The Republic of The Philippines v. Abaya et al

Filing 20

OPINION AND ORDER re: 8 FIRST MOTION to Intervene As Plaintiff filed by Jose Duran: For the reasons discussed herein, Class Plaintiffs' motion to intervene as of right is hereby GRANTED. Class Plaintiffs shall file their Proposed Intervenor Complaint forthwith. The Clerk of Court is directed to terminate Docket Entry 8. (Signed by Judge Katherine Polk Failla on 11/5/2015) (tn)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
THE REPUBLIC OF THE PHILIPPINES,
:
:
:
Plaintiff,
:
:
v.
:
GAVINO ABAYA, et al.,
:
:
Defendants. :
:
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USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: November 5, 2015
______________

14 Civ. 3829 (KPF)
OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:
On May 29, 2014, the Republic of the Philippines (“Plaintiff” or the
“Republic”) commenced this action against Gavino Abaya, Juan Abaya, Susan
Abaya, Diane Dunne, and Barbara Stone (collectively, “Defendants”), asserting
state-law claims for money had and received, unjust enrichment, conversion,
aiding and abetting conversion, constructive trust, and violations of New York
Executive Law § 632-a. Plaintiff’s claims arise out of the distribution of
proceeds from the sale of a painting that was allegedly stolen from the
Republic. Presently before the Court is an unopposed motion by Jose Duran —
on his behalf and as representative of a class of judgment creditors
(collectively, “Class Plaintiffs” or “Movants”) of Imelda Marcos, Ferdinand R.
Marcos, and the Estate of Ferdinand E. Marcos — to intervene as of right in
this case pursuant to Federal Rule of Civil Procedure 24(a), or in the
alternative, to be permitted to intervene pursuant to Rule 24(b). For the

reasons set forth more fully below, Class Plaintiffs’ motion to intervene
pursuant to Rule 24(a)(2) is granted.
BACKGROUND 1
A.

Factual Background
1.

Plaintiff’s Complaint

The Court recites only those Complaint allegations necessary for the
resolution of the instant motion. This action has its genesis in the more than
twenty-year reign of Ferdinand E. Marcos as President of the Republic.
(Compl. ¶ 7). It is alleged that during his presidency, Marcos “systematically
transferred public assets and property to his personal control through various
schemes.” (Id. at ¶ 20). Imelda Marcos, Marcos’s wife, also allegedly
misappropriated assets from the Republic, including a vast collection of
artwork, jewelry, antique furniture, and real property. (Id. at ¶ 22). 2 Among
other allegations of misconduct, Mrs. Marcos purportedly converted a New York
City townhouse owned by the Republic to her own personal use, and adorned
the residence with art, furniture, and antiques purchased with monies stolen
from the Republic. (Id. at ¶ 23).
Immediately prior to the fall of the Marcos regime, a substantial amount
of the artwork and other valuables acquired by Mrs. Marcos vanished from the
New York City townhouse. (Compl. ¶¶ 8, 24). These items were purportedly

1

For convenience, Plaintiff’s Complaint (Dkt. #2) is referred to as “Compl.”; Class
Plaintiffs’ Proposed Intervenor Complaint (Dkt. #9-2) is referred to as “Prop. Compl.”;
and Class Plaintiffs’ brief (Dkt. #10) is referred to as “Mot.”

2

Imelda Marcos is referred to as “Mrs. Marcos” to distinguish her from other members of
the Marcos Family.

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removed by Vilma H. Bautista, Mrs. Marcos’s social secretary and personal
confidant. (Id. at ¶¶ 9, 30). According to the Complaint, Bautista “was fully
aware when she took this property that it did not belong to Mrs. Marcos, but
was, in fact, the lawful property of the Republic.” (Id. at ¶¶ 30, 37). One
particular item that was allegedly stolen by Bautista, and that is at the heart of
this litigation, is Claude Monet’s “Le Bassin aux Nymphease” (the “Water Lily
painting”). (Id. at ¶ 31).
According to the Complaint, in July 2009, Bautista and others plotted to
sell the Water Lily painting. (Compl. ¶¶ 32-35). To this end, Defendants Diane
Dunne and Barbara Stone located a purchaser for the painting and brokered
its sale. (Id. at ¶¶ 18, 19, 40, 83, 91). Defendant Gavino Abaya drafted a
fraudulent letter to assuage the prospective buyer’s concerns over Bautista’s
authority to sell the Water Lily painting, while fully aware that the painting
belonged to the Republic. (Id. at ¶¶ 38-39). On September 14, 2010, the Water
Lily painting was sold for $32 million. (Id. at ¶ 40). Of that figure, $28 million
was deposited into a bank account in Bautista’s name, and the remaining $4
million was transferred to an account held jointly by Bautista, Dunne, and
Stone. (Id. at ¶¶ 18, 19, 40, 55). Dunne and Stone then “withdrew and/or
transferred [the] approximately $4 million [as] so-called commissions[.]” (Id. at
¶ 56). Bautista also transferred $2.7 million that she received from the sale of
the painting to “Gavino Abaya and his children or relatives, Juan Abaya and
Susan Abaya,” in exchange for Gavino’s assistance in the scheme. (Id. at
¶¶ 53, 101).
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As a consequence of the sale, Bautista was indicted by a Grand Jury in
New York County, and subsequently prosecuted by the District Attorney of New
York County (“DANY”). (Compl. ¶¶ 1, 43). DANY subsequently filed an
interpleader action in this Court, The District Attorney of New York County v.
The Republic of the Philippines, 14 Civ. 890 (KPF) (the “Interpleader Action”), to
resolve competing ownership claims over the money and property that was
seized during its prosecution. (Id. at ¶ 1).
2.

