5 FSM Intrm. 130 (Chk. S. Ct. Tr. 1991)

CHUUK STATE SUPREME COURT
TRIAL DIVISION

CSSC CIVIL ACTION 106‑90

OSHIRO K. BILLIMON
Plaintiff

V

CHUUK STATE GOVERNMENT
Defendant

BEFORE: Wanis R. Simina, Associate Justice, Chuuk State Supreme Court

APPEARANCES: For the Plaintiff: Richard Eas, Office of the Public Defender; For the Defendant: Madeleine Austin, Attorney General and Tony Rosokow, Deputy Attorney General

OPINION: May 17, 1991

HEADNOTES

Constitutional Law; Property
FSM Constitution terminated all existing indefinite term land use agreements five years after the effective date of the Constitution. Billimon v. Chuuk, 5 FSM Intrm. 130, 132 (Chk. S. Ct. Tr. 1991).

Attorney, Trial Counselor and Client; Contract
Prior representation of another party to contractual negotiations is not in and of itself sufficient to create a conflict of interest which would invalidate the negotiated contract unless it can be shown such representation was directly adverse to the other client or materially limited the interests of the present client. Billimon v. Chuuk, 5 FSM Intrm. 130, 135‑35 (Chk. S. Ct. Tr. 1991).

Constitutional Law ‑ Chuuk; Contract
Lease agreement executed by the Chuuk State is void insofar as it purports to "incur public indebtedness" without legislative authority by way of an appropriation or statute. Billimon v. Chuuk, 5 FSM Intrm. 130, 135‑36 (Chk. S. Ct. Tr. 1991).

Attachment and Execution
Absent specific legislative authority the Chuuk State Judiciary Act properly bars the state court from attaching, executing, or garnishment of public property. Billimon v. Chuuk, 5 FSM Intrm. 130, 136 (Chk. S. Ct. Tr. 1991).

Constitutional Law ‑ Taking of Property
To consider lease valid when lessor state government cannot be compelled to honor it would be unconstitutional taking of lessee's property. Billimon v. Chuuk, 5 FSM Intrm. 130, 136 (Chk. S. Ct. Tr. 1991).

Property; Remedies
Although the Court is powerless to compel Chuuk State to honor its lease agreement it has full power to restore unlawfully held property to its rightful owner as a remedy for forcible entry and unlawful detainer. Billimon v. Chuuk, 5 FSM Intrm. 130, 136‑37 (Chk. S. Ct. Tr. 1991).

Civil Procedure; Remedies
Under Civ. R. 54(c) the Court has full authority except in default judgments, to award the party granted judgment any relief to which it is entitled whether that party prayed for it or not. Billimon v. Chuuk, 5 FSM Intrm. 130, 137 (Chk. S. Ct. Tr. 1991).

Remedies; Torts ‑ Damages
Where the Court cannot compel the state to honor an illegal and/or unconstitutional lease it can order the state to restore the illegally held land, with any and all public improvements removed, to its rightful owner who may also be entitled to damages. Billimon v. Chuuk, 5 FSM Intrm. 130, 137 (Chk. S. Ct. Tr. 1991).

COURT'S OPINION

WANIS SIMINA, Associate Justice:

INTRODUCTION

Plaintiff Oshiro K. Billimon brought this action for relief from breach of a lease entered into between plaintiff and the government of Chuuk State.

The lease agreement conveyed to the State of Chuuk a parcel of land 49.79 meters by 10 meters, totalling 498 square meters+/‑, or 0.123 acres +/‑. The term of the lease was fifty (50) years, and in exchange for the right to use the property for fifty years, Chuuk State agreed to pay plaintiff 150,000.00. The real property leased to Chuuk State included a portion of the roadway between the Federated States of Micronesia Telecommunications Corporation office and the Airport in Weno.

In order to fully understand the situation which led to the lease agreement, a brief statement of the history behind the agreement is necessary.

Prior to the ratification of the Constitution of the Federated States of Micronesia in 1979, the government of the Trust Territory of the Pacific Islands acquired and used privately owned land pursuant to agreements to use land for "indefinite terms." The FSM Constitution terminated all such agreements, and prohibited any such future agreements. All existing "indefinite term" agreements expired five years after the effective date of the FSM Constitution. FSM Const. art. XIII, § 5. The land which is the subject of the lease herein had been subject to an "indefinite term" use agreement, which expired on May 10, 1984, five years after the effective date of the FSM Constitution.

