Goya Foods, Inc. v. Wallack Management Co.

• Decision Date: 17 May 2002
• Docket Number: No. 01-2497.,No. 01-1928.,01-1928.,01-2497.
• Citation: 290 F.3d 63
• Parties: GOYA FOODS, INC., Petitioner, Appellee, v. WALLACK MANAGEMENT CO. et al., Respondents, Appellants.
• Court: U.S. Court of Appeals — First Circuit

290 F.3d 63

GOYA FOODS, INC., Petitioner, Appellee, v. WALLACK MANAGEMENT CO. et al., Respondents, Appellants.

No. 01-1928.

No. 01-2497.

United States Court of Appeals, First Circuit.

Heard March 6, 2002.

Decided May 17, 2002.

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Stuart W. Berg, with whom Baer, Marks & Upham LLP was on brief, for respondents-appellants Wallack Management Co. and 625 Park Corp H. Peter Haveles, Jr., with whom Cadwalader, Wickersham & Taft was on brief, for respondent-appellant Ira Leon Rennert.

Arturo J. García-Solá, with whom Ira Brad Matetsky and McConnell Valdés were on brief, for appellee.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and LIPEZ, Circuit Judge.

SELYA, Circuit Judge.

These appeals represent yet another chapter in a seemingly interminable intra-familial dispute that has run a litigatory gauntlet stretching from Puerto Rico to New Jersey. See, e.g., Goya Foods, Inc. v. Unanue-Casal, 275 F.3d 124 (1st Cir. 2001); Goya Foods, Inc. v. Unanue, 233 F.3d 38 (1st Cir.2000), cert. denied, 532 U.S. 1022, 121 S.Ct. 1964, 149 L.Ed.2d 758 (2001); Quiros-Lopez v. Unanue-Casal (In re Unanue Casal), 998 F.2d 28 (1st Cir.1993); Unanue-Casal v. Unanue-Casal, 898 F.2d 839 (1st Cir.1990); Goya Foods, Inc. v. Unanue-Casal, 141 F.Supp.2d 207 (D.P.R.2001); Goya Foods, Inc. v. Unanue-Casal, 982 F.Supp. 103 (D.P.R.1997); Goya Foods, Inc. v. Unanue-Casal (In re Unanue-Casal), 164 B.R. 216 (D.P.R.1993); Goya Foods, Inc. v. Unanue-Casal (In re Unanue-Casal), 159 B.R. 90 (D.P.R.1993); Quiros-Lopez v. Unanue-Casal (In re Unanue-Casal), 144 B.R. 604 (D.P.R.1992); Unanue-Casal v. Unanue-Casal, 132 F.R.D. 146 (D.N.J. 1989); In re Settlement of Accounts of Unanue, 311 N.J.Super. 589, 710 A.2d 1036 (N.J.Super.Ct.App.Div.1998); In re Settlement of Accounts of Unanue, 255 N.J.Super. 362, 605 A.2d 279 (N.J.Super. Ct. Law Div.1991). This chapter arises out of a matched set of interlocutory orders entered by the district court with a view toward barring the transfer of certain assets held in the name of the wife of a judgment debtor (including a lavish Park Avenue cooperative apartment). Despite their knowledge of these court orders, the appellants — Wallack Management Co., 625 Park Corporation, and Ira Leon Rennert — participated in a sale of the apartment. Acting on the petition of the original plaintiff, Goya Foods, Inc., the district court found the appellants in contempt, and awarded substantial monetary sanctions. The appellants ask us to overturn (or, at least, to modify) this award.

The outcome of these appeals hinges primarily upon a complex issue of first impression as to whether Goya's failure to comply strictly with the requirements for perfecting orders prohibiting the alienation of property resulted in the expiration of those orders upon the court's subsequent entry of judgment in the underlying case (and, therefore, left the appellants free to consummate the challenged transaction). This close question has been well briefed and argued on both sides by able counsel. We conclude that, notwithstanding Goya's failure to satisfy the literal requirements of Rule 56.4 of the Puerto Rico Rules of Civil Procedure, the relevant orders remained legally binding upon the appellants, given their actual knowledge of the prohibition. Largely on that basis, we affirm the district court's contempt findings against the appellants. We find no fault with the court's choice of a monetary sanction, but we conclude that the court misapprehended the relationship of prejudgment interest to that award. Consequently, we vacate the separate award of prejudgment interest and remand for reconsideration of the amount of the monetary sanction.

I. BACKGROUND

In setting the stage, we draw heavily upon our previous distillation of the relevant facts. See Goya Foods, Inc. v. Unanue, 233 F.3d at 41-42. We add details only where necessary.

