliance with the duty of care, would have done or not done in the same situation.  Asher v. Kosrae, 8 FSM Intrm. 443, 449 (Kos. S. Ct. Tr. 1998).

Torts ) Duty of Care; Torts ) Negligence
     In determining liability for negligent injuries generally, electricity providers are required to use reasonable care in the construction and maintenance of their lines and apparatus, and will be responsible for any conduct falling short of this standard.  Asher v. Kosrae, 8 FSM Intrm. 443, 449 (Kos. S. Ct. Tr. 1998).

Torts ) Duty of Care
     Electricity providers transmitting or using electricity are required to guard against events which can be reasonably foreseen or anticipated.  The extent of the duty or standard of care is measured in the terms of foreseeability of injury from the situation created.  It is not necessary that a power provider anticipate the precise injury to someone who had a right to be in the vicinity.  Asher v. Kosrae, 8 FSM Intrm. 443, 449-50 (Kos. S. Ct. Tr. 1998).

[8 FSM Intrm. 445]

Torts ) Duty of Care
     One in the business of generating and distributing electricity who engages to install electric equipment must exercise the care of a reasonably prudent person skilled in the practice and art of installing such equipment according to the state of the art or method generally used by persons engaged in a like business at the time the work is done.  An electricity provider is also charged with the duty of maintaining their electrical equipment and appliances.  Asher v. Kosrae, 8 FSM Intrm. 443, 450 (Kos. S. Ct. Tr. 1998).

Torts ) Duty of Care; Torts ) Negligence
     It is the imperative duty of electricity providers to make reasonable and proper inspection of their wires and other equipment and to use due diligence to discover and repair defects.  A failure to perform such duty constitutes negligence.  Asher v. Kosrae, 8 FSM Intrm. 443, 450 (Kos. S. Ct. Tr. 1998).

Torts ) Duty of Care
     An electricity provider must make reasonable and proper inspections of its appliances with such frequency as appears reasonably necessary, and use due diligence to discover and remedy defects so that injury will not result.  The presence of a conspicuous defect or dangerous condition of the electrical appliance which has existed for a considerable length of time will create a presumption of constructive notice of the defect.  Asher v. Kosrae, 8 FSM Intrm. 443, 450 (Kos. S. Ct. Tr. 1998).

Torts ) Negligence
     The placing of a guy wire within areas that are traveled may constitute negligence where the wire is not guarded, covered, rendered easy to see, and a person is injured by a collision with it.  An electricity provider can be held liable for injures sustained from a collision if it is shown that the company's negligence in the erection or the maintenance of such wire was the proximate cause of the injury.  The test is whether the injury under all of the circumstances, might reasonably been foreseen by a person of ordinary intelligence and prudence.  Asher v. Kosrae, 8 FSM Intrm. 443, 450 (Kos. S. Ct. Tr. 1998).

Torts ) Negligence
     It is reasonably foreseeable to a person of ordinary intelligence and prudence that a dangling, frayed wire could cause injury to passersby in the vicinity of the pole and wire.  Asher v. Kosrae, 8 FSM Intrm. 443, 450 (Kos. S. Ct. Tr. 1998).

Torts ) Negligence
     A state will be liable for damages resulting from personal injury as a result of a collision with a guy wire when the state erected and maintained the guy wire to support a pole carrying its electric transmission wires, when for a considerable length of time prior to the accident it failed to make reasonable and proper inspections of the guy wire as necessary and failed to use due diligence to discover and remedy the defective guy wire so that that injury would not result, and when the type injury which occurred was reasonably foreseeable.  Asher v. Kosrae, 8 FSM Intrm. 443, 450 (Kos. S. Ct. Tr. 1998).

Torts ) Causation
     Failure to use due care under the circumstances in maintaining a telephone pole guy wire is the proximate cause of an eye injury resulting from a collision with the defective wire because the injury was one that might be reasonably anticipated or foreseen as a natural consequence of the wrongful act.  Asher v. Kosrae, 8 FSM Intrm. 443, 450-51 (Kos. S. Ct. Tr. 1998).

Torts ) Duty of Care
     The provisions of the Kosrae State Code do not impose a duty upon the state to grant medical

[8 FSM Intrm. 446]

referrals to every person.  Asher v. Kosrae, 8 FSM Intrm. 443, 451 (Kos. S. Ct. Tr. 1998).

