FSM 2 Intrm. 173-188

The issue of standing to sue, because it was a particularly unsettled area in United States law when the FSM Constitution was drafted and ratified, is an area especially calling for independent analysis rather than adherence to decisions construing similar provisions in the United States Constitution. Innocenti v. Wainit, 2 FSM Intrm. 173, 178-79 (App. 1986).

The principal objectives of the case and dispute requirement are to enhance the ability of the courts to make fair and intelligent decisions, and to keep the judicial power within its proper role. Innocenti v. Wainit, 2 FSM Intrm. 173, 178-79 (App. 1986).

A concrete case or dispute clearly exists where a state legislature contends that an act of the legislature requires payment of a tax on imports and others insist that the act is null and void, and, depending on the outcome of the controversy, money may or may not be collected, and penalties may or may not be imposed. Innocenti v. Wainit, 2 FSM Intrm. 173, 179 (App. 1986).

The standing requirement is not expressly stated in the Constitution but implied as an antecedent to the constitutional case or dispute requirement, and should be interpreted so as to implement the objectives of that requirement. Innocenti v. Wainit, 2 FSM Intrm. 173, 179 (App. 1986).

Business people have standing to challenge the constitutionality of an excise tax based on imports where the addition of the tax increases the cost that business people must pay for goods intended for resale to consumers. Innocenti v. Wainit, 2 FSM Intrm. 173, 180 (App. 1986).

Where a party on appeal challenges the intervention in the appeal of another party, and the issue on the merits is decided in favor of the challenging party, no harm is visited on the challenging party by allowing the intervention, and the court is not required to rule on the propriety of that intervention. Innocenti v. Wainit, 2 FSM Intrm. 173, 180 (App. 1986).

The nature of the expressly delegated powers in article IX, section 2, of the Constitution--including the power to impose taxes, to provide for the national defense, ratify treaties, regulate immigration and citizenship, regulate currency, foreign commerce and navigation, and to provide for a postal system--strongly suggests that they are intended to be the exclusive province of the national government, since they call for a uniform nationally coordinated approach. Innocenti v. Wainit, 2 FSM Intrm. 173, 181-82 (App. 1986).

Taxes imposed on goods because of their entry into a port of entry of the State of Truk, levied at the port of entry in amounts based upon the quality or value of imported goods, and which must be paid to the Division of Revenue prior to release of the items from the port of entry, are taxes based on imports. Such a tax represents an effort to exercise powers expressly delegated to the national government, is beyond the powers of the state, and is null and void. Innocenti v. Wainit, 2 FSM Intrm. 173, 183-84 (App. 1986).

Failure to apply a constitutional holding retroactively does not violate the supremacy clause of the Constitution, FSM Const. art. II, § 1. To the contrary, courts may choose between prospective and retroactive application in order to avert injustice or hardship. Innocenti V. Wainit, 2 FSM Intrm. 173, 184-85 (App. 1986).

Earlier legislation similar to the legislation at issue cannot serve as "past precedent" within the meaning of the first guideline for determining whether a decision should be given retroactive effect where that legislation has not been subjected to court review for constitutionality. Innocenti v. Wainit, 2 FSM Intrm. 173, 185 (App. 1986).

The courts must apply three guidelines in determining whether a decision should be given retroactive effect. First, the decision, to be applied nonretroactively, must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied or by deciding an issue of first impression whose resolution was not clearly foreshadowed. Second, the court must weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation. Finally, the court must weigh the inequity imposed by retroactive application. Innocenti v. Wainit, 2 FSM Intrm. 173, 185-86 (App. 1986).

Although retroactive application of a decision holding a state tax unconstitutional would impose hardship on a state, where funds collected under the tax have already been committed, such a result is not inequitable where the state legislature pushed on with the tax act despite the strong resistance of business people to the tax in the form of petition and establishment of an escrow account to hold contested payments, and a veto message by the governor of the state, and there is no indication that the legislature seriously considered the constitutionality of the legislation. Innocenti v. Wainit, 2FSM Intrm. 173, 186 (App. 1986).

