Cunard SS Co., Ltd. v. Salen Reefer Services, AB

• Citation: 49 BR 614
• Decision Date: 01 May 1985
• Docket Number: No. 85 Civ. 0233 (RWS).,85 Civ. 0233 (RWS).
• Parties: CUNARD STEAMSHIP COMPANY, LIMITED, Plaintiff, v. SALEN REEFER SERVICES, A.B., Defendant. In re UNITED BRANDS COMPANY, Garnishee.
• Court: U.S. District Court — Southern District of New York

49 B.R. 614 (1985)

CUNARD STEAMSHIP COMPANY, LIMITED, Plaintiff, v. SALEN REEFER SERVICES, A.B., Defendant.

In re UNITED BRANDS COMPANY, Garnishee.

No. 85 Civ. 0233 (RWS).

United States District Court, S.D. New York.

May 1, 1985.

Kirlin, Campbell & Keating, New York City, for plaintiff; Joseph K. Molloy, New York City, of counsel.

Haight, Gardner, Poor & Havens, New York City, for defendant; Donald J. Kennedy, Edward A. Rial, New York City, of counsel.

OPINION

SWEET, District Judge.

Defendant Salen Reefer Services A.B. ("Salen") has moved 1) to vacate an order of attachment entered in this action on January 9, 1985, 2) for an order requiring plaintiff Cunard Steamship Company, Ltd. ("Cunard") to provide a more definite statement of damages, and 3) for an order requiring Cunard to post security in the amount of $400,000. After the submission of evidence and hearing of testimony, the motion to vacate the attachment is granted.

Prior Proceedings

On December 19, 1984 Salen, a Scandinavian business entity, commenced a bankruptcy proceeding in Stockholm City Court, Kingdom of Sweden. Pursuant to the procedures of that court, an announcement of bankruptcy was published and an administrator was appointed to manage the affairs of the bankrupt. Salen appeared in this proceeding through the administrator, Bjorn Edgren. (Exhibit 1 is a translation of the Swedish Court's statement of insolvency and the appointment of Edgren.) On January 9, 1985, an order of attachment was issued to Cunard, an English corporation, under Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims, authorizing the attachment of goods and chattels in the amount of $1,100,000.00 held by United Brands Company for Salen's account.

On January 24, 1985 Salen brought an order to show cause, made returnable January 28, seeking dissolution of the attachment. A hearing was held on January 28 and January 29, 1985.

Facts

Cunard alleges in its complaint that Salen and Cunard had entered a time charter with respect to the vessel SCYTHIA and that on or about December 27, 1984 Salen defaulted on its obligations under the charter, causing damages of $1.1 million in unpaid fees.

On September 29, 1981 Cunard entered a contract with United Brands Company whereby United Brands hired six vessels from Cunard. Six separate charter parties were entered. The contract provided for London arbitration of disputes arising from the charter party, and the agreement set a rental rate for class S vessels of $388,089.44 per thirty days. A supplemental agreement also established a redelivery schedule for the vessels, specifying that redelivery of the last "S" vessel would not be later than March 15, 1985. At the time the Cunard-United Brands contracts were entered into, a sub-charter agreement between United Brands and Salen, covering the same six vessels, was entered.

In November, 1983, the time-charter between Cunard and United Brands was terminated. Although a time-charter between Cunard and Salen was not executed, there was substantial communication between Cunard and Salen with respect to the terms of Salen's continued use of the vessels covered by the Cunard-United Brands time-charter. On November 22, 1983 Cunard telexed to Salen:

SIC REF PHONECONVERSATION EARLIER TODAY THIS IS TO CONFIRM THAT WE OFFER FIRM TO CONTINUE THE CHARTER ON THE SCYTHIA AS FROM REDELIVERY FROM UNITED BRANDS UPTO THE END OF THE PRESENT CHARTER PARTY. ALL OTHER TERMS AND CONDITIONS TO REMAIN UNCHANGED.

THIS OFFER IS FIRM FOR REPLY LATEST TODAY 2100 HOURS LONDON TIME. YOU CAN REACH ME AT PHONENO 468/100460

On November 23, 1983, Salen telexed in return:

FOLLOWING SUCCESSFUL DISCUSSIONS UB, SIC WE HEREBY CONFIRM ACCEPTANCE OF YOUR OFFER TO TAKE ON TIME CHARTER, `MV SCYTHIA\', COMMENCING NOON, LOCAL SHIPS TIME TODAY, 23 NOV 1983. TERMS OF CHARTER, BAL-TIME 1939, AND HEAD AGREEMENT AS PER CP AND AGREEMENT DATED 29 SEPTEMBER 1981, BETWEEN CSS COMPANY AND UNITED BRANDS COMPANY, DETAILS OF WHICH ARE KNOWN TO YOU. . . .

On November 25, 1983 Cunard confirmed the redelivery schedule:

CONFIRMING OUR TELECON THIS P.M. REDELIVERY TO BE GOVERNED BY PROVISIONS EQUIVALENT TO OUR CP AND HEAD AGREEMENT OF 29 SEPT 1981 WITH UB, AS ADVISED IN OUR TELEX NO 6661 OF 23 NOV 1983. THESE PROVISIONS STATE:—

1. C. P IS SUBJECT TO SUPPLEMENTAL HEAD AGREEMENT OF 29/9/81

2. PARA 3 OF HEAD AGREEMENT READS `NOTWITHSTANDING THE PROVISIONS OF THE RESPECTIVE CHARTER PARTIES, REDELIVERIES WILL BE GOVERNED BY SCHEDULE 3 ATTACHED HERETO SETTING FORTH THE APPROXIMATE

REDELIVERY DATES PROVIDED THAT FIRST VESSEL TO BE REDELIVERED NOT BEFORE 31 OCT 1984 AND LAST VESSEL TO BE REDELIVERED NOT LATER THAN 15 MARCH 1985.

