In re Gross Revenue Tax [2018] FMSC 45; 22 FSM R. 124 (Pon. 2018) (20 December 2018)

FSM SUPREME COURT TRIAL DIVISION
CIVIL ACTION NO. 2018-028
In re: Matter of Gross Revenue Tax,

FELICIANO PERMAN,
Petitioner,

vs.

SIHNA N. LAWRENCE, as Secretary Dep’t of
Treasury & Finance, FSM Nat’l Government,
Respondent.
_____________________________________________

ORDER GRANTING PRELIMINARY INJUNCTION

Beauleen Carl-Worswick
Associate Justice

Hearing: November 29, 2018
Decided: December 20, 2018

APPEARANCES:

For the Petitioner: Joseph S. Phillip, Esq.
P.O. Box 464
Kolonia, Pohnpei FM 96941

For the Respondent: Abigail J. Avoryie, Esq.
Assistant Attorney General
FSM Department of Justice
P.O. Box PS-157
Palikir, Pohnpei FM 96941

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HEADNOTES

Civil Procedure - Injunctions
The object of a preliminary injunction is to preserve the status quo pending the litigation on the merits. In re Gross Revenue Tax, 22 FSM R. 124, 127-28 (Pon. 2018).

Civil Procedure - Injunctions
The issuance of a preliminary injunction is a matter of the facts of each situation and thus a matter for the trial judge’s discretion. In re Gross Revenue Tax, 22 FSM R. 124, 128 (Pon. 2018).

Civil Procedure - Injunctions
In exercising its broad discretion in deciding on the motion for injunctive relief, the court applies the long established standard, a four-factor test. The four factors are: 1) the likelihood of success on the merits of the party seeking injunctive relief; 2) the possibility of irreparable injury to the moving party; 3) the balance of possible injuries or inconveniences to the parties which would result from granting or denying relief; and 4) any impact on the public interest. In re Gross Revenue Tax, 22 FSM R. 124, 128 (Pon. 2018).

Civil Procedure - Injunctions
Injunctive relief can be granted if three of the four factors favor the granting of the preliminary injunction. In re Gross Revenue Tax, 22 FSM R. 124, 128 (Pon. 2018).

Civil Procedure - Injunctions - Likelihood of Success
A court may grant a preliminary injunction even if the court is not convinced that the moving party will more likely than not prevail, as long as the movant’s position appears sufficiently sound to raise serious, nonfrivolous issues. In re Gross Revenue Tax, 22 FSM R. 124, 128 (Pon. 2018).

Civil Procedure - Injunctions - Likelihood of Success
As to the likelihood of success on the merits, a court may grant a preliminary injunction so long as the movant’s position raises serious nonfrivolous issues. In re Gross Revenue Tax, 22 FSM R. 124, 128 (Pon. 2018).

Civil Procedure - Injunctions - Irreparable Harm
For the court to grant a preliminary injunction, the party seeking protection must be faced with the threat of irreparable harm before the litigation’s conclusion unless the injunction is granted. In re Gross Revenue Tax, 22 FSM R. 124, 128 (Pon. 2018).

Civil Procedure - Injunctions; Evidence
Because a preliminary injunction can be granted on basis of procedures that are less formal and evidence that is less complete than in a trial on the merits, the evidence rules are relaxed when considering requests for a temporary restraining order or preliminary injunction. In re Gross Revenue Tax, 22 FSM R. 124, 129 (Pon. 2018).

Civil Procedure - Injunctions; Evidence
Because a preliminary injunction hearing is less formal than a full trial, less complete evidence is required for an injunction than at trial. Therefore, a petitioner’s affidavits submitted on the record may be sufficient evidence when considering a temporary restraining order or a preliminary injunction. In re Gross Revenue Tax, 22 FSM R. 124, 129 (Pon. 2018).

