Northern Marianas Housing Corporation v Finik [2004] FMSC 19; 12 FSM Intrm. 441 (Chk. 2004) (14 April 2004)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as Northern Marianas Housing Corp. v. Finik, [2004] FMSC 19; 12 FSM Intrm. 441 (Chk. 2004)

[2004] FMSC 19; [12 FSM Intrm. 441]

NORTHERN MARIANAS HOUSING CORPORATION,
Plaintiff,

vs.

FRANTINA FINIK,
Defendant.

CIVIL ACTION NO. 2003-1016

ORDER GRANTING DEFENDANT SUMMARY JUDGMENT

Dennis K. Yamase
Associate Justice

Decided: April 14, 2004

[12 FSM Intrm. 442]

APPEARANCES:

For the Plaintiff:
Michael A. White, Esq.
White, Pierce, Mailman & Nutting
P.O. Box 5222
Saipan, Mariana Islands MP 96950

For the Defendant:
Camillo Noket, Esq.
Midasy O. Aisek, Esq.
Micronesian Legal Services Corporation
P.O. Box D
Weno, Chuuk FM 96942

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HEADNOTES

Judgments - Foreign
Under principles of comity, the FSM Supreme Court will enforce foreign judgments, but not when the foreign court lacked jurisdiction, or where enforcement of the foreign judgment would violate a public policy, or where granting comity would result in prejudice to the forum’s citizens. Northern Marianas Housing Corp. v. Finik, [2004] FMSC 19; 12 FSM Intrm. 441, 444 (Chk. 2004).

Jurisdiction - Personal
A long-arm statute does not by itself grant a court personal jurisdiction over those who fall within the statute’s reach. What a long-arm statute does is to permit a court to acquire personal jurisdiction over those persons subject to the statute once they have been properly served with notice that comports with due process. Northern Marianas Housing Corp. v. Finik, [2004] FMSC 19; 12 FSM Intrm. 441, 444 (Chk. 2004).

Constitutional Law
The FSM Constitution does not apply to a lawsuit in a CNMI court over a transaction that occurred in Saipan. Northern Marianas Housing Corp. v. Finik, [2004] FMSC 19; 12 FSM Intrm. 441, 444 (Chk. 2004).

Civil Procedure - Service
If a plaintiff must use a disfavored form of service, such as service by publication, it should, at a minimum, be held to strict compliance with the statute authorizing that form of service. Northern Marianas Housing Corp. v. Finik, [2004] FMSC 19; 12 FSM Intrm. 441, 445 (Chk. 2004).

Judgments - Foreign
The FSM Supreme Court will not enforce a foreign judgment entered by a court that lacked personal jurisdiction over the defendant when it entered its judgment against her. Northern Marianas Housing Corp. v. Finik, [2004] FMSC 19; 12 FSM Intrm. 441, 446-47 (Chk. 2004).

Contracts - Damages; Judgments - Foreign
Since the only prejudgment interest recognized so far in breach of contract cases is where the contract itself specifically provides for such a remedy, the part of a foreign judgment containing such prejudgment interest may thus be unenforceable in the FSM as against public policy. Northern Marianas Housing Corp. v. Finik, [2004] FMSC 19; 12 FSM Intrm. 441, 447 (Chk. 2004).

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[12 FSM Intrm. 443]

COURT’S OPINION

DENNIS K. YAMASE, Associate Justice:

This comes before the court on the plaintiff’s motion for summary judgment and on the defendant’s cross motion for summary judgment. The plaintiff’s motion asks that the court grant summary judgment based on a judgment against the defendant, Frantina Finik, entered in the Commonwealth of the Northern Marianas Superior Court on April 26, 2002. The plaintiff states that it is well settled law in the Federated States of Micronesia that the FSM Supreme Court will enforce judgments lawfully entered in the CNMI Superior Court.

Finik contends that the judgment was not lawfully entered because she had never received notice of the CNMI lawsuit against her. She moves for summary judgment on the ground that service of the CNMI complaint on her by publication in a Saipan newspaper deprived her of her rights to due process as guaranteed by the FSM Constitution.

I.

From 1988 to at least sometime in 1997, Finik, lived in Saipan, Northern Marianas Islands with her husband. According to her affidavit, which is not controverted, she moved to Chuuk around April, 1997, her husband died in Chuuk in 1997, and she returned to Saipan for one week, sometime in 1999.

