Application of Reconstruction Finance Corp.
| Decision Date | 30 July 1952 |
| Citation | 106 F. Supp. 358 |
| Parties | Application of RECONSTRUCTION FINANCE CORP. In re HARRISONS & CROSFIELD, Limited. |
| Court | U.S. District Court — Southern District of New York |
Harold E. Jacobsen, New York City, for petitioner, Charles R. L. Hemmersley, Hoboken, N. J., and Abram Glaser, New York City, of counsel.
Donovan, Leisure, Newton, Lumbard & Irvine, New York City, for respondent. Burr F. Coleman, New York City, of counsel.
Petitioner, Reconstruction Finance Corporation, moves to vacate a notice of arbitration served upon it by respondent, Harrisons & Crosfield, Ltd., and permanently to restrain the proposed arbitration proceeding. The respondent cross moves for the dismissal of the petition and seeks, pursuant to the provisions of the Federal Arbitration Act, 9 U.S.C. § 4, an affirmative order directing the petitioner to proceed to arbitration, the controversy being otherwise one over which the Court would have jurisdiction.
Petitioner, a wholly-owned Government Corporation, is the statutory successor of Rubber Reserve Company. On December 6, 1941, Rubber Reserve Company as buyer entered into five written contracts with Pagel, Horton & Co., Inc., for the purchase of various quantities of crude rubber to be shipped to the United States from the Netherlands East Indies. The contracts were, so far as here material, identical in form and are so treated by the parties. Although Pagel, Horton & Co., Inc., was described therein as "Seller," payment for the rubber was to be made not to it, but to the respondent herein, Harrisons & Crosfield, Ltd., described in the contract as the "Eastern Shipper," by letter of credit to be furnished in its favor by the Rubber Reserve Company. Harrisons & Crosfield, Ltd., although not a party to the contract, was the actual shipper of the rubber. Payment to it was conditioned upon the presentation of shipping documents transferring title to the buyer to include "on-board" bills of lading of ocean-carrying vessels destined for United States ports, or local or through bills of lading endorsed "on-board" by ocean-carrying vessels destined for United States ports. Each contract provided for delivery by January 31, 1942. Rubber Reserve Corporation issued the letters of credit as required by the contracts, but subsequently, and while the cargo of rubber was in transit or on dock, a portion was destroyed by enemy action or otherwise lost before it could be delivered on board an ocean carrier destined for a United States port. In consequence, Harrisons & Crosfield, Ltd., was unable to present the necessary on-board bills of lading and subsequently was required to refund to an intermediate bank the purchase price for the destroyed rubber. Respondent now claims it is entitled to receive from Reconstruction Finance Corporation, as successor to Rubber Reserve Company, payment for this rubber by reason of the latter's failure to place war risk and marine insurance upon the shipment as required by the contracts.
Each contract also contained the following clause:
As already noted, the respondent is designated in the contracts as the Seller's Eastern Shipper, and, additionally, has succeeded to the right of Pagel, Horton & Co., Inc., by formal assignment and has initiated these proceedings for arbitration in its own name and on the strength of the assignment. Petitioner challenges the right of respondent to invoke arbitration.
At the outset the respondent asserts that petitioner's application for a stay may not be granted since the Federal Arbitration Act, unlike the New York State Civil Practice Act, § 1458, does not expressly grant authority for a stay of arbitration. The petitioner, recognizing this possible infirmity, requests the Court to treat its application as a suit for a declaratory judgment under the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202, and contending it would suffer irreparable injury if compelled to proceed to arbitration, asks that the stay be granted as incidental to the main relief. The basic questions have been so fully presented and are necessarily involved in the consideration of the respondent's cross motion to compel arbitration under § 4 of the Arbitration Act that I believe the issues should be disposed of on the merits rather than on any narrow procedural ground.
The first ground on which petitioner relies to defeat arbitration is that the contracts were for the exclusive benefit of Rubber Reserve Company, the buyer, and Pagel, Horton & Co., Inc., the seller, and were intended to be personal as between them; that since the respondent was not a party thereto, the assignment does not permit it to proceed under the arbitration clause. Petitioner points to various provisions of the contracts as requiring personal performance on the part of Pagel, Horton & Co., Inc., including the duty to declare the particular shipments and the name of the vessel; to reimburse Rubber Reserve Company to failure to do so; to refund to Rubber Reserve Company the amount of additional insurance expense; to pay for specified loss or damage resulting from delay in shipment; and the right of Pagel, Horton & Co., Inc., to substitute another shipper in the event of nonperformance by Harrisons & Crosfield, Ltd. Finally, it asserts that Pagel, Horton & Co., Inc., was made primarily responsible for the full performance of respondent's obligations. The Court believes that these duties were not so unique or personal as to preclude assignment. Certainly, an assignee was as qualified to perform them as an assignor. No particular skill was required or was performance based upon any relationship of personal confidence between the contracting parties.1 Essentially, the contracts were for purchase and sale of merchandise and were freely assignable. Their assignment to respondent, independent of other factors, carried with it the right as an assignee to invoke the arbitration clause.2
There...
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