FSM SUPREME COURT
TRIAL DIVISION
Cite as FSM v. Webster George & Co.,
7 FSM Intrm. 437 (Kos. 1996)

[7 FSM Intrm. 437]

FEDERATED STATES OF MICRONESIA,
Plaintiff,

vs.

WEBSTER GEORGE & CO., RICKSON
GEORGE and ZORRO GEORGE,
Defendants.

CRIMINAL CASE NO. 1995-2000

MEMORANDUM OF DECISION

Martin Yinug
Associate Justice

Trial:  January 9-10, 1996
Decided:  March 27, 1996

APPEARANCES:
For the Plaintiff:                     Teresa K. Zintgraff, Esq.
                                                Assistant Attorney General
                                                Office of the FSM Attorney General
                                                P.O. Box PS-105
                                                Palikir, Pohnpei FM 96941

For the Defendant:                William Sublette, Esq.
(Webster George & Co.)     Office of the Public Defender
                                                P.O. Box 245
                                                Tofol, Kosrae FM 96944

For the Defendant:                Ready Johnny, Esq.
(Rickson George)                 Office of the Public Defender
                                                P.O. Box 754
                                                Weno, Chuuk FM 96942

For the Defendant:                Joseph Phillip, Esq.
(Zorro George)                      Office of the Public Defender
                                                P.O. Box PS-174
                                                Palikir Pohnpei FM 96941
 
*    *    *    *

HEADNOTES
Criminal Law and Procedure; Statutes) Construction
     The unambiguous words of a statute which imposes criminal penalties cannot be altered by

[7 FSM Intrm. 438]

judicial construction to punish someone not otherwise within its reach, no matter how much he deserves punishment.  FSM v. Webster George & Co., 7 FSM Intrm. 437, 440 (Kos. 1996).

Criminal Law and Procedure) Aiding and Abetting
     When a law punishes criminal conduct only by a consignee and the government prosecutes agents of the consignee, it must proceed under the principles of vicarious criminal liability governed by 11 F.S.M.C. 301.  FSM v. Webster George & Co., 7 FSM Intrm. 437, 440 (Kos. 1996).

Criminal Law and Procedure) Aiding and Abetting; Criminal Law and Procedure) Information
     A person who allegedly aided and abetted another to commit an offense must be specifically charged with aiding and abetting in the information.  FSM v. Webster George & Co., 7 FSM Intrm. 437, 440 (Kos. 1996).

Criminal Law and Procedure; Statutes) Construction
     A general section in a statute cannot expand the class of principals to whom the more specific sections are directed.  FSM v. Webster George & Co., 7 FSM Intrm. 437, 440 (Kos. 1996).

Criminal Law and Procedure; Criminal Law and Procedure) Information
     A statute not cited in the information and not mentioned by the prosecution until closing argument cannot be the basis of criminal liability.  FSM v. Webster George & Co., 7 FSM Intrm. 437, 440 (Kos. 1996).

Business Organizations
     A sole proprietorship differs from a corporation.  It does not have the advantages of a corporation, such as a corporation's separate capacity to hold property, to contract, to sue and be sued, and to act as a distinct legal entity.  A sole proprietor does not have the protection of the corporate veil by which the corporation's owners, the shareholders, are exempt from liability for the corporation's acts.  A sole proprietorship has no legal existence separate from that of its owner. Its acts and liabilities are those of its owner.  Its owner's acts and liabilities are those of the sole proprietorship.  FSM v. Webster George & Co., 7 FSM Intrm. 437, 441 (Kos. 1996).

Business Organizations) Sole Proprietorship; Criminal Law and Procedure; Criminal Law and Procedure) Aiding and Abetting
     A sole proprietorship cannot be charged as a principal if there are no acts or omissions committed by its owner, but it can be found culpable as an accessory if it is specifically charged with vicarious liability for the acts of another.  FSM v. Webster George & Co., 7 FSM Intrm. 437, 441 (Kos. 1996).

*    *    *    *

COURT'S OPINION
MARTIN YINUG, Associate Justice:
     The trial in this criminal action was held on January 9 and 10, 1996.  By Order entered on February 26, 1996, the Court granted the motion of defendant Zorro George for judgment of acquittal.  By the same Order, the Court proposed to find the other defendants, Rickson George and Webster George & Co., Not Guilty. Rickson and Webster George & Co. then waived their right to have the proposed findings entered in open court.  The Court finds Rickson George and Webster George & Co., Not Guilty of all counts pending against them.  This memorandum of decision explains the Court's reasoning in its ruling and findings.

