June 5, 2023 -The Daily Herald News -PHILIPSBURG–The Court of First Instance in Curaçao has ruled against Pasanggrahan Strand Hotel Sint Maarten NV in its proceedings against Development Bank of the Netherlands Antilles OBNA, and its intention to auction off the landmark guest house along Great Bay beach in Philipsburg.
In the case which was filed on May 22, 2023, the owners of Pasanggrahan called on the court to order OBNA to cease or suspend the planned auction of the iconic hotel, or to set a minimum bidding price of NAf. 8.2 million. Two days later, on May 24, 2023, the court announced that it rejected the plaintiffs’ claims and that they were ordered to pay the costs of the proceedings.
OBNA closed credit agreements with Pasanggrahan in August 2009 and July 2011. In September 2014, OBNA cancelled the agreement and demanded the entire outstanding amount of approximately NAf. 12.8 million. The bank wished to enforce its mortgage right attached to the hotel on October 15, 2019, and had an auction planned for 10:00am May 25, 2023.
The auction was preceded by a multi-year process during which Pasanggrahan had the opportunity to find financing elsewhere or to otherwise meet its obligations to OBNA, according to the court.
In the meantime, OBNA made three attempts to auction off the hotel. An auction planned for May 2020 was called off in connection with the COVID-19 pandemic. A second effort, in December 2020, was parried by the hotel owners with a provisional suspension of payments with a cooling-off period. A third attempt to auction the hotel complex in March 2021 failed because there were no candidates.
In its judgment, the court stated that the starting point is that a mortgagee is authorised under the Civil Code to proceed with a foreclosure sale if the debtor is in default with the payment of his mortgage obligations. In this light, the hotel owners could not plausibly demonstrate any special circumstances. For many years they have not been able to meet their financial obligations. Also, there is no prospect of alternative financing, or possibilities to make a substantial repayment, the court stated.
Late 2022, OBNA received NAf. 1,650,000 from NAGICO from an insurance policy. According to Pasanggrahan, OBNA would have been satisfied with this amount for the hotel, which was heavily damaged by Hurricanes Irma and Maria in September 2017, but a settlement agreement and correspondence submitted by OBNA showed that the hotel also agreed that its claim against NAGICO had been settled for this amount.
OBNA also promised that, after receipt of this amount, it would not sell the hotel before January 2023, in view of possible financing. According to the court, OBNA has kept that promise.
The fact that OBNA has received or can expect to receive more than US $200,000 from garnishments levied by OBNA against the plaintiffs cannot detract from OBNA’s interest in recovering its due and payable claim, the court said. “OBNA is, therefore, also entitled to continue the auction, partly to prevent its claim from increasing further. The latter must also be considered to be in the interest of the claimant as borrower and of its other creditors,” the judge stated in the verdict.
In view of Pasanggrahan’s long-standing default to OBNA, as evidenced by documents submitted to the court and what was put forward during the hearing, the court said it could not follow the hotel’s position that OBNA is abusing its power to proceed with an auction.
OBNA has set the starting price for the auction of the Pasanggrahan hotel at $5,285,000. The hotel owners considered this amount to be too low and claimed this would harm their interests.
OBNA had set the starting price in reference to the execution value as mentioned in an appraisal report, adding that a lower starting price would attract more potential buyers and could lead to a better result. In this regard, the development bank pointed out that at the March 2021 auction, with a starting price of $7.15 million, no one showed up. The fact that an appraiser engaged by Pasanggrahan arrived at a higher foreclosure value does not have to be a reason for OBNA to change its starting price, the judge concluded.
In the meantime, a fourth auction has taken place, attorney-at-law Bertie Braam said according to newspaper Antilliaans Dagblad. “No biddings have been made, so everything will remain as it is for the time being,” the hotel’s lawyer was quoted as saying, adding that “the owners are diligently seeking funding to pay OBNA.”