FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite case as E.M. Chen & Associates (FSM) Inc. v Pohnpei Port Authority,
9 FSM Intrm 551 (Pon. 2000)

E.M. CHEN & ASSOCIATES (FSM), INC.,
Plaintiff,

vs.

POHNPEI PORT AUTHORITY,
Defendant.

CIVIL ACTION NO. 1997-104

ORDER

Andon L. Amaraich
Chief Justice

Decided: October 13, 2000

APPEARANCES:

For the Plaintiff:
Daniel J. Berman, Esq.
P.O. Box 1491
Kolonia, Pohnpei FM 96941

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

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HEADNOTES

Civil Procedure - Dismissal
In considering a motion to dismiss, a court must assume the allegations in the complaint to be true and give the plaintiff the benefit of all reasonable inferences. A motion to dismiss for failure to state a claim for which relief can be granted will be granted only if it appears to a certainty that no relief can be granted under any set of facts which could be proven in support of the claim. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 556 (Pon. 2000).

Contracts; Statutes of Limitation
A plaintiff's claim for payment arises at the time that the payment became due because a cause of action arises when the right to bring suit on a claim is complete: the true test in determining when a claim arose is based upon when the plaintiff first could have maintained the action. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 556-57 (Pon. 2000).

Contracts; Statutes of Limitation
When under the parties' contract, the defendant was to pay plaintiff within one year from the time that the defendant accepted the plaintiff's Master Plan and the Master Plan was accepted on October 3, 1994, the plaintiff's claim against defendant arose one year later on October 4, 1995. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 557 (Pon. 2000).

Contracts; Statutes of Limitation
Breach of contract claims against Pohnpei state have a two year statute of limitations. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 557 (Pon. 2000).

Statutes - Construction; Statutes of Limitation
Without a separate statute of limitations in the act creating a public corporation, the state legislature obviously intended for suit to be brought against the corporation within the same time period that suit must be brought against the state and its various related entities even though the corporation may act on its own and sue and be sued in its own name. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 558 (Pon. 2000).

Remedies - Quantum Meruit
Quantum meruit is an equitable doctrine, based upon the concept that no one who benefits by the labor and materials of another should be unjustly enriched thereby. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 558 (Pon. 2000).

Remedies - Quantum Meruit
The essential elements of recovery under quantum meruit include: 1) valuable services rendered or materials furnished; 2) to a person sought to be charged; 3) which services or material were used and enjoyed by the person sought to be charged; and 4) under such circumstances as reasonably notified the person sought to be charged that the person performing the services expected payment. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 558 (Pon. 2000).

Contracts; Contracts - Implied Contracts
As a general proposition, an express contract and an implied contract for the same thing cannot exist at the same time. Where an express contract is in force, the law does not recognize an implied one. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 558 (Pon. 2000).

Contracts; Remedies - Quantum Meruit
As a matter of law, the presence of an express written contract, which clearly sets forth the obligations of the parties, precludes a party from bringing a claim under quantum meruit. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 558 (Pon. 2000).

Contracts - Implied Contracts; Remedies - Quantum Meruit; Statutes of Limitation
The settled rule that the statute of limitations begins to run upon the accrual of a cause of action applies in actions on implied and quasi contracts. When compensation for services is to be made on a certain date, the statute of limitations on an implied or quasi contract begins to run at that time. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 559 (Pon. 2000).

Contracts; Equity - Estoppel and Waiver
When estoppel serves as the basis for a plaintiff to file a breach of contract claim and that contract claim has been time barred, the plaintiff's estoppel claim is also barred. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 559 (Pon. 2000).

Civil Procedure - Pleadings; Statutes of Limitation
Because leave to amend a pleading shall be freely given when justice so requires, a plaintiff may be granted leave to amend its complaint to present its argument that the statute of limitations may have been tolled based upon its request that the parties submit their dispute to arbitration when the defendant has not presented any arguments that would show any injustice if the plaintiff amended its complaint. E.M. Chen & Assocs. (FSM), Inc. v. Pohnpei Port Auth., 9 FSM Intrm. 551, 559 (Pon. 2000).

