The opinion of the court was delivered by: HERLANDS
HERLANDS, District Judge:
Five defendants (all except the sixth defendant Aris Steamship Co. Ltd.) apply for an order permitting these defendants to post an approved undertaking in the amount of Five Hundred Thousand Dollars ($500,000), to cover the amount of plaintiff's claim, with accrued interest and costs, and payment of the marshal's fees and expenses, thereby discharging the attachment of these defendants' property. The motion is brought pursuant to Rule 12 of the Rules of Admiralty and Maritime Claims for the Southern and Eastern Districts of New York implementing Supplemental Admiralty Rule E and also under New York CPLR § 6222.
Plaintiff's complaint, filed on August 8, 1968, alleges as a first claim breach of a time charter by Aris Steamship Co. Ltd. (hereinafter Aris) and damages in the amount of Five Hundred Thousand Dollars ($500,000). Reiterating the allegations of the first claim, the second claim further alleges that the remaining defendants were, in effect, mere alter egos of Aris and, as such, should be held responsible for Aris' acts. Plaintiff demands judgment against these defendants in the same amount.
On August 9, 1968, Judge Pollack ordered an attachment of property of all defendants in the possession of various named concerns, including the Israel Discount Bank, Ltd. Defendants moved, inter alia, to vacate the attachment as against all defendants other than Aris, which motion was denied by Judge Tenney in a comprehensive opinion filed on August 29, 1968.
These same defendants now seek to substitute a bond in an amount sufficient to cover the damages sought to be recovered by plaintiff.
In opposing this motion, plaintiff argues that the Court, in its discretion, should condition the posting of the bond and discharge of the attachment upon the furnishing by Aris of a similar bond in the amount of Three Hundred Thousand Dollars ($300,000), because "[if] Aris is defunct, then plaintiff faces the possibility that its overwhelming case for damages against Aris will be practically worthless if a judgment is obtained solely against Aris." Plaintiff's Memorandum on Certain Defendants' Motions To Post Security and Vacate the Attachment Order, at 4. Moreover, plaintiff claims that any assets still possessed by Aris would be transferred to the other defendants by reason of the "close interrelationship of the parties by which assets can be effectively diverted from Aris to others * * *." Id.
Defendants argue that Supplemental Admiralty Rule E(5)(a), Local Admiralty Rule 12 and CPLR § 6222 mandate the Court's order approving the posting of security and discharging the attachment. Alternatively, defendants contend that the Court, in its discretion, should permit the posting of security and discharge because the attachment is inflicting "incalculable harm" upon them and is operating as a penalty without furnishing any increased security to plaintiff.
Supplemental Admiralty Rule E(5)(a) relevantly provides that whenever a maritime attachment is issued, "the execution of such process shall be stayed, or the property released, on the giving of security, to be approved by the court or clerk * * *."
Local Admiralty Rule 12 provides that property seized by the marshal may be released by paying into court the amount alleged due, with interest and costs.
Rule 5 of the Rules of Practice in Admiralty and Maritime Cases - rescinded as of July 1, 1966, when the Federal Rules of Civil Procedure, as amended, were made applicable to admiralty cases - provided that, where goods are attached, "the attachment shall be dissolved by order of the court to which the process is returnable, on the giving of a bond or stipulation * * *."
The Advisory Committee's Note points out that Rule E(5) "restates the substance of Admiralty Rule 5," and that it also incorporates the provisions of 28 U.S.C. § 2464 (1964) which directs the marshal to discharge the attachment when an adequate bond is posted. Proposed Supplemental Rules For Certain Admiralty and Maritime Claims, 39 F.R.D. 146, 159 (1966).
CPLR § 6222 provides that a defendant whose property has been levied upon may move to discharge the attachment, and that defendant, upon making this motion, must give an undertaking equal to the value of the property or debt sought to be discharged.
Rule E(5)(a) does not explicitly direct the Court to order the discharge of the attachment upon the giving of security nor does it unambiguously place the matter within the sound discretion of the Court. Further, neither Local Admiralty Rule 12 nor CPLR § 6222 definitively guides the Court on this question. But the predecessor provisions to Rule E(5) do indicate that a defendant was entitled of right to the release of attached property upon the posting of an adequate sum; and there is nothing in either Rule E(5)(a) or Local Rule 12 that indicates any intended change on this point. The Rules now in effect appear to differ from the pre-existing Rules and statutory provision only with respect to the amount of the bond - an issue not contested on this motion - and the difficult question of the amount of the bond apparently was the basis for requiring court approval.
Even if the Court were not compelled, as a matter of law, to substitute a bond for the attached property and the issue were entirely one of judicial discretion, the Court would conclude, as it does, that the bond should be accepted and the attachment discharged. Defendants have been subjected to severe economic hardship by the attachment which, in the circumstances of this case, does not provide any greater security for plaintiff and which hardship would be relieved through the posting of a bond.
Nor has plaintiff demonstrated either in its memoranda or at oral argument how it would be prejudiced by discharging the attachment upon the posting of the proffered security. Plaintiff asserts that, if judgment were entered against Aris solely, there is a distinct possibility that plaintiff would be unable to satisfy its judgment. The salient fact is that, if the attachment were to remain and judgment were entered against Aris solely, plaintiff would be unable to apply the attached property in satisfaction of its judgment.
In view of the foregoing, the motion is hereby granted. The Court approves the discharge of the attachment upon the posting of security in the amount of Five Hundred Thousand Dollars ($500,000) to cover the amount of plaintiff's claim, with accrued interest and costs, and ...