Netherlands Shipmortgage Corp., Ltd. v. Madias, s. 1247 and 1290
| Decision Date | 12 September 1983 |
| Docket Number | D,Nos. 1247 and 1290,s. 1247 and 1290 |
| Citation | 717 F.2d 731 |
| Parties | , 1984 A.M.C. 141 NETHERLANDS SHIPMORTGAGE CORPORATION, LTD., Plaintiff-Appellant, v. Mark MADIAS and Nicholas T.K. Skarvelis, Defendants-Appellees. ockets 83-7041, 83-7043. |
| Court | U.S. Court of Appeals — Second Circuit |
Robert L. Sills, New York City, for plaintiff-appellant.
Stephen M. Rathkopf, New York City, for defendants-appellees.
Before KEARSE, PIERCE and PECK *, Circuit Judges.
Netherlands Shipmortgage Corporation (NSC) appeals the dismissal for lack of standing by the District Court for the Southern District of New York of its actions for recovery on a guaranty executed by Mark Madias and Nicholas Skarvelis and for voidance of a conveyance of real estate by Madias and Skarvelis to their spouses without consideration. 1 NSC contends that the district court erred in holding that it did not have jurisdiction for the actions under the Ship Mortgage Act of 1920, as amended, 46 U.S.C. Sec. 954, and that NSC is barred from bringing this action under diversity jurisdiction by New York's "door closing" statute, New York Business Corporation Law (B.C.L.) Sec. 1312. The issues raised by the latter contention include whether NSC was doing business in New York State within the meaning of B.C.L. Sec. 1312, whether defendants are estopped from raising B.C.L. Sec. 1312 as a defense, and whether B.C.L. Sec. 1312 would violate the commerce clause if applied in this case.
Although we hold that the Ship Mortgage Act does not provide the district court with jurisdiction of these actions, we reverse the judgment of the district court and remand the cause to that court for further proceedings because the district court's finding that NSC was doing business in New York for the purposes of B.C.L. Sec. 1312 was clearly erroneous.
NSC is a Bermuda corporation engaged in the business of accepting deposits and making loans on "floating objects". The defendants are New York citizens and residents.
On October 23, 1981, NSC loaned Phoenix, Inc., a Liberian corporation of which Madias and Skarvelis are the principal shareholders, $1,550,000 to purchase the M/V Nagos, a ship of Liberian registry. A loan agreement between Phoenix, NSC and Triship Agency incorporating the terms of the loan was executed on August 3, 1981. In addition to executing and transferring a promissory note, Phoenix executed and delivered a mortgage on the Nagos to NSC as security for the loan. On October 23, 1981, in consideration of the making of the loan to Phoenix, Madias and Skarvelis executed a written personal guaranty of the obligations arising from the Note, the Mortgage and the Loan Agreement.
In 1982, Phoenix defaulted on its obligations to NSC. NSC seized the Nagos and sold it at a foreclosure sale. On September 24, 1982, NSC filed suit against Madias and Skarvelis to recover, under the guaranty, $1,508,288 as the outstanding obligations of Phoenix. On December 23, 1982, NSC initiated a second action against Madias, Skarvelis, their spouses and a New York partnership, Real Associates, to set aside conveyances of realty by Madias and Skarvelis to their spouses as fraudulent and to restrain Madias and Skarvelis from disposing of their remaining assets during the pendency of the initial action on the guaranty.
The district court, on December 23, 1982, issued a temporary restraining order prohibiting defendants from further transferring any property. An evidentiary hearing on the second action was held on December 29, 1982. On the following day, the district court delivered an oral opinion and order holding that the court did not have admiralty jurisdiction over the guaranty action, that NSC was subject to B.C.L. Sec. 1312, and that NSC was doing business in New York State in violation of B.C.L. Sec. 1312. The opinion subsequently was reduced to writing and supplemented with footnotes. 554 F.Supp. 375 (S.D.N.Y.1983). On the basis of the opinion the court entered orders dissolving the temporary restraining order, denying the equitable relief sought by NSC and entering a conditional order of dismissal in both actions. NSC filed a timely appeal of these orders. 2
NSC's first contention on appeal is that the district court had admiralty jurisdiction over the action on the guaranty as a result of the Ship Mortgage Act of 1920, 46 U.S.C. Sec. 954(a). 3 NSC argues that the Ship Mortgage Act must be read broadly because the act is remedial in nature. NSC further suggests that if admiralty jurisdiction exists, B.C.L. Sec. 1312 will not bar its action on the guaranty. See In re Grand Bahama Petroleum Co., 550 F.2d 1320 (2d Cir.1977) (). We hold, however, that the district court properly construed the Ship Mortgage Act as not conferring jurisdiction on the district court over the action on the guaranty.
