Reply Brief — Guam Hakubotan, Inc. v. Furusawa Investment Corp.

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| Supreme Court, WS

(y) FILED

No. 91-1419 APR 20 i992

z= PORT oF THE CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

GUAM HAKUBOTAN, INC.,

. Petitioner,

FURUSAWA INVESTMENT CORPORATION,

JULALE INVESTMENT CORPORATION, and

YASUDA SHOJI KK,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

REPLY TO BRIEF IN OPPOSITION

WILLIAM ALSUP LAWRENCE J. TEKER

Counsel of Record GAYLE & TEKER

JOANNE HOEPER Agana Bay Building -

MORRISON & FOERSTER 220 East Marine Drive

345 California Street Agana, Guam 96910

San Francisco, CA 94104-2675 (671) 477-9891

(415) 677-7000

PHILLIP TORRES

General Counsel

HAKUBOTAN ENTERPRISES INC.

P.O. Box 8914

Tamuning, Guam 96931

(671) 646-4866

Dated: April 20, 1992

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

Be Lagi wakes

ey SE

TABLE OF AUTHORITIES

Cases Page

Blount v. T.D. Publishing Corp., 77 N.M. 384, 423

Rs —_. RRR e ree eaeN 4

Carolene Products Co. v. United States, 323 U.S. 18

I aah ede 4

DeCastro v. Board of Commissioners, 322 U.S. 451

5 PRESEOE A GER ae ma SUPOLEEar yr CCR ee TINT passim

Guam v. Yang, 850 F.2d 507 (9th Cir. 1988) ........ 2

State v. Tramble, 144 Ariz. 48, 695 P.2d 7387

IIE ceuihaededimipslliclialahlamatldistepdirieiictn Cis aa a 4

United States v. Johnson, 181 F.2d 577 (9th Cir.

paces peered AAP AE ST eR 4

Whitney v. Fox, 166 U.S. 637 (1897) ...................... 4

Zerbe v. State, 583 P.2d 845 (Alaska 1978) ............ 4

Statutes & Rules

evs. Si1siee ..

Guam Civil Code § 1056 ....................--...ccccccccccceccsseeee.

Other Authorities

ow w

John Haley, The Preliminary Contract for Substi-

tute Performance: A Reflection of Japanese

Judicial Approach, Law in Japan, Volume 7

ERE RT SMO HA CCE SR EST OO Ts AR 2

2B Sutherland Statutory Construction (5th ed.

IGGL) § 62.68 ................. AOE y Te SEMEN ROS LEE 4

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-1419

GUAM HAKUBOTAN, INC.,

Petitioner,

FURUSAWA INVESTMENT CORPORATION,

JULALE INVESTMENT CORPORATION, and

YASUDA SHOJI KK,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

REPLY TO BRIEF IN OPPOSITION

The Ninth Circuit unambiguously declared that it “‘re-

viewed[ed] the appellate division’s application of Guam

law de novo” (App. A at 5a). Respondents Furusawa

Investment Corporation, et al. (““Furusawa”) now urge

this Court that the opposite is true—that “the Ninth Cir-

cuit did not engage in de novo review of Guam law”

(Opposition at 13). Petitioner Hakubotan believes that

the Ninth Circuit’s opinion speaks for itself, and that

the Court of Appeals did what it said it did.

In Guam v. Yang, 850 F.2d 507, 511 (1988), the

Ninth Circuit explained that de novo review “accords no

deference to interpretations of local law by the Appel-

late Division of the District Court of Guam.” This is

exactly what the Ninth Circuit did in this case. It ac-

corded no deference to the Appellate Division’s interpre-

tation of the relevant Guam statutes and adopted its own

interpretation based on its view of the proper “logic,”

“economic sense” and “policy” behind the statutes (App.

A at 8a, 12a). The Ninth Circuit thus acted in direct

contravention of this Court’s ruling in DeCastro v.

Board of Commissioners, 322 U.S. 451, 456 (1944), which

permits reversal “only on a clear showing that the rule

applied by the local court does violence to recognized

principles of local law or established practices of the

local community.”

Respondents attempt to disguise the true nature of the

Ninth Circuit’s ruling by making two arguments. They

claim first that the Ninth Circuit did not engage in a

de novo review because, although the issues in the case

are heavily “fact-dependent,” these facts are undisputed

and can be determined as a matter of law (Opposition

at 3, 9). But as discussed in the Petition, the relevant

facts were sharply disputed by the parties at trial (Peti-

tion at 20). Key among these disputed facts were those

relating to the parties’ intent, which, as the Ninth Cir-

cuit concedes, is a central issue in determining whether

the deed was actually a mortgage (App. A at 7a). The

Ninth Circuit simply disagreed with the trial court’s

assessment of the evidence on intent, substituting its own

1 The question of intent must be examined in light of the peculiar

history and culture of Guam, which has roots in Spanish and Cha-

morro culture and close proximity to and ties with Asia. For ex-

ample, the principals in Hakubotan and Furusawa are Japanese,

and deeds of the sort at issue in this case are common security

devices well-known to Japanese businesspeople. John Haley, The

Preliminary Contract for Substitute Performance: A Reflection of

Japanese Judicial Approach, Law in Japan, Volume 7 (1974).

“more logical” and “economically sensible’ view of the

evidence (App. A at 8a). This of course is not only con-

trary to DeCastro v. Board of Commissioners, but vio-

lates Rule 52 of the Federal Rules of Civil Procedure

as well.

