Farr & Co. v. Cia. Intercontinental De Navegacion

• Decision Date: 04 February 1957
• Docket Number: No. 127,Docket 24212.,127
• Parties: FARR & CO., a partnership of which F. S. Farr, John Farr, W. F. Prescott, E. M. Jonklaas, Emmet Whitlock, L. H. Dixon and John C. Buys are partners, Petitioner-Appellee, v. CIA. INTERCONTINENTAL DE NAVEGACION DE CUBA, S. A., Respondent-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

243 F.2d 342 (1957)

FARR & CO., a partnership of which F. S. Farr, John Farr, W. F. Prescott, E. M. Jonklaas, Emmet Whitlock, L. H. Dixon and John C. Buys are partners, Petitioner-Appellee, v. CIA. INTERCONTINENTAL DE NAVEGACION DE CUBA, S. A., Respondent-Appellant.

No. 127, Docket 24212.

United States Court of Appeals Second Circuit.

Argued December 14, 1956.

Decided February 4, 1957.

Rehearing Denied April 23, 1957.

Kirlin, Campbell & Keating, New York City, for respondent-appellant, James P. Kehoe, New York City, of counsel.

Hill, Rivkins, Middleton, Louis & Warburton, New York City, for petitioner-appellee; Yorkston W. Grist, New York City, and Robert J. Byrnes, Brooklyn, N. Y., of counsel.

Before SWAN, LUMBARD and WATERMAN, Circuit Judges.

SWAN, Circuit Judge.

This is an appeal from an order entered upon the petition of Farr & Co., subcharterer of a vessel chartered by her owner to the appellant, for brevity called Cia., directing Cia. to appoint an arbitrator and proceed to arbitration in accordance with an arbitration clause contained in the subcharter.¹ The petition was filed pursuant to section 4 of the United States Arbitration Act, 9 U.S.C.A. § 4.² The petition alleged, in a supporting affidavit, that a dispute existed with respect to petitioner's claim for damage to sugar carried on the chartered vessel, and that petitioner had appointed an arbitrator and had demanded arbitration but had received no reply from Cia. Service of the petition was made by registered mail addressed to Cia.'s office in Tampa, Florida. Appearing specially, Cia. moved to vacate service of the petition. This motion was denied, and Cia. was directed to appoint its arbitrator within 15 days, and to proceed to arbitration within 30 days, after service of a copy of the order upon its proctors. From this order Cia. has appealed. The order has been stayed pending appeal. Judge Noonan's opinion is reported in D.C., 144 F.Supp. 839.

The appeal raises several interesting questions concerning the United States Arbitration Act, 9 U.S.C.A. § 1 et seq. But before these can be considered, it must be determined whether the order is appealable. The appellee contends it is not. The facts are undisputed. In addition to those above recited it should be stated that in May 1954 Farr & Co. filed a libel against the S.S. Punta Alice, her owner, referred to as Ravena, and Cia., to whom Ravena had chartered the vessel and by whom she had been subchartered to the libelant in June 1953. The libel claimed damage to various shipments of sugar carried on the vessel from Santiago de Cuba to Montevideo, Uruguay — the same claim of which the libelant later demanded arbitration. No jurisdiction in rem was acquired over the vessel and no jurisdiction over the person of either respondent was obtained by appearance or service of a citation, and no property of either was ever attached. On February 9, 1956, twenty-one months after filing its libel, Farr & Co. filed its petition for arbitration.

The appellee contends that the order is interlocutory and not appealable. In two cases involving orders, pursuant to 9 U.S. C.A. § 4, to proceed to arbitration, this court has held such an order a final judgment and as such appealable. The matter was first considered in Krauss Bros. Lumber Co. v. Louis Bossert & Sons, 2 Cir., 62 F.2d 1004, 1005, where Judge L. Hand said that the order is the "last deliberative action of the court." This was followed in In re Canadian Gulf Line, 2 Cir., 98 F.2d 711, 713. In The Sydfold, D.C.S.D.N.Y., 25 F.Supp. 662, Judge Patterson also considered an order directing arbitration to be a final order. In two other cases we have assumed appealability without discussion. In re Utility Oil Corporation, 2 Cir., 69 F.2d 524, certiorari denied Petroleum Nav. Co. v. Utility Oil Corp., 292 U.S. 655, 54 S.Ct. 866, 78 L.Ed. 1504; Petition of Nortuna Shipping Company (Nortuna Shipping Company v. Isbrandtsen Company), 2 Cir., 231 F.2d 528. Other circuits have also held such orders appealable as a final judgment.³ The appellee argues that the above mentioned cases in this circuit have been impliedly, if not actually, overruled by our later decisions in In re Pahlberg Petition, 131 F.2d 968 and Stathatos v. Arnold Bernstein S.S. Corp., 202 F.2d 525. We do not agree. Any seeming inconsistency between the cases previously cited and the two relied upon by the appellee can be resolved by noting that in the former the order to compel arbitration was made in an independent proceeding under section 4 of the Act, while in the latter the order was made in the course of a continuing suit.

