USA Fanter Corp. Ltd. has requested the federal court to foreclose the mechanic’s lien against Imperial Pacific International LLC.
USA Fanter, through attorney Colin Thompson, said in a memorandum: “A judicial foreclosure order should be issued and the auction process may begin three months from the date of the court’s order if the full amount owed has not been paid.”
IPI, for its part, has proposed to place $2,089,345.28 in a restricted account instead of auctioning its property in depreciated value to secure its former contractor’s judgment amount.
According to Thompson, “Mechanic’s liens are not frequently used in the CNMI even though the law has been in effect for nearly 25 years. This is unfortunate because the paucity of case law provides little guidance to the courts or for the parties as to the process to be followed, and how to foreclose on this lien, once granted, if payment in full is not made.”
But some guidance is given, Thompson added.
In particular, he said, “the verbiage in the CNMI mechanic’s lien statute, 4 CMC § 5802, and CNMI P.L. 10-65 addresses mechanic’s liens. It states, in relevant part, that ‘decrees for the foreclosure of (mechanic’s) liens… shall be made and entered as near as may be done in accordance with the practice on foreclosure of mortgages as provided by law in the Commonwealth of the Northern Mariana Islands.”
The pertinent section of the judicial foreclosure statute in the CNMI is 2 CMC § 4537, Thompson said, of which there is much case law and guidance.
“Indeed, the regulatory scheme in the CNMI on all types of liens indicates that the Legislature did not want lien foreclosures to occur in the CNMI absent a party following the provisions (and protections) of the Real Estate Mortgage Law,” Thompson said.
A mechanic’s lien is a “hold” against property filed by an unpaid contractor. If unpaid, it allows a foreclosure action, forcing the sale of the property in lieu of compensation, an online legal dictionary stated.
USA Fanter sued IPI for the casino investor’s failure to pay the full amount due to the plaintiff under their construction contract for labor and materials provided for the improvement of IPI’s real property.
The lawsuit stated that IPI had paid USA Fanter $300,000 only and the unpaid balance due was not less than $2,089,345.28.
On May 4, 2021, Chief Judge Ramona V. Manglona of the District Court for the NMI issued an order directing entry of an “Amended Final Judgment re: Mechanic’s Lien.”
Thompson said the court granted money judgment as follows:
Principal: $2,089,345.28
Prejudgment interest: $109,060.28
Total: $2,198,405.56
Plus costs: Filed and awaiting court’s approval with post-judgment interest accruing at 0.07% per annum
After IPI appealed to the U.S. Court of Appeals for the Ninth Circuit, USA Fanter applied for a writ of execution on the judgment, and filed a motion for limited appointment of receiver in aid of execution, which the court granted on Oct. 26, 2021. The court then appointed Clear Management Limited acting through Timothy Shepherd as the receiver.
IPI, through attorney Kevin T. Abikoff, requested the court to vacate the receivership decision and terminate the limited receiver.
“In the alternative, the court should stay these proceedings until the Ninth Circuit resolves IPI’s appeal,” Abikoff added.
He said IPI is willing and able to secure the full judgment amount of $2,089,345.28 in a restricted account designated by USA Fanter or this court within five days of an order vacating the limited receivership, Abikoff said.
The funds would remain in this restricted account until IPI’s appeal to the Ninth Circuit is resolved, at which point the funds would be transferred to USA Fanter for satisfaction of the judgment or returned to IPI, the lawyer said.
But according to Thompson, “Since the time that this lawsuit was filed on Jan. 30, 2020, nothing has been paid by the defendant to plaintiff. Defendant did, however, apparently pay other plaintiffs/claimants, as attested to in court at the Oct. 14, 2021, receivership hearing.”
“Hence,” he added, “since the filing of this case nearly two years ago, nothing has been paid to plaintiff on the type of action that the CNMI Legislature desired to be handled ‘in an expeditious and cost-effective fashion.’”
Accordingly, Thompson said, “all that is necessary to foreclose on the mechanic’s lien at issue is an order from this court stating the amount owed, and that the full amount of this money due plaintiff must be paid into the Registry of the Court within three months of the court’s order.”
He said, “If payment, in full, is not paid on time, the same order should additionally state that the court shall order the property to be sold at auction and shall appoint a person to perform the sale who must follow the mandates of the foreclosure statute….”
