263 F.3d 1274 (11th Cir. 2001), 99-12527, Fogade v ENB Revocable Trust

Docket Nº:99-12527
Citation:263 F.3d 1274
Party Name:FOGADE, FONDO DE GARANTIA DE DEPOSITOS Y PROTECCION BANCARIA (Fogade) an agency of the Republic of Venezuela, CORPOFIN, C.A., AS LIQUIDATOR Plaintiffs-Appellees, v. ENB REVOCABLE TRUST, a trust organized under the laws of the British Virgin Islands, JUAN SANTAELLA, JULIO C. LEANEZ, OSCAR L. ZAMORA, MERCORP Page 1275 ADVISORS, INC. a British Virgi
Case Date:August 28, 2001
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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263 F.3d 1274 (11th Cir. 2001)

FOGADE, FONDO DE GARANTIA DE DEPOSITOS Y PROTECCION BANCARIA (Fogade) an agency of the Republic of Venezuela, CORPOFIN, C.A., AS LIQUIDATOR Plaintiffs-Appellees,

v.

ENB REVOCABLE TRUST, a trust organized under the laws of the British Virgin Islands, JUAN SANTAELLA, JULIO C. LEANEZ, OSCAR L. ZAMORA, MERCORP

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ADVISORS, INC. a British Virgin Islands Corporation, EASTERN NATIONAL BANK, ADCO ASSOCIATES, INC., Defendants-Appellants.

No. 99-12527

IN THE UNITED STATES COURT OF Appeals, FOR THE ELEVENTH CIRCUIT

August 28, 2001

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Appeal from the United States District Court for the Southern District of Florida. D.C. Docket No. 96-01679 CV-DMM

Before CARNES and MARCUS, Circuit Judges, and HAND[*], District Judge.

CARNES, Circuit Judge:

The plaintiffs in this lawsuit are the Venezuelan agency, Fondo de Garantia de

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Depositos y Proteccion Bancaria (FOGADE), and Corpofin, C.A., a Venezuelan company that FOGADE placed in intervention. The individual defendants - Juan Santaella, Julio C. Leanez, and Oscar L. Zamora - were former shareholders and controlling board members of Corpofin. The remaining defendants - the ENB Revocable Trust, Mercorp Advisors, Inc., Eastern National Bank, and ADCO Associates, Inc. - are business entities that are directly or indirectly controlled by the individual defendants.

Plaintiffs filed suit in the United States District Court for the Southern District of Florida, alleging that the individual defendants had misappropriated from Corpofin the stock of Eastern National Bank (ENB), a United States chartered bank in Miami.1 The district court initially dismissed plaintiffs' complaint (the second amended one) on forum non conveniens grounds, concluding that it involved primarily Venezuelan legal issues between Venezuelan parties, arising from transactions most of which had occurred in Venezuela. The plaintiffs subsequently requested leave to amend the complaint (for a third time) so that it would focus on defendants' alleged misappropriation of the ENB shares, which took place primarily in Miami, and would omit claims that focused on defendants' alleged violations of Venezuelan corporate and banking law. After reviewing plaintiffs' revised allegations, the district court granted plaintiffs' motion for leave to file a third amended complaint. The court eventually granted summary judgment in favor of plaintiffs on their claims of conversion and for reclamation of shares, and it ordered that the shares of ENB be returned to Corpofin.

The defendants' appeal brings us issues involving the jurisdiction of the district court over the case when it entered the order granting plaintiffs leave to amend after the court had already dismissed the complaint on forum non conveniens grounds, and the propriety of the court's grant of summary judgment to plaintiffs on their conversion and reclamation of shares claims. The defendants also attempt to appeal the dismissal of certain counterclaims they filed, but we lack jurisdiction to review that dismissal.

I. BACKGROUND

A. FACTS

In early 1994, Venezuela suffered a banking crisis engendered by the failure of Venezuela's largest bank. Several Venezuelan banks were forced to seek financial assistance from FOGADE, a Venezuelan agency, similar to the Federal Deposit Insurance Corporation, that provides financial assistance to struggling Venezuelan depository institutions. Bancor, S.A.C.A., was one such bank. The individual defendants were minority shareholders and controlling board members of Bancor. The majority of Bancor's shares, in turn, was owned by Corpofin, and the individual defendants were also minority shareholders and controlling board members of Corpofin.

