People of the Municipality of Eauripik v FV Teraka No. 168 [2012] FMSC 24; 18 FSM Intrm. 297 (Yap 2012) (20 June 2012)

FSM SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 2011-3002

PEOPLE OF THE MUNICIPALITY OF EAURIPIK, YAP, by and through SANTUS SARONGELFEG, JOHN HAGLELGAM, and MOSES MOGLIG,
Plaintiffs,

FEDERATED STATES OF MICRONESIA,
Plaintiff in Intervention,

vs.

F/V TERAKA NO. 168, F/V YUH YOW 606, F/V FU KUAN 606, their engines, masts, bowsprits, boats, anchors, chains, cables, rigging, apparel, furniture, and all necessaries thereunto pertaining,
In Rem Defendants,

YUH YOW FISHERY COMPANY, LTD., MARIN MARAWA, LTD., MASANAGA SHIMAZU, MALAYAN TOWAGE AND SALVAGE CORPORATION, and HSIN HORNG FISHERY COMPANY, LTD.,
In Personam Defendants.

_______________________________________________

MEMORANDUM AND ORDER DENYING SUMMARY JUDGMENT

Martin G. Yinug
Chief Justice

Decided: June 20, 2012

APPEARANCES:

For the Plaintiffs: Joshua D. Walsh, Esq. (pro hac vice)

Teker Torres & Teker, P.C.

Suite 2A, 130 Aspinall Avenue

Hagatna, Guam 96910

For the Defendants: David Ledger, Esq. (pro hac vice)

Cabot Mantanona LLP

929 South Marine Corps Drive

Tamuning, Guam 96913

* * * *

HEADNOTES

Civil Procedure - Summary Judgment - Grounds
A court must deny a motion for summary judgment unless it, viewing the facts presented and the inferences made in the light most favorable to the non-moving party, finds there is no genuine issue as to any material fact. People of Eauripik ex rel. Sarongelfeg v. F/V Teraka No. 168[2012] FMSC 24; , 18 FSM Intrm. 297, 299-300 (Yap 2012).

Civil Procedure; Civil Procedure - Affidavits; Statutes
By its terms, a statute enacted by the U.S. Congress that permits declarations in place of affidavits affects only U.S. rules and regulations. When the FSM Congress has not enacted an equivalent statute and no procedural rule has been promulgated to bring about the same result, an unsworn declaration, even when the declarant avers or asserts that it is made "under the penalty of perjury," is not the equivalent of an affidavit required by the FSM rules. This is not a matter of interpreting an FSM procedural rule similar to a U.S. rule, but is rather a matter of not applying a foreign statute that has no FSM counterpart. People of Eauripik ex rel. Sarongelfeg v. F/V Teraka No. 168[2012] FMSC 24; , 18 FSM Intrm. 297, 300 & n.1 (Yap 2012).

Business Organizations - Corporations - Liability; Civil Procedure - Parties
The alter ego doctrine treats two entities that are nominally separate as the same when one corporation has acted unjustly or fraudulently. Specific factors which are determinative on this point include substantially identical management, business purpose, operation, equipment, customers, supervision, and ownership. People of Eauripik ex rel. Sarongelfeg v. F/V Teraka No. 168[2012] FMSC 24; , 18 FSM Intrm. 297, 300-01 (Yap 2012).

Business Organizations - Corporations - Liability; Civil Procedure - Summary Judgment - Grounds - Particular Cases
When one reasonable inference is that Yuh Yow Fishery is the alter ego of the corporation that owns the vessel thus establishing a genuine issue of fact, the court cannot grant Yuh Yow Fishery's summary judgment motion that it is not liable for damages that may flow from a vessel's grounding since summary judgment is not available when the facts lead to differing reasonable inferences. People of Eauripik ex rel. Sarongelfeg v. F/V Teraka No. 168[2012] FMSC 24; , 18 FSM Intrm. 297, 301 (Yap 2012).