The question whether taxes paid by plaintiffs under a taxing statute subsequently found to be unconstitutional may be refunded to them turns upon whether the tax was voluntarily paid. Innocenti v. Wainit, 2 FSM Intrm. 173, 187 (App. 1986).

Where taxpayers informed the government that they, protested the tax as unconstitutional, and had to pay the tax in order to receive the taxed property, the payments are coerced, not voluntary, and taxpayers are entitled to the refund of all amounts paid. Innocenti v. Wainit, 2 FSM Intrm. 173, 187 (App. 1986).

In a new nation in which the courts have not yet established a comprehensive jurisprudence, and the issue is one of first impression and of fundamental importance to the new nation, the Court should not lightly impose sanctions upon an official who pushes such an issue to a final court decision, and should make some allowance for wishful optimism in an appeal. Innocenti v. Wainit, 2 FSM Intrm. 173, 188 (App. 1986).

The principal question raised by this appeal is whether the Truk State Tax Act of 1984, which imposes an "excise tax" at the port of entry on items imported into the State of Truk, is consistent with article IX, section 2(d) of the Constitution of the Federated States of Micronesia, under which the power "to impose taxes, duties, and tariffs based on imports" is "expressly delegated" to the Congress of the Federated States of Micronesia.

The legislation provided for an "excise tax" to be levied at the port of entry on tobacco, alcoholic beverages, motor vehicles and, subject to certain specified exemptions, all other "items imported into the State of Truk." Id. § 4. Every item subject to tax under the bill is also covered by the national import tax law. 54 F.S.M.C. 201. The bill further specified that the taxes must be paid prior to release of the items from the port of entry. Id. § 8.None other than imported items would be reached by the Truk excise tax.1

Opposition arose immediately. On September 21, 1984, the Truk Chamber of Commerce adopted a resolution calling for immediate repeal of the excise tax and resolving, if this and other demands were not met, "to withhold all sales and other taxes collected in the State of Truk." Among the reasons given for this extraordinary threat was that "the action of the legislature by levying an excise tax on the people of Truk is an intentional violation of the Constitution of the Federated States of Micronesia."

In a letter also dated September 21, 1984, Truk Governor Erhart Aten advised the legislature of his disapproval on grounds that the bill "is clearly unconstitutional in that its enactment, if approved, is an infringement on the authority and powers expressly delegated to the FSM National Congress under Article IX, Section 2 of the Constitution of the Federated States of Micronesia." Governor Aten's veto was overridden and the legislation enacted as Truk State Law No. 5-103 by a November 20, 1984 vote of the legislature.

On April 22, 1985 various Truk business persons 2 filed a law suit with this Court's Trial Division in Truk seeking a declaratory judgment that the Act's "excise tax" is really an unconstitutional import tax, therefore is "null and void." Plaintiffs also requested an injunction prohibiting enforcement of the tax and an order requiring refund to them of the taxes they had already paid.

Governor Aten and the Truk State executive branch declined to defend the Act against the plaintiffs' complaint. Therefore Simeon Innocenti, as Speaker of the Truk State Legislature, requested permission to intervene in the case to defend the Act's constitutionality, and to seek orders requiring Governor Aten to enforce the Act and plaintiffs to pay the tax.3

counterclaim against the plaintiffs. Wainit v.Truk (I), 2 FSM Intrm. 81 (Truk 1985). The trial division then granted plaintiffs' motion for summary judgment, holding that the Act's excise tax on imports represents an unconstitutional attempt by Truk State to exercise import tax powers delegated to the Congress of the Federated States of Micronesia by article IX, section 2(d) of the Constitution of the Federated States of Micronesia. Wainit v. Truk (II), 2 FSM Intrm. 86 (Truk 1985). The court enjoined Truk State from enforcing those taxes on imports and ordered that any such taxes already paid by the plaintiffs be refunded to them.

