FILIPINO HUMAN RIGHTS VICTIMS:
U.S. COURT OF APPEALS APPLIES
“EQUITY AND GOOD CONSCIENCE”
AGAINST THE PHILIPPINE GOVERNMENT
By:
MANUEL J. LASERNA JR.
Introduction
In the very recent decision of the US 9th Circuit Court of Appeals promulgated on May 4, 2006MERRILL LYNCH, PIERCE, FENNER AND SMITH, INC. vs. ENC CORPORATION, et. al.”, involving the multi-billion peso money claim of the human rights victims of the infamous martial-law regime of the late Philippine Pres. Ferdinand Marcos, entitled of “with companion cases, docketed as Case Nos. 04-16401, etc. (consolidated), the US 9th Circuit Court of Appeals affirmed the judgment of the federal district court of Hawaii awarding US $35 Million to the Class of Human Rights Victims of the regime of Pres. Marcos.
The amount represented the value of shares of stock in Arelma S.A., a shell Panamian corporation owned by Marcos.
The Philippine National Bank “held in escrow” the shares of Arelma under separate decisions of the Supreme Courts of Switzerland and the Philippines.
Merill Lynch Pierce Fenner and Smith, Inc. (Merill Lynch) was “the custodian of the assets of Arelma”.
The decision of the US 9th Circuit Court of Appeals also held that the Republic of the Philippines and the Presidential Commission on Good Government (PCGG), which likewise claimed the aforementioned amount, were “not indispensable parties under Rule 19 (b) of the US Federal Rules of Civil Procedure”.
Parties and Proceedings
Interpleader was begun on September 21, 2000 by Merrill Lynch, the custodian of the assets of Arelma. , S.A. (Arelma), now amounting to approximately $35 million. The Merrill Lynch account was found by the district court to have been established in 1992 by a deposit of $2 million by Pres. Marcos.
The Republic was made a defendant in the interpleader and successfully asserted its sovereign immunity. (In re Republic of the Philippines, 309 F.3d 1143, 1149-52, 9th Cir., 2002).
The Republic now maintains that it is an indispensable party inasmuch as “the Arelma assets were acquired by Marcos illegally and never lawfully belonged to him but from the beginning of his acquisition belonged to the Republic”. (cf. R.A. No. 1379, s. 1955, “An Act Declaring Forfeiture in Favor of the State of Any Property Found to Have Been Unlawfully Acquired by Any Public Officer or Employee and Providing for the Proceeding Therefor”).
In the 2002 appeal to the US 9th Circuit Court of Appeals, it ruled that “the Republic was a necessary party but declined to rule that the Republic was indispensable”. (Republic of the Philippines, 309 F.3d at 1153).
Mariano Pimentel was the representative of 9,539 persons who brought suit against Pres. Marcos after his fall from power. In 1996 the class of human rights victims won a judgment against the estate of Pres. Marcos of nearly $2 Billion. (In re Estate of Ferdinand E. Marcos Human Rights Litigation, 103 F.3d 767 [9th Cir. 1996]).
The US 9th Circuit Court of Appeals stated: “This class, composed of victims of a rough and rapacious ruler (Pres. Marcos), who often exercised arbitrary power, is a group whose sufferings naturally evoke sympathy”.
The district court awarded all the Arelma assets to them.
Both Arelma and the Philippine National Bank, the escrow holder of its stock, contended that “Arelma was an indispensable party and that the district court lacked jurisdiction over Arelma”.
The Estate of Roger Roxas and the Golden Buddha Corp. also claimed the Arelma assets.
According to the US 9th Circuit Court of Appeals: “The Yamashita Treasure was discovered by Roxas and was stolen from Roxas by Marcos’s men. Roxas was tortured and imprisoned, giving rise to human rights claims valued at $6 million. Roxas formed a corporation to which he assigned his rights in the treasure. The Estate of Roger Roxas and the Corporation won an initial judgment against Imelda Marcos and the Estate of Ferdinand Marcos”. (Roxas v. Marcos, 969 P.2d 1209 [Haw. 1998]).
The Hawaii Supreme Court had “allowed Roxas’ judgment against Imelda Marcos to stand, while holding that the Estate of Ferdinand Marcos could not be bound by that judgment”. (Id. At 1244).
Roxas claimed the Arelma assets “both as a creditor of Marcos and on the basis that the $2 million used by Marcos to set up the Merrill Lynch account were most probably derived from the Yamashita Treasure and can be traced to the property stolen from Roxas”, the US 9th Circuit Court of Appeals stated.