Civil Procedure - Dismissal; Civil Procedure - Pleadings
A party will appeared to have preserved the defense of lack of personal jurisdiction for determination by motion before trial when the answer denies the plaintiffs' averment that the party was "subject to in personam jurisdiction in this Court." People of Eauripik ex rel. Sarongelfeg v. F/V Teraka No. 168[2012] FMSC 24; , 18 FSM Intrm. 297, 301 (Yap 2012).

Jurisdiction - Personal - Long Arm
The Trust Territory's long-arm statute for the Trust Territory courts' jurisdiction is 6 F.S.M.C. 131, which statute is thus obsolete. The FSM's long-arm statute is codified at 4 F.S.M.C. 204. People of Eauripik ex rel. Sarongelfeg v. F/V Teraka No. 168[2012] FMSC 24; , 18 FSM Intrm. 297, 302 n.2 (Yap 2012).

Civil Procedure - Dismissal - Lack of Jurisdiction; Jurisdiction - Personal
In analyzing a motion to dismiss for lack of personal jurisdiction, the court must undertake a particularized inquiry into the allegations that support personal jurisdiction. The complaint's allegations are accepted as true for a motion to dismiss, except when those allegations have been controverted by affidavit, in which event conflicts are construed in the non-moving party's favor. People of Eauripik ex rel. Sarongelfeg v. F/V Teraka No. 168[2012] FMSC 24; , 18 FSM Intrm. 297, 302 (Yap 2012).

Civil Procedure - Dismissal - Lack of Jurisdiction; Jurisdiction - Personal - Long Arm
A motion to dismiss Yuh Yow Fishery will be denied when the allegations in the amended complaint are sufficient to show personal jurisdiction over Yuh Yow Fishery if the plaintiffs succeed in proving the alter ego allegations that Yuh Yow Fishery is the alter ego of the corporations that own the vessels since Yuh Yow Fishery would have operated vessels that are alleged to have caused damage while in FSM waters. People of Eauripik ex rel. Sarongelfeg v. F/V Teraka No. 168[2012] FMSC 24; , 18 FSM Intrm. 297, 302 (Yap 2012).

* * * *

COURT'S OPINION

MARTIN G. YINUG, Chief Justice:

This comes before the court on 1) Defendant Yuh Yow Fishery Company Ltd.'s Motion for Summary Judgment and Motion to Dismiss for Lack of Personal Jurisdiction, filed April 6, 2012, along with supporting declarations of Chao You Chen a/k/a Peter Chen and Simon Liu; 2) Plaintiffs' Opposition to Defendant Yuh Yow Fishery Company Ltd.'s Motion for Summary Judgment and Motion to Dismiss for Lack of Personal Jurisdiction, filed May 14, 2012, along with supporting affidavit of Joshua D. Walsh; and 3) Yuh Yow Fishery Company Ltd.'s Reply to Opposition to Defendant Yuh Yow Fishery Company Ltd.'s Motion for Summary Judgment and Motion to Dismiss, filed June 12, 2012 along with supporting declarations of Simon Liu and David P. Ledger. The motion is denied. The reasons follow.

I. Parties' Positions

The movant, Yuh Yow Fishery Company Ltd., seeks summary judgment that it is not vicariously liable to the plaintiff People of Eauripik ("Eauripik") because it does not own either the F/V Teraka No. 168 or the F/V Yuh Yow 606. Yuh Yow Fishery states that the F/V Teraka No. 168 is entirely owned by its subsidiary and registered owner, Marin Marawa, Ltd., and that it never owned the F/V Yuh Yow 606, which is owned by a wholly unrelated corporation. Yuh Yow Fishery further contends that it cannot be held liable for either vessel's alleged unseaworthiness since only a vessel's owner or, in certain instances, a vessel's operator can be held liable on an unseaworthiness claim.

Alternatively, Yuh Yow Fishery Company Ltd. moves for its dismissal on the ground that it is not subject to the FSM Supreme Court's personal jurisdiction. It asserts that it does not have the requisite minimum contacts with the FSM in order for an FSM court to be able to exercise personal jurisdiction over it because it conducts no business in the FSM and does not own any vessels that operate or have operated in FSM territorial waters.

