CDA files $103M suit against CUC

The Commonwealth Development Authority has handed over to the court’s judgment a long-standing debt, accrued over a 13-year period, that the Commonwealth Utilities Corporation has allegedly failed to settle with the government-run lending agency.

The plaintiff, in a civil court complaint filed yesterday, is seeking to recoup over $103 million from CUC based on three separate loan agreements both autonomous agencies entered into on three isolated occasions.

Further, the development authority has demanded to the court that a business entity be appointed to manage the operation of CUC.

CDA through counsels Vicente T. Salas and F. Matthew Smith has alleged that the local utilities corporation has repeatedly failed to honor the promissory notes agreed upon by both parties, executed on all three loan agreements.

The defendant, according to court documents, has been cited for default by allegedly falling short of its obligations in repaying the debts with its corresponding interest per annum.

Last February 17, 1988, CDA extended a direct loan to CUC in the principal amount of $30 million in order that the latter might finance generation and distribution equipment and other utility improvements.

Both government agencies, during this occasion, inked an agreement where the debtor promised to repay the direct loan, plus a seven percent interest per annum.

But CUC has allegedly failed, among other things, to make the promised payments to CDA, thereby breaching the conditions set forth in the loan agreement, court papers state.

The plaintiff further alleged that CUC was also unable to make the promised quarterly payments and has allegedly failed to do so for two successive fiscal years since 1988.

This 13-year-old debt has now accumulated to some $67.5 million with interest of seven percent per annum, according to the plaintiff.

CDA has claimed it has, to no avail, attempted to collect the amount from CUC and has spent considerable time and money working with the latter to address and resolve the issue.

Last January 13, 1989, the development authority again extended a direct loan to CUC in the principal amount of $16,068,750 in order that agency might finance a capital improvement project.

Similar to the first loan, both agencies entered into an accord, agreeing on a repayment plus a five percent interest per annum.

But as of April 20, 2001, the amount plus interest has yet to be collected from the local utility agency. The second loan now stands at $24,169,048.07.

In a relatively recent occasion, CUC again requested for a $5.5 million direct loan from CDA to finance the construction and equipment outfitting of the Saipan power plant.

The loan agreement was again set, calling for loan repayment in addition to a seven percent interest per annum.

Though CUC reportedly made four loan payments totaling $242,157 under this January 30, 1990 loan, CDA complained that the corporation has again failed to make the promised payments.

Based on the series of listed allegations, CDA is then seeking to collect over $103 million, exclusive of interest and other remedies provided under the three loan agreements.

The plaintiff is also intent to receive award to cover attorney’s fees, costs of the suit, and others the court deems just and proper.

CUC legal counsel Brien Sers Nicholas, in an earlier report, assessed that the utility company has no financial obligation to CDA, noting that a management takeover in operations is unlikely to happen.

He said all loan agreements entered into by the two agencies have no legal effect and are not binding.

Mr. Sers Nicholas said CDA has no legal authority to claim ownership of the bond proceeds and subsequently loan portions of the same to CUC. These bonds were considered as public funds and subject to appropriations by law, the counsel added.