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HEADNOTES

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COURT'S OPINION

READY E. JOHNNY, Associate Justice:

On January 24, 2013, the court heard the defendants' Motion to Vacate the Judgment, filed April 11, 2012, and the Plaintiff's Opposition to Defendants' Motion to Vacate, filed May 28, 2012. On February 7, 2013, the Federated States of Micronesia, through its Department of Justice, filed the Federated States of Micronesia's Response in Opposition to Defendants' Motion to Vacate Judgment (as Amicus Curiae), and on February 18, 2013, the movants filed their response to the FSM's amicus brief. On February 20, 2013, the FSM Development Bank filed Plaintiff's Submission of Supplemental Authority. On March 1, 2013, the defendants filed Defendants' Comment on Plaintiff's Improper Submission of Supplemental Authority and Defendants' Reply Memorandum to Plaintiff's Submission of Supplemental Authority. The court then considered the defendants' motion submitted to it for its decision. The motion is denied. The court's reasons follow.

I. VACATING VOID JUDGMENTS

The defendants, Perdus I. Ehsa and Timakyo I. Ehsa a/k/a Timakio I. Ehsa, contend that the judgment against them must be vacated since the judgment is void because the court lacked subject-matter jurisdiction over the case. The Ehsas assert that the FSM Constitution does not give the court subject-matter jurisdiction when an FSM government instrumentality or agency is a party but only when the national government itself is a party. They further assert even if the court has subject-matter jurisdiction when an FSM government instrumentality or agency is a party that the FSM Development Bank is not an FSM national government instrumentality or agency since Congress specifically restructured the bank in 1994 to create an entity that was independent and separate from the FSM national government and of which the FSM was just the shareholder. The Ehsas also contend that the statute creating the restructured FSM Development Bank is unconstitutional because the national government has no power to create or own a commercial bank. They thus conclude that the judgment is void and must be vacated.

Civil Procedure Rule 60(b)(4) provides for the relief from judgment when the judgment is void. Unlike other grounds for relief from judgment under Rule 60(b), the court does not have any discretion when the relief is sought because the judgment is void since a judgment is either void or it is valid and if it is void the court must vacate it. Lee v. Lee, 13 FSM Intrm. 252, 256 (Chk. 2005). There is no time limit on seeking relief from a void judgment. Ruben v. Petewon, 13 FSM Intrm. 383, 389 (Chk. 2005). The reason for this is obvious – if a judgment is void when issued, it is always void. Id. Although the court has no discretion and must grant the relief when relief is sought from a void judgment, id., a judgment is void only if the court that rendered it lacked jurisdiction of the subject matter, or of the parties, or if it acted in a manner inconsistent with due process, FSM Dev. Bank v. Arthur, 15 FSM Intrm. 625, 633 (Pon. 2008); Lee, 13 FSM Intrm. at 256.

The bank contends that the Ehsas have waived any rights they may have had to seek relief from the judgment against them. The bank contends that because the Ehsas are directors and officers of Pacific Food and Services, Inc., a corporation that was a joint and several judgment-debtor in this action, they therefore accepted the judgment when they directed the corporation to seek bankruptcy protection from this judgment.

The court cannot give this argument any weight. As the corporation's directors, the Ehsas had a duty to act in the corporation's best interest and, regardless of whether this judgment existed, the corporation had debts that greatly exceeded its assets and it was unable to pay those debts as they became due. Bankruptcy was probably in the corporation's best interest.

[18 FSM R. 614]

Nor can the court give any weight to the argument that the passage of time is enough to bar vacating a void judgment.

II. THE EHSAS' CONTENTIONS AND GROUNDS

A. Agencies and Instrumentalities as the National Government

The Ehsas contend that the judgment is void because the FSM Development Bank, and not the national government, is the named plaintiff. They contend that the constitutional provision that "[t]he trial division of the Supreme Court has original and exclusive jurisdiction . . . in cases in which the national government is a party except where an interest in land is at issue," FSM Const. art. XI, § 6(a), applies only to cases in which the national government itself, and not one of its agencies or instrumentalities, is a named party.

