Federal Business Development Bank v SS Thorfinn [1990] FMSC 20; 4 FSM Intrm. 367 (App. 1990) (14 November 1990)

[1990] FMSC 20; 4 FSM Intrm. 367 (App. 1990)

FEDERATED STATES OF MICRONESIA
SUPREME COURT APPELLATE DIVISION

APPEAL CASE NO. T2-1989

FEDERAL BUSINESS DEVELOPMENT BANK
Plaintiff/Appellant

V

S/S THORFINN, together with her engines, machinery, tackle, equipment, and appurtenances, IN REM, SEAWARD HOLDINGS (MICRONESIA), Ltd., IN PERSONA
Defendants/Appellees

OPINION

BEFORE: Honorable Edward C. King, Chief Justice, FSM Supreme Court
Honorable John Petewon, Designated Justice, FSM Supreme Court*
Honorable Jesus C. Borja, Designated Justice, FSM Supreme Court**

*Associate Justice, Chuuk State Court, on this Court by designation for this case.

**Associate Justice, Supreme Court of the Commonwealth of the Northern Mariana Islands, on this Court by designation for this case.

APPEARANCES: For the Appellant: Traylor T. Mercer; For the Appellees: R. Barrie Michelsen, Attorney-at-Law

OPINION: Oral Argument Waived - Decided: November 14, 1990

HEADNOTES

Jurisdiction; Constitutional Law - Case or Dispute
The decision as to jurisdiction is one to be made by the Court, and counsel may not by agreement, confer upon a court jurisdiction that it does not have by law. Federal Business Dev. Bank v. S.S. Thorfinn, [1990] FMSC 20; 4 FSM Intrm. 367, 369 (App. 1990).

Constitutional Law - Interpretation
When the meaning of the words in the FSM Constitution are not self-evident and it is apparent the words have been drawn from or are patterned upon language in the Constitution of the United States or of some other jurisdiction, the Supreme Court of the FSM may look to decisions of courts in that other jurisdiction for assistance in discerning the appropriate meaning of the words in the FSM Constitution. Federal Business Dev. Bank v. S.S. Thorfinn, [1990] FMSC 20; 4 FSM Intrm. 367, 371 (App. 1990).

Constitutional Law - Interpretation
The decisions of United States courts are not binding upon the FSM Supreme Court as to the meaning of the FSM Constitution even when the words of the FSM Constitution plainly are based upon comparable language in the United States Constitution, and the FSM Supreme Court will not accept a United States interpretation which (1) was shaped by historical factors not relevant to the FSM; (2) was widely and persuasively criticized by commentators in the United States; and (3) was not specifically recognized or even allude to by the framers of the FSM Constitution. Federal Business Dev. Bank v. S.S. Thorfinn, [1990] FMSC 20; 4 FSM Intrm. 367, 371 (App. 1990).

Statutes - Construction; Common Law
Statutory changes overruling previous judicial rulings may fundamentally alter the general law in the area newly governed by statute. Federal Business Dev. Bank v. S.S. Thorfinn, [1990] FMSC 20; 4 FSM Intrm. 367, 372 (App. 1990).

Admiralty; Jurisdiction
The maritime jurisdiction conferred on the FSM Supreme Court by the Constitution is not to be decided with reference to the details of United States cases and statutes concerning admiralty jurisdiction but instead with reference to the general maritime law of seafaring nations of the world, and to the law of nations. Federal Business Dev. Bank v. S.S. Thorfinn, [1990] FMSC 20; 4 FSM Intrm. 367, 374 (App. 1990).

Admiralty; Jurisdiction
The FSM Supreme Court has jurisdiction over all cases which are maritime in nature including all maritime contracts, torts and injuries. Federal Business Dev. Bank v. S.S. Thorfinn, [1990] FMSC 20; 4 FSM Intrm. 367, 374 (App. 1990).

Admiralty; Jurisdiction
The question of the enforceability of ship mortgages is a matter that falls within the maritime jurisdiction of the FSM Supreme Court under article XI, section 6(a) of the Constitution. Federal Business Dev. Bank v. S.S. Thorfinn, [1990] FMSC 20; 4 FSM Intrm. 367, 376 (App. 1990).

