U Corporation v Salik [1988] FMSC 20; 3 FSM Intrm. 389 (Pon. 1988) (30 May 1988)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION (Pon.)
Cite as U Corporation v. Salik, [1988] FMSC 20; 3 FSM Intrm. 389 (Pon. 1988)

[1988] FMSC 20; [3 FSM Intrm. 389]

U CORPORATION,
Petitioner,

v.

GREGORIO SALIK,
STATE OF POHNPEI,
Respondents.

CIV. ACTION NO. 1987-077

OPINION AND ORDER

Before Edward C. King
Chief Justice
May 30, 1988

APPEARANCES:

For the Petitioner:
Douglas F. Cushnie
Attorney at Law
Saipan, Mariana Islands 96950

For the Respondent (Gregorio Salik):
Sungiwo Hadley
Trial Counselor
P.O. Box 369
Kolonia, Pohnpei 96941

For the Respondent (State of Pohnpei):
Randy Boyer
State Attorney
Kolonia, Pohnpei 96941

[3 FSM Intrm. 390]

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HEADNOTES

Jurisdiction-Subject matter;
Corporations;
Civil Procedure
The Trust Territory of the Pacific Islands, which still exists and has governmental powers in the Republic of Palau, is now "foreign" to the Federated States of Micronesia and a corporation organized under the laws of the Trust Territory may itself be regarded as foreign for purposes of diversity of citizenship jurisdiction. U Corp. v. Salik, [1988] FMSC 20; 3 FSM Intrm. 389, 392 (Pon. 1988).

Jurisdiction - Subject Matter
The Constitution requires only that one plaintiff has citizenship different from one defendant for there to be diversity jurisdiction. U Corp. v. Salik, [1988] FMSC 20; 3 FSM Intrm. 389, 392 (Pon. 1988).

Constitutional Law - National/State Power;
Civil Procedure;
Jurisdiction - Subject Matter
National Constitution does not prohibit state courts from hearing cases described in article XI, section 6(b) if all parties accept state court jurisdiction, but parties to a dispute within scope of article XI, section 6(b) have a constitutional right to invoke jurisdiction of FSM Supreme Court Trial Division. U Corp. v. Salik, [1988] FMSC 20; 3 FSM Intrm. 389, 392 (Pon. 1988).

Civil Procedure
A party named as a defendant in state court litigation which falls within the scope of article XI, section 6(b) of the Constitution may invoke national court jurisdiction through a petition for removal and is not required to file a complaint. U Corp. v. Salik, [1988] FMSC 20; 3 FSM Intrm. 389, 394 (Pon. 1988).

Civil Procedure;
Jurisdiction - Subject Matter
Prolonged delay in seeking removal, as well as affirmative steps, such as filing a complaint in the state court, or filing a motion aimed at obtaining a substantive state court ruling, should normally be regarded as signalling acquiescence of a party to state court jurisdiction. U Corp. v. Salik, [1988] FMSC 20; 3 FSM Intrm. 389, 394 (Pon. 1988).

Constitutional Law - National/State Powers;
Jurisdiction - Subject Matter;
Civil Procedure
Intent of framers of the Constitution was that national courts would handle most types of cases described in article XI, section 6(b) of the Constitution and national courts therefore should not lightly find a waiver of

[3 FSM Intrm. 391]

right to invoke its jurisdiction. U Corp. v. Salik, [1988] FMSC 20; 3 FSM Intrm. 389, 394 (Pon. 1988).

Constitutional Law - Interpretation;
Jurisdiction;
Civil Procedure
The Constitution's jurisdictional provisions are self-executing. U Corp. v. Salik, [1988] FMSC 20; 3 FSM Intrm. 389, 394 (Pon. 1988).

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COURT'S OPINION

EDWARD C. KING, Chief Justice:

Petitioner U Corporation, named defendant in civil action No. 52-86 filed with the Pohnpei State Supreme Court, seeks removal of that action to this Court.

The petitioner asserts that there is diversity of citizenship between the parties in the Pohnpei Supreme Court litigation and that the case therefore falls within the jurisdiction of this Court under article XI, section 6(b) of the Constitution of the Federated States of Micronesia.

