POHNPEI SUPREME COURT REPORTS
VOL. 2
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PONAPE TRANSFER AND STORAGE,
Plaintiff
v.
FEDERATED SHIPPING COMPANY, Inc.,
Defendant
Pohnpei Civil Action No. 141-85
Trial Division of the Pohnpei Supreme Court
July 1, 1986
Action for breach of contrast. The Trial Division of the Pohnpei Supreme Court, JUDAH C. JOHNNY, Associate Justice, held that the circumstances in this matter justified the actions of the defendant, rendering it free from liability.
1. Contracts - Construction - intention of the Parties
The Court does not look outside of the contract before it to get at the intention of the parties, and carry out that intention regardless of whether the instrument contains language sufficient to express it; but it is the sole duty of the Court to find out what was meant by the language of the instrument (17 Am Jur 2d, Contracts, Section 245)
2. Contracts - Construction - Intention of the Parties
The language of the instrument must be sufficient, when looked at in the light of such facts as the Court is entitled to consider, to sustain whatever effect is given to the instrument. (17 Am Jur 2d, Contracts, Section 245)
3. Contracts - Construction - Intention of the Parties
Where there is no ambiguity in the language used in a contract, the intention of the parties must be gathered from that and from that alone.
4. Contracts - Construction - Intention of the Parties - Enforcement.
The intention with which the law is concerned in construing and giving effect to in a contract, is that of the parties at the time of entering into
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the contract, regardless of any event occurring afterward, at least if such subsequent events were not reasonably within the contemplation of the parties when the contract was made.
5. Contracts - Evidence of Intention of the Parties
The words of a contract are always the most important evidence of the parties' intention.
6. Contracts - Secondary Agreements - Effect
A contract may be superseded or modified by another contrail, in which case the superseded or modified contract is usually referred to as the primary contract and the superseding or modifying contract as a secondary agreement. (17 Am Jur 2d, Contrails, Section 459)
7. Contracts - Primary Contracts - Alteration of Teens
No abrogation, change, modification or substitution in a primary contract can be effected by the sole action of one of the parties to it.
8. Contracts - Primary Contracts - Alteration of Terms
The consent of both parties to a contract is required to cancel, alter or supplant a contract fairly made, and the same meeting of minds is needed that was necessary to make the contract in the first place.
9. Contracts - Secondary Agreements- Requirement of Consideration
In the absence of a statute to the contrary, a new agreement by the parties to an older one, altering, canceling, supplementing, or supplanting their former compact, in order to be valid requires some consideration (17 Am Jur 2d, Contrails, Section 460)
10. Contracts - Secondary Agreements - Requirement of Consideration
Where plaintiff alleges the existence of a secondary agreement between him and defendant relating to an existing contract between them, there mud be valuable consideration, and that may include new advantages or burdens that the new contract imposes upon the parties.
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11. Contracts - Breach
It is recognized that the law will not permit a party to violate his solemn contract with impunity; nor will the law sanction a breach of contract as a means of escaping its burdensome terms.
12. Contracts - Breach
Breach in contract is a failure without legal excuse to perform any promise which forms a whole or a part of a contract, including the refusal of a party to recognize the existence of the contract or the doing of something inconsistent with its existence.
13. Contracts - Breach
In the obligation assumed by a party to a contract is found his duty, and his failure to comply with the duty constitutes the breach.
14. Contracts - Breach
Not all failures to comply with promises are breaches as some non-compliance are excused.
15. Contracts - Broach - Justification
The power to violate a contrail exists whenever the circumstances are such that the Court will not decree specific performance, but the right to do so depends upon some justification recognized in the law.
16. Contracts - Breach - Recovery of Damages
A party who seeks to recover damages from other party for breach of contract must show that he himself is free from fault.
