FSM SUPREME COURT
Cite as Mackenzie vs. Tuuth,
5 FSM Intrm. 78 (Chk. 1991)
PATRICK MACKENZIE, in his Capacity
as Director of Court Administration
of the Federated States of Micronesia,
ALOYSIUS J. TUUTH, in his Capacity
of Secretary of Finance of the
Federated States of Micronesia,
MEMORANDUM OF DECISION
FSM CIV. 1988-088
RICHARD H. BENSON
May 28, 1991
For the Plaintiff: Alan Burdick
Attorney at Law
702 Hasegawa Komuten Bldg.
820 Mililani Street
Honolulu, Hawaii 96813
For the Defendant: Steven Pixley and Douglas Juergens
Office of the Attorney General
FSM National Government
Palikir, Pohnpei FM 96941
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Constitutional Law - Legislative Powers
The legislative enactment of the Financial Management Act does not conflict with the constitutional provision stating the Chief Justice is the chief administrator of the national judiciary. Mackenzie v. Tuuth, 5 FSM Intrm. 78, 80 (Chk. 1991).
Constitutional Law - Legislative Powers
The legislative passage of the Financial Management Act rests upon the provisions of the Constitution, pursuant to which the Department of Finance and the General Fund were established to oversee the national administration
[5 FSM Intrm. 79]
and management of public money. Mackenzie v. Tuuth, 5 FSM Intrm. 78, 81 (Chk. 1991).
Constitutional Law - Legislative Powers
Historically the concept of a single, general fund administered by one person is found in laws enacted by the Congress of Micronesia. The enactment of the Financial Management Act reflects a continuity of purpose and statutory consistency. Mackenzie v. Tuuth, 5 FSM Intrm. 78, 82 (Chk. 1991).
Constitutional Law - Judicial Powers
The constitutional provision making the Chief Justice the chief administrator of the national judiciary was not intended to establish a separate administration of funds allotted to the judiciary; it is not so specific as to overcome the presumption of the constitutionality of the Financial Management Act as it relates to the judiciary. Mackenzie v. Tuuth, 5 FSM Intrm. 78, 82-83 (Chk. 1991).
Separation of Powers
Where the record fails to reflect that the functions of the judiciary have been prevented or substantially impaired by the financial management and fiscal powers exercised by the Secretary of Finance, the judiciary has not been deprived of its essential role and constitutional independence. Mackenzie v. Tuuth, 5 FSM Intrm. 78, 84 (Chk. 1991).
In general, to the extent that the Financial Management Regulations are consistent with the Financial Management Act , such uniform standards and procedures serve to prevent misappropriations and expenditures in excess of budgetary allowances. Mackenzie v. Tuuth, 5 FSM Intrm. 78, 85 (Chk. 1991).
A Financial Management Regulation that bears no reasonable relationship to the fiscal accounting and management objectives of the Financial Management Act is in excess of the statutory authority granted to the Secretary of Finance. Mackenzie v. Tuuth, 5 FSM Intrm. 78, 86-87 (Chk. 1991).
The Secretary of Finance lacks the authority to terminate administratively the fiscal year prior to its lawful expiration period where such termination precludes the judiciary from making obligations during the entire fiscal year for which an appropriation is made. Mackenzie v. Tuuth, 5 FSM Intrm. 78, 88 (Chk. 1991).
In implementing the provisions of the Financial Management Act the Secretary of Finance must disburse funds within 30 days of the submission of a payment request unless the withholding of payment approval is necessary to prevent the misappropriation or over obligation of a specific appropriation. Mackenzie v. Tuuth, 5 FSM Intrm. 78, 88 (Chk. 1991).
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RICHARD H. BENSON, Associate Justice:
This is before me on the motions for summary judgment filed by both parties, which were heard on April 5, 1991. Upon receipt of additional submissions by the parties following the oral argument, the motions were considered submitted for decision.
The plaintiff seeks a declaration that the Financial Management Act of 1979 (55 F.S.M.C. 201, et seq.) (hereinafter referred to as "the FMA") is unconstitutional as applied to the judiciary, and a declaration (essentially in the alternative) that the Secretary of Finance acts in excess of his authority under the Financial Management Act.
The defendant seeks no affirmative relief.
One issue is whether the FMA, by making the Secretary of Finance responsible for the administration of the general fund which includes appropriations to the judiciary, conflicts with the FSM constitutional provision stating the Chief Justice is the chief administrator of the judiciary. I conclude that it does not.
The second issue is whether the Secretary of Finance has acted in excess of the authority granted to him by the Financial Management Act. I conclude that in some particulars this has occurred.
