Hotel owners’ racketeering suit vs bank is dismissed

The racketeering lawsuit filed by the owners of Victoria Hotel against a bank in Guam that they accused of operating in the CNMI without a license has been dismissed.

Citing failure to state a claim, U.S. District Court for the NMI Chief Judge Ramona V. Manglona dismissed with prejudice the seventh cause of action for violation of the Racketeer Influenced and Corrupt Organizations Act filed by Jesus T. Lizama, his wife Victoria LG. Lizama, and J&JEV Enterprises Inc. against ANZ Guam Inc., which is formerly known as Citizens Security Bank (Guam) Inc.

Dismissed with prejudice means the Lizamas can no longer re-file the case.

Because the RICO claim was the sole basis for the court’s original jurisdiction over the lawsuit, the court declined to exercise supplemental jurisdiction over the remaining claims, said Manglona in a 22-page order granting ANZ Guam’s motion to dismiss.

The Lizama couple and J&JEV Enterprises Inc. filed the lawsuit last March against ANZ Guam Inc., and five unnamed co-defendants for violations of RICO, Commonwealth Consumer Protection Act, and Commonwealth Debt Collection Act-wrongful disclosure.

The plaintiffs, through counsel Juan T. Lizama, also sued ANZ Guam for negligent misrepresentation, intentional misrepresentation, breach of contract, constructive fraud, tortuous interference with contractual relations, interference with prospective contractual relations, and intentional infliction of emotional distress.

The plaintiffs were suing for damages, attorney’s fees, and court costs.

The allegations stem from foreclosure proceedings brought by ANZ Guam against the Lizamas and J&JEV Enterprises in the CNMI Superior Court.

In an order on Monday granting ANZ Guam’s motion to dismiss, Manglona said the plaintiffs’ entire RICO claim is premised upon the assertion that ANZ needed a full-service banking license in the CNMI when it executed the mortgage agreement in Guam and instituted foreclosure proceedings in the CNMI.

“ANZ did not need a full-service CNMI banking license when it executed the mortgage agreement in Guam and, in fact, had one when it instituted foreclosure proceedings over the CNMI real properties,” the judge pointed out.

Moreover, Manglona said, the U.S. Department of Agriculture’s payment of 70 percent of the loan to ANZ Guam did not free the plaintiffs from paying the underlying debt or mortgage.

According to court records, on Jan. 9, 1997, plaintiffs and ANZ entered into a loan agreement in Guam, whereby ANZ loaned the plaintiffs $1.8 million, with interest of 1.75 percent, to build the Victoria Hotel in Garapan, Saipan.

Once the construction was complete, the loan was converted to a Business Loan Agreement in 1999, together with a promissory note in the increased amount of $1.99 million.

When plaintiffs defaulted on the loan, ANZ tried to foreclose on the plaintiffs in the Superior Court in June 2000. In 2001, the Superior Court directed the plaintiffs to pay ANZ $2.2 million in principal and interest.

When the plaintiffs failed to comply, ANZ moved for an order directing foreclosure sale on Oct. 29, 2012.

The Superior Court then issue an order directing foreclosure sale of the mortgaged property in the outstanding unpaid amount of $2.1 million in principal, interest, and attorney’s fees.

In 2014, plaintiffs appealed to the CNMI Supreme Court, which then dismissed the appeal for lack of jurisdiction.

ANZ gave notice of the foreclosure sale of the mortgaged property to be held on March 21, 2016.

Plaintiffs then filed the racketeering lawsuit in federal court, placing the foreclosure sale on hold until further notice.

ANZ, through counsel Joyce Tang and Robert T. Torres, moved to dismiss the racketeering lawsuit on the grounds that it failed to plead fraud with sufficient particularity.

In granting the motion to dismiss, Manglona pointed out that plaintiffs assert a RICO claim but fail to identify the statutory section they are referring to.

Manglona said plaintiffs instead make broad assertions that ANZ acted in concert with five Does and engaged in interstate commerce with respect to “concealing and misrepresenting to plaintiffs and to the CNMI courts” ANZ’s questionable legal status in the CNMI and USDA’s payment of the guaranteed amount of the loan, and “showing a pattern of racketeering.”

Manglona said plaintiffs have failed to allege sufficient facts to support the allegations of any racketeering activity.

Manglona said while plaintiffs assert that ANZ engaged in “excessive and continuous coercion to collect debts,” it provides nothing further to put ANZ on notice as to what specific wrongful conduct ANZ engaged in.