SERVICES OF SAMOA, INC., Plaintiff
SILA POASA and TONY’S CONSTRUCTION,
Court of American Samoa
Under the statutory requirements set forth in Title 30 of the American Samoa
Code, corporate entities must conduct an organizational meeting of
incorporators, adopt bylaws, and issue stock certificates.
Corporations are required to prepare guidelines fixing the number of directors
and the manner of their election.
Corporations are required to maintain a stock book containing the names of all
persons who are stockholders of the corporation, their interests, the amount
paid on their shares, and all transfers thereof.
Where purported corporation had failed to conduct organizational meeting of
incorporators, adopt bylaws, issue stock certificates, prepare guidelines for
electing directors, and maintain accounting books or stock book, court held such
business entity was not a corporation.
The court may issue a permanent injunction only after full and final trial on
the merits has been conducted and a determination has been made that a judgment
for money damages will provide an inadequate remedy.
circumstances indicated that parties shared a personal and business
relationship, managerial authority, and some ownership over business entity,
but entity had failed to properly operate as a corporation, court could treat
entity as a partnership.
partnership is an association of two or more persons to carry on, as co-owners,
a business for profit.
partners mutually agree to dissolve their partnership and to transfer their
interests to one or both of them in return for assumption of certain
partnership liabilities, the mutual promises of the partners constitute the
consideration for the agreement.
partnership dissolution agreement is valid where it is the product of free and
voluntary action on the part of all the partners, after a meeting of the minds,
and where the agreement has the effect of settling accounts between the
Where Partnership dissolution agreement divided equipment, assets, claims, and
obligations of the company between the parties, designated how the office was
to be divided, and occurred after twenty days of discussion, and at least four
hours of direct negotiation and consideration of its terms, said agreement
contained adequate consideration and was binding upon the parties.
Injunctive relief was proper where, despite having executed agreement to
dissociate himself from company, party continued to act on behalf of company
and interfere with its activities.
Where written agreement to end business relationship and divide a company was
the only evidence of parties’ intents regarding allocation of the entire range
of assets, liabilities, service work and resources in the company, specific
performance of the agreement was proper.
KRUSE, Chief Justice, ATIULAGI, Associate Judge, and SAGAPOLUTELE, Associate
For Plaintiff, Paul F. Miller
For Defendant, Katopau
Construction Services of Samoa, Inc., (“CSS”) filed a complaint praying for a
permanent injunction to (1) restrain defendants Sila Poasa (“Poasa”) and Tony’s Construction from using the assets and equipment of
CSS, (2) return all assets and equipment to CSS, and (3) pay costs and
attorney’s fees. Defendants Poasa and Tony’s Construction
filed and answer and counterclaim for specific performance of an agreement
dated March 29, 2000 (“the agreement”), addressing, among other things, the
division of assets and liabilities between CSS and Tony’s
Construction. Plaintiffs argue that the
agreement is void for lack of consideration.
evidence presented in this case consisted of the uncertain, contradictory, and
overtly conflicting testimonies of Moru Mane, Sallie
Mane, and Sila Poasa along
with a profound lack of documentary submissions to clarify or at least mitigate
the resultant confusion. From this
befuddlement, we look for the facts.
Business of CSS
CSS is a company engaging in the business of construction. Moru and Sallie
Mane claim to have founded it in December of 1996. According to their testimony, Moru Mane and his friend Peter Larsen (“Larsen”), a
purported engineer who now lives in Hawaii, incorporated CSS in July of
1997. Named on the
Articles of Incorporation as original board members are Peter Larsen, Sallie
Mane, and Jeanette Sili (“Sili”),
daughter of defendant Sila Poasa. Since its incorporation, CSS has failed to
conduct itself as corporations are wont to do under the statutory requirements
for corporate entities accorded by Title 30 of the American Samoa Code. There was no organizational meeting of
incorporators, nor bylaws adopted, nor stock certificates issued. See A.S.C.A. §§ 30.0118, 30.0119; Donald
Export Trading Co. v. Toko Groceries Distrib., Inc., CA No. 13-77, slip op. at 4 (Trial Div.
1979) (Order Denying Motions For Summary Judgment, entered May 18, 1979). There were no guidelines fixing the number of
directors or manner of their election. See
A.S.C.A. §§ 30.0140 and 30.0141.
Further, CSS failed to maintain books of account of business
transactions, nor even a “stock book containing all the names of all persons
who are stockholders of the corporation, their interests, the amount paid on
their shares and all transfers thereof,” pursuant to A.S.C.A. § 30.0160. Receipts and records appear to have been left
in utter disarray until retroactively recorded and interpreted by accountant
Victor Stanley in 1999 for tax purposes.
