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Guaschino v Reimers and Reimers [1995] MHSC 3; 2 MILR 49 (8 March 1995)

2 MILR 49

IN THE SUPREME COURT
REPUBLIC OF THE MARSHALL ISLANDS

S. Ct. CIVIL NO. 94-02
(High Ct. Civil No. 1993-076 and High Ct. Civil No. 1993-077)

CORRADO GUASCHINO,
Plaintiff-Appellant,

-v-

ROBERT REIMERS and RAMSEY REIMERS,
Defendants-Appellees.

APPEAL FROM THE HIGH COURT

MARCH 8, 1995

ASHFORD, C.J.
WALSH, A.J. pro tem,¹ and HOUSEL, A.J. pro tem²

SUMMARY:

Plaintiff appealed the judgments in two cases which were consolidated for trial in the High Court. In both cases, the High Court denied judgment for Plaintiff and awarded compensatory damages against him on Defendants' counterclaims. In one case, the High Court also awarded punitive damages against Plaintiff. The Supreme Court affirmed the denials of Plaintiff's claims and the awards of compensatory damages because Plaintiff had failed to meet his burden of proof at trial and had not demonstrated any errors of law by the trial judge. The Supreme Court vacated the award of punitive damages, however, because Defendant had not asked for punitive damages until closing argument and the evidence did not establish outrageous conduct by Plaintiff.

DIGEST:

1. JUDGMENTS - On Trial of Issues: A trial court can only decide issues of fact on the basis of evidence whether written or oral introduced before it.

2. EVIDENCE - Unsworn Statements: Statements in pleadings or argument, whether oral or written, do not themselves constitute evidence.

3. PARTIES - Appearing Pro Se - Compliance with Rules: An unrepresented litigant appearing prose is not entitled to any different treatment in the application of Rules of Evidence and Procedure than is a litigant represented by counsel.

4. CIVIL PROCEDURE - Discovery - Production of Documents: Orders for production of documents are discretionary and will not normally be interfered with on appeal, unless the action was improvident and affected substantial rights.

5. DAMAGES - Punitive Damages - in General: Punitive damages cannot be awarded when not asked for in the pleadings, but only in argument after the close of evidence.

6. DAMAGES - Punitive Damages - Contract Actions: In an action for breach of contract, punitive damages may be awarded only if the conduct constituting the breach is also a tort for which punitive damages are recoverable.

7. DAMAGES - Punitive Damages - Tort Actions: In tort actions, punitive damages are awarded to punish a person for his outrageous conduct and to deter him and others like him from similar conduct in the future.

8. DAMAGES - Punitive Damages - Tort Actions - Outrage: Since the purpose of punitive damages is not compensation of the plaintiff but punishment of the defendant and deterrence, those damages can be awarded only for conduct involving some element of outrage similar to that usually found in crime.

OPINION OF THE COURT BY WALSH, A.J.

These two actions and the counter-claims brought by Defendants in connection therewith are consolidated for hearing of the appeals before us, as they had been before the trial judge. As a result, some of the evidence adduced at trial and some of the issues raised in appeal related to the construction of a residence for Robert Reimers and some to the construction of a residence for Ramsey Reimers with respect to which the most important issues arose.

The trial judge properly wrote a separate judgment for each, but it would be repetitive for us to deal at length in two judgments with the issues and facts applicable to both.

General Comments

These cases contain many unusual features and for instruction of litigants raising similar issues in future it appears desirable to deal in a general way with them, setting out some basic legal principles before applying them to the issues in the present cases.

[1,2] (1) A trial court can only decide issues of fact on the basis of evidence whether written or oral introduced before it. Statements in pleadings or argument, whether oral or written, do not themselves constitute evidence. Sandbargen v. Gushi, 7 TTR 471, 474 (1976).

(2) The burden of proof of facts on which a plaintiff bases his claim or a defendant bases his defense rests on the party making it. Tasio v. Yesi, 3 TTR 598, 600 (1966); Sandbargen, supra, 475.

