Yokeno v. Mafnas, 91-15745

Citation973 F.2d 803
Decision Date28 August 1992
Docket NumberNo. 91-15745,91-15745
PartiesMatao C. YOKENO, Plaintiff-Appellee, v. Ramon C. MAFNAS, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Jay H. Sorensen, Saipan, Com. of Northern Mariana Islands, for defendant-appellant.

Stephen J. Nutting, White, Novo-Gradac & Thompson, Saipan, Com. of Northern Mariana Islands, for plaintiff-appellee.

Appeal from the United States District Court for the Northern Mariana Islands.

Before: BOOCHEVER, BEEZER, and TROTT, Circuit Judges.

BOOCHEVER, Circuit Judge:

Ramon Mafnas appeals the district court's entry of summary judgment against him in Matao Yokeno's action to quiet title to a leasehold interest in real property located on the island of Saipan, in the Commonwealth of the Northern Mariana Islands (CNMI or Commonwealth). We conclude that summary judgment was improper because the district court's subject matter jurisdiction over Yokeno's claim has not been established. Accordingly, we vacate the judgment and remand.

BACKGROUND

The underlying property dispute in this case centers on a provision of the CNMI Constitution which restricts acquisition of certain interests in land--permanent freehold interests and leasehold interests exceeding fifty-five years--to persons of Northern Marianas descent. CNMI Const., art. XII, §§ 1, 3. The property transactions in question represent an attempt to comply with the letter of the constitutional restriction by severing the freehold interest from the leasehold interest while giving the lessee power to designate a freehold grantee of CNMI descent. The plaintiff, Matao Yokeno, is Japanese. He is the leaseholder of a 55-year lease in a parcel of land at San Roque, Saipan, originally owned by the defendant, Ramon Mafnas. Mafnas is of CNMI descent.

The series of conveyances and assignments in Yokeno's chain of title began in April 1980 when Mafnas entered into an exclusive agency listing agreement with Randall Fennell, a local attorney, to sell or lease the parcel. A month later, Mafnas executed a 40-year lease for a total of $75,000, plus interest, with Fennell and two other attorneys (the Fennell group), along with a separate agreement giving the lessee the power to designate a grantee of CNMI descent to whom Mafnas would convey the fee interest for $10.00. In December 1984, Mafnas conveyed the fee interest to Fennell's secretary Antonia Villagomez, who is of CNMI descent. In November 1985, Villagomez conveyed the fee interest to Marian Aldan-Pierce, a friend of Fennell's, who is also of CNMI descent.

In September 1987 the lessees and the fee holder together conveyed their interests to a new grantee and a new lessee under a purchase and lease agreement. Aldan-Pierce conveyed her fee interest to Ana Guerrero Little, who is of CNMI descent. The Fennell group assigned its remaining leasehold interest to Nansay Micronesia, Inc. (Nansay), a CNMI corporation and subsidiary of Nansay, Inc., a Japanese corporation. Yokeno, Nansay Micronesia's president and incorporator, represented the corporation in this transaction. The total price was $995,940, of which 98% was to be paid to the Fennell group for the leasehold interest and 2% to Aldan-Pierce for the fee interest. Shortly thereafter Little and Nansay Micronesia rescinded the original lease and entered into a new 55-year lease. At the same time Yokeno, on In March 1990, Mafnas notified Fennell and Nansay Micronesia of his intent to file suit to void the 1980 lease to the Fennell group and the 1984 conveyance to Villagomez, based in part on the CNMI Constitution's restrictions on land alienation. From March to May 1990, attorneys for the respective parties corresponded about the dispute, and Mafnas furnished Nansay with a draft copy of the complaint he intended to file in Commonwealth Superior Court. On May 13, 1990, Nansay Micronesia assigned its interest in the property to Yokeno. On May 22, 1990, Yokeno both recorded the assignment and filed a quiet title action against Mafnas in federal district court.

                behalf of Nansay Micronesia, executed a mortgage securing a promissory note for $597,564, with the Fennell group as mortgagee.   The leased property was to become part of the site on which Nansay proposed to develop a beachfront hotel and condominium resort
                

Mafnas moved to dismiss the complaint based on lack of subject matter jurisdiction, failure to join an indispensable party, and federal abstention. The district court denied the motion, in part based on its conclusion that Yokeno's complaint raised a federal question conferring federal subject matter jurisdiction. Mafnas then unsuccessfully petitioned this court for a writ of mandamus. In April 1991, on the parties' cross motions for summary judgment, the district court ruled that Yokeno was entitled to judgment, finding that the transactions involving the property fully complied with Article XII of the CNMI Constitution.