The plaintiff relies particularly on FSM Const. article XI, section 9 in his contention that the constitution decrees that the Chief Justice be the person responsible for the administration of the funds appropriated for the national judiciary. That provision reads:
The Chief Justice is the chief administrator of the national judicial system and may appoint an administrative officer who is exempt from civil service. The Chief Justice shall make and publish and may amend rules governing national courts, and by rule may:
(a) divide the inferior national courts and the trial division of the Supreme Court into geographical or functional divisions;
(b) assign judges among the divisions of a court and give special assignments to retired Supreme Court justices and judges of state and other courts;
(c) establish rules of procedure and evidence;
(d) govern the transfer of cases between state and national courts;
(e) govern the admission to practice and discipline of attorneys and the retirement of judges; and
(f) otherwise provide for the administration of the national judiciary. Judicial rules may be amended by statute.
The plaintiff supports his argument by pointing to the committee reports of the 1975 Constitutional Convention. One typical passage will suffice to show the nature of this support.
The independence of the judicial branch should not be undermined by allowing such important matters as jurisdiction, appointment of judges, their removal, rule-making power and administrative control of the judiciary to be decided by the legislature. For this reason, your Committee has included in the proposal those matters relating to the judiciary which we believe should be included in the Constitution in order not only to maintain the independence of the judiciary, but also to prevent as much as possible the tendency experienced to date to give lower priority to matters relating to the judiciary.
SCREP No. 49, II J. of Micro. Con. Con. 876.
The legislative passage of the Financial Management Act rests upon the provisions of the Constitution. First, article X, section 8 states, "Executive departments shall be established by statute." This was carried out by 2 F.S.M.C. 203, Pub. L. No. 1-6, Section 2 (1st Cong., 1st Reg. Sess. 1979). One department established was the Department of Finance. As to this department, the committee report states, "The Department of Finance will have substantially the same duties as its counterpart in the Trust Territory administration, which include accounting, revenue collection and tax administration, payroll, procurement and supply, property management, and treasury management." SCREP No. 1-16, J. of 1st Cong., 1st Reg. Sess. 241 (1979).
Second, article XII, section 1(a) states, "Public money raised or received by the national government shall be deposited in a General Fund..." Pursuant to that provision and to Pub. L. No. 1-6, id., Congress passed C.B. No. 1-55 to establish a General Fund and "to provide for administration, responsibility, collection and safekeeping" of the Fund. SCREP 1-40, J. of 1st Cong., 1st Reg. Sess. 267 (1979). This act was vetoed by the President. J. of 1st Cong., 1st Reg. Sess. 332 (1979). C.B. 1-86 was introduced to overcome the objections noted in the veto message. This bill became Pub. L. No. 1-45, the FMA, codified at 55 F.S.M.C. 201, et seq. C.B. 1-86 retained the
legislative intent underlying the purposes of C.B. 1-55.
In order to sustain the position of the plaintiff that the constitution requires a separate administration of funds allotted to the judiciary, I would have to find that the FMA is unconstitutional as applied to the judiciary. I do not make that finding.
A. Acts of Congress are presumed to be constitutional. FSM v. Otokichy, 1 FSM Intrm. 183, 190 n.6 (App. 1982).
B. The FMA was enacted because of the provisions in the FSM Constitution which are specific with respect to the establishment of executive departments and of a general fund. Furthermore, the concept of a single, general fund administered by one person is found in laws enacted by the Congress of Micronesia. Specifically, the Congress of Micronesia passed: Pub. L. No. 3-1, (3rd Reg. Sess. 1967) effective August 17, 1967, establishing a general fund; Pub. L. No. 6-33 (6th Cong., 1st Reg. Sess. 1975), effective April 4, 1975, providing that the Director of Department of Finance of the Trust Territory was responsible for the administration of the general fund; Pub. L. No. 6-108 (6th Cong., 2nd Reg. Sess. 1976), effective April 14, 1976, providing for criminal sanctions for expenditures in excess or advance of appropriations; and Pub. L. No. 6-111 (6th Cong., 2d Reg. Sess., 1976), effective September 1, 1976, providing for the documentary evidence required to establish an obligation and imposing a time limitation for liability.
These enactments had no Trust Territory statutory antecedents. All provisions are found in the FMA of 1979. The committee report on C.B. 1-86 states, "The overall effect of this bill, in addition to formally establishing the FSM Department of Finance, is re-enacting Title 77 of the Trust Territory Code and Public Law No. 6-108 and 6-111, and transferring the functions set forth thereunder to the FSM Department of Finance." SCREP No. 1-88, J. of the 1st Cong., 1st Spec. Sess. 112 (1979). The establishment of a general fund and of the Department of Finance are consistent with and authorized by article X, section 8 and article XII, section 1(a) of the Constitution.
