Guerreros, Tenorios block sale of Hafa Adai property

The Guerrero and Tenorio shareholders of Saipan Hotel Corp. filed a lawsuit yesterday to prevent any action that will divest the CNMI company of its ownership of the Hafa Adai Hotel property.

They accused the majority shareholders of the company of proposing a reorganization that would dilute their shares, which would result in decreased value and diminished control over the company. SHC has scheduled to vote on the plan today.

Businessman Juan T. Guerrero, Jesus T. Guerrero, Carmen Guerrero Borja, Guerrero Family Trust, Jose C. Tenorio Trust, AJT Trust, and the estate of Santiago C. Tenorio filed the civil action before the Superior Court, asking for the award of unspecified amount of damages.

The defendants in the suit include SHC, Kinki Nippon Trust, Ltd., Pacific Development, Inc., and Pedro J.L. Igitol, the secretary of SHC.

SHC, a CNMI corporation formed in 1967 by CNMI residents, does business as the Hafa Adai Hotel. SHC is a subsidiary of PDI, which owns 79 percent of SHC’s common, voting stock. The plaintiffs own the remaining 21 percent as minority shareholders. KNT, meanwhile, owns 100 percent of SHC’s preferred, non-voting stock, and manages the hotel.

KNT also owns 60 percent of the voting stock of PDI, the largest asset of which is the SHC stock. The minority shareholders own the remaining 40 percent of PDI.

“KNT had financial control over both PDI and SHC. Exploiting this control and constructive ownership of these two CNMI corporations, KNT over-encumbered the hotel and the minority shareholders’ holdings through a series of loans with no direct security other than guaranties by KNT. KNT also manipulated the accounts and management of the hotel for the sole purpose of financially sustaining itself,” the plaintiffs’ lawyer, Rodney J. Jacob, stated in a complaint.

The minority shareholders assailed the company reorganization that would dilute their shares with SHC. Jacob said the reorganization was proposed in a special board meeting last Dec. 4.

“The proposed scheme included the reorganization of KNT’s non-voting stock into voting stock in SHC, and the issuance of an additional 250,000 common, voting shares in SHC,” the lawyer said. SHC also proposed a change in the composition of the board of directors from seven to “not less than three and not more than 15 directors.”

The minority shareholders would have agreed to reorganization had KNT agreed with their proposal to provide agreeable consideration. KNT refused the plaintiffs’ condition.

“Following the SHC special board of directors meeting, the scheme was designed to divest the minority shareholders of their interest in the hotel so that it could be sold to a third party despite previous representations to the contrary,” Jacob said, adding that KNT’s corporate reorganization involved the sale of two other Japan hotels.

Jacob also said the defendants failed to fully disclose to his clients documents and information regarding the proposed reorganization in SHC stock ownership.

Last Wednesday, the minority shareholders sent a letter to SHC so that they could determine whether or not the dilution of their shares that was proposed to be voted on at the annual shareholders’ meeting scheduled today would violate Article XII of the CNMI Constitution, which provides for alienation of land from those who are not of Northern Marianas descent.

“Because of the conduct of KNT, SHC, and PDI…all defendants should be enjoined from taking any action that will divest SHC of its existing ownership interest, if any, of the property under Article XII of the CNMI Constitution,” the lawyer said, asking the court for a temporary restraining order and injunction, and for a jury trial.