COURT'S OPINION

EDWARD C. KING, Chief Justice:

This appeal requires a decision as to whether an action brought by a creditor to foreclose on ship mortgages falls within the trial division's jurisdiction over "admiralty or maritime cases" under article XI, section 6(a) of the Constitution.

I

The Federal Business Development Bank, a Canadian banking organization, initiated this litigation in the trial division of this Court in Chuuk State. The defendant was the S.S. Thorfinn, a cruise ship of Canadian registry engaged in pleasure cruising, catering especially to underwater diving devotees, in the waters of the Federated States of Micronesia.

The Bank alleged that the owners of the Thorfinn defaulted in their loan payment obligations under two loans aggregating more than $500,000.00, and that the loans are secured by two ship mortgages issued by the Bank. Accordingly, the Bank asked the trial division to enforce the Bank's rights under the mortgages.

In response to a motion of the defendants, the trial court concluded that a request for enforcement of ship mortgages does not fall within the exclusive jurisdiction of the FSM Supreme Court trial division under article XI, section 6(a) of the Constitution. The trial court therefore vacated its earlier order of arrest and the Thorfinn was released.

This appeal by the Bank followed, whereupon the Thorfinn has modified its position, now agreeing that ship mortgage foreclosures fall within the admiralty or maritime jurisdiction of this Court.

Of course, the decision as to jurisdiction is one to be made by the court, and counsel may not, by agreement, confer upon a court jurisdiction that it does not have by law. See United Church of Christ v. Hamo, 4 FSM Intrm. 95, 117 n.13 (App. 1989); Suldan v. FSM (I), [1982] FMSC 19; 1 FSM Intrm. 201, 205 (Pon. 1982). Thus, we have proceeded to review the trial court's ruling and have reached our own determination as to jurisdiction.

Having concluded that we should look to the law of nations in determining the scope of our maritime jurisdiction and that the enforcement of ship mortgages falls within the general body of international law known as maritime law, we reverse the trial court's dismissal, and remand the case for any further appropriate proceedings.

II

To determine the scope of its jurisdiction over "admiralty or maritime cases" under article XI, section 6(a) of the Constitution, the trial court looked to decisions concerning the "admiralty and maritime" jurisdiction of United States courts under that Constitution. An 1854 decision of the United States Supreme Court holds that a ship mortgage is not a maritime lien enforceable as a part of admiralty jurisdiction. Bogart v. The Steamship John Jay, 58 U.S. (17 How.) 399 (1854). Based upon The John Jay decision, the trial court concluded that the ship mortgages at issue in this case do not fall within the trial division's exclusive jurisdiction over admiralty or maritime cases.

III

A

The John Jay decision, a two-page, 1854, United States Supreme Court opinion, appears as an aberration in United States admiralty and maritime law. The reasoning and rule of the case have been roundly criticized by commentators and subsequent courts. The primary substantive criticism is that the decision embraced a distinction which emerged from "the mists of English history," but had no parallel or meaning in either general maritime law or the context of the United States. G. De Lord and G. Glenn, The Foreign Ship Mortgage, 56 Yale L. J. 923, 940 (1947). Specifically, the anomalous English rule that admiralty courts could not exercise jurisdiction over ship mortgages was a product of centuries of disputes between the admiralty and common law courts in England. Id.

A second, equally damning, criticism of The John Jay decision is that the odd and deviant rule which the decision embraced had been overcome in England well before the court's decision.

“It is somewhat ironical...that while England long since altered the rule by statute in order to facilitate the needs of maritime commerce, the United States...whose ancestral colonies were never bound by such prohibitory writs and which is not bound by the English admiralty in ascertaining its admiralty jurisdiction...should continue to preserve this anachronism.”

7 A.J. Moore & A. Palaez, Moore's Federal Practice .285 [1], at 3233. See also McCorkle v. First Pennsylvania Banking & Trust Co., [1972] USCA4 88; 459 F.2d 243 (4th Cir. 1972).

Just as the English rule providing restrictions on admiralty jurisdiction in that country had been altered by statute when The John Jay case was decided, the rule of that case had been eroded, if not completely overturned, by statute in the United States when the Constitution of the Federated States of Micronesia was adopted. See the United Ship Mortgage Act of 1920, 46 U.S.C. 911 et seq. It would be doubly ironic, then, for this court, which is twice removed from the acts of English law, now to accept a twice rejected rule "which cannot be supported by history or reason". 7A Moore's, supra, at 3236.