Civil Procedure - Injunctions - Irreparable Harm
When the petitioner avers that he has children abroad who are dependent upon him for financial support, there is substantial threat of irreparable harm to the petitioner’s children because, in Micronesia, our very survival and ability to pursue education sharply contrasts those of other cultures and because familial support, whether it be emotional, physical, or financial, is of vital importance to our success. Because of the children’s continuous need for their father’s financial support, they could face un-compensable damage and harm without the petitioner’s support and their future could potentially be unnecessarily cut short if relief is not granted before completion of judicial review. In re Gross Revenue Tax, 22 FSM R. 124, 129 (Pon. 2018).

Civil Procedure - Injunctions - Balance of Injuries
When the petitioner has a substantial risk of potential irreparable harm if injunctive relief is not granted and the harm that the respondent faces in comparison is only minimal because the worst case scenario is that the respondent will not be allowed to execute the levy on the petitioner’s bank accounts and if the court later rules in the respondent’s favor, then the respondent will be able to collect the tax the petitioner owes. In re Gross Revenue Tax, 22 FSM R. 124, 129-30 (Pon. 2018).

Civil Procedure - Injunctions - Balance of Injuries
When to disturb the status quo now would only cause the movant irreparable harm and little harm would come to the respondent from maintaining the status quo and any damage to the respondent would be compensable by reasonable money damages, the balance of the injuries weighs in the movant’s favor. In re Gross Revenue Tax, 22 FSM R. 124, 130 (Pon. 2018).

Civil Procedure - Injunctions - Likelihood of Success
When money damages cannot possibly remedy the harm that the petitioner could face if relief is not granted and when, on the other hand, the respondent can be compensated if any potential inconvenience actually exists, the balance-of-injuries factor weighs in the petitioner’s favor. In re Gross Revenue Tax, 22 FSM R. 124, 130 (Pon. 2018).

Civil Procedure - Injunctions - Public Interest
The public interest encourages orderly judicial process in which all interested parties may be heard, their view properly heard, and their rights honored. In re Gross Revenue Tax, 22 FSM R. 124, 130 (Pon. 2018).

Civil Procedure - Injunctions
One objective of a temporary and preliminary injunction is to maintain and preserve the status quo pending litigation on the merits. In re Gross Revenue Tax, 22 FSM R. 124, 130 (Pon. 2018).

Civil Procedure - Injunctions; Civil Procedure - Injunctions - Bond
A motion for preliminary injunction can be granted with the issuance of the preliminary injunction held in abeyance and authorized only upon the posting of a bond in accordance with Rule 65(c). In re Gross Revenue Tax, 22 FSM R. 124, 130-31 (Pon. 2018).

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COURT’S OPINION

BEAULEEN CARL-WORSWICK, Associate Justice:

BACKGROUND

This matter came before the Court on a Petition for Judicial Review (complaint) filed by the petitioner, Feliciano Perman (hereinafter referred to as "Petitioner"), on November 1, 2018. Petitioner filed his First Amended Petition for Judicial Review and Designation of Records for Judicial Review on November 5, 2018.

On November 5, 2018, Petitioner also filed its Motion for TRO and Preliminary Injunction seeking to enjoin the respondents, Sihna N. Lawrence in her capacity as Secretary of the FSM Treasury & Finance, and the FSM National Government (hereinafter referred to as "Respondent") from executing a levy on Petitioner’s bank accounts. On November 7, 2018, the Court issued an order scheduling a hearing on the Petitioner’s motion on November 19, 2018.

On November 15, 2018, the Respondent filed a Motion for Enlargement of Time for the hearing. On November 16, 2018, Petitioner filed a Conditional Non-opposition to Motion to Enlarge Time with an Affidavit of Feliciano M. Perman (Petitioner). On the same day, November 16, 2018, the Court entered an Order granting the motion for enlargement and reset the hearing to November 26, 2018. On November 20, 2018, Petitioner filed its Motion to Reconsider Order Enlarging Time and to Grant the TRO, until the next scheduled hearing on November 26, 2018. On November 21, 2018, the Court entered an Order and reset the hearing on the TRO matter for November 23, 2018.