Torts ) Duty of Care
     Although neither state law nor regulation imposes any duty upon the state to make a medical referral to every person, a volunteer who gratuitously offers to provide service or assistance to another, and causes that other to rely upon the offer rather then to seek alternative ways of responding to the need, owes a duty to perform the donated services with reasonable care.  Asher v. Kosrae, 8 FSM Intrm. 443, 451 (Kos. S. Ct. Tr. 1998).

Torts ) Duty of Care
     When the state volunteers to provide medical service or assistance and causes the someone to rely upon that offer, what constitutes reasonable action or assistance must be determined in light of the surrounding circumstances.  Asher v. Kosrae, 8 FSM Intrm. 443, 451 (Kos. S. Ct. Tr. 1998).

Torts ) Duty of Care
     In order to impose a duty upon the state to return a patient to Pohnpei for treatment, the state must know about the need for further medical care.  If the state was not informed, it cannot be charged with the knowledge or the duty to return a patient for further medical treatment.  Asher v. Kosrae, 8 FSM Intrm. 443, 451 (Kos. S. Ct. Tr. 1998).

Business Organizations ) Corporations ) Liability; Contracts
     If a board of directors, upon learning of an officer's unauthorized transaction, does not promptly attempt to rescind or revoke the action previously taken by the officer, the corporation is bound on the transaction on a theory of ratification.  Asher v. Kosrae, 8 FSM Intrm. 443, 452 (Kos. S. Ct. Tr. 1998).

Business Organizations ) Corporations ) Liability; Contracts; Equity ) Laches, Estoppel and Waiver
     An officer's authority to contract for a corporation may be actual or apparent, and may result from the officer's conduct and the acquiescence thereto by the directors.  The corporation may be estopped to deny the officer's authority by having accepted the benefit of the contract.  Generally, an officer's authority to act for his corporation with reference to contracts is a question of fact to be determined by the trier of fact.  Asher v. Kosrae, 8 FSM Intrm. 443, 452 (Kos. S. Ct. Tr. 1998).

Business Organizations ) Corporations ) Liability; Contracts
     A corporation's directors may ratify any unauthorized act or contract.  A corporation's ratification need not be manifested by any vote or formal resolution of the board of directors.  An implied ratification can arise if the corporate principal, with full knowledge and recognition of the material facts, exhibits conduct demonstrating an adoption and recognition of the contract as binding, such as acting in the contract's furtherance.  It is well established that if a corporation, with knowledge of its officer's unauthorized contract and the material facts concerning it, receives and retains the benefits resulting from the transaction, it thereby ratifies the transaction.  A corporation may not accept a transaction's benefit and at the same time attempt to escape its consequences on the ground that the transaction was not authorized.  Asher v. Kosrae, 8 FSM Intrm. 443, 452-53 (Kos. S. Ct. Tr. 1998).

Business Organizations ) Corporations ) Liability; Contracts
     When the board of directors did not act promptly to rescind or revoke the agreement made by its general manager; when all its subsequent actions have been consistent with the agreement's terms; when it had knowledge of the unauthorized contract and of the material facts concerning it; when it received, retained, and continues to receive and retain the benefits resulting from the transaction; it is clear that the board of directors has ratified the agreement.  The corporation may not accept the agreement's benefits and at the same time escape its liabilities.  Asher v. Kosrae, 8 FSM Intrm. 443, 453 (Kos. S. Ct. Tr. 1998).

[8 FSM Intrm 447]

Contracts ) Indemnification
     When an agreement's indemnification provisions regarding the transfer of liability for causes of action and other claims are clear, the transferee is liable to indemnify the transferor for damages awarded for the transferor's negligence.  Asher v. Kosrae, 8 FSM Intrm. 443, 453 (Kos. S. Ct. Tr. 1998).

Torts ) Damages
     A person injured through the negligent or intentional tort of another is entitled to an award of damages for pain and suffering.  Calculating the amount is difficult because there are no fixed rules to help in that determination.  The determination lies in the sole discretion of the trier of fact.  Asher v. Kosrae, 8 FSM Intrm. 443, 453-54 (Kos. S. Ct. Tr. 1998).

