Federated States of Micronesia v Skico Ltd [1997] FMSC 13; 8 FSM Intrm. 040 (Chk. 1997) (20 March 1997)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 1995-1012

FEDERATED STATES OF MICRONESIA,
Plaintiff,

vs.

SKICO LIMITED and CHUUK MULTI-
PURPOSE STORAGE COMPANY,
Defendants.

FINDINGS OF FACT AND CONCLUSION OF LAW

Richard H. Benson
Associate Justice

Trial: October 21-23, 1996
Decided: March 20, 1997

APPEARANCES:

For the Plaintiff: Teresa K. Zintgraff, Esq.
Assistant Attorney General
Office of the FSM Attorney General
P.O. Box PS-105
Palikir, Pohnpei FM 96941

For the Defendant (Skico): Ron Moroni, Esq.
P.O. Box 1618
Kolonia, Pohnpei FM 96941

For the Defendant (CMSC): Johnny Meippen, Esq.
P.O. Box 705
Weno, Chuuk FM 96942

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HEADNOTES

Fishing
As defined in 24 F.S.M.C. 102(22) "fishing" includes refueling or supplying fishing vessels. FSM v. Skico, Ltd., 8 FSM Intrm. 40, 41 (Chk. 1997).

Fishing
A company that stores its fuel cargo in a tanker, stations a cargo supervisor aboard the tanker, and sends messages that tell the tanker where to go to sell the company's fuel to fishing vessels needing refueling is an operator of the tanker within the meaning of Title 24. FSM v. Skico, Ltd., 8 FSM Intrm. 40, 42-43 (Chk. 1997).

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COURT'S OPINION

RICHARD H. BENSON, Associate Justice:

This action was begun July 5, 1995 against M.T. HL Achiever, Chuuk Multi-Purpose Storage Co. and Skico Limited. The case against M.T. HL Achiever, a fuel tanker, was settled and the case dismissed as to it.

Chuuk Multi-Purpose Storage Company (CMSC) was the charterer of the HL Achiever which was used to supply fuel to fishing vessels in Chuuk. On August 15, 1996 an Order Granting Summary Judgment was entered as to CMSC; the amount of civil penalties remained to be decided in this trial. Skico is the owner of the fuel. Skico posted a security for the value of the fuel on board at the time of the arrest of the HL Achiever.

The action seeks civil penalties pursuant to 24 F.S.M.C. 502(2) and forfeiture pursuant to 24 F.S.M.C. 504(1) for violations of 24 F.S.M.C. 501. The violations alleged were the bunkering of fishing boats within the Exclusive Economic Zone of the FSM.

By the Order Granting Partial Summary Judgment entered September 2, 1996, I found that cargo fuel owned by Skico and on board the HL Achiever bunkered one fishing vessel on April 8, 1995 and two fishing vessels on June 6, 1995 in the EEZ without a permit to do so, all in violation of Title 24. (The plaintiff's Motion for Summary Judgment was filed July 4, 1996.)

The plaintiff alleged that the bunkering violated 24 F.S.M.C. 501(1)(a) ("It is unlawful for any person to violate any provision of a fishing permit, license, agreement, arrangement, treaty, or regulation issued pursuant to this title") and 24 F.S.M.C. 501(2) ("It is unlawful for any fishing vessel, and for the crew, owner, or operator of any fishing vessel, to engage in fishing in the exclusive economic zone without a valid and applicable fishing permit issued pursuant to this title . . . ."). efined in 24 F.S.M.C. M.C. 102(22) "fishing" includes refueling or supplying fishing vessels.

On May 22, 1996, Skico filed its Third Motion for Summary Judgment with the ground that Skico was not "crew, owner or operator" of the HL Achiever. In its opposition, filed June 12, 1996, the plaintiff responded to the Section 501(2) contention of Skico and argued the applicability of Section 501(1)(a). Skico replied on July 17, 1996. I denied Skico's Third Motion for Summary Judgment on August 15, 1996.

