High Court injunction blocks DBAS from foreclosing on Fuiava land
The Lands and Titles Division of the High Court has granted an injunction preventing the Development Bank of American Samoa from foreclosing and seizing a parcel of land in Ili’ili, belonging to Michael Fuiava that was used as “security interest” in a DBAS loan for Tausani Airlines, which has since ceased operation.
Fuiava — who is currently the ASG Agriculture Department director — is an officer and president of the locally based start-up airline, which was to operate Manu’a flights. And it was more than two years ago that the airline leased the ASG plane, Segaula, which have since been returned to ASG.
Responding to Samoa News inquires, US Federal Aviation Administration (FAA) spokesman, Ian Gregor said from Los Angeles yesterday that Tausani withdrew their certification application in the Spring of 2017.
The court’s decision followed a complaint — which provides new details on the Tausani loan and its operation plans — filed last December by Tausani and Fuiava against DBAS, which in 2014 entered into negotiations with the airline’s officers for financing the development of Manu’a air service.
During negotiations, the complaint said, Tausani officers presented a $400,000 loan proposal to fund the company’s equipment spare parts, aircraft, hangar improvements and working capital. Tausani proposed to purchase two aircraft — a nine-seat BN Islander for $250,000 and a Piper Cherokee for $50,000. The two aircraft would be used as loan collateral as well.
According to the funding proposal document included in the complaint, Tausani would initially operate using the FAA issued Air Operation Certificate of Guam-based Aviation Services Ltd. that provided air service for Guam as Freedom Air.
In the late part of 2014, DBAS agreed to a loan amount of $400,000, with $300,000 funded by the bank and $100,000 funded by the Commerce Department’s Economic Development Revolving Loan Fund (EDRLF) program. The loan documents were executed Nov. 12, 2014 and the complaint alleges that it was the plaintiffs’ understanding at the time that the loan would be disbursed in a single transaction.
It’s further alleged that DBAS representatives “promised” the airline that the full $300,000 of the loan would be disbursed immediately upon execution of the loan documents or the following day at least. But nothing was disbursed until Dec. 14 and then only $50,000 of the $300,000 loan.
As a result of DBAS’s failure to fund the entire $300,000 loan total, Tausani “was unable to develop its air services” to Manu’a, including purchase of the two aircraft as planned, the complaint alleges.
For the loan from the EDRLF, the complaint alleges that the $100,000 loan amount was immediately disbursed in a single payment upon execution on Feb. 2, 2015 of the loan agreement.
Because DBAS “failed to disburse” the balance of the $300,000 loan, the airline “was unable to purchase the two FAA certified aircraft it had intended to buy, and instead had to scramble to find an alternative to fulfill its plans” for Manu’a air service, the complaint alleges.
The alternative cited in the complaint is the lease of the Segaula plane, which was offered by ASG in 2015, but one major problem is that this ASG aircraft lacked FAA certification.
As part of its offer, ASG agreed to lease the Segaula in exchange for Tausani’s agreement to use the DBAS funds to repair the plane up to FAA standards, according to the complaint, which revealed that the lease agreement granted the airline an option to purchase the Segaula for $150,000 within one year from the date that the aircraft become certified by the FAA.
However, if Tausani didn’t purchase this aircraft, the complaint alleges that ASG agreed to give the airline the option to be reimbursed for the sum equal to Tausani’s expenses and costs incurred to bring the Segaula to an airworthy condition as certified by the FAA.
Around Aug. 15 last year, Tausani notified ASG of its intent to exercise its option to be reimbursed for expenses and costs related to repairing the Segaula, but as of last December ASG had not responded, according to the complaint but didn’t provide details of how much the airline spent on repairing the Segaula.
The complaint noted that Fuiava, owns a parcel of land — about .26 acres — in Ili’ili and the land has “significant improvements” on it, including a two-story house that was appraised to be valued at over $400,000. And it was in August 2016 that Fuiava granted DBAS “a security interest in this parcel.”
Then around Oct. 30, 2017, DBAS published a foreclosure sale notice in the newspaper, Samoa News, for this parcel of land, which was to be sold at a public auction around Dec. 7. The notice included a photo, which showed an undeveloped parcel of land and not Fuiava’s land, according the complaint, adding that DBAS had been advised of this matter.
The complaint notes that the land — based on the photo used for the advertisement — is raw and not developed.
CAUSE OF ACTION
The complaint cites four causes of action against DBAS, with the first accusing the bank of its failure to advertise the sale to the public in accordance with local law. And such failure “not only risks the sale of another’s land but will reduce the value of any proposed sale” of Fuiava’s land.
Plaintiffs also accused the bank of “breach of contract” for failing to disburse the loan funds in one transaction as well as the remaining balance of the $300,000 loan amount.
DBAS’s breach, which resulted “in the frustration of Tausani’s business development” of Manu’a air service, “directly and proximately caused Tausani to suffer substantial damages”, including but not limited to, “liabilities in the amount of over $250,000 in DBAS loans, the threat of the loss of Fuiava’s property, loss of profits and such other related damage in an amount to be determined at trial, according to the complaint.
The court’s injunction was granted last month and as of yesterday, no date has been set for trial.
Local attorney Gwen Tauiliili-Langkilde is representing the plaintiffs while the RDA Law Firm American Samoa is representing DBAS.