For this proposition, the Ehsas rely on the principle that identical words and phrases within the same document are presumed to have the same meaning. They point to the absence of the phrase "every branch, department, agency or statutory authority of" before "the national government" in article XI, section 6(a) and that phrase's inclusion in article XII, section 3(b) requiring the Public Auditor to "inspect and audit accounts in every branch, department, agency or statutory authority of the national government . . . ." The Ehsas assert that the Constitution's framers could easily have added that phrase to section 6(a) but since the framers did not, they must have meant that if a branch, department, agency, or statutory authority of the FSM national government is a named party to the case instead of the national government, the FSM Supreme Court lacks jurisdiction.

The court must reject this contention. The court's subject-matter jurisdiction cannot be determined by reference to the Constitution's detailed command to the Public Auditor about the breadth and depth of the tasks that the Public Auditor must undertake. The court concludes that the exclusive jurisdiction it exercises when the national government is a party cannot be avoided, and was never meant to be avoided, by the mere device of naming a branch (such as Congress), or a department (such as the Department of Foreign Affairs), or an agency (such as the Social Security Administration), or a statutory authority (such as the FSM Post Office) of the national government as a party instead of naming the national government itself as a party. That would make a mockery of the constitutional provision on exclusive jurisdiction if it could be circumvented so easily. The court's exclusive jurisdiction cannot be so ephemeral.

B. Whether the Bank Is a National Government Instrumentality

The Ehsas also contend that the bank is not a national government instrumentality for the purpose of the FSM Supreme Court's subject-matter jurisdiction.

1. Analytical Construct

A classic method for determining if a case is within the FSM Supreme Court's subject-matter jurisdiction is to follow an analytical construct. Such an approach is always helpful and instructive. The court (or a legal practitioner seeking to determine in which court or courts the case must or can be filed) needs only to ask (and answer) the right questions in the right order.

First, the construct starts with the court's exclusive jurisdiction. FSM Const. art. XI, § 6(a). Ask if the case involves officials of foreign governments, or disputes between states, or admiralty or maritime matters. If the answer to any of these is yes, stop right there. No further analysis is needed. The FSM Supreme Court trial division has exclusive jurisdiction. No other court can exercise it. If the

[18 FSM R. 615]

answer is no, then ask if the FSM national government is a party to the case. If the answer is yes, then ask if an interest in land is at issue. If the answer is no, stop right there. The FSM Supreme Court trial division has exclusive jurisdiction. If the answer is yes, the FSM Supreme Court may still have jurisdiction (is there another basis for its jurisdiction?) but it will not be exclusive. See FSM Dev. Bank v. Ifraim, 10 FSM Intrm. 1, 4-5 (Chk. 2001).

If the answer is no – the FSM national government is not a party, the analysis will not end there. It proceeds to the next set of questions about the FSM Supreme Court's concurrent jurisdiction. FSM Const. art. XI, § 6(b). Next, ask if the case arises under the FSM Constitution, national law, or treaties. If the answer is yes, then the FSM Supreme Court trial division has concurrent jurisdiction over the subject-matter.¹ The determination of whether a case is one "arising under" the FSM Constitution, national law, or treaties is derived from the plaintiff's cause of action, not inferred from any possible defenses. Etscheit v. McVey, 13 FSM Intrm. 477, 479 (Pon. 2005); McVey v. Etscheit, 13 FSM Intrm. 473, 476 (Pon. 2005); Mailo v. Chuuk, 12 FSM Intrm. 597, 600 (Chk. 2004); Enlet v. Bruton, 10 FSM Intrm. 36, 40 (Chk. 2001); Ifraim, 10 FSM Intrm. at 4; David v. San Nicolas, 8 FSM Intrm. 597, 598 (Pon. 1998).

