In re Levant Line, SA

• Decision Date: 21 April 1994
• Docket Number: Bankruptcy No. 92 B 44292 (TLB). Adv. No. 92-9901A.
• Citation: 166 BR 221
• Parties: In re LEVANT LINE, S.A., Debtor. LEVANT LINE, S.A., Plaintiff, v. MARINE ENTERPRISES CORPORATION and Bank of Crete, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

166 B.R. 221 (1994)

In re LEVANT LINE, S.A., Debtor LEVANT LINE, S.A., Plaintiff, v. MARINE ENTERPRISES CORPORATION and Bank of Crete, Defendants.

Bankruptcy No. 92 B 44292 (TLB). Adv. No. 92-9901A.

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

April 21, 1994.

COPYRIGHT MATERIAL OMITTED

Coritsidis & Lambros by Michael N. Coritsidis, New York City, for debtor/plaintiff.

Varet Marcus & Fink P.C. by Leo G. Kailas, New York City, for defendants.

AMENDED DECISION

TINA L. BROZMAN, Bankruptcy Judge.

OPINION ON MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

At issue is whether a Liberian corporation, which is both a chapter 11 debtor and the indirect owner of a majority interest in a Greek limited partnership, may vest this court with personal jurisdiction over the limited partnership on the theory that the partnership is a mere department of the debtor. Levant Line S.A. ("Levant"), the debtor, commenced an adversary proceeding seeking to compel the defendants, Marine Enterprises Co., Ltd. ("MEC"), the Greek limited partnership, and the Bank of Crete (the "Bank"), to turn over $1.46 million which Levant claims is property of its estate and is being held by the Bank. Not long afterwards, Chief Judge Lifland, in my absence, signed an order enjoining the Bank from releasing $1.4 million of the funds pending the resolution of the adversary proceeding. After both defendants defaulted, Levant served them with a motion for a default judgment. MEC submitted opposition to the motion and also moved to dismiss the complaint for lack of personal jurisdiction or, alternatively, under the doctrine of forum non conveniens. I adjourned the hearing on the motions to dismiss and for entry of default to allow the parties to take additional discovery in contemplation of an evidentiary hearing solely on the issue of jurisdiction.¹ With discovery completed, I conducted an evidentiary hearing limited to the jurisdictional challenge.

BACKGROUND

A. The Dispute Generally

Levant, which is headquartered in New York City, at one time owned and operated three vessels directly or indirectly through affiliates. These vessels primarily transported military equipment from the United States to Black Sea and Eastern Mediterranean ports. Levant's most significant customer was the Greek armed forces. A dispute respecting the trans-Atlantic shipment of particular military cargo for the Greek armed forces precipitated the filing of this adversary proceeding.

In June 1992, all three of Levant's vessels were seized in Greece by a creditor that held a first mortgage on the ships. The following month, in order to avoid a default under an existing contract, Levant entered into an agreement with MEC, Levant's agent in Greece, to perform Levant's obligation pursuant to the so-called Greek Military Contract to transport the military's cargo to Greece for $1.46 million (the "disputed transaction"). MEC, following up on an arrangement initiated by another affiliate of Levant, then entered into an agreement with an Israeli shipping concern to carry the cargo from Wilmington, Delaware to Greece for $1.06 million. The Greek armed forces tendered the $1.46 million to a MEC account at the Bank. The disposition of the balance of the contract price, $400,000, is at the heart of the adversary proceeding. MEC has offered to pay Levant what is essentially a commission of $50,000, a sum far too paltry in Levant's estimation. It is not entirely clear what sum Levant is seeking; its complaint pleads that Levant is entitled to the entire $1.46 million. How this could be so is a mystery. In any event, and notwithstanding Judge Lifland's injunction, it appears that MEC has paid the Israeli shipper and has made other disbursements as well from the $400,000 balance.

B. The Relationship of the Various Organizations

One might have thought that this dispute would have been resolved without the requirement of judicial intervention given the relationship between Levant and MEC. Levant owns 51% of the shares of a New York corporation, Constellation Navigation, Inc. ("Constellation"), which in turn has a 52% partnership interest in MEC. Levant acquired its 51% interest in Constellation (which at the time already owned its interest in MEC) from an organization called Pharos Lines, an entity affiliated with Levant and which preceded Levant in performing the Greek Military Contract.²