Skico opposed the plaintiff's Motion for Summary Judgment by filing on August 14, 1996 its Supplemental Opposition to Motion of the FSM for Summary Judgment against Skico Ltd. One ground in the opposition was the basis of its Third Motion for Summary Judgment.

In ruling on the plaintiff's Motion for Summary Judgment it was thus necessary to reconsider Skico's Third Motion for Summary Judgment. The following appears in the Order Granting Partial Summary Judgment: "The material fact actually and in good faith controverted is whether Skico is an operator (24 F.S.M.C. 102(33)), by itself or acting through an agent, liable for the unlawful bunkering. This issue will be tried upon the call of the case for trial at 9:00 o'clock a.m. October 15, 1996."

That order overruled the plaintiff's contention, in its opposition, that Section 501(1)(a) was applicable. This result was reconsidered following the trial. I received the parties' arguments at a hearing on November 5, 1996. After careful reconsideration I conclude that the result found in the Order Granting Partial Summary Judgment is not altered: This is not a section 501(1)(a) case.

FINDINGS OF FACT

This case was tried on October 21, 22 and 23, 1996. The following facts are found from evidence which was largely uncontested. The implications to be drawn from the testimony were contested.

Hong Lam is the owner of M.T. HL Achiever. Chuuk Multi-Purpose Storage Company chartered fueling vessels. On February 21, 1995 Hong Lam as owner and Chuuk Multi-Purpose Storage Company as charterer entered into a charter agreement for eight months, with option to renew, for the charter of M.T. HL Achiever.

Yukong Line guaranteed payment to Hong Lam and actually paid Chuuk Multi-Purpose Storage's charter fee. Yukong Line was a fuel wholesaler which sold fuel to defendant Skico for its business of trading in fuel. Skico's payment to Yukong Line for fuel included compensation for managing certain aspects of Skico's operation.

Chuuk Multi-Purpose Storage Company and Skico entered into a storage agreement on March 1, 1995. Yukong Line used Skico's Storage payment to pay the charter fee, with the leftover amount remitted to Chuuk Multi-Purpose Storage Company.

In the pattern of the operation Skico contracted with fishing companies to supply fuel for fishing vessels. The fishing companies then notified Skico of the needs of its vessels. Skico would give this information to Yukong Line which contacted the master of the HL Achiever to supply the vessels requiring fuel. The great majority of bunkering was to fishing vessels within Chuuk State waters. The HL Achiever had the proper state permits for this operation.

Skico owned the fuel on the HL Achiever which was delivered to the fishing vessels. Skico maintained an employee on the HL Achiever as its fuel cargo supervisor. It was his responsibility to represent Skico in the fuel deliveries, and to see that a Skico-captioned Bunker Delivery Receipt was given to the vessels receiving fuel. Skico had given the cargo supervisor permission to take instructions from Yukong Line.

If bunkering took longer than the HL Achiever's crew's normal working hours, the cargo supervisor, representing Skico, authorized overtime pay so that the bunkering could continue until completed. The cargo supervisor also communicated by radio with the vessels to be bunkered.

Skico, as owner of the fuel cargo being delivered to fishing vessels, was responsible for any damage to the HL Achiever occurring during the bunkering operation.

The Bunkering Delivery Receipts formed the basis for invoicing of the fishing companies for payment by Skico. Payments were made to Skico.

Pursuant to Skico's storage agreement Skico notified Chuuk Multi-Purpose Storage Company of allocations of fuel for delivery by the HL Achiever. Chuuk Multi-Purpose Storage Company conveyed these memorandums to the HL Achiever without alteration.

CONCLUSION OF LAW

As stated in the beginning of these findings, the only issue for trial was whether Skico was an "operator" under section 501(2) ("unlawful . . . for rew, or r or operatoerator"). Section 102(33) of Title 24 states "`Operator' means any person who is in charge of, directs or controls a vessel, including the owner, charterer or the master.
conclude that Skat Skico dico directed and controlled the HL Achiever. The tanker was the platform or vehicle for the conduct of Skico's fuel trading. Skico, or Skico through Yukong Line, directed where the vessel went and what vessels were to be bunkered, and it is therefore liable under the statute for the three unlawful bunkerings. Civil penalties and forfeiture authorized by law are accordingly imposed.