[7 FSM Intrm. 439]

I.  Introduction
     This is a criminal action charging violations of FSM customs laws and regulations.  It involves the presentation of documents to obtain release of a container, payment of customs duties, and the unauthorized removal from the container of more than one hundred cases of liquor imported into the Federated States of Micronesia.

     In the course of pre-trial and trial, the parties raised a number of issues including the interpretation of statutes and regulations, improper procedure under the FSM Rules of Criminal Procedure, violations of constitutional rights, burdens of proof on defenses and statutory exemptions, even alleged unethical behavior.  The Court considered these disturbing side issues, but does not address them.  The Court rules instead on a question of pleading.  The failure of the FSM to charge the defendants as being vicariously liable is fatal.

II.  Procedural Background
     The FSM filed an Information charging violations of Title 54 FSM Code, and regulations promulgated under authority of statutes in Title 54.  At first, there were four defendants: Webster George & Co., a sole proprietorship, Webster George, its sole proprietor, and two of Webster's sons, Rickson George and Zorro George. The FSM dismissed Webster George without prejudice.
 
     The Information has three counts.  Webster George & Co. and Rickson George are charged with Entry of Goods Without Required Documents, in violation of 54 F.S.M.C. 803 and FSM Customs Regulation 4.3(d).  Webster George & Co. and Zorro George are charged with Opening a Container without Permission, in violation of 54 F.S.M.C. 205(2), and with Removal of Imported Goods without Permission, in violation of 54 F.S.M.C. 803 and FSM Customs Regulation 4.3(e). The Information does not charge the defendants under 54 F.S.M.C. 901.  All three defendants are charged as principals.

III.  Legal Analysis
A.  Rickson and Zorro George
     1.  Laws and Regulations Directed to Consignees
     Although they are not the consignees of this shipment, Rickson and Zorro are charged as principals.  The applicable code sections and regulations they are alleged to have violated are directed to consignees of imported goods.

     Zorro is charged first with violating 54 F.S.M.C 205(2), which provides in pertinent part:  "Consignees of CY-CY container shipments . . . shall not open the shipment without the approval of an official of the Division of Customs."  (emphasis added).  By stipulation, Zorro admitted that he removed a lock placed on a container at the direction of FSM Customs and then opened the container.  He is also charged with violating Customs Regulation 4.3(e), likewise directed at the consignee.  FSM Tax & Customs Reg. 4.3(e).  Zorro stipulated that he removed 112 cases of liquor from one container.

     Rickson is charged with violating Customs Regulation 4.3(d), which does not state the person to which it is directed.  That subsection must be read in conjunction with Customs Regulation 4.3(c).  So read, it is clear that both subsections are directed to consignees.  The cited Code sections and regulations make it clear that it is unlawful for a consignee:  (1) to fail to present all the documents when seeking entry of goods; (2) to open a container without permission; or (3) to remove goods from a container without permission.

[7 FSM Intrm. 440]

     The evidence adduced at trial proved that the consignee of the shipment is Webster George & Co.  There was no evidence that Rickson or Zorro are consignees of the shipment.  The Code sections and regulations that Rickson and Zorro are charged with violating are directed only at conduct by consignees.  The Court will not adopt a construction to punish the agents of consignees.  "The unambiguous words of a statute which imposes criminal penalties are not to be altered by judicial construction so as to punish one not otherwise within its reach, however deserving of punishment his conduct may seem."  Viereck v. United States, 318 U.S. 236, 243, 63 S. Ct. 561, 564, 87 L. Ed. 734, 738 (1943).

     This does not mean that agents of consignees may not be prosecuted under Title 54 or its customs regulations.  Rather, when the FSM proposes to prosecute the agents of consignees, it must proceed under principles of vicarious criminal liability.  Rickson and Zorro could thus be charged only as accomplices to an offense by the consignee, Webster George & Co.

     2.  Vicarious Criminal Liability
     Vicarious criminal liability is governed by statute, 11 F.S.M.C. 301.  What the FSM could have proved, but failed to plead, was that by their admitted actions, Rickson and Zorro aided and abetted the consignee, Webster George & Co., to violate Title 54 and the Customs Regulations.

     A person claimed to have aided and abetted another to commit an offense must be specifically charged with aiding and abetting in the Information.  11 F.S.M.C. 301(4).  Rickson and Zorro are not charged as being vicariously liable.  Rather, as noted before, they are charged as principals.  This failure to charge Rickson and Zorro as accomplices is fatal to the prosecution because they cannot be found guilty as principals.

