Worldwide Carriers, Ltd. v. Aris Steamship Co.

• Decision Date: 29 August 1968
• Docket Number: No. 68 Civ. 3232.,68 Civ. 3232.
• Citation: 301 F. Supp. 64
• Parties: WORLDWIDE CARRIERS, LTD., Plaintiff, v. ARIS STEAMSHIP CO. Ltd., Adrian Maritime Co. Ltd., Aaron Maritime Co. Ltd., Arger Navigation Co. Ltd., Intercontinental Maritime Ltd., Evie Navigation Co., Ltd., Defendants.
• Court: U.S. District Court — Southern District of New York

301 F. Supp. 64

WORLDWIDE CARRIERS, LTD., Plaintiff, v. ARIS STEAMSHIP CO. Ltd., Adrian Maritime Co. Ltd., Aaron Maritime Co. Ltd., Arger Navigation Co. Ltd., Intercontinental Maritime Ltd., Evie Navigation Co., Ltd., Defendants.

No. 68 Civ. 3232.

United States District Court S. D. New York.

August 29, 1968.

Kriendler & Kriendler, New York City, for plaintiff; Paul S. Edelman, New York City, of counsel.

Levin, Kreis, Ruskin & Gyory, New York City, for defendants; Herbert B. Ruskin, New York City, of counsel.

OPINION

TENNEY, District Judge.

This is a motion, brought on by order to show cause, by all of the defendants herein except Aris Steamship Co. Ltd. (hereinafter referred to as "Aris") to (a) set aside certain attachments levied against their assets; (b) to dismiss the complaint as to them pursuant to Rule 12(b) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted; (c) to increase plaintiff's bond herein from $25,000 to $250,000; and (d) in the alternative to set a reasonable bond for the release of their assets from attachment. No attempt is made to dismiss the action against defendant Aris or to seek relief in so far as the attachment affects the assets of Aris.

The underlying action has been brought by plaintiff herein against all of the defendants claiming damages for breach of a charter party with Aris, the defendants other than Aris being joined as the latter's alter egos. The complaint alleges damages of $500,000. The moving defendants seek the relief prayed for herein on the grounds that (1) they have general releases from plaintiff and have entered into an agreement whereby all such claims were settled,¹ and (2) that the affidavit upon which the attachment was issued is insufficient to support such attachment. No answer to the complaint has, as yet, been filed by any of the defendants herein.

The Court will first address itself to defendants' contention that the affidavit upon which the attachment was issued is insufficient. The attachment herein was issued pursuant to Rules 4(e) and 64 of the Federal Rules of Civil Procedure which permit a plaintiff to obtain an order of attachment in the United States District Court by utilizing the attachment procedures of the state in which the district court is located. The New York State statutes involved are §§ 6201 through 6226 of the New York Civil Practice Law and Rules (hereinafter referred to as "CPLR"). Rule 6212 of the CPLR establishes the requirements to sustain an order of attachment and provides that plaintiff on its motion for an order of attachment must show by "affidavit and such other written evidence as may be submitted, that there is a cause of action."

Defendant's principal contentions are that plaintiff has failed to show "that there is a cause of action" because the allegations in the complaint and affidavit in support of the attachment are made by plaintiff's attorney rather than by an officer of plaintiff (plaintiff allegedly has no officers or directors in New York) and that such allegations are hearsay and totally unsupported by any evidence whatsoever. Defendants further allege that plaintiff has failed to adequately show the amount of its damages.

It is, of course, "incumbent on an applicant for a warrant of attachment * * * to show under oath that the necessary allegations of his complaint have some basis in fact. These facts may be stated upon knowledge, or upon information and belief provided that the sources of the information and grounds for the belief are set forth. * * *" Reitmeister v. Reitmeister, 273 App.Div. 652, 79 N.Y.S.2d 22, 24 (1st Dep't 1948).

"It is not sufficient that the papers upon which the attachment was procured set out the ultimate facts showing the cause of action or the grounds. Evidentiary facts making out a prima facie case proving such facts must be shown * * *. To sustain the attachment the affidavit in support thereof must contain evidence from which the court can determine that the ultimate facts stated can be substantiated." Banco Agricola y Pecuario v. Jiminez Export Corp., 97 N.Y.S.2d 437, 439 (Sup.Ct.1950).

However, on a motion to vacate an order of attachment, the court is not restricted to the documents submitted in support of such attchment, but "shall give the plaintiff a reasonable opportunity to correct any defect." N.Y.R. Civ.Prac. 6223 (emphasis added); Weinstein-Korn-Miller, New York Civil Practice, ¶ 6223.07 at 62-212 (1967); McLaughlin, Practice Commentary, McKinney's CPLR § 6223 (1967 Supp.) at 30. Accordingly, "evidentiary facts submitted by plaintiff in its papers in opposition to this motion, must be considered in determining the validity of the order of attachment." Cocoline Chocolate Co., Inc. v. Hillside Enterprises Inc., 45 Misc. 2d 594, 257 N.Y.S.2d 444, 445 (Sup.Ct. 1965).

