5 FSM Intrm 342 (Pon 1992)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION

FSM CIVIL ACTION 1991‑028

SHIGAMATSU KIHARA
Plaintiff

V

ROBERT NANPEI
Defendant

OPINION: Hearing:  April 22, 1992 - Decided:  August 24, 1992

BEFORE: Honorable Edward C. King, Designated Justice

APPEARANCES: For the Plaintiff: Fredrick L. Ramp, Attorney at Law; For the Defendant: John Brackett, Attorney at Law

HEADNOTES

Contracts ‑ Interpretation
Conditions to contractual obligations are not favored in the law because they tend to have the effect of creating forfeitures.  Kihara v. Nanpei, 5 FSM Intrm. 342, 344 (Pon. 1992).

Contracts ‑ Interpretation
Requisite clarity to establish a reference in a contract as a condition precedent may be created through plain and unambiguous language or necessary implication manifested by the contract itself.  Kihara v. Nanpei, 5 FSM Intrm. 342, 344 (Pon. 1992).

Contracts ‑ Interpretation
Contracts are not interpreted on the basis of subjective uncommunicated views, or secret hopes of one of the parties, but on an objective basis, according to the reasonable expectations or understanding of parties based upon circumstances known to the parties and their words and actions, at the time the agreement was entered into.  Kihara v. Nanpei, 5 FSM Intrm. 342, 345 (Pon. 1992).

Federalism ‑ Abstention and Certification
A bond of debt is simply a loan instrument.  Therefore when determining its legal effect does not require a determination concerning interests in land there is insufficient basis for abstention.  Kihara v. Nanpei, 5 FSM Intrm. 342, 345 (Pon. 1992).

Foreign Investment Laws
An isolated interest free unsecured loan is not engaging in business within the meaning of the Pohnpei State Foreign Investment law.  Kihara v. Nanpei, 5 FSM Intrm. 342, 346 (Pon. 1992).

COURT'S OPINION

EDWARD C. KING, Designated Justice:

On or about September 3, 1990, plaintiff Shigemitsu Kihara gave the defendant, Robert Nanpei, $50,000 and Mr. Nanpei signed a handwritten document, which says:

A bond of debt

3 sep. 1990

TO:  MR. SHIGEMITSU KIHARA

US Fifty thousand dollars (US $50,000)

I acknowledge the loan of the amount above inscribed.  I agree when contract between Mr. S. Kihara and myself regarding the Ant Atoll will be concluded within 6 months from 3rd of September in 1990, the above amount must be settled.

__________/s/_________
Robert Nanpei

Neither party disputes that the $50,000 was paid to the defendant and has not been repaid.

The case came before the Court on April 9 and 22, 1992 for hearing on plaintiff Kihara's motion for summary judgment and on defendant Nanpei's motion to abstain.  At the April 22 hearing, the Court partially granted the motion for summary judgment and denied the motion to abstain but instructed the parties to prepare a stipulated question, to be certified to the Pohnpei State Supreme Court appellate division, as to whether the loan reflected in this bond of debt constituted a violation of Pohnpei State Foreign Investment Law, Pon. S.L. 1L‑85‑86.

Since that time, defendant Nanpei has moved under FSM Civ. R. 60(b) for reconsideration of the summary judgment ruling and plaintiff Kihara has sought reconsideration of the Court's announced intention to condition its summary judgment ruling upon the response of the state court to a question to be certified to that Court.

Having considered the motions for reconsideration, the Court retains its view that summary judgment should be granted in favor of the plaintiff but has concluded that certification of an issue to the state court would not be appropriate under the circumstances of this case.  For the reasons explained in this opinion, the summary judgment issued today shall constitute a final judgment in this case.

SUMMARY JUDGMENT

In the first sentence of the bond of debt, Mr. Nanpei acknowledges the "loan."  Use of the term, loan, unless effectively rebutted by contrary evidence, is sufficient to require a finding that Mr. Nanpei was required to repay Mr. Kihara.  In order to avoid a summary judgment against him therefore, it was necessary for Mr. Nanpei to place before the Court evidence sufficient to show a genuine issue of material fact as to whether repayment was  required.  Federated Shipping Co. v. Ponape Transfer & Storage, Inc., 4 FSM Intrm. 3, 11 (Pon. 1989).

Two affidavits were filed by Mr. Nanpei but neither is adequate to raise a genuine issue as to the fact that the $50,000 paid by Mr. Kihara to Mr. Nanpei constituted a loan which was to be repaid.  Neither affidavit refers to any additional evidence.  Instead, the affidavits and the written and oral arguments made on behalf of Mr. Nanpei, take three tacks, none of which raises a genuine issue of material fact.

