The opinion of the court was delivered by: LEVAL
PIERRE N. LBVAL, U.S.D.J.
This is a motion by several defendants to vacate a temporary restraining order ("TRO") originally imposed in New York State Court and continued with modifications by this court after some of the defendants removed the action. The moving defendants contend that the temporary restraining order must be vacated because, absent consent, the court lacks the power under the Federal Rules of Civil Procedure to continue such an order beyond the twenty days permitted by Rule 65(b). Pan American World Airways v. Flight Eng'rs' Int'l Ass'n, 306 F.2d 840 (2d Cir. 1962). Plaintiff contends the restraints should be continued (in present or in further modified form) either as a temporary restraining order pending submission of further proofs on the preliminary injunction hearing, or as a preliminary injunction supported by plaintiff's submissions.
Plaintiff is the Republic of the Philippines. The principal defendants are the former President of the Philippines, Ferdinand Marcos and his wife Imelda Marcos. They have been served with process but have not appeared. Plaintiff has submitted a proposed default judgment against them. The complaint alleges that during President Marcos's term in office, he and Mrs. Marcos wrongfully took property belonging to the Republic of the Philippines. It is alleged that part of the moneys so taken were used by President and Mrs. Marcos to invest in valuable New York real property, including 730 Fifth Avenue (the Crown Building), Herald Center (formerly Korvettes) at 34th Street and 6th Avenue; 40 Wall Street, 200 Madison Avenue, and a large mansion in Center Moriches, Long Island referred to as the Lindenmere Estate (the "Properties").
The moving defendants are several real estate holding companies, and their alleged principals and managers, which are the record holders of the Properties, allegedly as nominees for President and Mrs. Marcos. (The defendant-movants are hereinafter referred to as the "Record Holders.") The TRO which the Record Holders seek to have vacated essentially bars the defendants from transferring or encumbering the Properties.
When the action has brought in New York State Court, a temporary restraining order was entered barring the defendants from taking any of a variety of actions with respect to the Properties. After removal, this court continued the order pending the preliminary injunction hearing but substantially eased its terms to permit profitable commercial use of the property to the maximum extent while protecting plaintiff's claimed equity interest.
Shortly after the removal, expedited discovery was ordered and a schedule was set for the submission of proofs on the preliminary injunction hearing. The schedule was delayed partly at the instance of defendants, who, for example, requested adjournment of the depositions of Joseph and Ralph Bernstein so that they could first testify before a Committee of Congress. In seeking that delay the defendants consented to adjournment of the preliminary injunction schedule.
Approaching the expiration date of the consent given, defendants suddenly advised plaintiff that they would give no further consent, and refused to furnish any further depositions. Defendants then filed this motion for immediate dissolution of the TRO. In response to the motion to dissolve the restraints plaintiff has hastily bundled together a mass of documents and depositions acquired thus far in discovery and has submitted these papers on April 28, 1986 in support of a preliminary injunction.
Defendants have submitted no proofs in opposition. They rely primarily on the act-of-state doctrine, the immunity of President Marcos under Philippine law, the Foreign Sovereign Immunity Act of 1976, 28 U.S.C. §§ 1602 et seq., the principle of forum non conveniens and the contention that plaintiff's proofs are conjectural and insufficient.
In order to qualify for preliminary injunctive relief in this Circuit, plaintiff must show "(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief." Jackson Dairy v. Hood, 596 F.2d 70, 72 (2d Cir. 1979). Considering all the proofs and circumstances, I find that the Republic of the Philippines has sufficiently supported its position to satisfy the requirements of law. It has demonstrated entitlement to a preliminary injunction.
Joseph Bernstein testified that in mid-1981 he began buying and subsequently managing New York commercial properties for undisclosed owners fronted by a Mrs. Gliceria Tantoco, a Philippine national and close friend and business associate of the Marcoses. During the next two years, he arranged for the purchase by the Tantoco interests of the Crown Building at 730 Fifth Avenue (called the Genesco Building at the time of purchase), 40 Wall Street, and the Herald Center Building (formerly E.J. Korvettes) at 34 Street and 6th Avenue. Subsequently he competed for but did not win the opportunity to act as agent for the Tantoco interests in their purchase of 200 Madison Avenue.
Bernstein set up or caused to be set up two tiers of offshore corporate vehicles for the acquisition and ownership of the three commercial properties as follows:
The Crown Building was purchased in September 1981 in the name of Lastura Corporation, N.V., a Netherland Antilies corporation, now called the Canadian Land Company of America, N.V. Joseph Bernstein served as director from 1982-84. Its shares were held by two Panamanian companies issuing bearer shares. Trade and Commodities, S.A. and Yewell Compagnia Immobiliera.
Herald Center was purchased in February 1981 in the name of a British Virgin Islands corporation named Voloby, Ltd. (now called Herald Center, Ltd.). Bernstein served as its sole director. Its shares were held by three Panamanian corporations issuing bearer shares. Bedner Development Corp., Compral Investment, S.A. and Dicet Finance Investment Corp.
