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M. PRUSMAN, LTD. v. ARIEL MARITIME GROUP

December 23, 1991

M. PRUSMAN, LTD. AND SAHAR INSURANCE CO., LTD., PLAINTIFFS,
v.
ARIEL MARITIME GROUP, INC., CHARLES KLAUS & CO., LTD. (D/B/A JAVELIN LINE), MARTYN C. MERRITT AND MARY ANNE MERRITT (A/K/A MARY ANNE PAWLOWSKI), JOSHUA DEAN & CO., LTD., FLORENCE WLEZEN (A/K/A FLORENCE PAWLOWSKI), AND FLORENCE PAWLOWSKI (A/K/A FLORENCE WLEZEN), DEFENDANTS.



The opinion of the court was delivered by: Sweet, District Judge.

OPINION

This action, brought by M. Prusman, Ltd. and Sahar Insurance Company, Ltd. (collectively "Prusman" or the "Plaintiffs") against Ariel Maritime Group, Inc. ("Ariel"), Charles Klaus & Co., Ltd. ("Klaus"), d/b/a Javelin Lines, Martyn C. Merritt ("Merritt"), Mary Anne Merritt, a/k/a Mary Ann Pawlowski ("Mrs. Merritt"), Joshua Dean & Co. Ltd. ("Dean"), Florence Wlezen, a/k/a Florence Pawlowski, and Florence Pawlowski (collectively "the Defendants"), was tried before the Court on October 22, 1991. Upon the findings and conclusions set forth below, judgment will be enforced against the Defendants jointly and severally.

Prior Proceedings

On April 25, 1988, judgment was entered for $28,682.08 with interest and costs arising out of the loss of goods shipped on board the M/V NATHANEL (85 Civ. 9485 (RWS)).

The instant action was filed on November 18, 1988, to enforce that judgment. Discovery was had, and the Defendants' motion to dismiss for lack of jurisdiction and failure of service was denied on August 10, 1988. Prusman's motion for summary judgment was granted in part and denied in part on July 11, 1990.

The principal issue remaining to be tried was the personal liability of the Merritts and whether or not the Defendants other than Ariel were the alter ego of Ariel or the Merritts.

Facts

The Plaintiffs are Israeli corporations with offices in Israel.

Merritt was a resident of New Rochelle, New York, and was the president and a shareholder of Ariel. Mrs. Merritt is Merritt's wife. She lived with him in New Rochelle and was an officer and director of Ariel. The Merritts maintained offices in the same space as Ariel on West Street and/or West 39th Street in New York City.

Ariel was organized as an Illinois corporation, with its principal place of business at 90 West Street and/or 323 West 39th Street, New York, New York, and was doing business under the name of Javelin Lines ("Javelin"). On June 1, 1988, Ariel changed its name to AMG Services, Inc. ("AMG"), but did not change its corporate form.

Klaus was organized as a Hong Kong corporation and was likewise doing business under the name of Javelin. It was incorporated in 1978 upon the written instructions of Merritt. Klaus's name derives from an amalgam of Merritt's middle name, "Charles," and the middle name of his former partner, Peter Schauer. Merritt and Schauer formed Klaus as 50/50 partners, but their business association ended in about 1980. Javelin was a division of Klaus and a trade name of Ariel.

Dean was organized as an English corporation. The sole shareholders of Dean are Broadview Developments, Ltd., with one share, and Klaus, with 999 shares.

The sole shareholders of Klaus are Dean, with 999 shares, and Merritt, with one share. The Merritts consider Klaus the ultimate holding company of Dean. The Merritts also controlled Broadview and were officers of and controlled Ariel.

In October and November 1984, Javelin issued two negotiable bills of lading for the carriage of Prusman's cargo on board the M/V NATHANEL from Germany to Israel. Javelin issued its bills of lading as a division of Klaus. The bills of lading were negotiated and transferred to plaintiff M. Prusman Ltd. During the voyage, the shipment suffered damage. The present action seeks to enforce the prior judgment arising out of this loss.

On May 31, 1991, Merritt agreed to plead guilty to a conspiracy to commit fraud that involved the submission of false bills of lading. Merritt reaped $936,000 from the conspiracy. "The payment was made pursuant to an Agency for International Development program to supply needed foodstuffs to the country of Sudan. In return for the $936,000, the defendant [Merritt] and his associates were supposed to ship and deliver high-quality powdered non-fat milk." Trial Exhibit 5 at 1.

In sentencing Merritt, the Honorable John S. Martin found that Merritt "engaged in obstruction of justice when he submitted a false document to the government," to wit, a fabricated fax allegedly confirming a payment and "official looking stationery with the title 'Maritime Bureau of Investigations' . . . — which 'obviously was designed to mislead the recipient of the letter into believing that they were responding to some official government inquiry" — with "a false statement that the payment had been made." Judge Martin further found that "Merritt continues to have control over $670,000 of the proceeds, which he is attempting to hide ...


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