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September 28, 1984

DIMITROIS D. SIRINAKIS, Plaintiff, against COLONIAL BANK, Defendant.

The opinion of the court was delivered by: LOWE



 Plaintiff Dimitrios D. Sirinakis ("Sirinakis") commenced this maritime and diversity action against defendant Colonial Bank ("Colonial" on "the bank"), seeking to recover compensatory and punitive damages up to $96,000,000 for breach of contract and intentional tortious conduct designed to destroy plaintiff's business and deprive plaintiff of ;his revenue-earning property, i.e., three ocean-going vessels.

 Before the Court is a motion for dismissal by Colonial brought pursuant to Rule 12(b)(6). Both parties have relied on facts and documentary proof outside the pleadings, *fn1" therefore, the Court will treat this motion as a motion for summary judgment. Fed. R. Civ. P. Rule 12(b). *fn2"



 Plaintiff Sirinakis, a Greek citizen, was at all times relevant hereto the president of three shipping companies ("shipping companies"): Gave Shipping, Incorporated, a Panamanian corporation, which owned the vessel Margareta, Ademodea Shipping Company, a Greek corporation which owned the vessel Anemodea, and Thalassarchis Shipping Company, a Liberian corporation which owned the vessel Paralos.Sirinakis is principle shareholder in Anemodea and Gave. He is 50% shareholder in Thalassarchis, the remaining 50% of the shares being owned by Vassilios Fassoulis, a Greek national.

 In February 1981, Anemodea Company and Gave Company borrowed $2,400,000 from Colonial. *fn3" This loan was secured by, among other things, a mortgage on the Paralos. Fassoulis and Sirinakis each guaranteed Thalassarchis' obligation to Colonial. The loan agreements contained an acceleration clause which entitled Colonial to demand payment of the entire outstanding indebtedness of the loan in the event that the borrower failed to pay the principle of interest when due.

 On or about February 19, 1982, a semiannual payment of $686,080 was due Colonial from Gave and Anemodea pursuant to the February 17, 1981 loan agreement. The shipping companies did not make this payment. Elwim Aff. P8; Sirinakis Aff. P11. On February 23, 1982, Colonial informed Gave and Ademodea of its intention to accelerate the debt and demanded payment in full of the February 17, 1981 loan in the total amount of $2,137,923.50.

 The Letter Agreement

 On February 24, 1982, the parties began negotiations in New York City respecting the shipping companies' defaults. Among those present at the February 24, 1982 meeting were Mr. Martin Northcutt, on behalf of Colonial, Mr. Sirinakis, and Sirinakis' attorneys, Messrs. Joseph Smith and John Osborne. During the negotiations, Sirinakis requested, on behalf of the ship-owning companies, a moratorium on principal and interest payments in order to allow time for the shipping market to rebound and to put the companies in a position to be able to repay the debt. Sirinakis Aff. P12.

 The result of the negotiations was a letter in which Colonial specified certain conditions under which it was "prepared to postpone taking any action to enforce its security in accordance with the . . . [Aug. 28, 1981 and Feb. 17, 1981] Loan Agreement." See February 25, 1982 letter, Defendants' Exhibit 2. Included in these conditions were the following:

 (1) On or before March 12, 1982, an agreement for the sale of the Anemodea was to be completed; this sale was subject to Colonial's prior approval of the purchaser and financial assistance.

 (2) By March 26, 1982, the Paralos was to be delivered or fixed for delivery within 14 days thereafter into a time charter for a period of not less than 12 months.

 The letter stipulated that if these conditions were met and if no creditors had taken any legal steps against any of the vessels, Colonial would renegotiate the terms of hte loan agreements so that the shipping companies' future obligations under the renegotiated agreements could be met out of the shipping companies' existing cash flow. At that point, the notice of demand would be withdrawn by Colonial. *fn4"

 The letter further indicated that, to protect its security, Colonial might have to make further cash advances. Although Colonial was "not in any way obliged to make any such advances, . . . it would be prepared to give favorable consideration to such advances being made so as to enable . . . [Sirinakis] to perform the agreement contained . . . [therein]."