B

In looking for guidance to decisions of United States courts construing words of the United States Constitution which are similar to those in the Constitution of the Federated States of Micronesia, the trial court was following well-established practice. This Court has frequently noted that when the meaning of the words in this Constitution are not self-evident and it is apparent that the words have been drawn from, or are patterned upon, language in the Constitution of the United States or some other jurisdiction, we may look to decisions of courts in that other jurisdiction to assist us in discerning the appropriate meaning of the words in the FSM Constitution. Gilmete v. FSM, [1989] FMSC 21; 4 FSM Intrm. 165, 169 (App. 1989); Jonas v. FSM, [1983] FMSC 8; 1 FSM Intrm. 322, 327 n.1 (App. 1983). See also Andohn v. FSM, [1984] FMSC 4; 1 FSM Intrm. 433, 441 (App. 1984). Indeed, United States decisions concerning the words "admiralty and maritime" in the United States Constitution have previously been looked to for guidance in determining the scope of "admiralty or maritime" jurisdiction under article XI, section 6(a) of the Constitution of the Federated States of Micronesia. Lonno v. Trust Territory (I), 1 FSM Intrm. 53, 69-70 (Kos. 1982).

However, even when the words of the Federated States of Micronesia Constitution plainly are based upon comparable language in the United States Constitution, we have never considered the decisions of United States courts to be binding upon this Court as to the meaning of this Constitution. Rather, we have cautioned against the error of adopting United States interpretations "without independently considering suitability of that reasoning for the Federated States of Micronesia." Alaphonso v. FSM, [1982] FMSC 22; 1 FSM Intrm. 209, 213 (App. 1982). This kind of independent consideration has led on several occasions to departures from United States precedents and to different meanings even though the language of the two Constitutions is similar.

For example, the Court has held that when an area of United States constitutional law is "particularly unsettled", there is an especially crucial duty to analyze independently, rather than simply to adhere to the United States approach. Innocenti v. Wainit, [1986] FMSC 3; 2 FSM Intrm. 173, 178-79 (App. 1986) (standing to sue). The Court also has been wary of adopting for the Federated States of Micronesia constitutional rulings which have been subjected to widespread criticism in the United States. Aisek v. Foreign Inv. Bd., 2 FSM Intrm. 95, 102 (Pon. 1985) (declining to adopt the nexus requirement from United States decisions concerning standing to sue).

In addition, of course, United States courts' decisions which are grounded upon specific features of United States history should not be lightly adopted for the Federated States of Micronesia when those same circumstances are not applicable here. Mongkeya v. Brackett, [1986] FMSC 1; 2 FSM Intrm. 291, 292 (Kos. 1986) (domestic relations cases fall within the diversity jurisdiction of national courts in the Federated States of Micronesia although United States federal courts declined jurisdiction on grounds that such cases fell within the jurisdiction of ecclesiastical courts); Federated States Shipping Co. v. Ponape Transfer & Storage, [1987] FMSC 19; 3 FSM Intrm. 256, 259 (Pon. 1987) (drawing upon notions familiar in the FSM to determine citizenship of corporations rather than accepting United States principles which "arose from unique historical factors not relevant to the Federated States of Micronesia today."); see also Luda v. Maeda Road Const. Co., [1985] FMSC 20; 2 FSM Intrm. 107, 112 (Pon. 1985) ("This Court should not be easily persuaded that our interpretation...is to be controlled by earlier decisions of other jurisdictions flowing from an odd and essentially unexplained twist in English law.")

Of course, if the constitutional history of the Federated States of Micronesia revealed that the framers, or the electorate, in embracing the language of the United States Constitution, specifically intended to adopt the particular interpretation given those words by the United States courts, then we would not be free to seek an alternative meaning. However, the journals of the Micronesian Constitutional Convention reveal no such specific intent concerning the meaning of the words "admiralty or maritime."

