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INTEGRAL CONTROL SYS. CORP. v. CONSOLIDATED EDISON

January 9, 1998

INTEGRAL CONTROL SYSTEMS CORP., KENNEDY COATINGS COMPANY, CJP MARINE SERVICE AND DRYDOCK CO., INC. and ARGO INDUSTRIAL, a DIVISION OF ARGO INTERNATIONAL CORP., Plaintiffs, -against CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., IN PERSONAM, And THE BARGE "ENLIGHTENED ENERGY" previously known as the "LEO FRANK," her engines, machinery, tackle, fittings, equipment, and appurtenances. IN REM, Defendants and Third-Party Plaintiffs, against STANDARD MARINE TRANSPORT SERVICES, INC., AND FIRST MARINE SHIPYARD, INC., Third-Party Defendants.


The opinion of the court was delivered by: HAIGHT

 HAIGHT, Senior District Judge :

 This admiralty action arises out of work performed upon a vessel under a contract between the shipowner and a shipyard. The shipyard subcontracted with other companies, including the plaintiffs, to do parts of the work. The shipyard having failed to pay them, plaintiffs commenced this action against the shipowner in personam and, asserting the existence of maritime liens for their work, against the vessel in rem. The shipowner filed third-party claims against the shipyard, which in turn alleged counterclaims against the other parties. Full discovery has been accomplished.

 The Court is now required, on cross-motions for summary judgment, to determine the existence vel non of maritime liens in favor of plaintiffs and against the vessel. Summary disposition is also sought with respect to various claims asserted by the shipyard.

 BACKGROUND

 Defendant and third-party plaintiff Consolidated Edison Company of New York, Inc. ("Con Ed"), the utility company, maintains a generation station at the foot of 59th Street on the East River in Manhattan. The station is powered by fuel oil. Until 1993, Con Ed owned and utilized three oil tank barges, moored in the river at 59th Street, to supply the station. In that year Con Ed purchased another tank barge to replace them. This was the barge "LEO FRANK," which Con Ed renamed the "ENLIGHTENED ENERGY" (hereinafter "the vessel").

 By contract dated August 16, 1993, Con Ed bought the vessel from third-party defendant Standard Marine Transport Services, Inc. ("SMT"). SMT had used the vessel for the transport and ocean dumping of municipal sewage sludge. That useful but humble occupation required that the vessel undergo substantial work to convert her into a suitable storage facility for Con Ed's fuel oil. Also on August 16, 1993, Con Ed entered into a contract with third-party defendant First Marine Shipyard, Inc. ("FMS") to perform all conversion work on the vessel specified by Con Ed for a firm lump sum price of $ 950,000.

 When these contracts were executed, the vessel was located at FMS's shipyard on Staten Island, where the conversion work was to be performed. That work included the replacement or renewal of steel members comprising the vessel's hull and cargo tanks; the installation of different equipment, machinery and fittings; and the cleaning and repainting of the vessel's interior and exterior.

 Con Ed required SMT to guarantee FMS's full performance of its obligations under the conversion contract. That requirement reflected Con Ed's concern, which proved to be prescient, about FMS's ability to perform; since 1991 FMS had been operating under the supervision of the Bankruptcy Court for the Eastern District of New York. In re First Marine Shipyard, Inc., Dkt. No. 191-11441-352 (Bkptcy. E.D.N.Y.).

 Peter Frank is the president of both SMT and FMS. Frank is also an attorney.

 The conversion contract between Con Ed and FMS (also referred to as "the Purchase Order") provided that FMS would "furnish all supervision, labor and materials to convert the Leo Frank Barge for the storage of No. 6 fuel oil" in accordance with Con Ed's specifications. P 1. The contract also provided at P 36:

 
The Contractor [FMS] shall be an independent contractor in the performance of the services hereunder. No right of supervision, requirement of approval or other provision of the Purchase Order and no conduct of the parties shall be considered to create a relationship of principal and agent, partners, or joint venturers between the parties, or joint employers of the Contractor's employees. Unless specifically provided elsewhere herein, nothing contained in the Purchase Order is intended for the benefit of any third parties.

