Republic of Haiti v. Crown Charters, Inc.

• Decision Date: 13 August 1987
• Docket Number: No. 86-6602-Civ.,86-6602-Civ.
• Citation: 667 F. Supp. 839
• Parties: The REPUBLIC OF HAITI, Plaintiff, v. CROWN CHARTERS, INC., Robert Williamson, and Guy Couach, Inc., Defendants.
• Court: U.S. District Court — Southern District of Florida

667 F. Supp. 839

The REPUBLIC OF HAITI, Plaintiff, v. CROWN CHARTERS, INC., Robert Williamson, and Guy Couach, Inc., Defendants.

No. 86-6602-Civ.

United States District Court, S.D. Florida.

August 13, 1987.

COPYRIGHT MATERIAL OMITTED

James M. Miller, of Akerman, Senterfitt & Edison, Miami, Fla., for plaintiff.

William F. Leonard, of Leonard and Morrison, & Harry G. Carratt, of Morgan, Carratt and O'Connor, Fort Lauderdale, Fla., for defendants Crown Charters, Inc. and Robert Williamson.

R.G. Lubbers, Jr., of Lubbers & Lynch, Fort Lauderdale, Fla., for defendant Couach.

ORDER ON MOTIONS FOR SUMMARY JUDGMENT, FOR PROTECTIVE ORDER AND TO COMPEL

PAINE, District Judge.

This cause comes before the court on defendant Guy Couach, Inc.'s motion for summary judgment (DE 74), plaintiff's motions to compel (DE 117) and for protective order (DE 121), and defendant Crown Charters, Inc.'s motion to compel (DE 94).

I. BACKGROUND

The Republic of Haiti brought this action to enforce certain equitable remedies with respect to property purportedly misappropriated by Jean-Claude Duvalier, former "president for life" of the Republic of Haiti. The complaint (DE 1) alleged the following. An eighty-six foot luxury yacht, originally named the "Niki" and now called the "Victoria Won," was purchased by Duvalier with over $1 million embezzled and converted from Haiti by Duvalier and others. Fincal Holding, Inc., a Panamanian holding company, acting as Duvalier's agent, used converted funds to purchase the yacht from Couach, which had constructed it pursuant to Duvalier's instructions. Duvalier put the yacht to personal use from October 1984 to March 1985, when he returned it to Couach for repairs and eventual sale. In March 1986, acting through Fincal, Duvalier sold the yacht to Crown through Crown's agent, defendant Robert Williamson. Crown and Williamson knew or should have known that Duvalier had acquired the yacht with misappropriated Haitian government funds and that the money paid by Crown to buy the yacht would be retained by Duvalier for his personal use and benefit. The complaint further alleged that Couach acted as broker for Duvalier in selling the yacht to Crown and received a commission on the sale from Fincal, and that Couach knew or should have known that the commission was comprised of converted Haitian government funds. The various counts of the complaint charged constructive trust, foreclosure of an equitable lien, conversion, and injunction.¹ Subject matter jurisdiction is proper based on diversity of citizenship because the action is between a foreign state and citizens of different states with the amount in controversy over $10,000. 28 U.S.C. § 1332(a)(4) (1982).

Crown moved to dismiss the complaint for failure to state a claim (DE 7) and for failure to join Duvalier, Fincal, and Captain Antoine Philador, the commander of Duvalier's private vessels, as indispensable or necessary parties (DE 6). In an order entered March 9, 1987 (DE 31), this court denied the motion to dismiss for failure to join parties but granted in part the motion to dismiss for failure to state a claim. The court concluded that the complaint stated a claim for declaratory relief under 28 U.S.C. § 2201 (1982) and should not be dismissed. The court granted the motion, however, with respect to the conversion claim, finding that the allegations of the complaint were insufficient to establish that the yacht was purchased with specific, ascertainable funds converted by Duvalier from the Haitian government.

Plaintiff has filed an amended complaint (DE 44) in a second attempt to state a claim for conversion. The amended complaint also seeks a declaratory judgment, damages, imposition of a constructive trust, and other equitable relief for breach of trust and fiduciary duties and for money had and received.

II. MOTION FOR SUMMARY JUDGMENT

A party seeking summary judgment bears the burden of demonstrating that there is no genuine dispute as to any material fact. American Viking Contractors, Inc. v. Scribner Equipment Co., 745 F.2d 1365, 1369 (11th Cir.1984). Once the moving party has sufficiently supported the motion, the party opposing summary judgment must come forward with significant probative evidence demonstrating the existence of a triable issue of fact. Ferguson v. National Broadcasting Co., 584 F.2d 111, 114 (5th Cir.1978).² The question for the court in a motion for summary judgment is "not whether there is literally no evidence, but whether there is any upon which a jury could properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986) (quoting Improvement Co. v. Munson, 14 Wall. 442, 448, 20 L.Ed. 867 (1872) (emphasis in original)). Couach asserts that the amended complaint, taken together with the submissions of the parties, fails to establish a basis for Couach's liability and should be dismissed. The court will address each of the five counts in turn.