It is quite significant then that The John Jay decision (1) was shaped by unique historical factors not relevant to the FSM; (2) was widely and persuasively criticized by commentators; and (3) was not specifically recognized or even alluded to by the framers of the FSM Constitution. Because of those factors, even if we were to find that The John Jay case is still controlling for purposes of constitutional law in the United States, the previous decisions of this Court nonetheless would require that we approach the case gingerly. We could not simply adopt The John Jay rule, but instead would be required to search for an interpretation both consistent with the words of this Constitution and responsive to the actual circumstances and needs, of the Federated States of Micronesia.

C

There is another, more compelling, reason for declining to accept the notion that The John Jay should govern a decision as to the constitutional jurisdiction of the Federated States of Micronesia Supreme Court. Our review of the law in the United States as of 1975, when the Micronesian Constitutional Convention convened, persuades us that The John Jay rule was no longer in effect in the United States at that time. Long before 1975, the United States Ship Mortgage Act, 46 U.S.C. 911 et seq., had placed the enforcement of ships' mortgages within the admiralty and maritime jurisdiction of United States federal courts. See The Oconee, 280 F. 927, 931 (E.D. Va. 1921). A 1954 amendment to that Act gave United States federal courts jurisdiction over claims of domestic holders of foreign ship mortgages. 46 U.S.C. 951.

Obviously, statutory changes overruling previous judicial rulings may fundamentally alter the general law in the area newly governed by statute. Rauzi v. FSM, 2 FSM Intrm. 8, 17 (Pon. 1985). A recent opinion of the American Samoa High Court fully and convincingly explains that the United States Ship Mortgage Act had just such impact on the scope of admiralty jurisdiction under United States constitutional law. Security Pacific National Bank v. M/V Conquest, No. CA 17-84 (Am. Samoa Tr. Div. 1987), reprinted in 1987 American Maritime Cases 1974.

Thus, if by using the words "admiralty or maritime" to define jurisdiction of this Court the framers of the FSM Constitution intended to adopt United States law as it stood when the Constitution was being drafted, they would have been looking not to The John Jay case but to the longstanding reality that United States courts do exercise jurisdiction over ship mortgages as part of their admiralty jurisdiction.

IV

The significance of the United States Ship Mortgage Act for purposes of the jurisprudence of the Federated States of Micronesia lies not in the Act's substantive or jurisdictional provisions but in the fact that the Act effectively overruled The John Jay decision, erasing that case as a standard by which to measure this Court's admiralty or maritime jurisdiction. In looking to the constitutional law of the United States for clues as to the extent of this Court's admiralty or maritime jurisdiction, we should not focus on The John Jay decision or upon the Ship Mortgage Act, but instead should take a more panoramic view.

In its excessive reliance on the esoterica of English history, The John Jay decision itself was a break with what is now mainstream United States law. In one of the earliest and most exhaustive American opinions regarding admiralty jurisdiction, Justice Story of the United States Supreme Court, sitting as a circuit judge, traced the history of Western maritime law from its ancient origins to the American Revolution. DeLovio v. Boit, 7 F. Cas. 418 (C.C.D. Mass. 1815) (No. 3,776).

In DeLovio, Story analyzed maritime law in a way which has stood the test of time and which we think is appropriate under the Constitution of the Federated States of Micronesia. He questioned which laws should be used to determine whether a particular action was a "case of admiralty or maritime jurisdiction" within the meaning of the United States Constitution. He considered as possible sources: the admiralty law of the American courts at the time of the Revolution; the admiralty laws of England at that time; the laws of Seventeenth Century English Admiralty Courts (before they were stripped of much of their power by the enactment of prohibitory writs at the behest of the jealous courts of law); and the "ancient and original" maritime law inherent in admiralty from the beginning. Id. at 441-42.

Story concluded that the latter furnished the best guide for United States federal court jurisdiction. He based his argument principally on the fact that the constitutional clause of the United States law grants authority over maritime as well as admiralty cases. Story noted that the framers of the United States Constitution were well aware of the disputes between the courts of admiralty and law, which had resulted in reduced jurisdiction of admiralty courts in England. He therefore concluded that the framers of the United States Constitution had added the word "maritime" in order to remove any doubts that United States federal court jurisdiction was to extend beyond any of the restrictive notions of "admiralty alone, to all general maritime law." Id. at 442-43.

