In the Matter of the Dissolution of Oka Towers Corporation

IN THE SUPREME COURT OF GUAM IN THE MATTER OF THE DISSOLUTION OF OKA TOWERS CORPORATION, Petitioner-Appellee, TRANS PACIFIC EXPORT CO., Claimant-Appellant. OPINION Filed: May 2, 2000 Cite as: 2000 Guam 16 Supreme Court Case No. CVA98-022 Superior Court Case No. CV1285-97 Appeal from the Superior Court of Guam Argued and submitted on May 10, 1999 Hagåtña, Guam Appearing for the Appellant: Steven A. Zamsky, Esq. Zamsky Law Firm Suite 501, Bank of Guam Bldg. 111 Chalan Santo Papa Hagåtña, Guam 96910 Appearing for the Appellee: James T. Mitchell. Esq. Frederick J. Horecky, Esq. on the briefs Law Offices of Horecky & Associates 1st Floor, J. Perez Bldg. 138 Seaton Blvd. Hagåtña, Guam 96910 In the M atter of the D issolution o f Oka To wers Co rp., Opinion Page 2 o f 9 BEFORE:BEFORE: BENJAMIN J. F.BEFORE: BENJAMIN J. F. CRUZ, Chief Justice;BEFORE: BENJAMIN JOHN A. MANGLONA, Designated Justice. SIGUENZA, J.:Ask ⌕

[1]OkaOka Towers Corporation filed a Petition for the Dissolution of a Corporation.Oka Towers Corporation ExportExport Company entered an appearance and objected to the dissolution on the basis of an outstandingoutstanding claim against the corporation which woutstanding claim against the corporation which w CourtCourt of Guam. That matter wasCourt of Guam. That matter was subsCourt of Guam. That matter was sub Towers and TransTowers and Trans Pacific appealed thatTowers and Trans Pacific appealed that ruling. In the sanctionssanctions against Trans Pacific for filing a legsanctions against Trans Pacific for filing a legally unrsa awardaward of sanctions. Contrary to theaward of sanctions. Contrary to the lower court, we findaward of sanction andand objection to dissolutionand objection to dissolution was proper; consequently, we reverse the award ofand ob FACTSAsk ⌕⧉ cite

[2]On September 22, 1997, Oka TowersOn September 22, 1997, Oka Towers Corporation (hereinafter App forfor Voluntary Dissolution of a Corporation in the Superior Court for Voluntary Dissolution of a Corporation anan amendedan amended petition was filed. A Notice by the Clerkan amended petition was filed. A Notice by the andand Order to Show Cause was filed on November 26, 1997.1 On January 9, 1998, On January 9, 1998, counsel PacificPacific Export Company (hereinafter Appellant ) filed an Entry of AppearancePacific Export Company (h objected to the dissolutionobjected to the dissolution ofobjected to the dissolution of Appellee; however, no basis document. 1ItIt appears thatIt appears that two Ame nded N otices by Cle rk for Vo luntary Disso lution were sub sequently It appears that two Am 19, 199 7, and Jan uary 12, 19 98. In the M atter of the D issolution o f Oka To wers Co rp., Opinion Page 3 o f 9 In the M atter of the D issolution o f Oka To wers Co rp., Opinion Page 4 o f 9Ask ⌕⧉ cite

[3]AtAt the March 10, 1998, Order to Show Cause hearing before Judge Lamorena it was discloseddisclosed thatdisclosed that another civil case between the parties was before Judge Manibusan, and thatdi judgmentjudgment motions were argued the previous week.2 Also at the hearing, it was discussed that Appellant sAppellant s counsel had filed an objection and that there wasAppellant s counsel had filed an objection waswas to be filed in addition thereto. Judge Lamorena continued the hearing until Apwas to be filed in add ostensiblyostensibly to allow time for either the Appellant to file a claim or forostensibly to allow time for either th TheThe Appellant, on the same day, filed its claim and incorporated by reference all documents and the entire record in the above-referenced civil case. See Appellee s Excerpts of Record (EOR) 7.Ask ⌕⧉ cite

