THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA
Cite asNanpei v. Kihara,
7 FSM Intrm. 319 (App. 1995)

[7 FSM Intrm. 319]

ROBERT NANPEI,
Appellant,

vs.

SHEGEMATSU KIHARA,
Appellee.

APPEAL CASE NO. P4-1992

OPINION

Submitted:  July 14, 1995
Decided:  November 27, 1995

BEFORE:
Hon. Richard H. Benson, Associate Justice, FSM Supreme Court
Hon. Martin G. Yinug, Associate Justice, FSM Supreme Court
Hon. Lyndon L. Cornelius, Temporary Justice, FSM Supreme Court*

*Chief Justice, Kosrae State Court, Lelu, Kosrae

APPEARANCES:
For the Appellant:     Joses Gallen, Esq.
                                    P.O. Box 255
                                    Kolonia, Pohnpei FM 96941

For the Appellee:      Fredrick Ramp, Esq.
                                    P.O. Box 1480
                                    Kolonia, Pohnpei FM 96941

*    *    *    *

HEADNOTES
Federalism ) Abstention and Certification
     Only "clean" questions of law are appropriate for certification, not questions of fact or mixed questions of law and fact.  Nanpei v. Kihara, 7 FSM Intrm. 319, 322 (App. 1995).

Appeal and Certiorari ) Standard of Review; Federalism ) Abstention and Certification
     The decision to certify a question to a state court lies wholly within the sound discretion of the trial court.  Thus the standard of review of the decision not to certify a question is whether the trial court abused its discretion.  Nanpei v. Kihara, 7 FSM Intrm. 319, 322 (App. 1995).

Federalism ) Abstention and Certification
     The FSM Supreme Court is not obligated to certify every unsettled issue of state law, and it does

[7 FSM Intrm. 320]

have a constitutional obligation to exercise its own jurisdiction, but there may be a preference for referring a matter to state court when the state court's decision on an unsettled matter of state law would be dispositive and obviate the need for an adjudication of the national constitution.  Nanpei v. Kihara, 7 FSM Intrm. 319, 322 (App. 1995).

Appeal and Certiorari ) Standard of Review; Federalism ) Abstention and Certification
     The choice to abstain from a decision, like the decision to certify a question, lies wholly within the sound discretion of the trial court.  Thus the standard of review of the decision not to abstain is whether the trial court abused its discretion.  Nanpei v. Kihara, 7 FSM Intrm. 319, 322 (App. 1995).

Federalism ) Abstention and Certification
     Certain circumstances may give rise to an inclination in favor of abstention, such as a state request for abstention where there are identifiable, particularly strong state interests such as monetary claims against the state or questions concerning ownership of land, but national courts still have the obligation to carry out their own jurisdictional responsibilities.  Nanpei v. Kihara, 7 FSM Intrm. 319, 322 (App. 1995).

Civil Procedure ) Summary Judgment
     A court must deny a motion for summary judgment unless it finds there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.  The court must view the facts presented and inferences made in the light most favorable to the nonmoving party, and the burden of showing a lack of triable issues of fact belongs to the moving party.  Nanpei v. Kihara, 7 FSM Intrm. 319, 323 (App. 1995).

Banking; Contracts ) Interpretation
     An instrument that is not a promissory note because it fails to contain words of negotiability may still be enforceable as a contract between the parties.  Nanpei v. Kihara, 7 FSM Intrm. 319, 323 (App. 1995).

Contracts ) Interpretation
     Interpretations of terms in contracts are matters of law to be determined by the court.  Nanpei v. Kihara, 7 FSM Intrm. 319, 323 (App. 1995).

Appeal and Certiorari ) Standard of Review
     Issues of law are reviewed de novo on appeal.  Nanpei v. Kihara, 7 FSM Intrm. 319, 323-24 (App. 1995).

Contracts ) Interpretation
     When the language of a contract is ambiguous or uncertain a court may look beyond the words of the contract to the surrounding circumstances to determine the parties' intent without changing the writing, and the court should attempt to determine meaning of words used rather than what signatory later says he intended.  Nanpei v. Kihara, 7 FSM Intrm. 319, 324 (App. 1995).

Contracts ) Conditions
     A contention that a contract provision is ambiguous defeats a contention that it creates a condition precedent.  Conditions precedent to contractual obligations are not favored in the law and courts will not construe terms to be such unless required to do so by plain and unambiguous language or by necessary implication.  Nanpei v. Kihara, 7 FSM Intrm. 319, 324 (App. 1995).

