Chuidian v Philippine National Bank
| Date | 29 August 1990 |
| Court | U.S. Court of Appeals — Ninth Circuit |
(Wallace, Thompson and O'Scannlain, Circuit Judges)
State immunity Jurisdictional immunity Individual acting in official capacity on behalf of government instrumentality Whether entitled to sovereign immunity Official acting for personal motives Whether acting in official capacity Tort exception Whether instruction to bank to halt payment of letter of credit constituting tortious act Expropriation exception Requirement that expropriation be in violation of international law Waiver Co-defendants that are unrelated instrumentalities of the same State Whether waiver by one co-defendant constituting implied waiver by other co-defendant United States Foreign Sovereign Immunities Act 1976 The law of the United States
Summary: The facts:The plaintiff, a citizen of the Philippines, owned various businesses in California. In 1985 the Philippine Export and Foreign Loan Guarantee Corporation (the Guarantee Corporation), an instrumentality of the Philippines Government under President Marcos, filed a law suit in the California courts against various Californian companies owned by the plaintiff (the Santa Clara law suit). Under a settlement reached later that year the Philippine National Bank (the Bank), which was owned by the Philippines, was required to issue an irrevocable letter of credit to the plaintiff on behalf of the Guarantee Corporation, payable at the Bank's Los Angeles branch.
Shortly thereafter, in February 1986, the Government of President Marcos was overthrown. Pursuant to an Executive order, the new regime formed a Commission on Good Government (the Commission) which had the task of recovering various assets accumulated by Marcos and his associates. Article 3(d) of the Executive order gave the Commission the power to enjoin or restrain any actual or threatened acts that could render its efforts ineffectual. During the course of its investigations, the Commission suspected that Marcos and the plaintiff had entered into a fraudulent settlement of the Santa Clara law suit in order that the plaintiff not reveal certain facts about Marcos's involvement in the plaintiff's business enterprises. Acting pursuant to Article 3(d) Mr Daza, a member of the Commission, instructed the Bank not to make payment on the letter of credit issued to the plaintiff. Mr Daza claimed that this action was necessary in order to secure payment if it transpired that the settlement had indeed been fraudulent. The plaintiff claimed that Mr Daza had acted on the instructions of a third party and was thus motivated by personal considerations. When the Bank refused to make payment under the letter of credit the plaintiff sued the Bank, Mr Daza and other individuals asserting intentional interference in his contractual relationship with the Bank. Mr Daza moved to dismiss the case on the grounds of defective service of process and sovereign immunity, and also asked for sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure (Rule 11 sanctions). The District Court granted the motion to dismiss, holding that Mr Daza had sovereign immunity for acts committed in his official capacity as a member of the Commission, and that the plaintiff's allegations that Mr Daza had acted beyond his authority were unfounded. The request for Rule 11 sanctions was denied. The plaintiff appealed against the dismissal and Mr Daza cross-appealed against the denial of sanctions.
Held:The decision of the District Court was affirmed.
(1) The Federal Courts had jurisdiction in cases against foreign sovereigns under the Foreign Sovereign Immunity Act (FSIA),1 even where the parties were not diverse and the underlying claims did not present a federal question (p. 483).
(2) The FSIA applied to individuals acting in their official capacity as employees of a foreign sovereign. Although Section 1603(b) of the FSIA1 defined those entities of a foreign State entitled to sovereign immunity in terms of agency, instrumentality, organ, and legal person, neither the text nor the legislative history suggested that individuals were not included within the definition of a foreign State. In particular, as individuals acting in their official capacity had been entitled to sovereign immunity under the pre-1976 common law and the intention of the FSIA had been to codify the common law principles of sovereign immunity, it followed that individuals had been included in Section 1603(b) (pp. 4858).
(3) The fact that the Guarantee Corporation and the Bank had participated in the proceedings without raising the defence of sovereign immunity did not mean that Mr Daza's immunity had been implicitly waived under Section 1605(a) of the FSIA. Even if the Bank and the Guarantee Corporation's actions had constituted a waiver of immunity this did not affect the immunity of Mr Daza who worked for a completely separate and unrelated instrumentality of the Philippines (pp. 48890).