On November 23, 2018, the hearing on the TRO was held. The parties through their counsels, attorney Abigail Avoryie for the Respondents and attorney Joseph Phillip for the Petitioner, presented arguments and evidence. Subsequently, on November 23, 2018, the Court entered an Order denying Petitioner’s request for temporary restraining order (TRO) finding insufficient evidence of immediate and irreparable harm. The Court further vacated the originally scheduled hearing date of November 26, 2018 and reset the hearing to November 29, 2018 to consider Petitioner’s Motion for Preliminary Injunction. The Court also required the Respondent to file its Response to Petitioner’s Motion for Preliminary Injunction entered on November 5, 2018.

On November 26, 2018, the Respondent filed its Opposition to Petitioner’s Motion for Preliminary Injunction. On November 28, 2018, the Petitioner filed its Reply to Opposition to Preliminary Injunction and an Affidavit of Plaintiff.

On November 29, 2018, the Court held the hearing on the Petitioner’s Motion for Preliminary Injunction. Attorney Abigail Avoryie appeared for the Respondents and attorney Joseph Phillip appeared for the Petitioner. The Petitioner was not present at the hearing.

At the outset of the hearing, the Court as a preliminary matter disclosed to the parties a potential conflict of interest on her part stating that she has a brother who is an employee of the Division of Customs and Taxation, FSM Department of Finance and Administration; however, the presiding justice advised the parties that the matter will proceed forward as this is a preliminary injunction hearing that must be heard at the earliest possible time and takes precedence over all matters except older matters of the same character.^[1] Attorney Phillip moved to disqualify the Presiding justice and the Respondent opposed. The Court denied Petitioner’s motion for disqualification since other national court justices were not presently available in the FSM to preside over the matter. Petitioner was instructed to submit his motion for disqualification in writing, to which the Respondent may file a response.

Counsel for Petitioner refused to present oral argument and advised that the Court may base its decision on the pleadings and submissions, which includes the affidavits submitted by Petitioner. Respondent, through counsel, presented oral argument on the motion for preliminary injunction with the supporting testimony of its employee, Mr. Salvador Jacob.

Based on the presentation of the parties, the record and filings in this matter, the Court hereby GRANTS Petitioner’s Motion for Preliminary Injunction for the following reasons:

DISCUSSION

a. Standard of Review

"The object of a preliminary injunction is to preserve the status quo pending the litigation on the merits." Seventh Kosrae State Legislature v. Sigrah, 11 FSM R. 110, 113 (Kos. S. Ct. Tr. 2002) (citing Ponape Enterprises Co. v. Bergen, 6 FSM R. 286 (Pon. 1993)). "The issuance of a preliminary injunction is largely a matter of the facts of each situation and thus a matter for the discretion of the trial judge." Id. (citing Onopwi v. Aizawa, 6 FSM R. 537 (Chk. St. Ct. App. 1994)).
In exercising its broad discretion in deciding on the motion for injunctive relief, the Court applies the long established standard, a four-part test where it considers four factors. The four factors include: 1) the likelihood of success on the merits of the party seeking injunctive relief; 2) the possibility of irreparable injury to the moving party; 3) the balance of possible injuries or inconveniences to the parties which would result from granting or denying relief; and 4) any impact on the public interest. Ruben v. Petewon, 13 FSM R. 383, 386 (Chk. 2005) (citing Ponape Enterprises Co. v. Bergen, 6 FSM R. 286, 288 (Pon. 1993)). Further, an injunctive relief can be granted if three of the four factors favor the granting of the preliminary injunction. See Carlos Etscheit Soap Co. v. Epina, 9 FSM R. 155, 164 (Pon. 1997).

1. Likelihood of Success on the merits of the Petitioner

A court may grant a preliminary injunction "even if the Court is not convinced that the moving party will more likely than not prevail, as long as the movant’s position ‘appears sufficiently sound to raise serious, nonfrivolous issues.’" Ponape Enterprises Co. v. Bergen, 6 FSM R. 286, 289 (Pon. 1993) "As to the likelihood of success on the merits, a court may grant a preliminary injunction so long as the movant’s position raises serious nonfrivolous issues." Sigrah, 11 FSM R. at 113.

