KOSRAE STATE COURT
FEDERATED STATES OF MICRONESIA
Cite as Esau, Et Al v. Kosrae Farmers Coop.Assoc.(Kosrae 1997)
 
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CARYULA ESAU, ET AL.,
Plaintiff,  

vs.

KOSRAE FARMERS
COOPERATIVE ASSOCIATION,
Defendant.  

CIVIL ACTION NO. 82-96

  OPINION AND JUDGMENT

     This matter came for trial on October 31, 1996. The trial of this matter was separated into two trials, by Order of this Court dated October 22, 1996. Trial of the claims of Plaintiffs Wakuk and Esau were held on October 31, 1996 and November 13, 1996. Trial of the claims of Plaintiff Kiobu Luey was held on November 13, 1996. Trial was continued on November 13, 1996 and closing arguments were heard on December 19, 1996. All three Plaintiffs were represented by Harry Seymour, Micronesian Legal Service Corporation. Defendant KFCA was represented by Mathias Mongkeya. This Opinion and Judgment sets out the findings of fact and conclusions of law made by this Court in this matter.

I. BACKGROUND FACTS

     The Complaint alleges that Defendant KFCA hired Plaintiffs Wakuk and Esau for employment through a verbal agreement in August 1992, at the rate of $100 biweekly each. Defendant terminated Wakuk and Esau for employment in November 1995.

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     Plaintiff Wakuk and Esau claimed that they never received their first biweekly wages or their wages for their final week of employment. Plaintiffs Wakuk and Esau each also claimed wages for 792 overtime hours from Defendant.

     Plaintiff Wakuk claimed damages resulting from his default on a $2000 personal loan from FSM Bank. Wakuk claims that he relied upon the Defendant's representations of his status as a "permanent employee" to obtain the loan. Plaintiff Wakuk also claims the Defendant KFCA allegedly deducted from Wakuk's wages, some allotments for payments to the Kosrae State Housing Renovation Program for a total $180.00. Defendant allegedly did not send these deducted allotments to the Housing Renovation Program.

     Plaintiff Luey, pursuant to his written contract with the Defendant, was to be compensated at $2.50 per hour. When his contract expired on September 31, 1995, KFCA allegedly extended Plaintiff Luey, employment contract to November 17, 1995. Plaintiff Luey claims wages from defendant KFCA for 256 hours worked between October and November 17, 1995.

     Plaintiffs brought claims for breach of contract, unjust enrichment, detrimental reliance and conversion. The elements and requirements for proof of each claim is discussed in turn below, as proven by the evidence presented at trial.

II. DISCUSSION

     A. Wakuk and Esau's Claims. Regular Wages

     The Court finds that Plaintiffs Wakuk and Esau formed a contract with Defendant KFCA for regular employment in August

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1992. This contract of employment continued until the termination of Plaintiffs Wakuk and Esau in November 1995.

     The objective theory of contracts is "mutual assent" or agreement. Mutual assent or agreement is usually occurs when there is a process of offer and acceptance. Under the objective theory, whether there is agreement is determined by asking what a reasonable person in the position of one party would be led to believe by the words and conduct of the other party. This is usually a question of fact. If offer is a promise to do or to refrain from doing some specified thing in the future. The offer creates the power of acceptance. The acceptance creates a contract and terminates the power of revocation by the offeror. The acceptance must be a voluntary act. Contracts, Black Letter Series, West Publishing, p. 1-2. A contract is a promise between two parties for the future performance of mutual obligations which the law will enforce. For the promise to be enforceable, there must be an offer and an acceptance, definite terms, and consideration for the promise. When one party fails to perform their promise, there is a breach of contract. Ponape Constr. Co. v. Pohnpei, 6 FSM Intrm. 114 (Pon. 1993). In order for an agreement to be binding, the agreement must be definite and certain as to its terms and requirements. Etscheit v. Adams, 6 FSM Intrm. 365 (Pon 1994).

