Sablan v. Superior Court

CLERK OF COURT SUPREME co:URT ' CNMI FILED 91 JUL 30 A9 : 53 FOR PUBLICATION sy,f!l/4::?-if? IN THE SUPRE1-1E COURT OF THE CQ}L.'10N:·lEALTH OF THE NORTHEIDl MARIANA ISLANDS HER."!AN S. SABLAN and ) ORIGINAL ACTION NO. 91-002 ANTONIO T. SALAS, ) ) Petitioner, ) ) vs. ) ) SUPERIOR COURT OF THE ) COMMONWEALTH OF THE NORTHERN ) ORDER DENYING .MANDA..'iUS MARIANA ISLANDS, ) ) Respondent, ) ) and ) ) ELOY INOS, DIRECTOR OF ) FINANCE; CNMI DEPARTMENT O F ) FINANCE; DIVISION OF REVENUE ) AND TAX; CON110NWEALTH ) GOVERNHENT, ) ) Real Parties In Interest. ) ____ ) Counsel for Petitioner: Robert J. O'Connor, Esquire P.O. Box 1969 Saipan, MP 96950 Counsel for Respondents/ Robert c. Naraja, Attorney General; Real Parties in Interest: Eric Smith, Assistant Attorney General 2nd Floor Administration Building Capitol Hill Saipan, MP 96950 BEFORE: DELA CRUZ, Chief Justice; HILLBLOM and ATALIG, Special Judges. 166 DELA CRUZ, Chief Justice: Herman S. Sablan and Antonio T. Salas, both of whom are Commonwealth taxpayers, have petitioned this Court to issue a writ of mandamus against the Commonwealth Superior Court:, which had denied their application for a temporary res training order and injunction against the Commonwealth Government and its director of finance. They seek to enjoin the disclosure of their tax returns and return information to any person, including the United States Government or arty of its officers and agencies. I. On July 9, 19 9 1, petitioners filed a complaint for declaratory and injunctive relief against the Commonwealth Government and its finance director. They allege that 4 CMC § 170l(d) prohibits the disclosure of their tax returns and return information to any person, including the U. S. Government or dny of its agencies or officers. They moved for a temporary restraining order, which was heard and denied the next day. In a three-page decision, the Superior Court denied the motion for a restraining order and injunction. It determined that the lawsuit was, in essence, one to enjoin the enforcement of 48 u.s.c. § 168l(b), through which federal statute the Inspector General of the u.s. Department of Interior ("IG") had announced its intention to conduct an audit of the Commonwealth's assessment and collection of income taxes. 167  11(S]ince any injun ct i on ordered a g a i ns t the defendants has a direct beari ng on the asserted statutory duty of the IG to audit the defendants," the court ruled that the IG is an i ndisp e nsa ble party to the action and must be joined.· S uperi or Court O rder , July 10, 1991, at 2. "Failure to do so dicta t es a denial of p la intiffs ' application for a res t r aini ng order o r i njunction . " Id., at 3. II. In reviewing the papers filed for and against the issuance of mandamus, we are guided by the f act o rs discussed in Tenorio v. S uperio r Court, Original Action No. 89-002 (N. :·L I. Nov. 14, 1989) . 11 (0] n ly ex c ept io n al circumstances amounting to a 1 judic i al usu rpa ti on of power' will j u s tify the invocation of this ex tr aordin ar y remedy.11 Id., at 6. 1 (T]he remedy of mandamus is 1 a drastic one, to be involved on ly in extr aordina ry situations." Id. One s ee ki n g mandamus must show that the lower court order is clearly erroneous. I,g. "If a rational and substantial legal argument can be made in supp ort of the q uestion ed • . • ru ling, the case is not appropriate for mandamus � • • even though on normal appeal a reviewing court may find reversible error." Id., at 5. III. The trial court denied the applic ation for temporary res tr ainin g order (or injunction) because of the failure to join the IG as an indispensable party. We examine whether this ruling 168 is clearly erroneous. A reading of the complaint, the application for .:!mporary res tr aining order and its supporting papers indicate that what apparently triggered the filing of the lawsuit was the announcement by the IG to perform an audit of the Commonwealth's assessment and collection of income taxes. Petitioners are concerned that if the IG performs the intended audit, their individual tax returns and return information would be disclosed to the IG in v io l at ion of 4 CMC § 1701(d). They, therefore, seek an order enjoining the Commonwealth Government and the Director of Finance from disclosing such confidential information. We are not convinced that, under our Tenorio g u id e lin e s , the trial court was clearly erroneous in ruling that the IG is an indispensable party to the lawsuit. Although the restraining order sought is not against the IG, but is rather against the Commonwealth Government, its aim is to ultimately prohibit the IG from reviewing petitioners' tax returns and return information. To that extent, there is an apparent conflict