FSM 3 Intrm. 033-039

A telephone conversation between parties, in which the defendant related his desire to hire plaintiff's rental vehicle, coupled with plaintiff driving the vehicle from his place of business to defendant's place of employment, and defendant, after signing the rental agreement and returning the plaintiff to his business office, driving the vehicle away, satisfied the elements of a binding agreement. Phillip v. Aldis, 3 FSM Intrm. 33, 36 (Pon. S. Ct. Tr. 1987).

When a car rental agreement provides that the lessee shall pay to the lessor all costs and expenses incurred as a result of loss or damage to the rented vehicle regardless of fault, then the lessor has a duty to accept the damaged vehicle and simply charge the repair costs to the lessee. Phillip v. Aldis, 3 FSM Intrm. 33, 36 (Pon. S. Ct. Tr. 1987).

The Pohnpei State Supreme Court will adhere to the common law rule followed by the former Trust Territory High Court that the wrongdoer in an automobile accident is not obliged to repair the damaged vehicle nor to pay its original cost; his only obligation is to pay the plaintiff-owner the amount of his loss. Phillip v. Aldis, 3 FSM Intrm. 33, 37 (Pon. S. Ct. Tr. 1987).

A "conditional sale" is one in which the vendee receives possession of and the right to use the goods sold, but transfer of the title depends upon the performance of a condition or the occurrence of a contingency, which is usually full payment of the purchase price. Phillip v. Aldis, 3 FSM Intrm. 33, 37 (Pon. S. Ct. Tr. 1987).

Plaintiff is the proprietor and operator of a car rental business known as Phill'S Rent-A-Car, P.O. Box 597 in Kolonia, Pohnpei. On February 2, 1985, (a Saturday) upon request of defendant by telephone, plaintiff rented a vehicle [hereinafter "vehicle"], an Isuzu Sedan, License No. 2065, to defendant at the rental rate of $25 per day.

On the night of February 2, 1985, defendant drove the vehicle to Endor's Bar in Ohmine Section of Kolonia Town and on that night a bar brawl took place and an unidentified person threw a rock at the vehicle damaging the rear window. on Monday evening February 4, 1985, defendant informed plaintiff that the vehicle's rear window was damaged as a result of an accident. Defendant intended to return the vehicle to plaintiff for repair. Plaintiff told defendant to repair the broken window before plaintiff would accept the vehicle back, or the defendant could buy the vehicle at the price of 42,500. Although complaining about the high price of the vehicle, defendant accepted to buy the vehicle but on the condition that he could secure a bank loan to finance the sale price. Defendant continued possession and use of the vehicle assuming that title to this vehicle would ultimately vest in him if the bank would approve his loan application.

Defendant, with the aid of the plaintiff, lodged an application with the Bank of Hawaii, but the bank disapproved of the application. Defendant and plaintiff then sought the approval of defendant's employer (the Ponape Bakery) to accept plaintiff's assignment of his account payable to the employer for the defendant as payment for the vehicle. (The amount of the account payable was $2,900 at the time of this negotiation.) Defendant's employer disapproved of the parties' proposal. Plaintiff did not demand rental payment, nor did he repossess the vehicle from the defendant. The defendant continued possession and use of the vehicle until he got into another accident on the Kitti road in the latter part of April, 1985. Substantial damage was sustained by the vehicle as a result of this second accident. Defendant, then, took the vehicle to PCR Repair Shop for repair. PCR undertook the repair instructed by defendant, and the repair work was completed on May 3, 1985, with a total bill of $180.00. Defendant, in two installments, paid $80.00. Plaintiff subsequently found the vehicle at PCR, paid the $100 balance of the bill and took possession of the vehicle. Plaintiff kept the vehicle at his business location until April 1986, when he took the vehicle to MJS repair shop for further repair work and a tune-up of the engine. In less than two weeks, MJS completed the work with a repair bill of $395.00 which the plaintiff paid on May 27, 1986 (Defendant Ex. A) and took

possession of the vehicle. Strangely though on May 22, 1986 (Defendant Ex. B) plaintiff sold the vehicle to a third person for $1,900. No satisfactory explanation was given by plaintiff as to why MJS's receipt for the repair bill was dated May 27, 1986, while the sale invoice of the vehicle issued by plaintiff was dated May 22, 1986.