In addition to this continuity of purpose and statutory consistency, there is a continuity of elected representatives. Out of the First FSM Congress, which body passed the FMA, four members originally were members of the Congress of Micronesia, 3rd Reg. Session (1967), and 7 were members of the Sixth Congress of Micronesia. Furthermore, eight delegates to the 1975 Constitutional Convention served in the Congress of Micronesia, 3rd Reg. Session (1967), and 8 delegates served in the Sixth Congress of Micronesia.
It is thus a fair inference that the constitutional provision making the Chief Justice the chief administrator was not intended, by this general statement, to establish a separate administration of the funds allotted to the
C. I do not find the provision "chief administrator" so specific as to overcome the presumption of the constitutionality of the FMA as it relates to the national judiciary. Each rule-making power granted by the Constitution in article XI, section 9, except one, pertains to specific judicial matters. The one exception is the power expressed at subsection (f) which states that the Chief Justice by rule may "otherwise provide for the administration of the national judiciary."
In the Journal of the Constitution Convention of 1975, there is no specific wording justifying the establishment of an independent financial administration of allotted funds. However, the general language is without qualification, and by itself would include such a power. See, for example, this passage:
This section is designed to guarantee efficient
administration of the entire judicial system. The chief justice, as highest judicial officer of the court system, is given ultimate responsibility in all administrative matters. At the same time, an administrative officer is provided for so that most administrative matters, such as preparation of the budget and hiring of non-judicial personnel, can be
delegated by the chief justice to the administrative
officer. This will allow the chief justice the time and attention to carry a full judicial load while still being ultimately responsible for all administrative matters.
SCREP No. 36, II J. of Micro. Con. Con. 859.
This passage is noted also because it does not suggest that the administrative officer would independently administer judiciary funds. It gives the example of "preparation of the budget" as the administrative officer's work in the financial area.
The provisions of the Constitution and the journal give considerable force to the plaintiff's argument. However, I cannot conclude that they outweigh the presumed constitutionality of the FMA, especially in view of its constitutional and statutory foundations.
I have considered the other arguments of the plaintiff. I do not find that the United States case law concerning the inherent power of the judiciary has merit in addressing the issue of this case. The plaintiff also draws on sources such as specific Hawaii statutory provisions and the standards of the American Bar Association which express support for the principle that the judiciary should administer independently its appropriated funds. These sources are not controlling authority here, where our Congress has expressly decided otherwise.
I lastly consider whether either as designed or as implemented the judiciary's inability to administer independently its legislative appropriations violates the principle of the separation of the powers among the branches of the government of the Federated States of Micronesia. The following is a fair statement of the principle:
On its most fundamental plane, the separation of powers doctrine protects the whole constitutional structure by requiring that each branch retain its essential powers and independence . . . .
The standard for determining whether there is an improper interference with or delegation of the independent power of a branch is whether the alteration prevents or substantially impairs performance by the branch of its essential role in the constitutional system.
Pacemaker Diagnostic Clinic of America v. Instromedix, 725 F.2d 537, 544 (9th Cir. 1984) (citations omitted).
The record does not reflect at all that the financial management and fiscal powers exercised by the defendant "prevent or substantially impair" the functions of the judiciary. In this connection I note that in his oral argument the plaintiff did not request any injunctive relief: the record failed to show any irreparable harm.
The defendant concedes the nature of his acts that prompted this case. He states that "the National Judiciary has been frustrated to some degree through the implementation of these laws," that it "may have been embarrassed by late payments made on accounts" and that it "has been required to jump through administrative hoops."
This state of affairs between two branches instead of an atmosphere of mutual respect and cooperation is regrettable, but does not constitute such a fundamental impairment of the functioning of the judiciary so as to deprive the judiciary of its essential role and constitutional independence.
In the alternative the plaintiff seeks a partial summary judgment in his favor declaring that several practices of the defendant are outside the scope of the authority granted to the Director of Finance pursuant to the FMA. In sum, the plaintiff sets forth in his motion the procedures that should be observed by the defendant in administering the judiciary. s finances and further describes how the defendant exceeds his authority under the FSM in several areas. He contends that certain provisions of the Financial Management Regulations (hereinafter "regulations" ) are invalid as applied to the judiciary.
In his cross motion for summary judgment, the defendant seeks an order declaring that the Department of Finance is legally authorized to continue the implementation of the FMA and regulations as to the national judiciary.
