Brent Liquid Transport, Inc. v. GATX Leasing Corp., GC85-338-NB-O.

• Citation: 650 F. Supp. 467
• Decision Date: 19 November 1986
• Docket Number: No. GC85-338-NB-O.,GC85-338-NB-O.
• Parties: BRENT LIQUID TRANSPORT, INC., Brent Towing Company, Inc., Brent Marine Transportation, Inc., Lea Brent and Howard Brent, Plaintiffs, v. GATX LEASING CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of Mississippi

650 F. Supp. 467

BRENT LIQUID TRANSPORT, INC., Brent Towing Company, Inc., Brent Marine Transportation, Inc., Lea Brent and Howard Brent, Plaintiffs, v. GATX LEASING CORPORATION, Defendant.

No. GC85-338-NB-O.

United States District Court, N.D. Mississippi, Greenville Division.

November 19, 1986.

J. Robertshaw, Greenville, Miss., for plaintiffs.

W. Wayne Drinkwater, Greenville, Miss., for defendant.

MEMORANDUM OPINION

BIGGERS, District Judge.

This cause came before the court on the following motions:

(1) the defendant's motion for partial summary judgment on the issues of the purchase options and termination of the bareboat charter/lease agreement;

(2) the plaintiffs' cross-motion for partial summary judgment;

(3) the defendant's motion to dismiss the plaintiffs' claims under the Racketeer Influenced and Corrupt Organizations Act or alternatively for partial summary judgment on those claims; and

(4) the plaintiffs' motion for leave to file a second amended complaint.

Having been fully advised in the premises, the court is now in a position to rule on these motions.

I. Introduction

The plaintiffs brought this action for a declaratory judgment as to the right to exercise options to purchase eight inland river tank barges under a bareboat charter/lease agreement. In addition, the plaintiffs seek treble damages for the defendant's alleged violation of the Racketeer Influenced and Corrupt Organizations Act. The defendant filed a counterclaim alleging that plaintiff Brent Liquid Transport, Inc. failed to give timely written notice of its intent to exercise its option to purchase certain barges and breached the charter/lease agreement by refusing to return the barges at the end of their lease terms, resulting in termination of the agreement.

II. Parties

Plaintiff Brent Towing Company, Inc. (hereinafter referred to as "Brent Towing") is an inland river towing company which agreed to purchase eight river tank barges from St. Louis Ship Division of Pott Industries, Inc. under a construction contract dated February 13, 1973. The contract provided for completion and delivery of the first four barges in 1973 and the remaining four barges in 1974. Brent Towing discussed the financing of the barges with commercial lenders and defendant GATX Leasing Corporation (hereinafter referred to as "GATX"), a lessor of maritime equipment. On April 17, 1973, GATX offered to buy the first four barges from St. Louis Ship Division of Pott Industries, Inc. and lease them to Brent Towing for twelve years with the option to purchase at the end of the lease term. Brent Towing formed Brent Liquid Transport, Inc. (hereinafter referred to as "Brent Liquid") to lease and operate the barges. Brent Towing assigned its right to purchase the barges to GATX. On September 24, 1973 Brent Liquid and GATX executed a bareboat charter/lease agreement and a schedule describing the first four barges (hereinafter referred to as the "schedule barges"). Lea Brent and Howard Brent, as well as Brent Towing, guaranteed Brent Liquid's performance under the charter/lease agreement.

On March 22, 1974, GATX offered to buy the last four barges from St. Louis Ship Division of Pott Industries, Inc. and lease them to Brent Liquid for twelve years with the option to purchase at the end of the lease term. Brent Liquid and GATX executed a supplemental schedule for the lease of the last four barges (hereinafter referred to as the "supplemental schedule barges") on May 6, 1974. The supplemental schedule incorporates the terms and conditions of the charter/lease agreement.

III. Terms of the Bareboat Charter/Lease Agreement, Schedule, and Supplemental Schedule

The schedule sets forth the lease term for each of the schedule barges as follows:

2. Term:

The Term of the Lease of each vessel shall be twelve (12) years commencing on the date such vessel is accepted by Lessee and made subject to this Lease.

The supplemental schedule similarly defines the lease term of each of the supplemental schedule barges:

4. Term:

The term of the Lease of each Vessel shall be twelve (12) years commencing on the date such Vessel is accepted by Lessee and made subject to this Lease and Supplemental Schedule.

The Lease (section 13) provides the option, with respect to each vessel, to purchase or renew the term in accordance with the terms and conditions set forth in the schedules:

Schedule

7.A) Lessee's Option to Purchase:

At the expiration of the lease term (as defined in Section II of this Lease Schedule) Lessee shall have the right to purchase all but not less than all the Vessels then subject to this Lease for an amount equal to 30.0% of their original cost.