(3) An appellate tribunal may not substitute its own view of the facts for that of the trial judge unless his decision on the facts is manifestly absurd or capricious or without due regard to the evidence before him, since an appeal hearing is not a trial "de novo." Ebot v. Jablotok, 1 MILR (Rev.) 8, 9 (Aug 6, 1984); Mwedritok v. Langijota and Abija, 1 MILR (Rev.) 172, 174 (Aug 15, 1989); Clanton, et al. v. MI Chief Elec. Off. (1), 1 MILR (Rev.) 146, 151 (Aug 2, 1989).

Conduct of Trial

[3] While it would not be appropriate for us to expound the evidence presented at trial in detail, one of the more serious grounds of appeal by Plaintiff-Appellant Guaschino is that the learned trial judge was biased against him. Unfortunately, Guaschino, though evidently very intelligent and eloquent and having some legal knowledge, found it necessary to act as his own counsel. As a result he suffered considerably from lack of legal knowledge, frequently failing to object to improperly asked leading questions or to irrelevant questions. On the other hand, many of his submissions were clearly improper or irrelevant. In such circumstances, a trial judge normally deals with an unrepresented litigant as sympathetically as possible in endeavoring to obtain the relevant facts, but an unrepresented litigant is not entitled to any different treatment in the application of Rules of Evidence and Procedure than is a litigant represented by counsel.

Reading the transcript as a whole, we cannot conclude that the conduct of the hearing was biased. Early in the hearing, the trial judge dealt sympathetically with Guaschino, frequently rejecting objections made by counsel for Defendants. Later on he clearly became impatient with Guaschino's attempts to introduce irrelevant material and statements he made unsupported by evidence. By the time Guaschino himself took the stand, called as a witness by the Defendants, he actively took part in the questioning of Guaschino.

One must sympathize with his position as the evidence on the whole was highly unsatisfactory and contradictory on essential facts. However, we cannot sustain Appellant's appeal on the issue of bias because the record does not support it.

Other Issues Raised by Appellant

Without going in detail on each and every argument raised by Appellant, there are several on which he argues that the judgment should be reversed whether because of a manifestly incorrect appreciation and application of the facts or for legal reasons.

These arguments can be conveniently dealt with under various headings.

On Findings of Fact

1. Nature of agreement or contract. Guaschino attempted to obtain a written contract with Ramsey Reimers, but his draft was never signed by Reimers. Although it allegedly remained in Reimers' desk for six years, it cannot be assumed that there was tacit approval of it. Although in Defendant's pleadings there are several references to a contract, there does not appear to be anything more than an oral construction undertaking with no meeting of the minds as to the details of Guaschino's responsibilities by virtue of it.

The draft agreement prepared by Guaschino but never signed by Reimers certainly sets out in some detail the work Guaschino undertook to do and refers to himself as "designer and project manager for the project," and to that extent corroborates Reimers' understanding of what was orally agreed to. Oral contracts can be valid but there must be a meeting of the minds. For the Ramsey Reimers' house there appears to have been no such complete understanding as to Appellant's responsibilities. Ramsey Reimers, believing Appellant to be an architect and designer originally sought a simple house, costing some $80,000.00, but accepted a design which would cost much more than that to build. In consultation with Appellant, Ramsey Reimers accepted the tender of Andrew Bing to build it for $271,000.00. Bing states that he purchased the major plumbing and electrical wiring conduits and boxes for the house and the rooting materials but not the windows. While not familiar with the agreement between Ramsey and Guaschino, he considered that Guaschino was the architect and designer, but not that this required him to be present all the time. He had some plans and got some answers from Guaschino when questions were asked during the construction. It appears that his own job foreman may not have been competent nor did he supervise to insure good quality work.

Eventually Bing was terminated and Noel Bigler was engaged by Ramsey to point out the many defects and make some repairs of faulty work.

