Daniels v. Powell

Decision Date14 March 1985
Docket NumberNo. 84 C 1889.,84 C 1889.
Citation604 F. Supp. 689
PartiesA. Verbena DANIELS, Liquidator of Northern Financial and Guaranty Company, Limited, Plaintiff, v. William L. POWELL, an individual, William Powell and Company, an Illinois Corporation, Westgate Properties, Incorporated, a Kentucky Corporation, and William Powell and Company, a Kentucky Corporation, Defendants.
CourtU.S. District Court — Northern District of Illinois

COPYRIGHT MATERIAL OMITTED

Robert N. Hermes, Gerald A. Saltarelli, Butler, Rubin, Newcomer, Saltarelli & Boyd, Michael J. Murphy, Lord, Day & Lord, Chicago, Ill., for plaintiff.

Daniel J. Pierce, John A. Dienner, III, Pierce, Lydon, Griffin & Montana, Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

ROVNER, District Judge.

A. Verbena Daniels ("Daniels") filed a complaint against defendant William L. Powell ("Powell"), William Powell and Company, an Illinois corporation ("Powell & Co."), Westgate Properties, Incorporated, a Kentucky corporation ("Westgate"), and William Powell and Company, a Kentucky corporation ("Powell Kentucky") for conversion (Count I), for fraud (Count II), for the imposition of a constructive trust (Count III), and for violation of the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. § 1961 et seq. (Count IV) ("RICO"). On August 20, 1984, Judge Paul Plunkett of the United States District Court for the Northern District of Illinois entered an order denying defendants' motion to dismiss plaintiff's original complaint.1 That order was subsequently modified on November 20, 1984 to grant the motion to dismiss Powell & Co. only from Count IV of the complaint.

On August 31, 1984, Daniels filed a motion pursuant to Fed.R.Civ.P. ("Rule") 56 for partial summary judgment on Count I. On November 1, 1984, this case was transferred to Judge Rovner. For the reasons stated below, partial summary judgment is granted in favor of Daniels against defendants Powell and Powell & Co.2

In order to prevail on a motion for summary judgment, a party has the burden of establishing that there is no genuine issue of material fact. Korf v. Ball State University, 726 F.2d 1222 (7th Cir.1984). Any inferences to be drawn from the underlying facts must be viewed in the light most favorable to the non-moving party. Hermes v. Hein, 742 F.2d 350 (7th Cir. 1984). The existence of a factual dispute, however, only precludes summary judgment if the disputed fact is outcome-determinative. Big O Tire Dealers, Inc. v. Big O Warehouse, 741 F.2d 160, 163 (7th Cir. 1984). "`A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the parties' differing versions of the truth.'" Korf, 726 F.2d at 1226, quoting Admiralty Fund v. Hugh Johnson & Co., 677 F.2d 1301, 1306 (9th Cir.1982). In this case, the defendants have not set forth a single fact that disputes the facts propounded by the plaintiff. Thus, the facts set forth below are the facts as presented by the plaintiff.

Origin and Nature of Daniels' Claim

Defendant Powell is the president, controlling stockholder, and a director of Powell & Co., which is engaged in various aspects of the insurance business. Northern Financial & Guaranty Company, Limited ("Northern") is a wholly-owned subsidiary of Powell & Co. Northern was incorporated in Bermuda with Powell as its president. Powell & Co. has two other subsidiaries named as defendants here: (i) Powell Kentucky and (ii) Westgate.3

On June 3, 1983, the Supreme Court of Bermuda, on petition of a judgment creditor, Island Reinsurance Company Limited ("Island Re"), placed Northern in involuntary liquidation by the issuance of a Winding-Up Order ("Order"). The Order ended the authority of Powell and other Northern directors and officers to manage the company and vested all such power and authority, as well as title to the property owned by Northern, in Daniels. Daniels' formal title is the Official Receiver and Registrar of Company of the Government of Bermuda.

Powell was advised of the liquidation Order by telegram on June 10, 1983 and replied by letter that he would act on instructions of plaintiff's Bermuda counsel. Thus, defendants knew that title to all of Northern's property had vested in Daniels and that Powell no longer had any legal authority or power to control Northern's affairs or to sell assets belonging to Northern.

In defiance of the Order of the Bermuda Supreme Court, Powell determined that he would sell three parcels of land that had been owned by Northern prior to its liquidation. When Daniels requested deeds to the pieces of realty, Powell falsely represented to her that he was attempting, through negotiations with Northern's creditors, to remove Northern from liquidation. He also assured her that he would not dispose of any of Northern's property. Powell requested that Daniels take no action pending completion of his negotiations, and she acquiesced in that request.

