STATE COURT OF YAP TRIAL DIVISION
Cite as Gimnang v. Yap ,
7 FSM Intrm. 606 (Yap S. Ct. Tr. 1996)
BASIL LIMED GIMNANG,
STATE OF YAP,
CIVIL ACTION NO. 1995-015
FINDING OF FACT, CONCLUSIONS OF LAW
AND MEMORANDUM OF JUDGMENT
Hearing: September 30, 1996
Decided: October 8, 1996
For the Plaintiff: R. Barrie Michelsen, Esq.
Law Offices of R. Barrie Michelsen
P.O. Box 1450
Kolonia, Pohnpei FM 96941
For the Defendant: Dawn Landwehr, Esq.
Office of the Yap Attorney General
P.O. Box 435
Colonia, Yap FM 96943
* * * *
Civil Procedure ) Summary Judgment
In considering a summary judgment motion, a court is required to view facts and draw inferences in a light as favorable to the party against whom the judgment is sought as may reasonably be done. The motion may then be granted only if it is clear that there is no genuine issue of material fact and that
the moving party must prevail as a matter of law. Gimnang v. Yap, 7 FSM Intrm. 606, 608 (Yap S. Ct. Tr. 1996).
Constitutional Law ) Yap ) Interpretation
A constitutional provision that a thing shall be done in such a way "as provided by law" is not self-executing and requires legislation to implement it. Gimnang v. Yap, 7 FSM Intrm. 606, 609 (Yap S. Ct. Tr. 1996).
The common law of the United States and other nations in the common law tradition, up to the initiation of constitutional self-government in the FSM in 1979, is an essential part of the common law of Yap, but a court ought not fall into the error of adopting the reasoning of other common law jurisdictions' decisions without independently considering their suitability for Yap. Gimnang v. Yap, 7 FSM Intrm. 606, 609 (Yap S. Ct. Tr. 1996).
Taxation ) Recovery of Taxes
Prior to November 25, 1986, a plaintiff had a common law right to recover taxes paid pursuant to an unconstitutional Yap statute if he could show payment was made under duress and under protest. Gimnang v. Yap, 7 FSM Intrm. 606, 607, 610-11 (Yap S. Ct. Tr. 1996).
Statutes of Limitation; Taxation ) Recovery of Taxes
After November 25, 1986, a claim for recovery of taxes paid under an unconstitutional Yap statute is subject to a two-year statute of limitations. Gimnang v. Yap, 7 FSM Intrm. 606, 607, 611 (Yap S. Ct. Tr. 1996).
* * * *
ANDREW REUPONG, Associate Justice:
Finding of Fact
Plaintiff, Basil Limed Gimnang (hereafter "Gimnang") did not pay the taxes from 1982 to November 25, 1986, under protest.
Conclusions of Law
1. Prior to November 25th, 1986, a remedy for recovery of tax payments made pursuant to an unconstitutional statute existed under Yap's common law.
2. Two necessary preconditions to common law recovery of payments made pursuant to an unconstitutional tax are 1) payment under duress; and 2) payment made under protest.
3. Gimnang cannot recover the taxes which he paid under Yap S.L. 1-104 prior to November 25, 1986, because he cannot show that he made payment under protest.
4. Gimnang's claim for taxes paid from November 25, 1986, through 1988 are time barred by the statute of limitations provision of 31 Y.S.C. 104(a).
Memorandum of Judgment
The court has received and considered the State's Motion for Summary Judgment and Memorandum in Support of Motion for Summary Judgment, filed September 13th, 1996, and Plaintiff's Opposition to Defendant's Summary Judgment Motion and Cross Summary Judgment Motion, filed September 20th, 1996. The court heard oral argument on September 30, 1996.
In considering each motion, the court is required to view facts and draw inferences in a light as favorable to the party against whom the judgment is sought as may reasonably be done. Bank of Guam v. Island Hardware, Inc., 2 FSM Intrm. 281 (Pon. 1986). The motion may then be granted only if it is clear that there is no genuine issue of material fact and that the moving party must prevail as a matter of law. Federated Shipping Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3 (Pon. 1989).