Despite the clear language of Article XIII, sec. 5, no new agreement between plaintiff and Truk State, as successor to Truk District, was negotiated prior to May 10, 1984. From that date, the State Government occupied and used plaintiff's land without an agreement, and without any legal right to do so. The State was a trespasser on plaintiff's land.

In 1988, plaintiff brought an action against Truk State alleging that the State had trespassed on his land, and that it was a continuing trespass. As a result of that action, defendant, through its then acting Attorney General, Kachuo Eko, began negotiating a lease for the right to use plaintiff's land between Anderson Field and Tenifion (the sewer plant area). Those negotiations resulted in the lease which forms the basis of this action.

The lease was duly executed by the then Acting Governor, Iskia E. Sony, and the Land Management Officer, Mr. Karadel Ezra, on October 5, 1989. The price of the lease, $150,000.00, included compensation for, or an agreed waiver of, all of Plaintiff's claims for trespass for the period between May 10, 1984 and the date of the lease. The lease provided that payment of the $150,000.00 would be made within 30 days of execution, not later than November 4, 1989.

STATEMENT OF THE CASE

The complaint herein was filed on August 24, 1990, and served the same day on Kachuo Eko, still acting Attorney General. The complaint alleged the lease, its breach by non‑payment by defendant, and prayed for an order compelling the Government to pay the agreed price, or for any other relief the Court considered just and proper.

No answer having been filed, plaintiff filed a request for judgment by default on October 9, 1990. Judgment was rendered for $150,000.00, plus interest, on October 15, 1990.

Defendant Chuuk State filed an answer by way of general denial on October 26, 1990, and by motion filed the same day sought to have the default judgment vacated. Hearing on the motion to vacate was held on December 11, 1990, and the judgment was vacated by order of this Court dated January 11, 1991. Trial of the matter was held, and submitted for decision, on February 13, 1991.

FINDINGS OF FACT

1. Plaintiff is the owner of the land known as Nenom No. 1, located between Anderson Field and Tenifion, consisting of 49.79 meters by 10 meters, or 489 square meters, more or less, of 0.123 acres, more or less.

2. From May 10, 1984, Chuuk State has had possession and use of plaintiff's land, and has used that property as a public right of way, and as an area for in installation and maintenance of public utility improvements including water, sewer and electrical transmission lines.

3. From May 10, 1984 to the present Chuuk State has had possession of said land without the consent or permission of the owner thereof, plaintiff herein.

4. On October 5, 1989, plaintiff and defendant Chuuk State entered into a contract whereby defendant Chuuk State, by and through is authorized representatives, agreed to pay the sum of $150,000.00 for the right to use said land for a period of 50 years, and for forbearance by plaintiff of his claims for damages for the period from May 10, 1984 to October 5, 1989.

5. No appropriation for payment of the agreed lease price has ever been made by the Legislature of Chuuk State.

6. No public funds may be paid of the Treasury of Chuuk State except as prescribed by statute.

OPINION

A. CONFLICT OF INTEREST OF ATTORNEY GENERAL

Prior to addressing the principal issues raised by this case, it is necessary to dispose of a contention raised by defendant regarding a conflict of interest on the part of Kachuo Eko, the acting attorney general who negotiated the lease on behalf of the State. This contention was raised for the first time at trial.

According to the evidence, Kachuo Eko represented plaintiff in a civil action, totally unrelated to the land issues presented here. While the civil action had been commenced prior to the beginning of the lease negotiations, it appears that Kachuo Eko was still attorney of record for plaintiff at the time he negotiated the lease on behalf of the state.

The State contends that this conflict led to a lease which was unfair to the government in terms of its price. The Court cannot agree.

Attorneys practicing in Chuuk State are governed in their conduct by the American Bar Association Model Rules of Professional Conduct. Rules of the State Bar of Truk, Rule 13(a). The rules regarding representation of conflicting interest are set forth in Model Rule 1.7, which states:

“(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:

(1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and

(2) each client consents after consultation.

(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client...or by the lawyer's own interest, unless:

(1) the lawyer reasonably believes the representation will not be adversely affected; and

(2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.”

