Hanes Supply Co. v. Valley Evaporating Company, 17327.

Decision Date07 November 1958
Docket NumberNo. 17327.,17327.
Citation261 F.2d 29
PartiesHANES SUPPLY CO., Inc., Appellant, v. VALLEY EVAPORATING COMPANY, Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Ben Kohler, Jr., Cohen & Kohler, Atlanta, Ga., for appellant.

Henry M. Quillian, Jr., Atlanta, Ga., Alan A. McDonald, Yakima, Wash., Bryan Carter, Ansley & Smith, Atlanta, Ga., for appellee.

Before RIVES, TUTTLE, and JONES, Circuit Judges.

TUTTLE, Circuit Judge.

This is an appeal from a judgment by the District Court for the Northern District of Georgia based on a default "foreign" judgment entered against the non-resident Georgia defendant in the United States District Court for the District of Oregon, and also, in a separate count, based on an ex parte arbitration award which was reduced to judgment in the Oregon proceedings.

Inasmuch as both parties and the District Court proceeded on the theory the other claim sued upon is merged in the judgment, only the count based on the "foreign" judgment need be considered. Since the enactment of the registration statute1 it is not at all clear that a judgment creditor who has obtained a judgment in one district can make this judgment the basis of a plenary suit in another district. The legislative history of this section clearly indicates that the registration statute is intended to provide all the benefits deriving from a local judgment on a "foreign" judgment without subjecting either plaintiff or defendant to the expense of a second lawsuit. U.S.Code Congressional & Administrative News 1954, p. 3142, and see Juneau Spruce Corp. v. International Longshoremen & Warehousemen's Union, D.C.Hawaii, 128 F.Supp. 697, 700. However, see also Moore's Commentary on the U. S. Judicial Code, p. 385. Appellant here does not urge this as a basis to support its motion to dismiss. It is not jurisdictional, and we therefore will not pass upon this question.

The other issues presented on this appeal must ultimately be resolved, so we will proceed to deal with them in this case.

The main issue here is whether the Oregon judgment which is based on 9 U.S.C.A. § 2 and § 9,2 authorizing service upon a non-resident of the district in a suit on an arbitration award, in which service was perfected on the non-resident defendant by mail and in which the latter made no defense, forecloses the defendant's right, when suit is later brought on such judgment in the district of its residence, to show that no agreement to arbitrate had been made by it, or if so, none to arbitrate at the place where this arbitration was held; and that thus the foreign judgment based on such purported arbitration is void for want of proper venue.

The facts necessary to an understanding of this issue are: On January 12, 1954, Valley Evaporating Co., of the state of Washington, hereinafter referred to as Valley, and the Dixson Company, of the state of Georgia, in a written contract,3 signed on its behalf by G. A. Hanes, sold to Dixson a stated amount of green apple rings at an agreed price. On January 16, 1954, the Dixson Company wrote Valley a letter advising that "we have, as of January 1, 1954, sold our bakery department to Mr. G. A. Hanes, who will operate as Hanes Supply Co., Inc.," and further that "effective January 1, 1954, all invoices and transactions of any description should be in the name of Hanes Supply Company."4 Hanes did not at any time, in writing or orally, expressly assume or agree to the terms of the written purchase order. Subsequently, shipment of the apples was completed and invoice covering them was mailed to Hanes. Hanes, on June 2nd, wrote complaining of the quality of the shipment, refusing 250 cases and requesting disposition by Valley. No reply having been received from this letter, counsel for Hanes addressed a second letter on June 22nd, and on July 28th a third letter, of which a copy was also sent to counsel for Valley, requesting disposition of the shipment. Valley disposed of the apples and billed Hanes for its loss. It thereupon notified Hanes that the contract of sale provided for arbitration "under National Wholesale Groceries Association at point nearest delivery point." This point, the letter states, "as recited on reverse of enclosed contract form, would, we believe, be New Orleans." The letter then continued:

"In checking with Northwest Dried Fruit Association office at Portland, we are advised there is no established arbitration board at New Orleans. If it is agreeable to you, we therefore suggest that arbitration be held at New York City or Portland, Oregon."