Goya was founded by Charles Unanue's father in 1936. The company prospered. Charles served as a Goya executive from the late 1940s until 1969, when internecine warfare led to his ouster. This, in turn, prompted no-holds-barred litigation involving Goya, Charles, Charles's father, and other relatives. Pursuant to settlements reached in 1972 and 1974, Charles received more than $4,400,000; in exchange, he surrendered his ownership interest in Goya and agreed that he would neither contest his father's will nor file any claims against his father's estate. The settlement agreements further provided that if any signatory wrongfully sued another signatory, the transgressor would be liable for liquidated damages equal to twice the victor's litigation expenses.

Charles's father died in 1976. Eleven years later, Charles claimed that he was entitled to an inheritance from his parents' estates (including certain Goya shares that his father had placed in trust). The trustees resisted the claim and sought a judgment in a New Jersey state court barring Charles from maintaining any action against either the trust or his parents' estates. After protracted litigation, the New Jersey court enforced the 1974 settlement agreement, enjoined Charles from pressing further claims of entitlement, and entered judgment for Goya, pursuant to the liquidated damages clause, for approximately $6,900,000. In re Unanue, No. M-128817 (N.J.Super.Ct. Ch. Div.1995) (unpublished opinion).

In the midst of this odyssey, Charles repaired to Puerto Rico and filed a petition for personal bankruptcy. From that point forward, the battle continued in both New Jersey and Puerto Rico. Among other initiatives, Goya filed an adversary proceeding in the bankruptcy court in which it contended that Charles was concealing assets by placing them in the names of various straws (including his wife, Liliane Unanue).

Eventually, the bankruptcy court dismissed Charles's insolvency petition without granting him a discharge. In re Unanue-Casal, No. 90-04490, slip op. at 5 (Bankr.D.P.R.1995). With the shield of bankruptcy shattered and a state court judgment in hand, Goya mounted a new offensive. It sued Charles and Liliane Unanue in Puerto Rico's federal district court, asserting that Charles was the beneficial owner of various assets held in Liliane's name, and, therefore, that it was entitled to reach and apply those assets to satisfy the New Jersey judgment. To ensure against dissipation of the assets, Goya moved for the imposition of provisional remedies.

The district court granted the motion on November 17, 1995, and issued an ex parte order prohibiting the alienation of various properties held in Liliane's name. Pertinently, the order encompassed a cooperative apartment located at 625 Park Avenue in New York City (the Apartment). In a companion order, the court barred any transfer or other alienation of the cooperative shares memorializing Liliane's interest in the Apartment.¹ Goya then transmitted copies of the district court's orders to both 625 Park (the cooperative housing association that owned the building) and Wallack Management (the building's managing agent).

Almost two years later, the district court resolved the underlying litigation, holding, inter alia, that Charles was the beneficial owner of the cooperative shares and the Apartment, and entering judgment to that effect. Goya Foods, Inc. v. Unanue-Casal, 982 F.Supp. at 109-12. Although the ruling ordinarily would have cleared the way for Goya to levy against the Apartment, the court stayed execution pending appellate review. Id. at 112. In February 1998, Goya informed both Wallack Management and 625 Park of the district court's decision and requested that it be notified before any disposition was made of the Unanues' interest in the Apartment.

That same month, Wallack Management informed Liliane that she was in default of her obligation to make mandatory maintenance payments to the cooperative, and that 625 Park would terminate her interest and take possession of the Apartment unless she cured the default. Adverting to this threat, Liliane asked the district court for permission to sell the Apartment, and her attorney informed Wallack Management that she had filed such a motion. The court did not rule upon the request, but, rather, ordered counsel to meet and discuss possible solutions to the dilemma.

In May 1998, Liliane agreed to sell the Apartment to Rennert for $4,600,000. Prior to the closing, Rennert's attorneys discovered that Goya had neglected either to record a cautionary notice of lis pendens in the Manhattan land records or to file a Uniform Commercial Code (UCC) statement anent the cooperative shares. Concluding that the November 1995 orders had lapsed when the district court entered judgment in November of 1997, Rennert's counsel advised him that no effective judicial restraint precluded Liliane from conveying clear title to the Apartment.²

The bylaws of the cooperative required 625 Park's approval of any transfer of shares. After consultation with counsel, 625 Park's board ratified the proposed sale of Liliane's shares (and, effectively, of the Apartment), on condition that Rennert indemnify it for all loss, cost, or damage (including litigation expenses) resulting from any challenge to the sale. Rennert agreed to hold both Wallack Management and 625 Park harmless, and the transaction proceeded.

The closing took place in June of 1998. From the $4,600,000 purchase price, Wallack Management, acting as Liliane's broker, received a $276,000 commission. Liliane's net proceeds (well in excess of $4,000,000) were wired to a Swiss bank account. The final version of the sales agreement included a confidentiality clause.

Goya did not learn of the transaction until October of 2000. It immediately brought the matter to the district court's attention. The court directed Charles and Liliane to appear personally and show cause why they should not be adjudged in contempt for violating the November 1995 orders. When neither defendant...