 Although the letter specified that Colonial was not obliged to make any further advances, Sirinakis alleges that at the February 24, 1982 meeting, Mr. Northcutt assured him orally that Colonial would be willing to advance funds to allow the contiued operation of the vessels. Sirinakis alleges that Northcutt agreed to provide $35,000 to bunker the Margareta. In addition, Sirinakis claims that Northcutt agreed that if the Paralos were to put into Malta, Colonial would provide the necessary money to arrange for crew changes and supply necessary fuels and supplies. *fn5"

 Sirinakis further alleges that he took steps to satisy the condition in the letter agreement that he sell the Anemodea, but that Colonial's actions hindered this attempt. He alleges that on or about February 25, 1982, he advised Colonial that he had a potential buyer willing to pay $1,000,000 for the Anemodea. On March 3, 1983, he advised Colonial that the buyer was a corporation controlled by a Mr. E. Geronimakis. He indicated that if Mr. Geronimakis were not acceptable, another potential buyer would be available. On March 4, 1982, Colonial telexed that Mr. Geronimakis was, in principle, an acceptable buyer. However, on March 5, Colonial advised Sirinakis that it had no knowledge of Geronimakis and was unabale to determine whether he was acceptable.

 The Arrest of the Ships

 The Anemodea

 During the week of March 1, 1982, the Anemodea was formally arrested in Avonmouth, England. One of the arresting companies was Hellarabia, a fuel supplier, which asserted a statutory maritime lien for unpaid bunker bills in excess of $130,000. On March 3, 1982, Sirinakis wired Colonial requesting that Colonial transfer $157,000 in order to avoid "disastrous situations". Colonial did not send this money.

 On March 16, 1982, Colonial separately effected an arrest of the vessel, by process issued in an action seeking foreclosure of its mortgage, commenced in the Admiralty Court of the Queen's Bench Division of the High Court of Justice in London (the "London Admiralty Court").

 By order of the London Admiralty Court dated March 22, 1982, the Anemodea was sold pendente lite. By final decree and judgment dated April 6, 1982, the London Admiralty Court: (i) "pronounced for the force and validity of the Greek mortgage Deed herein dated 21st February 1981", and (ii) rendered judgment in favor of Colonial in the amount of $2,061,308.40, the amount adjudged to be outstanding owing to Colonial under the joint and several loan agreement between Colonial as lender and Anemodea Company and Gave company as borrowers.

 Since the loan was a joint and several loan to Anemodea Company and Gave Company, default by either company entitled Colonial to judgment for the full amount of the loan, as the London Admiralty Court ordered. Although Ademodea Company, Gave Company and Sirinakis had notice of the foreclosure action in the London Admiralty Court, none of them appeared in that proceeding.

 The Margareta

 On or about March 3, 1981, the Margareta was arrested in Augusta, Sicily by Hellarabia on a claim in excess of $170,000. Sirinakis informed Colonial of this arrest and requested funds to settle the claim. Colonial did not provide the funds. However, Colonial eventually did arrange a settlement with Hellarabia and the vessel was released.

 After release from arrest, Colonial instructed the Margareta to proceed to Piraeus, Greece, where Colonial arrested the vessel. On November 8, 1983, a judgment of the courts of Greece was rendered in favor of Colonial against the Margareta. Neither Sirinakis nor the shipping companies appeared to defend the foreclosure.

 The Paralos

 On or about February 28, 1982, Thalassarchis defaulted on its loan from Colonial by failing to make a $386,432.99 payment.On March 2, 1982, Colonial gave notice of default and of its election to accelerate the debt and demanded payment of $1,895,779.68. Sirinakis alleges that, on March 4, 1982, he had a conversation with Mr. Northcutt in which Northcutt indicated that, although the Anemodea and the Margareta had been arrested, Colonial nonetheless considered the February 25, 1982 letter agreement to be in effect, Sirinakis claims that Northcutt demanded that Sirinakis direct the Paralos to enter port in Malta. Sirinakis alleges that in reliance on this confirmation, he arranged for the Paralos to enter port at Malta.