Contracts ) Conditions; Contracts ) Interpretation
     When faced with an allegation that an ambiguous contract provision creates a condition, courts

[7 FSM Intrm. 321]

prefer either an interpretation that imposes on a party a duty to see that an event occurs, rather than one that makes the other party's duty conditional on the occurrence of the event, or an interpretation that will reduce an obligee's risk of forfeiture if the event does not occur.  Nanpei v. Kihara, 7 FSM Intrm. 319, 324 (App. 1995).

Contracts ) Interpretation
     Unless it is clear from the agreement or the surrounding circumstances that the obligee has assumed the risk of forfeiture, courts prefer an interpretation that reduces that risk.  Nanpei v. Kihara, 7 FSM Intrm. 319, 324 (App. 1995).

Contracts ) Conditions
     Contractual terms that provide that payment is due "when" or "not until" a stated event occurs are generally not considered to be conditions, but merely a means of measuring time, and if the stated event does not occur then the payment is nevertheless due after a reasonable time.  Nanpei v. Kihara, 7 FSM Intrm. 319, 324 (App. 1995).

Civil Procedure ) Summary Judgment
     When the moving party has made out a prima facie case that there are no triable issues of fact and that it is entitled to summary judgment as a matter of law, the nonmoving party then has the burden to show by competent evidence that there is a triable material issue of fact.  Nanpei v. Kihara, 7 FSM Intrm. 319, 325 (App. 1995).

Contracts ) Illegality
     A party to an illegal agreement will not be permitted to avail himself of its illegality until he restores to the other party all that has been received from such a party on the illegal agreement, and so long as he continues to enjoy the benefits of the agreement, he will not be allowed to set up its nullity.  Nanpei v. Kihara, 7 FSM Intrm. 319, 325 (App. 1995).

*    *    *    *

COURT'S OPINION
RICHARD H. BENSON, Associate Justice:
     When neither counsel appeared for oral argument at the scheduled hour we considered the matter submitted on the briefs.  FSM App. R. 34(e).  We affirmed the trial court decision which granted summary judgment to the plaintiff Kihara and dismissed the appeal.1  Our reasoning follows.

I.  Issues on Appeal
     The appellant raises two issues on appeal:  1) Whether the trial court correctly followed the standard for granting summary judgment, and 2) whether the trial court should have certified to state court whether the plaintiff Kihara needed a foreign investment permit to loan defendant Nanpei $50,000.00 and/or whether the trial court should have abstained from the case because land is involved.

II.  Certification and Abstention

[7 FSM Intrm. 322]

     We address the second issue first.  Had the defendant-appellant had prevailed on this issue in the trial court there would not have been a final summary judgment from which to appeal.

A.  Certification
     Appellant contends that the trial court should have certified a question to state court concerning whether the plaintiff Kihara needed a foreign investment permit to lend defendant Nanpei $50,000.00.  Initially, the trial court had decided to certify such a question to the Pohnpei Supreme Court Appellate Division and to condition its grant of summary judgment upon the state court's response to the certified question, but the plaintiff moved for reconsideration and the court concluded that certification would not be appropriate under the circumstances of the case.  Kihara v. Nanpei, 5 FSM Intrm. 342, 343-44 (Pon. 1994).  Only "clean" questions of law are appropriate for certification, not questions of fact or mixed questions of law and fact. Edwards v. Pohnpei, 3 FSM Intrm. 350, 362 (Pon. 1988).  Whether a single, isolated, interest-free loan constitutes doing business in Pohnpei within the meaning of the applicable Pohnpei laws and regulations appears to be solely a question of law, and thus certifiable.  The decision to certify a question to a state court lies wholly within the sound discretion of the trial court.  Gimnang v. Trial Division, 6 FSM Intrm. 482, 485 (App. 1994).  Thus our standard of review of the decision not to certify a question is whether the trial court abused its discretion.

     The FSM Supreme Court is not obligated to certify every unsettled issue of state law.  Pryor v. Moses, 4 FSM Intrm. 138, 141 (Pon. 1989).  It does have a constitutional obligation to exercise its own jurisdiction.  See id. at 143.  There may be a preference for referring a matter to state court when the state court's decision on an unsettled matter of state law would be dispositive and obviate the need for an adjudication of the national constitution.  Gimnang v. Yap, 5 FSM Intrm. 13, 21 (App. 1991).  That situation does not exist in this case.

     We cannot say that the trial court's decision on reconsideration, or its decision to reconsider, was clearly unreasonable, arbitrary, or fanciful; was based on an erroneous conclusion of law or clearly erroneous findings of fact; or that the record contains no evidence on which the court could have rationally based its decision. Therefore, having considered these factors set out in Jano v. King, 5 FSM Intrm. 326, 330 (App. 1992) (abuse of discretion standard), we conclude that the trial court did not err in declining to certify the question to state court.

