THE findings of a jury in a case involving a property dispute have been affirmed by the CNMI Supreme Court.
According to the jurors, Li Fen Luan was the bona fide purchaser of Lot No. 014 H 023 in Chalan Kanoa and that Pacific Realty and Management Corp. or PRMC was a trespasser.
The jury also awarded Li Fen Luan compensatory and punitive damages.
PRMC appealed to the local high court.
What’s it all about
According to the facts and procedural history of the litigation, Calvin C. Tagabuel leased Lot No. 014 H 023 in Chalan Kanoa, Saipan to Cheong Pui Ng, operator of PRMC for 12 years, from Sept. 10, 1999 to Sept. 10, 2011, with an option to extend the term.
In 2001, PRMC paid Tagabuel $1,000 to extend the lease for another three years, to expire in 2014.
Neither the 1999 lease nor the three-year extension was recorded. Tagabuel and Cheong Pui Ng orally agreed to extend the lease for a second time. Prior to the expiration date, however, Cheong Pui Ng told Tagabuel that he was not ready and did not have the money.
They had not entered into a written agreement when the lease expired in 2014. In the meantime, PRMC constructed an apartment complex and rented the units to tenants.
Tagabuel wanted to secure another lessee and approached Kevin Tang who introduced Tagabuel to Li Fen Luan who was familiar with the premises because her coworker lived in one of the apartments on the property.
On Sept. 30, 2014, Tagabuel, without disclosing PRMC’s option to extend, entered into a lease agreement with Li Fen Luan who then engaged a title company to conduct a title search, which showed that Tagabuel held title to the premises.
PRMC’s lease was not in the chain of title because it was not recorded.
But the title company’s researcher, Jeffery Roligat, learned of PRMC’s unrecorded lease and notified Li Fen Luan of its existence. He also told her that the lease expired on Sept. 10, 2014. Based on the title report and the conversation with Roligat, Li Fen Luan did not inquire with the tenants on the property and recorded her lease on Nov. 6, 2014.
PRMC, however, was unaware of Li Fen Luan’s lease and continued to occupy the property.
Li Fen Luan eventually met with the tenants, and informed them of the new ownership. She told them to forward rental payments to her or vacate the property. But the tenants claimed they were legally obligated to pay PRMC and thus continued to make payments to PRMC.
Cheong Pui Ng tried to purchase the property interest from Li Fen Luan, but they failed to reach an agreement.
To keep the property, Cheong Pui Ng told Tagabuel to sign a second lease for $15,000 on Dec. 16, 2014. The lease stated that “[t]he term of the extension of the lease is for a period of 30 years effective Sept. 10, 2014 to and including Sept. 10, 2044.”
PRMC recorded the lease on Dec. 23, 2014, after which Tagabuel informed Li Fen Luan of his intent to return the $15,000 and terminate her lease.
The lawsuit
Li Fen Luan sued Tagabuel, demanding specific performance of the terms and conditions of the lease agreement. PRMC intervened, seeking to void the lease agreement between Li Fen Luan and Tagabuel.
In response, Li Fen Luan added a trespass claim to her suit because the apartment tenants continued to reside on the property and pay rent to PRMC.
The jury found Li Fen Luan to be a bona fide purchaser and PRMC a trespasser. The jury also found that PRMC’s actions were willful, reckless, and with malice.
The jury awarded Li Fen Luan $80,000 in compensatory damages for quiet title, $50,000 in compensatory damages for trespass, and $300,000 in punitive damages.
PRMC appealed and argued that the jury’s finding that Li Fen Luan was a bona fide purchaser was not supported by substantial evidence.
PRMC said Li Fen Luan was not a bona fide purchaser because the evidence demonstrated that she had actual and constructive notice of tenants residing on the property.
PRMC also argued that the 1999 lease does not set a deadline on the option to extend, and Tagabuel waived any time limit.
Moreover, PRMC said the award of $300,000 in punitive damages was inappropriate because the verdict form was ambiguous — the jury could have awarded punitive damages for both the quiet title and trespass claims, rather than just for trespass.
The high court ruling
Chief Justice Alexandro Castro, Justice John Manglona and Justice Perry Inos were not persuaded by PRMC’s arguments.
According to the high court ruling, there was no testimony that Tagabuel informed Li Fen Luan that Ng extended the lease.
Tagabuel testified that Li Fen Luan satisfied any obligation to inquire when Roligat’s title report concluded that any leases attached to the property would cease on Sept. 10, 2014.
PRMC’s argument that Li Fen Luan must have inquired with the tenants living at its apartment complex to satisfy inquiry notice is unpersuasive, the justices said.
“Luan knew of the apartment complex through her co-worker, a tenant at the time. After learning that Tagabuel was looking for a buyer, Luan procured a title report, which showed no encumbrances on the property. There is no evidence of a prior discussion between Luan, Tagabuel, or Roligat which would put her on notice of an existing lease beyond Sept. 10, 2014,” the justices stated.
Because Li Fen Luan was aware of the tenants’ presence and the purpose of PRMC’s rental complex, she need not inquire further, the justices added.
They said Li Fen Luan is a bona fide purchaser.
As for the verdict form, the justices said, “[the parties] drafted and reviewed the verdict form before it was submitted to the jury. Prior to closing arguments, the court went over the verdict form with the parties, and gave each side ample opportunity to review and discuss.”
The justices added, “At no time, before or after the close of evidence, did PRMC request to amend the form as required by Rule 51. Luan’s counsel explained the verdict form to the jury, to which PRMC did not object. And there is no indication in the record that the [trial] court was aware of PRMC’s claims of ambiguity in the form, obviating the application of Rule 51’s exception.”
Therefore, by failing to object, the justices said PRMC waived the issue of ambiguity in the verdict form.
“We preserve the jury’s verdict and find the court did not abuse its discretion in awarding punitive damages,” the justices added.
Li Fen Luan was represented by attorneys Victorino DLG Torres and Matthew J. Holley while PRMC was represented by attorney Jed Horey.
