Opinion
No. 654261/2012.
04-07-2015
Jose DURAN, on His Behalf and as Representative of a Class of Judgment Creditors of Imelda Marcos, Ferdinand R. Marcos and the Estate of Ferdinand E. Marcos, Plaintiff, v. Vilma H. BAUTISTA, Chaiyot Jansen Navalaksana, Pongsak Navalaksana, Cyrus R. Vance, Jr., the District Attorney For the County of New York, Ester Navalaksana, Leonor Hernandez, Gavino Abaya, Juan Abaya, Susan Abaya, Diane Dunne and Barbara Stone, Defendant.
Robert A. Swift, Admitted pro hac vice, of Kohn, Swift & Graf, P.C., for Petitioner. Fran Hoffinger, Esq. of the Hoffinger Firm LLP, for Respondents Vilma Bautista and Leonor Hernandez. Cesar de Castro. Esq. of The Law Firm of Cesar de Castro, P.C., for Respondent Ester Navalaksana. Kelly A. Librera, Esq. of Winston & Strawn LLP, for Respondent Diane Dunne. J. Roberto Cardena, Esq. of Cardenas & Associates, for Respondents Gavino Abaya, Juan Abaya and Susan Abaya. Daniel Schnapp, Esq. of Fox Rothschild LLP, For Respondent Barbara Stone.
Robert A. Swift, Admitted pro hac vice, of Kohn, Swift & Graf, P.C., for Petitioner.
Fran Hoffinger, Esq. of the Hoffinger Firm LLP, for Respondents Vilma Bautista and Leonor Hernandez.
Cesar de Castro. Esq. of The Law Firm of Cesar de Castro, P.C., for Respondent Ester Navalaksana.
Kelly A. Librera, Esq. of Winston & Strawn LLP, for Respondent Diane Dunne.
J. Roberto Cardena, Esq. of Cardenas & Associates, for Respondents Gavino Abaya, Juan Abaya and Susan Abaya.
Daniel Schnapp, Esq. of Fox Rothschild LLP, For Respondent Barbara Stone.
Opinion
CHARLES E. RAMOS, J.
Vilma H. Bautista, Chaiyot Jansen Navalaksana, Pongsak Navalaksana, Cyrus R. Vance, Jr., the District Attorney for the County of New York (the District Attorney) Ester Navalaksana, Leonor Hernandez, Gavino Abaya, Juan Abaya, Susan Abaya, Diane Dunne and Barbara Stone (collectively, the Respondents) move to dismiss the petition , originally commenced by Jose Duran, on his behalf and as representative of a class of judgment creditors of Imelda Marcos, Ferdinand R. Marcos and the estate of Ferdinand E. Marcos (the Class) pursuant to: a) CPLR 1001 for necessary joinder of a party; b) 3211(a)(4) due to another pending federal action; and, c) 3211(a)(7) for failure to state a cause of action.
Two petitions were originally filed in this action and have been consolidated. Except where noted, this decision will address the two petitions as one (the Petition).
The facts set forth herein are taken from the Petition, and the parties' submissions and affidavits, except where noted.
Ferdinand E. Marcos served as the president of the Republic of Philippines (the Republic) until he was removed from power in 1986, whereupon he fled to Hawaii with his family. During his reign, he was responsible for grave human rights violations and corruption, including the alleged embezzlement of state funds to Switzerland and into fictitious corporations.
Subsequent to his removal from power, scores of his victims and victims' families commenced actions against him under the Alien Tort Act, seeking damages for torture, summary execution, and disappearance suffered at the hands of his henchmen. These actions were later consolidated, and certified as a class action comprising approximately 10,000 individuals in Hawaii District Court in 1991 (In re: Estate of Ferdinand E. Marcos Human Rights Litigation, 910 F Supp 1460 [D Haw 1995] aff'd sub nom Celsa Hilao, et al. v. Estate of Ferdinand E. Marcos, 103 F3d 767 [9th Cir1996] ).
The Class ultimately obtained a verdict of liability against Marcos' Estate (he died in 1989), and an award of nearly $2 billion in damages. The United States Court of Appeals for the Ninth Circuit affirmed the final judgment (the 1995 Judgment) (id. ). In 2011, the Class obtained a second judgment in the amount of $353,600,000 against Imelda R. Marcos, Ferdinand R. Marcos, and the Estate (the 2011 Judgment)(aff'd sub nom Hilao v. Estate of Marcos, 2012 WL 5351264 (9th Cir.2012). However, these judgments have proven difficult to enforce as the Marcos family has successfully concealed much of their assets (see Hilao v. Estate of Ferdinand Marcos, 25 F3d 1467, 1480 [9th Cir1994] ).
Once Marcos was removed from power, the Republic created the Philippines Presidential Commission on Good Government (the PCGG) to recover property misappropriated by Marcos during his time in office. The PCGG determined that Marcos systematically transferred national assets, through various sophisticated schemes, to his personal control and amassed a fortune estimated in the billions of dollars. The PCGG has been seeking to recover this wealth stolen from the national treasury.
The Class commenced the original petition pursuant to CPLR § 5225 and § 5227 for a writ of execution and turnover order requiring Respondents to transfer all property held for or belonging to Imelda R. Marcos. Specifically, the Class is seeking to recover against assets that were identified and recovered in a criminal trial of Vilma Bautista, the personal secretary to Imelda Marcos. Bautista was criminally charged with having illegally conspired to possess and sell valuable works of art acquired by Imelda Marcos during her husband's presidency and keeping the proceeds for herself. The art work at issue includes a 1899 painting by Claude Monet, entitled “Le Bassin Aux Nymphease” (the Water Lily Painting), which had been missing for the past 30 years.
Bautista allegedly came into possession of this and many other highly valuable paintings from the Marcos's before the end of the regime in 1986 (Swift Aff., Ex. E and F).
Beginning in 2009, Bautista and her alleged co-conspirators attempted to covertly sell the paintings. In September of 2010, Bautista sold the Water Lily Painting to a London buyer for approximately $32 million.
In November 2012, Bautista was indicted by the District Attorney for illegally selling the Water Lily Painting and failing to pay New York City and New York State taxes on the sale (People of the State of New York v. Vilma Bautista, et al., Indictment No. 04930–2012 (Sup. Court, N.Y. County). In addition, Bautista was charged with the illegal possession of three other valuable paintings proportedly belonging to Imelda Marcos.
During the criminal investigation, the District Attorney seized more than 170 items of property from Bautista including over $15 million in cash, six insurance policies with a face value of $1,430,000, and two other paintings, Claude Monet's “L'Eglise et La Seine a Vethuil” and Alfred Sisley's “Langland Bay,” all of which the Class claims is subject to judgment execution and upon which it levied (the Levied Property). The Levied Property is still in the possession of the District Attorney.
