Federal Dep. Ins. Corp. v. Timbalier Towing Co.

• Decision Date: 28 August 1980
• Docket Number: Civ. A. No. C78-927.
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. TIMBALIER TOWING COMPANY, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

497 F. Supp. 912

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. TIMBALIER TOWING COMPANY, INC., et al., Defendants.

Civ. A. No. C78-927.

United States District Court, N. D. Ohio, E. D.

August 20, 1980.

As Amended August 28, 1980

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Arthur J. Rowbotham, Schneider, Smeltz, Huston & Bissell, Cleveland, Ohio, for plaintiff.

Harley J. McNeal, McNeal, Schick & Archibald, Marvin L. Karp, Ulmer, Berne, Laronge, Glickman & Curtis, Henry B. Bruner, Thompson, Hine & Flory, Cleveland, Ohio, for defendants.

MEMORANDUM OPINION AND ORDER

CONTIE, District Judge.

Invoking the Court's jurisdiction under 12 U.S.C. § 1819 and 28 U.S.C. § 1345, plaintiff Federal Deposit Insurance Corporation (FDIC) in its corporate capacity initiated this action on July 28, 1978 against Timbalier Towing Company (Timbalier); Donald W. Durant, a director and shareholder as well as the president of Timbalier; Associated Developers International, Inc., (ADI); Alex Dandy, ADI's president; and K. Bell Associates, Inc. (K. Bell).¹ FDIC instituted the action against Timbalier, Durant, ADI, and Dandy to recover jointly and severally for the amount due on an installment promissory note, and against K. Bell to recover for negligent failure to pay the plaintiff, as loss payee, the proceeds of an insurance policy. By the December 26, 1978 amended complaint, FDIC asserted that on the basis of an alleged agreement to be bound, Lilah A. Dandy, Alex Dandy's wife, was liable for the amount due on the note. Timbalier and ADI cross-claimed against each other, and ADI cross-claimed against K. Bell for indemnification in the event judgment is rendered in favor of the plaintiff.²

The Court duly heard testimony and received exhibits on November 28, 29, and 30, 1979. Incorporating the parties' trial stipulations, the Court makes findings of fact and reaches conclusions of law in accordance with Rule 52, Federal Rules of Civil Procedure.

A. Facts³

1. Plaintiff FDIC is a corporation organized and existing under an Act of Congress of the United States.

2. Defendant Timbalier is a Louisiana corporation with its principal place of business in Louisiana.

3. Defendant Durant is an individual residing in Louisiana.

4. Defendant ADI is a District of Columbia corporation with its principal place of business in Washington, D.C.

5. Defendants Alex and Lilah Dandy are individuals residing in Maryland.

6. Defendant K. Bell is a New York corporation with its principal business in New York.

7. Cayman International Towing, Ltd. (Cayman International) is a corporation incorporated in the Cayman Islands with its principal place of business in Louisiana.

8. Durant is the sole shareholder, the president, and a director of Indian Towing Co. (Indian Towing), a corporation with its principal place of business in Louisiana. Timbalier and various other owning companies

have the same corporate structure and business address as Indian Towing, with the possible exception that Indian Towing rather than Durant may be the sole shareholder of the various other companies.⁴ Indian Towing, the only one of Durant's companies that hires employees, acts as operating agent for Timbalier, Cayman International, Cayman Shipping Corp., and the numerous other towing and/or shipping companies.

9. Van Oosten is an administrator director for Indian Towing and acts as agent for the companies that Indian Towing operates. One of Van Oosten's responsibilities is to handle insurance matters.

10. Timbalier purchased the vessel John Roen IV, later named "Shawnee," for $200,000.00 on June 12, 1973.

11. In June, 1973 Van Oosten arranged through K. Bell for the placing of insurance on the Shawnee, which insurance became effective at 12:00 P.M., June 12, 1973. Indian Towing was listed as an insured.

12. On or about June 28, 1973, defendant Alex Dandy executed and delivered to NOB his Agreement to be bound as co-maker of all notes or other evidence of indebtedness and obligations of ADI to NOB then made or thereafter to be made. He undertook personal liability to the extent of $250,000.00.

13. ADI, Northern Ohio Bank (NOB), and Timbalier by their principals entered into a financial agreement. Timbalier viewed the agreement as one whereby ADI secured financing from NOB for Timbalier. NOB and ADI viewed the agreement as a loan to ADI, secured in part by Timbalier's note. None of the defendants has submitted written evidence of the three-way agreement.

14. On or about July 16, 1973 defendant Timbalier, by and through its duly authorized representative, defendant Durant, executed an installment promissory note dated July 16, 1973, which note was endorsed by Mr. Durant.