In June 1990, approximately three weeks after Yokeno filed suit in federal court, Mafnas filed his complaint, which he had previously furnished to Yokeno, in Commonwealth Superior Court. In May 1991, Yokeno moved for summary judgment based on the res judicata effect of the federal court judgment. The superior court stayed the action pending our resolution of this appeal.

Mafnas timely appeals the federal district court's judgment. We have jurisdiction under 28 U.S.C. § 1291 (1988), and we reverse and remand.

DISCUSSION

Mafnas bases his appeal on the grounds asserted in his motion to dismiss: lack of subject matter jurisdiction, failure to join an indispensable party, and federal abstention. He also attacks the district court's decision on the merits of Yokeno's claim, citing subsequent decisions of the CNMI Supreme Court voiding transactions in which non-CNMI lessees designated CNMI grantees and provided money for the conveyances, thus creating impermissible resulting trusts in persons not of CNMI descent. 1 Subject matter jurisdiction, however, is the threshold issue. As we discuss below, whether the district court had jurisdiction over Yokeno's complaint remains an open question, requiring remand. Until federal jurisdiction has been established, it would be inappropriate for us to address the remaining issues raised by this appeal.

Yokeno's complaint alleges two bases of federal jurisdiction: existence of a federal question, 28 U.S.C. § 1331 (1988), and diversity of citizenship, 28 U.S.C. § 1332 (1988). In attacking the district court's jurisdiction to entertain Yokeno's suit, Mafnas argues that the complaint does not present a substantial federal question and that diversity was collusively manufactured. The existence of subject matter jurisdiction is a question of law, and our review is de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989), cert. denied, 496 U.S. 937, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990). We review the district court's findings of fact relevant to its determination of subject matter jurisdiction for clear error. See Dweck v. Japan CBM Corp., 877 F.2d 790, 792 (9th Cir.1989).

Federal Question Jurisdiction

Mafnas contests the district court's conclusion that Yokeno's complaint presents a case "arising under" federal law Article XII of the CNMI Constitution provides that "[t]he acquisition of permanent and long-term interests in real property within the Commonwealth shall be restricted to persons of Northern Marianas descent." CNMI Const., art XII, § 1. The restricted interests include "freehold interests and leasehold interests of more than fifty-five years including renewal rights." Id. § 3. Transactions made in violation of these constitutional provisions "shall be void ab initio." Id. § 6. The CNMI Constitution was formulated and adopted pursuant to the Covenant To Establish a Commonwealth of the Northern Mariana Islands in Political Union With the United States of America, Pub.L. No. 94-241, 90 Stat. 263 (1976), reprinted as amended in 48 U.S.C.A. § 1681 note (West 1987) (the Covenant). Section 805 of the Covenant provides that, notwithstanding the United States Constitution and federal law, the CNMI government shall "regulate the alienation of permanent and long-term interests in real property so as to restrict the acquisition of such interests to persons of Northern Mariana Islands descent." The Covenant declares that this restriction on property interests is warranted "in view of the importance of the ownership of land for the culture and traditions of the people of the Northern Mariana Islands, and in order to protect them against exploitation and to promote their economic advancement and self-sufficiency." Covenant § 805.

                and that therefore it had subject matter jurisdiction under the federal question statute.   See generally 28 U.S.C. § 1331.   At issue are the following allegations in Yokeno's complaint:  "If Article XII [of the CNMI Constitution] ... is construed to affect Plaintiff's leasehold interest ... then Article XII is ultra vires, outside of the limited exception of Section 805 [of the Covenant establishing the CNMI as a commonwealth], and contrary to and in violation of Plaintiff's civil and constitutional rights under the Fifth and Fourteenth Amendments of the United States Constitution ... to be free from discrimination based upon race, national origin, and association."   Complaint at 4.   Before analyzing whether Yokeno's complaint presents a substantial federal question, we put these allegations into context by briefly reviewing the relevant provisions of the CNMI Constitution and authorizing federal legislation
                

Yokeno asserts that this case arises under federal law because his complaint alleges violations of the Covenant and of the United States Constitution. We disagree, for our limited jurisdiction cannot be invoked so simplistically. We analyze federal question jurisdiction...

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