The Sigrah court reasoned that because the petitioner’s case concerned the constitutionality of the respondent’s (Governor of the State of Kosrae) termination of the legislative counsel, the petitioner satisfied the likelihood of success test. Id. So long as the issues raised by the applicant are serious and non-frivolous, the Court may grant a preliminary injunction. Id.

Here, Petitioner argued that he is "highly likely to prevail on the merits because the lease is a ‘casual’ transaction, and land is a subject matter that is prohibited to the FSM National Government, and the defendant has never enforced levy against other lessors throughout the FSM."^[2] The Respondent argued that the assessment of GRT on leased lands is lawful under the FSM Constitution; further, that the FSM has made identical assessments on other similarly situated persons like Petitioner, and thus, Respondent believes it is likely to be successful on the merits.

Petitioner raises issues of constitutional and statutory law that are serious and non-frivolous, which the Court finds appropriate to review. These issues include, (1) whether the Respondent’s assessment of GRT on funds derived from the use or lease of lands within the FSM is constitutional pursuant to article XI, § 6(a) of th Constitution; ann; and, (2) whether a lease of private land falls within the meaning of ‘casual sales’ under Title 54 of the FSM Code. The Court fthese issues non-frivolous and likely to be issues of firstfirst impression before the Court. And, whether or not the Petitioner will prevail on the merits depends upon a full adjudication of the issues. Therefore, the Court finds this factor to be in favor of granting the preliminary injunction.

2. Possibility of Irreparable Harm to the Petitioner

For the Court to grant a preliminary injunction, "the party seeking protection must be faced with the threat of irreparable harm before the conclusion of the litigation unless the injunction is granted." Epina, 9 FSM R. at 161.

Here, the Respondent argued that the Petitioner still failed to provide sufficient evidence to support its claim that the money levied by Respondent could potentially cause an irreparable harm or injury to him, his family and children; further, that the Petitioner’s argument is also vague and speculative and failed to carry the requisite weight or urgency needed when considering TRO’s and Preliminary Injunctions. The Respondent did not provide any bases for this argument. Therefore, the Court finds it reasonable to infer that this argument is premised upon the absence of Petitioner at the Preliminary injunction hearing to provide testimonial evidence, other than what he has submitted on the record, including his affidavits.

Because this is a hearing on the Petitioner’s Motion for Preliminary Injunction, the Court will disagree with the Respondent’s argument. The Court believes that the rules of evidence should be relaxed when considering requests for a TRO and Preliminary Injunction. This is because a preliminary injunction can be granted "on basis of procedures that are less formal and evidence that is less complete than in a trial on the merits." University of Tex. v. Camenisch, [1981] USSC 88; 451 U.S. 390, 395[1981] USSC 88; , 101 S. Ct. 1830, 1834, 68 L. Ed. 2d 175, 180 (1981). The Court in Camenisch reasoned that "[b]ecause a preliminary injunction hearing is less formal than a full trial, less complete evidence is required for an injunction than at trial." See also Sierra Club v. Federal Deposit Ins. Corp., [1993] USCA5 1298; 992 F.2d 545, 547 (5th Cir. 1993).^[3] Therefore, the Court finds Petitioner’s affidavits submitted on the record to be sufficient evidence when considering TRO’s and preliminary injunctions.

In his affidavit, the Petitioner averred, inter alia, that, "I have children abroad including in Japan who are dependent upon me for financial support." Aff. of Pl. (Nov. 28, 2018). The Court recognizes that here lies the substantial threat of irreparable harm. In Micronesia, our very survival and ability to pursue education sharply contrasts those of other cultures. Familial support, whether it be emotional, physical, or in this case, financial, is of vital importance to our success. This issue is unique to our customs and traditions and our way of subsistence.^[4] Because the Petitioner’s children have a continuous need for the financial support of their father, the children could face un-compensable damage and harm without the support of the Petitioner.^[5] Moreover, the children’s future could potentially be unnecessarily cut short if relief is not granted before completion of judicial review. Accordingly, the court finds this factor to also favor the Petitioner.

