Friday, November 1, 2002
Court Blocks Bid by Marcos Creditors to Collect From U.S. Account
By KENNETH OFGANG, Staff Writer/Appellate Courts
A fight among the family of Ferdinand Marcos, the government of the Philippines, and creditors with judgments of more than $2 billion against the estate of the late dictator cannot proceed as an interpleader action in federal court, the Ninth U.S. Circuit Court of Appeals ruled yesterday.
The panel, reversing a decision of U.S. District Judge Manuel Real, ordered that the Republic of the Philippines be dismissed on the ground of sovereign immunity and that the remainder of the action be stayed while the parties search for another acceptable forum.
In the meanwhile, the funds at issue, several million dollars, remain on deposit with the U.S. District Court for the District of Hawaii. The money represents $2 million deposited with Merrill Lynch 30 years ago by Arelma Incorporated, a Panamanian company set up by Marcos, plus interest.
Two years ago, the Filipino government asked that the funds be deposited with the Philippines National Bank. The bank was to act as escrow agent pending disposition of the funds by the Sandiganbanyan, the country’s special anti-corruption court.
Other claimants objected, however, so Merrill Lynch filed the interpleader action. The defendants included the Filipino government, Arelma, the Marcos estate, various Marcos family members, and various creditors.
The creditors include a class of nearly 10,000 persons who won a $1.964 billion judgment in 1995 for human rights violations attributed to Marcos, including torture, summary executions, and kidnappings.
A 1999 settlement, under which $150 million would have been transferred from the Marcoses’ reported $590 million in Swiss bank accounts as full satisfaction of the judgment, was vacated by Real after the Swiss courts deferred to a ruling of the Sandiganbanyan requiring that the money be placed in escrow with the national bank.
Another creditor is the estate of Filipino treasure hunter Roger Roxas, who won a $13 million judgment for the conversion of an 800-pound gold Buddha. The statue, Roxas claimed, was forcibly taken by agents of Marcos along with other artifacts found in a dig around Baguio City.
Roxas’ judgment was originally for $22 billion, plus interest that nearly doubled the amount. But the Hawaii Supreme Court reversed, and the judgment on remand—for the greatly reduced sum—is now being appealed by the estate, which hopes the high court will reconsider its original ruling, the estate’s attorney, Daniel Cathcart of Los Angeles, said yesterday.
The interpleader was assigned to Real, the senior active member of the U.S. District Court for the Central District of California. Real has heard all Marcos-related federal litigation since 1991 by appointment of the federal Panel on Multidistrict Litigation.
The Filipino government moved to dismiss the interpleader. It argued that it was immune under the Foreign Sovereign Immunities Act, and that it was a necessary and indispensable party whose absence from the suit necessitated dismissal.
Real concluded that the sovereign immunity question was moot because the national bank and Arelma were the proper parties to litigate whatever interests the government had, obviating the claim that the government was a necessary party.
But Chief Judge Mary Schroeder, writing for the panel, said the sovereign immunity issue should have been resolved first, and went on to conclude that the Filipino government is immune.
She rejected the creditors’ argument that the government implicitly waived immunity by asking foreign governments, including that of the United States, for assistance in locating and freezing Marcos assets. That request for executive action cannot be deemed an invitation to claimants to commence court proceedings in foreign countries, the chief judge said.
The Filipino government is clearly a necessary party, she went on to say, because no other party is asserting that the assets belong to that entity.
But in order to dismiss the entire action, she explained, the court must find that the government is also an indispensable party, which under the Federal Rules of Civil Procedure requires a finding that must be made in “equity and good conscience” that the suit should not proceed.
Since questions have been raised about the adequacy and fairness of the Filipino court, she said, the proper ruling is to stay the action pending “later developments” that “may render it more equitably feasible for proceedings to go forward.”
Cathcart told the MetNews he has no faith in any forum in the Philippines, which he described as having “one of the the most corrupt legal systems in the world.” Barring a successful rehearing in the Ninth Circuit, he said, he may ask the court to dismiss the entire action so that he can litigate his claims by bringing a probate action in state court in Hawaii, since the money is already on deposit there.
The case is In re Republic of the Philippines, 01-71841.
Copyright 2002, Metropolitan News Company