Murray Oil Products Co. v. Mitsui & Co.

• Citation: 146 F.2d 381
• Decision Date: 28 December 1944
• Docket Number: No. 123.,123.
• Parties: MURRAY OIL PRODUCTS CO., Inc., v. MITSUI & CO., Limited.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

146 F.2d 381 (1944)

MURRAY OIL PRODUCTS CO., Inc., v. MITSUI & CO., Limited.

No. 123.

Circuit Court of Appeals, Second Circuit.

December 28, 1944.

Lemuel Skidmore, of New York City, for appellant.

Copal Mintz, of New York City, for appellee.

Before L. HAND, CHASE, and CLARK, Circuit Judges.

L. HAND, Circuit Judge.

The defendant, a Japanese corporation, appeals from a summary judgment for the plaintiff, entered upon an award of arbitrators, in an action for damages for failure to deliver a parcel of Manchurian "perilla oil," c.i.f. New York, under a contract of sale. The plaintiff began the action in the state court, and a few days later attached some of the defendant's bank accounts in New York. The defendant appeared and moved for a stay pending the war, which had then broken out; this was granted except that the defendant was required to serve an answer. It then removed the action to the district court and served an answer, pleading, among other defences, that the plaintiff had refused to arbitrate as the contract required. The court stayed the action as to all issues which could not be decided without evidence from Manchuria or Japan; but tried the issue whether the contract contained an arbitration clause, which the plaintiff denied. It found that the contract did contain such a clause; and ordered the parties to arbitrate; they did so, and the arbitrators made an award of $21,840 to the plaintiff, which thereupon moved in the action to confirm the award and for judgment. The defendant — though not disputing the award upon the merits — moved to discontinue the action and vacate the attachment, on the ground that this was the legal effect of the arbitration. The court confirmed the award; directed judgment for the plaintiff to be entered upon it; denied the defendant's motion to discontinue the action and to vacate the attachment; denied a cross-motion of the plaintiff (which we need not describe); and reserved jurisdiction to dispose of the attached property. A judgment was entered on this order, from which the defendant has appealed. The burden of its complaint is that by means of the attachment the plaintiff has obtained an unjust preference over its other creditors; the Alien Property Custodian having now seized its property, which will probably not be enough to pay all in full. It argues that the law of New York treats the submission of a cause to arbitration after an action has been brought as a discontinuance; and that this has been carried over into the Arbitration Act, 9 U.S.C.A. § 1 et seq. It further argues that the court has no power to direct the entry of judgment upon the award under § 9 of Title 9 U.S.C.A., because the contract contained no provision authorizing this to be done.

The contract was made in New York; it purported to submit all controversies to arbitration which might arise under it: "Any dispute arising out of this contract to be settled by arbitration." If this is to be construed as a condition precedent to any action upon the contract, it was illegal in New York at common law. President, etc., of Delaware & Hudson Co. v. Pennsylvania Coal Co., 50 N.Y. 250; Sandford v. Accident Association, 147 N.Y. 326, 41 N.E. 694; Meacham v. Jamestown, etc., R. R. Co., 211 N.Y. 346, 105 N.E. 653, Ann.Cas.1915C, 851; Marchant v. Mead-Morrison Mfg. Co., 252 N.Y. 284, 302, 169 N.E. 386. True, arbitration affects only the remedy (Atlantic Fruit Co. v. Red Cross Line, 2 Cir., 5 F.2d 218), and New York decisions do not control, but the doctrine is general, at least in this country. Hamilton v. Home Insurance Co., 137 U.S. 370, 385, 11 S.Ct. 133, 34 L.Ed. 708; Restatement of Contracts § 551(1); Williston (2nd Edition) § 1921A. On the other hand the clause at bar was perhaps not a condition precedent. Aktieselskabet, etc., v. Rederiaktiebolaget Atlanten, D.C., 232 F. 403, 406, affirmed sub nom. The Atlanten, 252 U.S. 313, 40 S.Ct. 332, 64 L.Ed. 586. If so, it was not a bar to a suit at common law, regardless of its legality. In either view therefore § 3 did not need to remove, and did not remove, what would at common law have been a bar; on the contrary, it provided the defendant with relief — a stay — under conditions where before he would have been helpless to assert the arbitration clause at all. This was the measure of its change, so far as we can see; had it meant to go further and finally to dispose of the action, as the defendant argues, it would not have chosen the words used, for a stay presupposes that the action shall not abate; and if it does not, it must go to judgment of one kind or another. If a defendant wins before the arbitrators, he must be able to clinch his victory by a judgment; on the other hand, having invoked arbitration, he must also abide the result, if he loses. It would be a lame and impotent conclusion in that event to require the successsful plaintiff to begin a new action on the award. Arbitration is merely a form of trial, to be adopted in the action itself, in place of the trial at common law: it is like a reference to a master, or an "advisory trial" under Federal Rules of Civil Procedure, Rule 39(c), 28 U.S.C.A. following section 723c. That is the whole effect of § 3.

The New York decisions on which the defendant relies are irrelevant for several reasons. First, as we have said, the question, being one of the remedy, is not governed by the law of that state; and it is not clear that the federal law recognized the doctrine. Thornton v. Carson, 7 Cranch 596, 3 L.Ed. 451. Second, even if it did, the doctrine applies only where the parties have agreed to arbitrate, and not where, as here, one has been forced to do so. There was some color, in the event of an...