Mori v Haruo [2008] FMSC 15; 15 FSM Intrm. 468 (Chk. S. Ct. App. 2008) (15 January 2008)

CHUUK STATE SUPREME COURT APPELLATE DIVISION
CIVIL APPEAL CASE NO. 05-2006

MINIKA MORI, AISEK MORI, and ESTHER RAN,
Appellants,

vs.

LINORA HARUO,
Appellee.
___________________________________

OPINION

Argued: November 8, 2007
Decided: January 15, 2008

BEFORE:

Hon. Dennis K. Yamase, Temporary Justice, Presiding*
Hon. Repeat Samuel, Temporary Justice**
Hon. Frank Casiano, Temporary Justice**

*Associate Justice, FSM Supreme Court, Pohnpei
**Attorney at Law, Weno, Chuuk

APPEARANCES:

For the Appellants: Frances K. Sain
P.O. Box 956
Weno, Chuuk FM 96942

For the Appellee: Hans Wiliander
P.O. Box 389
Weno, Chuuk FM 96942

* * * *

HEADNOTES

Appellate Review  Standard of Review  Civil Cases

Whether a party was a bona fide purchaser without notice and whether the consent of all adult lineage members is needed for the sale of lineage land are issues of law, which the appellate court review de novo. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 471 (Chk. S. Ct. App. 2008).

Property  Registered Land

The current system of land registration in Chuuk dates from the Trust Territory period. Title 67 of the Trust Territory Code, governing land registration, has been retained by the Chuuk. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 471 (Chk. S. Ct. App. 2008).

Property  Land Commission

The Land Commission is vested with the authority to register land. The Commission's statutory powers and duties include designating land to be registered, surveying the land and establishing boundaries, and determining title and adjudicating disputed claims through investigation, notice, and public hearings. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 471 (Chk. S. Ct. App. 2008).

Property  Registered Land

Land registration is based on the Torrens system of land registration, whereby land ownership is conclusively determined and certified by the government and thereby is easy to determine. The certificate of title issued by the government shows the state of the title and the person in whom it is vested. Determination of title is the system's basic requirement. To that end, the Land Commission holds a proceeding to settle and declare the state of the title. Once the Commission completes its inquiry and conducts a public hearing, it must issue a determination of ownership, pursuant to which a certificate of title is issued. Determinations of ownership are appealable to the Chuuk State Supreme Court trial division. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 471 (Chk. S. Ct. App. 2008).

Property  Registered Land

A party claiming ownership of land for which there is a determination of ownership showing another as owner, with the appeal period expired, has, at a minimum, the burden of showing facts to establish that the determination of ownership is incorrect. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 471 (Chk. S. Ct. App. 2008).

Property  Registered Land

When a determination of ownership was issued to a party, but no certificate of title was issued, and there has been no allegation that the determination of ownership was incorrect, the court proceeds as if a certificate of title had been issued. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 472 (Chk. S. Ct. App. 2008).

Property

The bona fide, or "innocent," purchaser rule arises from the statutory recording requirements for interests in real estate. For all real estate in each district, the clerk of court is required to make and keep in a permanent record a copy of all documents submitted to him for recording. No transfer of or encumbrance upon title to real estate or any interest therein, other than a lease for a term not exceeding one year, is valid against any subsequent purchaser or mortgagee of the same real estate or interest, or any part thereof, in good faith for a valuable consideration without notice of such transfer or encumbrance, or against any person claiming under them, if the transfer to the subsequent purchaser or mortgagee is first duly recorded. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 472 (Chk. S. Ct. App. 2008).

Property; Property  Registered Land

The "registration" of interests in land, pursuant to 67 TTC 119 "has the same force and effect as to such land as a recording" under 57 TTC 301. In order for a subsequent, bona fide, or "innocent," purchaser to have valid title against a prior holder of an interest in the same real estate the subsequent purchaser must "register" or "record" the interest before the prior holder. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 472 (Chk. S. Ct. App. 2008).

Property  Registered Land

Individual lineage members are not required to register their interest in their individual names in order to protect their interests as lineage members in the property. There is no legal requirement that the individual names of the lineage members appear in a registration or recording in order to give notice of their interest or otherwise protect their legal interest in lineage property. Such a requirement would be impracticable under the system of lineage land ownership. If such a requirement existed, each new member of the lineage would be required to seek an amendment of the ownership documents to the lineage land in order to obtain a legally protected right in the disposition of the land. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 472-73 (Chk. S. Ct. App. 2008).