 When the Paralos entered port, she was arrested by a supplier.Sirinakis alleges that he made numerous requests to Colonial to advance funds. Colonial did not comply.Instead, the bank joined in the arrest and began foreclosure proceedings. Sirinakis did not appear to defend the Paralos.However, Thalassarchis, through Fassoulis, did appear and he objected to the sale of the Paralos.

 The Commerical Court in Malta ordered that sale of the Paralos, rendered a foreclosure judgment in favor of Colonial on its mortgage in the amount of $1,650,000 and allowed Colonial to bid up to that amount for the vessel at the foreclosure sale.

 Colonial's Action on the Guarantees

 On December 17, 1982, Colonial commenced an action against Sirinakis in the High Court in London, Queen's Bench Division, to collect the balance of the debt due from the shipping companies under Sirinakis' guarantees. Affidavit of Chirstopher Elwen, sworn ot December 17, 1982 (the "Elwen Aff."), P20. Colonial brought that action pursuant to Sirinakis' submission to English jurisdiction and the forum selection clauses contained in his guarantees. Id., P20. The Writ of Summons and Statement of Claim (Elwen Aff., Exh. 24) were duly served upon London solicitors designatd in Sirinakis' guarantees as his agents for service of process. In addition, Sirinakis had actual notice of Colonial's action in London against him since the Elwen Affidavit, referring to such action, was served on his attorneys herein on December 20, 1982. Under English rules of procedure, Sirinakis had fourteen days from service of process within which to submit an intention to appear and defend. Id. Sirinakis defaulted.

 On January 12, 1983, the London Commercial Court rendered a default judgment against Sirinakis in the amount of $5,987,811.95. Austin Aff., Exh. A.

 Plaintiff, by his complaint, purports to make five claims for relief. However, as his memoranda seems to recognize, he actually makes only two distinct claims: First, he claims that the "wrongful fraudulent and intentional actions of Colonial in refusing and failing to provide funds to allow the continued operation of Margareta and Paralos and in refusing to approve a buyer for Anemodea constituted breach of the Agreement entered between Colonial and Sirinakis." *fn6"

 In plaintiff's Second Cause of Action, he claims that the "wrongful, fraudulent and intentional actions of Colonial . . . constituted a tortious intereference with the business of plaintiff." *fn7"

 Colonial makes several arguments in favor of dismissal. First, it argued that all of plaintiff's claims are barred by judgments rendered in England, Malta and Greece since the ultimate facts and issues necesary to those judgments are identical to the ultimate facts and issues alleged by plaintiff here. Second, Colonial contends that plaintiff's claims should be dismissed because it is the shipping companies, and not Sirinakis, who are the real parties in interest in this case. According to Colonial, "[t]he claims [Sirinakis] asserts, and the damages he claims, if they exist at all, belong to the Shipping Companies, not to Sirinakis individually." Defendant's Memorandum at 27.

 Next, Colonial argues that plaintiff's contract claim should be dismissed because it fails to state a claim under the clear and express terms of the letter agreement. Colonial asserts that any oral evidence that it made commitments beyond those included in the letter agreement is barred by the parol evidence rule.

 Fourth, Colonial maintains that any personal claims which Sirinakis has against the bank must be litigated in England because the guarantees Sirinakis signed "contain valid forum selection clauses whereby Sirinakis submitted to the jurisdiction of the English courts and designated the courts of England as the forum for any disputes between Colonial and Sirinakis individually related to loans or guarantees." Defendant's Memorandum at 35.

 Finally, Colonial argues that the complaint should be dismissed under the doctrine of forum non conveniens.

 As set forth below, we agree with Colonial that all of plaintiff's claims are barred under the doctrine of res judicata. Therefore, we need not reach the other issues raised by Colonial.