In addition, plaintiff, in response to defendant's interrogatories, particularly to the request: Please attach the itemized bill from Porakiet Car Repair (PCR), which plaintiff alleges was paid by him on February 6, 1986, and which plaintiff alleges was for repair of damages done to the car by defendant, submitted a receipt showing he had paid $100.00 to PCR but for a different vehicle, described as having the license No. 3825. The license number for the vehicle in question is 2065. See complaint paragraph No. 4.

Plaintiff sues defendant for more than one year's rent totalling $9,225 plus damages in the amount of $595.00. At the close of the trial, plaintiff argued in the alternative that defendant should be obliged to pay rent from February 2, 1985 through April, 1985, plus damages. Defendant denies, contending that his obligation, by law, is limited to the period February 2, through February 4, 1985, when defendant intended to return the vehicle but plaintiff refused to accept it, plus repair charges.

The telephonic conversation that defendant had with plaintiff on February 2, 1985, relating to defendant's desire to hire plaintiff's rental vehicle, and plaintiff's driving the vehicle from his business office to Ponape Bakery where defendant was then employed, and defendant's signing the rental agreement, accompanying plaintiff to return plaintiff to his business office, dropping plaintiff off, and defendant's driving the vehicle away, satisfy the elements of a binding car rental agreement. The car rental agreement was in effect from February 2, 1985, Saturday, until defendant returned the vehicle to plaintiff on February 4, 1985, Monday, with the notice that the vehicle was involved in an accident and that the rear window was damaged (smashed). Plaintiff refused to receive the vehicle and demanded that defendant take the car back and have it repaired before he could return it to the plaintiff. I find this demand on the part of the plaintiff to be contrary to the car rental agreement (Plaintiff's Exhibit 1), particularly paragraph 2(f) which reads in pertinent part as follows:

Under the common law rule applied by the former Trust Territory High Court, "The wrongdoer in an automobile accident is not obliged to repair the damaged vehicle nor to pay its original cost; his only obligation is to pay the plaintiff-owner the amount of his loss." Neton v. Ywelelong, 5 TTR 300 (Truk 1971); H&E U-Drive v. Heyl, Ponape Civil Action No. 53-76, (unreported). This rule of the common law has not been varied by any State or FSM statute, and I am offered no justification to disregard that rule as it relates to the instant case.

On February 4, 1985, plaintiff and defendant negotiated a new agreement; plaintiff offered to sell the vehicle to defendant for the price of 42,500. It should be noted here that plaintiff claimed his offered price was 43,000; defendant's version, corroborated by another witness, was 42,500, which I found convincing. Defendant accepted the offer on condition that he could secure financing from the bank. Here a conditional sale agreement was effected. A "conditional sale' is a sale in which the vendee receives possession of and the right to use the goods sold, but transfer of the title depends on the performance of a condition or happening of a contingency, usually full payment of the purchase price. Brown v. Tri-State Insurance Co., 177 Kan. 7, 274 P.2d 769 (1954); Hafer v. Spaeth, 22 Wash. 378, 156 P.2d 408 (1945). I look to these foreign sources for their persuasive precedent, and I find them to be in conformity with the Pohnpeian concept of justice. Therefore they are considered here in support of my finding.

Defendant lodged his loan application with the Bank of Hawaii with the assistance of plaintiff. The Bank rejected defendant's application. Plaintiff did not repossess the vehicle from the defendant. Instead, the two sought to negotiate another agreement providing that plaintiff was to assign his account payable at Ponape Bakery to defendant thus to release plaintiff of that debt, and title to the vehicle would then be transferred to defendant. This agreement was also conditioned upon whether the proprietor of Ponape Bakery (defendant's employer) would approve of the deal. Ponape Bakery disapproved. Plaintiff did not repossess the vehicle, but consented to defendant's continued possession and use, an act which is tantamount to forcing the defendant to buy the subject vehicle, even when the plaintiff had learned that the defendant had no means to finance the offered price of the vehicle.