Torts ) Damages
     Compensatory damages for personal injury include pain and suffering, past as well as the reasonable value of future pain and suffering.  The court must use its discretion in awarding it.  Pain and suffering includes mental anguish.  Asher v. Kosrae, 8 FSM Intrm. 443, 454 (Kos. S. Ct. Tr. 1998).

Torts ) Damages
     Damages for lost future earnings are not awardable when they are duplicative and speculative.  Asher v. Kosrae, 8 FSM Intrm. 443, 454 (Kos. S. Ct. Tr. 1998).

Torts ) Damages
     In determining pain and suffering, it is proper to consider not only past pain but future pain, and to consider the loss of enjoyment of life as an element of pain and suffering.  Asher v. Kosrae, 8 FSM Intrm. 443, 454 (Kos. S. Ct. Tr. 1998).

*    *    *    *

COURT'S OPINION
ALIKSA B. ALIKSA, Acting Chief Justice:
     This case involves personal injury claims against the State of Kosrae and Kosrae Utilities Authority ("KUA").  Plaintiffs are represented by Delson Ehmes. Defendant State of Kosrae is represented by Richard Martin, Office of the Attorney General and Kosrae Utilities Authority is represented by Ron Moroni. The matter went to trial on July 2 and 3, 1998.  On July 20, 1998, the Plaintiff submitted Points and Authorities to this Court.  On July 30, 1998, Defendant KUA submitted Citation of Legal Authority.  This document enters the judgment of this Court and provides a memorandum of its decision for its findings and conclusions.
 
I.  Factual Background.
     The subject electrical pole and guy wires were installed sometime during the mid 1980s, while the Honorable Yosiwo George served as Governor for the State of Kosrae.  During that time, the State of Kosrae, Department of Public Works operated the electrical power plant and the distribution system for the State.  The electrical pole and guy wire which caused the injury in this case was installed by the State of Kosrae, Department of Public Works, who was responsible for operation of power plant and the distribution system during the mid 1980s and through the end of 1993.

     The injury to Kim Asher's left eye occurred on August 22, 1993.  On the date of injury, Kim was about eight years old.  Kim was playing with other children near his home when he ran into a frayed

[8 FSM Intrm. 448]

and dangling guy wire attached to an electrical pole located approximately twenty feet from his home.  The frayed wire was loose and dangling at approximately the four foot height level, near a turnbuckle.  The accident took place in Finpukol, Utwe, late on a Sunday afternoon.  A nurse living in Utwe administered first aid to Kim, then Kim was transported to Kosrae State Hospital.  Dr. Vita Skilling admitted Kim to the hospital, where medicine was placed in his eye and then covered with a patch.  Kim remained at Kosrae State Hospital for one week, from August 22 to 28, 1993.  After Kim's release from Kosrae State Hospital, the State of Kosrae provided a medical referral to Kim for further specialized eye treatment in Pohnpei.  In Pohnpei, Kim received treatment from Dr. Ominis David, a physician with specialized training in the treatment of eye injuries.  Dr. David placed stitches in Kim's eye and gave him medicine.  Kim returned to Kosrae with bandages on his eye and was told to return to Pohnpei in four months to get the stitches removed.  Kim never returned to Dr. David in Pohnpei to get the stitches removed from his eye.  Kim's parents, Kun and Shrue Asher, did not contact Dr. Skilling or anyone else at Kosrae State Hospital to arrange for Kim's return to Pohnpei for removal of his stitches.

     Sometime later, Kim was sent to Hawaii for treatment for leptospirosis on another medical referral provided by the State of Kosrae.  While Kim was in Hawaii for treatment for leptospirosis, physicians looked at his injured eye. Medication was placed in the eye, but no further treatment given.

     Kim's left eye has a visible opaque spot.  Kim testified that he suffered extreme eye pain at the time of injury, which also continued for some time afterwards.  Kim testified that he suffered from headaches and continues to suffer from headaches until the present time.  Kim takes medication to help stop the pain.  Kun Asher, Kim's father, testified that since the injury, Kim participates less in sports, and gets angry easily.  Kim testified that he cannot play well.  Kun also testified that he expected Kim to take care of him in his old age, by assisting with farming and fishing activities.