 To date, four judgments have been rendered by the courts of England, Malta and Greece in connection with the arrest, foreclosure and sale of the vessels Anemodea, Paralos and Margareta, and with respect to plaintiff's obligation under the guaranty. These judgments are as follows:

 1) English in rem judgment in favor of Colonial Bank and against the vessel Amenodea, dated April 6, 1982 (Exhibit 13 to affidavit of Christopher Elwen, sworn to December 17, 1982);

 2) Maltese in rem judgment in favor of Colonial Bank and against the vessel Paralos, dated May 17, 1982 (Exhibit 18 to the affidavit of Christopher Elwen, sworn to December 17, 1982);

 3) Green in rem judgment in favor of Colonial Bank and against the vessel Margareta, dated November 8, 1983 (attached to defendant's letter of January 12, 1984);

 4) English judgment in favor of Colonial Bank and against plaintiff Sirinakis individually, as guarantor of the obligations of the shipping companies, dated January 12, 1983 (Exhibit A to the affidavit of Stephen G. Austin, sworn to February 9, 1983).

 As defendant points out, the in rem judgments necessarily established:

 1) the validity of Colonial's mortgage on the vessels in question;

 2) the existence and validity of Colonial's claim against the vessels; and

 3) the existence of default by the shipping companies under the mortgage deeds and Colonial's right to proceed with foreclosure.

 The in personam judgment against Sininakis as guarantor necessarily rested on the same findings and, in addition, established that Colonial was entitled to money judgments against Sirinakis and the shipping companies pursuant to the loan and mortgage agreements and Sirinakis' personal guarantees thereof.

 Colonial argues that the premise of the complaint herein is plainly inconsistent with findings necessary to the prior judgments:

 Viewed in any light, the complaint is founded upon the premise that the Letter modified the mortgages *fn8" and that Colonial, as mortgagee, breached that mortgages as modified. This would be a defense to foreclosure. See Christensen v. Columbia Acceptance Corp., 66 Wash.2d 347, 402 P. 497 (1965). The judgments of foreclosure included the contrary findings that the Shipping Companies wre in default and that Colonial was entitled to foreclose on its mortgages. Plaintiff's complaint therefore flies in the face of the clear res judicata effect of those foreclosure judgments and as such must be dismissed. [Footnote omitted].

 Memorandum of Law in Support of Defendant's Motion to Dismiss ("Defendant's Memorandum") at 13. *fn9" Colonial contends that the res judicata effect on the prior judgments can be applied to Sirinakis on several different theories.

 First, Colonial argues that Sirinakis' action is barred under the doctrine of The Mary, 13 U.S. 122, 143-44, 3 L. Ed. 677, 9 Cranch 122 (1815), because it is essentially a collateral attack upon the in rem judgments of foreclosure rendered against the vessels.Under The Mary, an admiralty court exercising in rem jurisdiction has the power to issue a judgment against a vessel which is binding on all the world. See Footnote 9 supra at 16.

 Second, Colonial argues that Sirinakis is barred from maintaining this action because, as guarantor of the obligations of the shipping companies, he is in privity with the shipping companies against whom judgments of foreclosure have been rendered.

 Third, Colonial asserts that Sirinakis' present claims are barred on the theory that, if the shipping companies were not signatories to the letter agreement, they were third-party beneficiaries of that agreement, and therefore Sirinakis, as promisee, is barred by the judgments against them.

 Finally, Colonial maintains that the claims herein are barred by res judicata because, assuming the letter agreement was an agreement between Colonial and Sirinakis personally, Sirinakis could have raised the letter agreement as a defense to Colonial's action against Sirinakis on the guarantees.

 Plaintiff responds that Colonial's res judica arguement is based on a mischaracterization of the complaint. According to plaintiff, he is not alleging that the letter agreement modified the mortgages or that the foreclosures were wrongful vis-a-vis the shipping companies:

 The causes of action in the complaint are based on a separate and independent agreement between Sirinakis and Colonial. As the ship-owning companies are not parties to the February 25, 1982 [letter] agreement it cannot be an amendment to, or an integral part of the February 17, 1981 and August 28, 1981 loan agreements or the related ship mortgages. Sininakis is suing on a separate agreement and upon causes of action with separate and distinct elements from defenses or claims which might have been asserted in the mortgage actions.