The legal effect of the two agreements for the sale of the vehicle operate to rescind the car rental agreement. "The general rule is well settled that the parties to a contract may rescind it by making a new contract inconsistent therewith." United States ex rel. International Contracting Co. v. Lamont, 155 U.S. 303, 15 S. Ct. 97, 39 L. Ed. 160 (1894). An agreement to rescind need not be expressed. Thus a contract may be discharged before breach by the mere making of a new agreement or by the performance thereof, depending upon the intent of the parties. 17 Am. Jur. 2d Contracts § 493 (1964).

There was enough evidence justifying defendant's inability to secure financial assistance to pay for the vehicle and plaintiff had all the rights to repossess the vehicle from the defendant and to negotiate for a new buyer who would be able to come up with the money. Plaintiff's failure to repossess the vehicle when he ought to and his acceding to defendant's continued possession and use (realizing that wear and tear would normally occur) made him guilty of what is known in Pohnpeian custom as: KE PWUROHNG OMW MWUR, meaning you reap the fruit of your misdeed. Application of customary law takes precedence over the common law, Pon. Const. art. 5, § 1; 1 TTC 103; 1 F.S.M.C. 203, and I think the act of the plaintiff, under the circumstances, warrants enunciation of the custom herein described.

When one, under Pohnpeian custom, reaps the fruit of his misdeed, he suffers also the consequences. In order to avoid the adverse impact of this "pwurohng omw mwur," plaintiff should have repossessed the vehicle on February 4, 1985, or immediately thereafter, had it repaired, and encouraged the defendant to secure a financial arrangement to pay for the sale price of the vehicle as offered, plus the cost of the repair and the three days' rental charge, but not for the one year rental charge. In other words, under circumstances like this, the plaintiff should have understood the nature of his acts and the consequences that follow.

It is undisputed that the defendant's continued possession and use of the vehicle from February 4, 1985 until the vehicle got into another accident in Kitti and was later brought to the PCR Shop for repair in late April 1985, was by the authority of a conditional sale agreement. Defendant's obligation to plaintiff for the use of the vehicle during this period was the depreciated value of the vehicle from February 4 through April 1985, or a period of three months, plus, of course, the repair cost.

Plaintiff, however, finally repossessed the vehicle from PCR, after having paid the balance of the repair bill in the amount of $100, towed the vehicle, and having it rest at his place of business for some months before taking it to MJS, which repaired the vehicle with the repair bill of $395.00. Plaintiff then sold the vehicle to a third party for $1,900. His loss therefore is $600, the difference between the original market value of $2,500 and the amount for which he was actually able to sell it ($1,900).