Property  Registered Land

The identification of a person as the lineage head in a determination of ownership was for the purpose of clarifying the identification of the lineage. It is not the Land Commission's function to vest, in any particular person, the authority to sell lineage land. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 473 (Chk. S. Ct. App. 2008).

Property; Property  Registered Land

A buyer is not a bona fide purchaser for value without notice when she executes a purchase agreement with an individual seller when an earlier determination of ownership was notice to the world, and thus to her, of the lineage's interest in the property. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 473 (Chk. S. Ct. App. 2008).

Property

Lineage heads need the adult lineage members' consent for transfers of lineage land. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 474 (Chk. S. Ct. App. 2008).

Property

The rule of law that has gained precedence in Chuuk based on customary practice, and which the court is bound to apply, does not provide for any legally recognizable means to assure that the sale of lineage land will be valid other than by proving that all living, adult members of the lineage have consented to the sale. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 474-75 (Chk. S. Ct. App. 2008).

Property

When adult lineage members did not consent to the sale of their interest, as lineage members, in lineage land and the buyer had notice of the lineage's ownership through the February 10, 1976 determination of ownership and therefore was not a bona fide purchaser without notice, the lineage head's transfer of the property was not valid since the lineage members did not ratify the unauthorized transfer of lineage land. Mori v. Haruo, [2008] FMSC 15; 15 FSM Intrm. 468, 475 (Chk. S. Ct. App. 2008).

* * * *

COURT'S OPINION

DENNIS K. YAMASE, Temporary Justice, Presiding:

This is an appeal from the trial court's decision in Chuuk State Supreme Court trial division Civil Action No. 131-94 confirming Linora Haruo's ownership of certain land. We reverse. Our reasons follow.

I. Background

The Chuuk State Supreme Court trial division judgment was entered on April 11, 2006. At issue was the validity of a land transfer from Simi Mailo, the lineage head of the appellant Souefeng Lineage members, to the appellee, Linora Haruo. A February 10, 1976 determination of ownership by the Truk District Land Commission indicated that the property was lineage land belonging to the "lineage clan of Souefeng headed by Simi Mailo." See Trial Court Judgment at 4. Simi Mailo sold the property to Haruo in two parcels, memorialized in separate purchase agreements, dated September 24, 1993 and December 8, 1993. On December 30, 1993, the Land Commission issued a certificate of title to Haruo. On May 25, 1994, the appellants filed suit contending that both transfers were invalid because the lineage members had not consented to sell the property.

The trial court ruled that the September 24, 1993 sale was valid because Haruo had been a bona fide purchaser without notice of the adverse claims of the lineage members. It, however, rejected the validity of the December 8, 1993 transfer, ruling that Haruo was not a bona fide purchaser without notice with respect to that parcel because, by that time, she had notice of appellants' interest in the property.[1]

II. The Law

A. Issues and Standard of Review

The issues before us are whether Haruo was a bona fide purchaser without notice and whether the consent of all adult lineage members is needed for the sale of lineage land. These are issues of law, which we review de novo. Ruben v. Hartman, [2007] FMCSC 10; 15 FSM Intrm. 100, 108 (Chk. S. Ct. App. 2007); Rosokow v. Bob, [2002] FMCSC 14; 11 FSM Intrm. 210, 214 (Chk. S. Ct. App. 2002).

B. Land Registration

The current system of land registration in Chuuk dates from the Trust Territory period. Title 67 of the Trust Territory Code, governing land registration, has been retained by the Chuuk State Code. Chipuelong v. Chuuk, [1993] FMCSC 3; 6 FSM Intrm. 188, 196 n.6 (Chk. S. Ct. Tr. 1993).

Title 67 vests authority to register land in the Land Commission. The Commission's statutory powers and duties include designating land to be registered, 67 TTC 104, surveying the land and establishing boundaries, 67 TTC 106, and determining title and adjudicating disputed claims through investigation, notice, and public hearings, 67 TTC 107-114. Chipuelong, 6 FSM Intrm. at 196. Land registration, as established by Title 67, is based on the Torrens system of land registration, whereby land ownership is conclusively determined and certified by the government and thereby is easy to determine. The certificate of title issued by the government shows the state of the title and the person in whom it is vested. Determination of title is the basic requirement of the system. To that end, the Land Commission holds a proceeding to settle and declare the state of the title. Chipuelong, 6 FSM Intrm. at 196. Once the Commission completes its inquiry and conducts a public hearing, it must issue a determination of ownership, pursuant to which a certificate of title is issued. Id. Determinations of ownership are appealable to the Trial Division of the Chuuk State Supreme Court and ultimately to the Appellate Division of the Chuuk State Supreme Court. Id.