 Plaintiff's Memorandum at 10.

 Plaintiff argues that since the shipping companies were neither signatories or intended beneficiaries of the letter agreement, they could not have raised breach of the agreement as a defense to foreclosure. Nor could Sirinakis have raised the letter as a defense to foreclosure since he had no personal stake in the vessels and thus no standing. Plaintiff further argues, without elaboration, that his present claims are separate and independent of any defense which could have been raised by him in the English action on the guarantees. Plaintiff urges that the court should not apply the doctrine of res judicata so as to deprive him of an actual opportunity to be heard.

 The Court finds that plaintiff's characterization of the letter agreement -- as an independent agreement between Colonial and himself in his personal, noncorporate, nonguarantor capacity -- is belied by the text of the letter itself. *fn10" The letter clearly shows that the shipping companies are either signatories to the agreement or third-party beneficiaries thereof. Plaintiff has presented no evidence which would contradict this finding, and in fact, plaintiff's own affidavit strongly supports a third-party beneficiary theory.

 To begin with, the first sentence of the letter refers to the loan agreements between Colonial and the shipping companies and identifies Sirinakis as the owner or controlling person of the shipping companies. *fn11" This suggests right away that the subject matter of the letter was the loan agreements and that Colonial viewed Sirinakis as acting in his capacity as representative of the shipping companies.

 More importantly, paragraphs 1, 3 and 4 of the letter impose conditions which only the shipping companies (or Sirinakis acting on their behalf) could carry out. *fn12" The fact that the letter consistently states that "you" (referring to Sirinakis) will perform the conditions, would see, beyond a doubt to indicate that the agreement was between Colonial and Sirinakis, acting as agent for the shipping companies.

 Sirinakis makes two arguments against this interpretation of the letter agreement.First, he points out that he signed his own name to the letter and did not indicate that he was signing as representative of the shipping companies. It is questionable whether this fact would be determinative given the fact that the letter itself referred to Sirinakis as owner or controlling person of the shipping companies. Sirinakis also argues that it the letter were intended to be an agreement between Colonial and the ship owners modifying the loan agreement, the bank would have required specific documents amending the agreements and evidence of authorization from the companies to ensure that Sirinakis had the authority to bind the ship-owning companies. Affidavit of John S. Osborne, Jr., sworn to on January 26, 1983, P4.

 Even assuming that the points raised by Sirinakis would preclude a finding that Sirinakis signed the letter agreement as agent for the shipping companies, they would have no relevance to the third-party beneficiary issue. Whether or not the shipping companies were signatories to the letter agreement, there can be no doubt that they were the intended beneficiaries.See Restatement (Second) of Contracts, §§ 302, 308 (the question is whether the parties intended to benefit a third person directly); United States v. Ogden Technology Laboratories, Inc., 406 F. Supp. 1090, 1092 (E.D.N.Y. 1973). It was the shipping companies, and not Sirinakis, which were in default on their loan payments. Thus, it was the shipping companies which would have benefited in the first instance from Colonial's forbearance. *fn13" Sirinakis himself admits in his affidavit that "[d]uring the negotiations [on the letter agreement] I requested on behalf of the ship-owning companies, a moratorium on principal and interest payments in order to allow time for the shipping markets to rebound and to put the companies in a position to be able to repay the debt" (emphasis added). Sirinakis Aff. P12. From this and from the letter itself, it could not be clearer than the agreement was intended to directly benefit the shipping companies. Thus, although questions if intent are ordinarily inappropriate for resolution by summary judgment, we find that there is no triable issue here. We find as a matter of law that the shipping companies were either signatories (through Sirinakis acting as their authorized representative) to the letter agreement or third-party beneficiaries thereof.