On November 18, 2013, Bautista was convicted of conspiracy in the fourth degree, criminal tax fraud in the first degree and offering a false instrument for filing in the first degree. Following the conclusion of the criminal trial, the District Attorney has sought to determine the rightful owner of the Levied Property.
On December 3, 2012, the Class filed the original petition naming Bautista, Chaiyot Jansen Navalaksana, Pongsak Navalaksana, and the District Attorney, as Respondents. In that petition, Petitioner sought the turnover of $32 million in proceeds from the sale of the Water Lily Painting and the turnover of physical paintings allegedly owned by Imelda and now in the possession of the Respondents (the 2012 Petition) (Swift Aff, Exhibit C).
On July 13, 2013, the Class filed a second petition for turnover of the proceeds of the sale of the Water Lily Painting (the 2013 Petition) (Id. Exhibit D). The 2013 Petition additionally names as respondents to the 2012 Petition, Ester Navalaksana, Leonor Hernandez, Gavino Abaya, Juan Abaya, Susan Abaya, Diane Dunne, and Barbara Stone.
By order of this Court dated January 17, 2014, the 2012 Petition and the 2013 Petition were consolidated.
The consolidated Petition alleges that certain of the Respondents were engaged in a fraudulent scheme to sell the Water Lily Painting without Imelda's authorization. In furtherance of this scheme, Bautista and Abaya falsely represented and notarized a Certificate of Authority, purporting to grant Bautista the authority to sell the painting on behalf of Imelda to a London Gallery.
The Class asserts a fraud claim against Respondents Vilma Bautista, Ester Navalaksana, Leonor Hernandez and Gavino Abaya, and a claim for conversion. The third cause of action is a claim for aiding and abetting the conversion against two brokers involved in the sale of the Water Lily painting: Diane Dunne and Barbara Stone (the Brokers). The fourth is a claim for unjust enrichment against all Respondents. The fifth is a claim for imposition of a constructive trust over the proceeds of the sale of the Water Lily Painting.
Writs of execution were served on the Sheriff's Office on July 11, 2013 with a levy on the: 1) cash proceeds from the sale of the Water Lily Painting; 2) Monet's “L'Eglise et La Seine a Vethuil” painting; 3) Sisley's “Langland Bay” painting; and 4) six insurance policies with face values totaling $1,430,000 (Swift Aff, ¶¶ 8–10). In addition, Petitioner caused restraining notices to be served against the Respondents prohibiting them from transferring or dissipating any of the property at issue in the criminal action and seized by the District Attorney.
On February 11, 2014, the District Attorney commenced an interpleader action in the Southern District to determine the rightful owner of the seized property in order for the District Attorney to be released from the case (District Attorney v. Republic of the Philippines, 14 Civ. 890[KPF] [SDNY] ). The federal interpleader names the Republic, Imelda Marcos, Ferdinand R. Marcos, Aida Hernandez and the Metropolitan Museum of Manila Foundation, Inc (the Interpleader Action). The additional respondents in this Petition, Chaiyot Jansen Navalaksana, Pongsak Navalaksana, Gavino Abaya, Juan Abaya, Susan Abaya, Diane Dunne, and Barbara Stone, are not named in the Interpleader Action (Swift Aff, Exhibit I).
On May 20, 2014 the Republic brought an action for money damages in the Southern District against the Brokers, Gavino Abaya, Juan Abaya, Susan Abaya (the Republic Action) against each of the defendants equal to that amount of money that he or she received as a result of the sale of the Water Lily Painting.
Discussion
In support of their motion to dismiss pursuant to CPLR 1001, CPLR 3211(a)(4), and/or CPLR 3211, the Respondents assert several grounds. First, the Respondents argue that the action must be dismissed for failing to join a necessary party, the Republic of the Philippines. Second, the Respondents state that the action must be dismissed because another action is pending, the Interpleader Action, that is sufficiently intertwined with the instant action to require dismissal of this action and, third, for failing to state a cause of action (CPLR § 3211[a][7] ).
The Petitioner contends that the Republic is not a necessary party, the Interpleader Action is not a viable alternative to this litigation, and that all causes of action against the Respondents have been adequately pled.
CPLR 1001(b) Failure to Join a Necessary Party.
CPLR 1001 provides that an individual or entity is a necessary party to litigation “if complete relief is to be accorded between the persons who are parties to the action” or if the entity “might be inequitably affected by a judgment in the action” (CPLR 1001[a] ).
Joinder is mandatory if the nonparty is subject to the court's jurisdiction (CPLR 1001[b] ). If jurisdiction can be obtained only by the entity's consent or voluntary appearance, “the court, when justice requires, may allow the action to proceed without [the entity] being made a party” (id. ). When a necessary party can be joined only by consent or appearance, the court must consider the following five factors set forth to determine whether joinder of the absentee may be excused:
1. whether the plaintiff has another effective remedy in case the action is dismissed on account of the nonjoinder;
2. the prejudice which may accrue from the nonjoinder to the defendant or to the person not joined;
3. whether and by whom prejudice might have been avoided or may in the future be avoided;
4. the feasibility of a protective provision by order of the court or in the judgment; and,
5. whether an effective judgment may be rendered in the absence of the person who is not joined (id. ).
Although a court must consider all five criteria, no single factor is determinative in the discretionary analysis of whether an action may proceed in the absence of a necessary party who is not subject to mandatory jurisdiction (Swezey v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 19 NY3d 543, 551 [2012] ). “The overall statutory design is intended to (1) guarantee that absent parties at risk of prejudice will not be embarrassed by judgments purporting to bind their rights or interests where they have had no opportunity to be heard, and (2) protect against multiple lawsuits and inconsistent judgments” (id. [internal quotation marks deleted] ).
The Court of Appeals in Swezey (id.), dismissed an earlier filed turnover petition brought by the same Class in an attempt to execute on the judgment against a brokerage account maintained by a Marcos shell corporation (Arelma), because the Republic claimed ownership of the funds, asserted sovereign immunity and refused to participate in the litigation. The Court of Appeals ruled that “an assertion of immunity by a sovereign entity requires dismissal of an action in which it is a necessary party if the entity's claims are not frivolous and there is a potential for injury to its interests” (id., citing to Republic of the Philippines v. Pimentel, 553 U.S. 851, 867 [2008] ).