Speaker Innocenti appeals from that decision. Plaintiffs cross-appeal, arguing that the trial division erred in permitting Innocenti to intervene in the litigation. Plaintiffs also contend that Innocenti's appeal is frivolous so that "just damages and single or double costs" should be awarded plaintiffs under Rule 38 of our Rules for Appellate Procedure.

Each primary party argues that the other should not be allowed to be heard. Innocenti contends that the case should have been dismissed by the trial court because plaintiffs do not have standing to sue. They, in turn, insist that Innocenti should not have been allowed to intervene.

This is the first time that the question of standing to sue, that is, the issue of whether a particular litigant has sufficient connection with a case or dispute to be permitted to bring his or her position before the Court as a party, has been presented to this court's appellate division. In approaching the issue we are aware that "standing to sue was a particularly unsettled area of United States law when the FSM Constitution was drafted and ratified." Aisek v. Foreign Inv. Bd., 2 FSM Intrm. 95, 99 (Pon. 1985). Thus, this issue is one especially calling for independent analysis rather than adherence to decisions construing similar provisions in the United States Constitution. Id.

This Court's trial jurisdiction extends only to "cases and disputes." FSM Const. art. XI, § 6. The trial division has recognized that the Court is thereby precluded from making policy pronouncements on the basis of hypothetical or academic issues Ponape Chamber of Commerce v. Nett Municipal Gov't, 1 FSM Intrm. 389, 401 (Pon. 1984).

The judicial power to declare the law will more likely be exercised in an enlightened fashion if it is employed only where the court is exposed to the differing points of view of adversaries. Thus judicial decision-making power is typically exercised by a court which has heard the competing contentions of adversaries having sufficient interests in the outcome to thoroughly consider, research and argue the points at issue. Even then, a court's declaration of law should be limited to those rulings necessary to resolve the dispute before it.

Jurisdictional limitations upon the judicial power also reflect the specialized and limited role of judiciaries within government. While the Judiciary must resolve disputes legitimately placed before it, it may not usurp legislative functions by making declarations of policy or law beyond those necessary to resolve disputes nor undertake administrative functions of the kind normally consigned to the Executive Branch where this is not necessary to carry out the judicial function.

Id. In Sproat, the petitioners requested a declaration that they are citizens of the Federated States of Micronesia. Finding no party asserting that the petitioners lacked citizenship or were prevented from exercising any rights linked to citizenship, the court concluded that no case or dispute existed and therefore dismissed the case.

Here, there can be no question that a case or dispute exists. The Truk Legislature contends that the Truk State Tax Act of 1984 requires payment of a tax upon goods imported into the State of Truk. Others insist that the Act is null and void and no such payment is required. Depending on the outcome, money may or may not be collected, and penalties may be imposed or not. A concrete case or dispute plainly exists under these circumstances. Ponape Chamber of Commerce v. Nett Municipal Gov't, 1 FSM Intrm. at 401-02.

The requirement of standing to sue is not expressly stated in the Constitution. Instead it is implied, a necessary antecedent of the restriction of our jurisdiction to cases and disputes. The purposes of that constitutional requirement would be defeated if parties having no connection with a particular case or dispute could nevertheless bring it before the court.

Innocenti does not suggest that the issues of constitutionality presented here are outside this Court's normally assigned functions. That argument would be futile for paramount within this Court's mission is the responsibility to interpret the Constitution of the Federated States of Micronesia.

Thus, our focus is upon the first of the purposes identified in Sproat,

[2 FSM Intrm. 180]

that the parties be sufficiently connected with the case or dispute to have incentive to "thoroughly consider, research and argue the points at issue." Innocenti says that the business taxpayers do not have sufficient interest. He recognizes that they pay the tax in the first instance to obtain possession of imported goods. However, he argues that they then simply add the tax to the price which they would otherwise have charged the consumers, thereby passing along to the consumers the actual burden.