between 4 CMC § l70l(d} which prohibits the disclosure of tax returns and return information by the Commonwealth Government and 48 U.s.c. § 168l(b), the federal statute under which the IG announced its intention to audit all accounts pertaining to the revenue and receipts of the Commonwealth Government. It is this potential dilemma which presumably led the trial court to decide that the IG is an indispensable party, in order to have a complete resolution of the case. 169  In its response to the petition for mandamus, the Com monwealth Government states that the IG's announcement is one to conduct a "performance audit.11 It argues that the announcement 11does not express an intention to audit Commonwealth income tax returns or ·tax inf?rmation." Therefore, it contends that there is no basis for an injunction and the case is premature. We agree. We also find that there has been no showing made by petitioners that the Commonwealth Government or its finance director will breach the non-disclosure provision of 4 CMC § 170l(d). Petitioners pre3ume that such will be the case. Absent a showing that the IG would in fact seek disclosure of tax returns or return information, •,.;e fail to see ho•..; the statute would be violated. Further, there has been no showing that the finance director will, upon request by the IG, voluntarily turn over such documents in apparent violation of 4 CMC § 170l(d); nor has there been a showing that he will, if subpoenaed, turn such docu�ents over to the IG. During oral argument, the Commomvealth Government informed us that the IG is presently reviewing the Commonwealth Gov ernment's concern with respect to the non-disclosure provision of the statute. Whether those concerns would ultimately be addressed by the IG so as not to violate 4 CMC § 170 l { d) is not yet known. For now, it is premature to presume otherwise. 170  IV. We, therefore, hold that the Superior Court was not clearly erroneous, as a matter of law, in denying the application for a restraining order (or inj unction ) for failure to join the IG as an indispensable party. Whether we ul ti mately , upon a regular appeal of the order denying the restraining order, would conclude otherwise ( i. e. that the IG is not an indispensable party), is a matter which has little b e ari n g on wh ethe r a writ should issue. The petition for a writ of mandamus, therefore, is hereby OENIED. JOSE S. DELA CRUZ, Chief JuSBYce 171 HILLBLOM, Special Judge, Dissenting: I. BACXGROUND OF THE CASE A. SUM1-f.ARY Petitioners seek a writ of mandamus requiring the Superior Court of the Northern Mariana Islands to vacate its order requiring the Inspector General1 be joined as an indispensable party (which might remove the action to the federal court), before considering the application for TRO and a pernanent injunction to prohibit the director of revenue and taxation from disclosing their tax returns in violation of HMI law.2 The denial of the petitioners motion is 1 Inspector General, United States Department of Interior. At the it should be noted that the people of the IDU, outset, including the petitioners did not vote for anyone in the government which created the Department of Interior or would appoint the Inspector General; or who oversee the operations of that department. 2 Although this dissent is lengthy my disagreement with the majority is not. The majority is concerned over the misuse of mandamus: it (government] contends that there is no basis for an injunction and the case is premature. We agree. We also find that there has been no showing made by petitioners that the Commonwealth Government or its finance director will breach the non-disclosure provision of 4 CMC § 170l(d). Petitioners presume that such will be the case. Absent a showing that the IG would in fact seek disclosure of tax returns or return information, we fail to see how the statute would be violated. Further, there has been no showing that the finance director will, upon request by the IG, voluntarily turn over such documents in apparent violation of 4 CMC § 1701 (d) ; nor has there been a showing that he will, if subpoenaed, turn such documents over to the IG. I, contrary to the majority, believe that the threat is significant if Director is faced with a subpoena. 