17. Contracts - Breach - Justification
Where defendant makes efforts to re-establish measures to regulate services which had resulted in loss, damage and pilferage in the movement of containers or cargo which measures mere inconsistent with existing contract between defendant and plaintiff, this is a justifiable breach
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18. Contracts - Rescission
A contract may, as a rule, be rescinded by a party thereto by reason of the breach or non-performance of a condition by the other party, and dearly the breach or non-performance of a condition precedent is a ground for rescinding a contract. (17 Am Jur 2d, Contracts Section 507)
19. Contracts
Where under a contract for the movement of containers and cargo defendant imposes a requirement to reinstitute the procedure the parties were following at the beginning, precedent to each container movement, the Court views such requirement to be a legitimate measure by the defendant to assure proper control and prevent future problems of damage, loss and piBerages of consignee's cargoes in defendant's custody over which it has responsibility for their safe delivery, and for which the defendant is financially and morally accountable.
20. Contracts - Rights of Party - Waiver
Where contract confers on the plaintiff a right against defendant in protecting the plaintiff's exclusive right to container movement, that right is waived by plaintiff where he agrees to the participation or involvement of other companies in the container movement.
21. Contracts - Rights of Party - Estoppel
Where party to a contract by his acts, consent or acquiescence waives his right under the contract he is estopped from asserting that right.
22. Equity - Estoppel
Estoppel to question or object to a thing done or a position taken by another may arise from consent or clearly implied consent thereto. (28 Am Jur. 2d, Estoppel and Waiver, Section 51)
23. Equity - Acquiescence
Where a party with full knowledge, of his rights and of all the material
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facts remains inactive for a considerable time or abstains from impeaching a contract or transaction, or freely does what amounts to a recognition thereof as existing, or ads in a manner inconsistent with its repudiation so as to offend or interfere with the relation and situation of the parties, so that the other party is induced to suppose that it is recognized, this amounts to acquiescence and the transaction although originally impeachable, becomes unimpeachable.
24. Equity - Equitable Estoppel
Where plaintiff, notwithstanding competition between it and other firms beginning in 1982, did not complain of his right of protection agreed upon to be afforded on the part of the defendant, but enjoyed the advantages of the lucrative services under their contract until the defendant imposed restrictions in 1985, there is under the circumstances, full knowledge of right which was never asserted until the occurrence of actions that led to the institution of plaintiff's action, and by plaintiff's consent and acquiescence in its letter to engage in the competition service, plaintiff waived that right and was therefore barred to assert it under the doctrine of equitable estoppel.
Counsel for Plaintiff: Michael Barman
Counsel for Defendant: D. Barrie Michelson
JUDAH C. JOHNNY, Associate Justice
This matter came on to be heard before me on August 16, 1985, in Kolonia, State of Pohnpei. Appearances were Michael J Barman, Esq. for plaintiff Ponape Transfer and Storage, Inc. (PT&S), and R. Barrie Michelsen, Esq. for defendant Federated Shipping Company Inc. (FSCO).
Plaintiff in this matter sued the defendant for breaching the
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provisions of a contract parties entered into. While in an ordinary contractual relationship, the defendant could have breached its promises for the acts complained of, circumstances in this matter justifies the actions of the defendant, rendering it free from liability. The facts and circumstances of the matter are as set forth below.
FINDINGS OF FACT
1. Plaintiff is a corporation which is chartered under the laws of the Trust Territory of the Pacific Islands, to do business in the State of Pohnpei in various capacities related to water transportation.
2. Defendant is a corporation, chartered under the laws of the Federated States of Micronesia, operating an ocean terminal in stevedoring and terminal services, known as the Teketik Ocean Terminal, located at Teketik Island, Pohnpei State under lease from the Pohnpei State Government.
3. Plaintiff and defendant entered into an agreement on July 17, 1981, known as the Teketik Ocean Terminal Use Agreement, in which they agreed that the plaintiff would supplement the services of the defendant in stevedoring operation.
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4. The Teketik Ocean Terminal Use Agreement provides, inter alia, that plaintiff will undertake all container movement on the premises.