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COURT'S OPINION

ANDON L. AMARAICH, Chief Justice:

This case comes before the Court on the defendant Pohnpei Port Authority's ("PPA") motion to dismiss the plaintiff's complaint. Plaintiff E.M. Chen & Associates (FSM), Inc. ("E.M. Chen"), filed an opposition to this motion and defendant, in turn, filed a reply. The parties waived a hearing on this motion. Upon consideration of the parties' filings, defendant's motion to dismiss plaintiff's complaint as being time barred under the statute of limitations is hereby conditionally granted, as provided for below. Plaintiff's request to amend its complaint is also granted. This case shall proceed forward on plaintiff's amended complaint, if filed. However, if plaintiff does not file an amended complaint, the case will be dismissed as provided below.

I. Background

A. The Complaint

In its complaint, plaintiff alleges three causes of action. First, it alleges that defendant breached a contract that the parties entered into on April 28, 1994. According to plaintiff, this contract called for plaintiff to "conduct a feasibility study and draw up a Master Plan" in connection with certain work at the airport in Pohnpei State, as approved by the Chairman of the Board of Directors for PPA.

Plaintiff alleges that, in exchange for performing this service, defendant was to pay plaintiff $75,000, plus compensation for time and expenses incurred in performing the services in question. Plaintiff maintains that defendant had 12 months from the date that the Master Plan was executed and accepted by PPA Board of Directors ("PPA Board") to pay plaintiff this amount. Plaintiff alleges that the Master Plan was completed on September 16, 1994, and accepted by the PPA Board on October 3, 1994. Plaintiff states that on October 3, 1994, it requested payment for the services it had rendered.

In its second cause of action, plaintiff maintains that it is entitled to relief under the theory of quantum meruit. Plaintiff alleges that it relied upon the contract that the parties entered into and that defendant benefitted from the services performed by plaintiff.

In its third cause of action, plaintiff maintains that defendant should be estopped from denying the validity of the contract that the parties entered into. According to plaintiff, the parties had a valid contract which called upon plaintiff to prepare the Master Plan. Plaintiff maintains that because the contract was legally binding on both plaintiff and defendant, and because plaintiff relied upon the contract, defendant should be estopped from denying the validity of the contract.

B. Motion to Dismiss

In lieu of filing an answer, defendant filed a motion to dismiss the complaint on the grounds that it fails to state a claim upon which relief may be granted. FSM Civ. R. 12(b)(6). Defendant argues that the complaint is barred by the two year statute of limitations set forth in the Pohnpei Government Liability Act of 1991, Pon. S.L. No. 2L-192-91 ("PGLA").

Defendant does not deny entering into a contract with plaintiff. Nor does defendant dispute that plaintiff submitted the Master Plan, as called for under the parties' contract, on September 16, 1994. Also, defendant does not deny that the PPA Board accepted the Master Plan on October 3, 1994. Defendant relies on these dates to argue that plaintiff's claim for breach of contract is barred under the two year statute of limitations set forth in the PGLA.

Defendant explains that the PGLA was enacted as a declaration of sovereign immunity by the state of Pohnpei. Citing the PGLA, defendant states that the "Pohnpei Government" or "State" is defined within the PGLA to include "any corporation and other person or entity primarily acting as instrumentalities or agencies of the government, and all boards, commissions, public corporations, authorities, departments, divisions or offices of the government." Defendant also notes that plaintiff, in its complaint, recognized that defendant is an entity organized pursuant to Pohnpei State Law.

Defendant does not dispute that under the terms of the parties' contract, plaintiff was entitled to be paid within 12 months from the date that the Board of PPA accepted the Master Plan. Thus, according to defendant, plaintiff's claim arose on October 3, 1995, which is when defendant's payment to plaintiff became due under the parties' contract. Defendant argues that the PGLA's two year statute of limitations required plaintiff to initiate this lawsuit not later than October 3, 1997. Noting that plaintiff filed its complaint on November 17, 1997, Defendant argues that the claim for relief is time barred and that the complaint should be dismissed for failure to state a claim upon which relief may be granted.