I

There can be no doubt that there is diversity of citizenship between the parties within the meaning of article XI, section 6(b). Gregorio Salik, plaintiff in the Pohnpei supreme Court litigation, is a citizen and resident of the State of Pohnpei. U Corporation has citizenship diverse from that of Mr. Salik on two grounds.

A

The U Corporation is organized under the laws of the Trust Territory of the Pacific Islands. Several years ago, when the Trust Territory government played a major supervisory role in the governmental affairs of the Federated States of Micronesia, this Court held that the Trust Territory of the Pacific Islands was not a foreign state within the meaning of article XI, section 6(b). Neimes v. Maeda Constr. Co., 1 FSM Intrm. 47 (Truk 1982); Lonno v. Trust Territory, 1 FSM Intrm. 53, 72-73 (Kos. 1982).

However, since that time the governmental powers of the Trust Territory Government within the Federated States of Micronesia have been terminated. On November 3, 1986, President Tosiwo Nakayama declared by proclamation that the Compact of Free Association with the United States was in effect. Vol. II, FSM Code, page 359 of the 1987 Supplement. A similar declaration was made that same day by President Ronald Reagan of the United States. Presidential Proclamation No. 5564, 3 C.F.R., 1986 Comp. at p. 146. The directives which formerly authorized the Trust Territory Government to act, United States Executive Order No. 11021 and Orders of the United States Secretary of the

[3 FSM Intrm. 392]

Interior Nos. 2902, 2918, 2969, 2989, 3027 and 3039, no longer apply to the Federated States of Micronesia. Id.

Thus, the Trust Territory of the Pacific Islands, which still exists and has governmental powers in the Republic of Palau, is now "foreign" to the Federated States of Micronesia. A corporation organized under the laws of a foreign entity may itself be regarded as foreign for purposes of diversity of citizenship jurisdiction.

B

An affidavit filed on behalf of U Corporation establishes that more than forty (40%) percent of the shares of that corporation are owned by noncitizens of the Federated States of Micronesia and that the corporation has always held foreign investment business permits to enable it to do business in Pohnpei. This Court has previously held that a corporation having noncitizen shareholders and required by law to hold a foreign investment permit is a foreign citizen for purposes of diversity jurisdiction. Federated Shipping Co. v. Ponape Transfer & Storage, [1987] FMSC 19; 3 FSM Intrm. 256 (Pon. 1987).

The presence of the State of Pohnpei as a third party defendant does not erase the constitutionally required diversity. The constitution requires only that one plaintiff have citizenship different from one defendant. In re Nahnsen, 1 FSM Intrm. 97 (Pon. 1982).

II

This Court has recognized that the national Constitution does not prohibit state courts from hearing the kinds of cases described in article XI, section 6(b) if all parties accept state court jurisdiction. Bank of Guam v. Semes, [1988] FMSC 7; 3 FSM Intrm. 370, 379 (Pon. 1988). However, parties to a dispute within the scope of article XI, section 6(b) have a constitutional right to invoke the jurisdiction of this Court. Bank of Guam v. Semes, 3 FSM Intrm. at 379. It is the "solemn obligation" of this Court and all others within the Federated States of Micronesia to uphold that constitutional right.^[1]

III

The document filed by U Corporation to initiate proceedings in this Court was a petition for review, not a complaint. This Court in Koike v. Ponape Rock Products Company, Inc., [1984] FMSC 7; 1 FSM Intrm. 496 (Pon. 1984) dismissed a motion to assume jurisdiction, holding that a complaint should have been filed. However, in Koike, the parties seeking removal were plaintiffs in the Pohnpei State Supreme Court litigation. It would have been a simple matter, therefore, for them simply to institute their litigation in this Court by filing a complaint similar to the one filed in the state court proceedings.

[3 FSM Intrm. 393]

In this case, however, U Corporation as defendant neither chose to initiate the litigation nor selected the original forum. U corporation does not wish to assert any claim against the plaintiff, only to defend.

Moreover, the petition employed here is much more similar to the complaint required by FSM Civ. R. 3 than was the motion used in Koike. The petition here is a short and plain statement of: (1) the relief sought; and (2) the facts which the petitioners assert establish grounds for removal.