If the answer is no, then ask if the case involves parties of diverse (different) citizenship. If the answer is yes, then the FSM Supreme Court trial division has concurrent jurisdiction, unless all the parties are foreign citizens. Geoffrey Hughes (Export) Pty, Ltd. v. America Ducksan Co., 12 FSM Intrm. 413, 415 (Chk. 2004); Kelly v. Lee, 11 FSM Intrm. 116, 117 (Chk. 2002); Trance v. Penta Ocean Constr. Co., 7 FSM Intrm. 147, 148 (Chk. 1995); International Trading Co. v. Hitec Corp., 4 FSM Intrm. 1, 2 (Truk 1989). Only minimal, not complete, diversity of citizenship is required for subject-matter jurisdiction in the FSM Supreme Court. Luzama v. Ponape Enterprises Co., 7 FSM Intrm. 40, 48 (App. 1995). If a party is a corporation, the corporation's citizenship is the citizenship of its shareholders and, for purposes of diversity jurisdiction, a corporation is considered a foreign citizen when any of its shareholders are not FSM citizens. Id. at 44.

Lastly, if all the answers up to here have been no, then subject-matter jurisdiction must be in some other (most likely the state) court.

2. Application of Analytical Construct

Applying this analytical construct, the first possible yes is to the question of whether the national government is a party. The Ehsas contend that the answer should be no since the restructured FSM Development Bank is not a national government instrumentality or agency. They acknowledge that under the reasoning in FSM Development Bank v. Estate of Nanpei, 2 FSM Intrm. 217 (Pon. 1986), the bank was then a national government instrumentality, but they argue that once FSM Public Law No. 8-47 restructured the bank, it no longer qualified under the Estate of Nanpei reasoning as a national government agency for Section 6(a) purposes.

The Estate of Nanpei court reasoned that an entity

[18 FSM R. 616]

created by national statute may or may not be a part of the national government depending on its role and characteristics. Activities and organizations created and controlled by the national government should remain subject to the constitutional provision regardless of the name given to the agency or other details of form. Conversely, organizations merely authorized or licensed by the national government but which operate for private purposes, with little if any governmental involvement or control, should not be treated as part of the national government. In each case, review of enabling legislation will be important in determining the organization's essential nature.

Estate of Nanpei, 2 FSM Intrm. at 219-20. That court noted that the bank, as then constituted, was a national government agency because the bank was "governed by a special act at title 30 of the FSM Code, rather than by the general banking statutes at title 29"; because the bank was "imbued with a public purpose"; because there was "no private ownership or control" and "no provision for issuance of stock"; because Congress appropriated funds for the bank's operations; because the President and Congress may undertake, on the national government's behalf, responsibility to pay selected obligations of the bank; because the bank was required to submit annual reports to the President and Congress; and because the bank existed and was operated solely for the public's benefit and was "exempt from any taxes or assessments on any part of its property, operations or activities." Estate of Nanpei, 2 FSM Intrm. at 220. The Estate of Nanpei court therefore concluded that since the bank was

[c]reated and funded by the Congress to carry out a public purpose, with its operations controlled by persons chosen by the President with advice and consent of the Congress, and reporting annually to the President and Congress, the bank is sufficiently identified with and controlled by the President and Congress to be regarded as part of the national government for purposes of Article XI, Section 6(a) of the Constitution.

Estate of Nanpei, 2 FSM Intrm. at 221. The Ehsas contend that under this analysis, the restructured bank does not qualify as an FSM national government instrumentality under Section 6(a).

They contend that the restructured FSM Development Bank does not qualify as a national government agency or instrumentality because the President does not appoint, and Congress does not confirm, the bank's principal officers; because the money received by the bank is not deposited in the national treasury and then only withdrawn through appropriation; because the foreign assistance that the bank receives is not deposited in the Foreign Assistance Fund created by the Constitution's Article XII, § 1(b); because Congress intended to create an entity that was independent and separate from the national government by creating capital shares for the restructured bank; because the bank is run by a board of directors chosen by the shareholders and not by the President; because the national government is not responsible for the bank's debts; because the bank is not funded through congressional appropriations; and because the bank is not required to report on its operation and finances to the national government.