 If the shipping companies were in fact the signatories to the letter agreement, it is clear that any rights created by virtue of that agreement run to the companies and not to Sirinakis personally. In that case, Sirinakis would not be the real party in interest for the purposes of the claims herein, and they would have to be dismissed on that basis. See Rule 17(a), Fed. R. Civ. P. Therefore, we will assume, in a light most favorable to Sirinakis, that the shipping companies are the third-party beneficiaries of the letter agreement and that Sirinakis is the promisee of that agreement.

 Assuming that the shipping companies were third-party beneficiaries of the letter agreement, there is no question that they could have raised the letter agreement as a defense to foreclosure. Yet they chose not to do so and final judgments were entered in favor of Colonial against the vessels. Under the doctrine of The Mary, 13 U.S. 126, 3 L. Ed. 678 (1815), the entire world is bound by these proceedings. Thus, if the ship owners were the plaintiffs herein, it is clear that they would be barred from reopening issues, i.e., the validity of the foreclosures and the existence of a forbearance agreement which they had a full and fair opportunity to litigate in the earlier actions. *fn14" See also Alpine Gulf, Inc. v. National Bank of Chicago, et al., 1981 A.M.C. 540; Global Navigation Corp., et al. v. Colonial Bank, Heritage Ship Agency, Inc., et al., No. 82 Civ. 3659 (S.D.N.Y. Oct. 19, 1982).

 It follows that Sirinakis is barred from reopening these issues as the promisee of the third-party beneficiary contract which he entered into for the benefit of the shipping companies. *fn15" It is well established that "[a] valid judgment against a third-party beneficiary precludes a later action on the obligation by the promisee." Restatement (Second) Judgments § 56(2) (1982).

 Plaintiff attempts to argue that the doctrine of The Mary does not bar the claims. Plaintiff asserts that since he does not challenge the judicial arrest, foreclosure or sale of any vessel subject to a court's in rem jurisdiction The Mary is inapplicable.The Court adknowledges that few cases have explored the outer limits of the doctrine; logic, however, suggests that plaintiff's interpretation of The Mary is too narrow. As defendant argues:

 If plaintiff were held not barred by the in rem judgments from relitigating the issues raised in this action, in rem judgments regarding rights in vessels would lose their finality. Owners of vessels and others, such as Sirinakis, asserting rights contrary to those claimed by the vessel's mortgagee bank, could stand by while a court with in rem jurisdiction proceeded to judgment and then assert, in a subsequent in personam action, a claim that the mortgagee bank had breached a forbearance agreement.

 When a mortgagee bank forecloses its lien and obtains judgment, it is entitled to be secure in the knowledge that the mortgagor, and related parties such as Sirinakis, cannot later claim rights inconsistent with those adjudicated in the Mortgage foreclosure. See Alpine Gulf, 1981 A.M.C. 540; Global Navigation, No. 82 Civ. 3659 (S.D.N.Y. Oct. 19, 1982).

 Memorandum of Law in Support of Defendant's Motion to Dismiss at 7.

 Moreover, even it plaintiff's claims were not barred by the in rem judgments, they would undoubtedly be barred by the in personam judgment obtained against Sirinakis in England. Sirinakis could have (assuming the in rem judgments are not res judicata on the issue) and should have asserted the letter agreement as a defense to Colonial's action on the guarantees. However, Sirinakis failed to appear and judgment was entered against him, conclusively establishing that the shipping companies were in default and that Colonial was entitled to recover against the shipping companies under the loan and mortgage agreements and against Sirinakis under the guarantees. *fn16" Plaintiff's present claims are in effect a collateral attack on that judgment which is not permitted under either English or New York law. *fn17"

 This Court finds that plaintiff's contract-based claim must be barred under both traditional res judicata principals and the doctrine of The Mary. The Court further finds that any tort-based claim which plaintiff might have stated must be dismissed because collateral estoppel bars plaintiff from re-litigating an essential element of that claim.

 Accordingly, the Court grants defendant's motion to dismiss.

 It Is So Ordered.

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