In the event that Lessee elects to exercise the option set forth above, Lessee shall give Lessor written notice of its intent at least 180 days prior to the end of the lease term.

Supplemental Schedule

10.A Lessee's Option to Purchase:

At the expiration of the lease term (as defined in Section 4 of this Supplemental Schedule), Lessee shall have the right to purchase all but not less than all the Vessels then subject to this Lease and Supplemental Schedule for an amount equal to 30.0% of their original costs.

In the event that Lessee elects to exercise the option set forth above, Lessee shall give Lessor written notice of its intent at least 180 days prior to the end of the lease term.

IV. Notice Deadlines

Under the charter/lease agreement and schedules, the lease terms began at the time Brent Liquid accepted each barge. However, GATX's internal memos prior to litigation designate the date of GATX's purchase payment for each barge as the beginning of each term. Although the plaintiffs acknowledge the express language of the lease term provisions, they refer to the dates in GATX's memos. In its supporting briefs GATX clarifies that the lease and schedules clearly provide for the terms to begin upon Brent Liquid's acceptance of the barges.

Brent Liquid accepted the schedule barges on September 27, October 15, October 29, and November 10, 1973. Under the option provision of the schedule, Brent Liquid has "the right to purchase all but not less than all the Vessels then subject to this Lease." In construing the plain language of the option, the court finds that the exercise of the purchase option contemplates the purchase of all four schedule barges, and that the deadline for giving written notice of intent to exercise the option was 180 days before expiration of the lease term of the first barge. The lease term expired on September 27, 1985 and the notice deadline was March 31, 1985. GATX asserts that even if Brent Liquid had the right to purchase only the last schedule barge, written notice would have been due on May 14, 1985. The respective dates cited by the plaintiffs are April 12 and June 12, 1985. The court rejects these dates but notes that Brent Liquid did not give written notice until July 19, 1985, at which time all notice deadlines for the schedule barges had expired.

V. Notice of Brent Liquid's Intent to Exercise Purchase Options

The plaintiffs contend that Brent Liquid intended to buy the eight schedule and supplemental schedule barges at the option price prior to any notice deadlines and that GATX had actual notice of Brent Liquid's intent. The plaintiffs rely on phone conferences between Dick Voth, Brent Liquid's comptroller, and GATX representatives as evidence of GATX's knowledge of Brent Liquid's intent to exercise the purchase options.

The following facts are undisputed. On March 22, 1985, before any notice deadline, Voth telephoned Jackie Jansen, an employee in GATX's contract administration department, to negotiate a single financing arrangement for the purchase of all eight barges at a total option price. Voth proposed either accelerating the lease terms of the supplemental schedule barges or extending the lease terms of the schedule barges. Jansen told Voth that a representative of GATX would get back in touch with him regarding his inquiry. However, Brent Liquid received no response from Voth's initial call, and on May 17, 1985, Voth telephoned Loray Walker, GATX's contract administrator, requesting an early buy out of all eight barges before July, 1985. Walker told Voth that GATX's Equipment Management would contact him during the week of May 20, 1985. Walker referred the inquiry to Marc Francis, a GATX employee responsible for contract negotiations.

Francis made inquiries into Brent Liquid's position in the industry and the fair market value of barges comparable to the schedule barges. Francis calculated GATX's potential gain of $650,742.00 in the event Brent Liquid failed to exercise its option to purchase the schedule barges. On May 23, 1985 Francis telephoned Voth who again proposed a single financing package for the purchase of the eight barges. Francis did not instruct Voth of Brent Liquid's contractual duty to give written notice of its intent to exercise the purchase options. However, he indicated that there should be no difficulty in reaching an agreement in view of Brent Liquid's credit record and at no time refused to consider Voth's financing proposals. Francis waited until the final notice deadline for the last schedule barge lapsed before calling Voth to open negotiations. During a phone conference on July 18 or 19, 1985, Francis informed Voth that Brent Liquid had missed the notice deadlines and had lost the option to purchase the schedule barges. Voth responded by expressing Brent Liquid's intent to buy the barges at the 30% option price regardless of the notice requirement.

On July 19, 1985, Brent Liquid sent GATX a mailgram:

Confirming our several telephone discussions over the past several months, Brent Liquid Transport, Inc., plans to purchase vessels currently under charter agreement dated September 24, 1973.

GATX mailed a response to Brent Liquid stating that Brent Liquid's written notice was untimely and the option to purchase the schedule barge had expired.

VI. Written...