99 Cal. Daily Op. Ser v. 501, 98 Daily Journald.a.r. 566mary Anne S. Milne, Plaintiff-appellant, v. Larry L. Hillblom, Defendant,andsan Roque Beach Development Company, Ltd., Defendant-appellee, 165 F.3d 733 (9th Cir. 1999)

Mary Anne S. Milne appeals the decision of the Supreme Court of the Commonwealth of the Northern Mariana Islands ("CNMI") to affirm the superior court's grant of summary judgment in favor of defendant, San Roque Beach Development Co., Ltd. ("SRBD"). Milne fails to raise a federal issue, and we dismiss for lack of jurisdiction.

On December 24, 1984, Milne entered into a contract to sell a parcel of land located in CNMI to SRBD. She subsequently conveyed the land to SRBD by quitclaim deed on January 7, 1985. Under the CNMI Constitution, only persons of Northern Marianas descent (NMD) can own land in the CNMI. See CNMI Const. art. XII, § 1. At the time of the sale of the land, a corporation was considered to be an NMD and could therefore acquire land if it: (1) was incorporated in the commonwealth; (2) maintained its principal place of business in the commonwealth; (3) had directors, 51% percent of whom were NMDs; and (4) had voting shares, 51% percent of which were owned by NMDs. See CNMI Const. art. XII, § 5 (amended 1986).¹ 

SRBD was formed in 1983 when it filed its articles of incorporation with the office of the registrar of corporations of CNMI. The articles of incorporation stated that SRBD's principal place of business was Saipan. Its board of directors consisted of Larry L. Hillblom, a non-NMD; Manuel S. Villagomez, an NMD; and Debra P. Diaz, also an NMD. SRBD issued 1000 shares of common stock. Hillblom owned 490 shares, Villagomez 260 shares, and Diaz 250 shares. Hillblom constructed a home, which he used as his primary residence, on the land purchased from Milne.

Milne brought an action against Hillblom and SRBD to regain title to the land, alleging that the earlier transfer violated Article XII of the CNMI Constitution. Milne contended that SRBD was actually the alter ego of Hillblom and, therefore, not a valid NMD corporation. During the course of litigation, Hillblom died in an airplane crash, and William I. Webster, the special administrator for Hillblom's estate, was substituted as a defendant.

Both Hillblom's estate and SRBD moved for summary judgment in superior court of CNMI.²  Milne did not oppose the estate's motion, which the superior court granted.³  The superior court also granted summary judgment to SRBD, relying in part on CNMI Public Law 8-32 (2 N. Mar. I.Code § 4973).⁴  Milne appealed to the CNMI Supreme Court, which affirmed the superior court's decision without relying on CNMI Public Law 8-32 ("PL 8-32").

This court determines its jurisdiction de novo. Wabol v. Villacrusis, 11 F.3d 124, 125 (9th Cir. 1993). "We analyze federal question jurisdiction with reference to the well-pleaded complaint rule." Yokeno v. Mafnas, 973 F.2d 803, 807 (9th Cir. 1992). "Under this rule, a complaint for coercive relief properly invokes federal jurisdiction where its well-pleaded allegations raise a substantial issue of federal law." Id.

This court has jurisdiction over "appeals from all final decisions of the highest court of the [CNMI] from which a decision could be had in all cases involving the Constitution, treaties, or laws of the United States...." 48 U.S.C. § 1824(a). "Our jurisdiction over appeals from judgments of the CNMI Supreme Court is similar to the U.S. Supreme Court's jurisdiction over the decisions of the highest state courts...." Santos v. Nansay Micronesia, Inc., 76 F.3d 299, 301 (9th Cir. 1996).

A. The CNMI Supreme Court applied only local law in reaching its decision.

Milne challenged the constitutionality of PL 8-32, which the superior court relied on in reaching its decision, in her appeal to the CNMI Supreme Court. The CNMI Supreme Court, however, specifically declined to address the constitutionality of PL 8-32. Instead, the court held that the issue of whether SRBD was a valid NMD corporation could be decided without applying PL 8-32.⁵ 

Although Milne argues that the CNMI Supreme Court implicitly applied PL 8-32, this court will

not reach purported federal questions neither raised nor decided by the CNMI Supreme Court. It is particularly inappropriate to reach out and search for a federal question when it appears from the opinion of the CNMI Supreme Court, and from the underlying record in the case that valid provisions of local law justified the verdict....

Santos, 76 F.3d at 301.

