THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA
Cite as Gimnang v. Yap,
4 FSM Intrm. 212 (Yap 1990)
BASIL LIMED GIMNANG,
STATE OF YAP,
FSM CIV. NO. 1988-3000
Before Richard H. Benson
January 9, 1990
For the Plaintiff: R. Barrie Michelsen, Esq.
P.O. Box 1450
Kolonia, Pohnpei 96941
For the Defendant: Brian Z. Tamanaha, Esq.
State Attorney General's Office
P.O. Box 435
Colonia, Yap 96943
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Federalism - Abstention and Certification; Taxation
The FSM Supreme Court will abstain from a claim for recovery of taxes where the defendant state requests abstention, the claim is for monetary relief, and the state has endeavored to develop a body of law in the areas of excise taxes and sovereign immunity. Gimnang v. Yap, 4 FSM Intrm. 212, 214 (Yap 1990).
Constitutional Law; Federalism - Abstention and Certification; Taxation
On a claim for declaratory relief from an unconstitutional excise tax, the FSM Supreme Court trial division will not abstain, where the issue could later be certified to the FSM Supreme Court appellate division and result in delay, where the trial court has already retained the case longer than contemplated, where the issue is narrowly posed and not capable of varying resolutions, and where it appears that a greater service may be provided by
deciding the issue. Gimnang v. Yap, 4 FSM Intrm. 212, 214 (Yap 1990).
Equity - Injunctions; Federalism - Abstention and Certification
It is not appropriate to abstain from deciding a claim for injunctive relief where it is undisputed that the court has jurisdiction and where the interests of time can be of pressing importance. Gimnang v. Yap, 4 FSM Intrm. 212, 214 (Yap 1990).
A state excise tax imposed on imports is unconstitutional, regardless of the manner of tax payment. Gimnang v. Yap, 4 FSM Intrm. 212, 215 (Yap 1990).
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RICHARD H. BENSON, Associate Justice:
In his complaint filed January 11, 1988 the plaintiff seeks the following relief:
1. a declaration that the Yap State excise tax is unconstitutional,
2. an injunction enjoining the state from collecting the tax, and
3. a refund of the taxes paid by him since 1982.
The basis of the plaintiff's action is the allegation that the Yap State excise tax is a tax on imports and is thus in violation of article IX, section 2(d) of the FSM Constitution, which gives Congress the express power to tax imports.
The case came before the Court on June 8 and 9, 1988. The defendant had raised a number of issues in its motion for a judgment on the pleadings and its motion for dismissal. Oral arguments in support of and in opposition to the motions was presented, and the issues submitted for decision.
Although the granting of a pre-trial motion might render trial unnecessary, the trial was held with the understanding that the decisions on the pre-trial motions would be made prior to resolving the legal and factual issues.
Abstention. One ground of the defendant's motion to dismiss is that I abstain. Article XI, section 6(b) of the FSM Constitution grants this court jurisdiction to hear this case since it arises under the Constitution. This grant of jurisdiction must, however, yield in a proper case when factors other than jurisdiction alone favor abstention. See Ponape Transfer & Storage v. Federated Shipping Co., 4 FSM Intrm. 37 (Pon. 1989) (abstention ordered; court's jurisdiction based on diversity).
I have considered the motion as it applies to each of the three claims for relief, and conclude it should be granted as to the claim for recovery of the taxes.
The motion is addressed to the discretion of the court. Pryor v. Moses, 4 FSM Intrm. 138, 141 (Pon. 1989). The factors favoring abstention on the claim for recovery of taxes preponderate for the following reasons.
1. The defendant state itself has requested the abstention. Ponape Transfer & Storage, 4 FSM Intrm. at 39 (state agency requesting abstention). The claim is for monetary relief. Id. at 45; Panuelo v. Pohnpei, 2 FSM Intrm. 150, 156 (Pon. 1986).
2. The defendant state has endeavored to develop a body of law both as to the excise tax and sovereign immunity. Ponape Transfer & Storage, 4 FSM Intrm. at 44 (public land use). Cf. Pryor v. Moses, 4 FSM Intrm. at 143 (no state action to develop law of defamation).
The Yap State excise tax law (Y.S.L. 1-104) was the pattern for the Truk law at issue in Innocenti v. Wainit, 2 FSM Intrm. 173 (App. 1986). Following that decision and in order to have a constitutionally valid tax, Yap State amended its law. Y.S.L. 1-219, effective November 6, 1986. Pending before the Yap State Legislature at the time of oral argument in this case was Bill No. 2-63, a further proposed amendment.
In the area of sovereign immunity, Yap State has made this claim in its Constitution and its legislation. Yap Const. art. II, § 12; Government Liability Act of 1986 (Y.S.L. 1-220).
I will not abstain on the claim for declaratory relief for the following reasons:
1. If abstention were granted either party or the state court could cause the issue to be certified to the appellate division of this Court. FSM Const. art. XI, § 8. The resulting delay militates against abstention at this stage.
2. I have already retained the case for longer than contemplated, the issue is narrowly posed and not capable of varying resolutions, and it appears that a greater service may be provided by deciding the issue now. Cf. Bernard's Retail Store & Wholesale v. Johnny, 4 FSM Intrm. 33, 35 (App. 1989).
It is not appropriate to abstain from deciding the claim for injunctive relief because it is undisputed that the court has jurisdiction and because the interests of time can be of pressing importance in such matters.
As to the remaining grounds asserted (failure to state a cause of action; no subject matter jurisdiction) the defendant's motion to dismiss is denied. The defendant's motion for a judgment on the pleadings is also denied.
Findings of Fact
Injunctive and Declaratory Relief
1. The plaintiff has a wholesale and retail business and sells goods imported into Yap.
2. The Court has jurisdiction of this action since it arises under the Constitution of the FSM.
3. On October 1, 1981 Yap State Law 1-104 became effective. It imposed an excise tax on items imported into Yap State. The tax had to be paid before the plaintiff could take possession of his goods at the dock.
4. On November 6, 1986 Yap State Law 1-219 became effective. It amended the excise tax law so that the taxpayer had 10 days to pay the tax after the release of the goods from the dock.
5. Pursuant to tax laws 1-104 and 1-219 the plaintiff paid taxes of $157,764.38 in 1982 through 1986, and $720 in 1987.
6. The payment of taxes in 1987 under the amended excise tax law was not made under legal compulsion.
7. The defendant state has brought no collection actions against the plaintiff or others to enforce payment of the excise tax imposed by Y.S.L. 1-219.
8. No showing has been made that the plaintiff will suffer irreparable injury if the injunction is not issued, or that money damages will not fully compensate the plaintiff for his claims.
Conclusions of Law
1. The motion that I abstain is granted as to the claim for recovery of the taxes.
2. The plaintiff has failed to establish his claim for injunctive relief.
3. Yap State Law 1-104 imposes a tax on imports and violates article IX, section 2(d) of the FSM Constitution. Innocenti v. Wainit, 2 FSM Intrm. at 173. The violation is not cured by Y.S.L. 1-219 since the excise tax is still imposed upon imports, only the manner of tax payment is changed.
Dated this 9th day of January, 1990.
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