Regarding plaintiff's second cause of action for recovery under the principle of quantum meruit, defendant notes that the PGLA permits the filing of claims against the state based upon express or implied contract with the state, and argues that such claims must also be filed within two years from the date the cause of the action arose, or be time barred. Thus, defendant argues that plaintiff's second cause of action also is time barred by the PGLA statute of limitations.

Defendant has not answered or otherwise addressed the plaintiff's third cause of action based upon the theory of estoppel.

C. Plaintiff's Opposition

In response, plaintiff argues that the PGLA does not apply to defendant, and claims against defendant are not subject to the PGLA two year statute of limitations. Plaintiff maintains instead that defendant is governed by the Pohnpei Port Authority Act, Pon. S.L. No. 2L-224-91 ("PPA Act"), which was enacted after the PGLA.

The PPA Act specifically states that:

The Authority [PPA] shall be solely responsible and liable for any indebtedness, obligation or liability incurred by the [PPA], and the revenues, grants and assets of the Pohnpei Government shall be immune from attachment, seizure, forced sale or any other form of judicial remedy thereof.

Pon. S.L. No. 2L-224-91, § 2-1.

Plaintiff argues that, because the Pohnpei State government is in no way liable for the actions of defendant, it is conceptually impossible that the Pohnpei Legislature intended that the PGLA apply to defendant. According to plaintiff, if the PGLA applies to defendant, then the provisions of the PPA Act are rendered ineffective. As an example, plaintiff states that the provision of the PPA Act which relieves the Pohnpei State government from the liabilities of defendant is the reason why plaintiff did not name the Pohnpei State government as a defendant in this lawsuit. According to plaintiff, had it elected to sue the Pohnpei State government, the Pohnpei State government would have merely relied upon the provisions of the PPA Act to show that it is in no way liable for the actions of defendant. Thus, plaintiff argues that if the Court applies the PGLA to defendant, then the Pohnpei State government must, in turn, be liable for the liabilities of defendant.

Plaintiff further argues that if the legislature had intended for the PGLA to apply to defendant, then the PPA Act would have been drafted in a completely different manner. For example, according to plaintiff, the legislature would have included language in the PPA Act that called for claims against defendant to be processed under the terms of the PGLA. Instead, the PPA Act provides that defendant can sue and be sued in its own name. Plaintiff also argues that, if the PGLA is applicable to defendant, the provision in the PPA Act that provides for certain limitations on the collection of judgments against defendant is rendered meaningless. According to plaintiff, because the Pohnpei State legislature never intended the PGLA to apply to defendant, it did not include these provisions in the PPA Act.

Plaintiff cites to additional examples of differences between the PGLA and the PPA Act which it argues show that the PGLA does not apply to defendant. First, plaintiff explains that the PGLA provides for Pohnpei State's liability for the actions of its employees and agents. However, according to plaintiff, employees of PPA are not considered employees of the Pohnpei State under the terms of the PPA Act. Secondly, plaintiff states that while the PGLA requires the state to be represented by the Pohnpei State attorney general, the PPA Act allows defendant to retain its own separate legal representation. Thirdly, plaintiff explains that, because funds collected by PPA are not remitted to the Pohnpei State coffer, defendant clearly was created to act as an entity separate from Pohnpei State.

Citing People of the Territory of Guam v. Quinata, 704 F.2d 1085 (9th Cir. 1983), plaintiff argues that, when construing statutes, courts must read statutes in a manner to avoid conflict. According to plaintiff, the Court may avoid any conflict between the two statutes in question by concluding that the PGLA does not apply to defendant. Plaintiff then argues that, if there is a conflict between the two statutes, then the PPA Act should control as it was enacted after the PGLA.

Plaintiff also argues that it should be given leave to amend its complaint if the Court determines that the PGLA's two year statute of limitations applies to its claims. Plaintiff states that it would amend its complaint by alleging that the contract between the parties provides for arbitration, and that plaintiff demanded within the two year statute of limitations that defendant submit to arbitration.