Analysis by the US 9th Circuit Court of Appeals
[1] The case is governed by Fed. R. Civ. P. 19, according to the Court of Appeals. The first section of the rule speaks of “persons needed for just adjudication.”
The Republic falls within this section because, as the rule puts the matter, the Republic “claims an interest relating to the subject of the action and is so situated that the disposition of the action in [its] absence may (i) as a practical matter impair or impede [its] ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of [its] claimed interest.”
Such a party should be joined to the action. [Rule 19(a)]. The rule goes on to prescribe what a court should do “whenever joinder is not feasible.” In such a case, “the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable.
The factors to be considered by the court include: “first, to what extent a judgment rendered in the person’s absence might be prejudicial to him or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person’s absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.” [Rule 19(b)].
[2] The US 9th Circuit Court of Appeals stated that “the Republic is a necessary party in this proceeding”. That determination meant that “for a just disposition of the assets it is necessary that the Republic participate”.
In ordinary speech, “a necessary party would be an indispensable party”. Rule 19 (b), however, “distinguishes between necessary and indispensable parties”. Rule 19 (b) indicates that “indispensability must meet a higher standard than necessity”.
Indispensability “can only be determined in the context of particular litigation.” [Provident Bank v. Patterson, 390 U.S. 102, 118 (1968)].
In determining indispensability, the US 9th Circuit Court of Appeals applied the criteria supplied by Rule 19 (b) itself: “equity and good conscience”. (Id. at 109). “Only if equity and good conscience require it is a necessary party also indispensable”, the Court of Appeals stated.
The phrase “equity and good conscience” in our judicial usage is coterminous with the first opinions of the United States Supreme Court, according to the US 9th Circuit Court of Appeals, citing Hollingsworth v. Ogle, 1 U.S. 257 (1788). It added: “Undoubtedly in its earlier usage, equity brought to mind a fairness sought by the chancery courts that transcended statutory law and “good conscience” referred to an interior moral arbiter regarded as the voice of God”. [See also: Montana v. Crow Tribe of Indians, 523 U.S. 696, 707 (1998)].
According to the US 9th Circuit Court of Appeals, Rule 19 of the Federal Rules of Civil Procedure emphasizes “the flexibility that a judge may find necessary in order to achieve fairness and the moral weighing that should attend the judge’s choice of solutions, a choice to be marked by “mercy and practicality.” [Hecht v. Bowles, 321 U.S. 321, 329 (1944)].
[3] Applying “equity and good conscience”, the US 9th Circuit Court of Appeals first explained that “the general rule is that a sovereign need not forfeit its immunity to protect its assertion of indispensability”. It stated that that “in the usual case of interpleader, the sovereign is immune and indispensable and so can cause dismissal of the action”, citing US cases involving Indian tribes entitled to sovereign immunity.
In Makah Indian Tribe v. Verity, 910 F.2d 555 (9th Cir. 1990), the same Court of Appeals held that “where the Makah Indian Tribe sought a reallocation of fishing rights beyond the three-mile limit, any reallocation would affect the rights of 23 other Indian tribes whose sovereign immunity prevented them being made parties”. In the said case, “prejudice to these tribes was inevitable; no relief could be shaped and no adequate remedy could be given that would remove the prejudice”. US 9th Circuit Court of Appeals continued: “In equity and good conscience, the case had to be dismissed for want of indispensable parties”.
The US 9th Circuit Court of Appeals continued: “A fortiori, when the sovereign is a foreign state, prejudice to it is a powerful consideration. However, under the guidance of equity and good conscience, it is not the sole consideration”.
[4] The Republic’s right in the United States to reclaim the spoils of office from Marcos has been unquestioned since Republic of the Philippines v. Marcos, 862 F.2d 1355 (9th Cir. 1988) (en banc). The Republic had set up the PCGG to effect this end. However, according to the US 9th Circuit Court of Appeals, “despite the lapse of 18 years, the Republic has not obtained a judgment” that the ill-gotten wealth of Pres. Marcos belongs to it. According to the Court, any judgment entered in the action would not bind the Republic because it was not a party to the action, consequently, if the Court would act in the case, “the Republic would remain free to sue for the Arelma assets in a forum of its choice”. But even if the Republic would pursue its action against Merill Lynch in New York, it would “be confronted with the New York statute of limitations of six years for its underlying claim”. In practical effect, “a judgment in this action will deprive the Republic of the Arelma assets”.