B.  Abstention
     The appellant also contends that the trial court should have abstained from the matter because this loan was a part of a transaction in which the parties were attempting to enter into a deal which involved an interest in land, and because state courts play the primary role in deciding policy and legal issues concerning ownership and interests in land.

     The choice to abstain from a decision, like the decision to certify a question, lies wholly within the sound discretion of the trial court.  Gimnang, 6 FSM Intrm. at 485. Thus our standard of review of the decision not to abstain is whether the trial court abused its discretion.

     Certain circumstances may give rise to an inclination in favor of abstention, Damarlane v. Pohnpei Transp. Auth., 5 FSM Intrm. 67A, 67D (Pon. 1991) (court will look with sympathy upon a state request for abstention where there are identifiable, particularly strong state interests such as monetary claims against the state or questions concerning ownership of land), but national courts still have the obligation to carry out their own jurisdictional responsibilities.  Id.  The state is not a party to

[7 FSM Intrm. 323]
 
this action, and has thus made no request.  The appellant contends that somehow an interest in land is at issue, and therefore the trial court should have abstained.  This is not a land case.  The sole relief sought by the plaintiff was the return of his $50,000.00 loan.  A trial court judgment for either party could not have altered any interest in land.  Therefore, even if it were possible for a trial court to abuse its discretion by not abstaining in a land title case, the court did not abuse its discretion here.

III.  Summary Judgment
     A court must deny a motion for summary judgment unless it finds there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.  Adams v. Etscheit, 6 FSM Intrm. 580, 582 (App. 1994).  The court must view the facts presented and inferences made in the light most favorable to the nonmoving party, and the burden of showing a lack of triable issues of fact belongs to the moving party.  Id.

     Appellant contends that the facts and inferences were not viewed in the light most favorable to him and that if they had been it would have been apparent that there were genuine issues of material fact requiring a trial.  Appellant states as genuine issues: (1) whether the document is a bond of debt or a promissory note, (2) whether repayment of the loan was required, (3) whether it contains a condition precedent to repayment that remains unfulfilled and is therefore not due and payable, and (4) the $50,000 was given to induce the defendant-appellant to breach an existing contract with a third party.

     It is undisputed that appellee Kihara on or about September 3, 1990, paid appellant Nanpei $50,000.00, and that this sum has not been repaid.  The handwritten instrument at the heart of this case reads as follows:

                    A bond of debt

                                             3 sep. 1990

     TO:  MR. SHIGEMITSU [sic] 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

A.  Contract Terms
     The words of the instrument do not, as a matter of law, make it a promissory note. 11 Am. Jur. 2d Bills and Notes 105 (1963) (for instrument to be negotiable it must contain "words of negotiability").  The outcome, however, does not turn on whether the instrument is negotiable.  Only the two parties to the instrument are before the court, and it is signed by the party against which its enforcement is sought.  It is a written contract, styled a bond of debt.

     Interpretations of terms in contracts are matters of law to be determined by the court.  17A Am. Jur. 2d Contracts 339 (1991).  The parties agree on this.  Issues of law are reviewed de novo on

[7 FSM Intrm. 324]

appeal.  Sigrah v. Kosrae, 6 FSM Intrm. 168, 169 (App. 1993).  When the language of a contract is ambiguous or uncertain may a court look beyond the words of the contract to the surrounding circumstances to determine the parties' intent without changing the writing.  Ponape Transfer & Storage, Inc. v. Wade, 5 FSM Intrm. 354, 356 (Pon. 1992); cf. Melander v. Kosrae, 3 FSM Intrm. 324, 328 (Kos. S. Ct. Tr. 1988) (court should attempt to determine meaning of words used rather than what signatory later says he intended).

     The word "loan" is unambiguous and can only mean that Robert Nanpei must repay the $50,000.00 to Shegematsu Kihara.  The term "within 6 months from 3rd of September in 1990, the above amount must be settled" is also unambiguous. Appellant contends, however, that the preceding term "when contract between Mr. S. Kihara and myself regarding the Ant Atoll will be concluded within 6 months" creates a condition precedent which must be satisfied before the other terms of the contract may be enforced.  The appellant also contends that summary judgment was improper because this contractual provision is unclear and ambiguous, thus requiring the resort to extrinsic evidence at a trial.