172 not immediately appealable. The order requires the joinder of the Inspector General, rather than dismissing the suit. As a result, petitioners seek an extraordinary writ as the only available remedy. In addition, the Petitioners request this Court to order the trial court to enter a TRO and a permanent injunction prohibiting disclosure of petitioner's tax returns to the Inspector General except as provided under the laws of the Northern Mariana Islands, and for us to assums custody of CN�U tax returns to assure compliance with such an order. Petitioners maintain an injunction .is necessary to prevent this controversy from becoming moot, in the event of compliance by the CNMI with the request of the Inspector General, before petitioners action to prevent disclosure of their tax returns is adjudicated. More importantly, as will be discussed more fully belor.v, petitioners argue that the mandatory joinder of the Inspector General3 will very likely deprive petitioner of the NMI Courts as a forum.4 The petition presents unique issues that go to the (fn. 2 con' t.) I also conclude that the record supports the conclusion that a subpoena by the IG will issue. 3 This is not a case of the Inspector General suing the taxpayer asking for the returns in the custody of the government. 4 People of the NMI do not elect anyone responsible for selecting or governing the District Court. For a discussion of democracy and the role of one man one vote in the judicial branch of government see Ronald Chism v. Charles E. Roemen, 91 C.D.O.S. 4637 decided June 20, 199 1 by the Supreme Court of the United States. 173 rights of all NMI taxpayers and to the relationship between the CNMI and the United States under the Covena nt. First, the United States s eeks taxpayer returns currently in the hands o f NMI. The issue becomes whether the tax returns sought are the property of the individual taxpayers or the prope rty o f the NMI government. S econd, th e issue requires us to resolve •..thether the federal judiciary can decide this case •..thich involves strictly local matters, without inpinging on the right of self government res e�1ed in the people of th'3 N:U pursuant to S ection 103 o f the Covenant and ·.vhethar this is such a case. 5 Th e covenant governs the political relationship bet�een the ID1I and the United States. In cases involving the coven:mt, und e r a "traditional analysis," the United States would be a proper, if not indispensable pa rty since it is a party to the Covenant. However , I b elieve that the covenant precludes a traditional analysis . No United States involvement in the internal a f fairs of the NMI can violate the dictates o f S ection 103 and its guarantee o f self gove rnment ove r internal and local a f fairs. Thus, even if the United States were to intervene or be added or party to an action its ability to remove the action to fede ral court shduld be limited to instances wh ere doing so would not impinge up on self government. In the instant case involving the cha racter of tax returns in the NMI and 5 As will discus s latter it is important to remember that in 1978 the p e ople o f the NMI reserved to themselves and did not qrant to the United states authority ove r local and internal matters. This means that no branch o f the federal government is entitled to trespass across the Covenant Section 103 border unle s s otherwise permitted in the covenant or by consent. 174 the conduct of NMI offi�!als, federal removal would be contrary to section 103 since the case involves a purely local matter. B. THE LEGISLATIVE AUTHORITYOF THE UNITED STATES TO IMPLEM�NT ART, IV OP THE COVENAliT . INCLUDING INTERVENTION AND REMOVAL� . The legislative authority-6 of the United St ates to implement Article 4 of the Covenant lS found in Covenant Section 105 which provides: · The United States may enact legislation in ac�orctance with its constitutional processes which will be applicable to the Northern Mariana Islands • .In • • order to respect the right of self-government guaranteed by this Covenant, th,e United States agrees to limit the exercise. of that authority. so that the fupdamental · provisions o.t this Covenant, pamely Articles I ( inc+uding section 103), II, �nd III· and Sections �01 (the incorporatiQn by reJ;erence of certain provisions of the United St�tes Constitution) and 805 may be modifi�d 9nly w�th the consent ot the Government of the Un��ed .states and the Government'of the Northern Mariana Is lands. The primary restraint on tne legis lative power of the United States then requires defining "self-governm�nt" �nasmuch as the legislative power of the united States in the NMI is limited to that which does not modify cor violate "self-government'' found in section 103. 6 Covenant section 501 does not make applicable in the Northern Mariana Islands the Necessary and Proper Clause, Interstate Commerce Clause, or the Territorial Clause of the United. States Constitution. These are the primary provisions of th� constitution which allow congress to legislate on local and internal matters in the several states and classic territories. The Covenant does, however, incorporate .the limited legislative powers to carry out the 13th, 15th, 19th, and 26th Amendments as Section 2 of those amendments are incorporated into Section 501 qf the Covenant. 