Faysound Ltd. v. Walter Fuller Aircraft Sales, Inc.

• Decision Date: 29 October 1990
• Docket Number: No. LR-C-89-834.,LR-C-89-834.
• Citation: 748 F. Supp. 1365
• Parties: FAYSOUND LIMITED, Plaintiff, v. WALTER FULLER AIRCRAFT SALES, INC. and Falcon Jet Corporation, Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

748 F. Supp. 1365

FAYSOUND LIMITED, Plaintiff, v. WALTER FULLER AIRCRAFT SALES, INC. and Falcon Jet Corporation, Defendants.

No. LR-C-89-834.

United States District Court, E.D. Arkansas, W.D.

October 29, 1990.

Vince Foster, Jr. and Jess Askew, III, Rose Law Firm, Little Rock, Ark., for plaintiff.

Friday, Eldredge & Clark, Little Rock, Ark., for Walter Fuller Aircraft Sales, Inc.

Putnam & Roberts, New York City, and Dover & Dixon, Little Rock, Ark., for Falcon Jet.

MEMORANDUM OPINION

HENRY WOODS, District Judge.

I. STATEMENT OF FACTS

Faysound Limited ("Faysound"), a Hong Kong corporation, purchased a Falcon aircraft, the subject of this lawsuit, from the manufacturer at a cost of over nine million dollars. The plane was then leased to a Philippine corporation, United Coconut Chemicals ("UNICHEM") for a period of five years on October 23, 1982. Paragraph 6.1 of the lease agreement reads as follows:

The aircraft may be used anywhere in the world and for this purpose the LESSEE may register the aircraft under the pertinent laws of such country as may be selected by the LESSEE. It is understood and agreed that the LESSEE is authorized by the LESSOR to register the aircraft under Philippine Registry. For this purpose, the LESSOR, upon request of the LESSEE, or the LESSEE itself, may cause the cancellation of the registration of the aircraft under any foreign registry.

(PX MM). The plane was then registered with the Philippine Bureau of Air Transportation on November 2, 1982, for use in the Philippines. UNICHEM's status was noted by striking the word "owner" and inserting the word "operator" above it. (Id). The original certificate registered the Falcon as "Name of operator: United Coconut Chemical, Inc. (Lessee)." Id.

The back of the certificate had the following entry:

Aircraft herein registered is subject to the Lease Agreement entered into by and between FAYSOUND, LTD., a corporation organized and existing in accordance with the laws of Hong Kong (Owner-Lessor) and UNITED COCONUT CHEMICALS, INC., a corporation organized with the laws of the Philippines with principal address, offices at UCPB Bldg., Makati, M.M. (Operator-Lessee). (Contract of Lease on file).

(PX LL). For the next five years, which comprised the entire term of the lease, UNICHEM renewed its registration of the Falcon. (PX NN, OO, PP and QQ). The same entries were made in Bureau registration records.

The former Philippine President, Ferdinand Marcos, fled the Philippines on February 25, 1986. His successor, Corazon Aquino, created the Philippine Presidential Commission on Good Government ("PCGG") and charged it with the task of recovering ill-gotten assets of former President Marcos and his close associates. On June 19, 1986, the PCGG issued a Writ of Sequestration against one Eduardo Cojuangco, Jr., describing several aircraft including the Falcon. (PX SS). Cojuangco was a multimillionaire businessman with substantial interest in UNICHEM and undoubtedly a close friend and adviser to Marcos. The Writ of Sequestration did not name Faysound nor was it served upon its agent. (PX YY). The writ therefore created no legitimate basis under Philippine law for the PCGG to seize any asset of Faysound. (PX WW at pp. 9-13). After the plane was sequestered, UNICHEM renewed the registration with the Philippine Civil Aircraft Registry for the last year of the lease on October 30, 1986. (PX QQ).

On July 31, 1987, the PCGG instituted action against Eduardo Cojuangco, Jr. to recover his ill-gotten wealth. The complaint was filed in the Sandiganbayan Court, the special Philippine court established to adjudicate cases brought by the PCGG to recover ill-gotten assets, and assigned Civil Case No. 033. The complaint did not name Faysound nor any of the lessees of the Falcon. (PX YY, 9). The Falcon remained in the PCGG custody, but there was no further action (PX WW). Faysound instituted demands on its lessees for redelivery of the Falcon. (PX KK). On August 2, 1988, the authority of the PCGG to issue sequestration orders lapsed, and under Philippine law any prior sequestration order upon which no judicial action was filed before August 2, 1987 was "deemed automatically lifted." Because no action was filed against the lessee or owner of the Falcon, as a matter of Philippine law, the writ of sequestration was deemed lifted on August 2, 1987.