     Appellant's contention that this provision is ambiguous, however, defeats his contention that a condition precedent was created.  Conditions precedent to contractual obligations are not favored in the law and courts will not construe terms to be such unless required to do so by plain and unambiguous language or by necessary implication.  Adams v. Etscheit, 6 FSM Intrm. 580, 582-83 (App. 1994). But the appellant relies upon the phrase's ambiguity as the basis of his argument. The agreement thus does not have the requisite clarity to create a condition precedent.  When faced with such ambiguity courts have displayed two preferences in interpretation.  Id. at 583.

"One preference is for an interpretation that imposes on a party a duty to see that an event occurs, rather than one that makes the other party's duty conditional on the occurrence of the event.  The other preference is for an interpretation that will reduce an obligee's risk of forfeiture if the event does not occur."

Id. (quoting E. Allan Farnsworth, Contracts 549-50 (1982)).

Courts manifest the second preference [if] . . . nonoccurrence of the condition results in the obligee's loss of his reliance interest when he loses his right to that exchange.  This loss . . . is often described as "forfeiture."  If the obligee's reliance has conferred a benefit on the obligor, the reliance interest will include a restitution interest, so that forfeiture will result in unjust enrichment unless restitution is granted.

Farnsworth, supra, at 552.  Unless it is clear from the agreement or the surrounding circumstances that the obligee (here, Kihara) has assumed the risk of forfeiture an interpretation that reduces that risk is preferred.  Id. at 553.
 
     Cases in which this interpretation is preferred often involve agreements with terms that provide that payment is due "when" or "not until" a stated event occurs. Such terms are generally not considered to be conditions, but merely a means of measuring time, and if the stated event does not occur then the payment is nevertheless due after a reasonable time.  Id. at 553-55.  We hold that to be the proper legal interpretation of this "bond of debt."  The language did not unambiguously create a condition precedent.  The phrase "when contract between Mr. S. Kihara and myself regarding the Ant Atoll will be concluded within 6 months from 3rd of September in 1990," is a term that measures time.  If the stated event did not occur then repayment was to be due within a reasonable time ) six months by the agreement's terms.  Any other construction would result in a forfeiture, and forfeitures are to be avoided, if at all possible.  Thus, as a matter of law, the terms of this written "bond of debt" required Robert Nanpei to repay the $50,000.00 loan to Shegematsu Kihara within six months from

[7 FSM Intrm. 325]

September 3, 1990.

     When the moving party has made out a prima facie case that there are no triable issues of fact and that it is entitled to summary judgment as a matter of law, the nonmoving party then has the burden to show by competent evidence that there is a triable material issue of fact.  Alik v. Kosrae Hotel Corp., 5 FSM Intrm. 294, 295 (Kos. 1992); Federated Shipping Co. v. Ponape Transfer & Storage Co., 4 FSM Intrm. 3, 11 (Pon. 1989).  The defendant introduced no such evidence, but instead relied upon the agreement's ambiguity.  Ambiguity in the agreement, however, precludes the existence of a condition precedent as a matter of law.

B. Improper Purpose
     The appellant also contends that the bond debt should not be enforced against him because it was made illegally or for an improper purpose ) it was made in violation of Pohnpei Foreign Investment laws and was made to induce improper interference with an existing contractual relationship.  Appellee contends that under the Pohnpei Foreign Investment Board Regulations a single loan transaction (especially one for which no interest is charged) does not constitute doing business in Pohnpei, and that therefore the transaction was not illegal.  This need not be decided because

[a] party to an illegal agreement will not be permitted to avail himself of its illegality until he restores to the other party all that has been received from such a party on the illegal agreement, and so long as he continues to enjoy the benefits of the agreement, he will not be allowed to set up its nullity.

17A Am. Jur. 2d Contracts 315, at 317-18 (1991).  Thus even if this bond of debt constitutes an illegal agreement appellant Nanpei cannot avail himself of that defense unless he returns the benefit conferred on him ) the $50,000.00.

IV.  Conclusion
     The trial court did not abuse its discretion by deciding not to certify a question to Pohnpei Supreme Court and not to abstain, and did not err in granting the plaintiff summary judgment.  Accordingly, we affirmed the trial court and dismissed the appeal.

*    *    *    *
 
Footnote:
 
1.  We also note that the appeal could have been dismissed for appellant's failure to file an Appendix as required by the rules.  Nakamura v. Bank of Guam (I), 6 FSM Intrm. 224, 228-29 (App. 1993) ("Only in limited circumstances at the court's discretion and by court order may the requirements of Appellate Rule 30(a) be waived." (emphasis in original)) (citing FSM App. R. 30(f)).