 The conversion contract provided that the $ 950,000 lump sum figure payable by Con Ed to FMS would in practice be disbursed in the form of monthly progress payments, with 15% of each approved invoice being withheld as security for FMS's proper performance of the contract.

 During September, October and November, 1993, FMS entered into a number of subcontracts for the performance of portions of the work called for by the conversion contract between FMS and Con Ed. The plaintiffs at bar are all subcontractors, as follows: Kennedy Coatings Company ("Kennedy"), surface preparation and painting; CJP Marine and Drydock Co, Inc. ("CJP"), welding services and equipment; Argo Industrial ("Argo"), supplying two fuel pumps to the vessel; and Integral Control Systems, Inc. ("Integral"), electrical and lighting equipment.

 A time came when FMS fell behind on its payments to these subcontractors. They importuned FMS for payment, to no avail. On June 28, 1994, Integral and Kennedy commenced this action against Con Ed in personam and the vessel in rem to collect their unpaid invoices. The Marshal arrested the vessel. Con Ed claimed the vessel, bonded her free of arrest, answered the complaint, and filed third-party complaints against SMT and FMS. *fn1" CJP and Argo intervened as additional parties plaintiff. However, their claims were subsequently discontinued by stipulation. The remaining plaintiffs are Integral and Kennedy.

 The present pleadings may be summarized thus. Integral and Kennedy assert claims for their unpaid invoices against Con Ed in personam, the vessel in rem, and FMS. Con Ed asserts third-party claims against SMT and FMS. FMS asserts counterclaims against Con Ed, Integral, and Kennedy.

 Following extensive discovery, these motions are now before the Court:

 (a) Plaintiffs Integral and Kennedy move against Con Ed for partial summary judgment and declaratory relief, adjudicating that they have maritime liens against the vessel; and for summary judgment against FMS on their claims against FMS and dismissing FMS's counterclaims against them.

 (b) Con Ed cross-moves for summary judgment dismissing plaintiffs' in rem claims against the vessel on the ground that no maritime liens exist; and for summary judgment dismissing FMS's counterclaims against Con Ed.

 DISCUSSION

 I. The Maritime Liens Claimed by Plaintiffs

 Plaintiffs Integral and Kennedy have invoked the Court's admiralty jurisdiction by proceeding against the vessel in rem. They procured the arrest of the vessel by the Marshal pursuant to Rule C, Supplemental Rules for Certain Admiralty and Maritime Claims, which provides in pertinent part that "an action in rem may be brought: (a) To enforce any maritime lien. . ." Rule C(1)(a). It is well settled that the existence of a maritime lien is the sine qua non for an in rem proceeding in admiralty. "A maritime lien is the necessary basis for every admiralty proceeding in rem." 2 Benedict on Admiralty (7th ed. rev. 1997) at § 21, p. 2-3 (footnote omitted). "In American jurisprudence the existence of a maritime lien is synonymous with the availability of a liable in rem." Gilmore and Black, The Law of Admiralty, (2nd ed. 1975) at 622. For that proposition Gilmore and Black cite The Rock Island Bridge, 73 U.S. (6 Wall., 213, 215 1867): "The lien and the proceeding in rem are, therefore, correlative -- where one exists, the other can be taken, and not otherwise."

 The question therefore arises whether Integral and Kennedy, as subcontractors from FMS, can assert maritime liens against the vessel for their services.

 In the United States, the question of who may assert a maritime lien against a vessel for services rendered to that vessel is addressed by the Maritime Commercial Instruments and Liens Act of 1988. The provisions pertinent to the case at bar are codified at 46 U.S.C. §§ 31341-31342.

 § 31341 provides:

 
(a) the following persons are presumed to have authority to procure necessaries for a vessel:
 
(1) the owner;
 
(2) the master,
 
(3) a person entrusted with the management of the vessel at the ...

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