3. Balance of Possible Injuries or Inconvenience of the Parties

The third factor requires the Court to weigh possible injuries to the parties from granting or denying the preliminary injunction. Under the analysis of the second factor above, there is a substantial risk of potential irreparable harm to the Petitioner if injunctive relief is not granted. The harm that the Respondent faces in comparison is only minimal. If the Court issues the order granting preliminary injunction, the worst case scenario is that the Respondent will not be allowed to execute the levy on Petitioner’s bank accounts. If, however, at the conclusion of trial the Court finds in favor of the Respondent, then the Respondent will be able to collect the tax owed by Petitioner.

If money damages is the only harm or loss the Respondent could potentially face, and money can compensate for that loss, then that harm is far outweighed by what Petitioner could potentially face. The Court has stated, "[w]hen money damages will fully compensate for the threatened interim action, then the preliminary injunction should be denied." Setik v. Pacific Int’l, Inc., 17 FSM R. 277, 281 (Chk. 2010). Further, "[w]hen to disturb the status quo now would only cause irreparable harm [sic] the movants and little harm would come to the defendant from maintaining the status quo and any damage to the defendant would be compensable by reasonable money damages, the balance of the injuries weighs in the movants’ favor." Ruben, 13 FSM R. at 384 (emphasis added).

Here, money damages cannot possibly remedy the harm that Petitioner could face if relief is not granted. The Respondent, on the other hand, can be compensated if any potential inconvenience actually exists. Thus, this factor also weighs in favor of Petitioner.

4. Impact on Public Interest

The Court has stated that the impact on public interest "encourages orderly judicial process in which all interested parties may be heard, their view properly heard, and their rights honored. Injunctive relief would advance that public interest and allow the matter to proceed in an orderly and deliberative fashion . . . in order that there may be just resolution of the matter." Id. at 391.

The Respondent’s main argument under this factor is that individuals similarly situas thitioner may no longer respect the departmentsRs’ e17; enforcement of its administrative mandate if the Court were to grant Petitioner’s request. This argument is without a doubt important. However, the right to be heard is one the Court cannot ignore. The right to appeal the department’s final decision, as afforded under 54 F.S.M.C. 156(1), would be undermined and rendered useless if the Court allows the Respondent to continue its levy on Petitioner’s bank accounts. Moreover, one of the objectives of a temporary and preliminary injunction is to maintain and preserve the status quo pending litigation on the merits. Therefore, the Court finds the fourth factor to also favor granting of Petitioner’s application for preliminary injunction.

Accordingly, because the court finds all four factors to favor granting preliminary injunction, the Petitioner’s motion for a preliminary injunction will be GRANTED.

5. Security

Under FSM Civil Rule 65(c),

No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum, if any, as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained.

The Court raised the issue of security to counsel for Petitioner in the event an injunction is issued in favor of the petitioner. However, counsel for the Petitioner was unable to comment indicating that he will need to confer with his client.

ACCORDINGLY, the Petitioner’s Motion for Preliminary Injunction is hereby GRANTED to enjoin the Respondent from any further levy upon the Petitioner’s FSM bank accounts. However, issuance of the preliminary injunction will be held in abeyance and authorized only upon the posting of a bond in accordance with FSM Civil Rule 65(c). The parties may agree to a proper security amount and submit it to the Court for consideration. If the parties are unable to agree, each may submit in writing a recommended security.

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^[1] See FSM Civ. R. 65(b).

^[2] Petitioner’s Conditional Non-Opp’n to Mot. to Enlarge Time (Nov. 16, 2018).

^[3] See Nix v. Ehmes, 1 FSM R. 114, 118 (Pon. 1982), a legal source of authority that allows the Court to look to outside sources for guidance.

^[4] See FSM Constitution art. V, § 2, which preserves and protects Micronesian traditions recognizing them as compelling social interests; see also the Pohnpei Constitution, art. 5, § 3, whiovides for the protecrotection of traditions, customs and family obligation.

^[5] Petitioner attests that the funds from the lease are the means of support for his family, including those studying abroad. See Aff. of Pl. (Nov. 28, 2018).