That argument minimizes the involvement of the taxpayers and overlooks risks inherent in 'any business operation. At the very least, addition of the tax to the cost of the goods imported increases the amount of money which businesses must produce to obtain possession. This in turn increases the funds which the business person has at risk until the goods are resold to the consumers, and any loss which may be sustained through theft, damage or spoilage before the goods are sold. Moreover, while we are willing to accept as a general proposition the idea that businesses attempt to, and successful businesses generally do, effectively pass along the burden of taxes and other increased costs to the consumers, increased costs may also strengthen consumer resistance, and make the more costly items more difficult to sell.

These factors provide sufficient connection between the tax here and the activities of the business people who challenge the tax to assure the "concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional issues." Aisek v. Foreign Inv. Bd., 2 FSM Intrm. 95, 102 (Pon. 1985), quoting Baker v. Carr, 369 U.S. 186, 204, 82 S. Ct. 691, 703, 7 L. Ed. 2d 663, 678 (1962).

We are asked also to decide whether Speaker Innocenti should have been permitted to intervene in the litigation. The business persons, supported by the amicus curiae brief of the national government, contend that the speaker's action in litigating to defend the tax usurps Truk State executive branch functions and should not have been permitted. In view of our holding in this case that the tax itself is unconstitutional and beyond the powers of the Truk State Government, no harm has been visited upon the plaintiffs by allowing Innocenti to intervene. A review now of his right to intervene would simply be an idle gesture. The issue having been rendered moot, we decline to rule upon it.

Interpretation must begin with the words of the Constitution. Alaphonso v. FSM, 1 FSM Intrm. 209 214 (App. 1982). If constitutional language is absolutely clear and amenable to only one possible interpretation, then theCourt must accept that and may go no further in its quest for meaning. Of course the particular provision must be read against the background of the entire Constitution. Review of other provisions properly may strengthen or weaken the firmness of conviction with which a reader perceives the meaning of a given clause or provision.

Among the powers "expressly delegated to Congress" is power "to impose taxes, duties, and tariffs based on imports." FSM Const. art. IX, § 2(d). Article VIII, identifying "state powers," excludes powers "expressly delegated to the national government,"4 confirming that these are national powers.5 Yet another provision identifies powers which may be exercised concurrently by the Congress and the states.6

The Constitution, then, identifies and allocates powers among three categories. There are national, state and concurrent powers. Power to impose taxes based on imports falls within the national powers, is excluded from the definition of state powers, and is not among the named concurrent powers.

The constitutional language discussed thus far approaches the goal of ultimate clarity. There are however in this imposing wall of apparent certitude two small splinters of ambiguity. Nowhere does the Constitution say in direct and conclusive terms that any power expressly delegated to the national government may not be exercised by a state. Nor is it said that the powers identified in article IX, section 3 are the only ones which may be exercised concurrently.

Additional considerations though lead us to conclude that the national power to impose taxes based on imports is exclusive, not to be shared by the states. First, the nature of the powers expressly delegated to the national government in article IX, section 2, strongly suggests that all were intended to be the exclusive province of the national government. The powers enumerated include, aside from imposition of taxes, powers to provide for the

national defense,7 ratify treaties,8 regulate immigration and citizenship,9 regulate currency,10 foreign commerce11 and navigation12 and to provide for a postal system.13 Those activities appear by their nature to call for a uniform nationally coordinated approach. Others, for example, the powers to impeach leading national officers14 and to override Presidential vetoes 15 --were patently intended to be exercised by the national Congress only.

Our review of the nature of the expressly delegated powers leaves us with the conviction that most, if not all, were intended to be exclusive with the national government. The presumption could be rebutted as to a particular power by showing specific constitutional language which either introduces ambiguity or clearly indicates that the particular power is concurrent. In that event, it would be proper to consult the convention journals, and perhaps other sources, for clarification. Alaphonso, 1 FSM Intrm. at 214.

