Feds enter multimillion dollar property dispute with veiled threat to take back land

GovGuam and its Guam Waterworks Authority have made a mess out of one of the most important civilian infrastructure projects to American national security in this region. Indeed, in order for the military buildup on Guam to proceed, the island’s northern wastewater treatment plant, must be upgraded. According to a statement of interest the U.S. Attorney for Guam and the CNMI entered in a civil lawsuit in the Superior Court of Guam, GovGuam – by its actions – may have forfeited the property back to the military.

“The United States is in the process of expanding certain of these facilities, pursuant to an international agreement requiring the United States to relocate additional military units to Guam starting in 2024,” the statement, filed by assistant U.S. Attorney Mikel Schwab on August 18, states. “The United States has expended approximately $140 million to support the expansion of the wastewater plant, which is needed to mitigate the environmental impacts of the base expansion and support military readiness.”

In December 2019, Michael Borja in his role as director of the Guam Department of Land Management, filed a civil lawsuit in local court to change what DLM asserted was a mistake made in the title certificate of Lot 10184, Dededo, also known as the multi-million dollar Harmon Annex (adjacent to Two Lovers Point). By the time of the lawsuit, CoreTech had already bought and was developing most of the property on Lot 10184, Dededo.

The problem is that one of the divisions of the lot, which CoreTech has asserted (and the certificate of title bears out) it purchased for millions of dollars from the previous owner, was Lot 10184-7 (now Lot 10193 and Lot 10194). That’s the sliver of property, where the northern wastewater treatment plant, and its pipeline to Camp Blaz, sits.

And to add the extra dramatic flair that carries most GovGuam scandals into Academy Award-winning sagas, a separate and seemingly unrelated lawsuit in federal court against the Chamorro Land Trust Commission, discusses the illegal destruction of land documents around the time of the CoreTech land dispute. At the time, the CLTC was part of the DLM.

CoreTech’s purchase of the land, its claims on the title, and an audit claiming the loss and destruction of land documents culminated in a 2019 counterclaim on the land by CoreTech and request for inverse condemnation of the property.

“The United States has a particular interest in the resolution of this case because Core Tech’s counterclaims threaten to adversely impact the chain of real estate title under which the United States reserved a reversionary interest in real estate if not used for public benefit, specifically a wastewater treatment plan that serves U.S. facilities at Andersen Air Force Base and Marine Corps Base Camp Blaz,” the USAO statement in the local court lawsuit states.

The USAO statement does not contemplate fault for how GovGuam and CoreTech arrived at the dispute, but it does state repeatedly that if, in fact, GovGuam released the property to private interests, such a transaction is void, and the land would revert back to the ownership of the military.

“Because the United States has a reversionary interest in parcels it conveyed to GovGuam that is triggered upon cessation of use for public benefit, conveyance of those parcels without encumbrance by the public benefit use – i.e., the Plant – would have caused title to revert to the United States,” the USAO statement reads.

The problem began long before CoreTech bought the property. In its statement, the USAO explained to the court that the U.S. government in 1980 granted GovGuam an easement “subject to the construction of the proposed Northern Integrated Sewage System Treatment Plant designed to serve Department of Defense as well as U.S. Government agencies in the Northern District of the Island of Guam.” Parcel 4, or what now is known as Lot 10184-7, was outleased specifically for the plant’s construction.

In 2002, the U.S. conveyed the Harmon Annex, including Lot 10184-7 to GovGuam “so long as GRANTEE uses the Property for public benefit use, as contemplated by the Guam Excess Lands Act, Public Law 103-339, 108 Stat. 3116 (1994). Should GRANTEE use the Property for other than such use, title to the Property shall revert to GRANTOR.

Four years later, in 2006, the Guam Ancestral Lands Commission conveyed the entire property to the Torres Estate via quitclaim deed. In two transactions that occurred over the next two years, the Torres Estate sold the properties, including the land, where the wastewater treatment plant sits, to an investor. Core Tech acquired the properties the following decade.

