Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

IN RE BALFOUR MACLAINE INTL. LTD.

January 23, 1995

In re: BALFOUR MACLAINE INTERNATIONAL LTD., Debtor, ATLANTIC MUTUAL INSURANCE COMPANY, Plaintiff, -against- BALFOUR MACLAINE INTERNATIONAL LIMITED, VAN EKRIS & STOETT, INCORPORATED, AMRO BANK, BANK BRUSSELS LAMBERT, S.A., BANQUE INDOSUEZ, BSI-BANCA DELLA SVIZZERA ITALIANA, Defendants/Removants, INSURANCE COMPANY OF NORTH AMERICA, Plaintiff, -against- ARMENIA COFFEE CORPORATION, RAFAEL ESPINOSA & HNOS., BANKERS TRUST COMPANY, NATIONAL WESTMINSTER BANK, AMERICAN EXPRESS BANK LTD., THE CHASE MANHATTAN BANK N.A., FRENCH AMERICAN BANK CORP., CHEMICAL BANK, FIRST FIDELITY BANK OF NEW JERSEY, BAII BANKING CORP., PBTC INTERNATIONAL BANK and CREDIT AGRICOLE CNCA, Defendants.

HONORABLE LEONARD B. SAND, U.S.D.J.


The opinion of the court was delivered by: LEONARD B. SAND

HONORABLE LEONARD B. SAND, U.S.D.J.

 There have been tried to the Court two declaratory judgment actions brought by insurers, Atlantic Mutual Insurance Company ("Atlantic") and Insurance Company of North America ("INA"), against two insured coffee traders, Van Ekris & Stoett, Inc. ("VES"), a wholly owned subsidiary of Balfour Maclaine International, Ltd., and Armenia Coffee Corporation ("Armenia") which they respectively insured. *fn1" Although the main controversy in the case, relating to the mysterious disappearance of substantial quantities of coffee from various Mexican warehouses, is substantially the same in both actions, certain defenses and claims are peculiar to each insurer and insured and will be treated separately herein. The following constitutes our findings of fact and conclusions of law.

 BACKGROUND

 A. The Parties and Policies

 At all relevant times for purposes of this litigation, VES and Armenia were New York corporations engaged in the business of buying and selling green coffee, including Mexican green coffee for resale to American roasters. These purchases were financed by various American banks. Pretrial Order ("PTO") at 2-3.

 Effective January 1, 1985, Atlantic issued to the parent of VES and its subsidiaries an "all risks" open cargo insurance policy covering many commodities, including green coffee purchased by VES in Mexico. This policy contained no exclusions for losses caused by conversion, theft, misappropriation or "mysterious disappearance" of coffee and imposed no obligations on VES to inspect its inventory stored in Mexican warehouses. Ex. 71.

 Effective September 6, 1989 INA bound for the account of Armenia an "all risks" open cargo insurance policy covering coffee purchased by Armenia in Mexico. This policy similarly contained no exclusions for theft, misappropriation or "mysterious disappearance" of coffee. Ex. 92.

 B. The Trade Practices

 The coffee which is the subject of this litigation was purchased from Cafetalera Zardain Hermanos S.A. de C.V. ("Cafetalera Zardain"), a Mexican corporation the principals of which were Carlos Zardain Herrerias and his younger brother, Ricardo. In its normal business operation, Cafetalera Zardain purchased coffee from growers, owned or leased storage warehouses and mills, and exported coffee to countries throughout the world. PTO at 3.

 Cafetalera Zardain utilized the facilities of two warehousing authorities, Almacenadora Somex S.A. ("Somex") and Almacenadora Creditzam S.A. ("Creditzam"). Somex and Creditzam are Mexican corporations authorized to operate warehouses and to issue certificates of deposit representing coffee deposited in those warehouses. Id.2

 During the relevant periods, Zardain tendered to VES warehouse receipts for coffee in three direct and five habilitated Somex warehouses, as well as one Creditzam habilitated warehouse. VES duly declared these nine warehouses as insured locations under the warehouse risks cover of the Atlantic policy. Zardain similarly tendered to Armenia warehouse receipts for coffee stored primarily at two Somex direct warehouses, and Armenia declared this coffee under its INA policy. Plaintiff-insurers maintain that these warehouse receipts tendered by Zardain to VES and Armenia were fraudulent and that the coffee these receipts supposedly represented never was deposited in the Mexican warehouses.

 The coffee industry in Mexico at all relevant times was subject to the authority and governance of the Instituto Mexicano del cafe ("Inmecafe"), an agency of the Mexican government. Prior to July 1989, Inmecafe conducted quarterly surveys of coffee in all warehouses throughout Mexico. The results of the surveys were reported to the International Coffee Organization ("ICO"), an international cartel which, until early July 1989, established quotas on exports of coffee. Tr. 634-35, 658-59.

 C. The Insurance Claims at Issue

 On October 26, 1990, VES and its lender banks filed a claim under its Atlantic policy for the loss of the equivalent of 165,564 69-kilo bags (25,185,165.21 pounds) of prima lavado export quality Mexican green coffee or its equivalent in pergamino, *fn3" which were discovered to be missing from storage warehouses in Mexico. On November 2, 1990, Atlantic in effect denied this claim by filing a declaratory judgment action alleging that VES had "failed to demonstrate or prove that the alleged stolen, lost and/or missing coffee was ever physically deposited in the named warehouse covered under the Policy."

 On October 23, 1990, Armenia submitted a claim to INA for some 11,998 bags (1,825,105 pounds) of Mexican green coffee that were discovered to have mysteriously disappeared from at least two of the Somex warehouses from which VES also claims to have lost coffee. On December 20, 1990, INA denied this claim by filing a declaratory judgment complaint alleging, similar to Atlantic's complaint, that the insured failed "to establish that the coffee alleged to have been stolen, lost or missing was at any time actually physically placed in warehouses at insured locations in Mexico."

 DISCUSSION

 A. Applicable Law

 In previous litigation involving VES and Atlantic, the Court of Appeals for the Second Circuit determined that the connection between the Mexican coffee at issue in these consolidated cases and maritime commerce "was simply too speculative and attenuated to justify admiralty and maritime jurisdiction." Atlantic Mut. Ins. Co. v. Balfour Maclaine Int.'l, Ltd., 968 F.2d 196, 200 (2d Cir. 1992). Plaintiffs nevertheless argue that we should apply federal maritime law to the underlying issues of the case. We disagree. Because there is no admiralty jurisdiction over the claims in this case, it follows that there is no basis for applying maritime law. Cf. 1 Steven F. Friedell, Benedict on Admiralty ยง 114 (7th ed. 1994) ("If a case is capable of being brought in federal court under that court's admiralty jurisdiction, the rights and liabilities of the parties are governed by maritime ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.