2. Responsibility of an architect or designer. Appellant is not a qualified architect or industrial designer and does not claim to be, although he states he had had wide experience in design and supervising construction of buildings when he undertook this assignment. The Marshall Islands has no specific requirements for qualifications of industrial designers. Appellant insists that he was not required to be on the job constantly as it is the responsibility of a contractor and his foremen to see that the work is properly done. He engaged what he calls competent and qualified electrical and mechanical engineers to prepare whatever plans were necessary for this work. He himself did not provide very detailed drawings, stating that even an architect employs draftsmen to do this. Nevertheless, it is evident that much of the highly incompetent and unacceptable electrical and mechanical work was done without detailed plans or competent supervision.

The best witness as to what is expected by way of supervision by a designer is the expert witness Carleton Hawpe, a very fair witness. Although frequently employed by Defendants, which is not unusual, especially with respect to expert witnesses, he testified that in a project of this magnitude structural and soil engineers should have been hired as well as electrical and mechanical engineers. He stated that normally supervision is not part of the architectural package during construction but that drawings should be sufficiently detailed so that the contractor who is responsible can see that they are carried out.

It is evident that Guaschino was negligent in his design, provided insufficiently detailed drawings and left too much of the supervision to contractors, subcontractors and their employees. He has not discharged the burden of proof as to his performance, so the final judgment dismissing his claim and sustaining the counterclaims was well justified on the facts.

On Issues of Law

1. Contract for Robert Reimers' house. Appellant contends that there was no valid contract for it since it was signed by Ramsey Reimers and not by Robert Reimers himself without any proof of agency. There is no merit in this argument. Appellant acted on it and the house was substantially finished prior to his termination. Moreover, he even argues that the fact that it encountered only minor problems indicates that he is a competent designer. There is no merit in this since one design, even if adequate, does not indicate that a different one for an entirely different and more unusual house will be.

2. Appellant argues that he was not properly notified when certain witnesses were examined in Honolulu so did not have the opportunity to cross-examine them. The record reveals that proper notice was given, and the depositions were properly produced in evidence. MIRCivP Rule 26(b).

[4] 3. Appellant argues that it was erroneous in law to refuse to order production of and to admit customer invoices and receipts for materials purchased in Hawaii on the basis of their being irrelevant. Orders for production of documents are discretionary and will not normally be interfered with on appeal, unless the action was improvident and affected substantial rights. Carter v. Baltimore & O.R. Company et al., 152 F.2d 129 (1945). The receipts and invoices were certainly irrelevant with respect to Appellant's innuendo that the Reimers were attempting to avoid payment of import duties which was not an issue. They might have been relevant however in determining the amount of commissions he was claiming on an alleged 10% agreement basis. Since the decision is against him in any event and they would only be of interest with respect to the quantum of his claim, the non-admission does not affect the validity of the judgment.

4. Appellant attacks the admissibility of the testimony of many of the witnesses called, including those called by him. Admittedly, many of them are either related to, have been employed by, are currently in the employ of, or wish to be employed in future by Reimers or by Reimers Enterprises. This does not disqualify them from testifying, but their testimony must be examined with caution. Some of them have been or are employed in correction of defects in the houses and have, of course, been paid for their services. This is particularly true of the evidence of the expert witness Hawpe. It is entirely proper that he should be paid for his services and not be deemed to be an unacceptable witness as a result thereof. At trial Plaintiff did not object to Hawpe being qualified as an expert. It is important to note that Appellant called no expert himself to refute Hawpe's evidence. Appellant himself is not a disinterested witness nor are the Reimers.

5. One legal issue, or perhaps one of mixed fact and law is that of the kick-back which Appellant undoubtedly received from many of the materials suppliers. He is candid about receiving them for his own benefit. As he states, it is by no means unusual for a supplier to offer a discount to large purchasers or regular customers.