Here, while the evidence did show that Kachuo Eko had represented plaintiff on a totally unrelated matter, no evidence was proffered that counsel represented both parties to the lease negotiations. Thus no violation of the last sentence of Rule 1.7(b)(2) can be found. Furthermore, no evidence was introduced by the State that Kachuo Eko's representation of plaintiff in an unrelated matter constituted representation "adverse" to the interests of the State. Neither did the State offer evidence that its interests were "materially limited" by Eko's prior representation of plaintiff.

The State sought to infer, without evidence, that Kachuo Eko's prior legal relationship with plaintiff resulted in a lease whose terms were less favorable to the State than would have resulted had someone else negotiated the lease. The evidence does not support the inference. The terms of the lease, including price, were proposed by the office of Land Management. The lease had to be approved by both the Chief Executive Officer of the State and the head of the office of Land Management. Under those circumstances, the Court must find that the State, at the time of the execution of the lease, considered the terms thereof to be fair to the State.

Prior representation of another party to contractual negotiations is not in and of itself sufficient to create a conflict of interest which would invalidate the negotiated contract. Evidence that such representation was directly adverse to another client, or that such representation materially limited the interests of another client, must be shown. Absent such evidence, no invalidating conflict can be found.

B. VALIDITY OF THE LEASE

The primary issue presented for resolution is whether the lease between plaintiff and Chuuk State is valid and enforceable. If the lease is neither valid nor enforceable, the Court must then decide what remedy is available to plaintiff, if any.

It is not disputed that a lease was negotiated in good faith and approved by both plaintiff, as owner, and the State, as prospective lessee. Neither can it be disputed that the lease was necessary, and indeed mandated, by the provisions of the FSM Constitution, article XIII, sec. 5.

Despite the provisions of article XII, sec. 5 of the FSM Constitution, the State apparently took no steps to commence negotiations for a new lease until compelled to do so by the action for trespass filed by plaintiff in 1988. When confronted with the very real possibility of eviction, however, the State commenced and apparently successfully concluded lease negotiations which resolved all issues of unlawful use prior to the date of the lease, and assured the continued use of a vital public roadway and utility easement well into the next century. The lease was signed by all parties, and the problem should have been resolved. Other provisions of the Chuuk State law govern this transaction, however. For the reasons which follow, the court must reluctantly declare the lease void and of no force and effect.

The Chuuk State Constitution provides, in article VIII, sec. 1, that "The government may not incur public indebtedness except as prescribed by the statute." The Constitution also provides, in article VIII, sec. 2, that "No public funds may be paid out of the treasury of the State of Chuuk except as provided by statute." Thus, insofar as the lease agreement purported to "incur public indebtedness" without legislative authority, by way of an appropriation, it is void on the grounds that it violates directly the provisions of the State Constitution. It is agreed that no appropriation of other legislative approval or ratification of the lease has been enacted by the Chuuk State legislature.

Not only is the lease unconstitutional, it also violates State law, specifically the Truk Financial Management Act. TSL 5‑44. The Financial Management Act provides:

“The treasurer shall not record or assent to any claim that an obligation exists unless it is supported by documentary evidence, and is for the purpose specified by an appropriation. Only allottee or his designee may offer evidence of an obligation.”

TSL 5‑44, § 6(a).

Although the lease agreement clearly constitutes "evidence of an obligation" (TSL 5‑44, sec. 6(2)(a)), the Financial Management Act clearly requires an appropriation as a condition to the creation of a lawful obligation of the State. By reason of State statute, as well as on constitutional grounds, the Court concludes that the lease is void. Truk v. Maeda Constr. Co., (Maeda I), 3 FSM Intrm. 485, 487 (Truk 1988).

Furthermore, even if the Court could find the lease to be valid, it has no means with which to compel its enforcement. The Judiciary is specifically prohibited from issuing process to enforce its money judgments against the State. The Chuuk State Judiciary Act of 1990 provides:

“Section 4. General Powers of State and Municipal Courts. Each court shall have power to issue all writs of equitable and legal relief, except the power of attachment, execution and garnishment of public property....”

TSL 190‑08, § 4 (emphasis added).

This provision of the Judiciary Act is clearly a proper exercise of Legislative power. The authority of the Judiciary, in claims against the government, ends with the determination of liability and the amount of damages, if any. Absent specific legislative authority the Courts have no power to order execution against public property. See, e.g., 6 Am. Jur. 2d Attachment and Garnishment § 184; 30 Am. Jur. 2d Executions § 39; 57 Am. Jur. 2d Municipal, Etc., Tort Liability § 703.