The bank is not a private institution. It was created by and is controlled by the national government. Even as restructured, it is still imbued solely with a public purpose. 30 F.S.M.C. 128 ("[t]he Bank shall exist and operate solely for the benefit of the public"). "[T]he Bank is authorized to engage in all banking functions that will assist in the economic advancement of the Federated States of Micronesia." 30 F.S.M.C. 104(1). These include: mobilizing additional financial resources for development, 30 F.S.M.C. 104(2)(a), to provide loans for high priority projects, 30 F.S.M.C. 104(2)(b), "[t]o provide technical assistance and services for project identification, project formulation, and to perform investment studies," 30 F.S.M.C. 104(2)(c), to administer trust funds and special funds available to the FSM, 30 F.S.M.C. 104(2)(d), and to foster economic activities and cooperate with other lending institutions in supporting activities for the FSM's development, 30 F.S.M.C. 104(2)(e).

[18 FSM R. 617]

While the restructured bank differs from its earlier incarnation, it does not differ enough for the court to consider it no longer an FSM national government instrumentality for Section 6(a) purposes. It is still imbued with a public purpose and it is still governed by a special act at title 30 of the FSM Code, rather than by the general banking statutes at title 29. There is still no private ownership of the bank although, unlike earlier, the restructured bank has issued stock shares, but virtually all of those shares, 98.7%, are owned by the national government. Thus, the shareholder that chooses or elects the board of directors is the FSM national government, with the exception of the bank's president who is an ex officio member of the board and who is chosen by the other board members. 30 F.S.M.C. 114(1). The bank is thus still under the control of the FSM national government that created it. The bank still submits annual reports to the national government although now this is in the national government's capacity as a shareholder. 30 F.S.M.C. 134. And in every fiscal year but one, Congress has appropriated funds for the restructured bank's use.

The restructured bank is fiscally independent of the national government as are a number of other national government instrumentalities and agencies – FSM Social Security Administration, see 53 F.S.M.C. 606; National Fisheries Corporation, see 24 F.S.M.C. 1123 and 1124; FSM Telecommunications Corporation, 21 F.S.M.C. 207 and 225; see also FSM Telecomm. Corp. v. Department of Treasury, 9 FSM Intrm. 380, 385 (Pon. 2000); MiCare Health Insurance, FSM Pub. L. No. 12-77, § 2, 12th Cong., 3d Spec. Sess. (2002) (to be codified at 52 F.S.M.C. 404); and FSM Petroleum Corporation, FSM Pub. L. No. 15-08, § 25, 15th Cong., 1st Spec. Sess. (2007) (to be codified at 27 F.S.M.C. 251). This fiscal autonomy removes these FSM national government instrumentalities from the national government's every day political influence and control. But these instrumentalities were created by the national government and are still under its control, first as a shareholder or the shareholder, and second since Congress can, at any time, amend the statutes that created the restructured bank, or any of these other instrumentalities, to exert or enforce some new national policy preference.²

The bank exists solely for the public's benefit. 30 F.S.M.C. 128(1). It does not operate for a private purpose and it is not a profit-seeking venture. That the national government is not legally responsible for the bank's debts, 30 F.S.M.C. 129, does not prevent the bank from being a national government instrumentality. Other national government instrumentalities have similar status. See, e.g., 21 F.S.M.C. 207 (FSM Telecommunications Corp.); 24 F.S.M.C. 1123 (National Fisheries Corp.); 27 F.S.M.C. 251 (FSM Petroleum Corp.); 40 F.S.M.C. 724(1) (College of Micronesia-FSM);

Furthermore, as befits a national government agency or instrumentality, the bank is exempt from any taxes (except import taxes) or assessments on its property or operations. 30 F.S.M.C. 128(1). Similar statutory provisions exist for other national government instrumentalities and agencies. See, e.g., 21 F.S.M.C. 208 (FSM Telecommunications Corp.); 24 F.S.M.C. 1124 (National Fisheries Corp.); 27 F.S.M.C. 251(1) (FSM Petroleum Corp.); 40 F.S.M.C. 729 (College of Micronesia-FSM).