     Kun testified about the condition of the electrical pole and guy wire which Kim collided with.  Kun testified that the guy wire was anchored into the ground, and had a turnbuckle at about the four foot level.  The turnbuckle had a twelve inch piece of wire cable hanging out which was not secured to anything.  The end of the loose cable was frayed into several strands.  Over time, Kun observed more strands sticking out at the location of the turnbuckle.  Kun testified that he had made these observations two years prior to the date of the accident.  Kun also testified that he observed other electrical poles being anchored differently.  Some electrical pole had guy wires with the turnbuckles close to the ground.  Other electrical poles had guy wires covered with piping.  These observations were made by Kun recently before trial in his village of Utwe.

     The Agreement for the Transfer of the Operation of Kosrae Power System from the Department of Public Works to the Kosrae Utility Authority ("Transfer Agreement") was executed on December 30, 1993 by Governor Thurston Siba and the KUA General Manager John Barnett.  The Transfer Agreement was effective on January 1, 1994.  The Transfer Agreement included an Exhibit A which listed all property to be transferred from the State of Kosrae to KUA, including the Tofol power plant, power distribution system, building, land, vehicles, supplies, tools and parts.

     John Barnett was hired as the KUA General Manager prior to the organization of the KUA Board of Directors, which was formally organized on October 1, 1993. The current KUA General Manager Paul Kalv had reviewed the minutes of the meetings of Board of the Directors from October 1993 to August 5, 1994 and could not find any reference to the approval of the Transfer Agreement by the Board of Directors.  The minutes of the meetings did not contain any reference to authorization by the Board of Directors to John Barnett to enter into and execute the Transfer Agreement.  Paul Kalv testified that KUA did receive all property listed on Exhibit A to the Transfer Agreement and continues to receive benefits pursuant to the Transfer Agreement, including various OMIP funds given by the United States and the Compact Section 214 Energy Production Funds.  This past year, KUA received

[8 FSM Intrm. 449]

Compact Section 214 Energy Production Funds in the amount of $ 495,000 from the State of Kosrae.  KUA did not provide any monetary payment to the State for the property and assets which were transferred to KUA.

II.  Issues Presented at Trial.
  A.     Whether the Defendant State was negligent in the installation and maintenance of the guy wire?

  B.     Whether the Defendant State was negligent in failing to send Kun Asher back to Pohnpei for further medical treatment?

  C.     Whether Defendant KUA is obligated to indemnify Defendant State under the provisions of the Kosrae State Code and the Transfer Agreement?

III.  Legal Analysis.
  A.     Defendant State's Negligence in the Installation and Maintenance of the Guy Wire.
     Everyone has a duty of care to act in such a way that other people are not harmed.  Duties of care differ according to the circumstances.  The exact parameters of each person's responsibilities towards others will be defined through time by judicial decisions and statutes.  Nena v. Kosrae, 5 FSM Intrm. 417, 421 (Kos. S. Ct. Tr. 1990).  In this case, when the State of Kosrae, Department of Public Works installed the electric pole and guy wires, it had a duty of care to take precautions in installing the pole and wires to avoid foreseeable harm.  The Department of Public Works, when considering the location and method of installing the pole and wires, should have considered the houses nearby, its occupants and the exposure of the electric pole and the wires to children playing in yard.  The Court finds that the State had a duty to take precautions in installing the pole and wires to avoid foreseeable harm, for example, a child or another person walking into the dangling wire and causing injury.

     A tort is a wrong for which the harm that resulted is capable of being compensated in an action at law.  The purpose is to afford compensation for injuries sustained by one person as the result of the unreasonable or socially harmful conduct of another.  Primo v. Refalopei, 7 FSM Intrm. 423, 430 n.13 (Pon. 1996).  Roughly stated, the general principle is that one person may be liable in tort to another only if the first intentionally or negligently violates a duty owed to the other, and the other is injured as a result.  Semens v. Continental Air Lines, Inc. (I), 2 FSM Intrm. 131, 142 (Pon. 1985).  Generally, a breach of duty is proven by the testimony of a witness who describes what a reasonable person, acting in compliance with the duty of care, would have done or not done in the same situation.  Nena, 5 FSM Intrm. at 421.  For example, the excavation of large holes on the land of private citizens, in areas where children play, and near a public road, is inherently dangerous and calls for special precautions.  Ray v. Electrical Contracting Corp., 2 FSM Intrm. 21 (App. 1985).  Here, a dangling wire left at the four foot height presented a danger to persons who live, visit and walk in the area of the pole and the wire.  Kun Asher testified that other electrical poles were anchored differently, so that there was no loose wire was dangling at a height where it presented a danger to persons in the area.