As to import taxes, however, there are no provisions in the Constitution which shake our presumption that powers expressly delegated to the national government are exclusive. Indeed the lone remaining provision relating directly to import taxes confirms the thrust of the other provisions toward exclusivity of this national power. "National taxes shall be imposed uniformly. Not less than 50% of the revenues shall be paid into the treasury of the state where collected." FSM Const. art. IX, § 5. This provision, calling for uniformity and assuring that the states will benefit from the existence and exercise of the national government's taxing powers, confirms that the states are not to duplicate those powers.

convention, recognized, based upon a review of other federal systems, that "the financial relations between the Centre and the units are the most difficult" and that "to avoid the conflicts and tangles of overlapping tax jurisdiction, the duplication of collection agencies, and clashes of fiscal policy" federations typically try to avoid concurrent taxation and "nearly always" assign tax sources "exclusively to one level of government or the other." SCREP No. 38, II J. of Micro. Con. Con. 863.

Based upon this background, the Committee proposed that the collection of income and import taxes would be assigned to the national government with all other taxing powers "reserved expressly" to the states. Id. at 864. To assure for the states a "high degree of fiscal autonomy" the Committee recommended that the states be assured not less than 50% of all central income and import tax revenue. Id.

The Committee gave additional reasons for its belief that the taxing powers should be "exclusive and distinct." Id. These included: (1) minimization of overlapping taxation by two levels of government; (2) reduction of administrative costs; and (3) avoidance of future legal disputes between national and state governments as to the reach of their respective taxing authorities. Id. at 865. Finally the Committee pointed out that its plan was calculated to ensure adequate revenue to both levels of government and to prevent interstate trade inequities. Id.

Unmistakably, the tax specified in Section 4 of the Truk State Tax Act of 1984 is one based on imports. Importation itself triggers the tax. Every item reached by the tax is also subject to the national import tax. See 54 F.S.M.C. 201. Imported goods may not leave the port of entry and enter local commerce until the tax has been paid. This is the same. enforcement procedure employed to collect national import taxes. Department of Finance Reg. § 2.7 (Jan. 29, 1982). No items other than imported goods are reached by the Truk excise tax provisions.

Taxes imposed on goods because of their "entry... into a port of entry of the State of Truk," 16 which taxes are "levied... at the port of entry"17 in amounts based upon the quality or value of imported goods18 and which must be "paid to the Division of Revenue prior to the release of the items from the port of entry"19 are taxes based on imports.

These provisions of the Act represent an effort by the State of Truk to exercise taxing powers "expressly delegated" to, and exercised by, the national government. 54 F.S.M.C. 201. Such a tax is beyond the powers of the State of Truk. The offending provisions are null and void. The trial court was correct in enjoining further collection of the tax.

The trial court ruled that the Truk State Government must repay to the taxpayers the import taxes already wrongfully collected from them. Innocenti asks that we set aside that ruling and hold that the trial court's decision should operate only prospectively. He would have us prevent plaintiffs from obtaining refunds of the import taxes they have already paid and allow the state to collect taxes which accrued before August 16, 1985 but have not been paid.

There is no Federated States of Micronesia case precedent or statute indicating whether decisions holding state tax legislation violative of the national constitution may be applied for future purposes only. Nobody suggests, and we see no way, that any principle of custom or tradition may help us address this issue.

This Court has previously noted that our Constitution's supremacy clause is based upon the comparable clause of the United States Constitution. Jonas v. FSM, 1 FSM Intrm. 322, 327 n.1 (App. 1983). We may therefore look to United States court interpretations for guidance in considering plaintiffs' arguments.

Plaintiffs have directed us to no authority, and we have found none, holding that failure to apply a constitutional holding retroactively violates the supremacy clause. To the contrary, it is well established that to avert "injustice or hardship" courts may choose "between the principle of forward operation and that of relation backward." Great Northern Rwy. v. Sunburst Oil & Refining Co., 287 U.S. 358, 364, 53 S. Ct. 145, 148, 77 L. Ed. 360, 366 (1932).