Class Plaintiffs’ Proposed Complaint

The allegations in Class Plaintiffs’ proposed complaint generally track
those of the Republic’s Complaint. Specifically, Class Plaintiffs’ proposed
complaint avers that: (i) Mrs. Marcos amassed a collection of artwork, including
the Water Lily painting, during her husband’s tenure as president of the
Republic (Prop. Compl. ¶¶ 25, 27-28); (ii) these works were displayed in a
townhouse in New York City (id. at ¶ 25); (iii) Bautista, with the aid of Gavino
Abaya, Dunne, and Stone, schemed to sell the Water Lily painting (id. at ¶¶ 3239, 43, 58, 84-85, 105); (iv) the proceeds from the sale of the painting were
distributed to Stone, Dunne, Gavino Abaya, Juan Abaya, and Susan Abaya (id.
at ¶¶ 47-48); and (v) Bautista was ultimately indicted in New York County for
illegally conspiring to possess and sell the Water Lily painting (id. at ¶ 50).
Class Plaintiffs and the Republic offer competing theories, however, as to
the rightful owner of the Water Lily painting at the time of the sale.
Specifically, Class Plaintiffs allege that “at no time prior to the date on which
Bautista came into custody of the Water Lily painting, or thereafter, did Imelda
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Marcos transfer title or any other possessory interest in the Water Lily
Painting.” (Prop. Compl. ¶ 30). Accordingly, unlike the allegations of the
Republic in its Complaint, Class Plaintiffs allege that the Water Lily painting
“remained the property of Imelda Marcos.” (Id.). As a consequence, “Bautista’s
custody of the Water Lily Painting, if in any way legitimate, was in her capacity
as bailee, trustee or agent of Imelda Marcos[.]” (Id. at ¶ 31).
Class Plaintiffs’ proposed complaint then asserts an interest in the funds
obtained from the sale of the Water Lily painting by virtue of their status as
judgment creditors of Imelda Marcos. (Prop. Compl. ¶ 52). In this regard,
Class Plaintiffs aver that they obtained a judgment against the Estate of
Ferdinand E. Marcos as a consequence of human rights violations committed
during the Marcos presidency. (Id. at ¶¶ 11-12, 22). Class Plaintiffs further
recite that they obtained a 2011 judgment (the “2011 Judgment”) against
Imelda R. Marcos, Ferdinand R. Marcos, and the Estate of Ferdinand E.
Marcos. (Id. at ¶¶ 3, 11-12, 22-23). Both judgments are registered in the
Southern District of New York (id. at ¶ 24), and Class Plaintiffs’ motion to
intervene is premised on the 2011 Judgment (id. at ¶ 3).
B.

Procedural Background
On May 29, 2014, Plaintiff filed the Complaint in this action. (Dkt. #2).

The Court accepted the instant action as related to the Interpleader Action on
June 18, 2014. On February 19, 2015, the Court issued an oral decision
staying the special proceedings that Class Plaintiffs had commenced against
the Defendants in New York State Court. (See Dkt. #7). The Court then issued
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an Order on April 16, 2015, confirming that the state court proceedings were
stayed in their entirety. (Dkt. #7). Thereafter, on May 12, 2015, Class
Plaintiffs moved to intervene in this action. (Dkt. #8-10). The existing parties
to this litigation have not opposed this motion.
DISCUSSION
A.