The appellate division has previously noted that the College of Micronesia is a national government instrumentality similar to the FSM Development Bank, Berman v. College of Micronesia-FSM, 15 FSM Intrm. 582, 596 (App. 2008), and the bank itself, Helgenberger v. FSM Dev. Bank, 18 FSM Intrm. 498, 500 (App. 2013). The Ehsas correctly note that the Helgenberger appeal focused on the applicability of the exception to the court's jurisdiction when an interest in land was at issue and that the Berman appeal was dicta as far as the court's jurisdiction in FSM Development Bank cases. Nevertheless, those appeals indicate that FSM Supreme Court jurisdiction over such national government agencies has been generally accepted in the past even by the court of last resort.

[18 FSM R. 618]

Accordingly, the restructured FSM Development Bank remains subject to the constitutional provision [FSM Const. art. XI, § 6(a)] regardless of the name given it and the other details of form because it is an organization created by the national government for a public purpose and over which the national government can exercise control when it chooses. It is not an organization that the national government merely licensed or authorized to operate for private purposes. As with similar national government instrumentalities, the FSM Development Bank should be treated as part of the national government for article XI, § 6(a) purposes. Thus, the answer to whether the national government is a party in this case is yes.

The Ehsas contend that the answer to the question of whether the national government is a party should be a no. If the court were to assume that the Ehsas are correct, the analysis would then proceed as follows. The plaintiff bank is a corporation. The Ehsas contend that it is not a national government agency or instrumentality but that the FSM national government is only a shareholder, owning 98.7% of the bank. The other 1.3% of the shares are owned by the States of Chuuk and Kosrae. Thus, if the bank is not a national government instrumentality, it would be an entity with Chuuk and Kosrae citizenship for diversity purposes³ because a corporation's citizenship for diversity purposes is the citizenship of its shareholders. See Luzama, 7 FSM Intrm. at 44. So even if the Ehsas' contention were correct that the bank is not an FSM national government agency, the FSM Supreme Court would still have subject-matter jurisdiction over this case as one between a plaintiff corporation with Chuuk and Kosrae citizenship and Pohnpei citizen defendants.

The court thus must reject the Ehsas' contention that it did not have subject-matter jurisdiction over this case. It either has exclusive jurisdiction because the bank is a national government agency or it has concurrent jurisdiction because of the parties' diversity of citizenship. It cannot have both simultaneously because a court's jurisdiction over a case cannot be both exclusive and non-exclusive (concurrent) at the same time. It is either exclusive or it is not.

3. Summary

Accordingly, the court concludes that the FSM Development Bank is an instrumentality of the FSM national government and that the court therefore has jurisdiction under section 6(a) of article XI. The court further concludes that if this first conclusion is in error then the court has jurisdiction under section 6(b) of article XI because the parties are of diverse citizenship.

C. Constitutional Power to Create Development Bank

The Ehsas further contend that FSM Public Law No. 8-47, which created the restructured FSM Development Bank, is unconstitutional and that the bank is therefore an illegal entity without standing. The Ehsas contend that Congress was given only the authority to regulate banking, FSM Const. art. IX, § 2(g), and that this power does not extend to the creation and ownership of a bank. The Ehsas thus conclude that the bank is an illegal entity and as such is defunct and has no standing to proceed in court or to obtain a judgment against any party. Mot. to Vacate at 20 (Apr. 11, 2012).

The court must reject this contention. First, the bank is not defunct. If Public Law No. 8-47 were unconstitutional, then the previous FSM Development Bank statute would apply, see Samuel v.

