De Cuellar v. Baker, 87-1622-Civ.

• Decision Date: 14 March 1988
• Docket Number: No. 87-1622-Civ.,87-1622-Civ.
• Citation: 686 F. Supp. 890
• Parties: Margarita Rose De CUELLAR, Plaintiff, v. James A. BAKER, as Secretary of the Treasury of the United States, and Manufacturers Hanover Trust Company, Defendants.
• Court: U.S. District Court — Southern District of Florida

686 F. Supp. 890

Margarita Rose De CUELLAR, Plaintiff, v. James A. BAKER, as Secretary of the Treasury of the United States, and Manufacturers Hanover Trust Company, Defendants.

No. 87-1622-Civ.

United States District Court, S.D. Florida.

March 14, 1988.

Alexander Arandia, Coral Gables, Fla., for plaintiff.

Julian Kreeger, Miami, Fla., for Mfrs. Hanover.

Stephen Murphy, Sandra Schraibman, U.S. Dept. of Justice, Washington, D.C., for Government.

ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

ATKINS, District Judge.

THIS CAUSE is before the court on plaintiff's motion for partial summary judgment and on the defendants' cross motions for summary judgment and motions to dismiss. After careful consideration of all submitted papers and after a hearing, it is

ORDERED AND ADJUDGED that the plaintiff's motion for partial summary judgment is GRANTED, and the defendants' motions for summary judgment and motions to dismiss are DENIED.

The plaintiff, a Cuban refugee residing in Florida, was the sole remaining beneficiary of a United States personal trust, the corpus of which consisted of One Hundred Twenty Seven Thousand Dollars ($127,000.00) principal face amount of Republic of Cuba External Sinking Fund 4½ Bearer Bonds of 1937 due 1977. The bonds were issued in 1937 under an indenture contract between the Republic of Cuba and Manufacturers Hanover Trust ("MHT"). The Republic of Cuba agreed to make payments of principal and interest on the bonds to the indenture trustee, MHT, in trust for the bondholders. Until 1960 when Cuba defaulted on its obligation, all payments were made to the New York offices of MHT, the indenture trustee. MHT currently holds the sinking fund.

On May 12, 1987, the plaintiff filed a petition seeking a specific license authorizing the liquidation and distribution of the assets of the trust. The plaintiff's request was denied by Richard Newcomb, director of the Office of Foreign Assets Control ("OFAC") on July 27, 1987. OFAC found that the Republic of Cuba's contingent reversionary interest¹ was sufficient to support blocking the fund under the Cuban Assets Control Regulations, 31 C.F.R. § 515.201(b). The office characterized Mrs. De Cuellar's interest as that of a secured creditor and decided that, since she was not "legally entitled" to her distributive share, she did not qualify under the general license provision of 31 C.F.R. § 515.524.² For the purpose of this motion which asserts the applicability of the general license of section 515.524, the court assumes that the transaction in question is prohibited by the regulations and specifically by section 515.201(b).³

The plaintiff filed this action challenging OFAC's refusal to apply section 515.524 of the regulations to her transaction, OFAC's refusal to declare the regulations wholly inapplicable to her transaction, and OFAC's refusal to issue a specific license authorizing the transaction.⁴ The plaintiff's complaint seeks a declaratory judgment that the Republic of Cuba has no interest in the sinking fund or in the bonds, an order in the nature of mandamus compelling the Secretary of the Treasury to grant the plaintiff a specific license allowing her to redeem her bonds with the corresponding pro rata share of the fund, and an order compelling MHT to comply with the license.

The plaintiff's motion for partial summary judgment alleges that her transaction has been expressly authorized by the general license of 31 C.F.R. § 515.524. This court agrees.

Under Fed.R.Civ.P. 56(a), summary judgment is proper "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact, and that the moving party is entitled to a judgment as a matter of law." The Supreme Court has interpreted Rule 56(c) as mandating entry of summary judgment after "a sufficient time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and upon which the party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). Although the moving party bears the burden of informing the court of the basis of its motion, see id. 106 S.Ct. at 2553, the opposing party is not relieved of the burden of producing evidence that would support a jury verdict. In Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986), the Supreme Court found that Rule 56(e) provides that "party opposing a properly supported motion for summary judgment may not rest upon mere allegation or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial."