Accordingly, in reaching its conclusions herein, the Court has considered not only the papers originally submitted on the application for the warrant of attachment but the affidavits and exhibits submitted on the present motion to vacate.² There is no dispute that all the defendants are foreign corporations and that the action is for a sum of money. N.Y.R.Civ.Prac. 6201 (1). Accordingly, defendants were "per se subject to attachment." A. C. Israel Commodity Co. Inc. v. Banco do Brazil, 50 Misc.2d 362, 365, 270 N.Y.S.2d 283 (Sup.Ct.1966). (Emphasis added.) The sole issue presented, other than that of a sufficient showing of damages, is whether sufficient facts have been shown to support the allegation that the moving defendants are the alter egos of defendant Aris so as to warrant a piercing of the corporate veil. "What is sufficient for a pleading may not be enough to justify attachment." Glaser v. North Amer. Uranium & Oil Corp., 222 F.2d 552, 554 (2d Cir. 1958). The burden is on defendants to show that plaintiff does not have a valid and meritorious cause of action, i. e., that plaintiff has not demonstrated that he has a prima facie case. Cocoline Chocolate Co. Inc. v. Hillside Enterprises Inc., supra.

As stated in Steven v. Roscoe Turner Aeronautical Corp., 324 F.2d 157, 160-161 (7th Cir. 1963):

"In order to establish that a subsidiary is the mere instrumentality of its parent, three elements must be proved: control by the parent to such a degree that the subsidiary has become its mere instrumentality; fraud or wrong by the parent through its subsidiary, e. g., torts, violation of a statute or stripping the subsidiary of its assets; and unjust loss or injury to the claimant, such as insolvency of the subsidiary. Fisser v. International Bank, 2 Cir., 282 F.2d 231, 238 (1960); Lowendahl v. Baltimore & O. R. Co., 247 App.Div. 144, 287 N.Y.S. 62, 76 (1936), aff'd, 272 N.Y. 360, 6 N.E.2d 56; Powell, supra at 4-6.

In determining whether the requisite degree of control is maintained by the parent corporation, many factors are relevant. It is the presence of these factors in the proper combination which is controlling. Factors generally considered by courts are as follows:

(a) The parent corporation owns all or most of the capital stock of the subsidiary.

(b) The parent and subsidiary corporations have common directors or officers.

(c) The parent corporation finances the subsidiary.

(d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation.

(e) The subsidiary has grossly inadequate capital.

(f) The parent corporation pays the salaries and other expenses or losses of the subsidiary.

(g) The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to it by the parent corporation.

(h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is described as a department or division of the parent corporation, or its business or financial responsibility is referred to as the parent corporation's own.

(i) The parent corporation uses the property of the subsidiary as its own.

(j) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary but take their orders from the parent corporation in the latter's interest.

(k) The formal legal requirements of the subsidiary are not observed. Taylor v. Standard Gas & Electric Co., supra, 96 F.2d 693 at 704-705 (quoting Powell, supra at 9." (Emphasis added.)

It must be emphasized that the Court, in the present posture of the case, is not trying the issues or attempting to decide the merits of the controversy. Giving plaintiff the benefit of all the legitimate inferences that can be drawn from the present record, it would appear that plaintiff has at least made out a prima facie case and should be given an opportunity by discovery to ascertain other facts in support thereof.

With respect to stock ownership, it would appear that on October 10, 1967, Aris, Adrian Maritime Co. Ltd. (hereinafter referred to as "Adrian") and Aaron Maritime Co. Ltd. (hereinafter referred to as "Aaron") were "affiliated corporations having substantially identical stockholders", that Aris owned 10 per cent of the capital stock of Intercontinental Maritime Ltd. (hereinafter referred to as "Intercontinental"), that Arger Navigation Co. Ltd. (hereinafter referred to as "Arger") had a 50 per cent ownership of Intercontinental (Affid. of Paul S. Edelman, Esq., of Aug. 18, 1968, Exh. A), and that Aris had a substantial interest in Arger. As of February 23, 1968, there was practical identity of officers and directors among Aris, Adrian and Aaron and a substantial identity between them and Arger and Intercontinental (Schedule attached to Affids. of Herbert B. Ruskin, Esq., and Lawrence Weisberg, verified Aug. 16, 1968). While it is stated that there are "significant differences" between the stockholders of Evie...