Chung, Yong Il v. Overseas Nav. Co. Ltd.

• Citation: 774 F.2d 1043
• Decision Date: 25 October 1985
• Docket Number: No. 84-7152,84-7152
• Parties: CHUNG, YONG IL, et al., Plaintiffs-Appellees, Cross-Appellants, and Hanseung Shipping Co., Ltd., Plaintiffs-Appellees, R. S. Price, Plaintiff-Intervenor, Appellee, v. OVERSEAS NAVIGATION CO., LTD., and Jimmy Mardikos, Defendants, Crossclaim-Plaintiffs, Counterclaim-Defendants, Third-Party Plaintiffs-Appellants, Cross-Appellees. M.V. BEAVER SPIRIT, etc., Defendant, Crossclaim-Defendant, HIBERNIA NATIONAL BANK, Defendant-Crossclaim-Defendant, Counterclaim-Plaintiff, Third-Party Plaintiff-Appellant, Cross-Appellee, v. E.F.D. CAPITOL GROUP INC., and Frank Deutsch, Third-Party Defendants-Appellants, Cross-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1043

774 F.2d 1043

CHUNG, YONG IL, et al., Plaintiffs-Appellees, Cross-Appellants, and Hanseung Shipping Co., Ltd., Plaintiffs-Appellees, R. S. Price, Plaintiff-Intervenor, Appellee, v. OVERSEAS NAVIGATION CO., LTD., and Jimmy Mardikos, Defendants, Crossclaim-Plaintiffs,

Counterclaim-Defendants, Third-Party

Plaintiffs-Appellants,

Cross-Appellees.

M.V. BEAVER SPIRIT, etc., Defendant, Crossclaim-Defendant, HIBERNIA NATIONAL BANK, Defendant-Crossclaim-Defendant, Counterclaim-Plaintiff, Third-Party Plaintiff-Appellant, Cross-Appellee, v. E.F.D. CAPITOL GROUP INC., and Frank Deutsch, Third-Party

Defendants-Appellants, Cross-Appellees.

No. 84-7152.

United States Court of Appeals, Eleventh Circuit.

Oct. 25, 1985.

Stephen Paul Blank, New York City, Robert S. Edington, Mobile, Ala., for E.F.D. Capitol and Frank Deutsch.

George A. Frilot, Randell E. Treadaway, New Orleans, La., for Hibernia Nat. Bank.

Allan R. Wheeler, Broox G. Holmes, Mobile, Ala., Stephen L. Oppenheim, Monticello, N.Y., for Overseas Navigation Co.

Ross Diamond, III, Mobile, Ala., for Chung, Yong & Crew.

Appeals from the United States District Court for the Southern District of Alabama.

Before KRAVITCH and CLARK, Circuit Judges, and WRIGHT ^*, Senior Circuit Judge.

KRAVITCH, Circuit Judge:

This litigation arose out of an unperformed agreement for the purchase and sale of a cargo ship, the M/V CARMEN A. ¹ Caught in the middle are twenty-three Korean nationals who served aboard the vessel, without being paid, while the parties to the contract made the arrangements necessary for the sale. The major issues on appeal relate to the district court's award of penalty wages to the crew members pursuant to 46 U.S.C.A. Sec. 596. ² We affirm in part, reverse in part, and remand for further proceedings not inconsistent with this opinion.

I. BACKGROUND

The primary parties involved in the events leading to the litigation include Hibernia National Bank in New Orleans (Hibernia or the Bank) and one of its vice presidents, Jay Capouch; Overseas Navigation Co., LTD. (Overseas) and its sole shareholder, James Mardikos; and E.F.D. Capital Group, Inc. (E.F.D.) and its sole shareholder, Frank Deutsch. At all relevant times the M/V CARMEN A was located at a dock in the Port of Mobile, Alabama.

On February 24, 1981, the M/V CARMEN A was seized by United States marshals in order to satisfy a stevedore lien. At that time, the vessel was documented under Liberian law, and owned by Armadora Maritima Salvadora Lines, with Hibernia holding a foreign preferred ship mortgage against the vessel. Less than three months later, on May 6, 1981, Hibernia submitted the highest bid for the vessel at a marshal's sale and became its owner. Apparently not interested in operating the ship, Hibernia immediately began negotiations to sell the ship to Mardikos. After an agreement on the terms of the sale had been reached, Mardikos was unable to secure financing from his bank. His bank, however, put him in touch with Deutsch. Deutsch and Mardikos entered into an agreement through their respective corporations: E.F.D. was to purchase the vessel and then lease it to Overseas, which in turn agreed to operate the ship. To demonstrate his good faith, Mardikos advanced $100,000 to Deutsch.

