Wiseman ends Plumeria Resort receivership

Superior Court associate judge David A. Wiseman has ordered the termination of the three-year-old receivership imposed on the Plumeria Resort in San Roque and its owners.

Wiseman said the termination of the receivership on Plumeria Resort and its owners, Saipan Achugao Resort Members’ Association, will take effect on Nov. 21, 2006.

In his order issued Monday, Wiseman directed receiver Antonio Muna to return all SARMA materials on or before Nov. 21.

The judge instructed Muna to immediately submit final billing to the court.

Wiseman said the court’s final judgment regarding outstanding dues and other assessments owed will be issued in a forthcoming separate order.

SARMA has sued one of its members, Wan Jin Yoon, for alleged non-payment of management fees and maintenance fees. But Yoon filed a counter lawsuit against the association for the alleged forced sale of his units.

The bench trial was held intermittently from Jan. 19, 2005 through Sept. 8, 2005.

According to Wiseman’s findings issued in May 2005, SARMA was formed in February 2000 as a non-profit corporation. It is comprised of members who own subleasehold interests in units and or commercial spaces at the Plumeria Resort.

Plumeria Resort was built in 1990 by Saipan Achugao Resort Joint Venture. The Joint Venture assigned the ground lease to the resort to SARMA in 2000.

Plumeria Resort is made of commercial and retail spaces and resort guest rooms. After the resort was completed, individual resort guest rooms were sold to members of the Joint Venture for between $100,000 and $400,000 per unit.

As authorized in the Bylaws, SARMA charges its members management fees and renovation or urgent repair fees.

After September 2001, the tourist revenues earned at the resort dropped dramatically as a result of a drop in tourist arrivals due to Sept. 11 terrorist attacks.

In September 2001, the membership fees collected by SARMA suddenly plummeted due to the bankruptcy of Micronesia Co. Ltd., a Japanese corporation SARMA member which was obligated to pay over 40 percent of the membership dues.

After filing for bankruptcy, Micronesia Co. stopped paying its dues.

Because of the almost simultaneous drop in the collection of membership fees and loss of room revenues, SARMA was financially unable to repair the resort and as a result, tour operators stopped sending guests.

Micronesia Co. had mortgaged its subleasehold interests in 34 residential (guest) units and the entire “commercial area” at the resort to a Japanese company known as Itochu Corp.

After Micronesia Co. went bankrupt, a foreclosure auction was undertaken by a law firm on behalf of its client, Itochu Corp.

In 2002, three separate foreclosure auction sales were held by the law firm in an attempt to sell Micronesia Co.’s subleasehold interests in the resort.

The property being offered for sale at the auctions (34 residential units and the commercial area of the resort) comprise more than a 40 percent in the resort.

At the first foreclosure auction sale in February 2002, SARMA bid $300,000 for the 34 units and commercial area. This was the only bid at that auction.

SARMA’s bid was rejected by Itochu Corp. as being “too low.” SARMA did not bid at the second auction in August 2002 and the 34 units and commercial area remained unsold.

During the final auction in December 2002, SARMA bid $120,000 and Yoon bid $400,001. Yoon’s bid was accepted.

After the auction, Yoon asserted control over the 34 residential units and commercial areas. In January and February 2003, Yoon padlocked and began to renovate the commercial areas sold at the auction.

Following the auction, Yoon stated on numerous occasions that he was the “majority member” of the Association.

On Feb. 11, 2003, Yoon, through his attorney, demanded that SARMA’s management company vacate the front desk of the commercial area which the management company was using to run the resort.

Between Dec. 27, 2002 and April 14, 2003, Yoon failed to pay any of the dues ($184,566) set forth on the final statement-invoice he received on Dec. 27, 2002.

In March 2003, the Superior Court approved the foreclosure sale of the units owned by Micronesia Co. to Yoon.

Between December 2002 and April 2003, SARMA made numerous attempts to get Yoon to pay the $184,566 statement-invoice.

In addition to the 34 residential units and commercial area that Yoon acquired by auction sale, he also purchased, by assignment of sublease, three additional residential units at the resort from Asanuma Corp., a Japanese company, on Dec. 23, 2002.

Asanuma paid to SARMA $5,217.86 which was its share of the SARMA management and urgent repair fees referred to in the Asanuma/Yoon assignment of sublease.

On April 14, 2003, Yoon had still not paid any membership dues and fees and SARMA forced the sale of the resort’s commercial area and five of Yoon’s units at the resort from Yoon to the association.

Yoon’s interests in the commercial area and five units were transferred without court intervention by way of an assignment of subleasehold interests recorded at the Commonwealth Recorder’s Office on April 17, 2003.

SARMA purchased the commercial area and five units for $169,001. The purchase price of $169,001 was offset against Yoon’s unpaid dues of $184,566.11.

Yoon testified that he refused to pay dues in 2003 because SARMA would not have a meeting to recognize him as the majority owner.

There was also testimony that Yoon wanted to shut down the resort so that he would not have to pay the membership dues.

In his May 2006 order, Wiseman ruled that SARMA’s forced sale of Yoon’s unit was improper because Yoon was not in default of either lease or SARMA’s by law provisions at the time of the forced sale.

Wiseman said the unpaid membership dues and emergency repair assessments were wiped out pursuant to the foreclosure sale.

“Notwithstanding the question on default, SARMA had no authority to unilaterally sell Yoon’s units without court enforcement and supervision,” he pointed out.

The judge concluded that as a purely legal matter, SARMA’s forced sale of Yoon’s units was improper and illegal because Yoon was not in default at the time the forced sale was executed.

The judge, however, found that Yoon is subject to dues assessments and emergency repair fees from March 7, 2003 to present.

Wiseman also ruled that Yoon is subject to dues assessments and emergency repair fees assessed after Dec. 24, 2002 for the Asanuma interests.