The family of a couple that was gunned down in Israel by terrorists has a right to a jury trial in a declaratory judgment action seeking to collect $116 million from the Palestinian Liberation Organization, a Manhattan judge has ruled.

The vexing issue before Supreme Court Justice Shirley Werner Kornreich was whether there is a right to a jury trial when the sole cause of action is for declaratory judgment, which, as a product of legislation, is neither equitable nor legal in nature.

Because the nature of the slain family’s collection claim is more legal in nature than equitable, Justice Kornreich concluded in Strachman v. The Palestinian Authority, 102101/06, the case should be tried before a jury.

The family of Yaron Ungar, an American rabbinical student, and his pregnant wife, who were gunned down in a 1996 attack attributed to Hamas, are seeking to recover on a $116 million default judgment entered in 2004 by a federal judge in Rhode Island against the Palestinian Authority, the Palestinian Liberation Organization and Hamas.

In the declaratory judgment action, the administrator of the couple’s estate, attorney David Strachman of Rhode Island, is seeking a ruling that will allow the judgment to be satisfied out of a custodial account at Swiss American Securities in Manhattan, holding more than $100 million in financial instruments.

Strachman initially sought control of the funds, which were held in an account under the name of the “Palestinian Pension Fund for State Administrative Employees of the Gaza Strip.”

The Palestinian Pension Fund objected to the attempt to use the funds to satisfy the judgment. Strachman countered that the fund was merely “an alter ego” for the Palestinian Authority.

In the meantime, Swiss American Securities, a U.S. subsidiary of Credit Suisse, has pledged not to move the funds, both sides said.

With cross motions for summary judgment before Kornreich, there is still a possibility the case will not be tried, said Charles L. Kerr of Morrison & Foerster, who represents the Palestinian Pension Fund.

Kerr added that his client “disagrees with the ruling” allowing a jury trial, and is considering an appeal.

Last year, Kornreich rejected a similar effort. In that case, she concluded that the monetary authority, which is Palestine’s central bank, is “a separate juridical entity” from the Palestinian Authority. An appeal of that ruling has been argued in the Appellate Division, 1st Department earlier this year, and a decision is being awaited, said Robert J. Tolchin of Jaroslawicz & Jaros, who represents Strachman.

A similar issue is raised in the current declaratory judgment action involving the account at Swiss American Securities.

Several factors led Kornreich to conclude that a jury trial is permitted in this case because the nature of Strachman’s claim is more “legal” than “equitable” as those terms are recognized in the common law.

First, she wrote, because both the Palestinian Authority and the Palestinian Liberation Organization have refused to pay the $116 million judgment, the declaratory judgment action must be viewed as “a means of executing the money judgment.” At common law, she wrote, “law judgments are enforceable by execution” while equity judgments are enforced by contempt.

Further, Kornreich wrote, Strachman’s claims, if proven, would support an award of money damages on theories “such as fraud and conversion.”

Strachman claims that the Palestinian Pension Fund account is being held for “a fictitious entity” which is “an alias” for the Palestinian Authority and Palestinian Liberation Organization, the judge said.

Setting up the account in that fashion was “part of a broader scheme” by which the Palestinian Authority and Palestinian Liberation Organization “used a number of aliases and fictitious entities ‘to shield its assets from creditors, law enforcement agencies and tax authorities,’” said the judge, quoting the complaint.