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January 13, 1983


The opinion of the court was delivered by: HAIGHT


HAIGHT, District Judge (orally):

 The case is before the Court on plaintiff's motion for a preliminary injunction which would restrain certain individuals and a corporation from dealing in any way with certain specified real estate in this state. In order to set forth the reasons for the Court's ruling, it is necessary to go into some detail with respect to the background of the litigation which brings us here.

 The injunctive relief is sought in 82 Civil 8588 which is brought by the plaintiff Netherlands Shipmortgage Corporation, Ltd. against the following defendants: Mark Madias, Irene Madias his wife, Nicholas T. K. Skarvelis, Maria Skarvelis his wife, and an entity known as Real Associates.

 That action, however, was preceded by another action in this Court which bears docket number 82 Civil 6378. In that action Netherlands Shipmortgage Corporation, Ltd. also appears as plaintiff. The individual defendants and the only defendants are Mark Madias and Nicholas Skarvelis. I will deal first with that action.

 The plaintiff is a Bermuda corporation. It made a loan of $1,550,000 to Phoenix, Incorporated, a Liberian corporation. Phoenix used the proceeds of that loan to purchase an oceangoing vessel called the NAGOS, of Liberian flag. In connection with the loan the plaintiff obtained a promissory note of Phoenix, a loan agreement from Phoenix, a preferred mortgage on the vessel herself, assignments of charter hire and other earnings of the vessel and a personal guaranty executed by defendants Mark Madias and Nicholas Skarvelis.

 It appears from the record before me that Phoenix has defaulted in various respects under the loan agreement, at least the plaintiff alleges it has done so. The NAGOS was arrested in Curacao to enforce the preferred ship mortgage and the individual defendants referred to have been sued here on their guaranty. It is that suit on the guaranty initiated by plaintiff and against those defendants which forms the subject matter of 82 Civil 6378. The individual defendants are residents of New York State.

 The second action, 82 Civil 8588, came into being when counsel for the plaintiff, concerned about the good faith of the defendants in the first action, conducted searches of various county clerk offices in the state and there discovered that in October of 1982 a significant piece of real estate had been conveyed by the defendants to their wives without consideration. This was real property which had been listed by the individual defendants in certain schedules which were presented to the plaintiff in respect of the efforts to obtain the loan.

 Because I regarded these transactions as prima facie evidence of fraud, a temporary restraining order was issued on December 23, 1982, and a hearing was ordered. The hearing took place yesterday. The hearing which took place yesterday addressed a series of questions, but the questions considered all relate to a single issue, and that is whether or not the plaintiff has proper standing to invoke the assistance of this Court.

 Alternative grounds are asserted by the plaintiff at least in respect of 82 Civil 6378. The plaintiff contends within the context of that suit, which I consider I must take into account for reasons that will become apparent later on, that it has two alternative sources of standing:

 One is admiralty jurisdiction as particularly conferred upon this Court by the Ship Mortgage Act of 1920 as amended to include foreign ship mortgages in 1954. *fn1" The second alternative ground of jurisdiction and standing is diversity of citizenship.

 The central issue which was addressed yesterday is whether or not Section 1312 of the Business Corporation Law of New York State operates to bar plaintiff from bringing this action. *fn2"

 Section 1312 applies to foreign corporations who are doing business in New York State. It does not apply to foreign corporations who are not doing business in New York State. Consequently, significant parts of the evidence adduced yesterday focused upon the question of whether or not this plaintiff, Netherlands Shipmortgage Corporation, Ltd. of Bermuda was doing business within New York State.

 I do not think, with due respect to counsel, that it can seriously be contended that the plaintiff is not doing business in New York State. What the plaintiff does is to solicit, and if the solicitations are successful, consummate loans on vessels.

 A schedule was received in evidence yesterday which listed some 18 consummated transactions. During the course of the testimony two additional consummated loans surfaced. One of those two is the transaction underlying this litigation which does not appear in the schedule, Plaintiff's Exhibit 1. The other is a transaction which was consummated in September of 1982.

 Of those 20 consummated transactions, 19 of them were partially closed in New York. By "partially closed" I mean this:

 The closing with all of the papers generated by such a transaction was coordinated in New York by counsel to the plaintiff. That is the firm of Burlingham, Underwood & Lord.

 It is true that in respect of these transactions other geographical areas and countries were involved in the closing. At least that is true in respect of some of them. Where other geographical areas and countries become concerned, it is because in order to perfect the ship mortgage under the statute, documents must be registered with the country of the vessel's flag. In consequence, we see closings which take place partially in New York and partially in Panama or in Piraeus or in the Cayman Islands or in Mexico City. This results from the fact that the vessels in question in respect of which the loan was being issued flew the flags of those countries and it was necessary for the reason I have stated for certain documents to be filed in those countries in order to complete the closing and perfect the mortgage. But 19 out of 20 of the plaintiff's transactions were coordinated, orchestrated and put together by counsel for the plaintiff here in New York.

 In respect of most of those closings, the plaintiff's president and chief operating officer, Mr. Vriesendorp, who gave evidence before me, came to New York for the purpose of executing documents which were necessary in order to consummate the loan.

 These are not the only missions which have brought Mr. Vriesendorp to New York on a regular and recurring basis since the plaintiff was formed in January of 1979. He has also come to New York in order to solicit business from such brokers as Mr. Mukaida's employer, another witness who testified before me yesterday.

