Gantt v. Felipe Y. Carlos Hurtado & Cia, Ltd.

• Decision Date: 21 May 1948
• Citation: 297 N.Y. 433,79 N.E.2d 815
• Court: New York Court of Appeals Court of Appeals
• Parties: GANTT v. FELIPE Y. CARLOS HURTADO & CIA, Ltda.

297 N.Y. 433

79 N.E.2d 815

GANTT

v.FELIPE Y. CARLOS HURTADO & CIA, Ltda.

Court of Appeals of New York.

May 21, 1948.

Appeal from Supreme Court, Appellate Division, First Department.

Proceeding by R. B. Gantt, doing business under the name of Southland Supply Company, to restrain a proposed arbitration under contracts for sale of tropical woods by Felipe Y. Carlos Hurtado & Cia., Ltd., to petitioner. From an order of the Appellate Division, 272 App.Div. 801, 71 N.Y.S.2d 892, unanimously affirming an order of the Supreme Court at Special Term, Church, J., 189 Misc. 237, 70 N.Y.S.2d 55, denying petitioner's motion for a permanent injunction restraining the arbitration proceedings, petitioner appeals by permission of the Appellate Division, which certified a question as to whether the Special Term's order was properly made.

Order of Appellate Division affirmed, and certified question answered in the affirmative. Edward Jerome and Horace A. Teass, both of New York City, for appellant.

Walter M. Hinkle and Irving I. Goldsmith, both of New York City, and Robert G. Lind, of Brooklyn, for respondent.

DESMOND, Judge.

Petitioner Gantt is a North Carolina lumber dealer, using the business name of Southland Supply Company. Respondent Hurtado & Cia., Ltda., is a Nicaraguan partnership (or corporation) doing business in that Republic. In July, 1946, at High Point, North Carolina, an authorized representative of Hurtado made two written agreements with ‘Southland Supply Company’, the signatures of the latter being by W. O. Carter, who, in one of those agreements, styled himself ‘Manager’ but whose authority to contract for petitioner Gantt is now disputed by the latter. Each of these July, 1946, writings called for the sale and delivery by Hurtado to ‘Southland Supply Company’, of large quantities of various kinds of tropical woods to be shipped from Nicaraguan ports, at prices f. o. b. those ports, to High Point. Each of those agreements called for the opening by the buyer, for the seller, of an irrevocable letter of credit, the place where such letter of credit was to be obtained not being stated. Both those July, 1946, agreements were modified in various respects by a third document, signed at High Point in September of that year by a representative of Hurtado and by ‘Southland Supply Company, W. O. Carter’. The September pact contained the first mention of arbitration, the language being: ‘Any controversy or claims arising out of or relating to this contract or the breach thereof shall be settled by arbitration in accordance with the rules of the Inter-American Commercial Arbitration Comission. This agreement shall be enforceable and judgment upon any award rendered by the arbitrators or a majority of them may be entered in any Court having jurisdiction. The arbitration shall be held in New York, N. Y.’

Later in September, 1946, respondent Hurtado, asserting that there had been a violation of contract by Southland Supply Company (or Gantt), in the latter's alleged failure to set up the promised letter of credit, served on Southland a demand for arbitration before the Inter-American Commercial Arbitration Commission. Gantt did not reply to that demand, but commenced in Supreme Court, New York County, the present proceeding to restrain the proposed arbitration, alleging in his petition that Carter had signed the September, 1946, agreement without authority from him (Gantt). Petitioner first applied for a temporary order to restrain the arbitration pending a jury trial, which petitioner requested, of the preliminary question as to Carter's authority, see Civil Practice Act, s 1458. That motion was granted at Special Term but immediately afterwards, and before the jury trial could be held (it has not yet been held, we are informed) petitioner Gantt made a further motion, this time for a permanent stay of arbitration, on the ground that the arbitration clause was wholly void by the laws of North Carolina, where the paper in which it appears was signed, and that therefore, according to petitioner, he could not be compelled to enter into any arbitration, anywhere. Special Term denied that second motion, holding that the arbitration clause, in its specific declaration that any arbitration was to ‘be held in New York, N. Y.’ amounted to an unconditional consent by the parties to submit their contests to arbitration in New York State under New York arbitration procedures, and that, whether or not such an arbitration covenant could be enforced in North Carolina, it was enforcible under the law of the forum, i. e., New York. The Appellate Division, First Department, unanimously affirmed without opinion but granted petitioner Gantt leave to appeal to this court, certifying to us a question as to whether the order denying petitioner a permament stay, was properly made.

We deal first with the question of the legality of the arbitration clause, since if it be entirely void, as petitioner argues, the case ends there. North Carolina has an arbitration statute, General Statutes of North Carolina, 1943, div. II, ch. 1, art. 45, but, unlike our New York article 84 of the Civil Practice Act, the North Carolina enactment covers and enforces only agreements to submit existing controversies to arbitration. It does not mention at all the kind of arbitration covenant we have before us a covenant to arbitrate controversies thereafter arising and so we turn, see Tarpley v. Arnold, 226 N.C. 679, 680, 40 S.E.2d 33, to the North Carolina case law to see whether the clause here under scrutiny is good, or bad, in North Carolina. Petitioner says it is totally void, for all purposes, under North Carolina law, but his reliance at this point seems to be entirely on the use of the word ‘void’ in Williams & Bro. v. Branning Mfg. Co., 154 N.C. 205, 70 S.E. 290, 47 L.R.A., N.S., 337. An examination of that decision, and a number of others in North Carolina's highest court, convinces us that North Carolina's common law does not declare such covenants to be nullities without any legal existence or effect, but merely refuses to compel parties to arbitrate thereunder, see Williams v. Branning Mfg. Co., earlier appeal, 153 N.C. 7, 10, 68 S.E. 902, 31 L.R.A.,N.S., 679, 138 Am.St.Rep. 637,21 Ann.Cas. 954;Nelson v. Atlantic Coast Line R. Co., 157 N.C. 194, 202, 72 S.E. 998, 52 L.R.A., N.S., 829, and particularly Tarpley v. Arnold, supra, 226 N.C. at page 680, 40 S.E.2d at page 33. The second Williams case, supra, itself, as well as Tarpley v. Arnold, supra, and others of the above-cited North Carolina cases, plainly show that such agreements are given some effect by the North Carolina courts, since awards based thereon may be the subject of suits and defenses. In other words, North Carolina's common law as to arbitration is substantially the same as was the common law in New York before our Legislature dealt with the whole matter of arbitration, and as it was, and is, in other States, see Haggart v. Morgan, 5 N.Y. 422, 55 Am.Dec. 350; President, M. & Co. of D. & H. Canal Co. v. Pennsylvania Coal Co., 50 N.Y. 250, 264;Matter of Berkovitz v. Arbib & Houlberg, 230 N.Y. 261, 271, 130 N.E. 288, 290;Matter of Marchant v. Mead-Morrison Mfg. Co., 252 N.Y. 284, 293, 169 N.E. 386, 389;Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 121, 44 S.Ct. 274, 68 L.Ed. 582. Having thus found that the arbitration treaty we are passing on was not void but unenforcible only, at the place where made, we turn to the question of whether it may be compulsorily enforced by the courts of New York. The place of performance of the arbitration section, though not of the other parts of the September agreement, was to be New York. The New York statute, Civil Practice Act, art. 84, provides complete compulsion and full enforcement, as to such promises to arbitrate future-arising disputes. It is the law of the forum which, traditionally, controls as to remedies, McElmoyle v. Cohen, 13 Pet.,...