In re Request of Imina' Trentai Dos Na Liheslaturan Gu&aring, (2014)

• Docket Number: Supreme Court Case No. CRQ14-001
• Decision Date: 17 June 2014
• Citation: In re Request of Imina' Trentai Dos Na Liheslaturan Guåhan, 2014 Guam 15, Supreme Court Case No. CRQ14-001 (Guam Jun 17, 2014)
• Parties: IN RE REQUEST OF IMINA' TRENTAI DOS NA LIHESLATURAN GUÅHAN RELATIVE TO THE USE OF FUNDS FROM THE TAX REFUND EFFICIENT PAYMENT TRUST FUND
• Court: Guam Supreme Court

2014 Guam 15

IN RE REQUEST OF IMINA' TRENTAI DOS NA LIHESLATURAN GUÅHAN RELATIVE TO THE USE OF FUNDS FROM THE TAX REFUND EFFICIENT PAYMENT TRUST FUND

Supreme Court Case No. CRQ14-001

SUPREME COURT OF GUAM

Dated: June 17, 2014

OPINION

Request for Declaratory Judgment pursuant to

section 4104 of Title 7 of the Guam Code Annotated

Argued and submitted on April 16, 2014

Hagåtña, Guam

Appearing for Petitioner

I Mina' Trentai Dos Na Liheslaturan Guåhan:

John C. Terlaje, Esq.

Law Offices of John C. Terlaje, P.C.

Appearing for Amicus Curiae

Office of the Attorney General:

Shannon J. Taitano, Esq.

Assistant Attorney General

Office of the Attorney General of Guam

Appearing for Respondent

I Maga'lahen Guåhan:

Sandra Cruz Miller, Esq.

Arthur B. Clark, Esq.

Office of the Governor of Guam

Ricardo J. Bordallo Governor's ComplexBEFORE: ROBERT J. TORRES, Chief Justice; F. PHILIP CARBULLIDO, Associate Justice; KATHERINE A. MARAMAN, Associate Justice.

TORRES, C.J.:

[1] Petitioner I Mina' Trentai Dos Na Liheslaturan Guåhan ("the Legislature") requests a declaratory judgment from this court relating to alleged violations by I Maga'lahen Guåhan ("the Governor") of Title 11 of the Guam Code Annotated, Chapters 50 and 51. These provisions establish the Income Tax Refund Reserve Fund ("Reserve Fund") and the Income Tax Refund Efficient Payment Trust Fund ("Trust Fund"). The Legislature claims that the Governor has violated the provisions of Chapters 50 and 51 by unlawfully transferring funds out of the Trust Fund to pay General Fund obligations. It also requests a declaration that the statutes do not conflict with its Organic Act authority. The Governor contends that this court does not have jurisdiction to hear the declaratory judgment action, that Chapters 50 and 51 are inorganic and usurp his powers of administration and enforcement of the Guam Territorial Income Tax, and that his alleged actions do not violate Chapters 50 and 51.

[2] We find that jurisdiction is proper pursuant to 7 GCA § 4104 to resolve three narrow issues. First, as to the separation of powers, we hold that the Legislature's passage of Chapters 50 and 51 is a valid exercise of its Organic Act powers, and does not impinge upon the Governor's duty to administer and enforce the Guam Territorial Income Tax. Second, we hold that the Organic Act's income tax provisions set forth in 48 U.S.C.A. § 1421i do not preclude the passage of Chapters 50 and 51. Finally, we hold that Chapters 50 and 51 prohibit the transfer of any funds, even if they are "advances," from the Trust Fund for purposes other than those prescribed by the statutes.

I.

[3] Since the early 1990s, the Government of Guam has faced a series of controversies and lawsuits relating to its alleged inability to pay Guam Territorial Income Tax ("GTIT") refunds in a timely manner. Paeste v. Gov't of Guam, No. CV 11-00008 CBM, Doc. 196 at 3 (Finds. Fact & Concl. L. (D. Guam. Jan. 30, 2013)). In response to this issue, the Legislature amended Chapter 50 and enacted Chapter 51 of Title 11 of the Guam Code Annotated ("GCA"). Id. at 4; see also Guam Pub. L. 26-074 (Mar. 7, 2002). Section 1 of the legislation, "Legislative Findings and Intent," emphasizes the purpose of the law:

[E]ach year, the Department of Revenue and Taxation ("DRT") finds itself in a difficult situation, trying to find ways to promptly process Guam's taxpayers' income tax returns and timely pay the refunds due. . . .

Such problems in the delay of processing the income tax returns have greatly burdened Guam's taxpayers financially, as they patiently wait for their income tax returns so critical to making ends meet.

Therefore, it is the intent of I Liheslaturan Guåhan to develop a program to provide the resources to DRT to promptly process income tax returns, and to issue the refunds to Guam taxpayers.

P.L. 26-074:1.

[4] Chapters 50 and 51 establish two separate funds to facilitate payment of tax refunds and credits to Guam taxpayers: the Income Tax Refund Reserve Fund ("Reserve Fund"), and the Income Tax Refund Efficient Payment Trust Fund. Essentially, these chapters require the Director of the Department of Administration ("DOA") to deposit a certain portion of income tax payments into the Trust Fund. 11 GCA § 51102 (as amended by Guam Pub. L. 29-017:2 (Sept. 24, 2007)). Upon request of the Tax Commissioner, funds from the Trust Fund are transferred to the Reserve Fund in order to pay tax refunds and credits. Id.; 11 GCA § 50105 (2005). Chapters50 and 51 limit the use of funds in the Trust Fund and Reserve Fund to income tax-related purposes. See generally 11 GCA §§ 50101-50107, 51101-51108.