This Court agrees with the Respondents to the extent that the Republic is indeed a necessary party to this litigation and that the Republic's claim to the proceeds of the Water Lily sale is not frivolous. The Republic also has a legitimate interest in the funds misappropriated during the Marcos regime. Furthermore, the Republic's claim over the property is not frivolous because 1) the Republic has a forfeiture law providing that public officials' assets that are out of proportion to salary and income must be forfeited to the Republic, 2) there are findings in prior judicial decisions that the Marcoses misappropriated public funds to amass a vast personal fortune, and 3) the PCGG has listed the Water Lily painting on the List of Missing Art Works'.
The Class raises distinctions between Swezey (19 NY3d 543 ) and these proceedings. The first is that the Republic has not obtained a judgment of forfeiture with respect to the Water Lily painting as it did with the Arelma assets. The Republic has not initiated a forfeiture action against Imelda Marcos with respect to the other paintings identified in the Petition, and in fact, only claimed ownership of the Water Lily Painting after the Class initiated these proceedings. Further, the Class argues that in Swezey (id.) there was concern that Merrill Lynch, which held the account, could be subject to double liability, but here there is no similar concern because the District Attorney would likely be entitled to immunity as he is merely a stakeholder to the property.
Respondents argue that the Swezey decision noted that New York had no real interest in the outcome of the case and that adjudication by a U.S. court could disrupt international comity (Swezey, 19 NY3d at 53). However, this is not true with regard to the proceeds of the Water Lily painting. A four week criminal trial was conducted in a New York court, the assets are being maintained here by the District Attorney, and certain Respondents, including the Republic, are seeking a resolution of the issues in the Southern District, and not a Philippine court.
The United States Supreme Court in Pimentel, found that although the lower courts had not given “sufficient weight to the likely prejudice to the Republic and Commission [PCGG] should the interpleader proceed in their absence,” nonetheless cautioned that: “The balance of equities may change in due course” (Pimentel, 553 U.S. at 872–873 ). One such change could include the Philippine court's inability to issue a ruling with respect to ownership of the Arelma assets within a reasonable period of time (id. ).
We find that these proceedings can and should be adjudicated in this Court. The higher courts' rulings in Swezey and Pimentel derive their holdings from CPLR 1001, which provides that “the court, when justice requires, may allow the action to proceed without [the necessary entity] being made a party.” In making this discretionary determination, this Court is considering factors which must be weighed against one another. Here, this Court is confronted with a claim of ownership by a foreign sovereign to property, where the sovereign chooses not to participate in a proceeding brought to determine those claims while seeking a dismissal of that turnover proceeding. Although the Republic is a necessary party to these proceedings within the meaning of CPLR 1001, it has elected not to participate by not making an appearance in this action.
The principles of sovereign immunity require the consent of the Republic before a New York court may exercise jurisdiction over it, however this case must be analyzed according to the five statutory factors, to determine whether the case can proceed without joining the Republic as a party (CPLR 1001 [b] ). As appears below, this Court determines that the relevant factors do not warrant dismissal.
A. Whether the Petitioner Has Another Effective Remedy
This first factor weighs in favor of the Class. Generally, dismissal for non-joinder is particularly disfavored where the plaintiff would be left without a remedy (L–3 Communications Corp. v. SafeNet, Inc., 45 AD3d 1, 10–11 [1st Dept 2007] ). The Class may have an effective remedy if it is able to recover the proceeds from the sale of the Water Lily Painting and the turnover of other paintings in the Interpleader Action. However, it's unclear whether that action would be an effective remedy since the Levied Property would be deposited there and the Class would be unable to obtain new levies because the property would be in custodia legis (Landau v. Vallen, 895 F.2d 888, 893 [2d Cir, 1990] [The custodia legis doctrine prohibits attachment of funds in a court's registry that would prevent the court from disposing of the funds in accordance with the purpose for which they were deposited] ).
Furthermore, absent intervention of all the alleged conspirators and depositing the proceeds into the federal clerk's possession, the federal court in the Interpleader Action may lack subject matter jurisdiction to adjudicate entitlement to the proceeds of the Water Lily sale because the parties to that action are different to the parties in the present action.
B. Prejudice that May Accrue to the Absentee or Respondent
This second factor, supports the Class and not dismissal. Although the Republic's national interests may be prejudiced as this action implicates the government's monetary and sovereign interests, the primary purposes of the joinder rules are to protect a party against multiple lawsuits and inconsistent judgments and guarantee that in their absence the parties are not at risk of prejudice and will not be “embarrassed by judgments purporting to bind their rights or interests where they have had no opportunity to be heard” (Saratoga County Chamber of Commerce, Inc. v. Pataki, 100 N.Y.2d 801, 820 [2003] ).
To dismiss this proceeding when the foreign sovereign asserts a claim to the property but refuses to appear or intervene, would allow the Republic to utilize its immunity from litigation as a sword to preclude a judgment creditor from exercising its right to the property.
This type of assertion of sovereign immunity is disfavored by the Court of Appeals, which overruled an attempt by the St. Regis Mohawk Tribe to utilize its sovereign immunity in a similar manner (id. ). In that case, the Court refused to dismiss the claim pursuant to CPLR 1003 even though the Tribe was considered an indispensable party (id. ). The Court stated:
“The Tribe has chosen to be absent. Nobody has denied it the ‘opportunity to be heard’ ... While sovereign immunity prevents the Tribe from being forced to participate in New York court proceedings, it does not require everyone else to forego the resolution of all disputes that could affect the Tribe (id. ). While we fully respect the sovereign prerogatives of the Indian tribes, we will not permit the Tribe's voluntary absence to deprive these [Petitioners] (and in turn any member of the public) of their day in court” (id. ).
Similarly in this case, the Republic's absence is voluntary, it was not denied the opportunity to be heard, it simply declined to intervene. Consequently, as the Republic has chosen not to participate in the proceeding, their participation is not necessary to render an effective judgment.
C. Whether and by whom prejudice might have been avoided or may in the future be avoided
This third factor also weighs in favor of the Class. The court in Swezey considered this factor equal in that neither the Petitioner nor the Republic could effectively avoid prejudice, as the Republic could not be expected to give up its “sovereign prerogative” to litigate an issue of national importance in a forum of its own choice (Swezey, 19 NY3d at 553 ). The doctrine of sovereign immunity is a well-established principle. Thus, any attempt by the Petitioner's to join the Republic likely would be futile, in light of the Republic's assertion of sovereign immunity. Therefore, there is little the Petitioner can do to avoid or lessen the potential for prejudice to the absentee when the Republic has voluntarily chosen not to participate.
The case at hand also differs from the Swezey decision as the Republic's declaration of sovereign immunity is not based on the assertion that its own courts be permitted to adjudicate the dispute over allegedly stolen property. At this time there is no identical case regarding the proceeds of the Water Lily Painting pending before a Philippine court.