Mr. Nanpei's primary contention is that the reference in the bond of debt to a proposed contract regarding Ant Atoll means that Mr. Nanpei was to have no obligation to repay the $50,000 loan unless the parties entered into such a contract.  The Court does not find this to be a plausible or acceptable construction of the bond of debt.  Conditions to contractual obligations are not favored in the law because they tend to have the effect of creating forfeitures.  Panuelo v. Pepsi Cola, 5 FSM Intrm. 123, 127 (Pon. 1991); Federated Shipping Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3, 10 (Pon. 1989).  "Parties may create a condition through `plain and unambiguous language,' through `necessary implication' manifested by the contract itself or in some other way that makes their intent to create a condition clear."  Panuelo, 5 FSM Intrm. at 127.

The requisite clarity to establish the reference to the contract regarding Ant Atoll as a condition precedent to the repayment obligation does not exist.  The reference in the bond of debt to the contract concerning Ant Atoll seems simply to be an agreement by Mr. Nanpei that the $50,000 loan was to be taken into consideration and "settled," no later than upon finalization of such a contract.

There is nothing in the language of the bond of debt, or in the circumstances of the loan, indicating that Mr. Kihara was loaning $50,000 with the understanding that Mr. Nanpei need not repay the money if the two were able to reach an agreement concerning Ant Atoll.

Mr. Nanpei also asserts that he "never understood or believed" that plaintiff was going to require that the money be returned.  However, contracts are not interpreted on the basis of subjective, uncommunicated views or secret hopes of one of the parties.  Instead, courts interpret and enforce agreements on an objective basis, according to the reasonable expectations or understanding of parties based upon the circumstances known to the parties and their words and actions, at the time the agreement was entered into.  Mr. Nanpei's statement now is contrary to his acknowledgement of a $50,000 "loan."  Without evidence that such an explanation was reasonable, it cannot be given legal effect.

Finally, the defendant also contends that the payment to him constituted tortious interference with a pre‑existing economic relationship between Mr. Nanpei and a third party.  However, no factual support indicating a basis for that defense has been offered in response to the plaintiff's motion for summary judgment.

Accordingly, as indicated in the April 22, 1992 hearing the Court finds that defendant Robert Nanpei is indebted to plaintiff Shigemitsu Kihara in the amount of $50,000.  Interest rate of 9% per annum shall be awarded beginning as of April 22, 1992.

ABSTENTION

Mr. Nanpei's motion to abstain is based primarily upon the reference in the "bond of debt" to a proposed "contract...regarding...Ant Atoll."  Moreover, through an affidavit filed by his counsel, defendant Nanpei has notified the Court of the existence of an "Option Agreement and Right of First Refusal," dated December 8, 1990, singed by Messrs. Nanpei and Kihara, on behalf of their principals, the Estate of Henry Nanpei and Kihara Real Estate Inc., respectively, and registered with the Pohnpei State Land Commission December 12, 1990.

Mr. Nanpei argues that the bond of debt relates to or is tied into land matters, and this Court therefore should abstain from determining the liability of the defendant under the bond of debt.  The Court has concluded that this is an insufficient basis for abstention.  The bond of debt is simply a loan instrument.  Determination of its legal effect does not require any determination concerning interests in land.  Neither plaintiff's complaint nor any defense raised in this case places before the Court any legal issues concerning ownership and interests in land.

CERTIFICATION

As indicated in the April 22 hearing, the Court had previously reached a tentative conclusion that there was a substantial issue as to whether in loaning the money to Mr. Nanpei, Mr. Kihara was engaging in business within the meaning of the Pohnpei State Foreign Investment law.  Since Mr. Kihara admittedly had no foreign investment permit, this Court was concerned that his provision of funds pursuant to the bond of debt might have violated that law.

However, after reviewing more closely the statutory law as well as the application form used by the Pohnpei authorities, and having considered plaintiff's helpful brief on the subject, the Court concludes that an isolated interest‑free unsecured loan transaction such as this one plainly is not engaging in business within the meaning of the applicable Pohnpei law and regulations.  This result is not altered by the fact that the loan may be a step in the effort of a noncitizen to obtain an interest in land or to establish a business.

The Court has therefore concluded that certification would not be appropriate and the final judgment should be entered in this case.

CONCLUSION

Defendant's motion to abstain is denied and plaintiff's motion for summary judgment in the amount of $50,000 is granted.