     Companies and other entities in the business of generating and distributing electricity are held to a duty of care with respect to their equipment.  In determining liability for negligent injuries generally, electricity providers are required to use reasonable care in the construction and maintenance of their lines and apparatus, and will be responsible for any conduct falling short of this standard.  27A Am. Jur. 2d Energy and Power Sources 218, at 159 (1996). Electricity providers transmitting or using electricity are required to guard against events which can be reasonably foreseen or anticipated.  The extent of the duty or standard of care is measured in the terms of foreseeability of injury from the

[8 FSM Intrm. 450]

situation created.  It is not necessary that a power provider anticipate the precise injury to someone who had a right to be in the vicinity.  Id. 220-21, at 162-163. Here, it was reasonably foreseeable that a person in the vicinity of the subject electrical pole and dangling guy wire could walk or run into the dangling wire and be injured.

     One engaged in the business of generating and distributing electricity and engages to install electric equipment must exercise the care of a reasonably prudent person skilled in the practice and art of installing such equipment according to the state of the art or method generally used by persons engaged in a like business at the time the work is done.  Id. 271, at 196.  Furthermore, an electricity provider is also charged with the duty of maintaining their electrical equipment and appliances.  Id. 274, at 198.  It is the imperative duty of electricity providers to make reasonable and proper inspection of their wires and other equipment and to use due diligence to discover and repair defects.  A failure to perform such duty constitutes negligence.  Id. 274, at 199.  An electricity provider must make reasonable and proper inspections of its appliances with such frequency as appears reasonably necessary, and use due diligence to discover and remedy defects so that injury will not result from such defects.  Id. 276, at 200.  The presence of a conspicuous defect or dangerous condition of the electrical appliance which as existed for a considerable length of time will create a presumption of constructive notice of the defect.  Id. 278, at 201-02.  Here, the electrical pole and guy wires were installed in the mid 1980s.  The State of Kosrae had a duty to make reasonable and proper inspections of their pole and wires, and to discover and repair defects.  The State had a duty to inspect, discover and remedy the defect of the loose, dangling wire so that injury would not result from the wire.  In this case, the State breached its duty to inspect, discover and repair the defective dangling, frayed wire which caused Kim's injury.

     An electricity provider which erects and maintains a guy wire to support a pole carrying its electric transmission wires may be liable for damages resulting from personal injury as a result of a collision with the guy wire.  This liability is based upon the provider's failure to use due care under the circumstances or commensurate with the danger present.  Id. 346, at 253.  The placing of a guy wire within areas that are traveled may constitute negligence where the wire is not guarded, covered, rendered easy to see, and a person is injured by a collision with it.  Id. 465, at 346.  An electricity provider can be held liable for injures sustained from a collision if it is shown that the negligence of the company in the erection or the maintenance of such wire was the proximate cause of the injury. The test is whether the injury under all of the circumstances, might reasonably been foreseen by a person of ordinary intelligence and prudence.  Id. 347, at 255.

     Here, the State had the duty to install and maintain the electrical pole and guy wire with due care.  The guy wire which caused the injury to Kim Asher was not installed and maintained by the State with due care.  The State did not take all the necessary precautions when it installed the electrical pole and guy wire, and therefore breached its duty of care in the installation of the pole and wire.  It was reasonably foreseeable to a person of ordinary intelligence and prudence that a dangling, frayed wire could cause injury to passersby in the vicinity of the pole and wire.  The injury of the type which occurred to Kim Asher was reasonably foreseeable.  The State also failed to make reasonable and proper inspections of the guy wire as necessary and failed to use due diligence to discover and remedy the defective guy wire so that that injury would not result from the defect.  The presence of a dangerous condition of the guy wire existed for a considerable length of time prior to Kim's accident.  Therefore there is a presumption of constructive notice of the defective wire to the State.