In Pahlberg, the charterer of a vessel filed a libel against the owners; they demanded arbitration and sought a stay of the suit under section 3 of the Act, 9 U.S. C.A. § 3, which was denied. Thereafter Pahlberg, one of the owners, filed his petition under section 4, and from the order directing arbitration the charterer appealed. The appeal was dismissed on the authority of Schoenamsgruber v. Hamburg American Line, 294 U.S. 454, 55 S.Ct. 475, 79 L.Ed. 989. In that case also the order to proceed to arbitration was made in a pending suit, and in the same order the district court stayed the trial, and reserved jurisdiction to make further orders. It is highly unlikely that Judge Augustus N. Hand, who wrote the Pahlberg opinion, intended to overrule, without even mentioning it, his earlier decision in the Canadian Gulf Line case. Judge Patterson, in The Sydfold, supra, with his usual clarity discussed the distinction between the order in the Schoenamsgruber case and an order in an independent proceeding under section 4 of the Act. We agree with him.

In Stathatos arbitration was ordered under section 4. After the arbitrators had made an award, the winning party (who happens to have been the original petitioner) by a new petition sought and obtained court confirmation of the award. Thereafter on motion of the losing party, the confirmation was set aside, the prior award was vacated, and a resubmission to different arbitrators was ordered. After referring to the Pahlberg and Schoenamsgruber cases Judge Clark wrote 202 F.2d 526:

"While the order now at bar is a vacation of a prior award, it is in essence one which continues the proceeding for arbitration, just as do the orders in the cases just cited. * * *

"The issue would therefore seem to be ruled by the precedents cited to deny appealability to this one step in the continuing process of arbitration here going forward."

The opinion makes no reference to the earlier decisions of this court holding that an order to compel arbitration when made in an independent proceeding is final and appealable. It contains nothing to indicate that those cases were being overruled. On the contrary the authorities cited relate to orders made in a pending suit. Such orders were viewed as being interlocutory.

In the case at bar, although a libel had been filed, the district court had acquired no jurisdiction over the person or property of either respondent. Consequently we view the order on appeal as made in an independent proceeding and being a final and appealable order.

As a precautionary measure, in case the order should be held non-appealable, Cia. has moved for a writ of mandamus or prohibition.⁴ Having decided that the order is appealable, we need not consider the motion for a writ.

On the merits, the main question presented by the appeal is whether the district court obtained jurisdiction over appellant by reason of its agreement that the arbitration should take place in New York, and the extraterritorial service by mail of appellee's petition for specific performance of the agreement.⁵ Judge Noonan held that it did.⁶ We agree. Section 4 of the Arbitration Act requires that when parties have agreed to arbitrate the arbitration be had in the district where the petition is filed. The parties are presumed to have contracted with notice of this venue provision, and since the arbitration was to take place in New York and "This submission may be made a rule of court by either party," they consented to the jurisdiction of the district court in New York, where the petition was filed. Although New York cases are not controlling on us, their reasoning supports this conclusion. Thus, in Gilbert v. Burnstine, 255 N.Y. 348, 174 N.E. 706, 73 A.L.R. 1453, it was held that an agreement to arbitrate in Great Britain was a consent to jurisdiction of the courts of Great Britain. The Gilbert case was cited by this court in Bowles v. J. J. Schmitt & Co., 2 Cir., 170 F.2d 617, 622, for the proposition that "In general, jurisdiction can be granted by consent and by a consent given prior to the beginning of an action." The case of Jackson v. Kentucky River Mills, D.C. E.D.Ky., 65 F.Supp. 601, upon which the appellant strongly relies, is readily distinguishable. There the contract between a New York citizen and a Kentucky corporation provided for arbitration in New York. The plaintiff gave the defendant notice by registered mail of a demand for arbitration and appointment of an arbitrator. The defendant did not appear in the arbitration and, after the plaintiff obtained a judgment in New York on the award, suit was instituted in Kentucky on the judgment. The court held that the New York court which rendered the judgment did not have jurisdiction of the person of the defendant and the judgment was a nullity. The case was distinguished from Gilbert v. Burnstine and is distinguishable from the case at bar because the contract between the parties provided that "`the arbitration shall be enforceable under and pursuant to the laws of the State, Country or Government having jurisdiction and that judgment upon the award may be entered in any court of any such jurisdiction.'" The court pointed out that this specific provision, not present in the contract before us, precluded any implication that the parties intended, merely by agreeing to arbitrate in New York,...