     Based on the evidence presented at trial, the Court finds that Plaintiffs Wakuk and Esau had formed a valid enforceable oral contract for employment with Defendant KFCA. The contract was affirmed by all parties when Wakuk and Esau continued to work and were paid by KFCA. Through the pleadings and discovery and

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through testimony at trial, defendant admitted the employment of Wakuk and Esau through an oral agreement. The oral agreement provided that Plaintiffs Wakuk and Esau each be paid $100 biweekly for their work for Defendant KFCA. Defendant KFCA breached that agreement by failing to pay Wakuk and Esau for the first two weeks of their employment and for the last week of employment. Defendant KFCA is liable to Plaintiffs Wakuk and Esau for the sum of $300.00 to each Plaintiff. Since the Court has found that a valid contract was formed between Plaintiffs Wakuk and Esau, and the defendant, the Court does not reach plaintiff claims for unjust enrichment or detrimental reliance.

     B. Wakuk and Esau's Claims-Overtime Wades.

     With respect to overtime wages claimed by Wakuk and Esau, Plaintiffs failed to produce evidence to show that Wakuk's and Esau's overtime work was authorized by Defendant. Defendant presented evidence that the overtime work was not authorized by defendant KFCA. The Court finds that there was no agreement between Plaintiffs Wakuk and Esau and Defendant KFCA regarding overtime work and payment for overtime work, and therefore no valid contract for overtime work. Therefore, defendant KFCA is not liable to plaintiffs Wakuk and Esau for overtime wages under the basis of breach of contract. The Court next address plaintiffs claims for recovery under the theory of detrimental reliance. ^ In order for the theory of detrimental reliance to be applicable to the overtime pay, there must have been a promise made by KFCA relating to the overtime work by Plaintiffs Wakuk and Esau. For a promise to be

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enforceable under the theory of detrimental reliance, three elements must occur:

     1. The promisee must suffer legal detriment (do or promise to do what the promisee is not legally obligated to do);

     2. The detriment must induce the promise. This means that the promisor must have made the promise in exchange for the detriment to be suffered by the promisee;

     3. The promise must induce the detriment. This means that the promisee must know of the offer and show an intent to accept. Contracts, Black Letter Series, West Publishing, p. 148. In this case, the promisees are the plaintiffs Wakuk and Esau. The promisor is defendant KFCA.

     At trial, defendant strongly denied any promise or authorization for overtime work to be performed by plaintiffs Wakuk and Esau. Plaintiffs testified they worked during the early mornings hour and during lunch hours in order to meet exporting datelines and serving daily customers during lunch time. Since there was no promise made by KFCA to plaintiffs Wakuk and Esau regarding overtime work and pay, their claims based on the theory of detrimental reliance fails.
The Court has also considered Plaintiffs claim for recovery under the theory of unjust enrichment. A claim for recovery based on the grounds of unjust enrichment is based upon the common law action for quantum meruit, a form of action used for claims to payment for services. Quantum meruit is a basis for recovery where a benefit has been received by the defendant and it would be unequitable for him to retain it without payment. The general term

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of quasi-contract is also applicable, which refers to any money claim for the resolution of unjust enrichment. The Restatement of Restitution lays down the broad principle that a "person who has been unjustly enriched at the expense of another is required to make restitution." the person claiming restitution must have conferred a benefit of some kind on the other party. Contracts by Farnsworth, Section 2.20, pages 99-100.

     Restitution is a remedy which returns the benefits already received by a party to the party who gave them where the Court can find no contract. Jim vs. Alik, 4 FSM Intrm. 199(Kos. 1989). The doctrine of unjust enrichment applies where there is an unenforceable contract, and requires a party to either return what has been received under the contract or pay the other party for it. The unjust enrichment doctrine is based upon the idea that one person should not be permitted to unjustly enrich himself at the expense of another. Etscheit vs. Adams. 6FSM Intrm 365 (Pon. 1994).

     The doctrine of unjust enrichment has been expanded to cover cases where there is an implied contract, but a benefit officiously thrust upon one is not considered an unjust enrichment and restitution is denied in such cases. Etscheit v. Adams, 6 FSM Intrm. 365 (Pon. 1994). The term "Officious" means volunteering one's services where they are neither asked nor needed. Webster's Ninth New Collegiate Dictionary, page 820. Under Etscheit v. Adams, 6FSM Intrm. 365, since the overtime work was volunteered by Plaintiffs Wakuk and Esau, and not requested or needed by Defendant KFCA, the overtime work must be considered "officious." Therefore,

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Plaintiffs Wakuk and Esau cannot recover wages for the overtime work under the theory of restitution.