D. Reply

Defendant argues in reply that PPA is clearly encompassed within the definition of the "Pohnpei government" or "state," as that term is defined under the PGLA. According to the plaintiff, the PGLA applies to all branches of the state government, including entities like defendant.

The defendant explains that the definition of a "Pohnpei Government" or "state" includes, inter alia, public corporations and authorities, the latter of which includes defendant. Defendant argues that the fact that the PPA Act was enacted after the PGLA does not remove defendant from the terms of the PGLA. In support of this argument, defendant cites to the creation of the Pohnpei Utilities Corporation ("PUC"), which was created when the Pohnpei State legislature enacted the Pohnpei Utilities Corporation Act ("PUC Act"). Defendant explains that the PUC Act was enacted before the PGLA was enacted, yet the Pohnpei State legislature made no provision in the PGLA to exempt the PUC from the PGLA. Defendant further argues that the PUC Act, like the PPA Act, provides that the PUC will act as a state corporation that can sue and be sued in its own name. The defendant further notes that the Pohnpei State government is not in any way liable for the judgments rendered against the PUC, just as it is not liable for defendant's liabilities.

Defendant also argues that if the Court concludes that plaintiff's claims are time barred that plaintiff should not be permitted leave to amend its complaint. According to defendant, clauses in contracts that require all disputes to be submitted to arbitration are not enforceable. Citing Fineg v. Pickrell, 305 P.2d 455, 458 (Ariz. 1956) and Boughton v. Farmers Insurance Exchange, 354 P.2d 1085, 1089 (Okla. 1965), defendant explains that such clauses have been held unenforceable as an attempt to oust legally constituted courts of jurisdiction.

II. Analysis

A. Breach of Contract

In considering this motion to dismiss, the Court must assume the allegations in the complaint to be true and give the plaintiff the benefit of all reasonable inferences. Jano v. King, 5 FSM Intrm. 388, 390 (Pon. 1992). A motion to dismiss for failure to state a claim for which relief can be granted will be granted only if it appears to a certainty that no relief can be granted under any set of facts which could be proven in support of the claim.

Assuming all of plaintiff's allegations are true, defendant entered into a contract with plaintiff for plaintiff to perform certain services, and plaintiff has not been paid the full amount that it believed it was entitled to receive under the terms of that contract. The issue here is whether plaintiff is barred from recovering these sums because it filed its complaint outside of the statute of limitations.

With regard to the time period for the filing of its claim, the parties do not dispute that the plaintiff's claim for payment arose at the time that the payment became due. See Mid-Pacific Constr. Co. v. Semes (I), 6 FSM Intrm. 171, 176 (Pon. 1993) (a cause of action arises when the right to bring suit on a claim is complete: the true test in determining when a claim arose is based upon when the plaintiff first could have maintained the action). Under the parties' contract, defendant was to pay plaintiff within one year from the time that the PPA Board accepted the Master Plan prepared by plaintiff. The parties' pleadings show that the Master Plan was accepted on October 3, 1994. Thus, plaintiff's claim against defendant arose one year later on October 4, 1995. However, plaintiff did not file its complaint against defendant until November 17, 1997. Plaintiff filed its complaint more than 2 years after its claim arose.

In evaluating the relevant statute of limitations, neither party denies that the PGLA contains a two year statute of limitations for claims made against Pohnpei State based upon breach of contract. At issue here is the applicability of the PGLA to defendant. The Court finds that defendant is subject to the terms of the PGLA.

The Court notes that plaintiff does not appear to argue that defendant is anything other than an entity of the Pohnpei State government. Indeed, given the language of the PPA Act and the role that PPA plays in the Pohnpei State government, it is clear that defendant is an entity of Pohnpei State. Instead, plaintiff argues that the Pohnpei State legislature intended defendant to operate as an entity of Pohnpei State, but outside of the terms of the PGLA. As such, plaintiff argues that none of the provisions of the PGLA - including the two year statute of limitations - apply to defendant.

