Federated Shipping Company v Ponape Transfer and Storage [1987] FMSC 19; 3 FSM Intrm. 256 (Pon. 1987) (24 December 1987)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION (Pon.)
Cite as Federated Shipping Co. v. Ponape Transfer & Storage, [1987] FMSC 19; 3 FSM Intrm. 256 (Pon. 1987)

[1987] FMSC 19; [3 FSM Intrm. 256]

FEDERATED SHIPPING CO.,
Plaintiff,

v.

PONAPE TRANSFER AND STORAGE
POHNPEI PUBLIC LANDS AUTHORITY,
Defendants.

FSM CIV. 1986-085

OPINION

Before Edward C. King
Chief Justice
FSM Supreme Court
December 24, 1987

APPEARANCES:

For the Plaintiff:
R. Barrie Michelsen
Attorney-at-Law
Ramp & Michelsen
P.O. Box 1480
Pohnpei, FSM 96941

For the Defendant (Ponape Transfer& Storage):
Daniel Berman
Attorney-at-Law
Pohnpei, FSM 96941

For the Defendant (Pohnpei Public Lands Authority):
Randy Boyer
Staff Attorney
Pohnpei State 96941

* * * *

HEADNOTES

Constitutional Law - Interpretation
In determining whether constitutional language is amenable to only one

[3 FSM Intrm. 257]

possible interpretation, courts should consider the words in the light of history and the accepted meaning of those words prior to and at the time the Constitution was written. Federated Shipping Co. v. Ponape Transfer & Storage, [1987] FMSC 19; 3 FSM Intrm. 256, 258 (Pon. 1987).

Corporations
The Constitution specifically bars noncitizens from acquiring title to land or waters in Micronesia and includes within the prohibition any corporation not wholly owned by citizens. Federated Shipping Co. v. Ponape Transfer & Storage, [1987] FMSC 19; 3 FSM Intrm. 256, 259 (Pon. 1987).

Corporations;
Jurisdiction - Diversity
For purposes of diversity jurisdiction under article XI, section 6(b) of the Constitution, a corporation is considered a foreign citizen when any of its shareholders are not citizens of the Federated States of Micronesia. Federated Shipping Co. v. Ponape Transfer & Storage, [1987] FMSC 19; 3 FSM Intrm. 256, 260 (Pon. 1987).

Corporations
Noncitizen corporations are those which are not wholly owned by Federated States of Micronesia citizens. Federated Shipping Co. v. Ponape Transfer & Storage, [1987] FMSC 19; 3 FSM Intrm. 256, 259 (Pon. 1987).

Federalism;
Courts - Certification and Abstention
Abstention in favor of state court jurisdiction is inappropriate in a case which concerns leasehold of a dock facility, raises issues of national commercial import, and was filed almost two years ago during which time several opinions were rendered. Federated Shipping Co. v. Ponape Transfer & Storage, [1987] FMSC 19; 3 FSM Intrm. 256, 260-61 (Pon. 1987).

* * * *

COURT'S OPINION

EDWARD C. KING, Chief Justice:

Federated Shipping Co. (FSCO), now plaintiff in this action, moves for dismissal on grounds that the Court lacks jurisdiction. The motion requires that we consider the constitutional rules concerning diversity of citizenship between corporations.

The principal issue is whether this dispute between two corporations, both having their principal places of business in Pohnpei, is between a foreign citizen and a citizen of Pohnpei for purposes of diversity jurisdiction on grounds that one, Ponape Transfer & Storage, Co. (PT&S), has a foreign investment permit and a few foreign shareholders, while the other, FSCO, is owned exclusively by citizens of the Federated States of Micronesia.

[3 FSM Intrm. 258]

I. Legal Analysis

A. Diversity of Citizenship

Concerning jurisdiction on the basis of diversity of citizenship, the Constitution of the Federated States of Micronesia says: "The national courts...have concurrent original jurisdiction...in disputes between a state or a citizen thereof, and a foreign state, citizen or subject." FSM Const. art. XI, § 6(b).

We have previously rioted that this is quite similar to the language contained in the United States Constitution.^[1] In re Nahnsen, 1 FSM Intrm. 97, 102 (Pon. 1982); Etpison v. Perman, [1984] FMSC 3; 1 FSM Intrm. 405, 414 (Pon. 1984). FSCO therefore would have us look to United States law to determine the appropriate rules to be applied in fixing the citizenship of a corporation for purposes of diversity jurisdiction.