 It is apparent, for example, that while Mr. Vriesendorp and other representatives of the plaintiff were staying at a New York hotel, they affirmatively responded to an advertisement which Mr. Mukaida's company had placed in the press and as a result of that response negotiations transpired between the plaintiff and Mr. Mukaida's company which led to a series of consummated loan transactions, six in number, together with additional outstanding commitment letters.

 Mr. Mukaida's company is called Interlink Agencies. They are brokers concerned in arranging financings on behalf of shipowners.

 In addition to these contacts in New York with companies such as Mr. Mukaida's, Mr. Vriesendorp maintains contacts with past and prospective borrowers. He comes to New York on a regular and recurrent basis, he performs functions in New York which are essential to the business in which his company is engaged. When on rare occasions Mr. Vriesendorp was not present in New York himself to attend to a closing, the Burlingham firm was given the power of attorney to execute the necessary documents and acted as attorney in fact.

 It is said on behalf of the plaintiff that New York is the capital of the ship financing world and that to engage in a series of such transactions it is necessary to come to New York where expert admiralty counsel such as the Burlingham firm exist and are in a position to render services on a regular basis.

 This is entirely true. New York is the capital of the financial world in shipping, or at least certainly one of the capitals. The Burlingham firm is an excellent firm. I could suggest the names of others at least as well qualified, perhaps, but it is true as a practical matter that companies such as the plaintiff inevitably find themselves in New York. But that does not demonstrate that they are not doing business in New York, it simply shows why as a practical matter it is necessary for them to do business in New York; and that the plaintiff was doing business in New York within the meaning of Section 1312 the evidence really leaves no doubt whatsoever. In consequence, other questions arise.

 Since the plaintiff is doing business in New York, as I have found on the evidence, the question that arises is whether Section 1312 of the Business Corporation Law, which by its terms would seem to apply, does not apply. Is there some other reason which exists outside of the wording of Section 1312 itself which renders that section inapplicable?

 The plaintiff offers a number of reasons why this conclusion should be reached. The first is that this is a suit within the Court's admiralty jurisdiction as conferred by the Ship Mortgage Act.

 It is important to qualify the phrase "admiralty jurisdiction" by the following phrase I have just used: "as conferred by the Ship Mortgage Act." That is so because prior to the enactment of the statute it was quite clear that a mortgage on a vessel was not within the admiralty and maritime jurisdiction. *fn3" In that regard it may be contrasted with a contract of charter party or a contract for security in general average, more commonly referred to as a general average bond. These are contracts which always were regarded as within the admiralty and maritime jurisdiction. A ship mortgage was not so regarded at common law.

 The Ship Mortgage Act, first passed in 1920, was intended to encourage private investment in shipping by making available to lenders the process and jurisdiction of the admiralty court, not only in rem but in personam. *fn4" As I have said, in 1954 the statute was amended so as to extend the admiralty jurisdiction of this Court and processes in rem and in personam to foreign ship mortgages, assuming that certain requisite formalities had been complied with.

 The point, however, is that the Ship Mortgage Act is in derogation of the common law. It creates an admiralty remedy which had not existed before, and at least in jurisdictional terms it is my view that the statute must be construed strictly in accordance with its own terms.

 The federal courts are courts of limited, not general, jurisdiction. That, I think, is a principle which always must be kept in mind. Unlike states courts of general jurisdiction, federal courts have jurisdiction only if it is derived from the Constitution or from a specific act of Congress.

 The specific act of Congress in this case is, as I have said, the Ship Mortgage Act. The section upon which the plaintiff must necessarily depend appears in 46 U.S.C. § 954(a). That section provides as follows:

"Upon the default of any term or condition of a preferred mortgage upon a vessel, the mortgagee may, in addition to all other remedies granted by this chapter, bring suit in personam in admiralty in a district court of the United States against the mortgagor for the amount of the outstanding mortgage indebtedness secured by such vessel or any deficiency in the full payment thereof."

 The operative phrase is "against the mortgagor." That remedy in derogation of the common law the Ship Mortgage Act gives to lenders. It gives lenders no further or different remedy. Plaintiff in this case seeks to sue not the mortgagor, but the guarantor of the loan arrangements. The mortgagor is Phoenix. Phoenix is not the defendant; individual guarantors are the defendants.

 I find no authority in the statute or its legislative history or in case law to which I have been cited or in case law which my own research reveals which would extend the remedies of the Ship Mortgage Act to a guarantor. *fn5" The suit lies against a different party. It is founded upon an entirely different contract.

 Some ship mortgages are accompanied by guaranties, perhaps the majority of them are, but they do not need to be. A lender, if he wishes, may rest content with the mortgage upon the vessel, the promissory note issued by the borrower (the mortgagor) and the assignment of freights or charter hire. It is not necessary or essential to the viability of a ship mortgage, domestic or foreign, under the statute to have it accompanied by a guaranty. The guaranty is a separable and separate contract and I see nothing in the authorities to permit a suit against the guarantor to be brought within the Ship Mortgage Act. The plaintiff cites me to no such authority.

 Reliance is had upon admiralty actions against the guarantors of charter parties *fn6" or against the issuers of general average bonds. *fn7" But for the reasons already stated, those cases are entirely inapposite. One who guarantees the performance of a contract recognized as maritime under the general maritime law and always so recognized may fairly be said to have taken upon himself an obligation cognizable in the admiralty. In my view, that simply does not apply to the task of statutory construction which falls upon me insofar as the plaintiff seeks to invoke the provisions of the Ship Mortgage Act.

 I hold that the provisions of that statute are not available to this plaintiff in this suit ...

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