Furthermore, the Republic does have alternative remedies available to it. For example, it may elect to recover the misappropriated funds directly from Imelda Marcos who currently serves as a Congresswoman in the Philippines. Moreover, the Republic has brought it's own action in federal court regarding the Water Lily Painting and is a named Respondent in the Interpleader Action. The Republic may pursue its interests in those actions.
D. The Feasibility of a Protective Provision
This Court lacks a feasible protective provision to adequately safeguard each of the party's interests. The only relief this Court may provide would be if the Republic voluntarily waived its sovereign immunity and submitted to the jurisdiction of this Court. This would ensure that both parties' interest are protected, and would eliminate the risk of inconsistent and piecemeal rulings and unnecessary waste of judicial resources. The Republic is certainly entitled to assert its sovereign immunity and not to participate in this proceeding. However, if the Republic continues to elect not to participate, the Class should not be forced to forego a resolution as to the disposition of this property.
E. Whether an Effective Judgment May be Rendered in the Absence of the Non–Joined Person.
The fifth factor does not weigh in favor of the Republic. The Respondents rely upon the decision in Swezey stating that “allowing the turnover proceeding to go forward would create the possibility of multiple conflicting judgments” ( Swezey, 19 NY3d at 554 ). However, the court in Swezey found that if the Class prevailed in the turnover proceeding, the Arelma account assets would be disbursed amongst the Class and the Republic might turn to Merrill Lynch for satisfaction of the judgment. This would place Merrill Lynch at a risk of further liability, while in reality it had been trying to remove itself from that case for over ten years. This was a primary reason why the court concluded “that continuation of the turnover action “would not further the public interest in settling the [ownership] dispute as a whole “ (id. quoting Republic of Philippines v. Pimentel, 553 U.S. at 870–871 ). This fear of duplicate liability is not applicable in this case as the District Attorney has immunity from further liability since it is not a stakeholder to the Levied Property, but merely a custodian.
The Respondents claim that a turnover order in the Class's favor would not be binding on a nonparty such as the Republic. However, despite the Republic's nonappearance, an effective judgment may be rendered. In accordance with Article 52 of the CPLR, the Court is permitted to proceed to determine the priority and validity of the rival claims to the disputed assets in this race of diligence (Matter of National Union Fire Ins. Co. of Pittsburgh, Pa v. Eland Motor Car Co., 85 N.Y.2d 725, 729 [1995] ).
F. Weighing the Factors
Based on its balancing of the five factors, this Court concludes that they do not weigh in favor of dismissal of the Petition for non-joinder. The Republic is a necessary party and the Republic as a sovereign nation cannot be compelled to submit to this Court's jurisdiction. Nonetheless, to allow the case to be dismissed would result in inequitable prejudice to the Petitioner. The Class has been attempting to obtain satisfaction of the Judgments for almost two decades now and have been unsuccessful in recovering even a small percentage of the Judgments thus far.
It is imperative to note that in New York, dismissal for non-joinder is strongly disfavored. This is particularly true with the case at hand where the party seeking relief would be left without an efficient remedy (see Saratoga County Chamber, Inc., 100 N.Y.2d at 820–21 ).
Additionally, as the Petitioners were the first judgment creditors to levy against the property, they would be entitled to priority (See CPLR 5234 [b] ). Moreover, the Supreme Court had noted that the balance of equities may change in light of changed circumstances (Pimentel, 553 U.S. at 872–873, 128 S Ct at 2194 ). Thus, in accordance with the interests of justice, dismissal for non-joinder is denied.
CPLR 3211(a)(4) Existence of the Federal Action
The respondents move to dismiss the action pursuant to CPLR 3211(a)(4) based on the existence of the Interpleader Action pending in federal court arguing that the substantial identity of parties and issues, judicial economy, and the objectives of avoiding duplicative rulings warrants a dismissal or a stay of this action. In opposition, the Class argues that the Interpleader Action is not a viable alternative to this action since this Court possesses prior exclusive jurisdiction and this Court lacks authority to authorize transfer to the federal court of the property levied upon by Petitioner.
CPLR 3211(a)(4) states that “a party may move for judgment dismissing one or more causes of action asserted against him on the ground that: there is another action pending between the same parties for the same cause of action in a court of any state or the United States; the court need not dismiss upon this ground but may make such order as justice requires.”
The Interpleader Action is not between parties identical to those in this action. The interpleader complaint names the District Attorney as plaintiff, and the following defendants: the Republic, the Class, Imelda Marcos, Ferdinand R. Marcos, Vilma Bautista, Ester Navalaksana, Leonor Hernandez, Aida Hernandez, Imelda Marcos, Jorge Ramos, and the Metropolitan Museum of Manila Foundation, Inc. The following respondents in this Petition are not named parties to the Interpleader Action: Chaiyot Jansen Navalaksana, Pongsak Navalaksana, Gavino Abaya, Juan Abaya, Susan Abaya, Diane Dunne, and Barbara Stone. Furthermore, the following parties in the Interpleader Action are not parties in this Action: The Republic, Imelda Marcos, Aida Hernandez, Jorge Ramos, and the Metropolitan Museum of Manila Foundation, Inc. Thus, the only parties in common between the Interpleader Action and this action are the Class, District Attorney, Vilma Bautista, Ester Navalaksana, and Leonor Hernandez.
Further, the other related action pending in Federal court and brought by the Republic against the brokers and Gavino Abaya does not have common identity between the parties. The Republic filed a separate complaint and has not sought to consolidate with the Interpleader Action. To dismiss in favor of either federal action would allow parties to forum shop in an attempt to avoid possibly being an inferior claimant to the Levied Property.
The complaint in the Interpleader Action does not assert the same causes of action as in this Action. The Interpleader Action is to determine who the District Attorney can release the Levied Property to, while this action encompasses several causes of action and seeks the turnover to the Class, based on prior judgments, of approximately $32 million in proceeds from the sale of the Water Lily painting and the physical paintings allegedly owned by Imelda Marcos and now in the possession of the Respondents. This Petition includes five causes of action against the Respondents involving an alleged fraudulent scheme against Imelda Marcos. The Interpleader Action does not have these claims.
Respondents argue that since the Federal Action and this action impact the same property, namely the proceeds of the Water Lily painting and assets associated with it, this action should be dismissed or stayed. Respondents rely on the case of Belopolsky v.. Renew Data Corp., 41 AD3d 322 (1st Dept 2007) where the court affirmed a stay of an action pending resolution of a related action based on judicial economy, orderly procedure, prevention of inequitable results, overlapping issues and common questions of law and fact despite there being no complete identity of parties. This Court does not agree.