	POHNPEI SUPREME COURT TRIAL DIVISION Cite as Phillip v. Aldis , 3 FSM Intrm. 33 (Pon. S. Ct. Tr. 1987) [ 3 FSM Intrm. 33] NAITEN PHILLIP, Plaintiff, v. PAUL ALDIS, Defendant. CIVIL ACTION NO. 100-86 JUDGMENT OPINION Before Edwel H. Santos Chief Justice Pohnpei State Supreme Court April 27, 1987 APPEARANCES: For the Plaintiff: R. Barrie Michelsen Attorney-at-Law P.O. Box 1480 Pohnpei, FSM 96941 For the Defendant: Roberta J. Lindberg Attorney-at-Law Micronesian Legal Services Corporation Pohnpei, FSM 96941 [ 3 FSM Intrm. 34] HEADNOTES Contracts A telephone conversation between parties, in which the defendant related his desire to hire plaintiff's rental vehicle, coupled with plaintiff driving the vehicle from his place of business to defendant's place of employment, and defendant, after signing the rental agreement and returning the plaintiff to his business office, driving the vehicle away, satisfied the elements of a binding agreement. Phillip v. Aldis, 3 FSM Intrm. 33, 36 (Pon. S. Ct. Tr. 1987). Contracts When a car rental agreement provides that the lessee shall pay to the lessor all costs and expenses incurred as a result of loss or damage to the rented vehicle regardless of fault, then the lessor has a duty to accept the damaged vehicle and simply charge the repair costs to the lessee. Phillip v. Aldis, 3 FSM Intrm. 33, 36 (Pon. S. Ct. Tr. 1987). Contracts The Pohnpei State Supreme Court will adhere to the common law rule followed by the former Trust Territory High Court that the wrongdoer in an automobile accident is not obliged to repair the damaged vehicle nor to pay its original cost; his only obligation is to pay the plaintiff-owner the amount of his loss. Phillip v. Aldis, 3 FSM Intrm. 33, 37 (Pon. S. Ct. Tr. 1987). Contracts A "conditional sale" is one in which the vendee receives possession of and the right to use the goods sold, but transfer of the title depends upon the performance of a condition or the occurrence of a contingency, which is usually full payment of the purchase price. Phillip v. Aldis, 3 FSM Intrm. 33, 37 (Pon. S. Ct. Tr. 1987). Contracts - Rescission The general rule is that parties to a contract may rescind it by making a new contract that is inconsistent with the original contract. Phillip v. Aldis, 3 FSM Intrm. 33, 37 (Pon. S. Ct. Tr. 1987). Custom and Tradition The Pohnpeian custom of "Ke pwurohng omw mwur," according to which one reaps the fruit of one's misdeed, requires the lessor to bear the consequences of his failure to repossess the rented vehicle from the lessee. Phillip v. Aldis, 3 FSM Intrm. 33, 38 (Pon. S. Ct. Tr. 1987). [ 3 FSM Intrm. 35] Custom and Tradition Customary law takes precedence over the common law, according to Pon. Const. art. 5, § 1; 1 TTC 103; 1 F.S.M.C. 203. Phillip v. Aldis, 3 FSM Intrm. 33, 38 (Pon. S. Ct. Tr. 1987). * * * * COURT'S OPINION EDWEL H. SANTOS, Chief Justice: MATERIAL FACTS Plaintiff is the proprietor and operator of a car rental business known as Phill'S Rent-A-Car, P.O. Box 597 in Kolonia, Pohnpei. On February 2, 1985, (a Saturday) upon request of defendant by telephone, plaintiff rented a vehicle [hereinafter "vehicle"], an Isuzu Sedan, License No. 2065, to defendant at the rental rate of $25 per day. On the night of February 2, 1985, defendant drove the vehicle to Endor's Bar in Ohmine Section of Kolonia Town and on that night a bar brawl took place and an unidentified person threw a rock at the vehicle damaging the rear window. on Monday evening February 4, 1985, defendant informed plaintiff that the vehicle's rear window was damaged as a result of an accident. Defendant intended to return the vehicle to plaintiff for repair. Plaintiff told defendant to repair the broken window before plaintiff would accept the vehicle back, or the defendant could buy the vehicle at the price of 42,500. Although complaining about the high price of the vehicle, defendant accepted to buy the vehicle but on the condition that he could secure a bank loan to finance the sale price. Defendant continued possession and use of the vehicle assuming that title to this vehicle would ultimately vest in him if the bank would approve his loan application. Defendant, with the aid of the plaintiff, lodged an application with the Bank of Hawaii, but the bank disapproved of the application. Defendant and plaintiff then sought the approval of defendant's employer (the Ponape Bakery) to accept plaintiff's assignment of his account payable to the employer for the defendant as payment for the vehicle. (The amount of the account payable was $2,900 at the time of this negotiation.) Defendant's employer disapproved of the parties' proposal. Plaintiff did not demand rental payment, nor did he repossess the vehicle from the defendant. The defendant continued possession and use of the vehicle until he got into another accident on the Kitti road in the latter part of April, 1985. Substantial damage was sustained by the vehicle as a result of this second accident. Defendant, then, took the vehicle to PCR Repair Shop for repair. PCR undertook the repair instructed by defendant, and the repair work was completed on May 3, 1985, with a total bill of $180.00. Defendant, in two installments, paid $80.00. Plaintiff subsequently found the vehicle at PCR, paid the $100 balance of the bill and took possession of the vehicle. Plaintiff kept the vehicle at his business location until April 1986, when he took the vehicle to MJS repair shop for further repair work and a tune-up of the engine. In less than two weeks, MJS completed the work with a repair bill of $395.00 which the plaintiff paid on May 27, 1986 (Defendant Ex. A) and took [ 3 FSM Intrm. 