Opinion
Case No. CV-02-0016-ARM
December 12, 2003
ORDER ON MOTION TO DISMISS FIRST AMENDED COMPLAINT
THIS MATTER is before the Court on Defendant Commonwealth of the Northern Mariana Islands' Motion to Dismiss First Amended Complaint(Doc. #26) and Plaintiff United States of America's Opposition to Motion to Dismiss (Doc.#30). Upon review of the record, memoranda of the parties and the applicable law, the Court makes the following disposition.
I. BACKGROUND
Starting in October of 1991 and continuing to 1996, the then Mayors of Tinian and Aguiguan executed "Joint Funding Agreements" with the United States Department of the Interior, Geological Survey, for water resource investigation on the island of Tinian. Each of the agreements only named the "Municipality of Tinian" as a party to the agreement. Each agreement was signed solely by the then Mayor of Tinian on behalf of the "Municipality of Tinian." The cumulative effect of these agreements was that the United States was owed $2,765,499.83 in 1999.
On May 28, 1999 and July 26, 1999, Charles A. Wilson, Director, Debt Management Services, United States Department of the Treasury, submitted letters to the current Mayor of Tinian and Aguiguan, Francisco M. Borja, advising him that the Secretary of the Interior would accept a reduced amount of $1,589,367.96 as compromise payment of the total debt. As part of this compromise, the Mayor was to make a $393,648.00 payment on September 1, 1999, a $619,736.00 payment on September 1, 2000 and a $575,983.96 payment on September 1, 2001. The Mayor agreed to the compromise. However, the Mayor paid only $249,000 for the first payment and never made any other payments to the United States.
On April 30, 2002, the United States filed the instant action. Alleging that the Mayor of Tinian and Aguiguan "at all times relevant to this complaint was acting on behalf of the Municipality of Tinian and Aguiguan, or the Commonwealth of the Northern Mariana Islands ["CNMI"], or both," (Compl. ¶ 5), the United States sought to collect monies, penalties and interest owed under the agreements. Following certification to the Commonwealth Supreme Court to determine whether Tinian and Aguiguan was a chartered municipality, see United States v. Borja, No. 02-0001-OA, 2003 MP 8 (holding that Municipality of Tinian and Aguiguan was a chartered municipality that could sue and be sued), the United States filed an amended complaint (Doc. #20) on June 2, 2003. On July 30, 2003, Defendant CNMI filed the Fed.R.Civ.P. 12(b)(6) motion to dismiss now before the Court. The United States filed its brief in opposition and the matter was submitted to the Court on October 9, 2003.
II. STANDARD OF REVIEW
Dismissal of a claim under Fed.R.Civ.P. 12(b)(6) is appropriate only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is warranted under 12(b)(6) where the complaint lacks a cognizable legal theory or where the complaint presents a cognizable legal theory yet fails to plead essential facts under that theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984).
In reviewing a Fed.R.Civ.P. 12(b)(6) motion to dismiss, the court must assume the truth of all factual allegations and must construe them in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). However, legal conclusions need not be taken as true merely because they are cast in the form of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987). When ruling on a motion to dismiss, the court may consider the facts alleged in the complaint, documents attached to the complaint and matters of which the court takes judicial notice. Venetian Casino Resort L.L.C. v. Cortez, 96 F. Supp.2d 1102, 1106 (D.Nev. 2000).
III. DISCUSSION A. CNMI Motion and Argument
The CNMI argues that the United States fails to state a claim for which relief can be granted. Specifically, the CNMI argues that the First Amended Complaint and the attached documents fail to show that the CNMI was a party to the joint funding agreements such as to obligate the CNMI to the United States for any monies still due. This lack of contractual privity between the CNMI and the United States, the CNMI asserts, mandates dismissal of the claims by this Court.
The CNMI also argues that the claims asserted in the complaint are barred by the statute of limitations and the doctrine of sovereign immunity. As the Court disposes of this case on an alternate basis, the Court will not address these issues.
