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September 6, 1984

MORGAN GUARANTY TRUST COMPANY OF NEW YORK, et al., Plaintiffs, against HELLENIC LINES LIMITED, et al., Defendants.

The opinion of the court was delivered by: SWEET


Plaintiffs Morgan Guaranty Trust Company of New York ("Morgan"), Continental Illinois National Bank & Trust Company of Chicago ("Continental"), National Westminister Bank USA ("Natwest"), Banque de la Societe Financiere Europeenne ("BSFE") and SFE Banking Corporation Limited ("SFE") (collectively "plaintiff Banks") have moved for an order approving as reasonable administrative costs certain expenses incurred in connection with the maintenance and sale of the vessels arrested in this consolidated actions. In addition, International Terminal Operating Co., Inc. ("ITO") has moved for an order permitting certain container storage expenses, unreimbursed gate charges, Trailer Inspection Report charges, container mounting and grounding charges, and advertising charges paid by ITO to be treated as administrative costs. Finally, North American Refractories Co., Inc. ("NARCO") has moved for an order designating the costs incurred by Refractories in connection with the discharge of cargo from the M.V. HELLENIC STAR as administrative costs. For the following reasons, the motions of plaintiff Banks and NARCO are granted in pertinent part. ITO's motion is granted with respect to advertising expenses in the amount of $461.48. The remainder of ITO's motion is granted in part and denied in part.

 Factual and Procedural History

 On November 23, 1983, Morgan, Continental, Natwest and BSFE commenced the 83 Civ. 8560 action against Hellenic Lines Limited ("Hellenic") in personam and the M/V HELLENIC INNOVATOR ("INNOVATOR"), the M/V HELLENIC IDEAL ("IDEAL") and the M/V HELLENIC STAR ("STAR"), in rem, seeking to foreclose on those vessels under the ship mortgages. Pursuant to Supplemental Rule C of the Supplemental Rules for Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure, a warrant of arrest was issued, and the United States Marshal for the Southern District of New York (the "Marshall") arrested the STAR on November 25, 1983, the INNOVATOR on November 28, 1983, and the IDEAL on November 29, 1983. Numerous other parties also arrested the vessels or intervened in the action commenced by plaintiff Banks.

 At the time of the arrests, the STAR was discharging cargo at the ITO terminal in Brooklyn, and the IDEAL and INNOVATOR were at anchor in New York. On November 30, 1983, the Marshall informed attorneys for plaintiff Banks that the United States Coast Guard required the removal of the IDEAL and the INNOVATOR from anchorage to a berth within twenty-four hours. On December 1, 1983, plaintiff Banks obtained an order from this court directing the Marshall to permit the IDEAL and INNOVATOR to be shifted to a berth, the IDEAL, INNOVATOR and STAR to be discharged, and the IDEAL and INNOVATOR then shifted to an appropriate anchorage or lay berth. The court further directed that "all expenses attendant to the execution of [the] Order, to include but not be limited to pilotage, towage and wharfage is for the initial account of plaintiff, subject to further order of the court . . ." In addition, the court ordered plaintiff Banks to indemnify the Marshal against all expenses, losses or injuries arising out of the order. On December 9, 1983, the court directed the Marshal to permit the STAR to be moved and again required plaintiff Banks to indemnify the Marshal.

 On December 2, 1983, CTI-Container Leasing Corporation ("CTI") and Transamerica ICS, Inc. ("ICS") commenced an action in the Eastern District of New York, 83 Civ. 5284, and attached certain Hellenic containers bearing the prefix HLLU at the ITO Terminal. The attachment effectively prohibited ITO from delivering cargo stowed in those containers. In addition, Itel Containers International Corporation arrested its containers pursuant to Rule D of the Supplemental Rules for Certain Admiralty and Maritime Claims. At the same time, Hellenic announced to the shipping community that it was suspending all service from New York. Hundreds of Hellenic customers demanded the return or delivery of their respective cargoes.

 To permit loaded containers to be moved from the terminal, Hellenic, ITO, CTI and ICS entered into a stipulation and order (the "original stipulation"), signed by the Honorable Jack B. Weinstein on December 7, 1983. Under the terms of the original stipulation, ITO was permitted to release the attached containers if the shipper or consignee provided a security deposit to Hellenic. Hellenic was required to refund the security deposit "upon the safe return of the container[s] to the Terminal, or to any other storage area designated by the Court, within four weeks of the date of release by the Terminal in the same order and condition as when received from ITO." ITO was required to prepare an equipment interchange report with respect to the condition of each container released from the terminal both at the time of release and the time of return.

 On December 7, 1983, at a hearing before this court, the Marshal expressed concern about the scope of the vessel arrests and, in particular, whether containers on board the INNOVATOR, STAR and IDEAL were "appurtenances" of the vessels and therefore subject to the arrests, a position adopted by T. Smith at the hearing. The court orally adopted the original stipulation in open court, extending it to include HLLU containers and all other containers delivered to the terminal for loading on Hellenic vessels or discharged from Hellenic vessels onto the terminal.

 As a result of the security deposit requirement, the ITO terminal became overburdened with emply containers. The discharge of the INNOVATOR on or about December 9, 1983 dumped hundreds of additional containers onto the terminal. The stripping (or unloading) of house-to-house containers for Hellenic customers who were unwilling or unable to post the requisite security added dozens more.

 On December 10, the M/V HELLENIC SPIRIT ("SPIRIT"), laden with cargo, arrived in New York and was promptly arrested. On December 12, 1983, plaintiffs Morgan and SFE filed a complaint against Hellenic, Transpacific Carriers Corporation ("Transpacific") et al., in personam, and against the SPIRIT, in rem, seeking foreclosure of the first preferred mortgage held by Morgan and SFE on the SPIRIT because of Transpacific's failure to pay certain of Hellenic's obligations which it had unconditionally guaranteed. Morgan and SFE arrested the SPIRIT on December 12, 1983. The congestion at the ITO terminal, however, prevented the immediate discharge of the SPIRIT, and no other terminal or storage facility was willing or able to discharge the SPIRIT or to store the empty containers without payment in advance.

 The plaintiff Banks made payments for essential lubricating oil, water and provisions for the SPIRIT. On December 23, 1983, plaintiff Banks obtained an order permitting the shifting and discharge of the SPIRIT and explicitly deeming the plaintiff Banks' reasonable expenses to be administrative costs to be deducted as a first lien out of the proceeds of sale of the vessel.

 On January 9, 1984, the court signed on order designed to ease the congestion at the ITO terminal. Under the terms of the order, as subsequently modified, all lessors and owners of empty Hellenic containers were directed to pick up all containers in which they claimed an interest no later than Thursday, January 19, 1984. Any containers left on the terminal after January 20, 1984 would be assessed demurrage at rates prescribed in the order. ITO was required to publish notice of the order in the "Journal of Commerce" on Wednesday, January 11, 1984 and Thursday, January 12, 1984, "such advertising costs being chargeable by ITO as an administrative expense against the sale proceeds of the SPIRIT."

 All in rem actions against the INNOVATOR, IDEAL, STAR and/or SPIRIT were consolidated on January 24, 1984. *fn1" Pursuant to the order of this court dated February 3, 1984, the STAR, IDEAL, SPIRIT and INNOVATOR were sold free and clear of all liens and encumbrances. ...

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