A. Constructive Trust

Count I alleges that Duvalier owes plaintiff a fiduciary duty and that his misappropriation of government funds constituted a breach of that duty. The amended complaint sets out payments to Couach from Fincal preceded by payments of similar amounts to Fincal which allegedly were from Haitian government funds. Copies of checks and wire transfer documents are attached to the amended complaint.³ Plaintiff alleges that, when Fincal obtained these funds and used them to purchase the Niki, it did so as trustee for the benefit of Haiti. Plaintiff next alleges that, when Couach obtained funds from Fincal to purchase the Niki, obtained funds as its commission on the sale, and obtained possession of the Niki, it did so subject to plaintiff's beneficial interest. Further, plaintiff asserts that, when Crown purchased the Niki from Fincal, Crown took title with actual or constructive notice of plaintiff's interest and therefore holds the Niki in trust for plaintiff's benefit. Plaintiff seeks the imposition of a constructive trust on the yacht and proceeds of Couach's commissions.

The imposition of a constructive trust is an appropriate remedy for breach of fiduciary duty. Under the constructive trust doctrine, the rightful owner of misappropriated trust property may trace to the proceeds of such property and to whatever has been bought with the proceeds if it is capable of being substantially identified as having been acquired with the misappropriated property or funds. See Boswell v. Cunningham, 32 Fla. 277, 13 So. 354 (1893).⁴ This right of reclamation attaches to the property until it is barred by the superior equity of a bona fide purchaser for value without notice. 56 Fla.Jur.2d Trusts § 122 (1985).

Couach first argues that it is entitled to judgment as a matter of law on Count I because there is no material issue of fact that it was a bona fide purchaser for value without notice. Couach bears the burden of proof of its status as a bona fide purchaser without notice. McDonald v. McGowan, 402 So.2d 1197, 1200 (Fla.Dist. Ct.App.1981). In support of its position, Couach proffers the affidavit of Michael F. Katzin (DE 75), Couach's counsel, which sets forth the circumstances surrounding the sale of the Niki.⁵ Plaintiff proffers evidence in rebuttal, and Couach concedes (DE 75), that Couach probably knew that Duvalier was the purchaser of the yacht and that Fincal was related to Duvalier personally or the Haitian government. Whether the apparent relationship between the Haitian government or its dictator personally and a Panamanian holding company should have put Couach on notice of wrongdoing cannot be determined by the court on these materials. Where, as in this case, conflicting inferences can be drawn from the circumstances, the issue of constructive notice should be determined by the trier of fact. McDonald, 402 So.2d at 1200-01. Accordingly, the court will not decide the notice issue on summary judgment.

Couach further argues that plaintiff cannot prove Couach had notice that the funds were misappropriated because it is impossible to distinguish among Duvalier's acts as an individual, his lawful acts as president, and his improper acts as president. Couach contends that Duvalier was recognized by the executive branch of the United States government as the lawful government of the Republic of Haiti and that this court is constitutionally bound to accept that recognition. According to Couach, this premise compels the conclusion that, even if it knew Duvalier was the purchaser of the Niki, it had no reason to know that Duvalier's actions were unauthorized.

Couach cites Republic of the Philippines v. Marcos, 818 F.2d 1473, 1488-1489 (9th Cir.1987), in which the Ninth Circuit noted the difficulty of determining when the acts of an absolute ruler are authorized acts of the government and when they are not. That case, however, is quite different from the one before this court. The Republic of the Philippines sought not simply the recovery of specific property but the return of all or part of the former president's wealth allegedly looted from Philippine coffers. At the heart of that case was plaintiff's assertion that all of the Marcoses' wealth must have been stolen. The Ninth Circuit determined that a substantial portion of Marcos' conduct was shielded by the act of state⁶ and political question doctrines, thus defeating plaintiff's net worth theory and with it plaintiff's case. The Court of Appeals distinguished that situation, however, from a case in which plaintiff "sought to trace specific assets to specific alleged misdeeds." Id. at 1489. The matter before this court is that case. Although the Republic of Haiti may have difficulty proving its allegations that Duvalier improperly drew on Haitian government funds to buy the Niki, and that Couach had notice of these improprieties, the court is unwilling to hold that such...