     The State erected and maintained a guy wire to support a pole carrying its electric transmission wires and is liable for damages resulting from personal injury as a result of a collision with the guy wire.  This liability is based upon the State's failure to use due care under the circumstances, which was the proximate cause of Kim's eye injury.  The injury was one that might be reasonably anticipated or

[8 FSM Intrm. 451]

foreseen as a natural consequence of the wrongful act.  See Primo, 7 FSM Intrm. at 429; 27A Am. Jur. 2d Energy and Power Sources 232, at 170 (1996).  This Court concludes that the State was negligent in the installation, inspection, maintenance and repair of the guy wire and is liable for the injuries to Kim's eye. This liability is subject to indemnification by KUA, as discussed in section C below.

  B.     Defendant State's Negligence in Failing to Send the Minor Back to Pohnpei for Further Treatment.
     The Kosrae State Code, section 12.1104 provides authority for medical referrals:  "By regulation the Director of Health Services provides an impartial process for selecting persons genuinely needing medical treatment outside the State through a medical referral."  The provisions of the Kosrae State Code do not impose a duty upon the State to grant medical referrals to every person.
 
     The Medical Referral Regulation effective during the time of the injury to Kim Asher's eye was Regulation 23.  Regulation 23 provided that FSM citizens who are Kosrae State domiciliaries are eligible for consideration for medical referral. The Regulation further states the criteria for selection of persons to receive medical care outside the State of Kosrae.  The Regulation establishes the framework for referral procedures, criteria and payment, but does not require the State to grant medical referrals to every person.

     Neither State law nor the Regulation imposes any duty upon the State to make a medical referral to every person.  However, a volunteer who gratuitously offers to provide service or assistance to another, and causes that other to rely upon the offer rather then to seek alternative ways of responding to the need, owes a duty to perform the donated services with reasonable care.  Leeruw v. FSM, 4 FSM Intrm. 350, 357 (Yap 1990).  Here, the volunteer is the State of Kosrae, who offered to provide service or assistance to Kim Asher and caused the Plaintiffs to rely upon that offer.  What constitutes reasonable action or assistance must be determined in light of the surrounding circumstances.  Id. at 358.  In this case it was the duty of the State to perform the medical referral of Kim Asher with reasonable care.  The duty of the State in this case may extend to completing the medical referral with reasonable care, which includes sending Kim Asher back to Pohnpei to get the stitches removed by Dr. Ominis David.  There was evidence presented at trial that the stitches in Kim's eye were intended to be removed after a certain period of time.  The State has an obligation to follow through with the medical treatment that it offered with reasonable care:  after sending Kim to Pohnpei for treatment by Dr. Ominis David, Kim should have been returned to Dr. David for removal of the stitches.

     However, in order to impose the duty upon the State to return Kim to Pohnpei for treatment, the State must have known about the need to return Kim to Pohnpei. The State cannot be held to the duty of returning Kim to Pohnpei if the State was not informed of the need to return Kim to Pohnpei.  The information regarding the need to return Kim to Pohnpei was known by Kim's parents, yet they failed to notify the State.  The Plaintiffs testified that they were told in Pohnpei that they needed to return Kim to Pohnpei four months later to get the stitches removed from his eye.  There was no evidence presented that Dr. Skilling or anyone else at Kosrae State Hospital was notified by the Plaintiff of the need to return Kim to Pohnpei.  Therefore, the State cannot be charged with the knowledge or the duty to return Kim to Pohnpei.  This Court concludes, that under the circumstances of this case, the Defendant State did not owe a duty to send Kim Asher back to Pohnpei for further medical treatment.

  C.     Defendant KUA's Indemnification of the State of Kosrae.
     The KUA's liability with respect to the electrical equipment installed by the State of Kosrae is defined in Kosrae State Code and the Agreement for the Transfer of the Operation of Kosrae Power

[8 FSM Intrm. 452]

System from the Department of Public Works to the Kosrae Utility Authority ("Transfer Agreement").  The pertinent section of Kosrae State Code, Section 7.1216 states:

Transition.  . . . Any proceedings or cause of action pending or existing immediately before the effective date of this act by or against the State or any person acting on behalf of the State which pertains to any undertaking transferred hereby may be continued or enforced by or against the Authority.

The transfer of assets and liabilities between the State and the KUA is more specifically defined in the Agreement for the Transfer of the Operation of Kosrae Power System from the Department of Public Works to the Kosrae Utility Authority.  Section 1.4 of the Transfer Agreement sets forth the liabilities transferred from the State to KUA, in pertinent part:

1.4  Liabilities.  All funds . . . causes of action or other claims against, or related to the property and assets, or any power, duty, or interest, transferred pursuant to this agreement, whether liquidated or unliquidated, perfected or not, are conveyed herewith and accepted by KUA who agrees to defend and provide indemnity to the State therefore . . . .