However, we do not look to United States decisions as the first step in constitutional interpretation.

Interpretation must begin with the words of the Constitution. Alaphonso v. FSM, [1982] FMSC 22; 1 FSM Intrm. 209, 214 (App. 1982). If constitutional language is absolutely clear and amenable to only one possible interpretation, then the Court must accept that and may go no further in its quest for meaning. Of course the particular provision must be read against the background of the entire Constitution. Review of other provisions properly may strengthen or weaken the firmness of conviction with which a reader perceives the meaning of a given clause or provision.

Innocenti v. Wainit, [1986] FMSC 3; 2 FSM Intrm. 173, 180-81 (App. 1986). In determining whether constitutional language is amenable to only one possible interpretation, we should consider the words in "the light of history and the accepted meaning of those words prior to and at the time the Constitution was written." Alaphonso v. FSM, [1982] FMSC 22; 1 FSM Intrm. 209, 217 (App. 1982). The concept of corporate citizenship was a familiar and important one throughout the Trust Territory, and the meaning of the term was well established, when the Constitution for the Federated States of Micronesia

[3 FSM Intrm. 259]

was being drafted.^[2]

At that time there had been in existence for several years a Trust Territory Foreign Investors Business Permit Act. 33 TTC 1 et seq. (1970). That Act required noncitizen corporations wishing to do business in the Trust Territory to pay a filing fee and to apply to Economic Development Boards for permission to engage in business. 33 TTC 6 (1970). The boards had authority to deny permission on grounds that: the proposed business "would not promote the economic advancement of the citizens." They could also place limits or conditions upon any permission granted. 33 TTC 7 (1970). The term "noncitizen" included "any... corporation ... in which a person not a Trust Territory citizen owns any interest." Id. § 2.

Thus, the framers of the FSM Constitution were quite familiar with corporations and how to distinguish between "citizen" and "noncitizen" corporations. Indeed, the basic concept appears in the Constitution itself. The Constitution specifically bars noncitizens from acquiring title to land or waters in Micronesia and includes within that prohibition any corporation "not wholly owned by citizens." FSM Const. art. XIII, § 4.

The citizen-noncitizen distinction remains central to regulation of corporations and businesses throughout the Federated States of Micronesia. For example, see the Federated States of Micronesia Foreign Investment Act, 32 F.S.M.C. 201 et seq., and the Pohnpei Foreign Investors Permit Act of 1986, Pub. L. No. 1L-85-86. These statutes preserve the Trust Territory view that the citizenship of a corporation turns on whether a noncitizen owns any interest whatever in the corporation. The FSM Foreign Investment Act defines "noncitizen" as many business in which any interest is owned by a person who is not a citizen of the Federated States of Micronesia." 32 F.S.M.C. 202(4)(b). The definition of noncitizen in the Pohnpei statute is

[3 FSM Intrm. 260]

substantially similar. Pub. L. No. 1L-85-86, § 2(b) and (c).

This particular type of distinction reflected in the Constitution and the foreign investment laws is especially suitable for use in determining diversity jurisdiction. "[A] primary purpose of diversity jurisdiction is to minimize any belief of the parties that a more local tribunal might favor local parties in disputes with outsiders." In re Nahnsen, 1 FSM Intrm. at 102. In the legal milieu of the Federated States of Micronesia, noncitizen corporations, that is, those which are not wholly owned by Federated States of Micronesia citizens, plainly are regarded as "outsiders."

FSCO contends that even if PT&S is a noncitizen of the Federated States of Micronesia it still is not a citizen of any foreign state and therefore is not a "foreign state, citizen or subject" for purposes of diversity. For the following reasons, I conclude that this distinction between aliens and noncitizens on the one hand, and foreign citizens on the other, which has been applied to individuals under United States law, has no relevance to diversity based upon citizenship of corporations under the law of the Federated States of Micronesia.

As already discussed, the crucial distinctions among corporations within the Federated States of Micronesia are made on the basis of whether noncitizens of the Federated States of Micronesia own any interest in the corporation. FSM Const. art. XIII, § 4; 32 F.S.M.C. 202(4)(b); and Pohnpei State Law P.L. No. 1L-85-86, § 2(b). The titles of the various statutes already referred to, that is, the Trust Territory Foreign Investors Business Permit Act, the Federated States of Micronesia Foreign Investment Act, and the Pohnpei Foreign Investors Permit Act of 1986, suggest strongly that the words "noncitizen" and "foreign" are interchangeable in Micronesia.