BACKGROUND
Evidence before this Court shows that defendant FSCO presently leases certain premises at the Teketik Doric in Pohnpei, commonly known as the Teketik Ocean Terminal, under which it is the operator of the ocean terminal, providing stevedoring and terminal services. When it obtained the lease, FSCO was a new corporation which, while it owned some equipment, was unable to obtain the kind of equipment adequate for use in stevedoring operations in lifting heavy loads.
Plaintiff PT&S was the former lessee and operator of the Teketik Ocean Terminal. h had since been doing business in various capacities related to water transportation and possessed the type of equipment that FSCO required. At the same time, PT&S desired to provide stevedoring services at the Teketik Ocean Terminal and FSCO needed help in the performance of stevedoring at the terminal. The parties therefore entered into an agree-
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ment on July 17, 1981. This agreement, known as the Teketik Ocean Terminal Use Agreement, with term of five years, provided that FSCO agreed to permit PT&S to utilize the Teketik Ocean Terminal premises for the purpose of performing stevedoring services to supplement FSCO's services in water commerce for the port of Pohnpei: FSCO agreed to provide 1,600 sq. ft. of space in a warehouse it leases at the terminal for use for storage of PT&S gear and equipment. In consideration for FSCO's promises, PT&S agreed to pay FSCO forty per cent (40%) of its terminal rental, prorated on monthly basis.
Parties recognized in the agreement that the overall conduct of business at the Teketik Ocean Terminal comprised stevedoring and terminal services. They divided their duties into two major functions giving stevedoring to PT&S and terminal services to FSCO. They understood that at times, stevedoring and terminal functions would overlap or otherwise defy clear definitions. Therefore, for purposes of their agreement, and in order to avoid conflict they executed an attachment to the agreement referred to as Attachment A, in which they agreed that PT&S would provide longshoremen, equipment, and supervisory personnel in the load-
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ing and discharging of vessels calling at Ponape, other than government vessels. In the performance of its functions, PT&S was to move all cargo, whether break-bulk, containerized, Ro-Ro, special or heavy lifts et cetera, to and from the vessel, and over the dock. For the discharge of cargo, parties agreed that movement would generally be off the vessel and over the dock to a permanent place of rest. Parties agreed that permanent place of rest would be a location where PT&S relinquishes custody of cargoes to FSCO, at which point the terminal and storage function begins. They agreed that FSCO would undertake custody and unstuffing of all containers as removed from vessels. A last item in their agreement expressed an understanding that PT&S would undertake all container movement on the premises, including loading of empty containers, and any back-loading of full or partially filled containers.
Having agreed, the parties began their joint services. In each event when there was a need for PT&S to move a container on the premises, a special authorization slip would be issued by FSCO, identifying the container by number and its related bill of lading. This practice continued for some time.
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Services at the Teketik Ocean Terminal when the agreement was executed were limited to those enumerated in the contract. At that time, movement of containers was confined to the Teketik Terminal premises only. In effect, containers would be delivered from stevedoring by PT&S, to a place of rest, when FSCO would unstuff the cargo from containers and upon payment of required fees and taxes, FSCO would issue such cargoes to consignees, all unstuffed from containers.
It was not until 1982 that consignees and various other firms were able to obtain conveyances and delivery trucks capable of transporting containerized cargoes, still intact in containers from the Teketik Terminal to consignees' places of business. That service comprised of the loading of containers from the point of rest onto consignees' conveyance or delivery trucks and unloading containers from delivery trucks to terminal and storage yard. This became a lucrative service in the terminal operation. Other companies joined in the services and competition increased in this area. FSCO purchased a piece of equipment which was capable of performing this service, and joined in the competition in 1985.
