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Thursday, April 24, 2014

Lawsuit vs DPL, Finance over COP land lease dismissed

Superior Court Associate Judge Kenneth L. Govendo yesterday dismissed the taxpayers’ lawsuit filed by an investor and two taxpayers against the departments of Public Lands and Finance over the lease of a public land where Coral Ocean Point Resort sits.

In granting DPL’s and Finance’s motion to dismiss the lawsuit, Govendo found to be fatally flawed the complaint filed by Pacific Investment and Development Corp., Vicente O. Litulumar, and Bi Ruth Cabrera.

The judge said that no additional facts or allegations can cure the defects of the lawsuit and so the plaintiffs will not be allowed to amend the case.

Govendo said that PIDC, Litulumar and Cabrera have filed a taxpayer lawsuit in which they have failed to join an indispensable party, Suwaso Corp.

“However, private parties cannot be joined to taxpayer lawsuits, and this case cannot proceed without Suwaso’s joinder,” he pointed out.

Last September, Govendo dismissed all of the plaintiffs’ claims except one. The judge noted that portions of the briefs filed by plaintiffs were unintelligible, poorly written, and “fall far below the level of competency that this court expects from litigants.”

PIDC and Litulumar were originally represented by attorney Ramon K. Quichocho. Attorney Robert Myers later took over as counsel.

The plaintiffs sought for a permanent injunction terminating the lease between DPL and Suwaso, a declaratory judgment stating that the lease is invalid, among others, and a court order for a new request for proposal so that PIDC may bid on the property.

The complaint alleges that DPL entered into a renewed contract for public land with Suwaso Corp. despite Suwaso’s history of non-payment of both rent and taxes.

It alleged that DPL failed to present other offers on the property to the Legislature, one of which came from PIDC. It accused DPL of amending both the original and renewed lease without legislative approval. Finance also allegedly reduced Suwaso’s tax obligations to the Commonwealth. According to plaintiffs, all these acts constitute breaches to the fiduciary duties owed the people of NMI descent by DPL and Finance.

Last October, DPL and Finance, through assistant attorney general Peter B. Prestley, moved to dismiss the lawsuit on two grounds.

First, Prestley said, plaintiffs failed to join a necessary and indispensable party: Suwaso.

Prestley said Suwaso cannot be joined to this lawsuit because plaintiffs lack standing to sue Suwaso, and taxpayer lawsuits cannot be extended to private parties.

Finally, the government lawyer said, since plaintiffs seek injunctive relief that would effectively terminate the land lease, this lawsuit cannot proceed without joining Suwaso.

The court heard the motion last Dec. 3.

In his order granting the motion yesterday, Govendo ruled that the court cannot issue a judgment that would be binding on Suwaso because the latter has not joined the lawsuit.

Without joining Suwaso, Govendo said, the injunctive relief requested by plaintiffs could bind only DPL and Finance.

Thus, the judge said, Suwaso would have to decide whether to continue honoring its right and obligations under the lease agreement or obey an injunction issued by the court to which it is not a party and thus not bound.

“The court cannot issue judgments that would prejudice such inconsistent results,” Govendo said.

Suwaso, the judge noted, has a legally protected interest in its lease agreement with DPL that will go unprotected if it is not joined to this case.

Govendo pointed out that Suwaso has already invested substantial amounts of money renovating the property, anticipating that it will recoup its expenditures during the lifetime of the lease.

“Without Suwaso’s joinder, it would be unable to defend its interests,” he said.

Govendo said the CNMI Constitution allows a taxpayer to “bring an action against the government or one of its instrumentalities in order to enjoin the expenditure of public funds for other than public purposes or for a breach of fiduciary duty.”

“However, this right has not been extended to authorize taxpayer lawsuits against private parties. Suwaso is a private corporation and not a government entity,” he added.

In November 2012, PIDC sued DPL and Finance over the alleged waiver of tax obligations of E-Land Group of Korea.

PIDC and Litulumar then sought an injunction against DPL and Finance, asserting that they will be irreparably harmed by the agencies’ alleged pursuit of a sole-source lease with Suwaso Corp., Micronesia Resorts Inc., and E-Land Park Limited.

On Aug. 8, 2013, Govendo denied the plaintiffs’ request to issue a preliminary injunction to stop DPL and Finance from pursuing the land lease contract.

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