Federated States of Micronesia v George [1985] FMSC 18; 2 FSM Intrm. 088 (Kos. 1985) (30 September 1985)

THE SUPREME COURT OF THE
FEDERATED STATES OF MICRONESIA

Cite as FSM v. George, 2 FSM Intrm. 88 (Kos. 1985)

[2 FSM Intrm. 88]

FEDERATED STATES OF MICRONESIA,
Plaintiff,

vs.

WEBSTER GEORGE,
Defendant.

CIVIL 1985-2000

OPINION

Before Edward C. King
Chief Justice
September 30, 1985

APPEARANCES:

For the Plaintiff: W. Alan Lautanen
Assistant Attorney General
Office of the Attorney General
Federated States of Micronesia
Kolonia, Pohnpei 96941

For the Defendant: Delson Ehmes
Attorney-at-Law
Kolonia, Pohnpei 96941

APPEARANCES:

For the Plaintiff: W. Alan Lautanen
Assistant Attorney General
Office of the Attorney General
Federated States of Micronesia
Kolonia, Pohnpei 96941

For the Defendant: Delson Ehmes
Attorney-at-Law
Kolonia, Pohnpei 96941

[2 FSM Intrm. 89]

HEADNOTES

Taxation
The statement in 54 F.S.M.C. 144(2) that penalties provided in chapter 1 will apply to the gross revenue tax law does not preclude the penalty specified in 54 F.S.M.C. 902 from applying. FSM v. George, 2 FSM Intrm. 88, 91 (Kos. 1985).

Statutes
In approving the current codification of laws, the Congress "readopted and reenacted as positive law" those portions of the Code relating to laws enacted by the FSM Congress or the Interim Congress of the Federated States of Micronesia. For such laws then the Code itself indisputably is the official version. In the event of conflict between the Code and the language of the statute as reported in other sources, including congressional journals, the Code would be deemed accurate and would prevail. FSM v. George, 2 FSM Intrm. 88, 91 (Kos. 1985).

Statutes; Transition of Authority
In declining to "reenact" in Public Law No. 2-48 provisions originating with High Commissioners or Congress of Micronesia, Congress seems to have been motivated by transitional considerations rather than a desire to withhold official status from those laws. FSM v._George, 2 FSM Intrm. 88, 92 (Kos. 1985).

Statutes
The FSM Code was adopted by Congress to facilitate "law making and legal research," since Congress recognized that a "single body of laws" was "needed to organize all applicable statutes into one source." FSM v. George, 2 FSM Intrm. 88, 92 (Kos. 1985).

Statutes
The Code of the Federated States of Micronesia is intended by Congress to be regarded as the official and controlling version of the language of any legislation reported in the Code. FSM v. George, 2 FSM Intrm. 88, 92 (Kos. 1985).

Statutes
The Code will determine the content of statutory language to be enforced, although other sources such as congressional journals and even the original version of the statute might be consulted to indicate legislative intent when the language in the Code is ambiguous. FSM v. George, 2 FSM Intrm. 88, 92 (Kos. 1985).

Taxation
Public Law 3-32, the predecessor of 54 F.S.M.C. 902, is subject to the interpretation that it was to be a catch-all provision applicable to all taxes which subsequently might be established by Congress. FSM v. George, 2 FSM Intrm. 88, 94 (Kos. 1985).

[2 FSM Intrm. 90]

Statutes; Constitutional Law
Interpretations which strip clauses of substance and effect run against the norms of interpretation and are greatly disfavored. FSM v. George, 2 FSM Intrm. 88, 94 (Kos. 1985).

Statutes
The penalty provisions of 54 F.S.M.C. 902 apply to failure to make timely payment of the gross revenue tax imposed under 54 F.S.M.C. 141. FSM v. George, 2 FSM Intrm. 88, 94 (Kos. 1985).

* * * *

COURT'S OPINION

EDWARD C. KING, Chief Justice:

The issue here is whether the 54 F.S.M.C. 902 penalty, ten per cent per month of any tax levied or imposed, up to a maximum of one hundred per cent of the tax, applies to gross revenue taxes.

