FAIRYLAND LLC is culpable because it acted in bad faith, says attorney Colin Thompson who represents Peace & Order Trading Corp., a contractor.
Peace & Order sued Fairyland, an apartment investor, for breach of construction contract and unjust enrichment.
Peace & Order was hired by Fairyland to remodel and build an apartment building on Navy Hill, Saipan.
In a recent motion filed in federal court, Thompson opposed Fairyland’s motion to set aside default judgment.
He asked the following questions:
• What good faith efforts did Fairyland make between December 2019 and Valentine’s Day 2022 to compensate Peace & Order for the work it performed, work acknowledged by Fairyland owner Zhi Qi Shen to be 75% complete without issue, question or concern?
• Why does Fairyland raise bogus legal issues about Peace & Order’s business license for the first time in the instant motion?
• Why does Fairyland raise bogus complaints about the quality of work on the project for the first time in the instant motion?
• Why should Fairyland be excused from following the law?
As a CNMI limited liability company, Fairyland benefits from the laws of the Commonwealth, Thompson said.
“The law protects Shen from liabilities that arise in the ordinary course of Fairyland’s business. With these benefits come responsibilities and obligations. One obligation is to maintain an agent for service of process. If a CNMI LLC wishes to change its agent for service of process, there is a procedure for doing so. If the agent for service of process wishes to resign, there is a procedure for doing so. The law is clear that service of process upon the agent appointed by the CNMI LLC is the proper legal method for serving any process, notice or demand. In this case, service of process was legally accomplished on January 15, 2021. Service of the receivership was also legally accomplished on September 10, 2021,” Thompson said.
It is bad faith to ignore the obligations of CNMI law, he added.
“What diligence was exercised by Fairyland in maintaining contact with its agent for service of process? What diligence was exercised by the agent for service of process to communicate with Shen or the court? What diligence was exercised by Fairyland in maintaining contact with Peace & Order to whom Fairyland admitted it owed more than $700,000? Fairyland does not respond to these questions directly.”
Instead, Fairyland “obfuscates by submitting declarations to this court with excuses, half-truths and lies,” Thompson added.
Fairyland has acted in bad faith, he reiterated.
“Shen swears that he was not aware that Fairyland’s agent for service of process could not reach him by WhatsApp after December 2019. This is a lame excuse contradicted by Shen’s sworn statement that he sent his agent an email in Christmas 2021. He knows how to contact his agent when he wants to. Did he send [the agent] a Christmas email in 2019 or 2020? Did she know his email address? Fairyland avoids answering these questions. Shen complains that until December 2021, he did not receive notice of any sort from any source regarding the present action. But he is not the defendant in this action. His statements demonstrate contempt for the law, his mistaken belief that the laws of the Commonwealth should not apply to him, and that he takes no personal responsibility to manage Fairyland according to CNMI law. He points his finger at others while denying any personal responsibility. This is bad faith.”
Thompson added, “To accept his statement as true the court would need to ignore all other written agreements to which Shen was a party. The truth is that Shen would like to avoid Fairyland’s obligation to pay Peace & Order for the project. This is a continuing act of bad faith….”
“If the reason for nonpayment was because of poor performance,” the lawyer said, “then you would reasonably expect Shen to communicate the basis for determining poor performance. Shen never communicated that the reason for nonpayment was because of poor performance. The first time that Shen asserts a justification for nonpayment is in his declaration. It is a false statement that demonstrates bad faith. Not only does Shen’s declaration show bad faith, his excuses and false statements show that Fairyland lacks meritorious defenses.”
Representing Fairyland, attorney Michael Dotts made an appearance in court following the filing of the receiver’s 2020 financial report.
On Sept. 29, 2021, Chief Judge Ramona V. Manglona of the District Court for the NMI granted the motion of Peace & Order to appoint a receiver for Fairyland to help the plaintiff satisfy a judgement in the amount of $767,697.50.
Fairyland currently owns Lot 019 D 61 and Lot 019 D 83 located on Navy Hill.
According to its lawsuit, Peace & Order stopped work on the project because Fairyland refused to pay the amount owed for work completed under the construction contract.
On April 13, 2021 the federal court issued a default judgment against Fairyland in the principal amount of $767,697.50 plus attorney’s fees and costs, including the applicable federal interest rate for post-judgement interest.
On Dec. 12, 2021, Judge Manglona appointed local resident Ron Hodges as federal equity receiver who “shall have all authority, powers, and duties to sell Fairyland Investment LLC’s leasehold interest in Lot 019 D 61 and Lot 019 D 83.”
