New York Land Co. v. Republic of Philippines

• Decision Date: 05 May 1986
• Docket Number: No. 86 Civ. 2294 (PNL).,86 Civ. 2294 (PNL).
• Parties: NEW YORK LAND COMPANY, et al., Petitioners, v. REPUBLIC OF PHILIPPINES, Respondent.
• Court: U.S. District Court — Southern District of New York

634 F. Supp. 279

NEW YORK LAND COMPANY, et al., Petitioners, v. REPUBLIC OF PHILIPPINES, Respondent.

No. 86 Civ. 2294 (PNL).

United States District Court, S.D. New York.

May 2, 1986.

Amended May 5, 1986.

Phillips, Nizer, Benjamin, Krim & Ballon, New York City (Michael J. Silverberg, of counsel), for petitioners Joseph and Ralph Bernstein and New York Land Co.

Bernstein, Carter & Deyo, New York City (Philip Carter, of counsel), for petitioners Canadian Land Co. of America, N.V., Herald Center, Ltd. and Nyland (C F 8) Ltd.

Rosenman, Colin, Freund, Lewis & Cohen, New York City (Gerald Walpin and Lawrence G. Golde, of counsel), for defendant Ancor Holdings, N.V.

Golenbock, Eiseman, Assor, Bell & Perlmutter, New York City (Jeffrey T. Golenbock and David J. Eiseman, of counsel), for Glockhurst Corp., N.V.

James Drew & Associates, Washington, D.C. (Severina Rivera, of counsel), and Center for Constitutional Rights, New York City (Morton Stavis, Peter Weiss, Franklin Siegal and Juan Saavedra-Castro, of counsel), for respondent.

OPINION AND ORDER

LEVAL, District Judge.

This is a motion by several defendants to vacate a temporary restraining order ("TRO") originally imposed in New York State Court and continued with modifications by this court after some of the defendants removed the action. The moving defendants contend that the temporary restraining order must be vacated because, absent consent, the court lacks the power under the Federal Rules of Civil Procedure to continue such an order beyond the twenty days permitted by Rule 65(b). Pan American World Airways v. Flight Eng'rs' Int'l Ass'n, 306 F.2d 840 (2d Cir. 1962). Plaintiff contends the restraints should be continued (in present or in further modified form) either as a temporary restraining order pending submission of further proofs on the preliminary injunction hearing, or as a preliminary injunction supported by plaintiff's submissions.

Plaintiff is the Republic of the Philippines. The principal defendants are the former President of the Philippines, Ferdinand Marcos and his wife Imelda Marcos. They have been served with process but have not appeared. Plaintiff has submitted a proposed default judgment against them. The complaint alleges that during President Marcos's term in office, he and Mrs. Marcos wrongfully took property belonging to the Republic of the Philippines. It is alleged that part of the moneys so taken were used by President and Mrs. Marcos to invest in valuable New York real property, including 730 Fifth Avenue (the Crown Building); Herald Center (formerly Korvettes) at 34th Street and 6th Avenue; 40 Wall Street; 200 Madison Avenue, and a large mansion in Center Moriches, Long Island referred to as the Lindenmere Estate (the "Properties").

The moving defendants are several real estate holding companies, and their alleged principals and managers, which are the record holders of the Properties, allegedly as nominees for President and Mrs. Marcos. (The defendant-movants are hereinafter referred to as the "Record Holders.") The TRO which the Record Holders seek to have vacated essentially bars the defendants from transfering or encumbering the Properties.

When the action was brought in New York State Court, a temporary restraining order was entered barring the defendants from taking any of a variety of actions with respect to the Properties. After removal, this court continued the order pending the preliminary injunction hearing but substantially eased its terms to permit profitable commercial use of the property to the maximum extent while protecting plaintiff's claimed equity interest.

Shortly after the removal, expedited discovery was ordered and a schedule was set for the submission of proofs on the preliminary injunction hearing. The schedule was delayed partly at the instance of defendants, who, for example, requested adjournment of the depositions of Joseph and Ralph Bernstein so that they could first testify before a Committee of Congress. In seeking that delay the defendants consented to adjournment of the preliminary injunction schedule.

Approaching the expiration date of the consent given, defendants suddenly advised plaintiff that they would give no further consent, and refused to furnish any further depositions. Defendants then filed this motion for immediate dissolution of the TRO. In response to the motion to dissolve the restraints plaintiff has hastily bundled together a mass of documents and depositions acquired thus far in discovery and has submitted these papers on April 28, 1986 in support of a preliminary injunction.