On January 23, 1998, the Northern Marianas Housing Corporation, formerly known as the Marianas Islands Housing Authority, filed suit against Clark Finik and Frantina Finik in the Commonwealth of the Northern Mariana Islands Superior Court. The complaint sought $2,672.35 jointly and severally from Clark and Frantina for the rental of a five-bedroom house from December, 1996 to July, 1997 plus 9% prejudgment interest from July 11, 1997.[1] The plaintiff based its claimed right to prejudgment interest on the Restatement (Second) of Contracts § 354(1), which allows prejudgment interest as damages for breach of contract where the breach is the failure to pay a definite sum of money at the time of performance even though the contray not specifically provide for interest.

To effo effect service, the plaintiff placed advertisements in the Marianas Variety News and Views, a daily newspaper published in Saipan, CNMI, that were published on February 7, 14, 21, and 25, 2002. The advertisement, titled a Summons for Publication dated February 3, 2002, summoned Frantina Finik to file an answer to the complaint with the Superior Court clerk within 21 days of the Summons’s fourth publication. The publication did not state the amount sought or any details of the complaint other than the parties, court, and docket number. It did not mention the amount or relief sought, or the grounds.[2] The plaintiff contends that this constitutes good service on Finik. The record available to the court does not indicate what other attempts, if any, to effect service on Finik were

[12 FSM Intrm. 444]

made. A Declaration of [service by] Publication,[3] executed by the Marianas Variety publisher, was filed in the Superior Court on April 8, 2002.

On April 26, 2002, the Superior Court clerk entered a default judgment for $3,971.63 (this sum apparently includes the 9% prejudgment interest on the $2,672.35 principal amount sought in the complaint), plus 9% interest thereon from April 9, 2002. On June 9, 2003, the plaintiff filed this suit in the FSM Supreme Court (in Chuuk) based solely on the CNMI Superior Court judgment. The complaint seeks $3,971.63 and 9% interest thereon from April 9, 2002. The plaintiff’s summary judgment motion is based on the CNMI judgment’s validity and the plaintiff’s service by publication. Finik’s cross motion for summary judgment states that until she was served with the complaint in this suit, she was unaware of any lawsuit against her in Saipan, and that therefore that judgment was entered against her in violation of her constitutional rights to due process. It is undisputed that Finik never received actual notice of the CNMI lawsuit.

II.

The plaintiff asks that the CNMI judgment be enforced as a matter of comity. Under principles of comity, the FSM Supreme Court will enforce foreign judgments, but not when the foreign court lacked jurisdiction, or where enforcement of the foreign judgment would violate a public policy, or where granting comity would result in prejudice to the forum’s citizens. J.C. Tenorio Enterprises, Inc. v. Sado, [1994] FMSC 17; 6 FSM Intrm. 430, 431-32 (Pon. 1994).

The plaintiff asserts that the CNMI Superior Court had jurisdiction - that it had both subject matter and personal jurisdiction. Since the subject matter of the lawsuit is a transaction that took place in Saipan when Finik was resident in Saipan, the CNMI Superior Court had subject matter jurisdiction. The plaintiff contends that the CNMI long-arm statute grants the CNMI courts personal jurisdiction over Finik because she had resided and transacted business (rented property) there. This is incorrect. A long-arm statute does not by itself grant a court personal jurisdiction over those who fall within the statute’s reach. What a long-arm statute does is to permit a court to acquire personal jurisdiction over those persons subject to the statute once they have been properly served with notice that comports with due process.

Finik contends that her due process rights under the FSM Constitution were violated by service by publication in Saipan and no notice to her. Finik misunderstands. The FSM Constitution does not apply to a lawsuit in a CNMI court over a transaction that occurred in Saipan. The Northern Marianas is an American commonwealth. To determine whether Finik’s due process rights were violated, the court must determine what process she was due under the United States and Northern Marianas Constitutions and whether those rights were violated.

III.

The Due Process Clause of the U.S. Constitution’s Fourteenth Amendment applies in the Commonwealth of the Northern Marianas. See, e.g., N. Mar. I. Covenant § 501(a) (section 1 th Amendmmendment to U.S. Constitution to be applicable in CNMI); Northern Mariana Islands v. Atalig, [1984] USCA9 44; 723 F.2d 682, 685 (9th Cir.), cert. denied, 467 U.S. 1244 (1984); In re C.T.M., 1 N. Mar. I. 411, 413 (1990); see also N. Mar. I. Const. art. I, § 5; e of the Attorney Geny General v. Rivera, 3 N. Mar. I. 436,

[12 FSM Intrm. 445]

445 n.3 (1993) (Due Process Clause in CNMI Constitution affords the same proon as the U.S. Constitutionution’s Due Process Clause). It guarantees all persons due process of law.

