FSM SUPREME COURT
TRIAL DIVISION (Yap)
Cite as FSM Development Bank v. Yap Shipping Cooperative Association,
3 FSM Intrm. 84 (Yap 1987)

[3 FSM Intrm. 84]

FEDERATED STATES DEVELOPMENT
BANK,
Plaintiff,

v.

YAP SHIPPING COOPERATIVE
ASSOCIATION,
Defendants.

CIVIL ACTION NO. 1985-3001

[3 FSM Intrm. 85]

DENYING MOTIONS AMENDED ORDER

Before Richard H. Benson
Associate Justice
FSM Supreme Court
January 29, 1987

APPEARANCES:
          For the Plaintiff:          Maketo Robert
                                               Attorney-at-Law
                                               P.O. Box 979
                                               Pohnpei, FSM 96941

          For the Defendant:     Theodore R. Mitchell
                                               Attorney-at-Law
                                               P.O. Box 2020 - Nauru Bldg.
                                               Saipan, CNMI 96950

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HEADNOTES
Sovereign Immunity; Statute of Limitations
     The general rule is that statutes of limitations do not run against the sovereign.  FSM Dev. Bank v. Yap Shipping Coop., 3 FSM Intrm. 84, 86 (Yap 1987).

Sovereign Immunity; Statute of Limitations
     The Trust Territory of the Pacific Islands is a political entity possessing many of the attributes of an independent nation, and is to be regarded as a sovereign for the purpose of the statute of limitations, and therefore, is not subject to the statute of limitations. FSM Dev. Bank v. Yap Shipping Coop., 3 FSM Intrm. 84, 86 (Yap 1987).

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COURT'S OPINION
RICHARD H. BENSON, Associate Justice:
     This matter came before the Court on the motions of the defendant Yap Cooperative Association for an order granting summary judgment and for an order dismissing the action.  Both motions assert that the statute of limitations has run against the claim of the plaintiff.

     The issue presented is whether or not the statute of

[3 FSM Intrm. 86]

limitations runs against the Trust Territory of the Pacific Islands Economic Development Loan Fund, the assignor of the plaintiff.  It is an issue of first impression in this Court and in the High Court of the Trust Territory of the Pacific Islands.

     I conclude that the statute does not run, and the motions are accordingly denied.

     The complaint asks for judgment against the defendant for the balance owed on a promissory note.  According to the complaint, the note was executed January 6, 1970 by Yap Shipping Cooperative Association in favor of the Trust Territory of the Pacific Islands Economic Development Loan Fund.  The complaint alleges that Yap Cooperative Association, the moving party, guaranteed payment of the note.

     The maker has made no payments since October 17, 1972.  The note called for monthly installment payments.  The final payment on the note, had it been paid according to its terms, was due November 6, 1975. (This latter calculation was offered by the defendant and was not disputed.) on January 2, 1983 the note was assigned to the plaintiff. on November 21, 1984 the complaint was filed.

     The parties agree that, if applicable, the statute of limitations should bar the action after 6 years.  6 TTC 305.  The dates set out in the   preceding paragraph show that if the statute runs against the Trust Territory of the Pacific Islands Economic Development Loan Fund the entire period would have run before the assignment in 1983.

     The general rule is that statutes of limitations do not run against the sovereign. 51 Am. Jur. 2d Limitation of Actions 409 (1970).  The policy behind the rule is that the public interest should not be prejudiced by the negligence of public officials. Guaranty Trust Co. of New York v. United States, 304 U.S. 126, 132, 58 S. Ct. 785, 788, 82 L. Ed. 1224, 1228 (1938).

     The question to be decided is whether the Trust Territory of the Pacific Islands is the sovereign.  The exemption of the sovereign from the operation of the statute of limitations was derived from the prerogative of the crown.  However, the doctrine and the public policy behind it have survived monarchies and are applicable to other forms of government.  Id. at 132, 58 S. Ct. at 789, 82 L. Ed. at 1228.  I conclude that the Trust Territory of the Pacific Islands is entitled to the protection afforded by the policy.  It is a "political entity possessing many of the attributes of an independent nation."  People of Saipan v. United States Dep't of Interior, 502 F.2d 90, 100 (9th Cir. 1974), cert. denied, 420 U.S. 1003 (1975).  "[T]he daily administration of the islands has largely shifted into the hands of the local government.  TheTerritory operates under its own comprehensive legal code.  Inhabitants of the islands are citizens of the Territory. . . ."  Porter v. United States, 496

[3 FSM Intrm. 87]

F.2d 583, 588 (Ct. Cl. 1974), cert. denied, 420 U.S. 1004 (1975).  "Though by no means a settled point, the most persuasive view on this question is that sovereignty rests in the people of Micronesia and is held in trust for them by the administering power."  Id. at 588 n.4; see also In re Ngiralois, 3 TTR 303, 308, 309 (Pal. 1967) in which the High Court Trial Division held that although the Trust Territory of the Pacific Islands was not recognized as sovereign in the international sense, it was like a sovereign in regard to certain matters, and did therefore have the power of eminent domain.

     The "basic constitutional document" of the Trust Territory is the Trusteeship Agreement.  People of Saipan, 502 F.2d at 98.  That document imposes a primary obligation upon the administering authority to "promote the economic advancement and self-sufficiency of the inhabitants" of the Trust Territory.  Trusteeship Agreement art. 6(2).

     This obligation was to be met in part through the Economic Development Loan Fund, a program established by the United States Congress.  Congress appropriated the funds, and set forth the purposes of the Fund and the manner of its administration.  48 U.S.C.S. 1688-1693 (Supp. 1980).  The Trust Territory received the funds through a grant from the Secretary of the Interior.  The Trust Territory of the Pacific Islands established no special body, corporation or agency to administer the Economic Development Loan Fund.

     I conclude that the Trust Territory of the Pacific Islands is sovereign for purposes of the statute of limitations, that it was performing a basic governmental function and fulfilling part of its obligation of economic advancement in administering the Economic Development Loan Fund, and that the statute does not run.

     The motions for summary judgment and for dismissal are therefore denied.

     So ordered this 30th day of January, 1987.

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