Chatham Shipping Co. v. Fertex Steamship Corp.

• Citation: 352 F.2d 291
• Decision Date: 19 October 1965
• Docket Number: Docket 29671.,No. 23,23
• Parties: CHATHAM SHIPPING COMPANY, Warwick Corporation and Tsakalotos Navigation Corp., Libelants-Appellees, v. FERTEX STEAMSHIP CORPORATION, Respondent-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

352 F.2d 291 (1965)

CHATHAM SHIPPING COMPANY, Warwick Corporation and Tsakalotos Navigation Corp., Libelants-Appellees, v. FERTEX STEAMSHIP CORPORATION, Respondent-Appellant.

No. 23, Docket 29671.

United States Court of Appeals Second Circuit.

Argued September 30, 1965.

Decided October 19, 1965.

John J. Foley, New York City (Foley & Grainger, New York City), Robert P. Whelan, New York City, of counsel, for respondent-appellant.

Theodore P. Daly (Poles, Tublin & Patestides, New York City) (Christ Stratakis, New York City, of counsel), for petitioners-appellees.

Before FRIENDLY and KAUFMAN, Circuit Judges, and HERLANDS, District Judge.^*

FRIENDLY, Circuit Judge.

On June 19, 1964, appellant Fertex Steamship Corporation entered into a charter, in New York City, with Tsakalotos Navigation Corporation "as Agents for Owners of the Liberian steamer `Athenoula T.,' Owners' option substitute,

7227 gross of ---- tons ------ Register," for 4442 net

the carriage of a cargo of phosphate from Tampa, Florida, to Cartagena, Colombia. The charter provided that "should any dispute arise between Owners and the Charterers," the matter should be referred to arbitration in New York by three commercial men. The owner of the Athenoula T, Warwick Corporation, designated a Greek steamer, the General Tsakalotos, to perform the charter. After delivery of the cargo and partial payment of the freight, a dispute arose as to non-payment of the balance, damage to the vessel, and other matters.

There ensued, in the District Court for the Southern District of New York, a Pickwickian series of moves that has already accumulated more than two printed pages of docket entries without any approach to the merits. It began, in December 1964, with the filing of a libel by Tsakalotos Navigation Corporation, the agent, seeking damages against Fertex. The latter excepted on the ground that Tsakalotos Navigation was not the real party in interest. Thereupon a second libel was filed in which the agent was joined by Warwick Corporation, owner of the Athenoula T, and Chatham Shipping Company, owner of the General Tsakalotos. This libel invoked the arbitration clause in the charter, and stated "that by this action the libelants seek to compel the respondent to submit to arbitration and demands sic security to insure payment and satisfaction of an arbitration award, pursuant to 9 U.S.C. § 8." Tsakalotos Navigation Corporation then made a motion to have the first libel dismissed without prejudice, which Judge Metzner granted. Later the agent and the two shipowners served a petition which generally repeated the allegations of the second libel, asserted that they had appointed an arbitrator but that Fertex had declined to do so, and asked that judgment be entered unless Fertex proceeded to arbitration. Fertex excepted to the second libel and opposed the petition on the ground that by the first libel, filed by Tsakalotos Navigation, all three libelants had waived their right to arbitration. Apparently Fertex also argued that libelants had improperly relied on § 8 of the Arbitration Act, which indeed was not here applicable, whereas they should have filed a petition under § 4. Properly seeking to cut through the paper maze created by the rather bumbling efforts of petitioners' proctors and to place petitioners where they desired and deserved to be, Judge Metzner, on March 2, 1965, dismissed the second libel but granted the motion to direct Fertex to proceed with arbitration as properly made under § 4 of the Federal Arbitration Act.

On March 15, 1965, Fertex filed a notice of appeal from Judge Metzner's order. Some days later it submitted in the District Court an order to show cause why it should not be granted a variety of relief, including reargument on the allegedly new discovery of what it was later to characterize as "the startling fact, previously obscured by procedural movements, that Fertex Steamship Corporation has never agreed to arbitrate any disputes under the charter party, with Chatham Shipping Company, the owner of the `General Tsakalotos.'" Judge Metzner, pointing out that reargument had not been sought within the ten-day limit provided by General Rule 9(m) of the District Court, denied the motion save insofar as it sought to stay arbitration pending this appeal.

Fertex's points on appeal are wholly devoid of merit. The cases are altogether clear that the mere filing of an action for damages on a contract does not preclude a subsequent change of mind in favor of arbitration therein provided, see Richard Nathan Corp. v. Dacon-Zadeh, 101 F.Supp. 428, 430 (S. D.N.Y.1951); Farr & Co. v. Cia. Intercontinental de Navegacion, 243 F.2d 342, 348 (2 Cir. 1957); the earliest point at which such preclusion may be found is when the other party files an answer on the merits. The Belize, 25 F.Supp. 663, 664 (S.D.N.Y.1938); Cavac Compania Anomina Venezolana de Administracion y Comercio v. Board for Validation, 189 F.Supp. 205, 209 (S.D.N.Y.1960). Judge Metzner was quite warranted in rejecting as untimely Fertex's belated claim concerning the substitution of a vessel owned by Chatham. It was baseless in any event. Even if the bare words "owners' option substitute" are not enough to overcome the general principle that a voyage charter must be performed by the shipowner identified in the charter party, see Fratelli Sorrentino v. Buerger, 1915 3 K.B. 367; Scrutton, Charter-parties and Bills of Lading, at 3, n. 2 (17th ed. 1964), a point we find it unnecessary to decide, Fertex waived any right to object to the substitution by accepting performance by the General Tsakalotos, see Denton v. Brocksmith, 299 F. 559 (5 Cir. 1924); 3 Williston, Contracts § 418, at 102 (3d ed. 1960). And if we accept Fertex's contention that a novation did not occur, the substitution and acceptance of Chatham's vessel amounted at least to...