The US 9th Circuit Court of Appeals stated: “It is now eighteen years since the 1988 decision and four years since we stayed this action. The shares of Arelma have been since 1995 in escrow at the Philippine National Bank. In all this time, the Republic has not obtained a judgment that the assets in dispute belong to it. We do not hold the Republic guilty of laches, but we do note as an equitable consideration that its failure to secure a judgment affecting these assets is a factor to be taken into account. Any judgment entered in this action cannot bind the Republic because it is not a party to the action. See Idaho ex rel. Evans v. Oregon, 444 U.S. 380, 386 (1980). Consequently, if we act here, the Republic would remain free to sue for the Arelma assets in a forum of its choice.”
It added: “True, unless it acts with alacrity, the assets may be distributed after judgment here and be beyond recapture. After the assets are distributed, the Republic might seek the equivalent of the assets from their holder, Merrill Lynch, in New York where they were invested. But it would be confronted with the New York statute of limitations of six years for its underlying claim. See Stafford v. International Harvester Co., 668 F.2d 142, 147 (2d Cir. 1981); NY CPLR § 213 (misappropriation of public property).”
It further stated: “Tolling by Marcos’ time in office would not help it. The generous provision for recapture of the assets provided by the new constitution of the Philippines would not trump New York law. In practical effect, a judgment in this action will deprive the Republic of the Arelma assets.”
[5] The US 9th Circuit Court of Appeals noted the presence in the action of “victims of the former president of the Republic”. The class represented by Pimentel had “secured a judgment against Marcos of almost $2 billion, which the assets in dispute will scarcely satisfy”.
Nonetheless, according to the Court, “the symbolic significance of some tangible recovery is not to be disregarded, and if the recovery is distributed pro rata among the individuals, it will have monetary meaning for the poor among them”.
The Court rejected the argument that the victims were Filipino citizens and should seek redress from the Philippine Government. It stated: “The counter consideration, that most of the victims are citizens of the Philippines and should find redress from their own government, is outweighed by the fact that the Republic has not taken steps to compensate these persons who suffered outrage from the extra-legal acts of a man who was the president of the Republic. In good conscience, can we deny some small measure of relief to the class whose members have been found to have been grievously injured and who have the final judgment of a court assessing their wrongs and fixing their remedy?”
As to the late Roger Roxas, the Court held that he “was a victim, too”. His injury “was suffered before the date used to determine the class”. He, too, “has a judgment against Marcos, which resulted in an award of damages that has been affirmed on appeal”. [Roxas v. Marcos, 109 Hawaii 83 (2005)].
The question was: “Should Roxas, an early victim of Marcos, recover more in this action than the victims comprising the class?” (Note: Roxas’s claim that the assets could be traced to the Merrill Lynch account was not accepted by the district court, according to the US 9th Circuit Court of Appeals).
The Court held that “equity could assign him no more than the pro rata share due any class member; it is fair to treat him as entitled to this much and no more”.
[6] As a final consideration, the Court noted that “the res is in the United States”. As such, it could not be finally disposed of “except by the judgment of a court in the United States”.
Guided by existing US Supreme Court doctrines on “how a lawsuit involving assets in dispute would play out in the light of the decision made on interpleader” (Provident Bank, 390 U.S. 102 at 112-117), the US 9th Circuit Court of Appeals studied certain scenarios:
Scenario one: “We dismiss this action. Roxas sues Merrill Lynch in New York for the assets asserting conversion. The Republic intervenes, asserting its claim. The New York court holds the Republic barred by the six year statute of limitations. The court rejects the Republic’s appeal to toll the statute when Marcos was in office, because Marcos left in 1986; the court also finds that the post-Marcos constitution of the Republic does not affect the New York limitation on actions. Roxas takes the assets to the extent of his judgment”.
Scenario two: “The same, except the successful plaintiff in New York is Pimentel”.
Scenario three: “The plaintiff is the Republic. The Republic is time-barred. Pimental and Roxas intervene and obtain their proportionate share of the assets. Realistically, we cannot envisage a lawsuit in which the Republic will prevail”.
[7] The US 9th Circuit Court of Appeals stated: “In terms of the four factors set out by Rule 19(b) as included among those ‘to be considered,’ the Republic will not be prejudiced because it has no practical likelihood of obtaining the Arelma assets and so there is no need of lessening prejudice to it; judgment rendered in its absence will be adequate; if we dismiss the action for nonjoinder of the Republic, Pimentel and Roxas will be required to sue again in New York, a needless repetition that will not benefit the Republic. No injustice is done it if it now loses what it can never effectually possess.”
In fine, the US 9th Circuit Court of Appeals accordingly AFFIRMED the questioned judgment of the federal district court of Hawaii, modified to allot to Roxas a share of the assets no greater than that of any class member.