In Belopolsky (id.), the court's opinion affirming the stay was based on the existence of a prior action. “The general rule is that for the instant action to be dismissed because of the other's pendency, the other must have been commenced first” (Siegel, N.Y. Prac. § 262 [5th ed.]citing Izquierdo v. Cities Serv. Oil Co., 47 Misc.2d 1087, 1091 [Sup Ct, Kings County, 1965]. This Action was commenced prior to the Interpleader Action and the Republic's Action and so should not be dismissed or stayed.
The Class also argues that the doctrine of prior exclusive jurisdiction' confers jurisdiction on this Court to determine entitlement to the Levied Property to the exclusion of the federal court. The Supreme Court of the United States has articulated this doctrine stating that “when one court has taken possession and control of a res, a second court is disabled from exercising a power over that res” (Propper v. Clark, 337 U.S. 472, 492 [1949] ). A court first assuming jurisdiction over property may exercise that jurisdiction to the exclusion of other courts ... this has been true even where the Government was a claimant in existing state proceedings and then sought to invoke district-court jurisdiction (Colorado River Water Conservation Dist. v. US, 424 U.S. 800, 818 [1976] ). Respondents themselves acknowledge in their briefs the existence of federal case law regarding the doctrine of prior exclusive jurisdiction (Respondents' Reply Brief at P 6).
Writs of execution were delivered and stamped by the Sheriff's Office on July 11, 2013, which effected a levy on that property prior to the filing of the Interpleader Action on February 11, 2014. In addition, Petitioner caused restraining notices to be served against the Respondents prohibiting them from transferring or dissipating any of the property at issue in the criminal action and seized by the District Attorney. The Levied Property is in custodia legis of this Court and thus, this Court has assumed prior exclusive jurisdiction.
Cash proceeds from the sale of the Water Lily Painting; Monet “L'Eglise et La Seine a Vethuil” painting; Sisley “Langland Bay”; and, six insurance policies with a face value of $1,430,000.
CPLR 3211(a)(7): Failure to State a Claim
Respondents also move in the alternative to dismiss the Petition for failure to state a cause of action for fraud, conversion, aiding and abetting conversion, unjust enrichment, and constructive trust.
CPLR 3211(a)(7) states that “a party may move for judgment dismissing one or more causes of action asserted against him on the ground that the pleading fails to state a cause of action.” On a motion to dismiss for failure to state a claim, “the court is concerned with whether the pleading states a cause of action rather than the ultimate determination of the facts” (Stukuls v. State, 42 N.Y.2d 272, 275 [1977] ). Such motion will not be granted, unless the moving papers conclusively establish that no cause of action exists (Ming v. Hoi, 163 A.D.2d 268 [1st Dept 1990] ). The court should construe the pleadings in a liberal fashion by accepting the facts alleged in the complaint and interpreting them in a light most favorable to the plaintiff (Leon v. Martinez, 84 N.Y.2d 83, 87 [1994] ).
Statements in a pleading shall be sufficiently particular to give the court and parties notice of transactions, occurrences or series of transactions or occurrences, intended to be proved and the material elements of each cause of action (CPLR 3013 ). However, where a cause of action is based upon misrepresentation, fraud, mistake, breach of trust or undue influence, the circumstances constituting the wrong shall be stated in particularity or detail (CPLR 3016 ). CPLR 3016(b) is satisfied when the facts suffice to permit a “reasonable inference” of the alleged misconduct (Pludeman v. Northern Leasing Sys., Inc., 10 NY3d 486, 492 [2008] ). The purpose underlying the statute is to inform a defendant of the complained-of incidents (id. at 486 ).
A. Fraud
In pleading a claim of fraud, the plaintiff must allege representation of a material existing fact, falsity, scienter, deception, and resulting injury (Sabo v. Delman, 3 N.Y.2d 155 [1957] ; First Nationwide Bank v. 965 Amsterdam, Inc., 212 A.D.2d 469 [1st Dept 1995] ). Section 3016(b) requirements are not “to be interpreted so strictly as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud' “ (Joel v. Weber, 166 A.D.2d 130, 133–34 (1st Dept 1991), quoting Jered Contr. Corp. v. New York City Transit Auth., 22 N.Y.2d 187, 194 [1968] ).
Petitioner alleges that Bautista, Ester Navalaksana, Leonor Hernandez and Gavino Abaya (the Selling Group) were allegedly involved in a conspiracy to falsely give apparent authority to Bautista to sell the Water Lily Painting owned by Imelda Marcos when Bautista had no such right.
It is pled that in or about 1991, Bautista and either Ester Navalaksana or Leonor Hernandez knowingly and intentionally caused a notary public to falsely certify the Certificate of Authority allegedly signed by Imelda Marcos purporting to grant Bautista authority to sell paintings on behalf of Imelda Marcos. It is alleged that in about February 2010, Bautista or someone acting on her behalf and her direction altered the Certificate of Authority so that it contained the name of the Water Lily Painting. These allegations are based on information in the Criminal Indictment and satisfy the misrepresentation pleading requirement.
It is alleged in the Petition that Respondents Bautista and Gavino Abaya with knowledge that Bautista did not have authority to sell the Water Lily Painting and with intent to retain all proceeds for the Selling Group, endeavored to seek a buyer interested in a private sale of the Water Lily Painting. It is further alleged that on or about August 25, 2010, Gavino Abaya delivered the Certificate of Authority to the London Gallery for the purpose of causing the London Gallery as potential purchaser to rely on the false representations contained therein. Further it is alleged that on or about September 9, 2010, Gavino Abaya delivered a letter signed by Bautista to the London Gallery through their representatives (Letter of Explanation).The Letter of Explanation was delivered for purpose of causing the London Gallery as potential purchaser to rely on the false representation contained therein, which Bautista and Gavino Abaya sent knowing that it was intentionally and materially false and misleading. These allegations satisfy the scienter and falsity elements.
The London Gallery allegedly reasonably relied on the intentional and material false representations regarding Bautista's authority to sell the Water Lily Painting made in the Certificate of Authority and the Letter of Explanation by agreeing to purchase the Water Lily Painting from Bautista. Thus, the Class satisfied the pleading requirement of reliance.
The London Gallery paid $32.16 million in exchange for the Water Lily Painting. It is alleged that none of the proceeds were remitted to Imelda Marcos but were kept by Bautista and distributed by her to other members of the Selling Group, children or relatives of the Selling Group, the Brokers, and others. These allegations satisfy the elements of deception.