175  . My analysis .. begins by noting . that Covep.ant section 103 reserves to the people (not the government) of the Northern Mariana Islands the right of "self-government." The people govern themselves chiefly by exercising their voting rights. Accordingly, I conclude that "self-government" and the right to vote go hand-in- hand. The United states Supreme court has provided a definition of the right to vote which can serve as a starting point for the definition of the right of "self-government." Justice Warren in Kramer v. Union Free school District N0 .. 15, 395 u.s. 621 (1969), found that the plaintiff's right to vote was infringed because he was not allo·.ved to participate in an election that involved matters he was substantially interested in and which substantially affected ' him. I, therefore, define self-government as the right of the NMI to determine matters in which NMI inhabitants are substantially interested in and affected by. Since IDII voters do not (and cannot) participate in Federal elections, self-government must confer legislative, executive and judicial authority in the persons they do vote for the .officials of the NMI government. In light of the Covenant's grant to the ·United States of authority over foreign affairs and defense in section 104, I find that section 103 reserved to the people of the Northern Mariana Islands authority . over all internal matters in which the inhabitants are substantially interested a nd which substantially affect them, so long as those matters do not primarily involve 176 fo r eign affairs or defense.7 Independent grounds -exist to preserve ·the right of self­ government to. the people of the Northern Mariana Islands. The right of self-government, defined - as the right to elect those persons who govern, is so fundamental that it constitutes a peremptory norm of international- law or jus cogens from which no derogation is permitted whether by treaty or domestic legislation. See generally Committee of u.s. Citizens in Nicaragua v. Reagan, 859 F.2d 929, 939, 940 (D.C. Cir. 1988). See also Jus Ccgens: Compelling the Law of Human Rights, 12 Hastings Int'l. and Comparative Law Review, 411 (1989). The application of the doctrine of jus cogen to protect the right of self-government is particularly appropriate in the CID1I. As part of Trusteeship, the N!U was afforded all fundamental freedoms adopted by the United Nations, including Article 7 (equal protection) and Article 21 {the right to participate in government through freely chosen 7 The Covenant has a few specific exceptions to this rule. The Covenant also allows Congress to make applicable: (a) ·except as otherwise provided in Section 506, the Immigration and Naturalization laws of the United States; (b) except as otherwise provided in Subsection (b) of section 502, the coastwise laws of the United states and any prohibition in the laws of the United States against foreign vessels, landing fish, or unfinished fish products in the United States; and (c) the minimum wage provisions of Section 6, Act of June 25, 1938, 52 Stat. 1062, as amended. See also, Covenant section 501 incorporating by reference the 13th, 15th, 19th, and 26th amendments' legislative power. 177 representatives) of the International Bill of Human Rights and the United Nations Charter. Art. 7 and Art. 21 are peremptory norms of international law and the application of federal law in derogation of self-government would violate such peremptory norms. Having concluded that congress may enact legislation implementing Article 4 of the Covenant which does not violate Covenant section 103 reservation of the right of self-government and having defined "self-govern:ment" I conclude that the Inspector General, if allowed to intervene, may not remove this case to a Federal Court. He may intervene on the condition that he does not remove. C. APPLICATION OF ARTICLE III AND SUPRE�L'\CY CLAUSE, 0:? THE UNITED $TATES CONSTITUTI01l. To complete my analysis of the relationship of this cour� to the Federal courts, we mus·t determine if other authority, other than Article IV allows removal. The Federal courts are granted final authority "over" state courts because of the Supremacy Clause of the United States Constitution and the application of Article III of the United States Constitution. Article III grants the Supreme Court jurisdiction to decide all "cases, arising under this Constitution, (and] the Laws of the United States." t..bleman y. Booth, 1€i L.Ed. 169. Article III and the Supremacy Clause8 of the United states 8 This Constitution and the Laws of the United States which shall be made in Pursuance thereof, and all Treaties made, or which shall be made, under the Authority of the United States, shall be 178 