Throughout the transactions – title clearance, deeds, recordings – the Guam Department of Land Management accepted all land documents, including survey maps showing the boundaries of the land parcels that were part of the transactions. The certificates of title bear out that with each transaction, the new owner also owned the land, where the northern wastewater treatment plant sits.

GWA, which controls and operates the plant, never paid rent to any of the property owners; and none ever charged lease payments. And then, in December 2018, then-director Michael Borja filed the local court lawsuit seeking to change the certificate of title CoreTech holds to specify that Lot 10184-7 does not belong to CoreTech, but to GWA.

GWA soon joined as a plaintiff intervener in the case, its claim on the land giving the agency what appeared to be the greatest interest in the case. After all, GWA has been in the midst of borrowing from bond holders hundreds of millions of dollars for the improvements required for the plant, and for other islandwide improvements to its infrastructure required for compliance with the U.S. Clean Water Act.

The agency assured its creditors over several years of bond ratings and issuances that it had site control (free and clear ownership over the long term) of Lot 10184-7 (now 10193 and 10194), and that no concerns material to the credit GWA was seeking on hundreds of millions of dollars existed. To quiet any such claim, Guam DLM recorded a 2017 map showing GWA ownership of the lot, even though the certificates of title issued by the Deputy Title Registrar since 2014 said something completely different.

In fact, GWA said nothing to its creditors until it was forced by CoreTech in 2019, when the title holder countered the GovGuam-GWA claim to the land with its own claim to the land. At that point, GWA had no choice but to disclose to bondholders the dispute.

“In the event that the Guam Superior Court enters a judgment against the Authority and the Government,” a notation in GWA’s disclosure to creditors in 2020 states, “the resulting liability could have a material and adverse impact on the Authority’s financial position.”

As it turns out, GWA’s interest arguably is not the greatest in this matter; but that of the Defense Department, which has been relying on GWA to finance and complete the wastewater treatment plant upgrades needed for Camp Blaz.

“These wastewater expansion and improvement activities depend on the continued acknowledgment and validity of the easements in perpetuity on certain parcels and a lease granted to the Government of Guam by the United States in 1980 to construct and operate the Plant,” the Justice Department statement reads as it argues to the local court on behalf of the military’s interests. “Language in any certificate of title referring to such easements and lease should be construed in favor of preserving them, particularly given the existence of corroborating evidence available to the title holder that could resolve any possible ambiguities. Because the United States has a reversionary interest in parcels it conveyed to GovGuam that is triggered upon cessation of use for public benefit, conveyance of those parcels without encumbrance by the public benefit use – i.e., the Plant – would have caused title to revert to the United States.”

The Justice Department made it clear to the court that its interests don’t necessarily align with GovGuam and GWA, but simply in the federal government’s ability to provide sewage service to Camp Blaz and Andersen Air Force Base, whether that be by arrangement with GWA, or by the military or another of its assigns.

“The interests of GWA, GovGuam, and the United States in this case are not identical,” the federal government’s filing states. “[T]he United States has an ongoing property interest in the property.”

The USAO’s statement of interest does not dispute CoreTech’s demand for $130 million for inverse condemnation, trespassing, and encroachment. It simply reminds the court that if it finds for CoreTech’s counterclaim on the title, and that GovGuam did in fact sign over title to a private company, the land will automatically forfeit to the federal government, according to the original deed’s reversionary clause.

Not only will that leave GWA in a heap of carabao dung with its creditors and ability to comply with the U.S. Clean Water Act, and the future of northern wastewater and development in absolute chaos. Such an action will leave GovGuam exposed and left holding the bag on liability it will certainly owe a company that – through no fault of its own – paid for and received title to that land.

Kandit sent a number of questions to GWA general manager Miguel Bordallo Tuesday morning via email after he ignored read messages via phone on the matter for two weeks. He has not responded. Consolidated Commission on Utilities chairman Joey Duenas also was emailed the questions.

This is the first of an investigative series into the Harmon Annex property scandal.

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