Damages and injury are adequately pled. It is alleged in the Petition that the Class are judgment creditors of Imelda Marcos with a superior and valid claim to her assets including assets derived from the sale of the Water Lily Painting and any profits made by the Respondents in connection with any subsequent sale of the painting. The Class asserts they have suffered monetary and punitive damages based on the alleged fraud of the diversion of the Water Lily assets by Bautista and the Selling Group away from the Class.
Respondents argue that a plaintiff cannot normally claim reliance on misrepresentations a defendant made to third parties and so the fraud claim cannot stand (citing Garelick v. Carmel, 141 A.D.2d 501 [2nd Dept 1988], Pensee Assocs, Ltd. v. Quon Indus., Ltd., 241 A.D.2d 354 [1st Dept 1997], and Wildenstein v. 5H & Co, Inc., 97 AD3d 488, 490 [1st Dept 2012] ). Specifically, the Respondents state that the Class claims that false representations were made to, and relied on, by the London Gallery, which is not a party to this case, and that since the gallery is not an alleged victim of any fraudulent misrepresentation, the Class does not, and cannot, stand in the shoes of the gallery. Further, the Respondents argue that although there are allegations that the Class, as judgment creditors of Imelda Marcos suffered damages, there is no allegation that any Respondent made misrepresentations to Imelda Marcos that she detrimentally relied on.
The Class counters stating that a fraud claim may exist where a false representation is made to a third party, resulting in injury to the plaintiff. The class relies on the cases of Buxton Mfg. Co., Inc. v. Valiant Moving & Storage, Inc., 239 A.D.2d 452 (2nd Dept 1997), Ruffing v. Union Carbide Corp., 308 A.D.2d 526 (2nd Dept 2003), and Dresser v. Schatz, 182 A.D.2d 478 (1st Dept 1992) for this notion.
Generally, a cause of action for fraud requires a showing that false representation was made to the injured party for the purpose of inducing reliance thereon (Buxton Mfg. Co., Inc. 239 A.D.2d 453–454). However, an exception to this rule exists in that a fraud claim may exist where a false representation is made to a third party, resulting in injury to the plaintiff (id. ).
In Buxton Mfg. Co., Inc., the Appellate Division did not dismiss the complaint where a manufacturer sued a government contractor to recover an amount due under a contract for heat exchangers and asserted a cause of action against the contractor's vice president for fraud based on allegations that the vice president, signed and sent to the Department of Agriculture, a non-party, a “progress payment certification” on the project which represented that all subcontractors and suppliers had been paid including the manufacturer, plaintiff (id. ). Similarly, it is alleged that the Selling Group falsely notarized, altered and sent the Certificate of Authority to London Gallery, a nonparty, in order to falsely indicate that Bautista had the authority to the sell the painting so that Bautista and other Respondents could get the benefit of the sale.
In Ruffing, the Appellate Division also recognized that “fraud ... may ... exist where a false representation is made to a third party, resulting in injury to the plaintiff” (Ruffing, 308 A.D.2d at 528 ). Although the action in Ruffing, was centered around the recovery for personal injuries, the Court concluded that a surviving child injured in utero as the result of a fraudulent statement relied upon by his or her mother does, in fact, possess a valid fraud cause of action (id. at 531 ). Moreover, the Court asserted that exception is relatively well settled and is reflected in several prior cases of the Court of Appeals including Rice v. Manley, 66 N.Y. 82 [1876] ).
In Rice, the Court of Appeals stated, “it matters not whether the false representations be made to the party injured or to a third party, whose conduct is thus influenced to produce the injury” (id. at 87 ). In that case, the plaintiff, Rice, contracted to purchase cheese, and the defendant, Manley, knowing of Rice's contract, fraudulently induced the cheese vendor to deliver the cheese to him, instead of to Rice, by falsely telling the vendor that Rice no longer desired the cheese (id. ). Noting that Rice was damaged to the extent that he had lost the benefit of his bargain, the Court of Appeals upheld his fraud cause of action against the defendant, even though it was the cheese vendor, rather than the plaintiff, who had detrimentally relied on the defendant's fraudulent misrepresentation (id. ). The facts in the Petition closely resemble the type of fraud allegedly committed in Rice, and thus, the rule of law regarding misrepresentations to third-parties should apply to the Petition.
In both Buxton Mfg. Co., Inc. and Rice, the defendants allegedly received an unfair benefit from making fraudulent misrepresentations to third-parties. In Buxton Mfg. Co., Inc., the plaintiff claims that without the false representation in the progress payment certification, the Department of Agriculture would not have made payment to Valiant but would have withheld an amount sufficient to pay the plaintiff's outstanding claim (Buxton Mfg. Co., Inc., 239 A.D.2d at 451). In Rice, the defendant was the party who allegedly received the quantity of cheese and not the plaintiff who made the actual consideration for the product (Rice, 66 N.Y. at 87 ). Similarly, the alleged fraudulent sale of the Water Lily Painting to a third-party caused the Respondents to attain a benefit in the form of proceeds allegedly without legal ownership over painting and without the authority to sell. These types of benefits should not be condoned in our legal system and, thus, the notion that a fraud may exist where a false representation is made to a third party is affirmed by this Court and applied to the facts herein.
Respondents also argue that the fraud claim required the allegation that Marcos's signature on the Certificate of Authority from which Marcos's authority stemmed was forged, which did not appear in the pleading. Respondents are correct with respect to the fact that the Class did not plead such a fact. However, the Class does allege that the original Certificate of Authority was altered by Bautista or someone acting on her behalf and direction by inserting the Water Lily Painting into the Certificate of Authority without Imelda Marcos's consent. Also, the Class does allege that no one in the Selling Group had the authority to sell the Water Lily Painting. Thus, this Court finds that the Class sufficiently pled a claim for fraud against the Selling Group.
B. Conversion
Respondents also argue that the conversion claim should be dismissed as against Respondents Bautista, Navalaksana, Hernandez and Abaya. Respondents argue the Petition fails to allege two necessary factual underpinnings: that a) Bautista was never authorized by Imelda Marcos to sell the painting, and b) Marcos' signature on the Certificate of Authority was forged.
The tort of conversion exists when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person's right of possession (Colavito v. New York Organ Donor Network, Inc ., 8 NY3d 43, 50 [2006] ; see also Republic of Haiti v. Duvalier, 211 A.D.2d 379, 384 [1st Dept 1995] ). The key elements are 1) plaintiff's possessory right or interest in the property and 2) defendant's dominion over the property or interference with it, in derogation of plaintiff's rights (id. ).