Moreover, PT&S alleges that the stockholders of PT&S whose ownership triggers these provisions do themselves have citizenship in the Republic of Palau, the Republic of the Marshall Islands, and the United States. That foreign citizenship of the stockholders is what identifies PT&S as a foreign corporation, triggers the constitutional prohibitions against PT&S ownership of land and water rights in the Federated States of Micronesia, and requires PT&S compliance with the foreign investment laws. Under the pertinent state and national laws within the Federated States of Micronesia, PT&S has no separate citizenship of its own, but instead is identified as foreign through the foreign citizenship of its stockholders. PT&S is a foreign corporation under state law in Pohnpei and under national law, and therefore is a foreign corporation for diversity jurisdiction purposes as well.

FSCO, on the other hand, is a citizen of the State of Pohnpei under Pohnpei law and has no "foreignness" under national law. As Pohnpei is the principal place of business of this citizen corporation, FSCO must be deemed a citizen of Pohnpei for diversity jurisdiction purposes.

The Court therefore concludes that there is diversity of citizenship between FSCO and PT&S for purposes of jurisdiction under article XI, section

[3 FSM Intrm. 261]

6(b) of the Constitution.

B. Abstention.

FSCO also suggests that the Court abstain and permit the Pohnpei Supreme Court to resolve these issues. It is very late in the day to consider abstention. The litigation was filed more than a year ago. Numerous hearings have been held and many rulings have been made. Two written opinions have been issued. This Court has devoted considerable time and effort toward developing an understanding of the issues. It would be quite inefficient now to ask another court to begin work anew.

Moreover, the circumstances under which this request is made induce skepticism. The case was originally filed on September 30, 1986. PT&S asserted diversity jurisdiction. After originally filing a motion contesting jurisdiction, FSCO on October 20, 1986, filed an answer admitting the jurisdiction of this Court.

Up through FSCO's filing of crossclaims on July 14, in which FSCO specifically alleged the jurisdiction of this Court under article XI, section 6(b) of the Constitution, no party suggested abstention. That remained the state of affairs until the July 31, 1987, decision indicating a change in this Court's former view that FSCO was likely to prevail in this litigation. See Ponape Transfer & Storage Inc. v. Federated Shipping Co., [1987] FMSC 14; 3 FSM Intrm. 174 (Pon. 1987).

Within two weeks, FSCO for the first time requested abstention. It is difficult to avoid the conclusion that FSCO, dismayed by views expressed in this Court's opinion, is now shopping for a more receptive forum. It would ill serve the system of justice for courts to permit the abstention doctrine to be used cynically.

In any event, abstention would not be appropriate in this case. While leasehold rights are at issue, the essence of the dispute is a struggle for control over stevedoring operations at the Pohnpei dock facility. This litigation then will affect interstate commerce and shipping, both of which are of national import.

III. Conclusion

The motion of Federated Shipping Co. to dismiss is denied.

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^[1] The United States Constitution, article III, section 2 says: "The judicial Power shall extend to all Cases, in Law and Equity;...to Controversies between two or more States; between a State and Citizens of another State;--between Citizens of different States; between Citizens of the same State claiming Lands under Grants of different States, and between a State or the Citizens thereof, and foreign States, citizens or subjects."
^[2] This is in marked contrast to the history of the comparable provision in the United States. When that Constitution was being drafted, the private corporation was "virtually unknown." C. Wright, Law of Federal Courts 148 (4th ed. 1983). Naturally then, the United States Constitution itself provided no guidance as to how corporate citizenship was to be measured.
Since that time, the concept of corporate citizenship has had little significance in any aspect of law in the United States except for purposes of determining diversity jurisdiction. Similarly, the citizenship of stockholders of a corporation doing business in the United States has little or no relevance to the legal standing, or rights of that corporation. The United States courts were unable to draw upon existing concepts in related areas of the law but instead were forced to fashion new, essentially artificial rules, to determine corporate citizenship for diversity jurisdiction purposes.
The resulting United States principles "arose from unique historical factors not relevant to the Federated States of Micronesia today." In re Nahnsen, 1 FSM Intrm. at 103; Mongkeya v. Brackett, [1986] FMSC 1; 2 FSM Intrm. 291, 292 (Kos. 1986).