Ex-owner of 2 companies found no claim vs estate of late attorney Arriola

The Superior Court has ruled that a former owner of two companies does not have a claim against the estate of the late lawyer Edward Camacho Arriola, who had purchased the firms (companies) when he was still alive.

In an order issued Friday, Associate Judge Joseph N. Camacho said because Joseph Cabrera Guerrero does not have a claim, the court finds that he is therefore, not a creditor and cannot participate in the Arriola estate’s probate action.

Camacho said the evidence was overwhelming that although Guerrero wanted Arriola to assume his liabilities and indemnify him, there was no agreement by Arriola to do so.

“Without an agreement, there can be no breach and, therefore, Guerrero has no claim against the estate,” the judge pointed out.

Attorneys Colin M. Thompson and Michael W. Dotts served as counsel for Arriola estate’s executrix Frances Arriola. Frances is the wife of the late attorney Arriola. George Lloyd Hasselback appeared as counsel for Guerrero.

According to court records, Guerrero’s claim is essentially that the decedent, Arriola, breached an agreement to pay certain of Guerrero’s personal liabilities owed to third-parties.

Guerrero alleges that in late 2014 when Arriola purchased two companies from Guerrero, Arriola promised or agreed to assume Guerrero’s personal liabilities that arose out of personal guarantees Guerrero had given to secure financing for the companies.

Guerrero alleged that Arriola had refused to pay those third parties while he was alive.

After Arriola died on May 26, 2017 (two and a half years after the companies were sold to Arriola), Guerrero filed a notice of his claim in this probate action.

In his order Friday, Camacho said Guerrero’s notice was filed more than 88 days after the first publication of notice to creditors, 18 days after the cut off deadline.

At the Nov. 14, 2019 evidentiary hearing, Guerrero testified and took the position that he timely presented his claim because he was a known creditor.

Guerrero said as a known creditor, he was entitled to personal notice within 20 days of the executor’s appointment.

Estate executrix Frances Arriola (Frances) testified that Guerrero had no claim against the estate, and that assuming he had a claim, she did not know he had a claim.

Frances took the position that when Guerrero failed to file the claim by the 60-day deadline, his claim was forever barred.

In his ruling, Camacho found the testimony of Frances credible because her testimony is consistent with the documentations received as evidence.

Camacho found the testimony of Guerrero not credible because his testimony is contradicted by the documentations received as evidence.

Camacho said based on the admitted evidence and testimony at the evidentiary hearing, he finds that in 2009, Guerrero and Joseph Cabrera Santos both co-founded and were member managers of two limited liability companies, St. Joseph’s Medical Transport LLC, an ambulance company, and Precision Medical Imaging LLC, an imaging company.

St. Joseph’s operated in Guam. Precision operated on Saipan.

In March 2014, St. Joseph’s began having financial difficulty. In the following months, Precision also started to have financial difficulty.

The LLCs could not pay their rent, salaries, taxes, and other expenses and borrowed money from First Hawaiian Bank to meet these expenses.

In order to obtain financing for the LLCs, the bank had required that Guerrero personally guarantee loans for equipment, operating expenses, and credit cards and other lines of credit.

The LLCs were not able to pay the loans that Guerrero had guaranteed. In August 2014, Precision received a demand letter from the bank. Guerrero and Santos then began searching for an investor or a source of funds to support the failing LLCs.

On Oct. 23, 2014, Guerrero and Santos signed a document transferring their interests in Precision to Arriola. The document does not provide for Arriola assuming the personal liabilities of Guerrero, or in any way indemnify Guerrero about his personal guarantees be called on.

Guerrero entered into the agreement transferring the ownership of Precision to Arriola without ever meeting with Arriola or discussing the transaction.

On Dec. 4, 2014, Guerrero sold his interests in St. Joseph’s to Santos, who later sold this interest to Arriola on Dec. 19, 2014 in an agreement.

Guerrero understood that the bank would go after him personally if St. Joseph’s assets were not sufficient to cover its debts.

The documents that transferred ownership of Precision and St. Joseph’s to Arriola did not provide that Arriola assume Guerrero’s personal liability or that Arriola would indemnify Guerrero from any liability.

A couple of months after Arriola acquired the two LLCs, Guerrero and Frances met at the Mango Six Café where Guerrero had asked Frances to ask her husband Arriola to reconsider assuming the liabilities.

When Frances told her husband about it, Arriola refused, replying to her that everything was already signed.

Beginning in October 2014, Frances was in charge of the financial matters of the LLCs and in possession of the transfer agreements and other records.

Both LLCs were past due on their expenses when Arriola acquired them, and the lawyer invested his own cash exceeding $400,000.

In April 2015, in a phone call, Arriola expressly told Guerrero that he would not assume Guerrero’s personal liability, Guerrero then threatened to sue Arriola.

However, on May 29, 2015, Guerrero signed a new document with the bank consenting to the transfer of St. Joseph’s to Arriola to satisfy the bank.

This consent does not provide for Arriola to assume Guerrero’s liabilities.

In November 2015, Guerrero received a notice of default for a St. Joseph’s loan from the bank with a Dec. 15, 2015 deadline.

On Dec. 1, 2015, Guerrero received a message from Arriola repeating that he had not assumed Guerrero’s personal liability.

Arriola died on May 26, 2017.