Between March and June of 1994, Bancor received financial aid from FOGADE

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equivalent to $300 million at the then-prevailing exchange rates. In June of 1994, on the stated grounds that Bancor had not repaid its debts or increased its capital, FOGADE caused the Superintendency of Banks to "intervene" Bancor, a process similar to placing a company in receivership in the United States. In September of 1994, upon a finding that Corpofin was related to Bancor and that Corpofin had very large unguaranteed debts with Bancor, FOGADE caused the Superintendency of Banks to intervene Corpofin as well. As part of the intervention process, FOGADE removed the individual defendants from the management of both Bancor and Corpofin and replaced them with FOGADE-appointed boards. In October 1995, the Republic of Venezuela, through its Financial Emergency Board, ordered that Bancor be liquidated. Corpofin remains intervened, though defendants contend that the authority for intervention of it has expired under Venezuelan law.2

Corpofin's interventor, Juan Miguel Senior, who is responsible for marshaling the corporation's assets for the benefit of creditors, discovered documents detailing a series of transactions between subsidiaries of Corpofin, as well as shell corporations within the exclusive control of the defendants, that had resulted in the transfer of all shares of Eastern National Bank outside of Corpofin's ownership and control. Those documents were dated May 9, 1994, exactly one day before the individual defendants had been removed from control of Bancor by resolution of FOGADE.3 In any event, on May 9, 1994, Corpofin owed Bancor approximately $16.5 million.

Prior to the May 9, 1994 transactions (if they did take place on that date), the corporate structure was as follows: Corpofin, the parent company, owned 100% (70,000 shares) of First Bancorporation ("First Bancorp"). First Bancorp in turn owned 95% of the shares of ENB and 100% of the shares of Eastern Overseas Bank ("Eastern Overseas"). Eastern Overseas owned the remaining 5% of the ENB shares. Allegedly in order to shield the ENB stock (valued at $30 million) from judicial proceedings in Venezuela, Corpofin, at the direction of the individual defendants, engaged in the following five May 9th transactions:

(1.) Corpofin transferred 64,000 shares of First Bancorp, valued at $28.5 million, to Eastern Overseas for the equivalent of $795,000.

(2.) Those 64,000 shares of First Bancorp were then transferred by Eastern Overseas, for approximately $795,000, to Mercorp Advisors ("Mercorp"), a shell corporation allegedly created for the sole purpose of restructuring the ENB ownership.

(3.) Corpofin then transferred, for approximately $75,000, the remaining 6,000 shares of First Bancorp directly to Mercorp, which now owned 100% of the First Bancorp stock, and Bancorp in turn owned 95% of ENB.

(4.) First Bancorp then transferred its 95% ownership of ENB to Mercorp in

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exchange for a $28.5 million promissory note that was subsequently cancelled and never paid.

(5.) Finally, Mercorp transferred its 95% ownership interest in ENB to the ENB Revocable Trust ("the ENB Trust"), of which the individual defendants are among the trustees and beneficiaries; and Corpofin caused all of the stock of Eastern Overseas, as well as the remaining 5% of ENB, to be transferred to ADCO associates, another corporation controlled by the individual defendants. The consideration for both of these transfers also consisted of a promissory note that was subsequently canceled.

The final corporate structure was as follows: Corpofin retained no ownership interest in any of the corporations, including ENB. ADCO owned 5% of the ENB stock and 100% of Eastern Overseas. Mercorp owned 100% of First Bancorp and the ENB Revocable Trust owned 95% of the ENB stock. Thus, Corpofin, which owed Bancor $16.5 million, received approximately $870,000 in exchange for its entire ownership interest in ENB, which was valued at $30 million,while various business entities under the control of the individual defendants ended up owning all $30 million worth of those ENB shares.

B. PROCEDURAL HISTORY

In order to prevent the defendants from selling the ENB stock to Union Planters Corporation, in June of 1996 FOGADE and Corpofin4 brought this lawsuit in the district court against the individual defendants, the various business entities under the individual defendants' control, and Union Planters Corporation. The lawsuit sought a constructive trust over the ENB stock or the proceeds of its sale. The basis of FOGADE's claim was that the individual defendants had perpetrated a several-hundred-million-dollar fraud on FOGADE and Bancor arising out of insider loans, self-dealing, and misuse of financial aid provided by FOGADE to Bancor. Corpofin, through its government appointed interventor, claimed that the individual defendants had misappropriated its ownership interest in ENB.

At the same time they filed their complaint, plaintiffs also filed a motion for a temporary restraining order and a preliminary injunction. The district court, observing that, "it appears that the shares of [ENB] were fraudulently conveyed to [the defendants] . . . ," granted a temporary restraining order preventing the defendants from removing the ENB shares from the court's jurisdiction. However, after conducting an evidentiary hearing on plaintiffs' motion for a preliminary injunction, the district court denied that motion on grounds the plaintiffs had an adequate remedy at law for their claims. On appeal, in an unpublished opinion we affirmed the denial of the preliminary injunction. See FOGADE v. Union Planters Corp., No. 96-4915 (11th Cir. June 30, 1997). After that, plaintiffs twice amended their complaint, with the result being a second amended complaint containing claims for reclamation of shares under Fla. Stat. § 678.315, rescission, specific...

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