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A/S KREDITT-FINANS v. CIA VENETICO DE NAVEGACION S

March 31, 1983

A/S KREDITT-FINANS
v.
CIA VENETICO DE NAVEGACION S.A. OF PANAMA and Johs. Presthus and Arne Presthus, doing business as Presthus Chartering A/S, Johs. Presthus Rederi, and Arne Presthus Rederi A/S



The opinion of the court was delivered by: POLLAK

 The matter to be determined is a motion filed by plaintiff A/S Kreditt-Finans ("Kreditt-Finans") and certain intervenors -- Norges Skibshypotek A/S, Bergen Bank International S/A (Luxembourg) and Storebrand -- for summary judgment against defendant Cia Venetico de Navegacion S.A. of Panama ("Cia Venetico").

 In its primary aspect, the motion for summary judgment seeks an order disallowing claims made by Cia Venetico against a vessel of Norwegian registry, the ANNA PRESTHUS, "arrested" by Cia Venetico in Philadelphia on September 29, 1979. The purpose of the arrest was to enforce a consent judgment in the amount of $675,000, filed in the United States District Court for the Southern District of New York on April 9, 1979. That judgment was in favor of Cia Venetico and against several Norwegian individuals and enterprises, one of which, Arne Presthus Rederi A/S, was on the date of the judgment the registered owner of the ANNA PRESTHUS. However, on September 28, 1979, the day before the arrest of the ANNA PRESTHUS, title to the ship was transferred from Arne Presthus Rederi A/S to Kreditt-Finans. Wherefore, on October 1, 1979, Kreditt-Finans initiated this suit to get an adjudication confirming its title. On October 22, 1979, this court granted a motion to intervene filed four days before by Norges Skibshypotek, Bergen Bank and Storebrand; the three intervenors, holders of mortgages on the ANNA PRESTHUS, entered the suit to protect their secured creditor status against Cia Venetico's claim.

 In opposition to the motion for summary judgment, Cia Venetico contends that the transfer of title to the ANNA PRESTHUS on September 28, 1979, one day before the vessel's arrest, was a fraudulent conveyance. The movants, in turn, challenge Cia Venetico's standing to question the validity of the conveyance, arguing that there was no remaining equity in the heavily mortgaged vessel at the time it was conveyed. To resolve these contentions, it will be necessary to canvass in some detail the events, summarized above, which have precipitated this suit. *fn1"

 I.

 In March 1977 an arbitration panel in New York awarded $1,302,070.35 to Cia Venetico against Presthus Chartering A/S, a Norwegian corporation, for wrongful repudiation of a charter. In June 1977, Cia Venetico filed a complaint in the United States District Court for the Southern District of New York against Johs. Presthus Rederi and Presthus Chartering A/S to enforce the arbitration award. On April 9, 1979, in agreement settling that suit was entered in the Southern District of New York as a consent judgment for $675,000 against all defendants except Arne Presthus. The first installment payment under that judgment was due on June 1, 1979, but was never received by Cia Venetico. See Affidavit of Terry Stoltz ("Stotlz Affidavit") para. 31 (Nov. 12, 1982).

 Cia Venetico then sued in Norway to enforce the consent judgment. While waiting for a decision in that case, Cia Venetico learned that the ANNA PRESTHUS was scheduled to arrive in New York on September 15, 1979. Armed with this knowledge, Cia Venetico demanded from Arne Presthus Rederi A/S ("Rederi") payment of the full amount of the consent judgment. Rederi tendered nothing. *fn2" Thereupon, Cia Venetico on September 14, 1979 obtained a writ of execution on the ANNA PRESTHUS in the Southern District of New York. The Presthus defendants were notified of the court's action.

 The ANNA PRESTHUS did not arrive in New York as scheduled; instead, it went to Bermuda. While the ship was in Bermuda, Cia Venetico negotiated with the parties holding mortgages *fn3" on the vessel in an "attempt to settle the matter in a manner which would eliminate the necessity of levying under the Judgment." Stoltz Affidavit para. 36. These attempts proved unsuccessful, and the vessel was arrested by Cia Venetico on September 29, 1979, after its arrival in Philadelphia. One of the mortgagees, however, aware of the imminent arrest, had arranged for Rederi to transfer title to the vessel to Kreditt-Finans on September 28, 1979. Kreditt-Finans assumed liability on $5,227,000.00 of the mortgage debt, and Rederi remained liable for the remainder.

 On October 1, 1979, two days after the arrest, Kreditt-Finans filed a property claim in this court asserting its ownership of the ANNA PRESTHUS, thus preventing the United States Marshal from selling the vessel at auction. On October 18, 1979, the mortgagees of the ANNA PRESTHUS sought to intervene in order to protect their interests in the event of a forced sale and to recover damages from Cia Venetico should maritime liens superior to their mortgages attach during the period of arrest. At a conference on October 22, I granted the motion to intervene.

 On November 2, on the motion of Kreditt-Finans and the intervenors, I ordered the release of the ANNA PRESTHUS upon the filing with the court of a letter of credit in the amount of $1,350,000. *fn4" Kreditt-Finans and the intervenors now seek summary judgment on Cia Venetico's claim arising out of the arrest of the ANNA PRESTHUS and on Cia Venetico's counterclaim against Kreditt-Finans and the intervenors based on their alleged involvement in a conspiracy to transfer without fair consideration two other ships owned by Rederi to a company owned by one of the intervenors. (The single cause of action not embraced by the motion for summary judgment is the claim by Kreditt-Finans and the intervenors that the arrest of the ANNA PRESTHUS was an abuse of process; this claim is considered in part III of this Opinion.)

 II.

 In moving for summary judgment, Kreditt-Finans and the intervenors ("Kreditt-Finans" or "intervenors") dispute Cia Venetico's standing to contend that the September 28, 1979 transfer of title to the ANNA PRESTHUS from Rederi to Kreditt-Finans was a fraudulent conveyance. They contend that (1) proof of injury is an essential element in a fraudulent conveyance action, and (2) because Rederi had no equity in the vessel on that date, the transfer of title could not have injured Cia Venetico.

 According to Kreditt-Finans, this absence of equity is demonstrated by a comparison between the fair market value of the vessel and its total mortgage debt. *fn5" On the date of transfer, Kreditt-Finans contends, the total mortgage debt ($6,688,059.84) substantially exceeded the vessel's fair market value (between $4,750,000 and 5,000,000). See supra note 5; Holte Affidavit I at paras. 5-8. Cia Venetico does not challenge Kreditt-Finans' estimate of the vessel's fair market value. However, Cia Venetico does challenge both the validity of the mortgages and the amount of mortgage debt outstanding at the time the title was transferred. *fn6"


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