The Court does not agree with the arguments advanced by plaintiff. The fact that the PPA Act was enacted after the PGLA, does not render the PGLA inapplicable to defendant. The clear language of the PGLA is that it applies to the "Pohnpei Government" or "State" which is defined to include "all branches of government, any corporation and other person or entity primarily acting as [an] instrumentalit[y] or agenc[y] of the government . . . ." Pon. S.L. No. 2L-192-91, § 2(2). The subsequent enactment of the PPA Act did nothing to change this language. Instead, the subsequent enactment of the PPA Act merely created PPA, which is a state corporation and operates under the PGLA.

Moreover, the fact that the subsequently enacted PPA Act contains language isolating the State of Pohnpei from liability for the actions of defendant does not render the PGLA inapplicable here. The PPA Act does not contain any language that makes the PGLA inapplicable to the defendant. For example, the PPA Act does not contain its own statute of limitations, which would clearly indicate that the PGLA statute of limitations should not be applied to defendant.

As noted by defendant, before the state legislature enacted the PGLA and the PPA Act, the state legislature also enacted a similar law establishing the PUC. Like the PPA Act, the PUC Act contains no separate statute of limitations. Thus, like defendant, any claims made against PUC would be subject to the same statute of limitations set forth in the PGLA. This consistency in various legislative acts shows that the state legislature intended to have the state, including all of its branches and any corporation acting as an instrumentality of the state, subject to the same statute of limitations.

Plaintiff also maintains that the PPA Act contains language which would be rendered ineffectual if the terms of the --PGLA are found to apply to defendant. For example, plaintiff argues that the provision in the PPA Act limiting the state's liability for judgments entered against defendant never would have been included had the legislature intended or known that the PGLA would apply to defendant. Plaintiff states that this is the very reason it did not name the Pohnpei State government as a defendant in this lawsuit; to do so would have put the two state laws in question in conflict.

However, the purpose of the PPA Act was to create a state corporation which would have authority to enter into contracts and perform other actions without exposing the state to certain liabilities. Indeed, it is this provision of the PPA Act which allowed plaintiff and defendant to enter into a contract together in the first place. Moreover, it is this provision of the PPA Act which also makes clear that the plaintiff's claim is against defendant and not Pohnpei State.

Similarly, the fact that PPA employees are not considered state employees or that defendant may obtain private legal representation or even collect funds on its own behalf without remitting those funds to Pohnpei State does not change this result. The fact that the PPA Act contains language authorizing defendant to act on its own and to be sued in its own name does change defendant's status as a state entity, subject to the terms of the PGLA. As to plaintiff's claim that the PPA Act and the PGLA conflict, a review of the PPA Act shows that it is clearly void of provisions which would take defendant outside of the purview of the PGLA. As noted above, the PPA Act does not contain a separate statute of limitations that would distinguish the filing of claims against defendant, on the one hand, from claims filed against the State of Pohnpei, on the other hand. Without a separate statute of limitations in the PPA Act, the state legislature obviously intended for suit to be brought against the defendant within the same time period that suit must be brought against Pohnpei State and its various related entities. That time period is two years for contract claims, as provided for under the PGLA. The Court agrees that it should read the PPA Act and the PGLA to avoid conflict. However, there is no conflict between the two statutes if the statute of limitations provided for in the PGLA applies to defendant. The PPA Act does not contain a statute of limitations. Instead, the PPA Act merely authorizes defendant to sue and be sued in its own. In short, the Court finds that there is no conflict in applying the PGLA to defendant.

Accordingly, the Court finds that the two year statute of limitations set forth in the PGLA applies. As noted above, the complaint in this case was filed more than two years after the plaintiff's claim arose. Accordingly, the plaintiff's claim is time bared by this statute of limitations.

B. Quantum Meruit

In its second claim, plaintiff asserts that it is entitled to recover from defendant under the theory of quantum meruit. Cases in the FSM have addressed claims based on the theory of quantum meruit; however, no cases granting relief under quantum meruit, or even recognizing that quantum meruit is a basis for recovery in the FSM, were found. See Sohl v. FSM, 4 FSM Intrm. 186 (Pon. 1990); Truk v. Maeda Constr. Co. (II), 3 FSM Intrm. 487 (Truk 1988).