Furusawa also argues that the controlling law is clear,

well-established and undisputed and that the Guam courts

“misapplied existing legal precedent” (Opposition at 8,

13-17) (original emphasis). Here again, the argument

cannot withstand scrutiny. The authorities construed by

the Guam courts, and those relied upon by the Ninth

Circuit, are old California opinions that are rooted in the

peculiar facts of each case. Moreover, the holdings of the

cases are not easily reconcilable. Contrary to Furusawa’s

claim, there is no simple “black-letter” rule of law that

can be easily applied in this case. The Guam courts de-

voted considerable effort to the task of construing the

California cases in the context of modern Guam in a way

that would do justice to the territory’s unique policies

and concerns (see, e.g., App. C at 25a-34a). This is the

essence of territorial self-rule, which Congress mandated

in the Organic Act of Guam,’ which this Court sought

to preserve in DeCastro v. Board of Commissioners, and

which the Ninth Circuit has cavalierly swept aside.

Furusawa’s argument relies on a mischaracterization of

the role of pre-1933 California precedent in Guam. Re-

spondents argue that the Guam courts must decide every

case in conformity with California decisions dating from

the Great Depression and before (Opposition at 2). How-

ever, Guam is not a territory of California, forever

obliged to parrot California opinions of fifty years ago.

Under the Organic Act, it is a territory enjoying a status

similar to that of a state, with its own legislature, courts,

and laws, and is free to decide cases in light of its unique

needs and policies.

2 Organic Act of Guam, ch. 512, 64 Stat. 384 (1950) (codified as

amended at 48 U.S.C. §§ 1421-1428).

Adoption of another forum’s statute does not inflexibly

impose the original forum’s construction upon the adopt-

ing forum’s courts. Borrowing a statute at most creates

a presumption that the adopting forum also imports the

construction of the adopted statute. 2B Sutherland Statu-

tory Construction § 52.02 at 199 (5th ed. 1991). As this

court has recognized, the adopting government is free to

ignore this presumption and to distinguish or depart from

the prior construction. See, e.g., Whitney v. Fox, 166

U.S. 637, 647 (1897) (Utah territorial court may depart

from California Supreme Court interpretation of statute

borrowed from California); see also State v. Tramble,

144 Ariz. 48, 695 P.2d 737, 740 (1985); Zerbe v State,

583 P.2d 845, 846-47 (Alaska 1978) ; Blount v. T.D. Pub-

lishing Corp., T7 N.M. 384, 423 P.2d 421, 425 (1966) .°

Furusawa also places great weight on the Ninth Cir-

cuit’s holding that “the conveyance did not occur until

the deed was recorded” (App. A at 9a). Respondents

argue that the failure of the Guam courts to apply this

undisputed “existing legal principle” constituted clear

error and required the Ninth Circuit to reverse even under

DeCastro v. Board of Commissioners (Opposition at 15-

17). However, the Ninth Circuit created this “principle”

out of whole cloth, without citing to Guam, California or

any other authority (see App. A at 9a). Although Furu-

8 The seminal Ninth Circuit case on this issue, United States v.

Johnson, 181 F.2d 577 (1950), did not hold that pre-1933 California

law governs construction of the Guam codes. Rather, Johnson

simply notes that Guam had adopted the California Civil Code and

that California law was “a convenient starting point” for analysis

of the Guam codes. Jd. at 580-81. Furthermore, the opinion ob-

serves that the drafter of the Guam codes, a Navy Captain, testified

before Congress that the California codes were adopted to give the

Guam bar the benefit of pre-existing library materials and “refer-

ence” to some interpretations, id. at 580 n.3, thus demonstrating

an intent to use California law as a guide and not as a strait-

jacket. See Carolene Prod. Co. v. United States, 323 U.S. 18, 26

(1944) (presumption to apply original jurisdiction’s interpretations

varies according to intent to do so).

sawa devotes several pages in its opposition to this issue

(Opposition at 9-10, 15-16), tellingly, respondents also

fail to come forward with any authority for the “prin-

ciple.” The simple reason is that this is not the law in

either California or Guam. Moreover, Guam Civil Code

section 1056, which is identical to California Civil Code

section 1056, provides that

A grant cannot be delivered to the grantee condi-

tionally. Delivery to him, or to his agent as such, is

necessarily absolute, and the instrument takes effect

thereupon, discharged of any condition on which the

delivery was made.

Thus, if “[t]he essential factor the court must consider

in scrutinizing a deed is whether the debt or debtor-

creditor relationship effectively continues after the con-

veyance” (App. A at 9a), there can be no doubt that the

Guam courts were correct in holding that the “mortgagor/

mortgagee relationship” continued after Hakubotan gave

the deed to Furusawa (App. C at 36a; see App. B at

18a).

Of course, the correctness of specific local law deter-

minations by the Ninth Circuit are not, and should not

be, the subject of Hakubotan’s Petition. We raise them

only in response to Furusawa’s effort to disguise the true

nature of the Ninth Circuit’s opinion. As we have dem-

onstrated, the Ninth Circuit has completely usurped the

proper role of the Guam courts in developing their own

body of law responsive to local needs and conditions. It

has brazenly substituted its own policy views for those

of the Guam courts and has flown in the face of this

Court’s long-standing rule of deference as stated in De-

Castro v. Board of Commissioners. This usurpation of

territorial authority must be halted. That the Ninth

Circuit’s opinion is legally in error only adds a further

reason for this Court to act.

Respectfully submitted,