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FSCO is the primary operator of the Teketik Terminal. As operator of the terminal, it is responsible for the proper storage, handling and issuance of cargoes destined to consignees including the collection of fees, such as handling and storage fees. This responsibility extends to authority to keep the cargo until payments of all taxes and drafts are cleared. Its responsibility also extends to the liability for damage, and loss of cargoes destined to consignees while in custody at the Teketik Terminal. As a result, FSCO enforces a system in which for cargo issuance, it must be checked, and applicable tax levied and collected prior to issuance to consignees. As competition progressed, management of the terminal operation became difficult and FSCO began to lose control in managing the terminal. The use of written authorization prior to movement of containers stopped. Incidents of pilferages, including removal of cargoes from the terminal place of rest without clearance by FSCO as operator was detected. This led FSCO to require that any movement of cargo be done by use of FSCO's equipment only, that movement with the use of other equipment be done with the prior approval of FSCO. This led to the dispute between the parties and is the cause of this action.
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CONCLUSIONS OF LAW
Plaintiff mentions in this action that under Attachment A of the Teketik Ocean Terminal Use Agreement, the defendant promised that all container movement on the premises would be performed by the plaintiff; that the requirement by the defendant in its letter of July 22,1985, which informed the plaintiff that only the defendants' equipment would be used for the movement of cargoes unto consignees' conveyances and/or delivery truck and from delivery truck to storage yard and warehouses, was a breach of that use agreement and cannot be maintained.
Certain facts need to be pointed out in this action in determining the liability of any party under the Use Agreement.
First, as to the performance of the parties under the agreement, they have no conflict in the manner of their performance of all provisions of the agreement except the last portion of Attachment A. Evidence shows that at the time the parties entered into their Use Agreement, "container movement" promised in Attachment A and complained of here was restricted to movement of containers within the compound of the Teketik Ocean Terminal. Specifically, it meant the delivery of a container from the point of
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stevedoring (ship and over the docket a place of rest at the terminal area) and movement of such container from place to place within the terminal compound. Such movement may be from the point of rest to another point, or into the warehouse. The movement of containers from the place of rest unto consignees' conveyances and/or delivery truck or from the delivery truck to the storage yard or warehouses, did not exist at the time of the execution of Attachment A.
Therefore, this function was not in the minds of the parties when they entered into the Use Agreement. Here, the parties entered into a written agreement. Their intent, with respect to movement of containers, is expressed in Attachment A.
[1-5] It is not the function of the Court to look outside of the contract before it to get at the intention of the parties and cant' out that intention regardless of whether the instrument contains language sufficient to express it. Its sole duty is to find out what was meant by the language of the instrument. This language must be sufficient, when looked at in the light of such facts as the Court is entitled to consider, to sustain whatever effect is given to the instrument. 17 Am Jur 2d. Contracts, Sec. 245. Also Domeyer v.
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O'Connell, 108 A.L.R. 476. In Domeyer, the Court ruled that where there is no ambiguity in the language used in a contract, the intention of the parties must be gathered from that and from that alone. The intention with which the law is concerned in construing and giving effect to in a contract, is that of the parties at the time of the entering into of the contract, regardless of any event occurring afterward, at least if such subsequent events were not reasonably within the contemplation of the parties when the contract was made. The words of a contract are always the most important evidence of the parties' intention. Fidelity Phoenix Fire Ins. v. Farm Air Service, Inc. 255 F 2d 658. In the case at hand, it was understood by the parties that the movement of a container stretched from the lifting from the ship, off over unto the dock, and to its resting place. This was the agreed function of the plaintiff and it was agreed that such movement would not be disturbed by the defendant. It was also understood that there would be need for the plaintiff to use its equipment to move each container from where it was deposited originally at the place of rest, to another place on the terminal compound. That was the movement contemplated, and intended by the parties on the premises. The contract was,
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therefore, drawn up by the plaintiffs attorney, stating in Attachment A,
"It is understood that PT&S will under take at all container movement on the premises..."