     The Transfer Agreement was signed on December 30, 1993 by Thurston Siba, then the Governor of the State of Kosrae and by John Barnett, then the General Manager for KUA.  At trial, KUA raised several objections to the validity of the Transfer Agreement.  KUA objected to the validity of the Transfer Agreement, claiming that it was never ratified by the Board of Directors.  KUA also claimed that the KUA General Manager at the time, John Barnett, did not have authority to enter into the Transfer Agreement on behalf of KUA.

     The duties of the KUA General Manager are set forth by statute, in Kosrae State Code, at Sections 7.1209 and 7.1210.  These statutory provisions do not provide the General Manager the specific authority to acquire real and personal property, or to acquire liabilities of the kind that were acquired pursuant to the Transfer Agreement from the State by the KUA.  However, the actions of the General Manager and the KUA Board of Directors strongly suggest that they ratified the Transfer Agreement.

     At some time after the Transfer Agreement was executed, the Board of Directors of KUA learned that the General Manager entered into a transaction in the past, namely the execution of the Transfer Agreement, without being specifically authorized to do so.  If the Board of Directors does not promptly attempt to rescind or revoke the action previously taken by the officer, the corporation is bound on the transaction on a theory of ratification.  Scientific Holding Co. v. Plessey Inc., 510 F.2d 15 (2d Cir. 1974).  Here, the KUA Board of Directors learned of the Transfer Agreement and did not act promptly to rescind or revoke the action taken by the General Manager.  Therefore, KUA appears to be bound by the Transfer Agreement on the theory of ratification.

     The authority of an officer to contract for a corporation may be actual or apparent.  Authority to contract for the corporation may be implied or apparent and may result from the conduct of the officer and the acquiescence thereto by the directors.  The corporation may be estopped to deny the officer's authority by having accepted the benefit of the contract.  18B Am. Jur. 2d Corporations 1542, at 415-17 (1985).  Generally, the authority of an officer to act for his corporation with reference to contracts is a question of fact to be determined by the trier of fact.  Id.

     Directors of a corporation may ratify any unauthorized act or contract.  See generally 18B Am. Jur. 2d Corporations 1635-39, at 491-94 (1985).  A ratification of an unauthorized act or contract

[8 FSM Intrm. 453]

of an officer of a corporation must, in order to be effective, be accompanied by certain conditions.  First, the conduct of the Board of Directors must be consistent with an intent to affirm the unauthorized action, to approve and to act in furtherance of the contract.  A further requirement for effective corporate ratification of an unauthorized transaction entered into on its behalf by its officer, is that the corporation must ratify the unauthorized transaction in its entirety, since a corporation cannot accept the benefits of the unauthorized act and reject its burdens.  The corporation must also have full knowledge of the material facts at the time it is charged with having accepted the transaction as its own.  See generally id. 1644-48.  As a general rule, ratification by a corporation need not be manifested by any vote or formal resolution of the board of directors; no higher degree of evidence is required to establish ratification on the part of a corporation.  Id. 1649, at 500.  "An implied ratification of a contract can arise if the corporate principal with full knowledge and recognition of the material facts exhibits conduct demonstrating an adoption and recognition of the contract as binding, such as acting in furtherance of a contract."  Id. 1651.  It is a well-established rule that a corporation, with knowledge of its officer's unauthorized contract and of the material facts concerning it, if it receives and retains the benefits resulting from the transaction it thereby ratifies the transaction.  A corporation may not accept the benefit of a transaction and at the same time attempt to escape its consequences on the ground that the transaction was not authorized.  Id. 1655.

