Posting for

Friday, October 23, 1998

by: Bert Rush

brush@firstam.com

POWER OF ATTORNEY/COMPETENCY AND CAPACITY/COMMERCIAL PROPERTIES

A legal battle has been joined in a Manhattan trial court which may decide ownership of the Empire State Building.

It seems the Empire State Building was owned by Prudential Insurance Co. of America back in 1991 when a prominent Japanese businessman, Hideki Yokoi, decided to buy it. Yokoi, who heads Nihon Sangyo Co. Ltd., offered $40 million for the property.

Prudential rejected the offer perhaps, according to a recent article in the National Law Journal, because of Yokoi's reputation as an "aggressive takeover specialist."

Instead, Prudential sold to E.G. Holdings Co. The persistent Yokoi then caused Nihon Sangyo Co. to acquire the stock of E.G. Holdings.

In 1993 the title to the property was transferred from E.G. Holdings to an entity known as "1991 American Trust," for no apparent consideration. Mr Yokoi's signature on the transfer deed was supplied pursuant to a power of attorney making his daughter, Kiiko Nakahara, his attorney-in-fact. It also appears that the principals behind the 1991 American Trust were Ms. Nakahara and her husband, Jean Paul Renoir.

In June 1994 title to the property was transferred from Nakahara and Renoir to Trump Empire State Partners (a/k/a "TESP"), whose principal is Donald Trump. Once again, this transfer appears to have been without consideration, but TESP later gave a mortgage against the property to secure a loan of $11.7 million.

In the wake of these dealings Nihon Sangyo Co. sued TESP, Ms. Nakahara, Mr. Renoir and their entities, claiming among other things that Nihon Sangyo Co. is the true owner of the property and that the transfer to 1991 American Trust pursuant to the power of attorney was unauthorized.

The various defendants filed motions to dismiss which were recently decided in favor of Yokoi and Nihon Sangyo Co. In light of allegations that prior to the transfer to TESP representatives of Yokoi (including Yokoi himself) met with Trump and told him that Yokoi still claimed to own the building, the trial court ruled that Nihon Sangyo Co. had alleged enough to proceed. However, counts alleging conversion and tortious interference with prospective economic advantage were dismissed.

Comment: I don't know if anyone insured this, but it's a classic example of "the stuff you gotta watch" when dealing with a power of attorney.

Of course, if an owner's policy of title insurance is involved one would expect any claim on behalf of TESP to be denied as involving matters "created, suffered, assumed or agreed to" by the insured. Another exclusion involved would cite matters which would not arise if the insured was a b.f.p.

But make no mistake--this is one you'd want to avoid by doing some checking before relying on the power of attorney. As this case shows, even "big" deals involve basic issues--the mishandling of which can result in total failure of title.

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