[6-9] Second, assuming that the parties, as the plaintiff maintains, entered into an oral subsequent agreement in 1982, when the movement of containers expanded to include the movement of containers or cargoes unto consignees' conveyances and/ or delivery trucks and from delivery trucks to storage yard or warehouses; a breach is possible.
"A contract may be superseded or modified by another contract, in which case the superseded or modified contract is usually referred to as the primary contract and the superseding or modifying contract as a secondary agreement." 17 Am Jur. 2d, Contracts Sec 459.
However, no abrogation, change, modification, or substitution in a primary contract can be effected by the sole action of one of the parties to it. The consent of both is required to cancel, alter, or supplant a contract fairly made. The same meeting of minds is needed that was necessary to make the contract in the first place. See Webb v. Moran, 96 P 2d 308. In the absence of a statute to the contrary, a new agreement by the parties to an older one,
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altering, canceling, supplementing, or supplanting their former compact, in order to be valid, requires some consideration. 17 Am Jur. 2d Contracts, Section 460.
[10] There are two obstacles that lie in plaintiffs allegation of the existence of a secondary agreement. One has to do with the existence of consideration. Here, there must be a valid consideration, and that may include new advantages or burdens that the new contract imposed upon the parties, as discussed in 461 supra. However, what advantage was conferred upon the defendant is questionable. Defendant here did not have an equipment when the nature of movement of container changed, and competition started. There could not have been a valid advantage to the defendant in order to consent to a secondary agreement. Competition began between plaintiff and other firms possessing equipment capable of performing the new movement service. It should be noted that it was at a later time that the defendant acquired the type of equipment necessary for performing the new movement service. Thus, there could not have been a valid consideration.
The other obstacle pertains to the appropriateness of the defendant's as well as the other competitors' service. It is shown
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by evidence that the new movement function resulted in defendant's loss of control over the operation of the Ocean Terminal. Incidents of loss of cargoes and pilferages were experienced or found by the defendant, -partly as a result of the discontinuance of the special authorization slip, which parties utilized prior to the increase of competition. Consequently, the plaintiff as well as other movers, were moving cargoes without prior authorization of the defendant. The defendant under a separate agreement with the State Government was the primary operator of the Teketik Ocean Terminal. As such, in addition to its powers to control activities of the terminal it is also responsible for any loss of and/or damages to consignee cargoes on the terminal. While such loss, damages, or pilferages were not blamed upon the plaintiff as admitted by the defendant it maintained that the requirement of its July 25, 1985, letter was a measure reimposed in order to prevent further harm which it had and was expected to suffer from.
[11] It is recognized that the law will not permit a party to violate his solemn contract with impunity; nor will the law sanction a breach of contract as a means of escaping its burdensome terms Weaver vs. Greenbaum, 87 P 2d 406.
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[12-13] "Breach" in contract is a failure without legal excuse to perform any promise which forms a whole or a part of a contract, including the refusal of a party to recognize the existence of the contract or the doing of something inconsistent with its existence. In the obligation assumed by a party to a contract is found his duty, and his failure to comply with the duty constitutes the breach. Lorden v. Snell, 4 P 2d 392; Anderson & K. billing Co. v. Brocht, 60 P 2d 758; Soule v. Weatherby, 39 Utah 580, 118 p 833.
[14-18] Not all failures to comply with promises are breaches. Some non-compliance are excused. The power to violate a contract exists whenever the circumstances are such that the Court will not decree specific performance, but the right to do so depends upon some justification recognized in the law. Moreover, a party who seeks to recover damages from other party for breach must show that he himself is free from fault. From the evidence shown, the Court considers that the efforts of the defendant to reestablish measures to regulate services which had resulted in loss, damage and pilferage was justifiable as breach. The plaintiff had failed to comply with the adopted condition precedent to his movement of containers or cargo on the premises.
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The defendant consequently was hampered in its ability to control loss and pilferages of cargoes in its responsibility.