When Hibernia learned of the substitution, new negotiations commenced. On May 28, 1981, the parties reached an agreement. E.F.D. agreed to purchase the M/V CARMEN A for $500,000; $350,000 to be paid in cash, including a $50,000 deposit to be made on June 4, 1981, with Hibernia agreeing to finance the remainder of the purchase price. The contract further provided that E.F.D. agreed to take the vessel "as is" and "where is." Because the vessel's registration under Liberian law was insufficient for the sale to go forward, the parties agreed that the vessel should be reinscribed under Panamanian law in Hibernia's name for E.F.D.'s account. Contemplating that the inscription would be uncomplicated, the parties agreed that the buyer would pay inscription costs up to $10,000. If the associated costs exceeded $10,000, and neither party wished to pay the excess, the agreement would be terminated and Hibernia would refund the $50,000 deposit, "provided, however, that should Buyer so elect to terminate this agreement it shall be responsible to Seller for all the aforementioned costs actually incurred by Seller toward the inscription up to the amount of $10,000." The closing of the sale was scheduled to take place within ten working days after the vessel was inscribed. If the buyer wished to withdraw at that point, Hibernia was allowed to keep the $50,000 deposit as its liquidated damages. Deutsch signed the agreement as President of E.F.D. and individually.

Shortly after the execution, Hibernia learned that certain repairs to the vessel were necessary for inscription under Panamanian law. Hibernia suggested therefore that the inscription-costs provision of the agreement be raised to $20,000, to which E.F.D. agreed. Upon further inquiry, Hibernia determined that inscription required even more extensive effort than previously anticipated. The bank initiated another amendment to the contract, to which E.F.D. agreed, decreasing the cash down payment and increasing the amount of the purchase price the bank would finance. In addition, the amendment called for elimination of the inscription-costs ceiling and the provision requiring termination if neither party chose to bear the costs to the extent they exceeded that ceiling. As modified, the agreement provided as follows: "Inscription of the Vessel in the name of Seller shall be for the account of Buyer. Payment of the costs incurred in connection with inscription of the vessel in the name of Seller shall be made by Buyer on January 5, 1982."

Meanwhile, Mardikos began looking for a crew to operate the M/V CARMEN A. On June 4, 1981, Overseas entered into a contract with Hanseung Shipping Company, whereby Hanseung agreed to locate crew members and send them to the vessel. In the agreement Overseas purported to be acting as an agent on behalf of the M/V CARMEN A. The agreement established the wages payable to the crewmen, and set forth Hanseung's fee for its services and its right to be reimbursed for expenses.

Shortly thereafter the bank decided to permit Deutsch to oversee the repairs that were required so that the vessel could be inscribed in the bank's name. On July 6, 1981, Mardikos brought in a ship repair company to inspect the vessel. Mardikos testified that he did this after Deutsch requested that he determine the most economical way to perform the repairs. After consulting with Deutsch and Capouch, Mardikos notified Hanseung to send a crew to the M/V CARMEN A. Twenty-two crew members flew from Korea to Mobile on July 23, boarded the vessel upon their arrival, and immediately began to perform maintenance and repair work to the vessel. An individual employed by Hibernia, who was aboard the M/V CARMEN A when the Korean crew arrived, supervised some of the repairs. In August, because of problems with the vessel's electrical system, Hanseung sent a twenty-third crew member to join the vessel. A number of independent contractors also made repairs to the ship, both before and after the crew's arrival. While this work was being done, Mardikos forwarded to Hibernia a number of invoices relating to the repairs and the crew's expenses, most of which Hibernia paid without objection. On September 3, 1981, the vessel was formally inscribed in Hibernia's name under Panamanian law.

The closing for the sale of the vessel was initially scheduled for August 14, and then postponed until August 20. Because the purchaser was not prepared to close on that date, the closing was further postponed to September 1. When the purchaser was unwilling or unable to perform on this date, and again on September 10, Hibernia informed Deutsch that if the sale were not consummated by September 18, Hibernia would consider the contract terminated. The parties scheduled a closing for that date, but postponed it once more until September 25. Again, the sale did not close. Hibernia then sent a telegram to Deutsch advising him that it would retain the $50,000 deposit and that he was "solely responsible for all of the costs and expenses incurred by Seller in connection with the inscription of the vessel and those costs incurred through your agents in Mobile." Further, the bank stated: "[i]mmediate arrangements should be made to pay the costs and expenses incurred by Seller. Direct arrangements should be made with your agents in Mobile as to the payment of those other costs and expenses which you have incurred."

The next day Hanseung addressed a telegram to Mardikos, informing him that the crew had not been paid since arriving on the vessel in July, and demanding payment of these accrued wages and reimbursement for expenses Hanseung incurred in locating and sending the crew to the vessel. ³ Hanseung further admonished that in the event the crew was discharged, the crew members were entitled to severance pay and payment for the costs of returning to Korea. Mardikos forwarded this telegram to Hibernia, as he had done with invoices relating to the ship's repair, with the request that Hibernia pay the amount due. Hibernia never responded and no wages were paid.

On September 28, a Hanseung representative met with Capouch in New Orleans, at which time Capouch asked that the crew leave the vessel. The crew, however, refused to leave the ship without being paid, and along with Hanseung initiated this lawsuit, naming Overseas, Mardikos, Hibernia, and the M/V CARMEN A as defendants. The complaint called for payment of wages and expenses pursuant to the employment agreement signed by Hanseung and Overseas, and asked that penalty wages be assessed in favor of the crew under 46 U.S.C.A. Sec. 596. The United States marshals arrested the vessel on October 1. Hibernia continued to insist that the crew leave the...