Where the United States is a party to a contract, the contract is construed according to general principles of contract interpretation.Mobil Oil Exploration v. United States, 530 U.S. 604, 607 (2000); Saavedra v. Donovan, 700 F.2d 496, 498 (9th Cir. 1983). In general, "the obligation of contracts is limited to the parties making them, and ordinarily, only those who are parties to contracts are liable for their breach." 17A Am. Jur.2d Contracts § 421 (1991). To determine whether the CNMI is a party to the joint funding agreements, the Court must first look solely at the words used within the agreements. If the language of the agreements is plain and unambiguous, the intention expressed in that language controls rather than whatever may be claimed to have been the actual intention of the parties. Id. § 352.
A plain reading of the joint funding agreements readily indicates that the CNMI is a stranger to the agreements. Each of the agreements only named the "Municipality of Tinian" as a party to the agreement. Each agreement was solely signed by the then Mayor of Tinian on behalf of the Municipality of Tinian. The CNMI is not mentioned in the agreements in any capacity, let alone a capacity obliging it to the United States for payment of money. The wording used in the agreements solely bind the Municipality of Tinian. Accordingly, the words of the agreements evidence that the CNMI is not a party to the agreements and cannot be held liable for their breach.
B. United States' Response
The United States nevertheless argues that the CNMI is still liable for monies due under the joint funding agreements. In opposition to the CNMI's motion, the United States contends that privity exists between the CNMI and the United States because the Mayor of Tinian and Aguiguan acted as an agent of the CNMI in undertaking duties imposed by the CNMI Constitution.
1. Express Authority
The United States first argues that, under the Constitution and statutes of the CNMI, the Mayors of Tinian and Aguiguan had express authority to bind the CNMI when they signed the joint funding agreements. Specifically, the United States argues that "[t]he constitutionally required delegation by the Governor of `responsibility for . . . the administration of public services" to the Mayor of Tinian and Aguiguan, N.M.I. Const, art. Ill § 17, `in the Commonwealth government,' 1 CMC § 5101, combined with the `additional duty' imposed through a public law passed by the legislature and signed by the Governor to provide water service in the public interest, 1 CMC § 5107(h)(2), all in furtherance of the Covenant's command that ` [t]he executive power of the Northern Mariana Islands will be vested in a popularly elected Governor and such other officials as the Constitution or laws of the Northern Mariana Islands may provide," lead to the ineluctable conclusion that as a matter of law, the Mayor of Tinian and Aguiguan is an agent of the executive branch of the CNMI government." (Doc. #30, United States' Oppo. Mot. Dismiss at 11).
Quoting but not citing section 203(b) of the Covenant to Establish a Commonwealth of the Northen Mariana Islands in Political Union with the United States of America, 48 U.S.C. § 1801 note.
a. 1 CMC § 5101
The United States' argument suggests that 1 CMC § 5101 expressly designates the Mayor of Tinian and Aguiguan as a member of the CNMI executive branch of government. In this regard, the United States misapprehends the position and role of a Mayor as set forth in the Constitution and statutes of the CNMI.
N.M.I. Const, art. VI § 1 states that "[a]gencies of local government shall be established as provided by this article." Section 2 of Article VI establishes the Office of Mayor in Rota, Tinian and Aguiguan, Saipan and the islands north of Saipan and calls for the election of the mayor. Section 3 of Article VI outlines the mayor's powers and duties. Section 4 of Article VI authorizes compensation for the mayor. Section 6 of Article VI mandates the creation of municipal councils in Rota, Tinian and Aguiguan, Saipan and the islands north of Saipan, lists qualifications needed to serve on the councils, and outlines the procedure by which vacancies shall be filled. Section 7 of Article VI lists the powers and duties of the councils. Finally, Section 8 of Article VI establishes the chartered municipality form of government on Rota and Tinian and Aguiguan. See Borja, No. 02-001-OA, 2003 MP 8, at ¶ 22.