At the outset, this court notes that both parties readily acknowledge their past and present strained administrative relations. Their seemingly resolvable differences unfortunately have been exacerbated by apparent difficulties in working together toward an improved relationship.
The parties' motions compel an examination of section 22 of the FMA, which section expressly authorizes the Secretary of Finance "to issue and promulgate rules and regulations implementing the [FMA] which...shall have the force and effect of law." 55 F.S.M.C. 227. Thus there exists clear legislative authorization for the Secretary of Finance to implement regulations which enable him to carry out his statutory duties. Indeed the stated purpose of the regulations is to provide for the "establishment of national government-wide standards and procedures necessary to provide an adequate degree of fiscal control and accountability over [Congressionally-appropriated] funds." FSM Fin. Mgt. Reg. 1.2. In general, to the extent that these regulations are consistent with the FMA, such uniform standards and procedures serve to prevent misappropriations and expenditures in excess of budgetary allowances.
Specifically, however, the plaintiff takes issue with the following regulations2 or policies:
1. Subpart 5.1. This subpart provides for the administrative processing of a Purchase Order with respect to purchases of supplies and personal property costing $1,000 or more. It includes provisions that allow the
Director of Administrative Services, or his designee, to:
1. determine "at his sole discretion . . . the cost of supplies or personal property to be purchased as part of a consolidated purchase by the Office of Administrative Services . . . and/or take any other action in determining cost . . . which is consistent with the procurement of supplies and personal
2. "submit the finally approved Purchase Order directly to the vendor."3 Plaintiff argues that this provision has resulted in "major difficulties" and that such payment processing procedures were established for the benefit and convenience of the Department of Finance.
The record shows that the Department of Finance's consolidation of or "lump sum" payments to vendors of law books resulted in a series of communications between the plaintiff and the Bancroft-Whitney publishing company regarding the judiciary's purported failure to pay its bills. Bancroft-Whitney eventually terminated the court's law book subscriptions, claiming that it had never received its payments. In fact, however, the bills had been timely paid by the Department of Finance by means of a single check, which payment included the accounts of the judiciary, Congress and the Office of the Attorney General. The judiciary had not received notice of this payment, nor was the vendor advised as to which particular national account the payment should be credited. A similar instance arose with another law book vendor. Both times, the plaintiff expended a considerable amount of administrative time and energy in unraveling the confusion and attempting to restore the accounts with the judiciary's vendors.
The deposition testimony of the Accounting Administrator for the Department of Finance reveals that the defendant's justification for this check consolidation practice is to avoid a "waste of checks." The defendant propounds no other justification for this policy. Given the administrative efforts of the executive and judiciary branches (as well as the vendor) that must be undertaken in order to reconcile the payments credited to a specific account of the judiciary this practice violates the statutory mandate of 55 F.S.M.C. 205(5) which is to "eliminate systems and processes that do not serve a purpose commensurate with the costs involved." As it is now implemented, this consolidated payment policy may be convenient for the Department of Finance; but at least as applied to the judiciary and its vendors, it results in an inefficient and time consuming effort to trace invoices and account payments.
Thus this practice bears no reasonable relationship to the fiscal accounting and management objectives of the FMA. The convenience that is
afforded to the Department of Finance in the absence of bearing any rational relationship to the Act, cannot sustain a finding that this regulatory practice is designed to prevent the misappropriation or over obligation of appropriated funds, and is therefore in excess of the defendant's statutory authority.
2. Subpart 4.16. This subpart provides for the documentation requirements for the reimbursement of travel expenses. The plaintiff objects to the documentation required for non-airline/ship/train travel expenses. Specifically, he argues that requiring original or duplicate receipts for car rental expenses is somehow unrelated to the financial abuses which are intended to be prevented by the FMA. This point is not well taken. Given the frequency of travel by national government personnel, there exists a potential for the claiming of non-incurred travel expenses. Requiring government travelers to document fully their travel expenses bears a direct relationship to the prevention of fraud and the misappropriation of public funds.
The plaintiff also objects to subsection (e)(2), which subsection limits car rental amounts "[i]n excess of actual expenses incurred or the maximum daily rental rate established by the Secretary, whichever is less." The record shows that while all licensed car rental companies on the island of Pohnpei charge a daily minimum of $35.00 for a car rental, the Department of Finance will not reimburse personnel of the national judiciary any sum in excess of $30.00 per day.