Appellant states that the contract made by Ramsey Reimers with the general contractor provided that materials should be provided by the owner. The general contractor, Bing, stated however that much of the material was purchased by him. The unsuitable windows were purchased by Guaschino from a reputable manufacturer but the witnesses indicate they were totally unsuitable with respect to the material and design for the climate. Testimony indicates that aluminum windows were called for in the original design plans and although they would have been more expensive and would also eventually suffer some damage from the climate they would be in all respects more satisfactory than those installed.

In any event Guaschino admittedly purchased much of the materials in Hawaii negotiating the prices himself, and sometimes buying the cheapest quality, including the unsuitable windows, allegedly in the interest of keeping the price down for the owners. He was being paid for his work in connection with the building of the houses and any discounts he received from suppliers clearly belong to the owner, unless the owner has been advised of the discounts and approved Appellant's right to keep them. It appears that this was not the case. Much of the evidence respecting the kick-backs and quantum of damages caused to Defendants by the totally unacceptable construction defects and costs already incurred for repairs and anticipated costs for future repairs of such defects as can be repaired, is highly confused and unsatisfactory and may contain some duplications, but the trial judge appears to have done the best he could with it and we see no reason to interfere with the damages awarded on the counter-claims, save for the punitive damages.

Quantum of Award in Counter-Claim

[5-8] Although we are in agreement that the appeals must be denied and the counter-claims maintained on the merits, we do not agree with all the amounts awarded against Appellant Guaschino. In particular the award of $500,000.00 punitive damages cannot be sustained. First, punitive damages were not asked for in the pleadings, but only in argument after the close of evidence by Defendant and Counter-claimants' counsel. Second, they were not justified. In an action for breach of contract, punitive damages may be awarded only if the conduct constituting the breach is also a tort for which punitive damages are recoverable. Restatement (Second) of Contracts § 355 (1979). The torts in this case were negligence and misrepresentation by Appellant. In tort actions, punitive damages are awarded to punish a person "for his outrageous conduct and to deter him and others like him from similar conduct in the future." Restatement (Second) of Torts § 908(1) (1964).

Since the purpose of punitive damages is not compensation of the plaintiff but punishment of the defendant and deterrence, these damages can be awarded only for conduct for which this remedy is appropriate - which is to say, conduct involving some element of outrage similar to that usually found in crime. Restatement (Second) of Torts § 908 cmt b (1964).

Appellant's conduct, while egregious, fell short of being outrageous.

Conclusion

It is evident that Appellant is the author of his own misfortunes for assuming design responsibilities for a very complicated and unusual design in the case of Ramsey Reimers' house, which was beyond his experience and qualifications, for providing insufficiently detailed plans and insufficient supervision in the circumstances of the work done without detailed plans by the contractor and subcontractors, and above all for soliciting and accepting and retaining kick-backs from suppliers chosen by him.

In many if not most cases what occurred was primarily the doing of others, but he is certainly legally responsible, and must be held accountable. The contractor Bing did a very unsatisfactory construction job as did his subcontractor Rosenberry with respect to the asphalting on the roof in connection with the dome to waterproof the roof. His subcontractor for electrical work also did unacceptable work. Paradise Construction Products International did not deliver much of the material and furnishings ordered and then went out of business, but Appellant was at fault in prepaying for merchandise before delivery (even if it was necessary to prepay at least 50% with the order as he claims). Ramsey Reimers was also negligent in blindly affirming these contracts and he and some of his company's employees in providing funds for prepayment of them.

Appellant undoubtedly spent considerable time on the two projects for which he will now be called upon to refund amounts he received, but if he has no claim on a quantum meruit basis he has only himself to blame.

The judgments appealed from are affirmed, with the exception of the award of punitive damages in High Ct. Civ. No. 1993-077. That award of punitive damages is vacated.

___________

¹Honorable Allison A.J. Walsh, Deputy Judge of the Federal Court of Canada, by appointment of the Cabinet.

²Honorable Jerry W. Housel, member of the bar and Court Commissioner in the State of Wyoming, by appointment of the Cabinet.