ITEL CONTAINERS INTERN. v. ATLANTTRAFIK EXP. SERV.
| Decision Date | 06 February 1992 |
| Docket Number | No. 86 Civ. 1313 (RLC),86 Civ. 2366 (RLC) and 86 Civ. 3717 (RLC).,86 Civ. 1313 (RLC) |
| Citation | 781 F. Supp. 975 |
| Parties | ITEL CONTAINERS INTERNATIONAL CORPORATION, Flexi-Van Leasing Inc., Cross-County Leasing Ltd., now named Textainer Inc., and Textainer Special Equipment Ltd., Plaintiffs, v. ATLANTTRAFIK EXPRESS SERVICE LTD., in personam and M/V TAVARA, AES Express, AES Challenge, Nagara and Cavara, their engines, boilers, tackle, freights, etc., in rem, and Sea Containers Ltd., Seaco Services Ltd., Sea Containers Australia Ltd., Seaco Inc. and Sea Containers America Inc., in personam, Defendants. |
| Court | U.S. District Court — Southern District of New York |
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Watson, Farley & Williams, New York City (Alfred E. Yudes, Jr., Wendy D. Ciolino, of counsel), for plaintiff Itel Containers Intern. Corp.
Kirlin, Campbell & Keating, New York City (Michael D. Wilson, of counsel), for plaintiffs Textainer, Inc. and Textainer Special Equipment Ltd.
O'Melveny & Myers, New York City (Andrew J. Frackman, of counsel), for plaintiff Flexi-Van Leasing, Inc.
Carter, Ledyard & Milburn, New York City (James Gadsden, Jonathan F. Mack, Andris J. Vizbaras, of counsel), for defendants other than Atlanttrafik Express Service, Ltd.
The plaintiffs in this action are Itel Containers International Corp. ("Itel"), Flexi-Van Leasing, Inc. ("Flexi-Van"), Textainer Incorporated ("Textainer"), and Textainer Special Equipment, Ltd. ("TSEL"). The defendants remaining in this action are Atlanttrafik Express Service, Ltd. ("AES Ltd."), against which plaintiffs have asserted in personam claims, and M/V Tavara, AES Express, AES Challenge, Nagara and Cavara (collectively "the vessels"), against which the plaintiffs have asserted in rem maritime lien claims. The vessels owners ("the owners"), Nagara Ltd., owner of the M/V Nagara; Nagara Tam, Ltd., the owner of the M/V Tavara; Contender I Ltd., owner of the M/V Cavara; Strider I Limited, owner of the M/V AES Express and charterer of the AES Challenge; and Strider 4, Ltd., owner of the M/V AES Challenge, are also represented in this action.
The background of this case is set out in previous opinions of the court, reported at 668 F.Supp. 225 (S.D.N.Y.1987) and 725 F.Supp. 1303 (S.D.N.Y.1989), familiarity with which is assumed. Plaintiffs are suppliers of maritime containers, large metal boxes used to transport maritime cargo, and chassis, frames and wheels used to move containers about. Sea Containers Limited ("SCL") organized defendant AES Ltd. in 1984 for the purpose of operating the AES shipping line. Plaintiffs had entered into container lease agreements with the previous operators of the vessels of the AES line and extended or renewed them with AES Ltd. after it began operating the line.
In the fall of 1985 SCL withdrew its support for AES Ltd., and in 1986 AES Ltd. closed down the operation of the AES line and later went into voluntary liquidation in England.
Plaintiffs subsequently began this action alleging breach of the container lease agreements against AES Ltd., and asserting corporate veil-piercing theories as to SCL and a number of other SCL subsidiaries. Plaintiffs also asserted maritime liens against the vessels.
After trial, the court dismissed all of plaintiffs' claims, but did not discuss plaintiffs' maritime lien claims or their claims against AES Ltd. 725 F.Supp. at 1308-14. On appeal, the Second Circuit affirmed on all the issues discussed but remanded for findings of fact and conclusions of law on the two matters not dealt with by the trial court. See 909 F.2d 698 (2d Cir.1990). The parties have submitted additional briefing to the court asserting their positions on the remanded issues.