The defendant's position is that he possesses the authority to impose a maximum rate of reimbursement which is "calculated to prevent extravagant expenses for rental cars." This justification is puzzling, for it is a calculation which lacks any reasonable set of standards, particularly in light of the minimum daily rental on Pohnpei of $35.00. How the regulatory amount of $30.00 is necessary to prevent the misappropriation or disbursement of public funds in excess of specific appropriations is not apparent. Although the Secretary of Finance may establish a ceiling on the daily rental rate, which rate reasonably relates to the established commercial rates charged by rental car agencies, in this instance the defendant lacks the authority to impose arbitrarily a daily $30.00 car rental reimbursement maximum. However, the executive branch may of course impose any ceiling it wishes to govern its own travelers.
3. September 15 deadline for Purchase Order submissions. The plaintiff objects to the defendant's practice of refusing to process Purchase Orders that are submitted after September 15. He contends that since the FSM fiscal year closes on September 30, the defendant's conduct precludes the judiciary from making obligations during the entire fiscal year for which an appropriation is made. The plaintiff's assertion is well-supported by Section 224 of the FMA which provides for the lapsing of funds "appropriated for any fiscal period . . . unless a valid obligation has been made before the expiration of the fiscal period."4 By virtue of the defendant's administrative
[5 FSM Intrm. 88]
termination of the fiscal year two weeks prior to its lawful expiration period, the plaintiff is foreclosed from obligating any funds remaining after September 15. The defendant is therefore without the authority to impose a Purchase Order submission date that falls prior to the closing of the fiscal year, or other applicable appropriation period. The court trusts that the plaintiff will not abuse this finding but will, in a spirit of respect for and comity with the defendant, fully appreciate the defendant's end-of-the-year pressures and endeavor to avoid last-minute requests for payment.
4. Thirty-day payment period. Section 223(3) of the Act imposes upon the defendant the duty to "disburse . . . funds as may be required to liquidate valid obligations within thirty days of their becoming payable, as indicated by valid documentary evidence of such obligation and a valid claim for payment." However, section 205(1) of the FMA specifically authorizes the defendant to withhold his approval "when necessary to prevent misappropriation of public funds as well as the disbursement of public moneys in excess of specific appropriations." The plaintiff contends that the defendant's arbitrary failure to start the 30-day period upon the plaintiff's submission of the judiciary's documented request for payment is, in fact, a withholding of such payment; and that such withholding is only authorized if the section 205(1) exception to payment is satisfied.
The Department of Finance's current policy is to commence the 30-day period once it determines that the payment request is adequately documented. This practice, however, conflicts with the statutory directive to disburse funds within "30 days of the obligation becoming payable." At the very least, it is the submission of the request for payment, along with the proper documentation, that should commence the 30-day payment period. To allow otherwise creates the potential for the Department of Finance to set arbitrarily its own disbursement schedule in violation of the FMA. Therefore the defendant must disburse funds within 30 days of the submission of the payment request unless the withholding of payment approval is necessary to prevent the misappropriation or over obligation of a specific appropriation.
Based on the foregoing, no genuine issues as to any material facts remain and the parties are entitled to judgment as a matter of law as follows:
1. In accordance with Part II of this memorandum, the plaintiff's motion for summary judgment that the FMA be declared unconstitutional as applied to the national judiciary is denied; and
2. In accordance with Part IV of this memorandum, the plaintiff's motion for summary judgment that the regulations and defendant's actions are in excess of the FMA, the motion is granted as to the four particulars hereinabove delineated.
The plaintiff is therefore requested to submit to the court a proposed final judgment consistent with this memorandum and approved as to form by the defendant.
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1. Cf. United States v. Ramsey, 431 U.S. 606, 617, 97 S. Ct. 1972, 1979, 52 L. Ed. 2d 617, 627 (1977) which held that the passage of the customs statute (permitting entry and search of any vessel) by the same Congress which later proposed the fourth Amendment to the United States Constitution made it clear that border searches were not "unreasonable."
2. Certain subparts of the regulations were amended by the President's adoption of Emergency Regulations dated June 12, 1990. The effective date of these regulations was extended from October 10, 1990 to July 10, 1991 on February 19, 1991. Thus plaintiff's grievances pertaining to the signature approval requirements for the procurement of single source of goods or services (e.g., postage stamps, telecommunication services) are rendered moot.
3. Plaintiff's citation of this regulation in his April 6, 1990 motion is to subpart 5.1(a)(2). The Emergency Regulations now codify this provision at subpart 5.1(a)(2)(iii).
4. 55 F.S.M.C. 102(5) defines "fiscal year" as the "twelve-month period from October 1 of one calendar year through September 30 of the succeeding calendar year."