[2 FSM Intrm. 185]

Tax decisions have been applied only prospectively when to do otherwise would work an injustice. Annot., 10 A.L.R.3d 1371, 1437-44 (1966). Innocenti points to State v. Martin, 384 P.2d 833 (Wash. 1963), where the Washington Supreme Court found governmental fund raising efforts unconstitutional. That decision was applied only prospectively, and the unconstitutional legislative authorization permitted to remain in force as to bonds already authorized. The court emphasized that the bonds had been issued in good faith, based on a prior Washington Supreme Court decision holding such an action to be legal.

The United States Supreme Court has recognized the "doctrine of nonretroactivity" for constitutional holdings, in both civil and criminal cases. See cases cited in Chevron Oil Co. v. Huson, 404 U.S. 97, 106, 92 S. Ct. 349, 355, 30 L. Ed. 2d 296, 305 (1971).

We therefore conclude that the supremacy clause, article II, section 1 of the FSM Constitution, does not require that we give retroactive application to our every constitutional decision. The next question is whether this particular decision should be given prospective or retroactive effect.

In Chevron Oil Co. v. Huson, 404 U.S. at 106, 92 S. Ct. at 355, 30 L. Ed. 2d at 305, the Court established three guidelines to be applied in determining whether a decision should be given retroactive effect. We find the guidelines consistent with Micronesian values and useful for solving problems of this kind. We therefore adopt and apply them in this case.

First, the decision to be applied nonretroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied or by deciding an issue of first impression whose resolution was not clearly foreshadowed.

There was no court precedent upon which the Truk State Legislature relied in enacting this legislation. Counsel for Innocenti points to similar legislation in the State of Yap as possible precedent. However, that legislation has not been subjected to court review for constitutionality and may not serve as precedent for Truk's statute within the meaning of this guideline. Exclusivity of the income tax was an issue of first impression, but the trial court's decision was clearly foreshadowed by the constitutional language referred to in this opinion. The first test, then, suggests that the trial court's decision should be applied retroactively.

As already noted, the Micronesian Constitutional Convention's Committee on Public Finance and Taxation pointed to several reasons for making state and national taxing powers "exclusive and distinct." These include avoidance of: (1) overlapping taxation; (2) administrative duplication; and (3) future legal disputes between national and state governments. To grant Innocenti's

[2 FSM Intrm. 186]

request here and permit collection of taxes accrued up to the date of the trial court's decision would prolong the period of overlapping taxation and administrative duplication, contrary to the purposes of the constitutional rule placing the power to base taxes on imports exclusively with the national government.

Nonretroactive application of the trial court ruling presumably would not lead to legal disputes or litigation between the state and national government but could embroil both this Court and the Truk State Court in disputes arising out of efforts by the Truk State Government to collect the pre August 16, 1985 tax, which we have held to be unconstitutional. The second guideline too, then, points toward retroactive application. Finally, we must weigh the inequity imposed by retroactive application.

Innocenti contends that some of the money which the State of Truk expected to collect under this tax law has already been committed, so hardship would be imposed upon the State of Truk if the decision is applied retroactively. While retroactive application may cause hardship, this would not be a substantially inequitable result. In the face of strong resistance by Truk business people in the form of petitions and the establishment of an escrow account to hold contested tax payments, as well as a veto message by the Governor of the State of Truk warning of the unconstitutionality of the Act, the Truk State Legislature pushed on with this legislation.

There is no indication that anybody in the legislature gave serious consideration to the constitutionality of the law which they were passing. Innocenti's counsel represented in oral argument that the issues here are "political" not legal, and that this case principally represents a struggle for power between the Truk State legislative and executive branches. Be that as it may, it does seem apparent that nobody involved with the Truk State Legislature was giving careful consideration to the legality of this legislation.

Innocenti also asks that we set aside the trial court's order that the import taxes already paid by the plaintiffs be refunded to them. This too is an issue of first impression and we look to decisions elsewhere for guidance.

