Yokeno v. Sekiguchi
| Decision Date | 19 August 2011 |
| Docket Number | Civil Case No. 09-00020 |
| Parties | MATAO "EDDIE" YOKENO, Plaintiff, v. SAWAKO SEKIGUCHI, a/k/a SAWAKO S. LAI, EMIL LAI, and JOHN DOES 1-10, Defendants. |
| Court | U.S. District Court — District of Guam |
MOTION FOR SUMMARY
Before the court is a Motion for Summary Judgment ("the Motion") filed by Defendants Sawako Sekiguchi and Emil Lai (collectively, "Defendants"). After reviewing the parties' filings and the relevant case law and statutes, the court hereby GRANTS the Motion and issues the following opinion.1
Plaintiff Matao "Eddie" Yokeno ("Yokeno") and Defendant EMIL N. LAI ("Lai") have known each other for many years, having been childhood friends. See Docket No. 7, Exh. B ¶ 16. Defendant SAWAKO SEKIGUCHI ("Sekiguchi") is Lai's wife. See id., Exh. B ¶ 36. Yokeno is a resident of Guam. See id., Exh. B ¶ 5. Lai is a British National Overseas citizen, and a full-time resident of Japan. See Docket No. 25 at 9. Sekiguchi is a citizen of, and a full-time resident of, Japan. See id. at 11.
Around May of 1995, Lai made a personal loan to Yokeno in the amount of $500,000 ("the 1995 loan"). See Docket No. 18 at ¶ 3. Interest was set at 10%per annum. See id. The purpose of the loan was to provide working capital for Yokeno's various business ventures, including the Santa Fe Corporation, which is owned or controlled by Yokeno. See id. Yokeno subsequently defaulted in the repayment of this loan. See id. at ¶ 4.
On October 19, 1997, Yokeno and Lai entered into a memorandum of understanding ("MOA" or "the MOA"). See Docket No. 7, Exh. B at ¶ 10; see also Docket No. 18 at 14 (the MOA). Their immediate purpose in entering the MOA was to structure and coordinate a joint purchase-and-development of Fai Fai Beach in Guam.2 See Docket No. 18 at 14. More generally, their purpose in entering the MOA was to create an investment opportunity that Yokeno could extend to Lai, as consideration or an inducement for Lai to forbear from taking legal action against Yokeno on the basis of his default on the 1995 loan. See Docket No. 18 at ¶¶ 4, 5.
By the terms of the MOA, Lai was to loan $1 million to "a company newly established for the specific purpose of the purchase of [Fai Fai Beach]." Docket No. 18 at 14. The loan was to be interest-free for 6 months from disbursement; thereafter, it would accrue interest at 10%per annum. Id. In exchange for the loan and the partial waiver for interest, Lai was to receive "ownership of up to 80% but not below 50%" of the new holding company. Id. The holding company was then to obtain a loan of $4.25-4.5 million, to repay Lai and create cash flow. Id.
After discussing some contingencies related to obtaining the loan, the MOA then describes "[t]he conditions to transfer back the initial shares" from Lai to Yokeno. Docket No. 18 at 14. There are four such conditions: (1) full repayment of the $1 million loan to the holding company;(2) full repayment of "the original loan [i.e., the 1995 loan] currently at USD 200,000 + [sic] a running interest charge of approximately USD 86,000," with interest to accrue past a certain date;
(3) full repayment of the loan "provided initially by Mr. E. Sakuma," along with any interest thereon; and (4) Lai's receipt/retention of 10% of the shares in the holding company, "after all of the liabilities are repaid." Id. Finally, the MOA refers to other unspecified "projects" of Yokeno's, and states that "each project must have its own accountability and not be a subject of a cash source to subsidize other projects" because "it is necessary and imperative to retain [the] autonomy" of these projects. Id.
In keeping with the MOA, a holding company called "Fai Fai Beach Associates" ("FFBA") was created on November 5, 1997. See Docket No. 7, Exh. B at ¶ 10; see also Docket No. 42, Exh. A at 3 (establishing correct date). FFBA filed its articles of incorporation and its bylaws on November 5, 1997. See Docket No. 19 at ¶¶ 3.f (articles of incorporation), 3.I (bylaws). FFBA was capitalized in ten thousand shares of common stock with a par value of $1. See Docket No. 7, Exh. B at ¶ 11.
Lai subscribed to 8,000 shares of FFBA's stock. Docket No. 7, Exh. B at ¶ 12; see also Docket No. 19 at ¶ 3.f (articles of incorporation). Lai has explained why his 80% ownership stake was important to him:
Because Yokeno was already in default in the repayment of Yokeno's loan debt to me and Yokeno was asking me to make yet another substantial outlay of cash to protect myself, . . . I definitely wanted and did have voting control over the management of that corporation, in the event that I decided to actually exercise control as the 80% stockholder of that corporation.