The effect of this provision, in the instant case, is to place plaintiff in a situation where his liability to recover on a judgment awarding him the value of the lease is no greater than his ability to compel the government to honor the lease in the first instance. To consider the lease valid under these circumstances would be to permit the State to take and use plaintiff's property without compensation ‑ itself a violation of the Chuuk State Constitution. Chuuk Const. art. III, § 2; art. XI, § 2.

C. REMEDY

While the Court may be powerless to compel Chuuk State to honor the lease agreement, and may be compelled to declare the lease void as unconstitutional and contrary to statute, plaintiff is nonetheless entitled to a remedy to correct the injury caused by the State's unlawful use of his property. That remedy lies in the remedies for forcible and unlawful detainer. The Courts have full authority to restore the unlawful detainer. The courts have full authority to restore the unlawfully held property to its rightful owner. Upon proof of wrongful possession, judgment shall restore possession to the rightful possessor. 35 Am. Jur. 2d Forcible Entry and Detainer § 47.

The Court is fully empowered to afford this relief to plaintiff. Chuuk Civ. R. 54(c) provides, in pertinent part:

“...Except as to a party against whom a judgment is entered by default, every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in his pleadings.”

Although the pleadings did not specifically request restoration of the land as an alternative to a judgment for the value of the lease, the Court pursuant to Rule 54(c) has complete authority to award any relief to which the plaintiff is entitled, including restoration of possession, whether prayed for or not.

Here, it is undisputed that the State's right to possession of plaintiff's land terminated on May 10, 1984. FSM Const., art. XIII, sec. 5. It is further undisputed that the State has failed and refused, and continues to refuse, to compensate plaintiff for the continued use of his land. The court concludes, therefore, that Chuuk State has been, and continues to be, unlawfully detaining plaintiff's land, and must immediately restore possession of said land to plaintiff. Defendant Chuuk State must furthermore remove any and all public improvements to said land, at its own expense.

The Court is mindful of the extraordinary hardship this judgment will cause to the citizens and the government of Chuuk State. It is therefore, inclined to stay execution of the judgment until September 30, 1991. In the intervening time, Chuuk State, may, at its sole option, choose to ratify the lease, and to appropriate sufficient funds to honor the terms of the lease, and to pay plaintiff interest on the sums due under the lease, at the rate of nine percent (9%) from November 4, 1989 to date of payment.

The lease, as negotiated, included implicitly, payment for, or a waiver of, all claims of plaintiff for damages arising from the State's unlawful use of the land from and after May 10, 1984. As the lease is void, for the reasons stated above, plaintiff may have a valid claim for such damages. The Court was not requested to, and therefore shall not, determine the extent, or existence of such damages at this time. Nothing contained in this opinion shall prevent plaintiff from bringing a claim for such damages in the future, however. The court may be precluded from making an award for such damages.

Neither was the Court asked to consider whether the failure of the State to complete an agreement for the use of plaintiff's land constitutes an unconstitutional violation of the mandate of Article XIII, section 5 of the FSM Constitution. The Court will leave this most important constitutional question, and its ramifications, for others to determine.

JUDGMENT

1. The defendant Chuuk State shall vacate plaintiff's land, known as Nenom No. 1, being 49.79 meters by 10 meters, or 498 square meters, more or less, comprising of 0.123 acres, more or less, not later than September 30, 1991, and shall by that date remove from said land all public utility improvements thereon.

2. In the alternative, the defendant Chuuk State may, at its sole option, ratify the subject lease, and by lawful appropriation, secure and pay such funds as are necessary to honor the terms of said lease, and to pay plaintiff the sum of $150,000.00, plus interest thereon at the rate of nine percent (9%) from November 4, 1989 to the date of payment.

3. Plaintiff may not refuse tender of payment pursuant to paragraph 2 above, should tender of payment be made not later than September 30, 1991. In the event Chuuk State elects not to ratify the lease, and make payments in accordance with paragraph 2 above, plaintiff shall be entitled to immediate possession of his land on October 1, 1991.

4. The Court retains jurisdiction of this action to carry out the terms of this judgment. In the event plaintiff is restored to his land, he may apply the court at any time after October 1, 1991, for judgment for damages suffered as a result of Chuuk State's unlawful use of his land from May 10, 1984 through September 30, 1991.

5. Plaintiff shall recover his costs.