Title 1, Division 5 of the Commonwealth Code mirrors and helps implement N.M.I. Const, art. VI. 1 CMC § 5101 provides that: "There are in the Commonwealth government as agencies of local government the offices of the mayors, composed of the duly-elected mayors of Saipan, Rota, Tinian and Aguiguan, and the islands north of Saipan." 1 CMC §§ 5102-5104 mandate the election of mayors, describe what should be done in case of a vacancy in the Office of Mayor and lists the qualifications to run for mayor. 1 CMC § 5106 lists powers and duties of mayors similar to those contained in N.M.I. Const, art. VI § 3. Finally, 1 CMC § 5107 lists additional powers and duties conferred on mayors by the legislature pursuant to N.M.I. Const. art. VI § 3(h)("A mayor shall perform other responsibilities provided by law").
Contrary to the United States' interpretation, the term "in the Commonwealth government as agencies of local government" in I CMC § 5101 does not mean that the mayor is a member of the executive branch exercising executive power at the local government level. Rather, the term designates those governmental entities that exercise specified power and duties over designated geographical subdivisions of the Commonwealth on behalf of and for the people of that geographical subdivision. C.f.Analysis of the Constitution of the Commonwealth of the Northern Mariana Islands 107 (1976) (hereinafter Analysis of the Constitution). The designation of the mayor as an agency of local government is meant to emphasize the limited powers and duties of a mayor as opposed to the Commonwealth wide powers and duties of the Governor, Congress or Judiciary. As such, a mayor is not a member or agent of the executive branch such that an exercise of its powers and duties will necessarily bind the CNMI, e.g., the Director of the Department of Public Works.
In reaching this conclusion, the Court notes that such an interpretation is consistent with the concept that all the executive power of the CNMI is vested in the Governor. See N.M.I. Const. Art. Ill § 1; Analysis of the Constitution at 58. Such an interpretation also makes sense in light of the fact that the constitutional sections providing for mayors are grouped in the same article as the sections establishing municipal councils and the chartered municipality form of government, entities clearly not related to the executive branch. Such an interpretation makes even more sense when read in light of the fact that mayors and municipal councils are elected solely by, and can only exercise their powers and duties solely for the people within their designated island jurisdictions. See N.M.I. Const, art. VI §§ 2-7. Accordingly, the Mayor of Tinian and Aguiguan is not a member or agent of the executive branch such that an exercise of its powers and duties will necessarily bind the CNMI.
b. N.M.I. Const, art. Ill § 17
Although the Mayor of Tinian and Aguiguan is not a member of the executive branch such that its actions necessarily binds the CNMI, the Court must still determine whether the Mayor of Tinian and Aguiguan could render the CNMI government liable in this case. Specifically, the Court must determine if N.M.I. Const, art. Ill § 17 could provide the Mayor of Tinian and Aguiguan with express authority to render the CNMI liable on the joint funding agreements.
N.M.I. Const, art. Ill § 1 states that: "The executive power of the Commonwealth shall be vested in a governor who shall be responsible for the faithful execution of the laws." N.M.I. Const, art. Ill § 17 states in relevant part that:
(a) The governor shall delegate to a mayor . . ., responsibility for the execution of Commonwealth laws as deemed appropriate, and the administration of public services in the island or islands in which the mayor has been elected. Services being provided on a decentralized basis in Rota, and Tinian and Aguiguan, on the effective date of this provision shall continue. In furtherance of this section, the mayor shall have the responsibility for ensuring that the resident department heads faithfully execute their duties under the law and in accordance with the policies of the Commonwealth government for the administration of public services, in the island or islands in which the mayor has been elected.
(b) Public services on Rota, Tinian and Aguiguan, shall be headed by a resident department head in the departments providing the services.
The unique and confusing relationship between the Governor and Mayors engendered by these constitutional provisions was extensively analyzed inInos v. Tenorio, No. 94-1289 (N.M.I. Sup.Ct. June 14, 1995). Construing N.M.I. Const, art III §§ 1 and 17, the court first declared that:
Ordinarily, a federal court is not bound by a trial court level decision interpreting state or territorial law. See Allen v. City of Los Angeles, 92 F.3d 842, 847 (9th Cir. 1996). However, the Supreme Court for the CNMI has stated that Inos is "authoritative law until the CNMI Supreme Court determines otherwise." Commonwealth v. Anglo, 5 N.M.I. 228, 230 n. 9 (1999).