It is worth noting that, despite Koike, this Court has permitted certain specialized kinds of proceedings to be initiated by documents entitled "petition" rather than "complaint." See, for example, In re Iriarte[1983] FMSC 1; , 1 FSM Intrm. 239 (Pon. 1983) (petition for writ of habeas corpus); Nix v. Ehmes, [1982] FMSC 8; 1 FSM Intrm. 114 (Pon. 1982) (petition for writ of mandamus); In re Nahnsen, 1 FSM Intrm. 97 (Pon. 1982) (petition for probate); Ishizawa v. Pohnpei, 2 FSM Intrm. 67, 73 (Pon. 1985) (petition for writ of mandamus and writ of prohibition "deemed ... to be a complaint for purposes of complying with rule 3"). Petitions were accepted in those cases because the term "petition" has traditionally been employed in connection with initiation of those kinds of special proceedings.

To the extent we have precedent to look to, the term petition, rather than complaint, is also traditional for removal proceedings. In the United States, removal of diversity of citizenship cases from state courts to federal courts is initiated by filing of a petition for removal, rather than by a complaint. 28 U.S.C. § 1446. Since this Court's rules of civil procedure are drawn from the rules of civil procedure applied in United States federal district courts, the removal procedures followed in the United States courts are relevant.

For all these reasons the Court accepts the petition for removal filed in this case as being in conformity with this Court's rules of civil procedure.

IV

The question remains whether the petition here has been timely filed. As already noted, state courts may exercise jurisdiction in diversity of citizenship cases if all parties agree.

The goals of efficient administration of justice and judicial harmony dictate that parties be deemed to have agreed to state court jurisdiction unless desire to invoke national court jurisdiction is manifested promptly. It would be inappropriate to permit litigants to proceed with state court litigation long enough to elicit rulings from that court, then, if state court rulings prove unfavorable, to remove their litigation to national courts. Cf. Federated Shipping Co. v. Ponape Transfer & Storage, 3 FSM Intrm. at 260. Thus, prolonged delay in seeking removal, as well as affirmative steps, such as filing a complaint, or a motion aimed at obtaining a substantive state court ruling, should normally be regarded as signalling acquiescence in state court jurisdiction.

[3 FSM Intrm. 394]

Civil action 52-86 was filed in the Pohnpei State Supreme Court by plaintiff Gregorio Salik on April 8, 1986. The petition for removal was not filed with this Court until more than one year later, on November 11, 1987. This is far too great a lapse in time. In the future, such prolonged delay will be regarded as agreement to state court jurisdiction and will result in denial of a petition for removal.

However, the rules concerning the relationship between state courts and national courts for diversity of citizenship cases have only recently been clarified. Until the recent decision in Bank of Guam v. Semes, there was considerable uncertainty as to the authority of the respective courts concerning article XI, section 6(b) cases. Until the instant case, there had been no confirmation that a defendant in state court litigation where diversity of citizenship exists has a constitutional right of access to the national courts. As this opinion and Koike reflect, confusion and uncertainty also existed as to the proper procedures for implementing that right.

The framers of the Constitution made abundantly clear their intention that national courts would handle most of the kinds of cases described in article XI, section 6(b) of the Constitution and that parties to such litigation would be entitled to invoke this Court's jurisdiction. Bank of Guam v. Semes. We should not lightly find a waiver of constitutional rights provided by such a carefully constructed constitutional arrangement. It would be perverse indeed to construe actions or inaction of litigants before issuance of this opinion, when it had not yet been established that options were available, as constituting agreement to state court jurisdiction and waiver of the constitutional right of removal.

The Court therefore finds: (1) that U Corporation has a constitutional right to invoke the jurisdiction of this Court to adjudicate U's dispute with Gregorio Salik; (2) that this right has not been waived; and (3) that U Corporation has correctly petitioned this Court.

V

The Constitution's jurisdictional provisions are self-executing. Bank of Guam v. Semes, 3 FSM Intrm. at 382; FSM Dev. Bank v. Estate ofNanpei[1986] FMSC 8; , 2 FSM Intrm. 217, 219 n.1 (Pon. 1986). Thus the Constitution directly places in this Court the responsibility and necessary authority to uphold the rights of the petitioner under article XI, section 6(b) of the Constitution.

Accordingly, the petition for removal shall be granted, and an order to that effect shall issue.

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^[1] "It is the solemn obligation of the national and state governments to uphold the provisions of this Constitution and to advance the principles of unity upon which this Constitution is founded." FSM Const. art. XIII, § 3.