[4]InIn the interim, on March 16, 1998, Judge Manibusan issued a Decision In the interim, on March 16, grantedgranted Appellee s Sumgranted Appellee s Summary Jgranted Appellee s Summary Judgment motion prejudice,prejudice, and assessed sanctions pursuant toprejudice, and assessed sanctions pursuant to Rule 11pr Appellee sAppellee s EOR 4. Judge LamorenaAppellee s EOR 4. Judge Lamorena transferred the instant dissolut April 7, 1998.Ask ⌕⧉ cite

[5]OnOn April 17, 19On April 17, 1998, AppelOn April 17, 1998, Appellee filed a Motion for Award of P Costs. The hearing occurredCosts. The hearing occurred onCosts. The hearing occurred on June 2, 1998, before J that the Appellant sthat the Appellant s objection was timely filed, sanctions were appropriate because it hadth dismisseddismissed the civil case. See Transcript, vol. --, Transcript, vol. --, p. 28 Transcript, vol. --, p. 28 (Hearin AttorneysAttorneys Fees and Costs, June 2, 1998). The court alsoAttorneys Fees and Costs, June 2, 1998). The co oror resurrected andor resurrected and some award granted, then Section 5101 of Title 18 of theor resurrected and 2Transp acificTransp acific Exp ort Co. v. O ka Tow ers Corp ., Superior Court Civil Case No. CV 1232-97. We have earlier decideddecided the appeal of this case in 2000 Guamdecided the appeal of this case in 2000 Guam 3 and decided the app eal of th Appellan t and the imp osition of sanc tions there. In the M atter of the D issolution o f Oka To wers Co rp., Opinion Page 5 o f 9 wouldwould provide the means for Appellant to act on itswould provide the means for Appellant to act on its claim MotionMotion for Award of Petitioner s Attorneys Fees and Costs, June 2, 1998). The court issued an Order forfor Paymentfor Payment of Petitioner s Attorneys Fees and Costs on July 30, 1998. See Appellant s EOR 4. App courtcourt articulated its findings by stating that Appellant s court articulated its findings by stating that Appe AppelleeAppellee was entitled to its attorneys fees and costs incurred in defending against a claim that should notnot have been maintained from the outset. See Appellant s EOR 4. Appellant s EOR 4. Judgment Appe VoluntaryVoluntary Dissolution of Oka Towers Corporation and Payment ofVoluntary Dissolution of Oka Tower Costs. See Appellant s EOR 5. DISCUSSIONAsk ⌕⧉ cite

[6]JurisdictionJurisdiction of this court is not disputed and vests pursuant to Title 7 of tJurisdiction of this Annotated sections 3107 and 3108 (1994).Ask ⌕⧉ cite

[7]We review orders imposingWe review orders imposing RuleWe review orders imposing Rule 11 sanction Hartmarx Corp., ⟂496 U.S. 384Persuasive authoritynon-Guam — not binding under the reception rule, 405, ⟂110 S.Ct. 2447Persuasive authoritynon-Guam — not binding under the reception rule, 2461, ⟂496 U.S. 384Persuasive authoritynon-Guam — not binding under the reception rule, 405, ⟂110 S.Ct. 2447Persuasive authoritynon-Guam — not binding under the reception rule, 2461 (1990). A co imposingimposing sanctions when imposing sanctions when it imposing sanctions when it bases its decision erroneouserroneous assessment of the evidence. Mark Indus Ltd. v. SeaMark Indus Ltd. v. Sea Captain s Choice,M 732 (9th Cir. 1995).Ask ⌕⧉ cite

