outstanding charges or unreturned equipment ( 9).
7. By its terms, the Lease Agreement was to run for five years, from September 1, 1985 to August 31, 1990. (Ex. 1).
8. At the time when Flexi-Van and Pharos Lines entered into the Lease Agreement, the units of equipment leased thereunder were then on lease to nonparty Constellation Lines, S.A. ("Constellation Lines").
(See Ex. PP, PP-1, PP-2, PP-3, PP-4, QQ). Elias J. Kulukundis, a director of Pharos Lines (Ex. 13 at 14/17-23), testified that Pharos Lines was incorporated in 1985 for the business purpose of continuing a liner service from the eastern seaboard ports in the United States to the eastern Mediterranean that had previously been under the control of Constellation Lines, which ceased to provide that liner service in 1985. (Ex. 13 at 16/9-22/11).
9. The continuity running from the operations of Constellation Lines to Pharos Lines is further manifested by the fact that Pharos Lines' general agent, Constellation Navigation, also served as the general agent for Constellation Lines. (Tr. 730/10-11).
10. The Lease Agreement explicitly states that "Lessee will, at its expense, pick up the units [of leased equipment] from Lessor at: As is, where is." (Ex. 1). Thus, the lease provided that it would be incumbent upon Pharos Lines to take possession of the equipment from wherever Constellation Lines, the previous lessee, had last placed the equipment. Such an arrangement made sense since Pharos Lines was then assuming and continuing Constellation Lines' liner service. Presumably, the equipment would be in locations conducive to the operation of that same liner service.
B. Payment Problems
11. Throughout the duration of the parties' relationship, there was no dispute regarding the amount Pharos Lines owed Flexi-Van under the lease. As both parties indicated, every time Pharos Lines made a lease payment, it was made in the full amount due for the respective billing period. (Tr. 73/23-76/6; 464/14-465-5; 608/23-610/22).
12. However, Pharos Lines was consistently late in making payments, or otherwise completely missed making payments under the Lease Agreement. (Tr. 60/14-62/21). On account of Pharos Lines having been in arrears (and, therefore, in default) under the Lease Agreement, on March 24, 1987 Flexi-Van exercised its rights to terminate the Lease Agreement with Pharos Lines. (See Ex. 2, 7). Flexi-Van, however, allowed Pharos Lines to cure this default. On April 28, 1987, Flexi-Van and Pharos Lines entered into a Settlement Agreement which incorporated a paydown schedule with respect to the arrearage and which also provided that Pharos Lines must pay all future outstanding invoices within 20 days of the invoice date on an ongoing basis. (Ex. 2; Tr. 73/9-13).
13. Notwithstanding the promises made by Pharos Lines under the Settlement Agreement, Pharos Lines persistently failed to make timely payments to Flexi-Van under the Lease Agreement and the Settlement Agreement. (Tr. 432/25-437/15; 454/3-16).
14. Pharos Lines ultimately went into default under the Lease Agreement on account of its failure to make timely lease payments to Flexi-Van. On November 22, 1989, Flexi-Van exercised its right to terminate the Lease Agreement on account of the Pharos Lines's default. (Tr. 78/12-79/3; Ex. 3).
15. Pharos Lines claims that on November 28, 1989 Flexi-Van accepted $ 17,536.82, covering the lease payment due for rental charges for the month of November. (Tr. 455/17-456/4). Pharos Lines also asserts that it made monthly rental payments of $ 17,536.82 in December 1989, January 1990 and February 1990. (Tr. 456/11-16; Ex. Z, AA). Pharos Lines ceased making payments in March 1990 since it claimed that its counterclaims exceeded the balance to be paid under the Lease Agreement.
16. Since Pharos Lines' counterclaims in no way exceeded the balance to be paid under the Lease Agreement (see infra), the court would reach the same conclusion -- that Pharos Lines defaulted on the Lease Agreement -- whether or not the court found that Flexi-Van accepted Pharos Lines' payments in November 1989, December 1989, January 1990 and February 1990. For the sake of clarity, the court finds that Pharos Lines defaulted on March 20, 1990 when it failed to make its lease payment for the month of March 1990. This ruling is in keeping with the fact that plaintiff seeks damages only from March 1990 forward. (Tr. 445/8-21).
