Tankers Intern. Nav. Corp. v. National Shipping & Trading Corp.

• Decision Date: 11 March 1986
• Citation: 116 A.D.2d 40,499 N.Y.S.2d 697
• Parties: , 1987 A.M.C. 478 TANKERS INTERNATIONAL NAVIGATION CORPORATION, Plaintiff-Respondent-Appellant, v. NATIONAL SHIPPING & TRADING CORP., Metropolitan Navigation Corp., Metropolitan Marine Transport Corp., Metropolitan World Tanker Corp., Metropolitan World Maritime Corp. and Metropolitan World Trading Corp., Defendants-Appellants-Respondents, Harry Theodoracopulos and John Theodoracopulos, Defendants.
• Court: New York Supreme Court — Appellate Division

Page 697

499 N.Y.S.2d 697

116 A.D.2d 40, 1987 A.M.C. 478

TANKERS INTERNATIONAL NAVIGATION CORPORATION, Plaintiff-Respondent-Appellant, v. NATIONAL SHIPPING & TRADING CORP., Metropolitan Navigation

Corp., Metropolitan Marine Transport Corp., Metropolitan

World Tanker Corp., Metropolitan World Maritime Corp. and

Metropolitan World Trading Corp., Defendants-Appellants-Respondents,

Harry Theodoracopulos and John Theodoracopulos, Defendants.

Supreme Court, Appellate Division,

First Department.

March 11, 1986.

Owen McGivern, of counsel (Beth A. Finley and Beth Glassman with him on brief; Donovan Leisure Newton & Irvine, New York City), for defendants-appellants-respondents.

Peter M. Bellsey, of counsel (Peter M. Bellsey and Stuart M. Fischman with him on brief; Dunn & Zuckerman, P.C., New York City), for plaintiff-respondent-appellant.

Before SANDLER, J.P., and SULLIVAN, ROSS, KASSAL and ELLERIN, JJ.

SULLIVAN, Justice.

Plaintiff, a ship-chartering broker, has brought this action against five shipowners and their agent, National Shipping & Trading Corp. (National), for commissions allegedly earned pursuant to charter parties it arranged from 1971 to 1973 between each of the shipowners and the national oil company of the government of Indonesia, P.N. Pertambangan Minjak Dan Gas Bumi National (Pertamina), not a party hereto. John Theodoracopulos is the president of all of the corporate shipowners, which are interrelated. Each of the charter parties required the particular shipowner to arrange for the construction and delivery of an ocean-going oil tanker for exclusive charter by Pertamina.

Three of the shipowners built vessels which were used by Pertamina from the time of delivery in 1973 and 1974 until late 1975, when, concededly, it defaulted under the charter parties. As a result of the default, the other two shipowners, which were to build a vessel, "To Be Named", for delivery sometime between September 1, 1976 and December 31, 1978, cancelled the construction contracts for these vessels.

Each of the charter parties was for a ten-year term with ownership of the subject vessel to be transferred to Pertamina at the conclusion thereof. The charter parties expressly provided that plaintiff was entitled to a 2 1/2% commission "on all hire as paid [thereunder]." There were no other writings memorializing the brokerage agreement. The parties agree that hire in the amount specified in the charter party was to be paid monthly, in advance, to plaintiff, which would then deduct its 2 1/2% commission and remit the balance to the appropriate shipowner through National. After delivery, Pertamina put the three newly constructed tankers, the Monemvasia, Mesologi and Mantinia, into service and paid hire in excess of $20,000,000 until August or September 1975 when, without notice and as a result of circumstances beyond the shipowners' control, it terminated the payments.

The shipowners subsequently learned that the Indonesian government was experiencing serious financial problems and that a major restructuring of the national debt was under way. After discussions with Pertamina's executives, when it became apparent that they would never collect the $309,387,038.80 in hire due them over the balance of the charter parties' ten-year terms, the shipowners moved to protect their rights. Thus, in early December 1975, at approximately the same time as Pertamina ordered that the Monemvasia, Mesologi and Mantinia be placed in lay up, ¹ their respective owners commenced an action against it in federal court in both New York and California, alleging a failure to pay charter hire and other amounts due and owing. They also served a demand for arbitration. Eventually, after Pertamina threatened to invoke sovereign immunity, the successful assertion of which would have barred any recovery, the five shipowners, pursuant to three agreements executed over a thirteen-month period, agreed to a $55,000,000 settlement.

The first two settlement agreements, executed in January and April of 1976, provided for payments of $6,000,000 and $7,000,000, respectively, for "charter hire" for a period during which the shipowners promised to refrain from taking any further legal action to vindicate their rights under the charter parties. ² The balance of the settlement amount, $42,000,000, was paid pursuant to a "Release and Cancellation Agreement", entered into on February 17, 1977, which, unlike the earlier agreements, finally disposed of the parties' dispute, expressly providing that the shipowners' cancellation of the charter parties was the consideration for the $42,000,000 payment. The shipowners further agreed to waive all past, present and future claims of any nature, including, but not limited to, unpaid charter hire and operating expenses. The $55,000,000 was allocated among the three shipowners whose vessels had been delivered.