Applicable Law
Federal Rule of Civil Procedure 24(a)(2) provides that “[o]n timely motion,

the court must permit anyone to intervene who … claims an interest relating to
the property or transaction that is the subject of the action, and is so situated
that disposing of the action may as a practical matter impair or impede the
movant’s ability to protect its interest, unless existing parties adequately
represent that interest.” Fed. R. Civ. P. 24(a)(2). The Second Circuit employs a
four-factor test in determining whether a party is entitled to intervene under
this provision. See United States v. Pitney Bowes, Inc., 25 F.3d 66, 70 (2d Cir.
1994). Specifically, “[i]ntervention as of right under Rule 24(a)(2) is granted
when an applicant: [i] files a timely motion; [ii] asserts an interest relating to
the property or transaction that is the subject of the action; [iii] is so situated
that without intervention the disposition of the action may, as a practical
matter, impair or impede its ability to protect its interest; and [iv] has an
interest not adequately represented by the other parties.” Id. (citing United
States v. New York, 820 F.2d 554, 556 (2d Cir. 1987); Restor-A-Dent Dental
Labs., Inc. v. Certified Alloy Prods., Inc., 725 F.2d 871, 874 (2d Cir. 1984)); see

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also R Best Produce, Inc. v. Shulman-Rabin Mktg. Corp., 467 F.3d 238, 240 (2d
Cir. 2006).
B.

Analysis
1.

Class Plaintiffs’ Application Is Timely

When analyzing timeliness, courts generally consider: “‘[i] how long the
applicant had notice of the interest before it made the motion to intervene;
[ii] prejudice to existing parties resulting from any delay; [iii] prejudice to the
applicant if the motion is denied; and [iv] any unusual circumstances militating
for or against a finding of timeliness.’” Frankel v. Cole, 490 F. App’x 407, 408
(2d Cir. 2013) (summary order) (quoting Pitney Bowes, Inc., 25 F.3d at 70);
accord MasterCard Int’l Inc. v. Visa Int’l Serv. Ass’n, Inc., 471 F.3d 377, 390 (2d
Cir. 2006).
Applying these factors, the Court concludes that Class Plaintiffs’ motion
to intervene is timely. Although Class Plaintiffs waited nearly a year to
intervene in the action, this delay does not automatically foreclose the instant
motion. See United States v. Yonkers Bd. of Educ., 801 F.2d 593, 595 (2d Cir.
1986) (noting that district courts “must not consider merely the length of time
the litigation or proceeding has been pending, but should base its
determination upon all of the circumstances of the case”). Specifically, the
delay in this case was occasioned by Class Plaintiffs’ efforts to prosecute a
similar action in state court, and once this Court stayed that action, the motion
to intervene was promptly filed. (Mot. 6).

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Perhaps more importantly, any delay in filing the motion to intervene has
not prejudiced the parties, as discovery has not commenced and the parties
have not engaged in dispositive motion practice. See, e.g., Stutts v. De Dietrich
Grp., No. 03 Civ. 4058 (ILG) (MDG), 2005 WL 3158038, at *1 (E.D.N.Y. Nov. 28,
2005) (although motion to intervene was filed almost two years after the action
was commenced, parties were not prejudiced because discovery had not
commenced); Mortgage Lenders Network, Inc. v. Rosenblum, 218 F.R.D. 381,
384 (E.D.N.Y. 2003) (finding no prejudice where discovery was in its initial
stages); see also E.E.O.C. v. Mavis Disc. Tire, No. 12 Civ. 0741 (KPF), 2013 WL
5434155, at *4 (S.D.N.Y. Sept. 30, 2013) (motion to intervene timely when
discovery had not yet begun). Any prejudice to the parties is further belied by
the absence of objections to Class Plaintiffs’ motion. See Stutts, 2005 WL
3158038, at *1 (finding no prejudice where the motion to intervene was
unopposed); Rosenblum, 218 F.R.D. at 384 (noting, with respect to the
prejudice analysis, that it was significant that the motion to intervene was
unopposed).
By contrast, Class Plaintiffs will be severely prejudiced if their motion is
denied. Class Plaintiffs claim an interest in proceeds from the sale of the Water
Lily painting, the property at the heart of this case. This interest is antithetical
to the interest the Republic asserts in the proceeds, and therefore, Class
Plaintiffs stand to suffer clear prejudice if excluded from participating in this
proceeding. See Peterson v. Islamic Republic of Iran, 290 F.R.D. 54, 58
(S.D.N.Y. 2013) (“The Intervenors have made colorable arguments to
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entitlement to a portion of the $1.75 billion in cash proceeds. Given the
difficulty of locating assets of Iran subject to execution in the United States,
barring the Intervenors from satisfying their $32 million judgment surely
constitutes prejudice.”); In re Tribune Co. Fraudulent Conveyance Litig., 291
F.R.D. 38, 41 (S.D.N.Y. 2013) (“As for prejudice, Movants would clearly be
prejudiced if they are excluded from pursuing their alleged interest in any
proceeds recouped from avoided transactions.”); Abondolo v. GGR Holbrook
Medford, Inc., 285 B.R. 101, 110 (E.D.N.Y. 2002) (“Third, the United States may
be severely prejudiced if it is not permitted to intervene in the Third-party
Action, because it will be denied the opportunity to litigate the ownership of
property over which it claims a substantial interest.”). Finally, there are no
unusual circumstances in this case militating against a finding of timeliness.
Accordingly, Class Plaintiffs’ motion is timely.
2.