Plaintiffs' in rem claims against the vessels were secured by defendants' posting of the following bonds with the court:
Vessel Plaintiff Amount
M/V AES Challenge Itel $470,000.00
M/V AES Challenge TSEL 23,400.00
M/V Tavara Itel 481,275.00
M/V Tavara Textainer 7,100.00
M/V Tavara TSEL 14,750.00
M/V Cavara Itel 481,275.00
M/V Cavara Textainer 10,558.81
M/V Cavara TSEL 30,731.86
M/V Nagara Textainer 9,779.30
M/V Nagara TSEL 30,463.07
As to these claims, several disputed factual issues must be decided. The first disputed issue is whether the plaintiffs, in entering into their leases with AES Ltd., chose to forego their right to maritime liens on the vessels and relied entirely on the credit of AES Ltd. or SCL.
Itel and Textainer each learned of the acquisition of the AES line by AES Ltd., and ultimately SCL, in 1984. Each took action to increase the security of its leases. Itel sought higher rates and a guaranty of the leases by SCL. Although Itel temporarily received the higher rates, in 1985 it entered into a new lease with AES Ltd. at the old rate and did not receive a guaranty from SCL. 725 F.Supp. at 1307. Itel's leases reserved its rights to "assert maritime or other liens" on default by the lessee. Itel Ex. 1 ¶ 13(b).1
Textainer sought to secure information on the ownership of AES Ltd. In negotiating a new lease in 1985, Textainer did a credit check on AES Ltd. but received little information. Tr. 67-69; 725 F.Supp. at 1307.2 Textainer's "New Business Checklist" dated December 5, 1985, indicates that some consideration may have been given to the credit of the vessels. The checklist has a space indicating whether AES's credit references were all checked. In this space is written: SC Defendants' Ex. 196. Textainer's credit manager testified that Textainer's minimum standards for deciding to issue credit to a customer do not include the customer's vessels, although Textainer does examine the books of ship owners. Geoffrey MacDonald dep. at 16, 19. However, Textainer's operations manager testified that Textainer's credit ratings of customers do include vessel ownership. Tr. 485-86. Textainer increased the credit extended to AES Ltd. after it was purchased by SCL.
It is unclear whether TSEL took any action to obtain guarantees or what the extent of its credit checks were.
There is little evidence illuminating the issue of Itel or TSEL's reliance on the credit of the vessels. There is more evidence that Textainer gave some consideration to the vessels when leasing its containers, although evidence on this issue is also sparse. As explained in the court's discussion of waiver, infra, however, there is a statutory presumption that the credit of the vessels is relied upon. Therefore, in the absence of clear evidence that plaintiffs intended to forego their rights to their liens, the court must find that they did not intend to do so.
A second disputed issue is whether plaintiffs' containers were put to maritime use by the vessels. This issue was raised previously and decided in plaintiffs' favor in the opinion reported at 668 F.Supp. 229-30. The nature of plaintiffs' leases, which primarily envisioned maritime use of the containers, the nature of AES Ltd's business and the testimony at trial confirm this conclusion. See, e.g., Itel Ex. 1; Textainer Ex. 1; TSEL Ex. 16; Tr. 574, 651.
A third disputed issue is whether plaintiffs' claims for damages to their equipment are for ordinary wear and tear or for damages attributable to AES Ltd. The unrefuted testimony of Itel's director of technical services was that Itel deducted ordinary wear and tear, as defined in the container inspection manual of the Institute of International Container Lessors, before billing its customers for repair expenses. Tr. 317-20; Defendants' Ex. 555. Defendants introduced testimony of an expert witness who had examined plaintiffs' repair documentation, had concluded that it did not include sufficient wear and tear deductions and produced an alternative set of repair expenses. Tr. 744-45. However, at least with respect to Itel, defendants' expert did not have a complete set of supporting documentation for his repair estimate. Hence part of the difference between his and Itel's calculations may have been due to reliance on dissimilar data. Tr. 851-55. In addition, the expert made his calculations from Itel documents that reflected damages to equipment before Itel took its deductions for wear and tear, and his testimony was not based on a personal examination of the equipment. Tr. 855-58, 872-73. There was also testimony that Itel did not repair some units until long after they were brought in, and that these delays could have caused further damage to the equipment. Tr. 280-84, 305-08, 318-19, 969. However, Itel provided estimated repair figures for equipment that had not been repaired, and a damage report was prepared for each piece of equipment as soon as it was received at an Itel depot. Tr. 260-61, 317-18. Therefore, based on the evidence adduced at trial, the court finds that plaintiffs' repair claims reflect damages attributable to AES Ltd.
Finally, the court must determine the date when plaintiffs' containers ceased to be used by the vessels. A confidential SCL memorandum dated February 28, 1986, discloses that sometime before that date, three of the vessels, the AES Challenge, the Nagara and the Cavara, had discharged their cargoes. As of that date the Tavara was under arrest in Italy,...
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