40 Wall Street was purchased in December 1982 in the name of an Antilles corporation now called Nyland (CF 8), Ltd. (formerly Ainesville, N.V.). Bernstein served as one of its 3 directors after Tantoco directed him to establish the corporation in 1982. It is owned by three Panamanian corporations issuing bearer shares. Beneficio Investment Incorporated, Bueno Total Investment Incorporated and Excelencia Investment Incorporated.
Although Bernstein did not succeed in represent ing the Tantoco group in their purchase of 200 Madison Avenue he testified that he was familiar with the situation, and had competed for the right to act as manager. In the fall of 1983, 200 Madison Avenue was acquired in the name of Glockhurst Corporation, N.V., a Nether land Antilles corporation. Bernstein, who established the three Panamanian corporations named above to hold the shares of Voloby and served as their attorney (Bedner, Compral and Dicet) testified that he believed the shares of Glockhurst had been transferred by Mrs. Tantoco to those corporations.
The acquisition of the Lindenmere Estate in Long Island, New York was not handled by Bernstein and does not appear to involve Mrs. Tantoco. It was purchased by Philippine interests in February 1981 in the name of Luna 7 Development Corp. Later it was transferred to its present owner, Ancor Holdings, N.V., a Netherlands Antilles corporation. Augusto Camacho, Lindenmere's architect, was President and a 10% stock owner of Luna. Ancor has one corporate and two individual directors, one of whom is Antonio O. Floirendo, a friend and business associate of the Marcoses.
II. Evidence on the Merits
The two general areas to which the plaintiff's proofs must be addressed are that President and/or Mrs. Marcos are beneficial owners of the Properties and that their acquisition of the Properties was with funds converted from the Republic of the Philippines.
The evidence of Marcos ownership of the Properties arises from actions and statements of the Marcoses supporting an inference of ownership, and from a great number of documents, many found in the Malacanang Palace after their departure in February 1986. Although the evidence produced thus far certainly falls short of conclusively demonstrating Marcos' ownership of the Properties, it is more than sufficient to raise fair questions for litigation, as required by the Jackson Dairy standard.
1. Behavior Suggesting Ownership
The evidence shows numerous instances in which President and Mrs. Marcos acted in a manner suggesting an ownership interest in the Properties.
Joseph Bernstein testified that in mid-1981 he began to discuss with Mrs. Tantoco the possible acquisition of the Crown Building by undisclosed principals. Shortly after the acquisition was concluded, Bernstein met with Mrs. Tantoco and Mrs. Marcos who then took an active role in discussing plans for the building.
Peter W. Williams, an attorney with the law firm of Rogers and Wells, testified by affidavit (made at the request of the U.S. House Subcommitte on Asian and Pacific Affairs) describing his firm's involvement with several of the record holder defendants. Williams testified that his firm was retained in September 1981 by Banque Paribas (Suisse) to act for undisclosed clients of Paribas engaged in the purchase of the Crown Building (730 Fifth Avenue). As the acquisition vehicle, he formed the defendant Lastura Corp., N.V., a Netherlands Antilles company (now named Canadian Land Company of America, N.V.). The purchase of the building was consummated. on September 30, 1981. Two weeks later, at the request of Mr. Cattaui, his contact at Paribas, Mr. Williams travelled with him to Honolulu and there met with Ferdinand Marcos. Again two weeks later, he accompanied mr. Cattaui to a meeting in New York with Imelda Marcos. At the meeting Mrs. Marcos discussed with Mr. Cattaui plans for the renovation of the building. Mr Williams testified that he understood he "was asked to attend the meeting to respond to any legal questions in connection with the purchase of the Crown Building. . . ." in mid-1982 the legal representation of Lastura was transferred from Rogers & Wells to the law firm of Bernstein, Carter and Deyo, Joseph Bernstein's firm.
An official of the Philippine National Bank who had ties with President and Mrs. Marcos and was knowledgeable about New York business, testified by affidavit that he was "contacted by Mr. and Mrs. Marcos for my views and opinions on real properties in New York . . . I specifically remember a telephone conversation with Mr. Marcos in the fall of 1981 . . . regarding . . . the Crown building . . . . I gathered the impression that Marcos was interested in the Crown Building." In late 1981 and early 1982 Mrs. Marcos questioned him about the 10 Wall Street property. Bernstein testified further that in March 1982 President Marcos asked him for advice about structuring a $34 million loan from Paribas Suisse to the Lastura Corporation (the record owner of the Crown Building). (Bernstein Dep. at 208-09; Bernstein House Testimony, at 35-37.)
Bernstein also testified that in April 1982 Roland Gapud, who was a business advisor of President Marcos dictated to him a declaration of trust by which Bernstein would undertake to serve as trustee for the benefit of Ferdinand Marcos for all matters concerning the Lastura Corp., N.V. The dictated draft of the trust deed provided furthermore that Bernstein as trustee, with respect to the shares of Lastura, was to act in accord with the instructions of President Marcos. (Salonga dep. at 33-35 and Bernstein dep. at 42-44.)
Bernstein testified that throughout the course of his activities in acquiring and managing subject Properties he has understood and believed that the Marcoses were the owners of Crown, 40 ...