     The Court finds, based upon the evidence presented at trial, that there was no agreement regarding overtime work to be paid to Plaintiffs Wakuk and Esau. Therefore Plaintiffs cannot recover based on their breach of contract claim. There was no promise made by Defendant KFCA regarding payment for overtime work, therefore no recovery is allowed under the theory of detrimental reliance. Furthermore, any overtime work performed by Plaintiffs Wakuk and Esau was neither asked for nor needed by Defendant KFCA. Therefore, the overtime work and wages claimed by the Plaintiffs were officious benefits given to the Defendant. Defendant KFCA is not liable to Plaintiffs Wakuk and Esau for overtime wages under the theory of unjust enrichment or restitution.
     C, Wakuk's Claim for Conversion

     At trial, Plaintiff Wakuk testified that Defendant KFCA made deductions from his wages for payments to the Housing Renovation Program, but then KFCA failed to transmit these deducted payments to the Housing Renovation Program. Mr. Kiobu Luey testified he made deductions of $20.00 from Plaintiff Wakuk's pay and made payments to the Housing Renovation Program for each pay period. Near to the end of Plaintiff Wakuk's employment, Defendant KFCA through Mr. Kiobu Luey continued making deductions without these deductions being paid into the Housing Renovation Program. Plaintiff's Exhibit "D" shows July 19, 1995 the last date in which deductions or payments was made to the Housing Renovation Program. The length of employment for Plaintiff Wakuk ended on

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November 16, 1995. This evidence figuratively shows deductions for the month of July 20, 1995, August, September, October and through November 16, 1995 were not paid to the Housing Renovation Program. At $20.00 each pay period for nine unpaid payments beginning July 20, 1995 to November 16, 1995. Defendant KFCA withheld $180 of Plaintiff Wakuk's salary without making payment to the Housing Renovation Program.

     Conversion is an intentional exercise of dominion or control over a tangible item which seriously interferes with the plaintiff's right to control that item. The only intend required for the tort of conversion is an intent to exercise dominion or control over the item. A conversion may occur when the Defendant (1) acquires possession, (2) moves the item, (3) makes an unauthorized transfer, delivery, or disposal, (4) withholds possession, (5) destroys or materially alters the item, or (6) under certain circumstances, merely uses the item. Damages for the tort of conversion include the full value of the item at the time of conversion. Torts, Black Letter Series, West Publishing, page 117-118.

     The evidence presented at trials support Plaintiff Wakuk's claim for conversion of nine Housing Renovation Program payments of $20 each by Defendant KFCA.
In addition to finding that the Defendant is liable for conversion to Plaintiff Wakuk, as a public policy matter, there is an expectation that if the employer makes authorized deductions from an employee's pay, then the employer will make the payment to the appropriate authority. This policy applies to national income tax deductions, Social Security deductions, health insurance deductions

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and loan payments. Once the employer has made the deduction from the employee's wages, either pursuant to law or otherwise authorized by the employee, the employer has a duty to pay out those deductions to the appropriate party. This Court finds Defendant KFCA liable to Plaintiff Wakuk for conversion of Wakuk's funds in the amount of $180.00.


     D. Wakuk's Claim Regarding Default on his loan.

     Plaintiff Wakuk claimed that Defendant KFCA should be held liable for damages caused by Wakuk's default on a loan. The Court refuses to impose liability on Defendant KFCA for this claim. This Court could not find any basis in law that would hold KFCA liable for damages incurred by Wakuk's default on the loan. Plaintiff presented Plaintiff's Exhibit "A". A bank document to show verification of employment signed by Mr. Luey then manager of Defendant KFCA was the reason the FSM Bank credit him the loan. Plaintiff's claim is based upon the theory of detrimental reliance, which requires that some detriment induce the promise. Plaintiff Wakuk did not suffer any detriment to induce Defendant KFCA to complete the verification form for the loan. Therefore, the theory of detrimental reliance is not applicable here.

