Court denies injunction against Sako equipment

The Superior Court yesterday denied the request of the CNMI government to hold equipment and machinery sold by Sako Corp. to another company.

Associate Judge Juan T. Lizama declared that the Finance Department’s over $1.6-million tax lien on the property attached after its sale to Korean corporation Chung Yang Modas had already been consummated.

The ruling precludes the government from asserting claim over Sako’s equipment and machinery, so they can be sold in auction to generate proceeds, subject to its right to appeal the decision.

But the judge earlier granted the government’s request to hold the proceeds of the sale to Modas in the amount of $270,000.

The judge declared that title over the machinery and equipment, which have been placed inside four containers and held at the port of Saipan, transferred to Modas on March 10, 2005. The containers were scheduled for shipment to a Cambodian firm, Cambo Fashion Co. Ltd., on or after that date.

“Because [Division of Tax and] Revenue’s lien on Sako’s property attached after that date, it has no valid security interest in the goods. Without such an interest, Revenue cannot show that it is substantially likely to succeed on the merits and so it is not entitled to a preliminary injunction preventing shipment of those goods,” Lizama said in an order yesterday.

Court records showed that the government filed and recorded 10 separate tax liens against Sako in the total amount of $1,665,574.97 as early as Feb. 4, 2005, even before Sako contracted with Modas on Feb. 28.

On May 17, however, the government filed a release of tax lien due to errors in the original filing.

“Unfortunately, the document released all 10 tax liens and not just those in error,” Lizama said. The amount of the eight liens filed on that date was over $1.2 million.

The judge noted that the government purported to revoke the May 17 filing by reinstating all 10 tax liens in the total amount of over $1.6 million.

Several parties are running after Sako over unpaid debts and obligations after the garment factory ceased local operations sometime in February this year.

Besides the CNMI government, the other creditors include the law firm of O’Connor Berman Dotts and Banes and Vicente SN. Babauta, Sako’s landlord.

Earlier, Saipan’s U.S. District Court also declared Sako liable in the amount of over $1 million, in connection with a lawsuit brought to court by the Equal Employment Opportunity Commission on behalf of some 65 workers.