Service by publication may comport with due process under the U.S. Fourteenth Amendment, but is generally a disfavored method of service. The CNMI statute authorizing such service, when other methods are unavailing, requires publication of the summons "once each week for four successive weeks." 7 N. Mar. I. Code § 1104(b) publication in this this case was actually once a week (Mondays, February 7, and 14, 2002) for two successive weeks and then twice in the third week (Monday the 21st and Friday the 25th) and nce in the fourth week. The. The service by publication was thus statutorily defective. Finik did not get the full measure of the process due her under the Northern Marianas service by publication statute. It would seem that if a plaintiff must use a disfavored form of service, it should, at a minimum, be held to strict compliance with the statute authorizing that form of service.

However, a more important question is whether any service by publication in a Saipan newspaper could be due process in this case. "Service of process by means of publication has long been constitutionally suspect." Polansky v. Richardson, 351 F. Supp. 1066, 1069 (E.D.N.Y. 1972). "The general rule . .;. is that notice by publipublication is not enough with respect to a person whose name and address are known or very easily ascertainable and whose legally protected interests are directly afd by the proceedings in quen question." Schroeder v. City of New York, [1962] USSC 181; 371 U.S. 208, 212-13[1962] USSC 181; , 83 S. Ct. 279, 282[1962] USSC 181; , 9 L. Ed. 2d 255, 259 (1962).

An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. The notice must be of such nature as reasonably to convey the required information, and it must afford a reasonable time for those interested to make their appearance. But if with due regard for the practicalities and peculiarities of the case these conditions are met, the constitutional requirements are satisfied. . . .

But when notice is a person’s due, process which is a mere gesture is not due process. The means employed must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it. The reasonableness and hence the constitutional validity of any chosen method may be defended on the ground that it is in itself reasonably certain to inform those affected, or, where conditions do not reasonably permit such notice, that the form chosen is not substantially less likely to bring home notice than other of the feasible and customary substitutes.

Mullane v. Central Hanover Bank & Trust Co., [1950] USSC 41; 339 U.S. 306, 314-15[1950] USSC 41; , 70 S. Ct. 652, 657-58[1950] USSC 41; , 94 L. Ed. 865, 873-74 (1950) (citations omitted).

The plaintiff served Finik by publication apparently because it was unable to locate her on Saipan. Due process requires more than that. The plaintiff had available to it methods to serve Finik in what to it is a foreign country, if it had reason to believe she was there. Both CNMI statutes, 7 N. Mar. I. Code § 1104(a), and civil procedure rules, N. Mar. I. Commw. Super. Ct. Civ. R. 4(f), provide methods for service in countries foreign to the CNMI.

The plaintiff public housing authoritw, or should have known, that Finik was a foreign citizen. zen. Title 42, chapter 8 of the U.S. Code, which concerns public housing programs and authorities, applies to the Northern Marianas. 42 U.S.C. § 1437a(b)(7). Onthe Northernthern Marianas Housing

[12 FSM Intrm. 446]

Corporation’s mandates is to "comply with the regulations and requits of the federal government." 2 N. Mar. I. Code § 443 The federal government ment restricts public housing benefits to U.S. citizens and certain classes of aliens. See 42 U.S.C. § 1436a. The court ther can ocan only conclude thaore the Finiks became the pthe plaintiff’s tenants and incurred the debt underlying the judgment, the plaintiff knew, or should known, Finik’s citizenship and therefore the likely kely place to look to serve her if she was no longer on Saipan. The Marianas Variety does not circulate in Chuuk.

Chance alone brings to the attention of even a local resident an advertisement in small type inserted in the back pages of a newspaper, and if he makes his home outside the area of the newspaper’s normal circulation the odds that the information will never reach him are large indeed.

Mullane, 339 U.S. at 315, 70 S. Ct. at 658, 94 L. Ed. at 874. "Constructive service of process usually is made on an absent defendant by publication in a local newspaper, but since realistically the effectiveness of publication as notice is at best dubious, further efforts to give notice are required where practicable." United States v. Smith, [1968] USCA3 372; 398 F.2d 173, 177 (3d Cir. 1968). Thus, more than just service by publication in a Saipan newspaper was needed to comply with due process. Once the plaintiff realized she could not be found in the Commonwealth, the logical and practicable step would have been to try to serve her in Chuuk, either by mail[4] or personally. (The court takes no position on the possibility of substituted service through radio or cable TV announcements in Chuuk, although it could be argued that they would be more reasonably calculated to reach Finik than a newspaper ad in Saipan.)