A party claiming ownership in land for which there is a determination of ownership showing another as owner, with the appeal period expired, has, at a minimum, the burden of showing facts to establish that the determination of ownership is incorrect. Benjamin v. Kosrae, [1988] FMKSC 2; 3 FSM Intrm. 508, 510 (Kos. S. Ct. Tr. 1988). Otherwise, when determining issues of ownership, the court proceeds as if a certificate of title had been issued in accordance with the determination of ownership, whether or not one has actually been issued. Id.

In this case a determination of ownership was issued to the Souefeng Lineage, but no certificate of title. Since there has been no allegation in this case that the determination of ownership was incorrect, the court proceeds as if a certificate of title had been issued to the Souefeng Lineage.

C. Bona Fide Purchaser without Notice

The bona fide, or "innocent," purchaser rule arises from the statutory recording requirements for interests in real estate. For all real estate in each district, the clerk of court is required to "make and keep in a permanent record a copy of all documents submitted to him for recording." 57 TTC 301. No transfer of or encumbrance upon title to real estate or any interest therein, other than a lease for a term not exceeding one year, is valid against any subsequent purchaser or mortgagee of the same real estate or interest, or any part thereof, in good faith for a valuable consideration without notice of such transfer or encumbrance, or against any person claiming under them, if the transfer to the subsequent purchaser or mortgagee is first duly recorded. 57 TTC 301. The "registration" of interests in land, pursuant to 67 TTC 119 "has the same force and effect as to such land as a recording" under 57 TTC 301. In order, therefore, for a subsequent, bona fide, or "innocent", purchaser to have valid title against a prior holder of an interest in the same real estate the subsequent purchaser must "register" or "record" the interest before the prior holder. Id.; Asanuma v. Flores, 1 TTR 458, 460-61 (Pal. 1958).

Here, the property was registered with the Land Commission on February 10, 1976 when a determination of ownership was issued naming as owner the lineage of Souefeng headed by Simi Mailo. Trial Court Judgment at 4. The trial court found that Haruo did not have notice of the interests of the lineage members in the property prior to her execution of the September 24, 1993 purchase agreement, but by time of the second purchase agreement Haruo had notice of appellants' interest through their October 27, 1993 letter. The trial court concluded that Haruo was a bona fide purchaser without notice with respect to the September 24, 1993 sale, but she was not a bona fide purchaser without notice with respect to the December 8, 1993 purchase agreement.

In concluding that the September 24, 1993 purchase agreement effectuated a valid transfer of the lineage land, the trial court placed a burden on the plaintiff/appellant lineage members to register the property in the individual names of the lineage members in order to protect their legal interest in its disposition. Otherwise, lineage members assumed the risk that the lineage leader would dispose of the property on the lineage's behalf without obtaining their consent. See Trial Court Judgment at 4-5. The trial court concluded that the February 10, 1976 determination of ownership was not requisite notice of the lineage members' interest in the property.

The February 10, 1976 determination of ownership, however, identifies the Souefeng Lineage's interest in the property. The registration of the determination of ownership identifying the owners as the "Souefeng Lineage" was sufficient to protect whatever interest the lineage members had against subsequent purchasers. Benjamin v. Kosrae, [1988] FMKSC 2; 3 FSM Intrm. 508, 510 (Kos. S. Ct. Tr. 1988); 67 TTC 119.

To the extent the trial court proceeded on the assumption that the individual lineage members were required to register their interest in their individual names in order to protect their interests as lineage members in the property, the trial court was in error. The court is unaware of any legal requirement that the individual names of the lineage members appear in a registration or recording in order to give notice of their interest or otherwise protect their legal interest in lineage property. Indeed, such a requirement would be impracticable under the current system of lineage land ownership. If such a requirement existed, each new member of the lineage would be required to seek an amendment of the ownership documents to the lineage land in order to obtain a legally protected right in the disposition of the land. In the absence of a system to assure that new lineage members are timely added to lineage land ownership documents, the likely result would be that the currently recognized legal right of a "lineage" to own land would be completely eviscerated, as only the individuals named on the ownership documents would have a recognized legal interest. The court, therefore, concludes that the identification of Simi Mailo as the lineage head in the February 10, 1976 determination of ownership was for the purpose of clarifying the identification of the Souefeng Lineage. It is not the Land Commission's function to vest, in any particular person, the authority to sell lineage land.