     There is no refuge for the FSM in 54 F.S.M.C. 901, which says that "any person" who willfully violates Title 54 or regulations promulgated under its authority may be held criminally liable.  That section cannot expand the class of principals to whom the more specific sections are directed.  See Viereck, 318 U.S. at 243, 63 S. Ct. at 564, 87 L. Ed. at 738.  The Court reads 54 F.S.M.C. 901 as allowing the FSM to plead and prove vicarious liability.  It would not be a complete defense simply to prove that one is not a consignee to a shipment.  Such a defense would invite abuse.

     More important to this case is the FSM's failure to charge the defendants under 54 F.S.M.C. 901.  The FSM did not refer to that statute at all until closing argument. Cf. FSM Crim. R. 7(c)(1).  This omission compounds the failure to specifically plead Rickson and Zorro with aiding and abetting an offense by the consignee, Webster George & Co.

B.  Webster George & Co.
     Webster George & Co. is the consignee of the shipment.  Under normal circumstances, Webster George & Co. could be charged as a principal for violating 54 F.S.M.C. 205(2) and Customs Regulations 4.3(d) and 4.3(e).  Two facts make the case against Webster George & Co. unique and compel a finding of Not Guilty.  First, Webster George & Co. is a sole proprietorship.  Second, there is no evidence of any act or omission by the individual, Webster George.

     1.  Sole Proprietorship
     The evidence and argument support a finding that Webster George & Co. is a sole proprietorship.  Counsel for Webster George & Co. offered to stipulate precisely that at both the pre-trial conference and at trial.  Before trial, the FSM referred to Webster George & Co. as a "business."  Only in closing
 
[7 FSM Intrm. 441]

did the FSM start to call Webster George & Co. a "corporate entity."  There is no evidence that Webster George & Co. held itself to the public as incorporated.  No paper showed the abbreviation "Inc." following the business name.  There was no evidence that Webster George & Co. applied to become a corporation, required by state, Kos. S. C. 15.101-15.106, and national law, 36 F.S.M.C. 101 et seq.

     As a business entity, a sole proprietorship is a different creature than a corporation.  18A Am. Jur. 2d Corporations 154 (1985).  A sole proprietor does not have the advantages inherent in a corporate existence, such as the separate capacity to hold property, to contract, to sue and be sued, and to act in other regards as a distinct legal entity.  See Henry W. Ballantine, Corporations 1 (1946).  A sole proprietor does not have the protection of the corporate veil by which a corporation's owners, the shareholders, are exempt from liability for acts of the corporation.  See id.

     As a sole proprietorship, Webster George & Co. has no legal existence separate from that of its owner, Webster George.  The acts and liabilities of Webster George are the acts and liabilities of Webster George & Co.  The acts and liabilities of Webster George & Co. are the acts and liabilities of Webster George.  This identity of interest and action was one reason why the FSM could not compel Webster George to testify as a witness against Webster George & Co.

     2.  Vicarious Criminal Liability of a Sole Proprietorship
     There is no evidence of any act or omission by Webster George himself. Because Webster George himself did not act, Webster George & Co. is culpable only if it is vicariously liable for the acts of another person or persons.  The FSM's theory of liability founders again on the shoals of 11 F.S.M.C. 301(4).  Webster George & Co. was charged as a principal, where it should have been charged with aiding and abetting.

     The FSM attempts to evade the impact of 11 F.S.M.C. 301(4) by arguing notions of corporate criminal liability.  But Webster George & Co. is not a corporation.  A sole proprietorship must be specifically charged as an accessory when there is no evidence of an act or omission by the sole proprietor.  11 F.S.M.C. 301(4).  The failure to charge vicarious liability is again fatal to the FSM's prosecution.

     This apparently quirky conclusion derives from the nature of the FSM Code and the unique facts of this case.  Before 11 F.S.M.C. 301(4) was enacted, the Information in this case may have been sufficient to support a finding of vicarious liability.  See Engichy v. FSM, 1 FSM Intrm. 532, 548-49 (App. 1984); FSM v. Hadley, 3 FSM Intrm. 281, 284 (Pon. 1987).  Since Congress has dictated that an accused under the proper circumstances must be specifically charged with aiding and abetting another to commit a crime, the Court must abide by that law.

IV.  Conclusion
     For this reason, the failure to charge the remaining defendants as being vicariously liable, the prosecution failed.  The following verdicts are therefore rendered:

     1.  Webster George & Co is found Not Guilty of Counts I, II and III of the charging Information.

     2.  Rickson George is found Not Guilty of Count I of the charging Information.

     3.  The Motion of Zorro George for Judgment of Acquittal is granted to Counts II and III of the charging Information.