FORFEITURE

The issue of what part of the fuel that was seized pursuant to the arrest has been decided by the Order Granting Skico's Fourth Motion for Summary Judgment entered August 15, 1996: 32.814 kiloliters divided by 762.727 kiloliters is .045. FSM v. Skico, Ltd. (I), [1996] FMSC 26; 7 FSM Intrm. 550, 551-52(Chk. 1996). Thus forfeiture of 4.5% of the security posted ($118,918.00) plus accrued interest is the amount forfeited pursuant to this order. This amount ($5,567.17) will be taken from the security deposited by Skico with the court, now totalling $123,714.96.

PENALTY (SKICO LTD.)

The standard set forth in Section 502(3) of Title 24 to determine the amount of the civil penalties has been carefully considered.

As to the nature, circumstances, extent and gravity of the acts, three bunkerings occurred within a two month period. Skico charged $29,649.00 for the fuel delivered to Chance I on April 8, 1995, $31,680.00 for Fong Seong 727 on June 6, 1995 and $53,983.80 for refueling Fong Seong 767 on June 6, 1995.

An aggravating circumstance is that fuel owned by Skico on board the M.T. Lukomorye bunkered the Eastern Pacific in the EEZ of the FSM on May 30, 1995.

The refueling of the three longliners at sea was contrary to the present policy of the plaintiff to require refueling, provisioning and transhipment to be done within the ports of the FSM. This policy added to the local economy, increased the tax base and enhanced the plaintiff's oversight ability of the fishing industry.

As to the violator itself, there is no history of prior offenses and no other civil or criminal fines or imprisonment have been imposed as a result of Skico's conduct.

Skico is culpable because these were knowing violations. Skico knew that a permit was required in order to bunker fishing vessels in the EEZ of the FSM. No party involved in this case had such a permit. Skico is also blameworthy by inserting "High Sea" on the Bunker Delivery Receipts of the two bunkerings on June 6, 1995 instead of locating the HL Achiever by latitude and longitude. The location thus written was an attempt to conceal HL Achiever's location within the EEZ.

The amount of the civil penalties imposed is based on the value of the fuel transferred rounded to the nearest thousand. The two unlawful bunkerings on 6 June 1995 are penalized as a single offense, and the value enhanced 75%. The total penalties imposed on Skico are $180,500.00.

April 8, 1995 Chance I $30,000.00

June 6, 1995 Fong Seong 727 $32,000.00

Fong Seong 767 $54,000.00

$86,000.00 x 1.75 = $150,500.00

Total penalties: $180,500.00

The balance of the posted security after paying the forfeiture shall be paid to the Federated States of Micronesia toward the payment of the penalties.

PENALTY (CHUUK MULTI-PURPOSE STORAGE COMPANY)

The elements to be determined in setting a penalty described above as to Skico apply in part to CMSC. The following apply only to CMSC.

CMSC's services were confined to obtaining Chuuk State permits to bunker within Chuuk waters. For this it received $4,000.00 monthly. Chuuk Multi-Purpose Storage Company made no decisions as to what vessels were to be bunkered or for the replenishment of the fuel cargo on the HL Achiever. Chuuk Multi-Purpose Storage Company passed messages but originated none itself and altered none that it received for delivery. The memorandums that Chuuk Multi-Purpose Storage Company received from Skico and passed to the HL Achiever fail to reflect the unlawful acts.

Chuuk Multi-Purpose Storage Company was the charterer and has the legal liability as such for the prohibited acts. It is uncontested that Chuuk Multi-Purpose Storage Company did not know of the prohibited acts until the HL Achiever was arrested.

Total civil penalties imposed on Chuuk Multi-Purpose Storage Company for the three prohibited acts are $15,000.00

Let judgment be entered accordingly.

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