The corporate status of CSS was, in fact, a fiction.
Involvement of Sila Poasa
Sila Poasa joined CSS in
June of 1998 as general manager of that company, whether by board appointment
or simple agreement between the Manes and himself, we cannot determine. Previous to that time, from 1997 until about
March of 1998, he worked full-time as a Safety Health Supervisor at Star-Kist
worked as a general manager for CSS for about six months, between June and
January of 1999, when he became “president of the company,” a title confirmed
by the Manes and Poasa in their testimonies before
the court. Again, there is no solid
evidence aside from contradictory testimony to confirm whether this ascension
occurred by board resolution or by simple agreement. Thereafter, Poasa
and Sallie Mane, who calls herself the “secretary-treasurer” of CSS, became
dual signatories on annual tax returns and on the two checking accounts held by
Bank of Hawaii in the name of CSS.
Before that time, Sallie Mane and Jeanette Sili
were the two signatories on the accounts.
Both Poasa and Sallie Mane drew biweekly
salaries from CSS. It is uncertain and
contested by both parties the extent to which Larsen and Sili
were actually involved in CSS. For
example, Poasa claims that his daughter handled
administration and letters for CSS as secretary of the company even while
attending school in Hawaii, where she would, incredibly, complete payroll and
fax it back. Moru and Sallie Mane, on the other hand,
testify that Sili’s appointment constituted only
nominal deference to their friendship with Poasa, and
represent her work as sporadic, inconsistent and noncommittal. What is certain, moreover, is that Sili and Larsen appear to have completely withdrawn from
any involvement in CSS by March 2000, if not much earlier. They were not “removed” from their directorships
by any formal process, but rather seem to have simply lessened their
involvement over time due to geographical circumstance.
March 2000, the principal decision-making powers of CSS resided in three
persons: Moru Mane, who was unpaid and titleless ostensibly so as not to decrease disability
payments from the U.S. Marine Corps for back injury; Sallie Mane, secretary and
treasurer; and Sila Poasa,
president and co-signatory on the CSS bank accounts.
Due to the lack of records
noted above, no documents exist as to the stock ownership of CSS. Plaintiffs did enter one document, Exhibit
1A, entitled “Initial Capitals to Start C.S.S. Operation,” but this does not
evidence capitalization despite its misleading title. It is, rather, a retroactively written list
of items of uncertain meaning, including “Housing rent collected” and “Mr. Mane
Reimbursement for expenses rendered.”
Unexplained, undated, and insufficiently annotated, we find it to be
insufficient proof of capitalization. We
have thus only the testimonies of the Manes and Poasa
to determine the ownership of CSS. On
the one hand, the Manes testify that they initially capitalized CSS with
between $20,000 and $55,000 drawn from M.S.M., a sole proprietorship owned by
Sallie Mane, Moru Mane’s 401K investment, and joint
savings. They further claim to have
invested an additional $50,000 by December 31, 1998. The Manes claim that Poasa
invested only $250 when CSS was first incorporated, and that he contributed
about $5,000 thereafter, which has been more or less repaid. On the other hand, in addition to the
undisputed initial $250, Poasa claims to have
contributed $70,000 between December 10, 1997, and December 31, 1998, which was
not repaid. Without further
documentation, testimony or other evidence for weighing the accuracy of these
assertions, we are unable to render a specific finding of exactly the extent to
which the Manes and Poasa share ownership of CSS,
beyond the finding that both had something of an ownership interest in CSS
through both cash and/or labor contributions.
is clear that Poasa and the Manes were close friends
who entered into a business relationship that went sour. Accounts differ as to the causes and events
leading up to the deterioration of the relationship and the signing of the
agreement partitioning the assets and liabilities of CSS, but in any case, by
March 29, 2000 all three agreed that Poasa would
leave CSS. The Manes and Poasa deeply disagree as to how the agreement dated March
29, 2000, came about. According to the
Manes, Poasa was notified by letter and did attend a
March 9, 2000 meeting to remove him from the position of president of CSS. They state that Poasa
did not agree to his removal, and in his anger, threatened to prevent CSS from
obtaining government contracts. Poasa then directed a CSS engineer to prepare an agreement,
and stated that he would resign from CSS and start his own company, Tony’s Construction.
or about March 29, 2000, the Manes testify that they met with Poasa at Krystal’s Restaurant at the Pago Pago International Airport.