Despite these promises to Daniels, Powell promptly proceeded to negotiate a sale of four adjacent parcels of property he and his corporations owned in Kentucky. Three of these parcels were owned solely by Northern. At a closing in November of 1983, over five months after the Order vested title in Daniels, Powell delivered to a third party buyer, Eaglestone, Inc. ("Eaglestone"), a resolution of the defunct Board of Directors of Northern. The resolution purportedly authorized Powell to convey title to the property. He also delivered to Eaglestone, along with instruments purportedly transferring title to the buyer, a sworn affidavit stating that Powell was authorized to act on behalf of Northern. At no time did Powell advise the directors of Eaglestone that Northern had been placed in liquidation by the Order of the Bermuda Supreme Court. In return for the property, Eaglestone delivered a check to Powell in the amount of $361,219.44 written to the order of Northern.4

Powell endorsed the check as president of Northern and deposited the check in a Northern account. Powell then caused the funds to be transferred from Northern's account to a Westgate account in the same bank. After the payment of some disbursements, the remaining funds were transferred by Powell to a Powell & Co. account at a bank in Chicago, Illinois. The remaining funds were used for the benefit of Powell and Powell & Co., including the payment of an alleged loan from Powell's father to Powell & Co. in the sum of $50,000,5 as well as the payment of a loan in the amount of $170,000 plus interest to Powell & Co. from the Chicago bank.

In her complaint, which invokes both diversity and federal question jurisdiction, Daniels alleges that the defendants converted the check for $361,219.44 belonging to the estate of Northern in definance of the Order of the Bermuda Supreme Court (Count I) and that they engaged in fraudulent activities to the detriment of the estate (Count II). Daniels also asks this Court to impose a constructive trust on the defendants for their breach of fiduciary duty (Count III). Finally, Daniels alleges that the defendants engaged in a scheme of racketeering and fraud in violation of the federal RICO statute (Count IV).6

Presently pending before this Court is Daniels' motion for partial summary judgment on the conversion count (Count I). Daniels' sole right to partial summary judgment for conversion of the check belonging to Northern's estate derives from the Order of the Bermuda Supreme Court. Accordingly, Daniels' claim for conversion depends on whether this Court should grant comity to that Order.

Comity

Comity is to be accorded an act of a foreign court as long as that court is of competent jurisdiction and as long as the laws and the public policy of the forum state are not violated. Hilton v. Guyot, 159 U.S. 113, 202-03, 16 S.Ct. 139, 158-59, 40 L.Ed. 95 (1895); Clarkson Co. v. Shaheen, 544 F.2d 624, 629 (2d Cir.1976). When federal jurisdiction is founded on diversity, a federal court must look to the law of the state in which it sits to determine whether to accord comity to the act of a foreign jurisdiction. American Optical Co. v. Curtiss, 56 F.R.D. 26, 29 (S.D.N.Y. 1971). Illinois courts have granted comity to the law of a foreign jurisdiction in the absence of evidence that such recognition would be repugnant to its policy or prejudicial to its interest. Hall v. Woods, 325 Ill. 114, 156 N.E. 258 (1927). Illinois traditionally has favored recognizing and enforcing foreign law, and thus the mere fact that the foreign law is not identical to Illinois law is generally not sufficient to preclude comity. Coleman v. American Sheet & Tin Plate Co., 285 Ill.App. 542, 2 N.E.2d 349 (1st Dist.1936).

The key inquiry is whether the Bermuda liquidation procedure offends the laws and public policy of Illinois. Defendants have not challenged the jurisdiction of the Bermuda Supreme Court over the liquidation of Northern. Nor have they alleged insufficient procedural due process protections in the application of Bermuda law. Recognizing that this Court may properly grant comity under these circumstances, and without citing any authority to the contrary, defendants nonetheless propose two reasons that this Court should deny comity to the Order of the Bermuda Supreme Court. Neither is persuasive.

Finality of the Judgment

First, defendants suggest that since the Order is not a final judgment, this Court should not grant comity to it. An examination of the case law, however, clearly indicates that American courts have granted comity to foreign liquidation proceedings regardless of whether a final judgment has been entered.7 Particularly where the foreign proceeding is a sister common law jurisdiction with procedures akin to our own, exceptions to the doctrine of comity are narrowly construed. Clarkson Co., Ltd. v. Shaheen, 544 F.2d 624, 630 (2d Cir.1976).

Over 100 years ago, the Supreme Court granted comity to a Canadian statutory reorganization that required United States bondholders who had...

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