The Class properly alleges each element of a conversion claim. The Class alleges that Imelda Marcos owned the Water Lily Painting, she had a possessory right superior to that of Bautista and the Selling Group, and the Class as judgment creditors of Imelda Marcos have an interest in the Painting. The Class further alleges that Imelda Marcos at no time authorized Bautista or anyone acting with or on behalf of Bautista including the Selling Group to engage in a sale of the Water Lily Painting and to keep the proceeds thereof. It is also alleged that without authority, Bautista and the Selling Group sold the Water Lily Painting and shared in the proceeds of the sale.
Respondents' reasons for dismissal are not convincing. First, the Class does allege that Bautista was never authorized by Imelda Marcos to sell the painting (see The Petition, Swift Aff., Exhibit D at ¶ 82). Second and similar to the Courts' analysis of the fraud claim, an allegation that the Marcos signature on the Certificate of Authority was forged is not a necessary allegation for a claim of conversion. Sufficient facts were articulated in the Petition that gave notice of the dates, parties, and factual underpinnings of the claim.
Furthermore, Respondent's assertion that a failure to plead a demand upon Bautista for return of the property in dispute does not apply here since the opinion that Respondent's rely on, Tache–Haddad Enterprises v. Melohn, 224 A.D.2d 213 (1st Dept 1996), was an appeal on a motion for summary judgment not a motion to dismiss the pleadings, the subject of the instant motion.
This Court finds that the Class's claim for conversion was properly pled as to the Selling Group.
C. Aiding and Abetting Conversion
Respondents argue that the Class fails to state a claim against the Brokers, respondents Stone and Dunne, for aiding and abetting conversion.
New York permits a claim for aiding and abetting conversion (Dickinson v. Igoni, 76 Ad3d 943, 945 [2d Dept 2010] ). The elements for such a claim are: 1) existence of a violation committed by the primary party, as opposed to the aiding and abetting party; 2) knowledge of this violation on the part of the aider and abettor; and 3) substantial assistance by the aider and abettor in achievement of the violation (Dangerfield v. Merrill Lynch, Pierce, Fenner & Smith, Inc. 2006 WL 335537 [SDNY 2006] ; see also Lindsay v. Lockwood, 163 Misc.2d 228 [Sup Ct, Monroe County 1994] ). Actual knowledge, as opposed to constructive knowledge, of the wrongful conduct is required to sustain a claim for aiding and abetting liability (id. ).
The Class has properly pled a claim for aiding and abetting conversion as against the Brokers. As analyzed above, the Class has sufficiently pled a claim for conversion in that Bautista engaged in the sale of the Water Lily Painting and kept the proceeds thereof without authorization from Imelda Marcos the rightful owner of the property. The Class alleges the Brokers were retained by Bautista and Gavino Abaya to identify a buyer for the Water Lily Painting and to act as Bautista's representatives in the sale.
The Class also alleges that the Brokers had actual knowledge that Bautista did not have the authority to sell the Painting because the Brokers knew that Bautista's 19 year old Certificate of Authority was of doubtful authenticity and that she could not provide adequate and more recent documentation to satisfy the potential buyer as to her right to possess and sell the Water Lily Painting (Petition at ¶ 104). The petition alleges that the Brokers initially found a potential buyer but that sale fell through when Bautista could not produce an updated Certificate of Authority or any additional documentation concerning her right to possess and sell the Water Lily Painting, thereby satisfying the actual knowledge element. (See Diamond State Ins. Co. v. Worldwide Weather Trading LLC., 2002 WL 31819217 at *6 [SDNY 002] [Knowledge was adequately pled when it was alleged that the aiding and abetting defendants had actual knowledge of the conversion of premiums obtained by another entity and that the aiding and abetting defendants actively participated in the conversion of those premiums] ). The Class also alleges that the Brokers consciously avoided conducting proper due diligence and disregarded clear warning signs of Bautista's lack of authority to sell the Watery Lily Painting in order to earn $4 Million in commissions. This Court finds that the allegations as pled do sufficiently meet the standards of actual knowledge.
Finally, the Class has sufficiently pled substantial assistance in that in or about July 2010, the Brokers identified the London Gallery as a potential buyer, were present at the sale of the Painting between the London Gallery and Bautista, and that the Brokers withdrew a total of $4 million from an account controlled by them and Bautista after the sale had taken place.
D. Unjust Enrichment
Respondents argue that the unjust enrichment claim should be dismissed as to all respondents for failure to state a claim.
The theory of unjust enrichment lies as a quasi-contract claim and looks to whether there is an obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the parties (Georgia Malone & Co., Inc. v. Rieder, 19 NY3d 511 [2012] ). “An unjust enrichment claim is rooted in the equitable principle that a person shall not be
allowed to enrich himself unjustly at the expense of another” (id. [internal quotation marks removed] ). In order to plead such a claim, the plaintiff must allege that: 1) the other party was enriched, 2) at that party's expense, and 3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered (id. ).
The Class alleges that respondents Bautista, Ester Navalaksana or Leonor Hernandez, Gavino Abaya engaged in and profited from a scheme to deprive Imelda Marcos of the Water Lily Painting or the proceeds thereof, through a pattern of deceitful and fraudulent acts. The Class also alleges that said respondents in addition to Juan Abaya and Susan Abaya received substantial sums of money directly or indirectly, as a result of the unauthorized sale of the Water Lily Painting. Furthermore, the Brokers, by aiding and abetting the conversion, received substantial profits and commission from the sale of the Water Lily Painting. It is alleged that all the Respondents have been unjustly enriched at the expense of the Class as judgment creditors of Imelda Marcos, and that it would be inequitable for Respondents to retain the proceeds derived from the sale of the Water Lily Painting.
Respondents argue that in order to sufficiently plead unjust enrichment, the plaintiff and the defendant alleged to have been unjustly enriched must have some dealing with each other and that the Class fails to make these allegations with respect to the Respondents (citing Georgia Malone & Co. v. Rieder, 19 NY3d 511 [2012] ; Mandarin Trading Ltd. v. Wildenstein, 16 NY3d 173 [2011] ). In Mandarin, the plaintiff sought to purchase a famous painting from the defendant so that it can later auction it for a profit (16 NY3d at 177 ). The defendant, an alleged art expert, wrote a letter to a third party estimating the painting's value at $15–$17 million but the letter did not disclose the defendant's ownership interest in the artwork (id. ). After obtaining a copy of the letter, the plaintiff claimed to have relied on defendant's representations on valuation in ultimately purchasing the painting for $11.3 million (id. ). $8.8 million of the sale proceeds went to defendant without plaintiff's knowledge (id. ). When the plaintiff was unable to resell the painting for a price greater than or equal to its acquisition cost, it sued the defendant for unjust enrichment.