Constitution (including the provision "and the Judges in every States shall be bound thereby,") do not apply in the NMI and do not govern the relationship between the Northern Mariana Islands and the United States. See Covenant, section 501. These provisions grant the federal courts final authority over state courts in the sense that federal courts decide what is or is not a federal question and can ultimately decide that federal question. In lieu of the Supremacy Clause, Covenant section 102 provides: The relations between the Northern Mariana Islands and the United States •11ill be governed by thi3 co•1an:1nt which, together with those provisions of the Constitution, -treaties and laws of the United States applicable to the Northern Mariana Islands will be the supreme law of the Northern Mariana Islands. (Emphasis added. ) The Covenant 1 s "supremacy clause" does not contain the "judicial supremacy" section found in the U. S. Constitution 1 s Supremacy Clause. The unique relationshiP and division of authority created by the Covenant, whereby the people of the Northern Mariana Islands retained authority over local and internal matters in section 103 and granted the United States authority over foreign affairs and defense in section 104 prevents either judiciary controlling the other in any manner other than that (fn. 8 con 1 t )• the Supreme Law of the Land ; and the Judges in every State shall be bound thereby, and any Thing in the Constitution or Laws of any state to the contrary notwithstanding. U. s. canst. , Supremacy Clause, Art. VII, cl. 2. 179 provided for in Article IV of the covenant. 9 II. FACTS OF THE CASE On July 9, 1991, petitioners filed an action in Superior Court requesting a TRO and for the court take custody of their tax returns {res in this action) and for permanent injunction against the Department of Finance and the Government of the Northern Mariana Islands prohibiting them from disclosing tax information except as required by the laws of the Northern Mariana Islands under the authority reserved over local and internal matters found in Section 103 of the Covenant . The parties argued the merits of the injunctive relief. The ·basic dispute of the parties centered around how "clear and present11 or imminent the danger was that tax returns would be disclosed. Petitioners argued that the threat to their fundamental right to privacy was sufficient to constitute the need for relief. 10 The respondents argued that the threat of the violation of petitioners rights was not sufficient to justify the 9 If differences in judicial op1n1ons occur, the Covenant provides for resolution of differences, pursuant to covenant section 902. 10 See Vaughn v. Bank of Guam, 1 N. Mar. I. 58, 62: 11 (I) t is manifestly impermissible for Congress to pass a law that places a case arising under the laws of the Commonwealth beyond the reach of the people or the· legislature of the Commonwealth" Wabol v. Villacrusis, 1 N. Mar. I. 19 at 22; Borja v. Goodman, (concurring beginning 79), 1 N. Mar. I. 63 ; Sablan v Iginoef, (concurring beginning 155) 1 N. Mar. I. 146. 180 injunctive relief11 requested and that petitioner's request that the Court take custody12 of the tax returns to enforce its order was not authorized by law. The lower court made no determination on the requested relief. Rather, sua sponte and without the benefit of argument by the litigants, it determined that the Inspector General was an indispensable party to this action. 13 (See Order Denying Application for Temporary Restraining Order or Injunction, Civil Action No.1 91-734). Based · upon the indispensable party finding, the lmver court noted that the joinder of the Inspector General would result in removal of the action to a federal forum. Instead of dismissing the action for failure to join an indispensable party, the trial court order gives rise to 11 The majority relies on the assurance by the government that it will not disclose tax returns in violation of NMI law. Contrary' to the position of the majority I believe that when faced with the specter of contempt the director will be put in the dilemma acknowledged by the Court in Blaz discussed at page 24 called the "untenable dilemma". The majority might also be relying on CNMI Canst. Art. 1, Sec. 10 which may grant a "Bivens" cause action against the Director if he discloses the tax returns. See Poreten v. University of San Francisco, 64 Cal.App. 3825 (1971). 1 2 The government opposed custody on the grounds that it would disrupt the operations of the department. Custody of the res (the tax returns) need not disrupt the operations of the department because the returns could physically remain with the department and the department continue its business as usual. 