The suit is one for declaratory judgment, with an alternative request for monetary relief. Gimnang asks this court to find that prior to November 25, 1986, the State of Yap was immune from suit for illegally extracted taxes. Gimnang's argument rests on the fact that before November 25, 1986, Yap had no statute law giving a taxpayer a right to sue the State to recover for an illegal tax. November 25, 1986, was the effective date of the Government Liability Act of 1986, which provides a taxpayer remedy for an illegal tax. Alternatively, the Complaint seeks, in the event that Plaintiff's position on the issue of sovereign immunity is wrong, for judgment in the amount of the taxes paid under Yap S.L. 1-104, previously found unconstitutional in a prior lawsuit between the parties filed in the FSM trial court.
The State in its Motion for Summary Judgment contends that this court should enter judgment in its favor, but asks the court to avoid a constitutional adjudication. Defendant argues for a retrospective application of the statute of limitations provision of 31 Y.S.C. 104, and concludes that so applied, the statute of limitations now precludes a claim for any taxes other than those paid prior to November 26, 1984. As to the pre-November 26, 1984 taxes, the State contends that Gimnang has waived his claim by not filing suit earlier. Also with respect to the pre-November 26, 1984, taxes, the State contends in the alternative that Gimnang is precluded from recovery because a necessary element of common law recovery for illegally extracted taxes is payment under duress and protest. Because Plaintiff did not protest, he cannot recover. In sum, the State takes the position in its Motion for Summary Judgment that the court need not reach the existence of whether the Yap State Constitution provides a remedy for illegally collected taxes, because even if that remedy did exist, Gimnang cannot recover because of the statute of limitations, because of an equitable time bar, and because he cannot show protest.
Plaintiff in his Cross Summary Judgment Motion says that there are no material facts in dispute, but argues that, applying the law to the undisputed facts, it is he, not the State, who is entitled to judgment. Gimnang reiterates his position that principles of sovereign immunity dictate that no remedy for recovery of taxes paid under an illegal statute existed in Yap prior to November 25th, 1986, and that this court should so hold. At oral argument, Gimnang argued alternatively that even should this court find that Yap was not immune, he can recover under the common law cause of action for recovery of payment of an illegal tax. Plaintiff interprets Innocenti v. Wainit, 2 FSM Intrm. 173 (App. 1986), to the effect that he need only have paid the tax under duress. Gimnang contends that payment made under protest is not a necessary prerequisite to common law recovery for an illegal tax.
The court grants the State's motion and denies that of Gimnang. The court finds that prior to November 25, 1986, a remedy existed under the common law of Yap for the recovery of taxes paid
under an unconstitutional statute; that a necessary element of that common law cause of action was protest at the time of payment; and that the Plaintiff made no protest. As to taxes paid after the effective date of the Yap Government Liability Act, the court finds the claim barred by the two year statute of limitations provision of 31 Y.S.C. 104(a). Accordingly, the court denies Gimnang's alternative request for recovery of taxes paid under Yap S.L. 1-104.
II. Before November 25, 1986, what were the elements of a cause of action for an illegally extracted tax under Yap's common law?
Defendant, as previously noted, urges the court to deny Plaintiff recovery on the basis of the statute of limitations, waiver, and lack of protest, and thus to avoid a constitutional adjudication. The assumption underlying each one of those arguments is that a remedy existed ) if no remedy existed, the Defendant's arguments are to no point. The court, as a first order of business, determines the issue of the existence of a remedy.
Article II, section 12 of the Constitution of the State of Yap provides: "Section 12. Every person may sue for redress, as provided by law, from the State or public entity in the case that person has suffered damage through an illegal act of any public official." (emphasis supplied). In a constitutional context, "a provision that a thing shall be done in such a way . . . `as provided by law' . . . is not self-executing." 16 Am. Jur. 2d Constitutional Law § 144, at 517 (1979). The phrase "as provided by law" used in Article II, section 12, refers to the enabling legislation that Article II, section 12, of the Constitution of the State of Yap contemplates. The Standing Committee Report No. 1-197, which deals with Bill No. 1-182, subsequently Yap S.L. 1-220, the Government Liability Act of 1986, makes it clear that 1-220 is the enabling legislation. The second paragraph of Committee Report No. 1-197 begins: "The purpose of this bill [Bill No. 1-182] as indicated in its title is to implement Section 12 of Article II of the Yap State Constitution." From the foregoing flows the conclusion that prior to November 25, 1986, ultimately the effective date of 1-220, there was no Yap State statute which addressed the issue of recovery for an illegal tax.