The trial court's conclusion that Haruo was a bona fide purchaser for value without notice when she executed the September 24, 1993 purchase agreement is an error of law. The February 10, 1976 determination of ownership was notice to the world, and thus to Haruo, of the Souefeng Lineage's interest in the property.

D. Lineage Members' Consent to Lineage Land Transfers

The second issue is whether the lineage leader can transfer lineage land without the consent of the lineage members. The appellants contend that Chuuk state law requires the consent of all adult lineage members for the sale. Haruo contends that the proper Chuukese custom to apply to lineage land is the one that provides that when the lineage head speaks the other lineage members remain silent and so the consent of all lineage members was not needed because the lineage had consented when the lineage head "spoke." From the trial court's ruling that the second sale was void because Haruo had notice that the other lineage members had not consented to the sale, we may infer that the trial court concluded that their consent was normally needed for a valid sale.

In Nakamura v. Moen Municipality, [2007] FMCSC 14; 15 FSM Intrm. 213, 218-19 (Chk. S. Ct. App. 2007), we held that lineage heads need the adult lineage members' consent for transfers of lineage land. This holding is consistent with a long line of authorities from the Trust Territory courts to recent decisions by the FSM and Chuuk State courts addressing the consent requirement for lineage land transfers. Some courts have held that the consent of all adult male lineage members is needed to alienate lineage land. See e.g., Lukas v. Stanley, [2001] FMCSC 4; 10 FSM Intrm. 365, 366 (Chk. S. Ct. Tr. 2001); Lus v. Totou, 1 TTR 552, 554 (Truk 1958)). Other courts have held that the consent of all adult lineage members is needed. Nakamura, 15 FSM Intrm. at 219 n.5 (requiring consent of all adult members because "the advent of the FSM Constitution and its provision disfavoring sex discrimination, FSM Const. art. IV, § 4, favors the principle that all adult members' consent is needed"); Marcus v. Truk Trading Corp., [2002] FMSC 31; 11 FSM Intrm. 152, 160 (Chk. 2002) (same); Epineisar v. Mori, CSSC Civil Action No. 211-94 (Nov. 11, 1998) (adjudging that "Simi Mailo was leader of the Mailo Souefeng Lineage during his lifetime but he had no right to transfer the land of the Mailo Souefeng Lineage without the consent of all the adult members of the Lineage"); Chipuelong v. Chuuk, [1993] FMCSC 3; 6 FSM Intrm. 188, 197 (Chk. S. Ct. Tr. 1993) ("lineage land," indivisibly belongs to the clan and cannot be sold or divided without the consent of the clan); Truk Trading Co. v. Paul, 8 TTR 515, 518 (App. 1986) ("It is well recognized as a rule of law in Truk [Chuuk] that lineage land cannot be transferred, distributed or sold by an individual member of the lineage without the consent of all adult members of that lineage."); Mesaita v. Fupi, 5 TTR 631, 632-33 (Truk 1972); Peretiu v. Karimina, 3 TTR 533, 535 (Truk 1968); Narruhn v. Sale, 3 TTR 514, 517 (Truk 1968); Nitoka v. Nesepuer, 2 TTR 12, 14 (Truk 1959); see also Resenam v. Nopuo, 5 TTR 248, 251 (Truk 1970) (consent of children needed to transfer "family land," which is not lineage land); Yoichi v. Amas, 4 TTR 59, 60 (Truk 1968) (oral will disposing of lineage land consented to by adult lineage members); Fred v. Airinios, 3 TTR 274, 276 (Truk 1967) (sale or gift of lineage land in Mortlocks requires unanimous consent of all adult members); Irons v. Rudo, 2 TTR 296, 300 (Truk 1961) (noted in dicta that only adults' consent needed, minors' lack of consent cannot prevent transfer of lineage land); Kinara v. Tipa, 2 TTR 8, 11 (Truk 1959) (transfer of lineage land to child of member must be consented to by all adult members of lineage or generally acquiesced in by them). A few authorities just state that the lineage's consent is needed without elaborating on which members' consent satisfy the requirement. Titer v. Teifis, 4 TTR 283, 285 (Truk 1969) ("consent of the lineage" needed); Oneitam v. Swain, 4 TTR 62, 73 (Truk 1968) (evidence was insufficient to indicate lineage approval of land transfer); Pinar v. Kantenia, 3 TTR 158, 159 (Truk 1966) (lineage leader's request to gift lineage land to second wife was rejected by other lineage members); Nitoka v. Nesepuer, 2 TTR 12, 14 (Truk 1959) ("consent of the lineage" needed to validate lineage head's gift of lineage property); Nusia v. Sak, 1 TTR 446, 447 (Truk 1958) (transfer of lineage land is by "positive agreement by the lineage as a whole or clear acquiescence").