The factual situation here is very similar to that in McDonald v. Mabee, [1917] USSC 47; 243 U.S. 90, 37 S. Ct. 343, 61 L. Ed. 608 (1916). When that suit was begun, Mabee was domiciled in Texas, but had left the state intending to establish a home somewhere else, although his family still resided there. Id. at 91, 37 S. Ct. at 343, 61 L. Ed. at 609. He returned to Texas for a short time but later established his domicile in Missouri. Id. The only service upon him was by publication once a week for four successive weeks after his final departure from Texas, and he never appeared in the suit. Id. The Texas supreme court held that "this satisfied the Texas statutes, and that the judgment was a good personal judgment." Id. The U.S. Supreme Court reversed. It held that

an advertisement in a local newspaper is not sufficient notice to bind a person who has left a state, intending not to return. To dispense with personal service the substitute that is most likely to reach the defendant is the least that ought to be required if substantial justice is to be done.

Id. at 92, 37 S. Ct. at 344, 61 L. Ed. at 610. The court concluded that the personal judgment was "invalid for want of service amounting to due process of law," and that the judgment "was not merely voidable . . . but was void.Id. at 9 at 92-93, 37 S. Ct. at 344, 61 L. Ed. at 610.

In the present case, Finik left the Northern Marianas intg noteturn; she returned briefly in 1999; and the only service on her was by publicatiication (aon (and defective at that) after her final departure from the Commonwealth; and she did not appear in the suit. Service on Finik by publication in Saipan was thus a mere gesture and not due process. The court therefore must conclude that, under United States law, the CNMI Superior Court lacked personal jurisdiction over Finik when it entered its judgment against her. The FSM Supreme Court will not enforce a foreign judgment entered by a court that lacked

[2004] FMKSC 3; [12 FSM Intrm. 447]

jurisdiction over the defendant. Sado, 6 FSM Intrm. at 432. The plaintiff’s summary judgment motion is therefore denied. Finik’s cross motion is granted and the case is dismissed.

The court does not today hold that constructive service, substituted service, or service by publication can never validly comply with due process (either in the U.S. or the FSM) or that all judgments based on such service are unenforceable in the FSM. What the court does hold is that this judgment may not be enforced for the reasons given. First, the service by publication did not strictly comply with the statute authorizing it. Second, the CNMI Superior Court lacked jurisdiction - personal jurisdiction - over Finik.

Lastly, the court doubts it could have enforced the prejudgment interest portion of the CNMI judgment even if comity were to otherwise permit the judgment’s enforcement. The basis asserted for prejudgment interest in the CNMI judgment, Restatement (Second) of Contracts § 3, has not been recognized ized in the FSM. The only prejudgment interest recognized so far in breach of contract cases is where the contract itself specificallyides for such a remedy. The prejudgment interest part of thof the judgment may thus be unenforceable as against public policy. See Coca-Cola Beverage Co. (Micronesia) v. Edmond, [1998] FMSC 20; 8 FSM Intrm. 388, 391 (Kos. 1998) (FSM Supreme Court will not enforce the part of a CNMI judgment imposing a CNMI statutory treble damages penalty for writing bad checks when the FSM has no similar public policy; recovery limited to the bad checks’ outstanding principal amount and the plaintiff’s undisputed additional costs - bank charges and court costs); Sado, 6 FSM Intrm. at 432 (attorney fees in excess of 15% of debt are repugnant to fundamental notions of what is decent and just in the FSM and that portion of foreign judgment not enforceable here).

IV.

Accordingly, the plaintiff’s summary judgment motion is denied and the Finik’s cross motion for summary judgment is granted. This case is therefore dismissed.

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^[1] The complaint also sought $4,138 plus 10% interest per annum plus fees from Clark Finik, individually, based on a promissory note. That claim is not at issue in this case.

^[2] Presumably, once having seen the advertisement, the summons by publication, or having it drawn to her attention by an acquaintance who had noticed it, a defendant then contacts either the court clerk or plaintiff’s counsel for a copy of the complaint so that the defendant may then answer it.
^[3] The Declaration of Publication, filed by the plaintiff with the CNMI Superior Court states February 28, not 25, as the last publication date. However, the attached Exhibit A clearly shows the date of the fourth publication as Friday, February 25, not Monday, February 28, 2002.

^[4] There are only two possible mailing addresses in Chuuk ) either General Delivery or, if known, a specific box number.