"Contract may, as a rule, be rescinded by a party thereto by reason of the breach or non-performance of a condition by the other party, and clearly the breach or non-performance of a condition precedent is a ground for residing a contract". 17 Am Jur 2d, Contracts Section 507
It should be noted incidentally, that the defendant did not completely prevent the use of plaintiff's equipment in the movement of cargo or containers on the premises, as the plaintiff asserts here. Close examination of the defendant's June 25th letter reveals that:
"...no containers is moved from its place of rest as defined under ocean use agreement unless FSCO authorized otherwise." See end of first paragraph
Here, the defendant did not mention use of equipment, but referred to the prior authorization applied as a condition precedent to the movement of container on the premises. Again, in, its last letter of July 22, the defendant stated in part,
"...Movement of cargo onto consignees' conveyance and/or delivery truck and from delivery truck to storage yard or warehouses is to be handled with FSCO's equipment only. No other equipment is allowed without the approval of the General Manager." See the end of the second paragraph;
[20] Again, there is no complete prevention. Plaintiff's
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equipment could still be used, but as a devise of proper control, with the approval of the defendant. Therefore, it can be seen clearly that the requirement imposed by the defendant intends to reinstitute the procedure parties were following at the beginning precedent to each container movement. It is viewed by this Court to be a legitimate measure by the defendant to assure proper control and prevent future problems of damage, loss and pilferages of consignees' cargoes in its custody over which it has responsibility for their safe delivery and for which the defendant is financially and morally accountable.
Lastly, the plaintiff asserts that the defendant breached its promises for failing to protect the exclusive right of the defendant to move containers at the terminal (paragraph 2 of Attachment A). This Court holds the plaintiff's contention without merit. The Court holds that white Attachment A confers on the plaintiff a right against the defendant in protecting the plaintiff's exclusive right to container movement, that right was waived by the plaintiff by agreeing to the participation of other companies, such as the Rock Products, to engage in that service. As is evidenced by its letter of June 28, 1986 (LSN-171) to the defendant, the plaintiff argued,
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"Regarding movement of containers from point of rest in your container yard unto consignee's conveyance ...I believe it is the consignee's right to select whomever he wants to perform this service.. See the last paragraph.
[21-22] Here, the plaintiff demonstrates his consent to the involvement of other companies in the services thereby waiving his right to protection under Attachment A. He is therefore, estopped from asserting such right by virtue of his consent, and acquiescence.
"Estoppel to question or object to a thing done or a position taken by another may arise from consent or clearly implied consent thereto." 28 Am Jur2d Estoppel and Waiver, Sec. 51; Divided Canal and Reservoir Co. V. Tenny 139 P 1110
[23] Here the plaintiff consented to the involvement of other companies in the container movement service.
"...Where a party with full knowledge of his rights and of ail the material facts remains inactive for a considerable time or abstains from impeaching a contract or transaction, or freely does what amounts to a recognition thereof as existing or acts in a manner inconsistent with its repudiation and so as to offend or interfere with the relation and situation of the parries, so that the other party is induced to suppose that it is recognized, this amounts to acquiescence and the transaction, although originally impeachable, becomes unimpeachable. " See Sec. 57 Supra; also 4 ALR 14
[24] Competition between the plaintiff and other firms began in 1982, when the defendant was not involved. The plaintiff did not
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complain of its right of protection agreed upon to be afforded on the part of the defendant, but enjoyed the advantages of the lucrative service until the defendant imposed restrictions in 1985. It was then that the plaintiff asserts that protection. There is, under the circumstances, full knowledge of right which was never asserted until the occurrence of actions that led to the institution of this matter. More than that, by its letter, the plaintiff states in plain terms its consent and acquiescence to engage in the competition service. The right is therefore waived, and the plaintiff is therefore barred to assert it under the doctrine of equitable estoppel.
It follows therefore, that no relief is available to the plaintiff in this matter.
Accordingly, it is ORDERED,
1. The plaintiff has no relief, and this matter is dismissed.
2. Each party will bear its own cost.