In the absence of statute, the court looks to Yap's common law. This is a case of first impression in Yap, and in making the determination as to what the common law of Yap at relevant times was, the court looks to the common law of the FSM as well as the common law of the United States. United States common law, and the law of other nations in the common law tradition, up to the initiation of constitutional self-government in the FSM in 1979, is an essential part of the common law of the FSM, Rauzi v. FSM, 2 FSM Intrm. 8, 17 (Pon. 1985), and hence of Yap. At the same time, this court ought not "fall into the error of adopting the reasoning of those decisions [of other common law jurisdictions] without independently considering suitability of that reasoning for the Federated States of Micronesia, Alaphonso v. FSM, 1 FSM Intrm. 209, 213 (App. 1982), and in this case for Yap.
Innocenti v. Wainit 2 FSM Intrm. 173 (App. 1986), a Chuuk case, deals with identical material facts. Innocenti involves the same sort of tax, an excise tax on imports into the state. The statute at issue1 there shared the same fate as the one at issue here. Both ran afoul of article IX, section 2(d) of the FSM Constitution. Judge King in Innocenti, looking to U.S. common law sources, sets out the elements of a common law cause of action for a recovery of an illegal tax:
In the United States clear rules have been developed from common law contractual concepts. The right to a court-ordered refund of an unconstitutional tax turns
upon whether the tax was "voluntarily" paid.
* * *
The analysis turns on whether the tax was voluntarily paid. Involuntariness is difficult to establish. See, for example, Chesebrough v. United States, 192 U.S. 253, 259, 24 S. Ct. 262, 264, 48 L. Ed. 432 (1904) ("generally speaking, even a protest or notice will not avail . . . without any coercion by the actual or threatened exercise of power"); Security National Bank v. Young, 55 F.2d 616, 619 (8th Cir. 1932), cert. denied, 286 U.S. 551 ("True, it is alleged that the taxes were paid under protest, but this is not sufficient to save the payment from being voluntary . . . if it was not made under any duress, compulsion, or threats.").
However, payment of tax coerced by a threatened deprivation of property and made under protest, is considered involuntary. In Chesebrough v. United States, supra, the Court noted:
Thus, in Elliot v. Swartwout, 10 Pet. 137, 9 L. ed. 373, and Bend v. Hoyt, 13 Pet. 266, 10 L. ed. 155, which were customs cases, the payments were made to release goods held for duties on imports . . . . The recovery rested upon the fact that the payment was made to release property from detention, and the protest saved the rights which grew out of that fact.
192 U.S. [at] 260, 24 S. Ct. at 264. The Truk merchants informed the government that they protested the tax as unconstitutional. They had to pay to get their property from the dock, and these payments were coerced, not voluntary.
Innocenti, 2 FSM Intrm. at 186-87.
Plaintiff's counsel argued at oral argument that the common law cause of action for recovery of tax payments made pursuant to an unconstitutional statute hinges on one consideration, duress. Plaintiff's position runs counter to the established common law rule:
At common law, and for many years under the federal statutes, protest at the time of payment was a condition precedent to the recovery of a tax. Elliot v. Swartwout, 10 Pet. 137, 153, 9 L. ed. 373, 379; Curtis v. Fiedler, 2 Black 461, 17 L. ed. 273; Chesebrough v. United States, 192 U.S. 253, 48 L. ed. 432, 24 S. Ct. 262; United States v. New York & C. Mail S.S. Co., 200 U.S. 488, 50 L. ed. 569, 26 S. Ct. 327.
George Moore Ice Cream Co. v. Rose, 289 U.S. 373, 375-76, 53 S. Ct. 620, 621, 77 L. Ed. 1265, 1268 (1932). Innocenti establishes two criteria for involuntariness: a payment is considered involuntary if it is "coerced by a threatened deprivation of property and made under protest." 2 FSM Intrm. at 187 (emphasis supplied). Judge King cites Chesebrough v. United States, 192 U.S. 253, 24 S. Ct. 262, 48 L. Ed. 432 (1904), which is a stamp tax case from 1903 where the taxpayer claimed that "the law requiring such stamps was unconstitutional, and that he was making the purchase under duress." Id. at 261, 24 S. Ct. at 264, 48 L. Ed. at 435. The Chesebrough court, in discussing Elliot v. Swartwout and Bend v. Hoyt, noted that in those two cases, protest "saved" the rights which "grew out of" the fact that the taxpayer paid the tax to release his goods from detention. Looking to Innocenti and the common law sources on which it rests, this court concludes that prior to November 25th, 1986, a right to recovery for taxes paid pursuant to an unconstitutional statute existed under the
common law of Yap. In order to recover, a plaintiff must show payment under duress and under protest.