The other 2,000 shares of FFBA stock went to Steffen Niu and Andrew Porter, who each subscribed to 1,000 shares. See Docket No. 19 at ¶ 3.f . The parties appear to agree that Niu and Porter collectively held these 2,000 shares in trust for, or as nominees of, Yokeno. See Docket No. 7, Exh. B at ¶ 12; Docket No. 16 at 11; Docket No. 46 at 9.
On November 14, 1997, FFBA acquired the title to Fai Fai Beach. See Docket No. 19 at ¶ 3.b. Since then, the fair market value of that property is alleged to have gone up. See Docket No. 7, Exh. B at ¶ 19. FFBA still holds the title to Fai Fai Beach. See id. at ¶ 20; see also Docket No. 16 at 2.
By 2003, Yokeno still had not repaid his debt to Lai. See Docket No. 18 at ¶ 13. At some point during the year, Yokeno suggested that Lai have Shigen Kaihatsu Sha Pte. Ltd. ("SKS")—a Singapore corporation that Lai holds shares of—invest in a new corporation, to be created under the laws of Guam, that would operate an eco-tourism business on Fai Fai Beach. See id. This new corporation was to be called Powder Sand, Inc. ("PSI"). Id. Lai and Yokeno believed that the creation and operations of PSI would improve the marketability, development, and sale of Fai Fai Beach—which would, in turn, enable Yokeno to repay his debt to Lai and allow Lai to realize a profitable return on his investment in FFBA. See id. at ¶ 14.
PSI was formed on April 21, 2003. See Docket No. 19 at ¶¶ 3.kk (articles of incorporation), 3.ll (bylaws). SKS is on record as the initial owner of 997 of the 1,000 shares of stock issued by PSI. See id. at ¶ 3.kk. On May 12, 2006, SKS transferred legal title to one share of PSI to Lai, one share to Sekiguchi, and one share to a Masaaki Hamamoto. See id. at ¶¶ 3.pp, 3.qq, 3.rr. In each case, SKS provided that it shall remain the beneficial owner of the particular share of capital stock. See id.
In December of 2004, Lai and Yokeno exchanged some emails in which they discussed their plans for FFBA. See Docket No. 19 at ¶ 3.a. On December 27, 2004, Lai wrote that they "should straighten out some basic understanding [sic]." Id. In that vein, Lai made six points. See id. Only three of those points are important here. The first point reads:
1) The ownership of the land is with Fai Fai Beach Associates (80% owned by Emil Lai) and there is no problem with the other minority stakeholders. In the event of the sale of the entire premise and operation, you will take care of the minority interests from your share of the profits.
You will also negotiate Mr. Sakuma's debt on your own, if necessary.
Id. The third point reads: "3) My investments plus the running rate to date (appx. USD 2.4 mln-accurate details to be furnished) will be repaid in an accelerated manner before you take any dividends." Id. And the sixth point reads: "6) When my initial investments are fully repaid, will split all proceeds from the income generated minus any necessary capital refurbishment costs which will include, when applicable, even the sale of the entire land and venture." Id. Finally, Lai asked that "[i]f you feel the above is appropriate, please acknowledge." Id. (emphasis added).
On December 28, 2004, Yokeno responded to Lai's email from the previous day. See Docket No. 19 at ¶ 3.a. He wrote that Lai's email was "well taken and acknowledged." Id. (emphasis added). Yokeno then went on to write:
On or about December 23, 1998, Yokeno executed a personal guaranty ("the guaranty") in favor of Citizens Security Bank ("CSB"), guaranteeing the payment at maturity of a certain promissory note in the amount of $2.4 million ("the Note"). See Docket No. 7, Exh. B at ¶ 25. The Note was made to CSB by the Santa Fe Corporation, which, again, Yokeno controls. Id. at ¶ 26. On or about July 27, 2001, the Santa Fe Corporation filed for bankruptcy, defaulting on the Note and making Yokeno individually and personally liable under the guaranty. Id. at ¶ 28. This liability extended to Yokeno's business and real property interests. Id. at ¶ 31.
In December of 2002, in the Superior Court of Guam, CSB moved to summarily enforce Yokeno's payment obligation under the guaranty. See Docket No. 7, Exh. B at ¶ 29. Yokeno did not oppose this motion. See Docket No. 19 at ¶ 6. The Superior Court of Guam granted this motion on February 27, 2004. See Docket No. 7, Exh. B at ¶ 29. The Superior Court of Guam entered judgment ("the CSB judgment") against Yokeno on January 23, 2008, for $2,497,369.93 indamages, plus interest and costs of suit. See Docket No. 19 at ¶ 6. On January 30, 2008, the CSB judgment was entered on the docket, and written notice thereof was mailed by the clerk of court to all counsel of record. See Docket No. 19 at ¶ 7. Yokeno did not appeal the CSB judgment, and...
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