Eauripik contends that Yuh Yow Fishery has not supplied any competent evidence to support its motion since the supporting declarations of Simon Liu, Chao You Chen a/k/a Peter Chen, and David P. Ledger are unsworn. Eauripik also contends that those declarations are contradicted by other competent evidence in the record about Yuh Yow Fishery's involvement with or control over the two vessels. Eauripik also contends that summary judgment is premature since discovery is far from complete and there are presently insufficient facts to determine whether Yuh Yow Fishery is liable as Marin Marawa Ltd.'s alter ego and what is the exact relationship between the F/V Yuh Yow 606's owner and Yuh Yow Fishery.

II. Summary Judgment

A court must deny a motion for summary judgment unless it, viewing the facts presented and the inferences made in the light most favorable to the non-moving party, finds there is no genuine issue as to any material fact. Congress v. Pacific Food & Servs., Inc., [2011] FMSC 26; 17 FSM Intrm. 542, 545 (App. 2011); Carlos Etscheit Soap Co. v. McVey, [2011] FMSC 12; 17 FSM Intrm. 427, 434 (App. 2011); Rosario v. College of Micronesia-FSM, [2003] FMSC 10; 11 FSM Intrm. 355, 358 (App. 2003); Weno v. Stinnett, [1999] FMSC 34; 9 FSM Intrm. 200, 206 (App. 1999); Taulung v. Kosrae, [1998] FMSC 9; 8 FSM Intrm. 270, 272 (App. 1998); Iriarte v. Etscheit, [1998] FMSC 3; 8 FSM Intrm. 231, 236 (App. 1998); Nahnken of Nett v. United States, [1996] FMSC 9; 7 FSM Intrm. 581, 586 (App. 1996); Luzama v. Ponape Enterprises Co., [1995] FMSC 11; 7 FSM Intrm. 40, 48 (App. 1995).

A. Affidavits and Declarations

Eauripik contends that Yuh Yow Fishery's supporting unsworn declarations, even though made "under the penalty of perjury," are not competent evidence to support a summary judgment motion under FSM Civil Procedure Rule 56 since that rule requires affidavits. Yuh Yow Fishery replies that when an FSM court has not previously construed a procedural rule nearly identical to a U.S. rule, it may look to U.S. federal practice for guidance in applying the rule. Yuh Yow Fishery asserts that "[r]outinely, and by statute, U.S. federal courts allow declarations instead of affidavits, so long as declarations conform with 28 USC §1746 - in other words, so long as the statements within are on personal knowledge and said to be true and correct, and sworn under penalty of perjury." Reply to Opp'n at 3 (June 11, 2012) (footnote omitted). Yuh Yow Fishery cites recent U.S. case law to that effect.

By its terms, that U.S. statute, enacted by the U.S. Congress, affects only U.S. rules and regulations. The FSM Congress has not enacted an equivalent statute.[1] In the absence of such a statute, the court must conclude that in the FSM an unsworn declaration, even when the declarant avers or asserts that it is made "under the penalty of perjury," is not the equivalent of an affidavit required by the rules. This is not a matter of interpreting a procedural rule similar to a U.S. rule, but is rather a matter of not applying a foreign statute that has no FSM counterpart. Yuh Yow Fishery's supporting declarations therefore cannot be considered affidavits or given the weight an affidavit would.

B. Whether Yuh Yow Fishery Could Be Liable under Any Theory

It is undisputed that the F/V Teraka No. 168 is owned by Marin Marawa Ltd. Yuh Yow Fishery has provided a copy of the Provisional Ship Registry from the Kiribati Ship Registry and a copy of the ship's insurance certificate that reflect that. Eauripik, however, contends that Yuh Yow Fishery's relationship with Marin Marawa is such that it is Marin Marawa's alter ego and can therefore be held liable to the extent that Marin Marawa can be held liable.