I. Factual Background

This lawsuit was initiated by the government to collect taxes alleged to be owing by defendant Webster George. On the day set for trial the parties notified the court of their agreement that the taxpayer owed the government some $7,610.76 in taxes, plus interest, with respect to Webster George's gross revenue in 1980, 1981 and 1982. An order has been entered to that effect. The only disagreement is whether the penalty provided by 54 F.S.M.C. 902 may be assessed. This opinion is addressed to that issue.

II. Legal Analysis

The government contends that Webster George should be made to pay a $7,610.76 penalty equal to the amount of tax agreed to be owing. This claim is based upon 54 F.S.M.C. 902, which provides:

§ 902 Monthly penalty upon unpaid taxes and fees - In case of failure to pay any tax, fee, or charge levied or imposed under this title when due, there shall be added to the amount due ten percent of the amount of such tax, fee, or charge if the failure is not for more than one month, with an additional ten per cent for each additional month or fraction thereof during which such failure continues, not exceeding one hundred percent in the aggregate.

The provisions establishing the tax on gross revenues appear in chapter 1, title 54 of the Code of the Federated States of Micronesia. Thus, the statement in section 902, also part of title 54, that the penalty applies "in case of failure to pay any tax ... under this title" seems to establish that the penalty applies to failures to pay gross revenue taxes.

[2 FSM Intrm. 91]

Defendant George advances several arguments against that seemingly obvious conclusion. First, he points to the statement set out as part of the gross revenue tax law in chapter 1 that "failure to comply with the provisions of this section shall be punishable under the penalties prescribed by this chapter." 54 F.S.M.C. 144(2). George contends that this statement forecloses application of chapter 9's section 902 penalty to George's chapter 1 violations. But 54 F.S.M.C. 144(2) is a sword against taxpayers, not a shield to protect them. The section only says that penalties provided in chapter 1 will apply to violations of the gross revenue tax law. It does not say that other penalties may not apply.

The defendant's argument that the section 144(2) reference to chapter 1 penalties at least implies exclusion of others might otherwise be plausible, but any such implication here is overcome by the clear 54 F.S.M.C. 902 statement that the penalties prescribed there are applicable "to failure to pay any tax...imposed under this title."

George has another paddle for his canoe however. He contends that the word "title" was improperly inserted in section 902 by the codifiers and that the word "chapter" should be there. Such a change would be crucial for if the section were to apply only to other provisions in chapter 9 of title 54, the penalty would not apply for failure to pay taxes payable under chapter 1. As will be explained later in this opinion, there are several reasons why the taxpayer's argument must fail here, in addition to considerations relating to codification of laws. However, this is the first time a litigant has questioned the accuracy of the FSM Code before this Court, and the matter of codification itself seems deserving of thought and comment.

In approving the current codification of laws, the Congress "readopted and reenacted as positive law" those portions of the Code relating to laws enacted by the FSM Congress or the Interim Congress of the Federated States of Micronesia. Public L. No. 2-48, reprinted at volume 1, page v of the Code of the Federated States of Micronesia. For such laws then the Code itself is the official version. In the event of conflict between the Code and the language of the statute as reported in other sources, including congressional journals, the Code would be deemed accurate and would prevail.

That does not solve our problem here however. The provision appearing at 54 F.S.M.C. 902 was enacted by the Congress of Micronesia and accordingly was not reenacted by Public Law No. 2-48. It is necessary therefore to determine how to approach conflicts between the Code and other sources purporting to show the language of current statutes originally enacted by the Congress of Micronesia or promulgated by High Commissioners before 1965.

The fact that Congress in Public law No. 2-48 reenacted some provisions and not others need not be interpreted as manifesting a Congressional intent that those other provisions in the Code be regarded as less than official. In declining to reenact provisions originating with High Commissioners or the Congress of Micronesia, Congress seems to have been motivated by transitional

[2 FSM Intrm. 92]

considerations rather than a desire to withhold official status. In particular, the need for retaining provisions relating to the interim jurisdiction of the Trust Territory High Court was recognized, but Congress understandably did not wish to reenact those Provisions. See Introduction, p. i, FSM Code. Cf. In re Raitoun, [1984] FMSC 10; 1 FSM Intrm. 561, 564 (App. 1984); Rauzi v. FSM, 2 FSM Intrm. 8, 14 (Pon. 1985).