Bearing in mind the Alaphonso caveat that the court consider the application of common law principles to Micronesia, and in this case to Yap, the court looks to the rationale for the protest requirement. Payment under protest puts the taxing authority on notice that the funds paid are subject to dispute. It allows a government to make contingent provision from the outset for repayment. This reasoning is applicable to Yap. Yap is a developing state in a new and developing nation, and as such, fiscal planning and its goal, fiscal stability, are essential. Protest of the tax at time of payment would have allowed Yap to take reasonable steps from the inception of the dispute to make provision for possible repayment. The protest requirement, viewed in this light, is not an empty one.
Applying this test to the facts viewed in a light most favorable to Gimnang, he can demonstrate duress: he could not take delivery of his goods from the dock until he had paid the tax. Judge Benson made this specific finding of fact in Gimnang v. Yap, 4 FSM Intrm. 212, 215 (Yap 1990), the prior FSM trial court litigation between the parties. In this regard, the facts of this case are identical to those in Swartwout, the first U.S. case to recognize the common law right of recovery. In Swartwout, the taxpayer had to pay an ad valorem duty to obtain his goods. Gimnang herein cannot, however, show the second prerequisite, payment under protest. The Defendant's Requests for Admission dated June 17, 1996, and made a part of the court file, asked Gimnang to admit that for the years 1982 through 1988, he "did not protest to any state revenue employee that the State excise tax was illegal." Plaintiff's response to the request dated September 13th, 1996, is in pertinent part as follows: "Requests 2-8. If by `protest,' the State refers to statutes in the United States that make it easier to contest tax assessments by replacing the traditional requirement of payment under duress, with one that merely requires the taxpayer to file a written `protest,' the Plaintiff admits. . . ." The precise meaning of this response is not apparent. The court explored the issue of protest at oral argument, and based on the representations of counsel on this point made on the record, it is clear that Gimnang did not pay the tax under protest. The court so finds. Since Plaintiff did not pay the tax under protest, he did not meet a necessary element of the common law cause of action for recovery of an illegal tax. On this basis recovery is precluded.
III. The post-November 25, 1986 taxes
The Yap, State Liability Act provides at 31 Y.S.C. 104(a) in pertinent part as follows:
§104. Limited waiver of sovereign immunity.
Actions upon the following claims may be brought against the State of Yap with the original and exclusive jurisdiction residing in the Trial Division of the State Court of Yap:
(a) Claims for recovery of any tax alleged to have been erroneously or illegally collected, . . . . Actions shall be commenced pursuant to this subsection only within two years after the cause of action accrues.
The instant action was filed on February 23, 1995. Gimnang alleges at paragraph 12 of the Complaint that from the period January 1, 1986 to December 31, 1986, the Plaintiff paid $11,540.44 under the illegal statute; in paragraph 13, he alleges that from January 1, 1987, to January 11, 1988, he paid $720. The record does not pro-rate the $11,540.44 over 1986, but to the extent that any sums were paid after November 25, 1986, the effective date of the Yap State Liability Statute, the claim is barred by the two year statute of limitations of 31 Y.S.C. 104(a). Likewise, the $720 paid in 1987 and 1988 are time barred.
Based on the foregoing, the court finds that prior to November 25, 1986, the common law of Yap provided remedy for the recovery of taxes paid under an unconstitutional statute. The necessary preconditions to recovery are payment under duress with notice of protest. Plaintiff in this case is precluded from recovery for the taxes at issue which were paid before November 25, 1986, because he did not pay the tax under protest. The two year statute of limitations provision of 31 Y.S.C. 104(a) precludes recovery for taxes paid after November 25, 1986, through 1988. A judgment consistent with the Finding of Fact, Conclusions of Law, and Memorandum of Judgment issues herewith.
1. Although not a fact of record in this case, it is the court's understanding that the Chuuk statute at issue in Innocenti was based on Yap S.L. 1-104.