Sila allegedly presented the agreement at that
time, and begged and cried from 8:30 to 1 p.m. for Moru
Mane to sign the agreement. Moru Mane said he steadfastly refused to sign the agreement
due to CSS’s liability to other vendors, but ultimately caved in due to
pressure from Sallie Mane, who told him “to please do this because I didn’t
want to see us part like that.”
contests this version of events, but his testimony is confusing and
inconsistent. At one point, he testified
that the “owners” of CSS met on March 9, 2000, and again on March 22, 2000, to
“iron out some of the problems we faced during that time frame,” but that at
neither time was his removal as president discussed or voted upon. At a later point, however, Poasa testified that he and the Manes discussed the
break-up of the company on March 9, March 17, April 4, and April 5, 2000.
also testified that he negotiated the agreement with Moru
Mane on March 23, 2000, at which time they agreed that, in order to maintain
the friendship, they would split the company in half. He claims to have left a draft of the
agreement on Moru Mane’s desk for review on March 23,
explains that the March 29, 2000, date on the agreement was when he “finalized”
the agreement for his own signature, which he left on Moru
Mane’s desk on March 30, 2000. He claims
that Moru Mane “dragged” his signing until April 5,
2000, and until the end, “kept changing his mind on how to go about it.”
these warring testimonies, and from the substance of the agreement,
undisputedly drawn up by Poasa himself, which
explicitly refers to the “departure” of Poasa and the
“new” formation of Tony’s Construction, we find that
the breakup and separation of Poasa from CSS had been
in a process of negotiation since at least March 9, 2000. Given the testimonies before us, and given
the face of the agreement, which has handwritten, initialed modifications of
the typewritten terms, as well as handwritten, initialed insertions of
additional terms, it is certain that discussion occurred as to the specific
terms of the agreement, whether for four hours by the Manes’ account or twelve
days by Poasa’s.
agreement dated March 29, 2000 and uncontrovertedly
signed by Moru Mane, Sallie Mane, and Poasa provides for the “division of the assets, liabilities
and associated resources of [CSS], between CSS and Tony’s
Construction, preceding the departure from CSS of Sila
Poasa to run the newly formed company, Tony’s Construction as follows.” (emphasis
added). The agreement then lists
equipment to be distributed between the two companies, and divides
responsibilities for two ongoing projects of CSS between the two
companies. The agreement designates CSS
as responsible for the Poloa Village Road project,
and states that the construction of an Amanave water
tank for the American Samoa Power Authority (“ASPA”) would be “constructed by Tony’s Construction under CSS contract” where “all debt
incurred for said project and all proceeds derived from this project will be
transfer [sic] to Tony’s Construction.” A later-inserted term, handwritten and
initialed, provides that either party can use “any equipment needed to
complete” either project “free of charge by either party.”
agreement sets forth certain assets and liabilities to remain with CSS,
including “all accounts currently receivable by CSS,” office furniture and
fittings. As for a shop building belonging
to CSS valued by both parties at $50,000 that is built upon the property of Sila Poasa adjacent his personal
residence, this was to “remain with Tony’s
Construction and will use [sic] by CSS until CSS has a suitable
building available for them” (italics indicate handwritten, inserted,
on its face, the agreement provides for the severance of Poasa
from CSS, and lists a division of assets, liabilities and projects between the
company of CSS, signed for by Moru Mane, and the company
of Tony’s Construction, signed for by Poasa.
Aftermath of the Agreement
after the agreement was signed, complications arose. Tony’s Construction
continued to build the Amanave water tank project
with equipment it claims to have obtained from CSS according to the agreement,
but encountered difficulties obtaining at least two pieces of equipment,
resulting in delays and additional costs of construction. It appears that Moru
and Sallie Mane at some point failed to recognize the validity of the
agreement, and thereafter refused to release the equipment described therein to
Tony’s Construction, either for the Amanave project or otherwise. Poasa, on his part,
seems to have taken records from the CSS office that he refuses to return, and
claims to have access to the office as part owner of the company.
also occurred with respect to the bank accounts held by CSS, for which Sallie
Mane and Poasa are co-signatories. After the agreement was signed, Sallie Mane
was unable to utilize the CSS accounts at the Bank of Hawaii. She testifies that Poasa
had put the CSS checking accounts on hold, and instructed the bank to prevent
her from opening another account for CSS.
Unable to purchase materials to sustain an ongoing project or to do payroll
for CSS’s workers, Sallie Mane testifies that she unsuccessfully attempted to
open two more accounts under CSS with herself and Moru
Mane, her husband, as signatories. The
Bank of Hawaii, according to Sallie Mane, instructed her to close the new accounts
and speak with Poasa.