36] possession of the vehicle. Strangely though on May 22, 1986 (Defendant Ex. B) plaintiff sold the vehicle to a third person for $1,900. No satisfactory explanation was given by plaintiff as to why MJS's receipt for the repair bill was dated May 27, 1986, while the sale invoice of the vehicle issued by plaintiff was dated May 22, 1986. In addition, plaintiff, in response to defendant's interrogatories, particularly to the request: Please attach the itemized bill from Porakiet Car Repair (PCR), which plaintiff alleges was paid by him on February 6, 1986, and which plaintiff alleges was for repair of damages done to the car by defendant, submitted a receipt showing he had paid $100.00 to PCR but for a different vehicle, described as having the license No. 3825. The license number for the vehicle in question is 2065. See complaint paragraph No. 4. Plaintiff sues defendant for more than one year's rent totalling $9,225 plus damages in the amount of $595.00. At the close of the trial, plaintiff argued in the alternative that defendant should be obliged to pay rent from February 2, 1985 through April, 1985, plus damages. Defendant denies, contending that his obligation, by law, is limited to the period February 2, through February 4, 1985, when defendant intended to return the vehicle but plaintiff refused to accept it, plus repair charges. I am charged to decide whether, under the circumstances, plaintiff is entitled to judgment for rent for the vehicle for more than the one-year period, or for the period February through April, 1985 or as the defendant contends, from February 2-4, 1985. OPINION AND ANALYSIS The telephonic conversation that defendant had with plaintiff on February 2, 1985, relating to defendant's desire to hire plaintiff's rental vehicle, and plaintiff's driving the vehicle from his business office to Ponape Bakery where defendant was then employed, and defendant's signing the rental agreement, accompanying plaintiff to return plaintiff to his business office, dropping plaintiff off, and defendant's driving the vehicle away, satisfy the elements of a binding car rental agreement. The car rental agreement was in effect from February 2, 1985, Saturday, until defendant returned the vehicle to plaintiff on February 4, 1985, Monday, with the notice that the vehicle was involved in an accident and that the rear window was damaged (smashed). Plaintiff refused to receive the vehicle and demanded that defendant take the car back and have it repaired before he could return it to the plaintiff. I find this demand on the part of the plaintiff to be contrary to the car rental agreement (Plaintiff's Exhibit 1), particularly paragraph 2(f) which reads in pertinent part as follows: 2. Lessee shall pay Lessor on demand: f. all Lessor's costs and expenses resulting from loss or damage to the vehicle while on rental, whether or not due to Lessee's fault.... This language of the car rental agreement clearly shows that plaintiff had a [ 3 FSM Intrm. 37] duty to take the vehicle with whatever damage had been sustained thereon, have it repaired and charge the repair costs to the defendant. Under the common law rule applied by the former Trust Territory High Court, "The wrongdoer in an automobile accident is not obliged to repair the damaged vehicle nor to pay its original cost; his only obligation is to pay the plaintiff-owner the amount of his loss." Neton v. Ywelelong, 5 TTR 300 (Truk 1971); H&E U-Drive v. Heyl, Ponape Civil Action No. 53-76, (unreported). This rule of the common law has not been varied by any State or FSM statute, and I am offered no justification to disregard that rule as it relates to the instant case. On February 4, 1985, plaintiff and defendant negotiated a new agreement; plaintiff offered to sell the vehicle to defendant for the price of 42,500. It should be noted here that plaintiff claimed his offered price was 43,000; defendant's version, corroborated by another witness, was 42,500, which I found convincing. Defendant accepted the offer on condition that he could secure financing from the bank. Here a conditional sale agreement was effected. A "conditional sale' is a sale in which the vendee receives possession of and the right to use the goods sold, but transfer of the title depends on the performance of a condition or happening of a contingency, usually full payment of the purchase price. Brown v. Tri-State Insurance Co., 177 Kan. 7, 274 P.2d 769 (1954); Hafer v. Spaeth, 22 Wash. 378, 156 P.2d 408 (1945). I look to these foreign sources for their persuasive precedent, and I find them to be in conformity with the Pohnpeian concept of justice. Therefore they are considered here in support of my finding. Defendant