15. The installment promissory note as executed and delivered by Durant on behalf of Timbalier is made payable to ADI in the amount of $415,000 ($300,000 principal plus $115,000 add-on interest) with 8 percent per annum interest after maturity. The maker agrees on the face of the note to pay a reasonable amount in attorney's fees in the event of a default in payment at maturity, without regard to whether maturity is brought about by exercise of the acceleration clause. The note provides that it is secured by a first preferred ship mortgage covering the vessel Shawnee.

16. On or about July 20, 1973 defendant ADI, by and through its duly authorized representative, marked the note "pay to the order of Northern Bank with full recourse", and endorsed it.

17. On the same date, ADI by and through its duly authorized representative executed and delivered to NOB a document entitled "Assignment".

18. By virtue of the assignment as executed and delivered on behalf of ADI to NOB, all rights, title, and interest due ADI under the note were assigned to NOB. In the assignment, ADI guarantees payment of all sums payable under the promissory note, including attorney's fees.

19. Of the $300,000 principal amount of the loan distributed on or about July 20, 1973, $225,000 was disbursed to Indian Towing for Timbalier and $75,000 was disbursed to ADI.

20. There was conflicting evidence regarding whether Durant, on behalf of Timbalier, knew and approved of the disbursement. Alex Dandy, president of ADI, testified that he telephoned Durant to inform him of the allocation of funds. But Durant in deposition testimony indicates that he was the one who initiated contact with Dandy immediately upon learning that only $225,000 of the $300,000 was channeled to Indian Towing for Timbalier.

21. The first written indication that Durant was dissatisfied with the disbursement was on March 8, 1974. Durant stated in a letter to NOB that it was his understanding that NOB would credit Timbalier's promissory note for the amount received by ADI. The letter was signed by Durant, but not approved by NOB or ADI.

22. On or about September 14, 1973, Timbalier transferred legal title of the Shawnee to Cayman International.

23. In early 1974, Cayman International by and through its duly authorized representative, Van Oosten, executed and delivered a mortgage on the diesel tug Shawnee to NOB and its assignees in the same principal amount and interest rate as stated in the promissory note. The mortgage was dated July 16, 1973 and was designated as a first preferred ship mortgage.

24. On February 14, 1975, pursuant to Chapter 1113 of the Ohio Revised Code, the superintendent of the banks of Ohio took possession of the business and property of NOB. Thereafter, pursuant to the same chapter, FDIC was appointed receiver for NOB, and title to all assets, business, and property of NOB was transferred to FDIC.

25. On or about February 17, 1975, FDIC in its capacity as duly appointed receiver for NOB and pursuant to Ohio Rev. Code Ann. § 1113.05(M) (Page), as approved by an Order of the Cuyahoga County Court of Common Pleas, entered into an agreement providing for the sale, assignment, and transfer of certain assets of NOB to FDIC in its corporate capacity and also to National City Bank.

26. The note, mortgage, and assignment of ADI were among the assets sold, assigned, and transferred to FDIC pursuant to the transfer agreement and an assignment dated February 17, 1975.

27. Pursuant to the transfer agreement and the FDIC assignment, FDIC is the owner and holder of the note, mortgage, and assignment of ADI.

28. On or about April 12, 1975, Timbalier and Durant were notified by FDIC that FDIC was the holder by assignment of the promissory note from Timbalier to ADI.

29. By letter of April 22, 1975, Durant suggested to Alex Dandy that the $75,000 channeled to ADI could be treated as a loan to ADI from Timbalier. There was no evidence presented at trial that ADI accepted the suggestion or that the FDIC liquidator consented to same.

30. Insurance was placed on the tug Shawnee through the insurance brokerage agency of defendant K. Bell with certain underwriters at Lloyds of London and at the Institute of London Underwriters Companies.

31. "ADI and/or its assigns" were listed as additional assureds on the Shawnee insurance policy as of July 19, 1973. When NOB was named loss payee on the May 3, 1974 Endorsement No. 2, ADI and/or its assignees were included "as their respective rights and interests may appear." On Endorsement No. 4, issued May 21, 1974, NOB was denominated an additional insured, but no reference was made to ADI.⁵ ADI was thereby deleted from the policy as an additional assured.

32. Trial testimony indicates that ADI was never notified that it was being eliminated from coverage.

33. On May 13, 1975, the FDIC liquidator of the NOB wrote to Durant informing him that according to bank records, insurance on the Shawnee had expired. The liquidator reminded Durant of the requirement to keep insurance coverage on the vessel and requested a new certificate of insurance.

34. Durant forwarded the FDIC letter to K. Bell along with a request that K. Bell comply with the letter. K. Bell sent FDIC a cover note that named FDIC as the...