In accordance with the well-established principle of law that a voluntary payment made under a mistake of law, but with a full knowledge of all the facts, cannot be recovered, it is generally held that one who voluntarily pays a tax imposed by an unconstitutional law, without knowing the law is unconstitutional, cannot recover the amount that is so paid.

It is equally as well settled that one who involuntarily pays under protest a tax imposed by an unconstitutional statute or ordinance may, in an appropriate action, recover the amount paid. Annot., 48 A.L.R. 1381, 1382, 1385 (1927)

The analysis thus turns on whether the tax was voluntarily paid. Involuntariness is difficult to establish. See, for example, Chesebrough v. United States, 192 U.S. 253, 259, 24 S. Ct. 262, 264, 48 L. Ed. 432, 435 (1904) ("generally speaking, even a protest or notice will not avail ... without any coercion by the actual or threatened exercise of power"); Security Nat'l Bank v. Young, 55 F.2d 616, 619 (8th Cir.), cert. denied, 286 U.S. 551 (1932) ("True, it is alleged that the taxes were paid under protest, but this is not sufficient to save the payment from being voluntary... if it was not made under any duress, compulsion, or threats.").

Thus, in Elliot v. Swartwout, 10 Pet. 137, 9 L. ed. 373, and Bend v. Hoyt, 13 Pet. 266, 10 L. ed. 155, which were customs cases, the payments were made to release goods held for duties on imports.... The recovery rested upon the fact that the payment was made to release property from detention, and the protest saved the rights which grew out of that fact.192 U.S. 260, 24 S. Ct. at 264, 48 L. Ed. at 435. The Truk merchants informed the government that they protested the tax as unconstitutional. They had to pay to get their property from the dock, and these payments were coerced, not voluntary. They are entitled to refunds of all amounts so paid. The trial court's ruling on this point is affirmed.

therefore award damages and costs to the plaintiffs under Rule 38 of our Rules of Appellate Procedure. That rule says, "If the Supreme Court Appellate Division shall determine that an appeal is frivolous, it may award just damages and single or double costs to the appellee."

The issues in this case are not close ones. it is difficult for us to perceive how the appellant or counsel could have believed they might prevail on appeal. Yet nineteen members of the Truk State Legislature voted to override the governor's veto and to enact this legislation. If there was frivolity in this appeal, then surely it is traceable to the legislative chamber itself.

We are not inclined to assess the rationality of the Truk State legislators as they voted for this legislation. Given the fact that they did vote for it, it does not seem frivolous to us that Speaker Innocenti should make all possible efforts to see to it that the vote of the legislature be implemented.

We are also influenced by the fact that exclusivity of state and national taxing powers is an issue of fundamental importance to this new nation. While the issues are not close, they are important. We would not lightly impose sanctions upon an official who pushes such an issue to a final court decision.

Perhaps too, because this is a new nation and the courts have not yet established a comprehensive jurisprudence, we should make some allowance for the kind of wishful optimism reflected in this appeal. This seems apt where, as here, the issue presented is one of first impression.

The decision of the trial court declaring null and void those provisions of Truk State Law 5-103 imposing an excise tax on imports is affirmed, as are the related orders of the Court enjoining further enforcement of those provisions and requiring that the amounts already paid by plaintiffs be refunded.

2. The named plaintiffs are Tadashi Wainit, doing business as Tadashi & Sons, Ltd.; Anna Mijares and Sasuo Wengu, doing business as ASA Enterprises; Xavier Kaminanga d/b/a Kiomasa Enterprises; Flavia M. Bruton d/b/a Mita & Bruton Enterprises; Resty Shotaro d/b/a Truk Lagoon Wholesalers; Alexander Narruhn; and Truk Trading Co. Inc.

20. FSM Const. art. II, § 1: "This Constitution is the expression of the sovereignty of the people and is the supreme law of the Federated States of Micronesia. An act of the Government in conflict with this Constitution is invalid to the extent of conflict."