The Court of Appeals dismissed the unjust enrichment claim due to “the lack of allegations that would indicate a relationship between the parties, or at least an awareness by [the defendant] of [the plaintiff's] existence” (id. at 182 ). The Court held that although the plaintiff was not required to allege privity, it had to assert a connection between the parties that was not too attenuated (id. ), concluding that:
“under the facts alleged, there are no indicia of an enrichment that was unjust where the pleadings failed to indicate a relationship between the parties that could have caused reliance or inducement. Without further allegations, the mere existence of a letter that happens to find a path to a prospective purchaser does not render this transaction one of equitable injustice requiring a remedy to balance a wrong. Without sufficient facts, conclusory allegations that fail to establish that a defendant was unjustly enriched at the expense of a plaintiff warrant dismissal” (id. at 182–183 ).
The Class has sufficiently pled such a relationship. There are allegations that Bautista represented to various individuals that the Water Lily Painting belonged to Imelda Marcos, thus showing that Bautista was aware of Imelda's existence and her relationship to the painting as owner. Furthermore, the Certificate of Authority in the record states that Bautista is Imelda Marcos's authorized representative to offer and negotiate on Marcos's behalf the sale of the Water Lily Painting and to sign deeds of transfer and receive receipts for the sale of the paintings (Swift Aff., Exhibit U, Certificate of Authority). There are allegations that Bautista was in possession of the Certificate of Authority and thus would necessarily have knowledge of the facts therein especially when the document was presented to other parties in order for the sale to move forward. The Class also alleges that Bautista's relationship with Imelda Marcos, vis a vis “Bautista's custody of the Water Lily Painting ... was in her capacity as bailee, trustee or agent of Imelda Marcos and, as such, Bautista's obligation was to maintain and preserve the painting or, having sold it, to retain the proceeds for the exclusive benefit of Imelda Marcos” (Petition at ¶ 37).
In Georgia Malone & Co., Inc., a real estate broker who prepared due diligence reports for a developer in connection with the potential purchase of commercial properties brought an action for unjust enrichment against a rival broker that acquired the reports from the developer and later obtained commission on ultimate sale of the properties (19 NY3d 511 ). Reaffirming the decision in Mandarin, the Court of Appeals in Georgia Malone & Co., Inc., found the relationship between plaintiff and defendant were too attenuated because they simply had no dealings with each other (id. at 517–518 ). The Court found that the complaint does not contain sufficient allegations to support an unjust enrichment claim against Rosewood, a co-defendant (id. at 518 ). In particular, the Court stated:
“the complaint does not assert that Rosewood and Malone (the plaintiff) had any contact regarding the purchase transaction. And, although the complaint states that Rosewood “knew at all times” that Malone produced the due diligence reports and provided them to CenterRock (the developer) with the expectation that it would be compensated in the event a purchase agreement was reached, there is no allegation that Rosewood was aware that Malone and CenterRock had agreed to the confidential nature of the due diligence information or that Rosewood knew that CenterRock had failed to pay Malone before the documents were conveyed to Rosewood ... (T)here is no claim that Rosewood had anything other than arm's length business interactions with CenterRock or the Rieders (a co-defendant). The pleadings do not implicate Rosewood in the Rieders' alleged wrongdoing. The Rieders furnished the due diligence documents and, in exchange, Rosewood paid them $150,000. Rosewood obtained a buyer and negotiated the purchase transaction with the sellers and their broker. Hence, Malone's argument that Rosewood profited without doing any work lacks merit (id. ).”
Unlike the pleadings in Georgia Malone & Co., Inc., the allegations in the Petition allege that Bautista was involved in more than an arm's length transaction by her direct involvement in the alleged fraudulent scheme and her failure to transfer the proceeds from the sale of the Water Lilly Painting to Imelda Marcos. The Petition fails to allege that any of the other Respondents were aware that the proceeds of the sale were not transferred to Imelda Marcos, since those Respondents only received a relatively small percentage of the total proceeds from the sale.
This Court finds that the Class has sufficiently pled a claim for unjust enrichment as to Bautista. It is against equity and good conscience to permit Bautista to retain the proceeds of the Water Lily Painting if the Class is able to prove the alleged fraudulent scheme. However, the Class fails to sufficiently plead the requisite relationship as to the remaining Respondents and as such the unjust enrichment claim as to those Respondents are dismissed, with leave to re-plead.
E. Constructive Trust
The respondents move to dismiss the constructive trust claim against all respondents arguing that the Class failed to allege any facts sufficient to satisfy the elements for such an action. Respondents rely on the case of Leidel v. Annicelli (114 AD3d 536 [1st Dept 2014] ), stating that the elements of a constructive trust are: a) a confidential or fiduciary relationship, b) a promise, c) a transfer in reliance thereon, and d) unjust enrichment.
The Class counters stating that the test is not necessarily the four part rigid formula but a more flexible standard as articulated in the case of Simonds v. Simonds (45 N.Y.2d 233 [1978] ). The Court of Appeals in Simonds did recognize the four factor test as being useful but stated that in many cases constructive trust doctrine is not rigidly limited (id. ). “[A] constructive trust will be erected whenever necessary to satisfy the demands of justice ... [I]ts applicability is limited only by the inventiveness of men who find new ways to enrich themselves unjustly by grasping what should not belong to them” (id. ).
Since there are sufficient allegations satisfying fraud, conversion, aiding and abetting conversion, and unjust enrichment claims against the respondents, the constructive trust claim should not be dismissed until further discovery is completed.Although this Court will not issue a blanket stay for the reasons set forth above, this Court will consider a partial stay of portions of the claims asserted herein upon a showing of merit. This Court has been kept abreast of developments in the companion federal cases by Judge Failla of the United States District Court for the Southern District of New York to whom they have been assigned. We have both committed ourselves to cooperate fully so as to avoid any duplication of effort or conflict.
Accordingly, it is;
ORDERED that motion sequence 006, the Respondent's motion to dismiss, is denied as to all causes of action except as to the fourth cause of action for unjust enrichment which is denied as to Respondent Vilma Bautista and granted as to Respondents Chaiyot Jansen Navalaksana, Pongsak Navalaksana, Cyrus R. Vance, Jr., the District Attorney for the County of New York, Ester Navalaksana, Leonor Hernandez, Gavino Abaya, Juan Abaya, Susan Abaya, Diane Dunne and Barbara Stone, with leave to re-plead; and it is further
ORDERED that the Respondents shall serve an answer to the consolidated petition and the parties shall conduct discovery concerning the factual assertions in the petition in accordance to CPLR 3211(d).