(4) Even if Mr Daza's actions constituted a taking of property in violation of the United States law, this would not be sufficient to deprive him of immunity under the expropriation exception provided for in Section 1605(a)(3) of the FSIA as the property had to be taken in violation of international law. The expropriation by a sovereign of the property of its own nationals did not implicate settled principles of international law (p. 490).
(5) Mr Daza's instructions to stop payment to the plaintiff was in substance a taking of property; not a tortious injury. Accordingly, his immunity was not lost under the tortious act or omission exception under Section 1605(a)(5) of the FSIA (pp. 4901).
(4) The plaintiff's claim that Mr Daza had acted for his own personal motives and had thus acted in an individual capacity could not be upheld as
it was clear that when he ordered payment to be halted, he had purported to act in an official capacity (p. 491)(5) Sovereign immunity did not protect an official who acted beyond the scope of his duty. However, even if Mr Daza had acted for personal motives, none of his actions departed from his statutory mandate and personal motives could not render his activities ultra vires (p. 492).
(6) The District Court did not abuse its discretion in denying Mr Daza's motion for Rule 11 sanctions (p. 492).
The following is the text of the judgment of the Court, delivered by Circuit Judge Wallace:
Chuidian, a Philippine citizen, sued Daza, a Philippine citizen and an official of the Philippine government, after Daza instructed the Philippine National Bank (Bank) to dishonor a letter of credit issued by the Republic of the Philippines to Chuidian. The district court dismissed for lack of subject matter jurisdiction, and Chuidian timely appeals. We have jurisdiction pursuant to 28 U.S.C. 1291, and we affirm.
Chuidian owns interests in various businesses in California. In 1985, the Philippine Export and Foreign Loan Guarantee Corporation (Guarantee Corporation), an instrumentality of the Republic of the Philippines government under then-President Ferdinand Marcos, sued several of Chuidian's companies in Santa Clara County Superior Court. Chuidian counterclaimed. The parties settled the Santa Clara County litigation in late 1985. As part of the settlement, the Bank, a state-owned bank, issued an irrevocable letter of credit to Chuidian on behalf of the Guarantee Corporation, payable at the Bank's Los Angeles branch.
Shortly thereafter, on February 26, 1986, the government of President Marcos was overthrown, and replaced by the current government of President Corazon Aquino. The new regime formed the Presidential Commission on Good Government (Commission), an executive agency charged with recovering ill-gotten wealth accumulated by Marcos and his associates. Philippine Executive Order No. 1, 2(a) (Feb. 28, 1986). The Commission was given the authority [t]o enjoin or restrain any actual or threatened commission of acts by any person or entity that may render moot and academic, or frustrate, or otherwise make ineffectual the efforts of the Commission. Id., 3(d).
Daza was a duly appointed member of the Commission. In March 1986, acting pursuant to section 3(d) of the executive order, Daza instructed the Bank not to make payment on the letter of credit issued to Chuidian. According to Daza, the Commission suspected that Marcos and Chuidian had entered into a fraudulent settlement of the Santa Clara County litigation to pay off Chuidian for not revealing certain facts about Marcos's involvement in Chuidian's business enterprises. As a result, the Commission wished to examine the propriety of the settlement, and, in order to secure payment in the event of a decision against Chuidian, needed to prevent payment under the letter of credit.
When the Bank, pursuant to Daza's order, refused to make payment under the letter of credit, Chuidian sued the Bank in Los Angeles County Superior Court. The Bank removed the action to federal district court pursuant to 28 U.S.C. 1441(d). Chuidian later added as defendants Daza and several other individuals, asserting intentional interference in his contractual relations with the Bank.
In an unrelated action, the Guarantee Corporation sought to reopen the Santa Clara County litigation and set aside the settlement giving rise to the letter of credit. Like Daza, the Guarantee Corporation asserted that the settlement was the product of a collusive arrangement between Chuidian and Marcos. The Guarantee Corporation also intervened in Chuidian's suit against Daza, arguing that Chuidian should not recover because the settlement giving rise to the letter of credit was invalid.
After protracted procedural maneuvering, Daza moved to dismiss on grounds of defective service of process and sovereign immunity. Daza also moved for sanctions pursuant to rule 11, Fed.R.Civ.P. The district court granted the motion to dismiss, holding...
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