In reaching its decision, the CNMI Supreme Court first examined whether SRBD was a valid NMD corporation. It held that SRBD met the four criteria set out in the 1976 CNMI Constitution, which were applicable at the time of the sale and are outlined above; therefore, SRBD was a legitimate NMD corporation. Next, the CNMI Supreme Court applied the holding of the Ferreira cases to find that the transaction between Milne and SRBD was valid. "Compliance with Article XII and qualification as a bona fide purchaser are questions of CNMI law," not of federal law. Yokeno, 973 F.2d at 808.

The court then looked at issues concerning property law and determined that Hillblom did not possess a fee interest in the land. Property law is an area of law that is traditionally left to the states. Cf. Boggs v. Boggs, 520 U.S. 833, 117 S. Ct. 1754, 1770, 138 L. Ed. 2d 45 (1997) (Breyer, J., dissenting). The decision of the CNMI Supreme Court concerning the nature of Hillblom's interest in the property does not raise a federal question.

Finally, the court addressed Milne's attempt to pierce the corporate veil and dissolve SRBD, and determined that the corporate form would only be ignored to apply liability, not to dissolve a corporation. "The formation of corporations and the dissolution ... of corporations are traditional areas of state [or local] law." Atchison, Topeka & Santa Fe Ry. Co. v. Brown & Bryant, Inc., 159 F.3d 358, 363 (9th Cir. 1997).

There is nothing in the CNMI Supreme Court's decision that raises a federal question. In fact, the court found it completely unnecessary to address the constitutionality of PL 8-32. It based its decision not on PL 8-32 but solely on local commonwealth law.

B. The CNMI Supreme Court's decision is not untenable.

This court will review a decision of the CNMI Supreme Court involving only local law if the decision is "untenable or amounts to a subterfuge to avoid federal review of a constitutional violation." Ferreira I, 1 F.3d at 962. The holding of Ferreira I was further explained in Castro v. Hotel Nikko Saipan, Inc., 96 F.3d 1259 (9th Cir. 1996). There the court stated that "the Ninth Circuit has jurisdiction only over those 'untenable' decisions of local law that implicate an appellant's federal rights." Id. at 1261; see also Diamond Hotel Co. v. Matsunaga, 99 F.3d 296, 298 (9th Cir. 1996).

The CNMI Supreme Court's decision does not implicate appellant's federal rights and does not, therefore, permit this court to exercise its jurisdiction.⁶  Additionally, far from being untenable, the court's decision here is in line with our decisions in Ferreira I and Ferreira II. See supra note 5.

C. Section 805 of the Covenant to Establish a Commonwealth of the Northern Mariana Islands does not provide a basis for federal jurisdiction in Article XII cases where a party challenges a conveyance of real property.

Milne also argues that a federal question is raised because the court's refusal to find a violation of Article XII of the CNMI Constitution is a violation of section 805 of the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States ("Covenant").⁷  It is well-settled law that not "every case which somehow implicates the Covenant is necessarily a case arising under federal law." Camacho v. Civil Serv. Comm'n, 666 F.2d 1257, 1262 (9th Cir. 1982) (disagreed with on other grounds in In Matter of McLinn v. F/V Fjord, 739 F.2d 1395, 1397 (9th Cir. 1984) (en banc)).

Essentially, the whole government and laws of CNMI are creatures of the Covenant. See id. If this court were to exercise jurisdiction every time an appellant referenced the Covenant, the distinction between the local law of CNMI and federal law would be meaningless. See id. Where the Covenant is only peripherally involved, a federal question is not raised, and this court will not exercise jurisdiction. See, e.g., Diamond Hotel, 99 F.3d at 298; Sablan v. Manglona, 938 F.2d 970, 971 (9th Cir. 1991); Camacho, 666 F.2d at 1262.

This court has repeatedly rejected the argument appellant raises here in other cases dealing with Article XII, and we do so again here. In Sablan, appellant argued that this court had jurisdiction to review a CNMI Supreme Court decision interpreting Article XII in a quiet title action because Article XII implemented section 805. 938 F.2d at 971. We "rejected such an expansive interpretation of our jurisdiction." Id. Similarly, in Diamond Hotel, the CNMI Supreme Court invalidated portions of a long-term lease as violative of Article XII. Once again, we held that the Covenant was only "peripherally involved" and that we had no jurisdiction. 99 F.3d at 298.

Here, the CNMI Supreme Court's decision was based solely on local law and section 805 was only peripherally involved. No federal issue is implicated, and we do not have jurisdiction. This court cannot now foresee any circumstance where CNMI's interpretation of Article XII will be reviewable because of the existence of section 805. Appellants should be discouraged from arguing that section 805 provides federal jurisdiction over a CNMI decision involving Article XII of the CNMI Constitution.

We DISMISS the appeal for lack of a genuine federal issue.

APPEAL DISMISSED.