The Manes’ complaint, filed in the name of CSS, is largely based on the
constriction of their business activity as a result of Poasa’s
Poasa’s testimony on this point is flatly
self-contradictory. At one point, he
stated that he put the CSS accounts on hold on March 31, 2000 because he
suspected that Moru Mane was not going to “pay and
follow through” with the agreement. At a
later point, Poasa claims that the Bank of Hawaii
rather than himself “froze” the CSS bank
accounts. In another instance, Poasa claims not to have known of his removal as President
of CSS until March 31, 2000 when he called the bank to “find out why [his]
signature had been removed.” On the
other hand, Poasa also undisputedly drafted and
signed the agreement establishing “departure from CSS of Sila
two clear facts emerge from this testimony regarding the parties’ attempts to
effectuate the agreement. First, Sallie
Mane could not utilize the CSS bank accounts without the signature of Poasa, either due to his interference or to the Mane’s
failure to comply with the formal requirements for changing signatories on
corporate accounts. Second, Poasa has not yet acknowledged that he has “departed” CSS,
and so may tend to conduct himself as a representative of that company.
CSS requests a permanent injunction against Poasa and
Tony’s Construction from using its assets and
equipment, and to return all of its assets and equipment. A.S.C.A. § 43.1302 allows this Court to issue
a permanent injunction only after “full and final trial on the merits”, and
“determination that a judgment for money damages will inadequately remedy the
complained of [sic] wrong.” A party
requesting injunctive relief must thus show that it would succeed on the merits
of the case, and that money damages are an inadequate remedy. See, e.g.,
Thompson v. Toluao, 24 A.S.R. 2d 127, 132 (Land
& Titles Div. 1993); Intervisual Commc’n Inc. v. Volbert, 975
F. Supp. 1092, 1104 (N.D. Ill. 1997).
1. Success on the Merits
claim the assets and equipment at issue, CSS must first prove to the court that
it is the true owner of the assets and equipment currently held and used by Tony’s Construction.
This, in turn, depends on the validity of the agreement providing for
the division of CSS and the transfer of those items to Tony’s
That the Manes and Poasa shared a personal and
business relationship, managerial authority, and some ownership over CSS is
certain. That CSS substantially failed
to operate as a corporation is also certain.
We now look to circumstantial evidence, and find it appropriate to
consider CSS as a partnership for the purpose of interpreting the dissolution
agreement. See Johnson v. Coulter,
28 A.S.R. 218, 219 (Trial Div. 1995) (when there is no written partnership
agreement between the parties the court may look to circumstantial evidence to
determine the presence or absence of a partnership).
We look to the definition of partnership offered by traditional common law, as
well as by the Uniform Partnership Act, which has been adopted by all states
except Louisiana, and has not yet been adopted by this Territory. The common law definition widely used is “a
contract of two or more competent persons to place their money, effects, labor,
and skill, or some or all of them, in lawful commerce or business, and to
divide the profit and bear the loss in certain proportions.” Black’s
Law Dictionary 1120 (6th ed. 1990); see also 59A Am. Jur. 2d, Partnership § 3. Although obviously the Manes and Poasa did not execute a partnership contract, but attempted
to formalize CSS as an empty corporation with the intention of avoiding
liability, their conduct in placing their money together for profit, and in
probably withdrawing those profits without benefit to the corporation, makes
them seem to this Court more a partnership than a corporation. This is confirmed by the modern definition
offered in the Uniform Partnership Act
§ 6(1), accepted by all common law states, which defines partnership as “[a]n
association of two or more persons to carry on, as co-owners, a business for
profit.” See also Black’s Law Dictionary 1120 (6th ed.
this light, the March 29, 2000, agreement between Poasa
and Moru Mane, also signed by Sallie Mane, can be
viewed as a dissolution agreement formed by the mutual agreement of all
partners to CSS. Such a construction is
confirmed by the words of the agreement.
The title line states: “This agreement is made between Moru Mane of [CSS] and Sila Poasa, both of [CSS] and Tony’s
Construction.” Thus, in the title line, Moru Mane is recognized as a representative of CSS, and Poasa as of both CSS and Tony’s
Construction. However, the title
paragraph goes on to reference the departure of Poasa
from CSS, and the body of the agreement refers to Poasa
as of Tony’s Construction only. Specifically, the headings for the columns
listing the division of plant and equipment refer to “CSS (Moru)”
and “Tony’s Construction (Sila).” Furthermore, the signature lines show that
where Moru Mane signed after the designation “For
CSS”, Poasa signed after “For Tony’s
mention in the title paragraph of the agreement as “both of [CSS] and Tony’s Construction” is thus adjectival of his status before
signing the agreement, and his signature as “For Tony’s
Construction” indicates the legal effect of dissolving Poasa’s
relationship with CSS. We thus find,
based on the explicit words of the agreement, that the
intended effect of the contract was to dissolve the partnership-like business
venture of CSS.