The instant case is governed by the Cuban Assets Control Regulations, 31 C.F.R. §§ 515.101-901 promulgated in July of 1963 and authorized first by the Trading with the Enemy Act, 50 U.S.C.App. § 1 et seq. and then by the International Emergency Economic Powers Act of 1976, 50 U.S.C. § 1702(a)(1)(B). The plaintiff does not challenge the validity of the regulations.⁵ The regulations prevent the transfer of "any property or evidences of indebtedness," see § 515.201(b)(1), if such transactions involve "property in which any foreign country designated under this part, or any national thereof, has at any time on or since the effective date of this section had any interest of any nature whatsoever," see § 515.201(b), and prohibit all financial and commercial transactions between United States nationals and Cuban nationals without authorization from the Secretary of the Treasury. These regulations, however, contain certain express exceptions or general licenses of which section 515.524 is one. That section reads:

(a) Any bank or trust company incorporated under the laws of the United States, or of any State, territory, or district of the United States, or any private bank subject to supervision and examination under the banking laws of any State of the United States, acting as trustee of any trust administered in the United States or as legal representative of any estate of an infant or incompetent administered in the United States in which trust or estate one or more persons who are nationals of a designated foreign country have an interest, beneficial or otherwise, or are co-trustees or co-representatives, is hereby authorized to engage in the following transactions:

(1) Payments of distributive shares of principal or income to all persons legally entitled thereto....

The defendants argue that this section was meant to apply only to private trusts and not to those established by a governmental entity. In addition, they argue that if the trust in question is susceptible to the license authorized by that section, OFAC determined that the plaintiff is not "legally entitled" to her distributive share as required by section 515.524(a)(1) and the fund must remained blocked. The defendants remind the court that the decision of OFAC finding that Mrs. De Cuellar is not "legally entitled" to a distributive share is due great deference and should be reversed only if arbitrary or capricious. See, e.g., Parker v. Bowen, 788 F.2d 1512, 1518 (11th Cir.1986) (agency's interpretation of its regulations entitled to great deference).

The plain words of section 515.524 belie the defendants' contention that it should be applied only to private trusts. That section excepts "any trust administered in the United States." The sinking fund clearly meets the qualification of a trust administered in the United States. In fact, the parties do not dispute this point. While it is true that the title of the section pertains to "Payment from, and transactions in the administration of certain trusts and estates," (emphasis added), the limitation requires that the trust be administered by a "bank or trust company incorporated under the laws of the United States, or of any State ... or any private bank subject to the supervision and examination under the banking laws of any State of the United States." Hence the movant has satisfied the directive of the Supreme Court in Celotex, 106 S.Ct. 2548 by informing this court of the basis for its motion, reliance on section 515.524 because the trust in question is administered in the United States by a qualified bank.

In opposing the plaintiff's motion, the defendants merely assert that "the agency has interpreted this section as applying to private trusts and not to public funds established by foreign government," see Defendant James A. Baker's Memorandum in Support of Motion to Dismiss, or in the Alternative for Summary Judgment, and in Opposition to Plaintiffs Motion for Partial Summary Judgment at 6, a "mere allegations or denials" insufficient to prevent entrance of summary judgment. See Anderson, 106 S.Ct. at 2514. In fact, in a letter dated July 27, 1987, in which the director of the Office of Foreign Assets Control detailed the rationale behind the rejection of Mrs. De Cuellar's claim, the agency never stated that the trust was not subject to the terms of section 515.524. The basis for OFAC's refusal to apply this section lay in the fact that it characterized Mrs. De Cuellar's interest in the fund as that of a secured creditor, see FAC No. 105357 at 3, and stated that such an interest did not place her in the position of one "legally entitled thereto" as required by section 515.524(a)(1).⁶ Furthermore, section 515.305 defines designated national for the purposes of the regulations to include "Cuba and any national thereof." (emphasis added). Section 515.524(a) excepts any trust in which "one or more persons who are nationals of a designated foreign country have an interest." The regulations in general, and Subpart B in particular, make no distinction between "the designated foreign country or any nationals thereof," and there is no basis to suppose that Subpart E,...