     Although Plaintiff Wakuk may have relied upon Defendant KFCA's employment verification form to secure the loan, the verification form is not a guarantee of continued employment. The verification form stated that "continued employment probability" was "good", and not "excellent". The word "Probability" means "the chance that a given event will occur." Webster's Ninth New Collegiate Dictionary, page 937. Clearly the phrase "continued employment

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probability" cannot be interpreted to mean a guarantee of continued employment forever.

     In addition, Wakuk's termination from employment at KFCA cannot be the sole cause of Wakuk's default on the loan. Other unrelated reasons may have caused Wakuk to default on the loan: failure to make loan payments due to other financial obligations, loss of job or inability to work due to other reasons such as leaving Kosrae, quitting or inability to work due to illness. Furthermore, Wakuk could have attempted to secure another job after his termination from KFCA. Mr. Wakuk testified he is a farmer. Another source of income that us, Kosraeans, are fortunate with is farming. Especially those who have land and are good, experienced farmers.

     In addition, this Court finds that it would be poor public policy to hold the employers such as Defendant KFCA responsible for an employees damages from the employees default on their loan. Such a policy would encourage employees to get a verification form from their employer, obtain a loan, and then quit their job, knowing that their employer would be held responsible for damages caused by the employees default. This Court refuses to support such a policy. Accordingly, Defendant KFCA is not liable to Plaintiff Wakuk for damages caused by Wakuk's default on his loan.

     E. Kiobu Luey's Claim-Regular Wages

     The evidence produced at trial showed that Plaintiff Kiobu Luey was a contract employee who worked as a manager for Defendant KFCA from September 1994 to September 1995. Luey's written employment contract expired on September 31, 1995. KFCA extended the contract to November 17, 1995. In discovery and at

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trial, the Defendant admitted that Luey's contract was extended. Based on the extended contract from KFCA, Luey worked 256 regular hours from October 1 to November 17, 1995. Plaintiff Luey testified that KFCA has refused to pay him for those additional hours. In discovery, KFCA claimed that it paid Luey $200 during October and $200 November. Plaintiff on the other hand, claimed he has not been paid for the October 1 st 1995 to November 17, 1995 based on the extended oral contract. In discovery defendant KFCA kept saying the Plaintiff, Kiobu Luey has already been paid without providing evidence to proof such payments. In reality it would be expected of the person, place, corporations, that may have documentary proofs to come forward with such good and direct evidence. The Defendant KFCA failed to provide evidence to support their argument that payments has been made to Plaintiff Luey.

     KFCA admitted that a valid oral contract was formed between Defendant KFCA and Plaintiff Luey for the extended term of October 1 to November 17, 1995. A contract is a promise between two parties for the future performance of mutual obligations which the law will enforce. For the promise to be enforceable, there must be an acceptance, definite terms, and consideration for the promise. When one party fails to perform their promise, there is a breach of contract. Ponape Construction Company vs. Pohnpei, 6 FSM Intrm. 114 (Pon. 1993). In order for an agreement to be binding, the agreement must be definite and certain as to its terms and requirements. Etscheit vs. Adams. 6 FSM Intrm. 365 (Pon. 1994).

     The Court finds that Defendant breached its contract with Plaintiff Luey by failing to pay Plaintiff Luey the wages agreed upon

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for work performed during that extended time period from October 1 to November 17, 1995. Defendant KFCA is liable to Plaintiff Lucy in the amount of $640.00. Since the Court finds that a valid contract existed between the parties, the Court does not need to reach any other theories of recovery.

III. JUDGMENT

     This Court finds Defendant KFCA liable to Plaintiff Wakuk and Esau for regular wages in the amount of $300 for each plaintiff. Defendant KFCA is liable to Plaintiff Wakuk in the amount of $180.00 for deductions made by Defendant for payment to the Housing Renovation Program. Defendant KFCA is liable to Plaintiff Luey for regular wages in the amount of $640.00.

     This Court finds that Defendant KFCA is not liable to Plaintiffs Wakuk and Esau for overtime wages. Defendant KFCA is not liable to Plaintiff Wakuk for damages resulting on Wakuk's default of his loan.

SO ORDERED this 30th day of anuary, 1997.

/s/
Aliksa B. Aliksa
Associate Justice

Entered on this 30th  day of January, 1997.

/s/
Chief Clerk of Court, Kosrae                                        
                                                                                                                                                                                                                                                                                                           
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