Based on the essentially consistent line of authorities beginning with the Trust Territory High Court's 1958 Nusia v. Sak decision to the recent decision by the Chuuk State Supreme Court in Nakamura v. Moen Municipality, it is crystal clear that the applicable rule of law for the sale of lineage land in Chuuk is that the sale requires consent from all the adult lineage members.

Courts have previously noted the logistical difficulties in complying with the stringent consent requirement for the sale of lineage land[2]See also Marcus v. Truk Trading Corp., 11 FSM Intrm. at 160 (Chk. 2002) ("This subject is ripe for action by the Chuuk Legislature . .&# ."). and the hindrhindrance that the consent requirement has on economic development in Chuuk.^[3] These are issuat thislature may choose to address. The rule of law tlaw that has gained precedence in Chuuk bauk based on customary practice, however, and which the court is bound to apply, does not provide for any legally recognizable means to assure that the sale of lineage land will be valid other than by proving that all living, adult members of the lineage have consented to the sale.

In this case, the appellants did not consent to the sale of their interest, as lineage members, in the Souefeng Lineage land and Haruo had notice of the lineage's ownership of the land through the February 10, 1976 determination of ownership. Therefore, Simi Mailo's transfer of the property to Haruo was not valid.

Haruo may still prevail, however, despite Simi Mailo's unauthorized transfer of lineage land to her if, by their conduct, the Souefeng Lineage members ratified the sale. See Nakamura, 15 FSM Intrm. at 219. Haruo does not, however, contend that the other lineage members ratified Simi Mailo's unauthorized sale and the appellants' prompt objection to Haruo's first purchase shows the lack of any ratification on their part.

III. Conclusion

Because appellants neither consented to the sale nor ratified it by their conduct, and because Haruo was not a bona fide purchaser without notice, the trial court's ruling that the September 24, 1993 purchase agreement effectuated a valid transfer to Haruo was an error of law. Accordingly, the trial court judgment that the September 24, 1993 purchase agreement effectuated a valid transfer of Souefeng Lineage land is reversed and judgment will be entered in favor of the appellants.

* * * *

---

^[1]The notice the trial court was referring to was a letter, dated October 27, 1993, wherein the three plaintiffs/appellants informed Haruo of "disagreement among the clan of Simi Mailo in his ability to sell the property." Trial Court Judgment at 6.
^[2]See Nakamura, 15 FSM Intrm. at 220 n.6:

This is a subject the Chuuk Legislature may want to consider. We do not suggest that the Legislature change the customary legal requirement that all adult members agree in order to alienate lineage land, although the Legislature may have the power to do so. The court suggests that appropriate legislation may be needed to outline what steps a buyer must take to be reasonably assured that all adult lineage members have consented to the transaction. This may take the form that, if certain steps are taken, a legal presumption arises that all adult members have consented. This need is particularly noticeable now that many Chuukese are absent from the state for extended stretches of time. Many work, study, or live in Pohnpei, Guam, Saipan, or the United States, or serve in the U.S. military, before returning to Chuuk.

^[3] See e.g., Truk Trading Company v. Paul, 8 TTC 515, 521 (1986) (Hefner, J., concurring):

There is much to say about keeping and enforcing the traditional land laws of Truk. Indeed, this court is obligated to do so. 1 TTC § 14.

However, the impact of a case such as this one on developing a market for land for the economic development of Truk is clear.

Truk Trading Company is probably the largest private enterprise in Truk and has invested substantial funds in placing improvements on Lot 040-A-23. I don’t believe the company did this fully aware of the potential disastrous effect of failing to obtain the consent of all the lineage members.

One is hard pressed to criticize customary law which safeguards lineage land for all its members. But on the other hand, a prospective buyer or developer of a business enterprise is faced with an almost impossible task of assuring that the consent of all lineage members is obtained before paying out funds to purchase or develop land. All lineage members necessarily includes minors and those who, over the years, may have moved away or lost some contact with the lineage. The problems of finding the lineage members and acquiring their consent is obvious.

In the future the people of Truk will have to make the decision of which way they wish to proceed)to maintain the status quo or to opt for land laws more conducive to economic development. It is their choice not this court’s.