Class Plaintiffs Claim an Interest Relating to the Property or
Transaction That Is the Subject Matter of the Action

The Second Circuit has explained that for purposes of Rule 24(a)(2), an
intervenor must have a “direct, substantial, and legally protectable” interest in
the property or transaction that is the subject of the underlying action.
Brennan v. N.Y.C. Bd. of Educ., 260 F.3d 123, 129 (2d Cir. 2001) (quoting
Washington Elec. Co-op., Inc. v. Massachusetts Mun. Wholesale Elec. Co., 922
F.2d 92, 97 (2d Cir. 1990)). In this case, the Republic is asserting a claim to
recover the proceeds derived from the sale of the Water Lily painting on the
theory that it, and not any member of the Marcos Family, was the rightful
owner of the painting. On the other hand, Class Plaintiffs’ proposed complaint
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alleges that Mrs. Marcos was the rightful owner of the Water Lily painting, and
by virtue of her ownership, the proceeds from its sale belong to her rather than
the Republic. Critical to the resolution of the instant motion, Class Plaintiffs
hold a judgment registered in this District against Imelda Marcos, which
judgment allows them to execute on Mrs. Marcos’s assets. As a consequence of
Mrs. Marcos’s alleged ownership of the Water Lily painting and the 2011
Judgment, Class Plaintiffs have asserted a sufficiently direct, substantial, and
legally protectable interest in the property that is the subject of the underlying
action. See Lawsky v. Condor Capital Corp., No. 14 Civ. 2863 (CM), 2014 WL
2109923, at *7 (S.D.N.Y. May 13, 2014) (holding that intervenors, who were
secured lenders, had sufficient interest in litigation); Peterson, 290 F.R.D. at 59
(finding that judgment creditor had sufficient interest in the litigation).
3.

Protection of Class Plaintiffs’ Interest May, as a Practical
Matter, Be Impaired by the Disposition of the Action

“As to the third requirement, impairment, the proposed intervenor must
show that his interest may be impaired by the disposition of the action, which
can be satisfied by asserting that as a practical matter, an adverse decision
may compromise the party’s claims.” Delaware Trust Co. v. Wilmington Trust,
N.A., 534 B.R. 500, 509 (S.D.N.Y. 2015) (internal citations, alterations, and
quotation marks omitted). Here, Class Plaintiffs and the Republic have
asserted competing theories of ownership in the proceeds from the sale of the
Water Lily painting. As a consequence, a decision in favor of the Republic
would frustrate Class Plaintiffs’ interests by disposing of the assets from the

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sale of the painting in a manner that potentially deprives them of the ability to
satisfy a portion of the 2011 Judgment.
4.

Class Plaintiffs’ Interests Are Not Adequately Protected by
an Existing Party

The intervenor’s burden of demonstrating inadequacy of “representation
is generally speaking ‘minimal[.]’” Butler, Fitzgerald & Potter v. Sequa Corp., 250
F.3d 171, 179 (2d Cir. 2001) (quoting Trbovich v. United Mine Workers of Am.,
404 U.S. 528, 538 n.10 (1972)). Here, the Republic will not adequately protect
Class Plaintiffs’ interests, inasmuch as each party is asserting mutually
antagonistic claims to the proceeds from the sale of the Water Lily painting.
Moreover, the Republic has purportedly expanded substantial resources
fighting Class Plaintiffs’ judgments and has asserted a claim for constructive
trust against Class Plaintiffs in the Interpleader Action. (Mot. 7-8). In this
situation, the Court finds that Class Plaintiffs’ interests will be inadequately
protected by the Republic.
CONCLUSION
For the reasons discussed herein, Class Plaintiffs’ motion to intervene as
of right is hereby GRANTED. Class Plaintiffs shall file their Proposed
Intervenor Complaint forthwith. The Clerk of Court is directed to terminate
Docket Entry 8.
SO ORDERED.
Dated:

November 5, 2015
New York, New York

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KATHERINE POLK FAILLA
United States District Judge
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