The Falcon sat at the Villamo Air Base in the Philippines and began to deteriorate. The PCGG began efforts to sell the plane. It is not necessary to go into the efforts to sell the plane. Several prospects emerged, and efforts finally culminated in a sale to the defendant Walter Fuller Aircraft Sales, Inc. ("Fuller"). It is not necessary to a decision on the summary judgment issue to examine all of these negotiations. Suffice it to say that there is a strong aroma of corruption and bribery in connection with the sales efforts of PCGG.

The PCGG ultimately determined that it would be necessary to obtain the Sandiganbayan Court's approval of the sale of the Falcon (PX WW). As that court noted in its opinion:

It appeared that the Solicitor representing the plaintiff did not know too many details about the relationship of the aircraft and the United Coconut Chemicals, Inc. (UNICHEM).

It appears that UNICHEM is not a sequestered company but rather a company where only the shareholdings of defendant Eduardo Cojuangco, Jr. have been sequestered. ... It likewise appears that UNICHEM had not been furnished with a copy of the instant Motion and that it had not been intended to be so furnished (the notices were addressed only to defendant Cojuangco's lawyers of record). The consideration of said motion was, therefore, deferred.

Id. at 2.

After the Sandiganbayan Court deferred consideration of the PCGG's first Motion to sell the Falcon, the PCGG filed a motion for early Resolution of its Motion to Sell on April 5, 1989. Id. This Motion was set for hearing on April 14, 1989. Id. at 3. The PCGG argued that the Sandiganbayan Court did not need to resolve issues concerning the validity of the sequestration or questions concerning whether Cojuangco, the named defendant in the sequestration case, even owned the Falcon. Id. The Sandiganbayan Court rejected the PCGG's argument:

The Court is unable to respond positively to plaintiff's position.

Unquestionably, neither the issue of the ownership of the aircraft nor the propriety of the sequestration thereof has been raised in the pleadings before the Court with regard to the motion to sell the aircraft in question.

Invocation, however, of the power of the court to authorize the disposition of a sequestered asset or a seized property (the sequestration or seizure of which was not upon this Court's authority) must necessarily, though perhaps implicitly, include a plea for the affirmance of the propriety of that seizure. And were there no reason for this Court to doubt the original seizure, then this Court would, as it must, accord the PCGG the rebuttable presumption of regularity in its act.

The plaintiff-movant through the PCGG itself, however, has presented this Court with the facts which serve to dilute the presumption of regularity which this Court would accord the PCGG's own acts, namely:

(1) The aircraft in question is apparently NOT owned by UNICHEM;

(2) It is apparently NOT owned by defendant Cojuangco either but, upon plaintiff's own admission, by "Faysound." Certainly no averment has been made either by PCGG or anybody else to prove false the data on the Certificate of Registration of that aircraft to that effect;

(3) UNICHEM itself is not a sequestered corporation (only the shares of stock therein owned by defendant Cojuangco appear to have been sequestered);

(4) The lease over the aircraft, according to the plaintiff itself, lapsed (in 1987) more than two years ago;

(5) The renewal of the Certificate of Registration issued by the Bureau of Air Transportation on October 30, 1986, four months AFTER this and other aircraft had been ordered sequestered per writ of sequestration on file with this Court. There is, then, every indication on the very face of the pleadings of plaintiff-movant and the allegations in open Court that the sequestration of the aircraft now sought to be sold was not in order. It is true that no one, not even the lessor has come to Court nor, as far as this Court is properly informed, has anyone sought to question the propriety of the plaintiff's (or PCGG's) seizure thereof anywhere else. This silence from others who may be parties in interest to this aircraft, however, does not justify authorization of the projected sale of that aircraft when it becomes apparent that the premises for such an authorization do not exist — in this instance, a valid sequestration.

Id. at pp. 3-5 (footnote omitted).

The PCGG, through the Solicitor General, had argued the Court need not concern itself with who owned the Falcon because that could be resolved later. The Court was unimpressed:

It will not do to say that the issue of ownership can be taken up later when the case proceeds to trial since one of the issues, even now, remains the prima facie propriety of PCGG's seizure thereof which PCGG now makes abundantly apparent to have been absent.

Id. at 5.

After the hearing on the PCGG's Motion for Early Resolution on March 14, 1989, the PCGG reversed its earlier position that it required Sandiganbayan Court approval to sell the Falcon. Id. at 7. The Sandiganbayan Court attributed this about-face to the fact that the PCGG knew Court approval of the proposed sale was unlikely:

The Motion to Sell the aircraft was heard on April 14, 1989 where very pointed questions were asked by the Court about the propriety of the sequestration of the aircraft in question and the resulting propriety of selling the same. Until that date the PCGG acknowledged its need for court authority before selling this aircraft.

Id.

Accordingly, on April 27, 1989, the Philippine Solicitor General filed a...