Yet Congress did make clear that its purpose was to establish the Code as the "single source of laws to draw upon" in contrast to the then "existing hodgepodge." SCREP No. 2-171, J. of 2nd Cong. 219 4, 3rd Reg. Sess. (1982).

Congress quite correctly noted that the laws were in "disarray." Id. at 218. The laws effective within the Federated States of Micronesia today emanate from four different, legislative sources, three of which (High Commissioner, Congress of Micronesia, and the FSM Interim Congress) no longer function as legislative bodies. It has always been difficult for many persons to locate the original source materials. This is especially true of the two sources not mentioned in Public Law No. 2-48, High Commissioners the Congress of Micronesia. The problem is exacerbated by the fact that nobody is printing new sets of those materials today and very few libraries have sets. Finally, because of realities of geography and transportation it is quite difficult for many of the people and legal practitioners in the Federated States of Micronesia to get to the few locations where those original source materials may be. In order to facilitate "law making and legal research" then, Congress recognized that a "single body of laws" was "needed to organize all applicable statutes into one source." Id. This was the purpose of Public Law 2-48.

Based upon the legislative history I conclude that the Code of the Federated States of Micronesia is intended by Congress to be regarded as the official and controlling version of the language of any legislation reported in the Code.

In the case of this penalty provision then, the language of 54 F.S.M.C. 902 is controlling. The word "title" in that section is to be enforced, unaffected by the word "chapter" in the original.

In future cases, this rule will avoid the necessity of going beyond the Code to determine the content of statutory language to be enforced, although other sources such as congressional journals and even the original version of the statute might be consulted to indicate legislative intent, when the language in the Code is ambiguous. 1A C. Sands, Sutherland on Statutory Construction § 28.10 (4th ed. 1972). Here though the word title in 54 F.S.M.C. 902 is unambiguous and dispositive and we need go no further to conclude that the penalty applies to George's failure to pay gross revenue taxes.

Yet, this is a newly announced rule. Lest Webster George feel he has been victimized by a new development in the law that he could not have foreseen, it seems proper to point out that other methods of analysis that

[2 FSM Intrm. 93]

could have been employed to determine the original intent of the Congress of Micronesia in enacting the penalty provision would yield the same result.

First, if there had been a need to go to the 1967 congressional journal to determine content, one would have found that the word "chapter" rather than "title" was used in the original statute. Pub. L. No. 3-32, § 1151(a) (1st Cong., 3rd Reg. Sess. 1967). If we took that as the official congressional language however, we could not simply stop there in resolving whether the penalty should apply to gross revenue taxes, which did not exist when Public Law No. 3-32 was enacted.

Words indicating categories or divisions, such as chapter, title, part and section, are typically a function of format and arrangement. Such words may have different meanings depending on the system of arrangement employed. Use of the word chapter in Public Law 3-32, for example, apparently is traceable to the fact that the earliest editions of the Trust Territory Code, up through the 1966 edition, were arranged in chapters, each chapter containing several sections. Since there were no "titles" or "parts" in 1967 when Public Law 3-32 was enacted, it is hardly surprising that: the statute said that the Section 1151(a) penalties applied to any tax imposed under "this chapter," rather than "title" or "part."

Yet the language made the penalty provision applicable to every kind of tax or license fee in existence at that time, since Public Law 3-32 amended chapter 18 of the 1966 version of the Trust Territory Code, relating to business license fees, export and import taxes and gasoline and diesel fuel taxes, the only taxes and business license fees in existence in 1967. Thus Public Law 3-32 is subject to the interpretation that it was to be a "catch-all" provision applicable to all taxes which subsequently might be established by Congress.