13 The court concludes that the action is in fact an injunction against 48 USCA § 1681(b) . This conclusions assumes (without authority or discussion) among other things that the plaintiffs returns are an 'account' of the Northern Mariana Islands and that the statute applies to the returns of the plaintiffs. The court assumes without argument or authority that the United States under its own constitution could enact and implement 48 USCA § 1681(b) in a manner to extend to individual tax returns of the petitioners .without violating the principles o.f ''one man one vote." These are substantial issues of a fundamental nature and cannot be "assumed" away as the court impliedly does. 181 the strong possibility of depriving the courts of the NMI of jurisdiction over the dispute. To preserve their choice of forum and to require a determination on the merits of the claim, the petitioners filed this writ. III. Ni::CESSITY FOR ISSU::UICB OF �iRIT OF �'\1iDA!-!:US In Tenorio v. Superior Court, 1 N.l-tar. I. 4, we determined under \vhat conditions a writ of mandamus may issue. The five guidelines laid out were as follows. First the party seeking the writ has no other adequate means, such as-direct appeal, to attain the relief desired. Second, the petitioner will be damaged or prejudiced in a way not correctable on appeal. Third, the lower court's order is clearly erroneous as a matter of law. Fourth, the lower court's order is an oft-repeated error, or manifest a persistent disregard of applicable rules and fifth, the lower court's order raises new and important problems, or issues of law of first impression. Tenorio, supra at 7. The Tenorio court went on to state: Tne considerations are cumulative, and proper disposition will often require a balancing of conflicting indicators" Tenorio, supra at 7-8. In another case involving the issuance of a writ of mandate this court stated "We place greater weight on the first two guidelines. Mafnas v. Inos, N.Mar. I 43, 14 45. 14 The parties dispute whether a TRO or permanent injunction should issue in this case but agreed (at oral argument) that the Inspector was not an indispensable party. 182  'l'he petition is structured in a way that two separate and distinct issues are involved. The first is whether the order itself is a basis for issuing the writ and secondly whether the underlying requests for TRO and permanent injunction should issue. I shall first address the order. In applying the prin�iples of Tenorio and Inos to the facts and circumstances in this case I find that the party seeking the writ has no adequate means other than a writ to determine whether this case may proceed without joining the Inspector General since the failure to dismiss precluded an appeal.15 In addition, if the case were removed to a federal forum the petitioners have alleged that there is a substantial likelihood the case will become moot precluding appeal. This is exactly what happened in two similar16 cases. In United States of America, ex rel. v. Sablan, Civil No. 89-0008 (D.C.NMI, 1989), there was a similar request to audit a different agency of the NMI government. In that case, the NMI began discussions with the Inspector General concerning the power of the Department of Interior to interfere with the internal affairs of the NMI. The District court in an opinion which treated the covenant as a unilateral agreement creating a political union, 15 If the Superior Court had dismissed with leave to amend then there would have been an appealable order. 16 This case differs from MIHA in one substantial respect. In MIHA the government was seeking accounts or property ot the government of the NMI. This case involves tax information and property of the Petitioners and not of the government. 183 decided the covenant was a federal law not a local law, 17 and that self-government in section 103 is apparently no more than tha right to elect a 11straw11 government. Without any discussion the District court assumed that the u.s. congress and Executive could override the will of the people of the mu on any and all matters withthe exception of the naked exi�tence of the positions of government • . In a broad ruling, the District Court sought to change the Covenant from a bilateral agreement creating and governing·the political union between the United States and the�NMr·to a wholly unilateral document giving the United St,ates carte blanche authority to legislate for the .NHI. 18 The court concluded covenant section 10519 explicitly provides that the: 17 It is an agreement between both parties that is enforceable it provides for legislative implementation of certain provisions by both the United States and the NMI. The fact that the Covenant, as an agreement, was approved by a joint resolution of Congress does not change the agreement for