[8]Rule 11 of the Guam Rules of Civil Procedure provides, in relevant part: RuleRule 11. Signing of Pleadings, Motions, And Other Papers; Sanctions. Every pleading,pleading, motion, or otherpleading, motion, or other paper ofpleading, motion, or other paper of a byby at least one attorney of record in the attorney's individuaby at least one attorney of record in the at shallshall be stated. A party whoshall be stated. A party who is shall be stated. A party who is not repres pleading,pleading, motion, or other paper and state the party's address. . .The signature of an attorneyattorney or party cattorney or party constitutes aattorney or party constitutes a certificate by the In the M atter of the D issolution o f Oka To wers Co rp., Opinion Page 6 o f 9 pleading,pleading, motion, or other paper, that to the best of the signer's knowledge, information,information, and belief formed after reasonable inquiry it is well grounded in fact and isis warranted by existing law or a good faith argument for the extension, modification oror reversal of existing law, and that it is not interposed for any imor reversal of existing law, and that suchsuch as to harass or to cause unnecessary delay osuch as to harass or to cause unnecessary delay or litigation. . . If a pleading, motion, or other paper is signed in violationlitigation. . . If a pleading, motion, thethe court, upon motion or its own initiative, shall imposethe court, upon motion or its own initiative, shall it,it, a represented party, or both, an appropriate sanction, which may include an order toto pay to the other party or pato pay to the other party or parto pay to the other party or parties the amo becausebecause of the filing of the pleading, motion,because of the filing of the pleading, motion, or other attorney's fee. Guam R. Civ. P. 11.Ask ⌕⧉ cite

[9]ThisThis rulThis rule was adopted from the corresponding provision of the Federal Rules of CiThis Procedure.Procedure. See Comment to GRCP 11. Rule 11 empowers federal courts to impose sanctions upon thethe signers ofthe signers of paper where: (a) the paper is frivolous orthe signers of paper where: (a) the paper is fri TownsendTownsend v. Holman ConsultingTownsend v. Holman Consulting Corp., ⟂929 F. 3d 1358Persuasive authoritynon-Guam — not binding under the reception rule, 1362., 929 F. toto denote a filing that is both baseless and made witto denote a filing that is both baseless and made witho (citation(citation omitted). Lastly, a reasonable inquiry means (citation omitted). Lastly, a reasonable circumstances of a case. Id. at 1364 (citing Cooter & Gell, 496 U.S. at 402, 110 S.Ct. at 2459).Ask ⌕⧉ cite

[10]InIn this case, the trialIn this case, the trial judge awarIn this case, the trial judge awarded sancti unreasonableunreasonable and that Appelleeunreasonable and that Appellee hadunreasonable and that Appellee ha notnot have been maintained from the outset. We are unsure wnot have been maintained from the outset. We a impositionimposition of sanctions wasimposition of sanctions was because the objection and claim were frivolou forfor some improper purpose,for some improper purpose, or both. for some improper purpose, or both. Under ei not have been ordered.Ask ⌕⧉ cite

[11]Guam law provides a mechanism for the pursuit of claimsGuam law provides a mechanism for the pursui In the M atter of the D issolution o f Oka To wers Co rp., Opinion Page 7 o f 9 itsits corporate existence is terminated.3 We are of the view that We are of the view that it We are of the view that i toto seek to protect its interest by filing the objection and claim in the instant mto seek to protect its interest by broughtbrought in good faith.brought in good faith. brought in good faith. Appellant proceeded to properly prosec usingusing the statutory procedure for resolution of claims inusing the statutory procedure for resolution of applicationapplication already contained an averment of the pending civil case between itself and Appellant and ofof an outstanding debt owed to Universe Insuranceof an outstanding debt owed to Universe Insurance Underwrit factfact alone does not precludefact alone does not preclude the respective creditor/claimant from filing their object TheThe resolThe resolutiThe resolution of Appellant s claims in the earlier civil case was still pending at th objectionobjection was filed.5 Mo Moreover, Appellee s petition to dissolve came shortly after Appellant had institinstitutedinstituted its breach of contract and fraud claims. We find nothing frivolous or impropinstitute Appellant sAppellant s pursuit of some protection of its interests byAppellant s pursuit of some protection of its claim against Appellee.Ask ⌕⧉ cite