CSS, or rather the Manes, claim that Poasa did not
provide consideration for the agreement.
However, where partners mutually agree to dissolve their partnership and
to transfer their interests to one or both of them in return for assumption of
certain partnership liabilities, the mutual promises of the partners are the
consideration for the agreement. Pejsa v. Bridges, 213 P.2d 473, 475
(Ariz. 1950); see also John D.
Calamari and Joseph M. Perillo, The Law of Contracts
§ 4.1 (4th ed. 1998); Restatement
(Second) of Contracts § 4.1 (1981).
In Pejsa, partners entered into a
dissolution agreement whereby one partner paid three other partners between $1
and $3,000 to assume all right, title, interest, claims and demands of the
partnership. 213 P.2d
at 474. As in this case, the
partner assuming the business from the others sued to dissolve the agreement
for lack of consideration. Id. The court ruled there to be no failure of
consideration where there was an absence of allegations of fraud, deceit or
coercion in procuring the agreement of dissolution, where the agreement was the
product of a “free and voluntary action on the part of all the partners after a
meeting of the minds the effect of which was to dissolve the partnership in the
manner agreed upon” and where the agreement had the effect of settling accounts
as between the partners themselves. Id. at 475-76. The March 29, 2000 agreement between the Manes
for CSS and Poasa for Tony’s
Construction involves a much more balanced set of promises for promises than Pejsa. It
divides the equipment, assets, claims, and obligations of the company between
the Manes and Poasa, and designates how the office is
to be divided. The agreement occurred
after twenty days of discussion and at least four hours of direct negotiation
and consideration of the terms of the agreement. The agreement contains, therefore, mutual
promises which we are bound to give credence to in this litigation.
of the legal documents submitted claim any fraud, deceit, or coercion. However, during testimony, the Manes implied
that they were unduly coerced into signing the agreement—Sallie Mane due to Poasa’s tears, and Moru Mane due
to his wife’s exhortations. The Manes
may have been moved by grief, guilt, sadness or despair, but nowhere does the
evidence indicate that they were forced or otherwise limited in their clear and
abiding capacities to reason and choose in entering into the agreement. The Court adjudicates intent, not emotional
motivation. Furthermore, the Court
perceives through the testimonies, that rational deliberation was indeed
invested in the terms of dissolution.
2. Adequate Legal
consideration, the agreement is valid and enforceable. As such, CSS’s claim for its assets and
equipment, based on the invalidity of the agreement, does not succeed on the
merits. Furthermore, none of the
equipment supplied, liabilities, buildings or projects claimed by CSS are
non-compensable. Indeed, at trial, CSS
presented evidence as to the value of most of the materials claimed. Since the request for injunctive relief
against Poasa for use and return of these assets and
equipment does not succeed on the merits, and is fully compensable in pecuniary
terms, injunctive relief is therefore not available. A.S.C.A. § 43.1302.
As to CSS’s request for injunctive relief against Poasa
for continuing to act on behalf of CSS, and for interfering with its
activities, we find that this claim for relief succeeds on its merits. A falling-out occurred between the parties,
a severance agreement was reached, Poasa is no longer
employed by or related to CSS, and yet he continues to represent himself as
cannot relieve CSS of any damage done to CSS through Poasa’s
holding himself out to third parties as an agent of CSS, where he has no actual
authority to do so. We therefore grant
the permanent injunction barring Poasa from holding
himself out as a representative of CSS.
Poasa and Tony’s
Construction counterclaim for specific performance of the agreement. We have found the agreement to be supported
by consideration and to be valid.
Specific performance is appropriate in a case such as this, where a
written agreement to end a business relationship and divide a company is the
only evidence of parties’ intents regarding allocation of the entire range of
assets, liabilities, service work and resources in the company. As ruled in Pejsa,
“[w]hen partners dissolve the partnership relation, whatever its character, and
put their agreement in writing, that writing measures the rights and
obligations of the parties.” Pejsa,
213 P.2d at 475 (citations omitted). Money damages clearly do not
resolve allocation issues in the dissolution of a partnership-like business
venture. Specific performance of the
agreement is therefore granted.
will accordingly enter (1) permanently enjoining Poasa
from holding himself out as a representative of CSS, and, (2) decreeing
specific performance of the parties’ agreement dated March 29, 2000.
is so ordered.