Quantum meruit is an "equitable doctrine, based upon the concept that no one who benefits by the labor and materials of another should be unjustly enriched thereby." Black's Law Dictionary 1119 (5th ed. 1979). The essential elements of recovery under quantum meruit include: (1) valuable services rendered or materials furnished; (2) to a person sought to be charged; (3) which services or material were used and enjoyed by the person sought to be charged; and (4) under such circumstances as reasonably notified the person sought to be charged that the person performing the services expected payment. Id.

In the matter at hand, however, the parties had a written contract which clearly spelled out the terms of their contractual obligations. Plaintiff is not alleging that it provided any services or goods that were in addition to or outside of those services and goods provided for under the parties' contract. As such, plaintiff's claim against defendant is for breach of contract. "[A]s a general proposition, an express contract and an implied contract for the same thing cannot exist at the same time. Where an express contract is in force, the law does not recognize an implied one." 66 Am. Jur. 2d Restitution and Implied Contracts § 59, at 1004-05 (1973). This Court holds as a matter of law, that in the presence of an express written contract, like the one at issue here which clearly sets forth the obligations of the parties, a party is precluded from bringing a claim under quantum meruit.

Furthermore, even if the Court did recognize that plaintiff had a valid quantum meruit claim, it is clear that the statute of limitations on that claim also ran two years after payment became due and is time barred. "The settled rule that the statute of limitations begins to run upon the accrual of a cause of action applies in actions on implied and quasi contracts." 66 Am. Jur. 2d Restitution and Implied Contracts § 84, at 1025 (1973). When compensation for services is to be made on a certain date, the statute of limitations on an implied or quasi contract begins to run at that time. Id. at 1027. Thus, plaintiff is also barred from bringing a quantum meruit claim against defendant by application of the PGLA, as set forth above.

C. Estoppel

Lastly, the plaintiff's claim for estoppel is also dismissed for failure to state a claim. This is not a case in which defendant is denying the validity of the contract that it entered into with the plaintiff. Indeed, defendant admitted entering into that contract. The fact that defendant chose to disregard its contractual obligations, as alleged in the complaint, does not change that conclusion. Instead, it served as the basis for plaintiff to file a breach of contract claim against defendant. That claim has been time barred by the PGLA, and, accordingly, plaintiff's estoppel claim also is barred. See 66 Am. Jur. 2d Restitution and Implied Contracts § 84 (1973).

D. Motion for Leave of Court to Amend Complaint

Under Rule 15 of the FSM Rules of Civil Procedure, a party may seek leave of court to amend a pleading. Leave shall be freely given when justice so requires. In this case, the plaintiff seeks leave to amend its complaint to present its argument that the statute of limitations may have been tolled based upon its request that the parties submit their dispute to arbitration. Because that argument is not now before the Court, the Court has not considered it. Instead, the Court has determined that the two year statute of limitations set forth in the PGLA applies to the plaintiff's claim. In challenging the plaintiff's request to amend its complaint, the defendant has not presented any arguments that would show any injustice if the plaintiff amended its complaint. Indeed, Rule 15 serves as an avenue for the parties to present their dispute for a full resolution on the merits. See 3 James Wm. Moore et al., Moore's Federal Practice ¶ 15.02[1] (2d ed. 1990). Accordingly, the plaintiff is hereby given leave of court to amend its complaint.

III. Conclusion

For the reasons set forth above, the defendant's motion to dismiss the plaintiff's complaint is hereby granted. The plaintiff's motion to amend its complaint is also hereby granted. The plaintiff shall file an amended complaint within 10 days from the date that this ordered is entered. The defendant shall answer that complaint within the time period allowed for under the FSM Rules of Civil Procedure. If the plaintiff fails to file an amended complaint within the time period specified in this Order, this case will be dismissed with prejudice.