The legislative history of Public Law 3-32 also undercuts any contention that the penalty provision was intended to apply only to taxes in effect when the law was enacted. The Senate Judiciary and Governmental Operations Committee of the Congress of Micronesia, in its report recommending passage of the legislation, noted that it had been informed that revenues in excess of $200,000 remained uncollected as of June 30, 1967. The committee emphasized the need to "improve the procedure for collection of revenues so that such revenues could be collected and available for appropriations." SCREP No. 13, Senate J. of 1st Cong., 3rd Reg. Sess. 407 (1967).

The committee stated that the bill's purpose was to "improve the collection and enforcement provisions of the tax laws by providing criminal and administrative penalties for failure to pay the taxes which the Congress assesses." Id. The report of the House Committee on Ways and Means also recited that the purpose was to provide "criminal and administrative penalties for failure to pay taxes which the Congress assesses." SCREP No. 12, House J. of 1st Cong., 3rd Reg. Sess. (1967). These references to the "tax laws" and the "taxes which the Congress assesses" suggest a general intention that the penalty provisions of Public Law 3-32 were to apply to all taxes which might

[2 FSM Intrm. 94]

be assessed by Congress, not just to those already in existence.

Previous codifications of the section also suggest that the present Code word "title" yields the proper interpretation. The provision which is now 54 F.S.M.C. 902 has uniformly been codified as applying to all taxes in existence in the Trust Territory and the Federated States of Micronesia.

The word "chapter" in Public Law 3-32 was never employed in any codification. The first Trust Territory Code produced after enactment of Public Law 3-32 changed the word chapter to "part." 77 TTC 202 (1970). The penalty provision therefore referred to all of part I, which imposed the same taxes and fees which formerly had been in chapter 18 of the 1966 Code. When gross revenue tax provisions were enacted in 1971, they were inserted in part I of title 77 of the Supplement to the 1970 Code, thus were reached by the 77 TTC 202 reference to "any tax ... under this part."

In the final Trust Territory Code, published in 1980, the penalty provision which is now 54 F.S.M.C. 902 was codified at 77 TTC 202. In that codification, the word "part" was changed to "title" so 77 TTC 202 contained precisely the language that is now in 54 F.S.M.C. 902. In the 1980 Trust Territory Code, the gross revenue provisions were set out in title 77 so the language of 77 TTC 202 reached gross revenue taxes, just as does the language at 54 F.S.M.C. 902 in the Code of the Federated States of Micronesia now.

Plainly then, the word "title" in 54 F.S.M.C. 902 is consistent with all previous codifications of Public Law 3-32 in that the penalty provisions in all versions have reached all forms of taxes payable under the Code. If this codification is a mistake, it is not one this Court would lightly set aside, for the codification now represents a uniform approach relied upon by tax officials and taxpayers alike, and left intact by legislators for more than fifteen years.

Finally, rules of statutory interpretation would doom Webster George's argument here. If we were to adopt the position that the word "title" in § 902 should read "chapter," the resulting reference in § 902 to "tax ... imposed under this chapter" would be rendered nonsensical. Chapter 9 does not impose any tax, so there would be nothing to which that language would apply. In Tammow v. FSM, 2 FSM Intrm. 53 (App. 1985), we considered a constitutional provision threatened in an analogous situation. The interpretation urged by the defendant in that case would have robbed the Major Crimes Clause of its meaning. To that threat we responded, "Interpretations which strip constitutional clause of substance and effect run against the norms of constitutional interpretation and are greatly disfavored." Id. at 57. This rule is also applicable to statutes. Statutory language must be read in a way that retains its sense and meaning wherever possible.

Conclusion

The Code of the Federated States of Micronesia is the official version of all statutory language set out there. The penalty provision now codified

[2 FSM Intrm. 95]

at 54 F.S.M.C. 902 unambiguously applies to all of title 54.

I therefore conclude that the penalty provisions of 54 F.S.M.C. 902 do apply to the gross revenue tax provisions of the Code. Webster George is therefore subject to a penalty in the amount of $7,610.76 by virtue of his failure to pay gross revenue taxes levied or imposed upon him for more than ten months. An order to that effect shall issue.