It is important to distinguish between executive power on the one hand and executive duties and responsibilities on the other. N.M.I. Const, art. III repeatedly directs the Governor to delegate executive duties and responsibilities to other officers within the executive branch. N.M.I. Const, art. III §§ 3, 11 and 14. However, nowhere in N.M.I. Const, art. III is the Governor forced to relinquish his or her ultimate control over the executive power.Id. at 14(emphasis in original). The court next declared that the definition of "delegate" contained in N.M.I. Const, art III § 17(a) meant "merely entrusting power to another to act for the good of the one who authorizes him," "rather than a complete surrender of relinquishment of power." Harmonizing these declarations, the court then concluded that "the phrase `shall delegate' in the first sentence of N.M.I. Const, art III § 17(a) does not divest a Governor of his or her executive power, but requires him to delegate certain duties and responsibilities to the mayors." Id. at 16.
The court next construed the scope of delegation mandated by N.M.I. Const, art III § 17. Finding that the "as deemed appropriate" language only qualifies that portion of N.M.I. Const, art. III § 17 requiring the Governor to delegate the duty to execute Commonwealth laws, the court ruled that the "Governor may refuse to delegate any authority to the Mayor over those departments whose primary function is the execution of law." Id. at 17-18. Conversely, the court ruled that where a department's primary function is the administration of public services, N.M.I. Const, art III § 17 mandates the delegation of the Governor's duties. What constituted "public services" under N.M.I. Const, art. III § 17 was broadly construed by the court to include "all those public services which the executive branch has an obligation to deliver. Id. at 21. Delegation of administration of public services does not necessarily mean that a mayor is directly in charge of a department's services as a resident department head. SeeId. at 31 n. 24. C.f. 1 CMC § 5201. However, it does mean that a mayor has at least a supervisory responsibility over the department's services. Id. at 22. This supervisory responsibility taking the form of "ensuring that the resident department heads faithfully execute their duties under the law and in accordance with the policies of the Commonwealth government." See Id. at 22-23.
In a later issued decision, Inos v. Tenorio, No. 94-1289 (N.M.I. Sup.Ct. Oct. 18, 1995), the court clarified its prior ruling by declaring that a delegation of responsibility has to be over the entire department. Id. at 5-6.
In light of the Inos court's interpretation, N.M.I. Const, art. III § 17 could provide the Mayor of Tinian and Aguiguan with express authority to render the CNMI liable on the joint funding agreements. To have such authority, the Governor must have delegated to the Mayor of Tinian and Aguiguan responsibility over a department that administers public services. The Mayor then must have entered into the joint funding agreements in his capacity as resident department head. Finally, the Mayor must have acted within the scope of CNMI law when it entered into the joint funding agreement. 72 Am. Jur.2d States, Territories and Dependencies § 72 (2001) (stating that "officers must act within their authority; a state is not bound by the unauthorized contracts of its officers").
The United States does not argue that the Mayor of Tinian and Aguiguan entered into the joint funding agreements through a delegation of responsibility to execute Commonwealth law.
As stated, the Court believes that the Mayor of Tinian and Aguiguan must be a resident department head in order to act as an agent of the CNMI. The delegation under N.M.I. Const, art. III § 17(a) gives mayors "supervisory responsibility" over the resident department head to ensure that he fulfills his duties and follows the Governor's policies.Inos, No. 94-1289, at 22 (N.M.I. Sup.Ct. June 14, 1995). This supervisory responsibility grants a mayor the authority "to remove, discipline and ultimately control the actions of the resident department heads". Id. at 31. By way of illustration,
[I]f mandatory AIDS . . . testing for doctors and nurses employed at Commonwealth public hospitals became the policy of the Commonwealth government, the Secretary of Public health would be charged with the responsibility to implement the policy. As the recipient of delegated authority over he administration of public services on [Tinian and Aguiguan], the Mayor would act as the secretary's eyes and ears on [Tinian and Aguiguan] to make sure that his Resident Department Head for Public Health on [Tinian and Aguiguan] implemented the Commonwealth-wide policy. If a resident department head failed to timely comply with the mandatory AIDS testing policy, the Mayor, as supervisor, would have a duty to take immediate steps to insure the policy's implementation, including reasonable disciplinary action.Id. Consistent with this delegation of supervisory responsibility, if a mayor believes that the department should enter into a contract, he must order the resident department head to enter into the contract on behalf of the CNMI. The delegation of supervisory responsibility under N.M.I. Const, art. III § 17(a) does not permit a mayor to enter into the contract on behalf of the CNMI.
