Lifoifoi daughters stopped from distributing corporate assets

Pending the outcome of a lawsuit filed by Commonwealth Ports Authority chair Jose R. Lifoifoi, the Superior Court has prevented his two children from distributing the dividends or transferring the assets of a corporation that is in dispute.

Pro tempore Judge Alberto C. Lamorena III also stopped Lifoifoi’s children, Ignacia L. Evangelista and Remedio L. Pangelinan, from transferring and/or encumbering any real estate owned or controlled by Quad L’s Company.

The two are corporate officers and directors of the company.

Lifoifoi and his children agree that Evangelista and Pangelinan can still receive their paychecks and can continue to pay Quad L’s Company employees and other payments that are carried out in the regular course of business.

In an order that granted Lifoifoi’s bid for a preliminary injunction, Lamorena said if Evangelista and Pangelinan doubt whether a transaction is appropriate, they can ask the court.

Lifoifoi is suing Evangelista and Pangelinan, and Quad L’s Company, also known as Quad L Corp., for conversion, unlawful taking, breach of fiduciary duty, and removal of directors by judicial proceeding.

Lifoifoi, through counsel Charity R. Hodson, asked the court to declare him as the only lawful shareholder of Quad L and to find the transfer of his company shares void from the beginning.

He wants the court to order his two daughters to transfer their shares back to him and to execute the documents to transfer the real property corporate assets back to the corporation.

In granting Lifoifoi’s motion for preliminary injunction, Lamorena ruled that Lifoifoi’s claims in his lawsuit are not likely barred by the statute of limitations.

Lamorena said it was reasonable for Lifoifoi to trust that his own children would not concoct a scheme to illicitly transfer his interest in Nha Thrang to themselves.

He said Lifoifoi is likely to prevail on his theory that his shares of Nha Thrang were never effectively transferred to his children.

The judge said defendants’ failure to contest the existence of a signed writing and/or produce said writing makes it likely that Lifoifoi will prevail on his claim that he never transferred his shares in Quad L’s Company.

Lamorena said defendants’ argument that the alleged injuries are speculative is not persuasive because, while it is undisputed that many of the most contested transfers and distributions of corporate assets occurred in the past, this suit presents added incentive for defendants to transfer or encumber assets.

Lamorena said it is evident that the balance of the hardships tips in Lifoifoi’s favor.

The judge said it appears undisputed that Lifoifoi is currently cut out of the management and control of the corporation and that he has no assurance that the corporation’s assets will be preserved pending the lawsuit.

Lamorena said Lifoifoi has alleged that defendants unlawfully attempted to transfer corporate ownership and used their corporate powers to enrich themselves at the corporation’s and ostensibly Lifoifoi’s expense.

“Ensuring that corporate formalities and duties are being observed is doubtless in the public interest because the Commonwealth Business Corporation Regulation Act prescribes as much,” he pointed out.

Lamorena said issuing an injunction at this point will preserve the status quo while providing time for the case to be heard and decided.

Lamorena specially enjoined Evangelista and Pangelinan from transferring and or encumbering four pieces of land in Garapan; a property at the Sugar King II Subdivision; a property in Tanapag; 11,205 square meters of land in an unspecified location; a land in Tanapag; and other real properties owned and/or controlled by Quad L’s Company.

Lamorena said there appears to be no pending land transactions, so Evangelista and Pangelinan would have little difficulty following the court’s order.

Lamorena ordered the parties to submit proposed scheduling orders on or before April 2, 2018, and to begin the mandatory mediation process.

The judge said once he has received the parties’ proposal, he will issue a scheduling order.

The case concerns a dispute between Lifoifoi and some of his children over the ownership and control of a family corporation, Quad L.

Quad L was originally organized in 1994 as Nha Thrang Inc. by Lifoifoi and his friend and business partner, the late business tycoon Larry Hillblom.

Lifoifoi and Hillblom each had 500 shares of Nha Thrang. Each owned and controlled 50 percent of the company.

The original deal between Lifoifoi and Hillblom was that Lifoifoi would provide land and Hillblom would provide capital to develop a real estate business.

In 1995, Hillblom passed away, leading to protracted litigation over his sizeable estate. Nha Thrang continued as a going concern after Hillblom’s death.

Hillblom’s 50 percent interest was held by his estate pending its ultimate distribution. Eventually, in 1999, Lifoifoi became the sole shareholder in Nha Thrang because Hillblom’s estate agreed to sell his shares to Lifoifoi.

In 1997, Lifoifoi’s four children—Evangelista, Pangelinan, Joseph T. Lifoifoi, and the late Josephine L. Tajibmai—returned to the CNMI in the wake of their mother’s passing.

After their return, the children decided to stay in the CNMI. Since the children wanted to stay, and not complete their academic studies on the U.S. mainland, Lifoifoi determined that it would be a good idea for them to start working for Nha Thrang in order to gain work experience.

Starting in 1998, Lifoifoi had his four children served in various capacities, including as directors and corporate officers. Evangelista and Pangelinan continued to act as corporate directors and officers up to the present.

In October 1999, the children filed Nha Thrang’s annual report with the Commonwealth Registrar of Corporations, indicating that Lifoifoi no longer had any interest in Nha Thrang and that all 1,000 shares in the corporation had been transferred to the children in equal shares of 250 shares each.

After the alleged transfer of ownership, the children allegedly: changed the name of the corporation to Quad L; started illicitly paying themselves dividends; and illicitly transferred real property held by the corporation to themselves.

Lifoifoi has alleged that his children abused the trust he had put in them by attempting to transfer his shares in the corporation to themselves and by raiding corporate assets for their own benefit.

Lifoifoi claims that he only discovered the misconduct when he started doing his estate plan in 2016. After attempting to get his shares back from his children, Lifoifoi sued the defendants.

Lifoifoi has not sued his son, Joseph T. Lifoifio, because he has allegedly renounced any ownership interest in the corporation.

Lifoifoi has requested that the court issue a preliminary injunction barring defendants from distributing any dividends and/or transferring or encumbering any corporate assets, in particular any real estate held by the corporation.

Lifoifoi does not seek to block day-to-day operations of the company, but merely seeks to enjoin large distributions, dividends, and/or large scale real estate transactions.