Levant's shares are owned by corporations controlled by the following individuals: Mr. Skoufalos, the president of Levant; Mr. Mamoulakis, the secretary of (and lawyer for) Levant; and Messrs. Valiotis, Bekas, Demetrios, and Xenopoulos. See Debtor's Exhibit 1. Until recently, all six of these individuals sat on the board of directors of Levant. For the sake of completeness, it bears mentioning that Skoufalos and Mamoulakis, the latter who signed Levant's chapter 11 petition as its corporate secretary, were principals of and held the same titles at Pharos Lines as they did at Levant until Pharos Lines ceased operations in 1991. The duo created Levant and brought in Valiotis, Bekas, Demetrios and Xenopoulos, none of whom had any experience in the shipping industry, as investors to capitalize the venture.³ Mamoulakis testified that after he was booted from Levant's board, he and Skoufalos started a new venture. They are now principals of Stellar Maritime, Inc. and Stellar Freight, Ltd. (collectively referred to as "Stellar"), two organizations that successfully bid against Levant during Levant's chapter 11 case in the most recent bidding for the Greek Military Contract. Thus, the Greek Military Contract has travelled along with Mamoulakis and Skoufalos from Pharos Lines to Levant and then to Stellar.⁴

As for Constellation, the remaining shares are owned by Messrs. Kulukundis, Christophides, and Chiaputa. The board of directors of Constellation was composed of the three shareholders as well as Skoufalos, Valiotis and Xenopoulos, who were elected to the board in 1990.⁵ MEC's remaining partnership interests are owned by: Ms. Aphrodite Methenitou (who owns 6%), and Messrs. Zoidis, Nicolaou, Sceverides, Georgiou, and Kontoleon. It does not appear as though anyone other than the shareholders and their proxies are directors of MEC.

Levant is registered in Greece as a "law 89 corporation" which, without the guidance of any competent evidence on Greek Law, I understand to be a foreign-owned company permitted to maintain a corporate presence there so long as the business in which it engages is not in Greece. If the law 89 corporation confines itself to foreign business, its revenues will not be taxed in Greece. The parties refer to Levant's office in Greece as Levant 89, although it appears that the entity is Levant itself, rather than a separate entity. (Not having the benefit of competent evidence of Greek law, however, I make no finding in this regard.) See Debtor's Exh. 1 (in which certain minutes of Levant board meetings refer to the entity as "the Company's office in Greece."). Zoidis, a Greek resident, was the general manager of Levant 89⁶, which maintained its own bank account at Banque Franco-Hellenic. Id. Levant 89 employed a handful of people.

C. The Agency Agreement

According to MEC, it and Levant are parties to an April 1990 agency agreement in which MEC agreed to act as Levant's exclusive representative in Greece. See Plaintiff's Exhibit B. In that agreement, which MEC says was signed by the parties in Greece, MEC agreed to perform "all of the customary services of a traffic representative ... in respect to Levant's Trans-Atlantic berth service between United States ports, Mediterranean and other ports." Id. at ¶ "FIRST." Under this arrangement, MEC was not permitted to provide similar services to competitors of Levant without obtaining Levant's prior approval. Id. at ¶ "SEVENTEENTH." The contract provided that MEC would "deposit all monies collected on behalf of Levant in a First Class Bank ..." and use these funds to make any necessary disbursements for Levant's account. Id. at ¶ "ELEVENTH."⁷ The agreement called for MEC to provide an accounting, supported by proper vouchers, in a form directed by Levant. Id. The parties also agreed that any dispute would be resolved in a Greek forum in accordance with Greek law. Id. at ¶ "FOURTEENTH" Levant suggests, but its principals do not unequivocally swear, that this entire agency agreement is a recent fabrication. I find nothing in the record to support Levant's charge. It was signed by Skoufalos, on behalf of Levant, and Methenitou, on behalf of MEC, both with corporate authority.⁸

D. The Witnesses

Were one to start reading a transcript of this proceeding at the beginning and stop at any point before the end, it would be very difficult to piece together a credible account of what actually transpired here. Prior to the testimony of Mamoulakis, the defendant's last witness, the other witnesses had painted two vastly different and seemingly irreconcilable pictures. This, I realize now, results from the fact that none of the Levant shareholders were actually in the know. When they were pushed to go beyond their broad brush testimony, the vast gaps in their knowledge were exposed. As for Aphrodite Methenitou, the current managing director of MEC, she was knowledgeable, yet less forthcoming than she might have been. The door to the truth was unlocked not through the incessant volleys over whether the president of Levant had a key to MEC's offices (an unimportant question whose answer remains obscure), but rather through the testimony of John Mamoulakis.

E. The Story Behind the Suit

In a most remarkable cross-examination, the story of Levant, its predecessor and, quite possibly, its successor finally was unfurled. As previously mentioned, the right to carry out the Greek Military Contract is central to this dispute. Mamoulakis, a New York maritime lawyer who has represented Levant while he was its secretary and a director, established that...