Only if a mayor is designated the resident department head can he contract on behalf of the CNMI. Resident department heads are part of the executive branch of the CNMI government. N.M.I. Const, art. III § 17(b). See, e.g., Inos, No. 94-1289, at 22, 30-31 (N.M.I. Sup.Ct. June 14, 1995). 1 CMC § 5201 permits the appointment of a mayor as a resident department head. If so appointed, a mayor is then part of the executive branch and can thus exercise any power a resident department head may have to contract. See also 1 CMC § 5201(stating that "the Mayor of Tinian and Aguiguan," if designated a department's resident head, "shall have the authority necessary to efficiently and effectively carry out the administration and delivery of public services"). A contract so executed would be binding on the CNMI. Therefore, the Mayor of Tinian and Aguiguan must be a resident department head in order to act as an agent of the CNMI.
With the above discussion in mind, the Court must determine if the United States pleads a claim for relief against the CNMI. Other than the conclusory allegation that the Mayor of Tinian and Aguiguan acted as an agent of the CNMI, the United States pleads no facts demonstrating that the Governor delegated to the Mayor of Tinian and Aguiguan responsibility over a department that administers public services, that the Mayor entered into the joint funding agreements in his capacity as resident department head and that the Mayor was authorized to enter into the joint funding agreements. Accordingly, the Court finds that the United States fails to state a claim that the Mayor of Tinian and Aguiguan bound the CNMI through N.M.I. Const, art. III § 17.
The court notes that 1 CMC § 5107(h)(2) does not create any sort of agency relationship between the CNMI and the Mayor of Tinian and Aguiguan. Under the statute, a mayor has discretion to provide "[w]ater service to individual residences or community centers in villages, farms, or homestead areas" so long as the provision of such service is "in the public interest or are of benefit to the community." Such service is provided solely by a mayor pursuant to power granted it by the legislature under N.M.I. Const. VI § 3(h). It cannot be construed as permitting a mayor to contract with another on behalf of the CNMI.
2. Apparent Authority
The United States next argues that the CNMI is liable on the joint funding agreements because the Mayors of Tinian and Aguiguan were acting with the apparent authority of the CNMI. However, this theory of liability is not viable against the CNMI.
Governments cannot be held liable to a contract through apparent authority. 81A C.J.S. States § 156 (1977). See, e.g., Thomas v. I.N.S., 35 F.3d 1332, 1338 (9th Cir. 1994) (stating that "[e]stoppel and apparent authority will not substitute for actual authority to bind the United States government"); ARA Health Servs., Inc. v. Dept. of Pub. Safety Correctional Servs., 685 A.2d 435, 440 (Md. 1996). To hold otherwise could eviscerate the well-settled rule that a state or territorial government is not bound by a contract entered into by an agency acting beyond the power specifically conferred on it by law. 81A C.J.S. States, supra; See,e.g.,SIU de Puerto Rico, Carib v Latinoamerica v. Virgin Islands Port Auth., 42 F.3d 801, 803 (3d Cir. 1994). As a result, the United States cannot claim that the Mayor of Tinian and Aguiguan was an agent that could bind the CNMI through apparent authority.
IV. CONCLUSION
Based on the foregoing, it is ORDERED that Defendant CNMI's Fed.R.Civ.P. 12(b)(6) Motion to Dismiss First Amended Complaint (Doc. #26) is GRANTED. Accordingly, all claims for relief by the United States of America against the CNMI are hereby DISMISSED.