In deciding any issue of statutory construction, consideration must first be given to the language of the statute. Bowsher v. Merck & Co., --- U.S. ----, 103 S.Ct. 1587, 1591-92, 75 L.Ed.2d 580 (1983); Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S. 176, 187, 100 S.Ct. 2601, 2608, 65 L.Ed.2d 696 (1980). Section 954(a) reads as follows:
Upon the default of any term or condition of a preferred mortgage upon a vessel, the mortgagee may, in addition to all other remedies granted by this section, bring suit in personam in admiralty in a district court of the United States, against the mortgagor for the amount of the outstanding mortgage indebtedness secured by such vessel or any deficiency in the full payment thereof.
The district court acted properly in construing this statutory grant of jurisdiction narrowly. As the district court noted, the federal courts are courts of limited jurisdiction which may entertain a case only if there is a congressional grant of jurisdiction and a constitutional basis on which the statute rests. Additionally, as the Supreme Court has decreed, "Jurisdictional statutes are to be construed 'with precision and with fidelity to the terms by which Congress has expressed its wishes'...." Palmore v United States, 411 U.S. 389, 396, 93 S.Ct. 1670, 1675, 36 L.Ed.2d 342 (1973) (quoting Cheng Fan Kwok v. INS, 392 U.S. 206, 212, 88 S.Ct. 1970, 1974, 20 L.Ed.2d 1037 (1968)).
In construing the terms of Sec. 954 with precision, the district court treated the statutory phrase "against the mortgagor" as resolving this case and held that the admiralty remedy provided by the act to lenders against mortgagors cannot be judicially extended to guarantors. 554 F.Supp. at 379. It is plain from the face of the statute that the terms are words of limitation designed to restrict the grant of in personam jurisdiction in admiralty for recovery on an outstanding mortgage indebtedness to only the mortgagor. Because it is undisputed that defendants are not mortgagors, but rather are guarantors of an outstanding indebtedness, the district court properly concluded that the act did not grant in personam jurisdiction to the court over this action.
NSC also contends that the courts may determine, independent of any statutory grant, its own admiralty jurisdiction. This contention is meritless not only in light of the general principles outlined above, but also in light of the Supreme Court's statement in The Thomas Barlum, 293 U.S. 21, 38, 55 S.Ct. 31, 35, 79 L.Ed. 176 (1934), that the courts can neither add nor subtract from the terms of the Ship Mortgage Act in determining their admiralty jurisdiction over actions involving ship mortgages. Accordingly, the district court properly held that it did not have admiralty jurisdiction over NSC's action for recovery on the guaranty.
NSC next contends that the district court has diversity jurisdiction over the actions and that the district court erred in holding that B.C.L. Sec. 1312 operates as a bar to NSC's maintaining the action. B.C.L. Sec. 1312(a) provides:
A foreign corporation doing business in this state without authority shall not maintain any action or special proceeding in this state unless and until such corporation has been authorized to do business in this state and it has paid to the state all fees, penalties and franchise taxes for the years or parts thereof during which it did business in this state without authority. This prohibition shall apply to any successor in interest of such foreign corporation.
Before the district court, NSC first argued that it is not doing business in New York within the meaning of B.C.L. Sec. 1312. NSC then argued that even if it is doing business in New York in the appropriate sense, application of B.C.L. Sec. 1312 to NSC in this case is precluded by the Commerce Clause of the United States Constitution. U.S. Const. art. 1, Sec. 8, cl. 3. NSC finally argued that defendants are estopped from asserting B.C.L. Sec. 1312 as a defense. NSC advances the same arguments on appeal. 4
The district court rejected NSC's arguments. The district court held that B.C.L. Sec. 1312 bars NSC from maintaining an action in New York courts because NSC was doing business in New York without state authorization. The district court based its finding that NSC was doing business in New York on the following facts: (1) NSC's business was soliciting and consummating loans on vessels; (2) of twenty loans consummated since NSC's incorporation, nineteen were partially closed in New York; (3) a New York law firm coordinated the papers generated by the transactions; (4) NSC's president and chief operating officer, Jaap Vriesendorp, regularly and on a recurring basis came to New York to execute documents and to solicit business; and (5) when Vriesendorp was not in New York, the New York law firm was given the power of attorney to execute documents and acted as attorney in fact. The district court, however, did not articulate the standard it applied in holding that these...
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