3. SCHEDULE 3 READS

PURSUANT TO CLAUSE 3 OF SAID HEAD AGREEMENT, REDELIVERIES OF VESSEL SHALL BE AS FOLLOWS:—

                ONE `C' VESSEL           OCT 31 1984
                ONE `C' VESSEL           NOV 27 1984
                ONE `S' VESSEL           DEC 24 1984
                ONE `S' VESSEL           JAN 20 1985
                ONE `S' VESSEL           FEB 16 1985
                ONE `S' VESSEL           MAR 15 1985
                

On December 19, 1984 Salen sent the following communication:

WE REFER TO YOUR TELEPHONE CONVERSATION WITH LARS RUTBERG AND WE ARE HEREWITH PLEASED TO RECONFIRM THAT WE HAVE BEEN ABLE TO REARRANGE OUR VARIOUS PROGRAMMES.

WE WILL THUS REDELIVER THE SOXONIA TO UNITED BRANDS ABOUT JANUARY 17TH.

THE SCYTHIA WILL CONSEQUENTLY BE REDELIVERED AS THE LAST VESSEL.

Subsequently, on January 2, 1985 the following telex was sent by Salen to Cunard:

IN VIEW OF THE BANKRUPTCY OF SALEN REEFER SERVICES AB WE HEREBY DECLARE THAT THE OWNERS MAY DISPOSE OF THE VESSEL WITHOUT ANY CLAIMS BY THE CHARTERERS FOR THE TERMINATION OF THE CHARTER.

SALEN REEFER SERVICES AB IN BANKRUPTCY FOR THE LIQUIDATOR ELISABETH FURA-SANDSTROEM

At the hearing, Fura-Sandstroem, a Swedish attorney representing the trustee in Bankruptcy of Salen, testified that, under Swedish law, following a judicial declaration of bankruptcy, all pending lawsuits are frozen and a meeting of creditors is called. (Exhibit 3 is the notice of such a meeting for Salen).

The Swedish bankruptcy statute states that:

§ 23. After the publication of the bankruptcy decision, property belonging to the bankruptcy estate may not be restrained for claims against the debtor. If such restraint would nevertheless take place, it will not be valid. Notwithstanding the bankruptcy, property which has been pledged for a certain claim may be restrained for that claim.

The effect of the publication of the notice of bankruptcy under Swedish law has been summarized as follows:

a A meeting of creditors is convened, usually about one month after the court order.

b An interim trustee is appointed.

c the proceedings are advertised in the Official State Gazette and in one or more local newspapers.

d Legal actions by creditors for recovery of debts are suspended, including cases where payment has not been made to the creditors concerned under enforcement proceedings.

e The court may make an order, either at this stage or when the application is lodged, to prevent the debtor from absconding with his assets. According to the circumstances, the order might provide for the safeguarding of the assets, the confiscation of the debtor\'s passport, or even the detention of the debtor.

European Insolvency Guide, Sweden, 3.1.2, (Exhibit D of Kennedy affidavit).

Discussion

Salen seeks to vacate the attachment based on the principle of international comity and on the theory that Cunard has not shown the existence of a charter party between Cunard and Salen. In the alternative, Salen seeks to reduce the value of the attachment and to require Cunard to post a bond.

The question posed is whether an American court, as a consequence of a Swedish court's adjudication of the insolvency of a Swedish business entity, should vacate an admiralty attachment obtained by an English corporation in an effort to force London arbitration of an alleged debt between the Swedish and English corporations. The rationale for extending comity to foreign courts was stated in Hilton v. Guyot, 159 U.S. 113, 16 S.Ct. 139, 40 L.Ed. 95 (1895), where the Court defined comity as:

the recognition which one nation allows within its territory to the legislative, executive, or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens, or of other persons who are under the protection of its laws.

In order to extend comity to a decision of a foreign court, it must be shown that the foreign court is a court of competent jurisdiction and that the laws and public policy of the forum state and the rights of its residents will not be violated by recognition of the foreign court's ruling. Kenner Products v. Societe Fonciere et Financiere, 532 F.Supp. 478, 479 (S.D.N.Y.1982); Cornfeld v. Investors Overseas Services, Ltd., 471 F.Supp. 1255, 1259 (S.D.N.Y.), aff'd, 614 F.2d 1286 (2d Cir.1979); Clarkson Co. v. Shaheen, 544 F.2d 624, 629 (2d Cir.1976). Reciprocity of the foreign state's courts in granting comity to the forum state's courts, although perhaps a consideration in granting or denying comity, is not determinative. Judge Learned Hand stated: "The court in Hilton v. Guyot certainly did not mean to hold that an American court was to recognize no obligations or duties arising elsewhere until it appeared that the sovereign of the locus reciprocally recognized similar obligations existing here. That doctrine I am happy to say is not a part of American jurisprudence." (emphasis in original). In Re Aktiebolaget Kreuger & Toll, 20 F.Supp. 964, 969 (S.D.N.Y.1937), quoting Direction der Disconto-Gesellschraft v. U.S. Steel, 300 F. 741, 747, affirmed 267 U.S. 22, 45 S.Ct. 207, 69 L.Ed. 495. See Matter of Colorado Corp., 531 F.2d 463, 468 (10th Cir.1976); Johnston v. Compagnie Generale Transatlantique, 242 N.Y. 381, 152 N.E. 121 (1926).

United States courts have granted comity to adjudications of bankruptcy by foreign courts. In Kenner...