lodged his loan application with the Bank of Hawaii with the assistance of plaintiff. The Bank rejected defendant's application. Plaintiff did not repossess the vehicle from the defendant. Instead, the two sought to negotiate another agreement providing that plaintiff was to assign his account payable at Ponape Bakery to defendant thus to release plaintiff of that debt, and title to the vehicle would then be transferred to defendant. This agreement was also conditioned upon whether the proprietor of Ponape Bakery (defendant's employer) would approve of the deal. Ponape Bakery disapproved. Plaintiff did not repossess the vehicle, but consented to defendant's continued possession and use, an act which is tantamount to forcing the defendant to buy the subject vehicle, even when the plaintiff had learned that the defendant had no means to finance the offered price of the vehicle. The legal effect of the two agreements for the sale of the vehicle operate to rescind the car rental agreement. "The general rule is well settled that the parties to a contract may rescind it by making a new contract inconsistent therewith." United States ex rel. International Contracting Co. v. Lamont, 155 U.S. 303, 15 S. Ct. 97, 39 L. Ed. 160 (1894). An agreement to rescind need not be expressed. Thus a contract may be discharged before breach by the mere making of a new agreement or by the performance thereof, depending upon the intent of the parties. 17 Am. Jur. 2d Contracts § 493 (1964). On the basis of the foregoing, I think defendant is obligated to pay a [ 3 FSM Intrm. 38] car rental charge for the period February 2, 3 and 4, 1985, plus repair charges. Defendant's Continued Possession and Use of Vehicle There was enough evidence justifying defendant's inability to secure financial assistance to pay for the vehicle and plaintiff had all the rights to repossess the vehicle from the defendant and to negotiate for a new buyer who would be able to come up with the money. Plaintiff's failure to repossess the vehicle when he ought to and his acceding to defendant's continued possession and use (realizing that wear and tear would normally occur) made him guilty of what is known in Pohnpeian custom as: KE PWUROHNG OMW MWUR, meaning you reap the fruit of your misdeed. Application of customary law takes precedence over the common law, Pon. Const. art. 5, § 1; 1 TTC 103; 1 F.S.M.C. 203, and I think the act of the plaintiff, under the circumstances, warrants enunciation of the custom herein described. When one, under Pohnpeian custom, reaps the fruit of his misdeed, he suffers also the consequences. In order to avoid the adverse impact of this "pwurohng omw mwur," plaintiff should have repossessed the vehicle on February 4, 1985, or immediately thereafter, had it repaired, and encouraged the defendant to secure a financial arrangement to pay for the sale price of the vehicle as offered, plus the cost of the repair and the three days' rental charge, but not for the one year rental charge. In other words, under circumstances like this, the plaintiff should have understood the nature of his acts and the consequences that follow. It is undisputed that the defendant's continued possession and use of the vehicle from February 4, 1985 until the vehicle got into another accident in Kitti and was later brought to the PCR Shop for repair in late April 1985, was by the authority of a conditional sale agreement. Defendant's obligation to plaintiff for the use of the vehicle during this period was the depreciated value of the vehicle from February 4 through April 1985, or a period of three months, plus, of course, the repair cost. Plaintiff, however, finally repossessed the vehicle from PCR, after having paid the balance of the repair bill in the amount of $100, towed the vehicle, and having it rest at his place of business for some months before taking it to MJS, which repaired the vehicle with the repair bill of $395.00. Plaintiff then sold the vehicle to a third party for $1,900. His loss therefore is $600, the difference between the original market value of $2,500 and the amount for which he was actually able to sell it ($1,900). Plaintiff claimed that he is entitled to $9,225 for a little over a year's rent, plus damages. As reasoned above, I cannot accept plaintiff's total claim; it is contrary to the Pohnpeian custom as enunciated above and the common law duty which requires plaintiff to mitigate his losses. On the basis of the foregoing, I conclude that plaintiff is entitled to judgment for the following: A. $25/day rent for 3 days....................$ 75.00B. [ 3 FSM Intrm. 39] B. Repair for damages $100 + $395........... $ 495.00 C. Depreciated value of the vehicle for3 months, using the straight line method $2,500 - $1,900 = $600 divided by 14 mos. = $42.86 $42.86 x 3 mos. = .........................$128.58 D. Court Fee .................................$ 1.00 Total....................$699.58 JUDGMENT It is ORDERED, ADJUDGED AND DECREED as follows: Plaintiff is awarded judgment against the defendant in the amount of $699.58, plus 1 percent interest per month beginning on the date of this judgment. Each party pays his own costs.