[5] In spite of the changes made to the law, the government allegedly continued to fail to pay tax refunds in a timely matter. Paeste, No. CV 11-00008 CBM, Doc. 196 at 4. In January 2012, the United States District Court of Guam addressed a case brought by a group of Guam residents and taxpayers. See id. at 2. The plaintiffs claimed that over the course of several decades, the government failed to timely pay their refunds, and that the government illegally expedited payment for certain taxpayer refunds and not others. Id. In its Findings of Fact and Conclusions of Law, the court entered summary judgment in favor of the plaintiffs on both claims. Id. at 9-15. It also granted declaratory relief and a permanent injunction, which required the government to "bring the administration of the GTIT into compliance with the Organic Act and the Equal Protection Clause." Id. at 16-18.

[6] For nine months following the District Court's findings of fact, the Government of Guam did not withdraw or transfer funds from the Trust Fund for non-tax purposes. In re Request of I Mina' Trentai Dos Na Liheslaturan Guåhan Relative to the Use of Funds from the Tax Refund Efficient Payment Trust Fund, CRQ14-001 (Req. for Declaratory J. at 7 (Feb. 20, 2014)) (hereinafter "Request"). However, in 2013, the government allegedly resumed transferring funds from the Trust Fund to other government accounts, including the government's General Fund and other operational bank accounts. Id.

[7] The Legislature filed a Request for Declaratory Judgment on February 20, 2014. Id. at 1. The Legislature alleges that during the first quarter of the 2014 fiscal year, over $12 million was improperly diverted from the Trust Fund to fund Government of Guam operations, and thatapproximately $4 million of the amount required by 11 GCA § 51102 was not deposited into the Trust Fund. Id. at 7-8.

[8] The Governor, designated by this court as the Respondent, claims that he has placed into the Trust Fund approximately $7 million more than required by law. Resp't's Br. at 26 (Mar. 21, 2014). He asserts that any payments made from the Trust Fund to the General Fund are "returns of advances" given by the General Fund to the Trust Fund. Id. The Director of DOA states that "Governor Calvo has never used his one-way transfer authority to withdraw any funds from either the Trust Fund or the Refund Reserve Fund. All funds withdrawn from the Trust Fund or the Reserve Fund have always been reimbursed." Decl. Benita A. Manglona at 6 (Mar. 21, 2014). In addition, the Governor states that all tax refunds are currently being paid on time. Decl. of John P. Camacho at 2 (Mar. 21, 2014) ("Since January, 2013, the Government of Guam has been and is completely up-to-date in paying tax refunds, no later than within six (6) months after a corresponding tax return was designated as 'Status A.'"). The Legislature has not disputed this latter fact.

[9] This court recognized the Attorney General of Guam ("OAG"), DOA, and the Department of Revenue and Taxation ("DRT") as interested parties. In re Request of I Mina' Trentai Dos Na Liheslaturan Guåhan Relative to the Use of Funds from the Tax Refund Efficient Payment Trust Fund, CRQ14-001 (Mins. Status & Disqual. Hr'g (Feb. 26, 2014)). Of these, only the OAG filed a brief in this matter as an amicus curiae and participated in oral argument.

II.

[10] This court has jurisdiction over requests for declaratory judgment made by the Governor or the Legislature of Guam pursuant to 7 GCA § 4104 (added by Guam Pub. L. 29-103:2 (July 22, 2008)). In re Request of Governor Carl T.C. Gutierrez, Relative to the Organicity &Constitutionality of Pub. Law 26-35 ("In re Request of Governor Gutierrez II"), 2002 Guam 1 ¶ 4. Because this case is a request for a declaratory judgment and not a taxpayer suit involving a specific tax controversy, this court, and not the District Court of Guam, has jurisdiction over the matter. See 48 U.S.C.A. § 1421i (Westlaw current through Pub. L. 113-93 (2014)); In re Request of I Mina' Bente Sing'ko Na Liheslaturan Guåhan Relative to the Application of the Earned Income Tax Credit Program to Guam Taxpayers ("The EIC Question"), 2001 Guam 3 ¶¶ 10-13.

[11] The Legislature must satisfy several jurisdictional requirements under 7 GCA § 4104, which limits the Supreme Court's jurisdiction over declaratory judgment actions to certain narrow questions. We discuss the requirements of section 4104 in detail below.

III.

A. Jurisdictional Requirements for Declaratory Judgment under 7 GCA § 4104

[12] We have found that "grants of original jurisdiction, as over declaratory judgments in section 4104, should be read literally and construed narrowly." In re Request of Governor Gutierrez II, 2002 Guam 1 ¶ 12. Before this court may exercise jurisdiction over a declaratory judgment pursuant to 7 GCA § 4104, the requesting party must satisfy three requirements. Id. ¶ 9; 7 GCA § 4104. First, the subject matter of the issues must be appropriate under 7 GCA § 4104 - that is, it must involve "the interpretation of any law, federal or local, lying within the jurisdiction of the courts of Guam to decide," or "any question affecting the powers and duties of I Maga'lahi and the operation of the Executive Branch, or I Liheslaturan Guåhan, respectively." 7 GCA § 4104. Second, the issue or issues raised must be "a matter of great public interest." I...