17. The Lease Agreement provides that upon the default of Pharos Lines, Flexi-Van is entitled to accelerate and immediately recover from Pharos Lines rental fees that are to become due during the remainder of the term of the Lease Agreement. (Ex. 1, Terms and Conditions 9). At the time that Flexi-Van terminated the Lease Agreement, it demanded that Pharos Lines immediately pay those accelerated rental fees. Also, in accord with its rights under the Lease Agreement, Flexi-Van demanded the immediate return of the leased equipment. (Pre-trial Order at 2, 3(a)(5) (stipulated fact)). However, neither Pharos Lines nor its general agent Constellation Navigation -- who maintained exclusive and complete dominion and control over the leased equipment -- returned the equipment to Flexi-Van; rather, Pharos Lines and Constellation Navigation converted the equipment for their own benefit. (See infra).
C. The Agency Relationship Between Pharos Lines and Constellation Navigation
18. As noted in 4, supra, at all times relevant to this action Constellation Navigation acted as the general agent in the United States for Pharos Lines. (Pre-trial Order at 2, 3(a)(2) (stipulated fact).
19. Prior to the parties' execution of the Lease Agreement, Pharos Lines and Constellation Navigation had already forged a broad principal-agent relationship. Pharos Lines had delegated to Constellation Navigation exclusive and complete authority and responsibility to manage and operate Pharos Lines' ocean liner service. This delegation included, without limitation, the authority and responsibility to: (1) negotiate and coordinate the booking, loading and discharge of cargo; (2) negotiate and coordinate services provided by stevedores and other suppliers of services and goods incidental to the ocean liner service; (3) collect freight from shippers, pay bills and perform accounting services; and, most importantly here, (4) coordinate and monitor intermodal operations including the use, maintenance and payment for the use of leased intermodal equipment such as that leased from Flexi-Van to Pharos Lines under the Lease Agreement. (Ex. 13 at 44/12-45/18; 46/2-10; 48/23-50/8; 50/19-52/7; Tr. at 566/9-17; 584/2-585/5).
20. Constellation Navigation maintained a Container Manager, Kamal Nayan Shah, who was in charge of intermodal operations. His duties were, among other things, to coordinate the use of marine equipment by Constellation Navigation's principals, which included Pharos Lines. (Tr. 565/6-14; Pre-trial Order at 2, 3(a)(3) (stipulated fact)).
21. At all times during the Lease Agreement between Flexi-Van and Pharos Lines, Constellation Navigation exercised exclusive and complete dominion and control over the marine equipment that was leased under the Lease Agreement. As Pharos Lines' Mr. Kulukundis testified, Pharos Lines delegated to Constellation Navigation exclusive authority and responsibility to manage and keep track of the whereabouts of the leased equipment. (Ex. 13 at 46/2-10). Furthermore, Flexi-Van's General Counsel, Bernard Vaughan, testified that all of Flexi-Van's dealings relating to the equipment leased to Pharos Lines under the Lease Agreement with respect to "payment and recovery of equipment was always with Constellation [Navigation] personnel." (Tr. 120/15-22). Constellation Navigation was responsible for monitoring and 9 coordinating the movement of the leased equipment as the equipment was used in Pharos Lines' ocean liner service. (Tr. 577/17-578/25; 584/12-15). In connection with these responsibilities relative to the tracking of the leased equipment, Constellation Navigation was responsible for regularly communicating with the various equipment depots through which the leased equipment passed so as to ensure that the location of the equipment was properly monitored. (Tr. 579/1-586/15).
D. Defendants' Alleged Breach
22. Notwithstanding these duties, Constellation Navigation personnel failed to keep track of the whereabouts of Flexi-Van's equipment which was the subject of the Lease Agreement. Pharos Lines' Mr. Kulukundis testified as to Constellation Navigation's poor performance in this regard.
Q. [by Mr. Flicker] Do you know what type of tracking system [Constellation] Navigation did use?
A. [by Mr. Kulukundis] No system.