Defendants have submitted no proofs in opposition. They rely primarily on the act-of-state doctrine, the immunity of President Marcos under Philippine law, the Foreign Sovereign Immunity Act of 1976, 28 U.S.C. §§ 1602 et seq., the principle of forum non conveniens and the contention that plaintiff's proofs are conjectural and insufficient.

In order to qualify for preliminary injunctive relief in this Circuit, plaintiff must show "(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief." Jackson Dairy v. Hood, 596 F.2d 70, 72 (2d Cir.1979). Considering all the proofs and circumstances, I find that the Republic of the Philippines has sufficiently supported its position to satisfy the requirements of law. It has demonstrated entitlement to a preliminary injunction.

I. Background

Joseph Bernstein testified that in mid-1981 he began buying and subsequently managing New York commercial properties for undisclosed owners fronted by a Mrs. Gliceria Tantoco, a Philippine national and close friend and business associate of the Marcoses. During the next two years, he arranged for the purchase by the Tantoco interests of the Crown Building at 730 Fifth Avenue (called the Genesco Building at the time of purchase), 40 Wall Street, and the Herald Center Building (formerly E.J. Korvettes) at 34 Street and 6th Avenue. Subsequently he competed for but did not win the opportunity to act as agent for the Tantoco interests in their purchase of 200 Madison Avenue.

Bernstein set up or caused to be set up two tiers of offshore corporate vehicles for the acquisition and ownership of the three commercial properties as follows:

The Crown Building was purchased in September 1981 in the name of Lastura Corporation, N.V., a Netherland Antilles corporation, now called the Canadian Land Company of America, N.V. Joseph Bernstein served as director from 1982-84. Its shares were held by two Panamanian companies issuing bearer shares: Trade and Commodities, S.A. and Yewell Compagnia Immobiliera.

Herald Center was purchased in February 1981 in the name of a British Virgin Islands corporation named Voloby, Ltd. (now called Herald Center, Ltd.). Bernstein served as its sole director. Its shares were held by three Panamanian corporations issuing bearer shares: Bedner Development Corp., Compral Investment, S.A. and Dicet Finance Investment Corp.

40 Wall Street was purchased in December 1982 in the name of an Antilles corporation now called Nyland (CF 8), Ltd. (formerly Ainesville, N.V.). Bernstein served as one of its 3 directors after Tantoco directed him to establish the corporation in 1982. It is owned by three Panamanian corporations issuing bearer shares: Beneficio Investment Incorporated, Bueno Total Investment Incorporated and Excelencia Investment Incorporated.

Although Bernstein did not succeed in representing the Tantoco group in their purchase of 200 Madison Avenue he testified that he was familiar with the situation, and had competed for the right to act as manager. In the fall of 1983, 200 Madison Avenue was acquired in the name of Glockhurst Corporation, N.V., a Netherland Antilles corporation. Bernstein, who established the three Panamanian corporations named above (Bender, Compral and Dicet) to hold the shares of Voloby and served as their attorney, testified that he believed the shares of Glockhurst had been transfered by Mrs. Tantoco to those corporations.

The acquisition of the Lindenmere Estate in Long Island, New York was not handled by Bernstein and does not appear to involve Mrs. Tantoco. It was purchased by Philippine interests in February 1981 in the name of Luna 7 Development Corp. Later it was transferred to its present owner, Ancor Holdings, N.V., a Netherlands Antilles corporation. Augusto Camacho, Lindenmere's architect, was President and a 10% stock owner of Luna. Ancor has one corporate and two individual directors, one of whom is Antonio O Floirendo, a friend and business associate of the Marcoses.

II. Evidence on the Merits

The two general areas to which the plaintiff's proofs must be addressed are that President and/or Mrs. Marcos are beneficial owners of the Properties and that their acquisition of the Properties was with funds converted from the Republic of the Philippines.

A. Evidence of Ownership

The evidence of Marcos ownership of the Properties arises from actions and statements of the Marcoses supporting an inference of ownership, and from a great number of documents, many found in the Malacanang Palace immediately after their departure on February 25, 1986. Although the evidence produced thus far certainly falls short of conclusively demonstrating Marcos' ownership of the Properties, it is more than sufficient to raise fair questions for litigation, as required by the Jackson Dairy standard.

1. Behavior Suggesting Ownership

The evidence shows numerous instances in which President and Mrs. Marcos acted in a manner suggesting an ownership interest in the Properties:

Joseph Bernstein testified that in mid-1981 he began to discuss with Mrs. Tantoco the possible acquisition of the Crown Building by undisclosed principals. Shortly after the acquisition was concluded,...