Plaintiff thereafter, on April 22, 1977, invoiced the shipowner defendants for 2 1/2% of the settlement payments. National responded in their behalf, writing in pertinent part, "The payment referred to in your letter, in amounts lesser than the charter hire payable under subject Charters, are not in payment of charter hire but rather in settlement of the Owners' claims against Charterer for breach of the Charters which, as you are aware, was the subject of litigation and arbitration." Plaintiff commenced this action some five years later, in May 1982, after its attempts to collect commissions on the settlement proceeds proved unsuccessful. After issue was joined and discovery conducted it moved for summary judgment.

Characterizing the settlement proceeds as, "in actuality, a substitution for the payments due under the charters", Special Term granted partial summary judgment and allowed plaintiff a recovery of brokerage commissions on all but $7,000,000 of the settlement payments. As to plaintiff's claim to commissions on the first $7,000,000, which were paid more than six years prior to the commencement of the action, Special Term granted defendants' motion to amend their answer to interpose a statute of limitations defense. Since we believe that the shipowners' obligation to pay brokerage commissions on the settlement proceeds cannot be resolved as a matter of law, we find that summary judgment should have been denied in its entirety.

The general rule with respect to brokerage commissions is that, in the absence of a special contract, the broker is entitled to a commission when he brings his principal and a third party together and their minds meet on the essential terms of an agreement. (Kaelin v. Warner, 27 N.Y.2d 352, 355-356, 318 N.Y.S.2d 294, 267 N.E.2d 86; Galbreath-Ruffin Corp. v. 40th & 3rd Corp., 19 N.Y.2d 354, 280 N.Y.S.2d 126, 227 N.E.2d 30; Williamson, Picket, Gross, Inc. v. Hirschfeld, 92 A.D.2d 289, 293, 460 N.Y.S.2d 36.) Where a special contract exists, the broker's entitlement to commissions is entirely dependent upon the language of the contract authorizing those commissions. (Lougheed & Co., Ltd. v. Suzuki, 216 App.Div. 487, 492, 215 N.Y.S. 505, affd. 243 N.Y. 648, 154 N.E. 642; Caldwell Co., Inc. v. Connecticut Mills Co., 225 App.Div. 270, 273, 232 N.Y.S. 625, affd. 251 N.Y. 565, 168 N.E. 429; Fuller v. Bradley Contracting Co., 183 App.Div. 6, 26-27, 170 N.Y.S. 320, affd. 229 N.Y. 605, 129 N.E. 925.) The rule is the same with regard to brokerage commissio due on the negotiation of a charter party. (See Poor on Charter Parties (5th ed.), § 34, p. 89.) Here, the provision authorizing the payment of brokerage commissions specifically states that commissions are due "on all hire as paid under th[e] charter[s]." Thus, plaintiff's right to commissions under each of the charter parties accrued only to the extent that hire was actually paid.

In Lougheed, supra, this court held that a ship-chartering broker was not entitled to recover a commission on the gross amount of the charter under a charter party that had been cancelled due to the failure of the defendant shipowner to make a timely delivery of the vessel to the charterer. The charter party provided that a commission was due "on the monthly payment of hire." The inclusion of such a clause, said the court, "indicate[d] a clear intention to pay commissions only on the monthly payment of hire when received" (216 App.Div. at 492, 215 N.Y.S. 505) and thus specifically limited the broker's right to recovery. "Treating the contract as unambiguous", the court found that "commissions were payable to plaintiff only as and when monthly hire for the steamship was received by defendants." (Id. at 493, 215 N.Y.S. 505.)

In support of its holding the Lougheed court cited White v. Turnbull, Martin, & Co. (78 L.T.Rep. 726). There, the court denied a recovery to a broker on a cancelled charter party which provided that the broker was to receive a commission of 5% on all hire earned. Litigation between the vessel owners and the charterers as to the fitness of the vessel had been terminated by the entry of a consent decree cancelling the charter party. There was no willful act or default on the part of the vessel owners in bringing about this result. The broker, who received his commission on the hire paid for the two months that the vessel had been employed before cancellation, sued for commissions on the balance of the charter period. In dismissing the complaint the court stated:

I think the intention of both parties was that commission should only be payable upon hire actually earned, and that all risks which might interfere with the earning of hire, short possibly of the [vessel owners'] own wilful default, should be shared by them both; that is to say, if from causes such as brought this charter to an end no hire was earned, the [broker] was to be paid no commission. (Id. at 727.)

In this case plaintiff argues that its right to commissions attaches to the settlement funds since they represent the payment of hire exclusively. The shipowners make the point...