The opinion of the court was delivered by: DUFFY
The First National Bank of Chicago ("FNBC") lent $24.9 million to Anastasios E. Karavias and the several corporations of which he is sole shareholder. The loan agreement dated December 23, 1974, granted FNBC a first preferred mortgage on eight vessels owned by Karavias controlled corporations, a pledge of all shares of stock in Karavias corporations, and a personal guarantee by Karavias for the total amount of the loan. By the fall of 1975, Karavias was in substantial default on the loan.
On September 17, 1975, Karavias and nine corporations which he controls ("the plaintiffs") brought suit against FNBC to enjoin Bank action against the collateral. An evidentiary hearing was held before me. Following the conclusion of the hearing, I was advised that the parties were making substantial progress in settling their dispute. On October 24, 1975, the parties appeared before me and presented an eighteen page agreement which was made an order of this Court ("consent order").
Eight months later, the parties returned to this Court with cross-accusations of non-compliance with the consent order. Plaintiff moved for an order compelling the defendant to comply with paragraph 17 of the consent order or, in the alternative, to have the entire order rescinded. The defendant cross-moved to cite plaintiffs in contempt and to compel performance of the obligations contained in paragraphs 7, 10, 16 and 23. I heard testimony from representatives of both parties regarding their performance. Attempts to settle the disagreement since that time have been unsuccessful. Reluctantly, I must intervene and decide the conflicting claims of performance.
The plaintiffs' primary contention is that the FNBC has failed to honor its obligations under paragraph 17. The FNBC responds that plaintiffs have not complied with the express conditions precedent to the Bank's performance under paragraph 17.
Paragraph 17 provides that "[after] performance, and only after performance, of the actions specified in paragraphs 6, 7, 8(a), 14 and 16" the defendants will: (1) discontinue its action in the English courts against Karavias on his personal guaranty; (2) release the vessels TASSOS V and ST. NICHOLAS II from the mortgage; (3) release its money claims on those two vessels; and (4) release and redeliver to Karavias the shares of stock which it holds in the Saint Anastasios Maritime Company Limited and Saint Grigorousa Maritime Company Limited. The parties have stipulated that plaintiffs have complied with paragraphs 6, 8A, and 14; performance under paragraphs 7 and 16 is in dispute.
In part, paragraph 7 provides that:
"The Saint Eirene Maritime Company Limited shall terminate or assign without recourse to a company designated by plaintiff Anastasios E. Karavias its management business and all contracts for the management of any vessels whatsoever and shall not thereafter be responsible or liable for the management of any vessels whatsoever."
On January 7 and March 15, 1976, the attorney for the plaintiffs submitted to the FNBC purported assignments of the St. Eirene Maritime Company Limited ("St. Eirene Maritime") to Magellan, Inc., of Monrovia, Liberia. Apart from the sufficiency of these assignments, which will be taken up shortly, defendant asserts that paragraph 7 has not been complied with in that Saint Eirene Maritime continues to perform management functions.
As evidence of Saint Eirene Maritime's continued management and control, defendant has introduced a copy of a report to the Greek Ministry of Mercantile Marine in Piraeus submitted on stationery bearing the letterhead of Saint Eirene Maritime. The report dated April 1, 1976 opens with the following statement: "[we] have the honor to advise you that: 1. Our company represents the following vessels . . . ." Nine vessels are then listed. It closes "For Saint Eirene Maritime Co., Ltd. (signature) The Manager." Karavias testified that the signature appearing on the letter is his. Karavias attempted to explain away the report as "an oversight of the accounting clerk [who] wrote it . . . ."
Attached to the report was a statement of personnel employed by Saint Eirene Maritime; the list contained eighteen names. On cross-examination, George Tzimopoulos testified that at the time the consent order was signed, Saint Eirene Maritime employed eighteen individuals. Nevertheless, on April 1, 1976, at a time when Saint Eirene was purportedly out of the ship management business and had agreed not to incur any liabilities, it employed eighteen people. As of July 1976, Saint Eirene still employed sixteen of the original eighteen employees. Some of these employees have threatened to sue the Bank for payment of their salaries (see Defendant's Exhibit K). Avoidance of suits of this nature, which might impair the Bank's collateral, was one of the apparent reasons for the inclusion of paragraph 7.
The April 1 report, which indicates that Saint Eirene continued to represent nine vessels, coupled with the continuation of the same staff from a time when the company was actively engaged in the ship management business to a time when it claimed to have ceased all such functions, leads me to the conclusion that plaintiff has not complied with paragraph 7. It must be remembered that plaintiffs have moved to compel the defendants to comply with paragraph 17. Since plaintiffs' performance under paragraph 7 is an express condition precedent to defendant's performance under paragraph 17, the plaintiffs must satisfy this Court by the preponderance of the evidence that they have met all requirements of paragraph 7. Although proof on the issue of the assignment would seem to be peculiarly within plaintiffs' control, they have failed to adequately demonstrate their performance.
The Bank also contends that the assignment to Magellan is defective as a matter of law because it fails to assign pre-existing liabilities of the vessels. The plaintiffs argue that paragraph 7 contains no such requirement. The issue carries important practical consequences. Apparently, four of all vessels owned by Saint Eirene Maritime, but not mortgaged to the Bank, are in arrears in their payments to the N.A.T., the Greek National Seaman's Pension Fund. The Bank of Nova Scotia, which had acted as guarantor of these obligations, has filed suit in the Court of First Instance in Piraeus (No. 111/1976) against Saint Eirene to recover payments made to N.A.T. on behalf of the vessels.
The record before me offers little guidance in reconstructing the intention of the parties with regard to paragraph 7. The briefs do not adequately focus upon the issue. The parties, therefore, will be permitted to file additional briefs. Should it be necessary, I will take additional testimony ...