     Paul Kalv, current General Manager of KUA, testified that the KUA Board of Directors was organized on October 1, 1993.  The Transfer Agreement was signed on December 30, 1993.  Therefore, there had been time for the Board of Directors to review the Transfer Agreement prior to its execution with the State of Kosrae.  Mr. Kalv's review of the minutes of the Board of Director meetings until August 5, 1994 indicated no reference to the Transfer Agreement.  The Board of Directors did not act promptly to rescind or revoke the action taken by the General Manager.  By the Board's inaction, the Board of Directors ratified the execution of the Transfer Agreement by John Barnett and Governor Thurston Siba. Furthermore, all subsequent actions of the Board of Directors were consistent with the terms of the Transfer Agreement.  KUA exercised control of the assets transferred to KUA, including the Tofol power plant, the distribution system, vehicles and equipment.  KUA also exercised control of the OMIP funds allocated to KUA and accepted substantial funds from the State under the Compact Section 214 Funds, most recently for the Fiscal Year 1998.  The actions of the KUA Board of Director have been consistent with the terms of the Transfer Agreement since its execution on December 30, 1993.
 
     The KUA Board of Directors had knowledge of John Barnett's unauthorized contract and of the material facts concerning it.  KUA received, retained, and continues to receive and retain the benefits resulting from the transaction.  KUA may not accept the benefits of the Transfer Agreement and at the same time attempt to escape its liabilities on the ground that the transaction was not authorized.  It is clear from these facts that KUA Board of Directors have ratified the Transfer Agreement.  Therefore, Section 1.4, regarding liabilities is applicable to this lawsuit.  The indemnification provisions of Section 1.4 regarding the transfer of causes of action and other claims from the State of Kosrae to the KUA are clear.  See Bank of the FSM v. Bartolome, 4 FSM Intrm. 182, 185 (Pon. 1990).  This Court concludes that pursuant to the terms of the Transfer Agreement, KUA is liable to provide indemnity to the State of Kosrae for the negligence of the Defendant State of Kosrae and the damages awarded to the Plaintiff in this case.

  D.     Damages.
     A person injured through the negligent or intentional tort of another is entitled to an award of damages for pain and suffering.  Meitou v. Uwera, 5 FSM Intrm. 139 (Chk. S. Ct. Tr. 1991).  Calculating the amount of damages for pain and suffering is difficult because there are no fixed rules to help in that determination.  The determination of damages lies in the sole discretion of the trier of

[8 FSM Intrm. 454]

fact, or the Court.  It is appropriate to consider past pain as well as future pain. Fabian v. Ting Hong Oceanic Enterprises, 8 FSM Intrm. 63, 66 (Chk. 1997).

     In this case, the Plaintiffs presented evidence of pain and suffering. Compensatory damages for personal injury also include pain and suffering, past as well as the reasonable value of future pain and suffering.  The court must use its discretion in awarding it.  A person injured by the tort of another is entitled to an award for pain and suffering, including mental anguish.  Davis v. Kutta, 7 FSM Intrm. 536, 549 (Chk. 1996).

     Kim Asher is a minor, has never been employed, and therefore did not suffer any lost wages.  Damages for lost future earnings are not awardable where they are duplicative and speculative.  Primo, 7 FSM Intrm. at 433-34.  Any future income or future lost wages for Kim are speculative and therefore cannot be awarded.  Plaintiffs did not present evidence of "customary services" of Kim that had been lost as a result of his injury.  Kun Asher testified that he expected Kim to take care of him in his old age, but did not present evidence that Kim would be unable to do so because of his injured eye.  Therefore, no damages are awarded for loss of customary services.

     In this case, Plaintiffs testified that they did not incur any medical expenses for the treatment of Kim's eye.  The care provided at Kosrae State Hospital was free. Kim's medical referral to Pohnpei was also provided by the State.  Therefore no damages for medical expenses are awarded.

     In determining the amount of damages for this case, this Court concludes that there are no special damages at all: no hospital bills, lost wages or loss of customary services.  In arriving at the amount of damages for pain and suffering, this Court carefully consulted the reported cases in the state courts and in the FSM Supreme Court.  In determining pain and suffering, it is proper to consider not only past pain but future pain.  In this case, the accident occurred in August 1993 and five years have passed since the injury to Kim's eye.  Also considered was the loss of enjoyment of life as an element of pain and suffering.  Kim's difficulty in playing and participating in activities appropriate to his age group were considered.  This Court concludes that the damages for Kim's pain and suffering was ten thousand dollars ($10,000).

IV.  Judgment.
     Let judgment be entered in favor of the Plaintiffs and against Defendant KUA in the amount of ten thousand dollars ($10,000).  Defendant State of Kosrae is not liable for damages based upon the indemnity provided by KUA pursuant to the provisions of the Transfer Agreement.

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