[18 FSM R. 619]

Chuuk State Election Comm'n, 14 FSM Intrm. 586, 588 (Chk. S. Ct. App. 2007); Cholymay v. Chuuk State Election Comm'n, 10 FSM Intrm. 145, 154 (Chk. S. Ct. App. 2001), and the Ehsas have not challenged the constitutionality of that statute. Second, Congressionally-enacted statutes are presumed to be constitutional. Jano v. FSM, 12 FSM Intrm. 569, 572 (App. 2004); Rodriguez v. Bank of the FSM, 11 FSM Intrm. 367, 382 (App. 2003). With that presumption in mind, the court now turns to the question of whether Public Law No. 8-47 was a valid exercise of Congress's power.

The Constitution expressly delegates to Congress the power to regulate banking and foreign and interstate commerce. FSM Const. art. IX, § 2(g). The Ehsas contend that, since this provision does not mention the creation of a bank, Congress is forbidden from creating a bank as part of the national government. Congress, however, has the power to create institutions that engage in the activity that Congress has the power to regulate. FSM Telecomm. Corp. v. Department of Treasury, 9 FSM Intrm. 380, 384 (Pon. 2000). Because the Constitution expressly delegates to Congress the power to regulate interstate commerce and because the existence, availability, and quality of telecommunication services in the FSM clearly impacts on interstate commerce, it was constitutionally permissible for the FSM national government to establish FSM Telecommunications Corporation. Id. Similarly, Congress's power to regulate banking must include the power to create a bank, especially a bank that provides banking services that the private sector commercial banks are unable or unwilling to provide, such as development banking.

The Constitution's broadly-stated express grants of power to regulate banking and foreign and interstate commerce "contain within them innumerable incidental or implied powers" as well as certain inherent powers. Chuuk v. Secretary of Finance, 9 FSM Intrm. 424, 431 n.2 (App. 2000) (quoting SCREP No. 33, II J. of Micro. Con. Con. 813, 814-15). The Constitution's framers recognized that these incidental and implied powers would include the power to form public corporations, such as the FSM Development Bank or the FSM Telecommunications Corporation, even in the absence of an express power to do so. SCREP No. 33, II J. of Micro. Con. Con. 813, 816. "[T]he national government has no express power to establish public corporations . . . [h]owever . . . there may be extraordinary circumstances which make formation of a public corporation desirable. . . . [and] the Constitution ought to be flexible enough to permit the national government to do so." Id. This is especially true when the power is one that is national in character and beyond the power of one state to control. Id. at 815. The framers concluded that "the entire issue of banking and banking regulation is of a national character . . . and should be exclusively within the scope of the national government." Id. at 818. Development banking, almost by definition, involves riskier loans and banking services that a private sector commercial bank would hesitate or would be unwilling to provide, but which would encourage or foster interstate and foreign commerce. Congress evidently found extraordinary circumstances were present and enacted Public Law No. 8-47.

Accordingly, FSM Public Law No. 8-47 is not unconstitutional because it was a valid exercise of Congress's power to regulate banking and to regulate interstate and foreign commerce, FSM Const. art. IX, § 2(g), and because development banking is a power of national character beyond the power of a state to control or provide and so is a national power, FSM Const. art. VIII, § 1.

III. CONCLUSION

The Ehsas' motion to vacate the judgment against them is accordingly denied.

Footnotes:

¹ Note that for some cases arising under national law, Congress has placed exclusive jurisdiction in the FSM Supreme Court trial division [e.g., all cases arising under Title 19, 19 F.S.M.C. 105; any review of Secretarial orders concerning aeronautics, 20 F.S.M.C. 106(3); all actions involving marine resources arising under FSM Code Title 24, 24 F.S.M.C. 511(1); any filing for bankruptcy protection, 31 F.S.M.C. 104(1)].

² Bills have been introduced to amend title 30 in various ways but none have been enacted.

³ The other two banks that operate in the FSM – the Bank of Guam and the Bank of the FSM – are deemed foreign citizens and the FSM Supreme Court therefore has subject-matter jurisdiction over their cases.