Yuh Yow Fishery relies on Kilkenny v. Arco Marine Inc., [1986] USCA9 1849; 800 F.2d 853, 857-58 (9th Cir. 1986), where the court upheld the dismissal of a case that was not, until too late, brought against the subsidiary corporation that owned the vessel but was instead brought against the parent corporation even though early in the case the plaintiff had been informed that the subsidiary was the vessel's true owner. The Kilkenny court indicated that, if the plaintiff had the required proof for her alter ego theory, the result would have been different. Id. at 859. Kilkenny therefore does not require the dismissal Yuh Yow Fishery seeks.

The alter ego doctrine treats two entities that are nominally separate as the same when one corporation has acted unjustly or fraudulently. Adams v. Island Homes Constr., Inc., [2002] FMSC 13; 10 FSM Intrm. 611, 614 (Pon. 2002). Specific factors which are determinative on this point include substantially identical management, business purpose, operation, equipment, customers, supervision, and ownership. Id.

Eauripik alleges that Marin Marawa acted unjustly when its vessel ran aground on their reef and when it tried but failed to free the vessel. The two corporations, Yuh Yow Fishery and Marin Marawa, have substantially identical management, ownership, and business purpose (fishing). One reasonable inference is that Yuh Yow Fishery is Marin Marawa's alter ego. In the end, this might not be enough for the court to conclude that Yuh Yow Fishery is Marin Marawa's alter ego. But at this early stage, it is enough to deny summary judgment because there is a genuine issue of whether Yuh Yow Fishery is Marin Marawa's alter ego and this issue would be material to whether Yuh Yow Fishery can be held liable to Eauripik.

Since summary judgment is not available when the facts lead to differing reasonable inferences, thus establishing a genuine issue of fact, Adams v. Etscheit, [1994] FMSC 52; 6 FSM Intrm. 580, 583 (App. 1994), the court cannot grant Yuh Yow Fishery's summary judgment motion, Bualuay v. Rano, [2002] FMSC 30; 11 FSM Intrm. 139, 149 (App. 2002), for liability that may flow from the F/V Teraka No. 168's grounding because one reasonable inference is that Yuh Yow Fishery is Marin Marawa's alter ego.

There is much less evidence from which the court can infer that Yuh Yow Fishery exercised sufficient control over the F/V Yuh Yow 606 that would permit liability under an alter ego theory for that vessel's actions or that it was the operator of that vessel. However, at this early stage of discovery, Eauripik will be permitted further opportunity to develop evidence that, as alleged, Yuh Yow Fishery either owned, operated, or controlled the F/V Yuh Yow 606 during the relevant time period when it was trying to free the F/V Teraka No. 168 from Eauripik reef. Yuh Yow Fishery may then renew its summary judgment motion that it is not liable for the F/V Yuh Yow 606 if the evidence warrants.

III. Personal Jurisdiction

Yuh Yow Fishery contends that the complaint against it must be dismissed because it does not have the requisite minimum contacts with the FSM in order for the FSM Supreme Court to be able to exercise personal jurisdiction over it.

A. Whether Defense Was Waived

Eauripik contends that the motion must be denied because defendants must make Rule 12(b) motions either before or at the same time as their answer and Yuh Yow Fishery answered Eauripik's November 8, 2011 amended complaint before it filed this motion to dismiss for lack of personal jurisdiction. Yuh Yow Fishery contends that it preserved this defense because it raised the defense at paragraph 5 in its answer to the complaint and at paragraph 5 in its answer to the amended complaint. If Yuh Yow Fishery raised this defense in its answer, it will have preserved the defense for determination before trial. FSM Civ. R. 12(d); see, e.g., Chase v. Pan-Pacific Broad., Inc., [1984] USCADC 479; 750 F.2d 131, 133-34 (D.C. Cir. 1984) (lack of personal jurisdiction defense first raised in answer is timely raised and not waived even though answer also raised counterclaim); Birge v. Delta Air Lines, Inc., 597 F. Supp. 448, 450 (N.D. Ga. 1984) (no procedural rule requires defendant to present defense by motion before asserting it in a responsive pleading).

