Duran v. Bautista, Index No. 654261/2012, 4/7/15 (Ramos, C.)

Failure to join a necessary party; CPLR 1001(b)

By: John-Paul Yezzo | Senior Staff Writer

 Ferdinand Marcos (“Marcos”) served as president of the Republic of Philippines (“the Republic”) until he was removed from power in 1986. Throughout his tenure, Marcos committed massive human rights violations and engaged in corrupt practices, including the embezzlement of state funds. After his removal, several of his victims and victims’ families filed suits against him, seeking damages for torture, execution, and kidnappings. These lawsuits were later consolidated and certified as a class action comprising approximately 10,000 individuals (“the Class”). After Marco died, the Class obtained judgments of over $2.3 billion against his estate. However, enforcement of these judgments proved difficult because the Marcos family concealed much of their assets.

Vilma Bautista (“Bautista”), the personal secretary to Marcos’ wife, illegally sold valuable works of art allegedly received from the Marcos family. The New York District Attorney (“the DA”) convicted Bautista of conspiracy, criminal tax fraud, and offering a false instrument related to the sales of highly valuable paintings. The DA also seized more than 170 items of property from Bautista.

In 2012 and 2013, the Class filed petitions for the turnover of $32 million in proceeds from a painting and the turnover of physical paintings, naming, among others, Bautista and the DA as respondents. The petitions were consolidated and asserted claims against respondents including fraud, conversion, and unjust enrichment. Furthermore, the DA filed an interpleader action against, among others, the Republic to determine the rightful owner of the seized property in order to be dismissed as a party.

Respondents filed a motion to dismiss pursuant to CPLR 1001[1], CPLR 3211(a)(4), and/or CPLR 3211. Most notably, under CPLR 1001, respondents claimed that the action must be dismissed for failing to join a necessary party, the Republic.

CPLR 1001(a) 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.” Under CPLR 1001(b), joinder is mandatory if the nonparty is subject to the court’s jurisdiction, but, if jurisdiction can be obtained only by the entity’s consent or voluntary appearance, the court considers five factors to determine whether joinder of the absentee may be excused: (1) whether plaintiff has another effective remedy in case the action is dismissed on account of the non-joinder; (2) the prejudice which may accrue from the non-joinder 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. The court must consider all five criteria and no single factor outweighs the others.

Because Marcos embezzled state funds, the Republic was a necessary party, but it did not appear in this action. Therefore, the court excused the Republic as a necessary party by employing a five-factor analysis for excusal, and concluded that the factors weighed in favor of the Class.

First, the court concluded that the Class could potentially be left without an effective remedy if their action was dismissed. In the interpleader action, the Class may be unable to recover the proceeds from the sale of the stolen artwork because the paintings would be in custodia legis, which 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. The first factor weighed in favor of the Class.

Second, the court held that, although the Republic’s national interest may be prejudiced, it voluntarily chose to exercise its sovereign immunity and, therefore, its participation was not necessary to make an effective judgment. The second factor weighed in favor of the Class.

Third, the court held that the Republic would not be prejudiced by its absence because it asserted its sovereign immunity and voluntarily chose not to participate. Additionally, the Republic had alternative remedies available through the interpleader action. The third factor weighed in favor of the Class.

Fourth, the court held that it lacks a feasible protective provision to adequately safeguard each of the party’s interests because the Republic chose not to participate. However, if the Republic continued to elect not to participate, the Class “should not be forced to forego a resolution as to the disposition of this property.” The fourth factor weighed slightly in favor of respondent.

Finally, despite the Republic’s absence, the court held that an effective judgment may be rendered in this action because 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.” The fifth factor weighed in favor of the Class.

Upon balancing the five factors, the court held that they weighed heavily in favor of the Class. Accordingly, joinder of the Republic as a party to this petition was excused.

Duran v. Bautista, Index No. 654261/2012, 4/7/15 (Ramos, C.).

[1] This summary deals only with the CPLR 1001 Failure to Join a Necessary Party claim.