“The language of the constitution will therefore warrant the most liberal interpretation; and it may not be unfit to hold that it had reference to that maritime jurisdiction, which commercial convenience, public policy, and national rights have contributed to establish, with slight local differences, over all Europe; that jurisdiction, which, under the name of consular courts, first established itself upon the shores of the Mediterranean, and, from the general equity and simplicity of its proceedings, soon commended itself to all the maritime states; that jurisdiction, in short, which, collecting the wisdom of the civil law and combining it with the customs and usages of sea, produced the venerable Consolato del Mare and still continues in its decisions to regulate the commerce, the intercourse, and the warfare of mankind.”

Id. at 443.

Story's general conclusion that the scope of maritime jurisdiction should be determined by reference to diverse cultures, ancient history and the law of nations has characterized the jurisprudence of the United States Supreme Court since then. See 7 A., Moore's supra .200 [2], at 2036 n.14. There is no reason to doubt that the similarity of language between the United States Constitution and the FSM Constitution in this area is meant to confer the same jurisdiction upon this Court as the United States federal courts have.

The "maritime law" over which this Court has jurisdiction, then, like that of the courts in the United States, is that which has its origins in the codes of seafaring nations of the world and which still is a part of the law of nations. Because the United States courts look to that body of essentially international law in order to define their "admiralty and maritime" jurisdiction, the framers' use of similar language in the FSM Constitution suggests that this Court should employ that same frame of reference. In other words, the maritime jurisdiction conferred on this Court by the Constitution is not to be decided with reference to the details of the United States' holdings in that area, but rather on the basis of this Court's understanding of the general maritime law to which the constitutional provisions, both of this country and of the United States, direct the respective courts of the two nations.

We find therefore that this Court has jurisdiction over all cases which are maritime in nature, or, as Justice Story put it:

“all maritime contracts, torts and injuries. The latter branch is necessarily bounded by locality; the former extends over all contracts, (wheresoever they may be made or executed, or whatsoever may be the form of the stipulations,) which relate to the navigation, business or commerce of the sea.”

DeLovio v. Boit, 7 F. Cas. at 444.

Not only is the conclusion of DeLovio appropriate here, but also its underlying policy aims are quite relevant to the Federated States of Micronesia, an island nation with a heavy stake in fishing and shipping. Placing maritime jurisdiction in the national courts ensures uniformity in the development and application of maritime law, an important feature of both national and international shipping and navigation systems. 1 S. Friedell, Benedict on Admiralty, § 105, at 7.10 through 7.15 (7th ed. 1988). Story saw the need for uniformity as a strong factor calling for a liberal construction of the jurisdictional grant:

“The advantages resulting to the commerce and navigation of the United States, from a uniformity of rules and decisions in all maritime questions, authorize us to believe that national policy, as well as juridical logic, require the clause of the constitution to be so construed, as to embrace all maritime contracts, torts and injuries, or, in other words, to embrace all those causes, which originally and inherently belonged to the admiralty....”

Id. at 443.

V

Using this approach, the specific question of whether ship mortgages fall within the maritime jurisdiction of the court is quite simple. As Professor Moore has said, "If such contracts do abet maritime commerce and navigation, they can be included within the admiralty jurisdiction if the Supreme Court or Congress deems it expedient to do so; if, on the other hand, there is no maritime connection, the Constitution withholds the power to bring such mortgages within the scope of the admiralty." 7A Moore's .285[1], at 3234.

From this perspective, it is beyond doubt that ship mortgages fall within the maritime jurisdiction. As a principal means for financing the very object around which maritime law was formed -- the ship -- such mortgages indisputably "abet maritime commerce and navigation."

A look at the maritime law of nations dispels any lingering doubts on the matter. Ship mortgages have been at the heart of several international maritime conventions with a multitude of signatories, including many Pacific island nations. See Brussels Convention of 1926 for the Unification of Certain Rules Relating to Maritime Liens; Brussels Convention of 1952 Relating to the Arrest of Sea-Going Ships; Brussels Convention of 1967 for the Unification of Certain Rules Relating to Maritime Liens and Mortgages.

VI

We do not here decide whether, and under what conditions, ship mortgages are enforceable under the laws of the Federated States of Micronesia. We hold only that the question of the enforceability of ship mortgages is a matter of international maritime law that falls within the jurisdiction of the FSM Supreme Court under article XI, section 6(a) of the Constitution.

The decision of the trial division is reversed and the case is remanded to the trial court for further proceedings.