[12]InIn fact, itIn fact, it appeared that the trial court felt thatIn fact, it appeared that the trial court felt that App andand the cand the claimand the claim of March 10 was proper. See Transcript, vol. --, pp. 20-24 (Hearing on AwardAward of Petitioner s Attorneys Fees and Costs, June 2, 1998). ThAward of Petitioner s Attorneys Fees 3AA corporationA corporation may be voluntarily dissolved byA corpo ration may b e voluntarily disso lved by the S uperior C ourt TheThe application for d issolution mustThe ap plication for d issolution mus t be in writing and must set forthThe application for dissolutio thatthat dissolution was resolved by the affirmativethat dissolution was resolved by the affirmative votethat dissolution was resolved by th ofof stock issued or subscrib ed. See Title §18 GCA § 510Guam Code Annotatedstatute — binding 4 (1992). Notice for the application of dissolution mus Title 18 G CA § 51 publishedpublished and the da te on which the right of objection to the ap plication mustpublished and the da te on which the right of obje c (1992).(1992). Any person may file objections to the dissolution of the(1992 ). Any perso n may file obje ctions to the d issolution of the c orp that arises from the applicatio n and the ob jection there to shall be tried by the court. Id. 4The rec ord indica tes that another creditor ob jected to the Appellee s dissolution, altho ugh itThe record indicates that another itsits claim. See Transcript, vol. --, p. Transcript, vol. --, p. 29 (Hearing on Motion Transcript, vol. --, p. 29 (Hearing on Motion for Awar 1998). 5HadHad the civil case Had the civil case been undecided at the time dissolution was granted, then the court would haveHad the civ to appo int a receiver fo r lawful distributio n to shareho lders, credito rs or other inte rested par ties. See §18 GCA § 5107.Guam Code Annotatedstatute — binding In the M atter of the D issolution o f Oka To wers Co rp., Opinion Page 8 o f 9 withwith Appellee that anywith Appellee that any action taken by the Appellant after its decision and order grantin judgmentjudgment in the civil case would be frivolous. See Transcript, Transcript, vol. --, pp. 24-28 (Hearing on M forfor Award of Petitioner s Attorneys Fees and Costs, June 2, 1998). However, thfor Award of Petitioner s Att indicateindicate that Appellant did anything more in pursuit of the claims in the dissolutindicate that Appellan justified the court s award of sanctions.Ask ⌕⧉ cite

[13]TheThe trial courtThe trial court concluded that Appellant should have withdrawn its claim uponThe trial co ofof the Decision and Order on the summary judgment motion of the Decision and Order on the summary judg pursuitpursuit of the claim was frivolous. However, bypursuit of the claim was frivolous. However, by its very ter aa pleading, a pleading, motion, or other paper that is frivolous or interposed for an improper purpose. SSeSe Townsend,, 929 F.3d, 929 F.3d at 1362. We find no infirmity in, 929 F.3d at 1362. We find no infirmity in the En byby the Appellant and hold that theby the Appellant and hold that the trial court abused its discretion in imposin Appellant for this filing.6 CONCLUSIONAsk ⌕⧉ cite

[14]TheThe trial court abusedThe trial court abused its discretion by awarding fees and costs on the basis thatTh objection and claim were legally unreasonable.Ask ⌕⧉ cite

[15]Therefore, the trial court s imposition of sanctions is REVERSED. JOHN A. MANGLONA PETER C. SIGUENZA 6Because Because the lower c ourt relied on no other b asis fBecause the lower court relied on no other basis for Because the l Appellee s arguments of alternative bases for the lower court s award. In the M atter of the D issolution o f Oka To wers Co rp., Opinion Designated Justice Page 9 o f 9 Associate Justice BENJAMIN J. F. CRUZ Chief JusticeAsk ⌕⧉ cite