Paragraph 5 of Yuh Yow Fishery's answer to the amended complaint merely says, "Paragraph 5 is denied." Answer to Pls.' Am. Compl. para. 5 (Nov. 24, 2011). Paragraph 5 in the amended complaint states "Defendants are subject to in personam jurisdiction in this Court pursuant to 6 F.S.M.C. § 1304(3) [sic] becaach has bhas been and is doing business in the FSM and/or has committed acts or omissions that have resulted in damage in the FSM." Am. Compl. para. 5 (Nov. 8, . Yuh Yow Fishery therefore denied in its answer that it wait was subject to the court's personal jurisdiction although it never specifically stated directly that it was raising as a defense the court's lack of personal jurisdiction over it. In Rice v. New England College, [1982] USCA11 55; 676 F.2d 9 (1st Cir. 1982), the court held that, regardless of whether the defense was jurisdictional or statute of limitations defense, it was plainly stated in the defendant's answer when it read, "Plaintiff has not filed this action . . . within (90) daysecf rt ofpt of such notice." Id. at 10 (argument that motion to dismiss must be denied because it was not filed until after answer was not valid since the answer had asserted the statutory defense). Thus, while the better practice would have been for Yuh Yow Fishery to plainly state as a defense that the court had no personal jurisdiction over it, Yuh Yow Fishery's denial of the plaintiffs' averment that it was "subject to in personam jurisdiction in this Court" appears to have preserved this defense.

B. Minimum Contacts and Long-Arm Jurisdiction

Yuh Yow Fishery asserts that it cannot be subject to the FSM Supreme Court's personal jurisdiction because under the "long-arm" statute[2] it does not have sufficient minimum contacts with the FSM for such jurisdiction and therefore it would violate its right to due process. It asserts that it has not conducted any business in the FSM or operated any vessel or craft within the FSM's territorial waters or conducted any tortious activity in the FSM.

In analyzing a motion to dismiss for lack of personal jurisdiction, the court must undertake a particularized inquiry into the allegations that support personal jurisdiction. Yap v. M/V Cecilia I, [2005] FMSC 41; 13 FSM Intrm. 403, 411 (Yap 2005). The complaint's allegations are accepted as true for a motion to dismiss, except when those allegations have been controverted by affidavit, in which event conflicts are construed in the non-moving party's favor. Id. As noted above, Yuh Yow Fishery has not provided any affidavits.

If Eauripik succeeds in proving its alter ego allegations, it will have also shown that the court has personal jurisdiction over Yuh Yow Fishery - if Yuh Yow Fishery is shown to be the alter ego of the corporations that own the F/V Teraka No. 168 or the F/V Yuh Yow 606, the allegations in Eauripik's amended complaint are sufficient to show personal jurisdiction over Yuh Yow Fishery because Yuh Yow Fishery would have operated vessels that are alleged to have caused damage while in FSM waters.

IV. Conclusion

Accordingly, Yuh Yow Fishery's summary judgment motion is denied and its alternative motion to dismiss for lack of personal jurisdiction is also denied.

* * * *

---

^[1] Nor has a procedural rule been promulgated to bring about the same result.

^[2] Yuh Yow Fishery cites 6 F.S.M.C. 131 for its argument (and the plaintiffs miscited 6 F.S.M.C. 1304(3) in their pleading). That statute is the Trust Territory’s long-arm statute for the Trust Territory courts’ jurisdiction and is thus obsolete. The FSM’s long-arm statute is codified at 4 F.S.M.C. 204 (also cited in the plaintiffs’ pleading). Because of the two statutes’ similarity, this error should not harm Yuh Yow Fishery’s argument. From the litigants’ point of view, the only major difference between the two is that the FSM statute asserts personal jurisdiction over not only "the operation of a vessel or craft" within the FSM’s territorial waters or airspace, 4 F.S.M.C. 204(1)(c), but also the "exploitation of economic resources" within the FSM’s exclusive economic zone, 4 F.S.M.C. 204(1)(d), while the Trust Territory statute only asserts personal jurisdiction over "the operation of a vessel or craft within the territorial waters or airspace of the Trust Territory," 6 F.S.M.C. 131(3). Since the reef on which the F/V Teraka No. 168 is grounded is within the FSM’s territorial waters, it should not matter.