The letter enclosed a document consisting of one legal size page of fine print entitled "Northwest Dried Fruit Contract." In a paragraph marked "Arbitration,"5 provision is made for arbitration of disputes such as the one here in issue, in one of a number of cities, including Portland, Cincinnati, New York and New Orleans, and providing further that in the absence of agreement by the parties, arbitration is to be held "in the city which is nearest to destination of shipment."

This letter was followed by a letter dated July 26th, 1955, stating that since Hanes had not replied "we propose to submit our case to Portland, Oregon, and we will so proceed by August 15th unless we receive some reply from you in response to our letter of June 7th." Counsel for Hanes replied to these two letters on August 2nd, stating: "It is the position of Hanes Supply Company that it can in no way be compelled to submit to arbitration in connection with your alleged claim and that it can in no way be bound by any so-called arbitration award."

In this posture of affairs, Valley submitted its claim to an arbitration panel in Portland, Oregon, not participated in by Hanes; the arbitrators awarded the sum of $3,095.21, plus arbitration costs of $20.00. Thereafter Valley filed a suit in Portland on such award, purporting to act under the terms of 9 U.S.C.A. § 9 (see footnote 2, supra). Service was attempted by mail, as provided in Section 9, and the trial court thereafter, on motion by Valley for default judgment, made its findings of fact and conclusions of law and entered judgment against appellant Hanes for $3,115.21. This judgment, not having been paid by Hanes, was made the basis of the present suit in the District Court for the Northern District of Georgia.

Hanes filed its motion to dismiss, supported by affidavit denying that it had contracted to submit to arbitration and contending that the arbitration agreement, if valid, required arbitration in the listed city nearest Atlanta, to-wit, Cincinnati, Ohio,6 and that it had, under no circumstances, agreed to an arbitration in Portland, Oregon; thus it had not "specified," as required in Section 9, the Oregon District Court; that therefore, since the venue of an action against a non-resident, permitted as an exception to the general federal venue statutes, depends upon the existence of "a written provision in * * * a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract * * *" and that such agreement also specifies the court which entered the judgment, the existence of these facts is "jurisdictional" in the sense that the Oregon court has no power to issue process to a non-resident without the existence of such facts; that, therefore, the truth or falsity of such facts may be inquired into by the second court.

The appellee countered with its affidavit which asserted substantially the facts which have already been recited and which concluded that Hanes was a party to the "written" contract, and that such contract incorporated by reference the separate agreement to arbitrate.

The trial court overruled the defendant's motion to dismiss, treated as motion for summary judgment, as contemplated under Rules 12(b) and 56, F.R.C.P., 28 U.S.C.A. Holding that the statute expressly provides for service on a non-resident, the trial court said: "The above language is clear and not ambiguous, although it does mark a departure by the Congress from its policy, existing since the establishment of this nation, of not giving to federal district courts jurisdiction for judgments in personam against non-residents of the state, upon personal service perfected upon them in the district where they reside." There can, of course, be no question as to the correctness of this statement. The difficulty, however, is that the trial court did not consider, and therefore did not pass upon, appellant's contention that Section 9 of the Act never came into play at all because appellant denied the existence of any written contract binding on it agreeing to an arbitration and, a fortiori, the existence of any contract which specified Portland as the place for any arbitration, or the district court of the district of Oregon as the court which could enter a final judgment as contemplated in Section 9; that without the existence of such an agreement the provisions of that section for service on a non-resident never became applicable, and since the defect in service under the usual venue and service requirement were not waived by a voluntary appearance, the Oregon district court never obtained jurisdiction over the person of appellant in order to make a binding determination on the existence of the agreement to arbitrate.

The trial court's conclusion, "It was within the jurisdiction of the Oregon court to determine the meaning of the contract between the parties, and it did so," is correct only if the Oregon court properly had the non-resident appellant before it, and this it did not have unless in fact there was a written agreement to which appellant was a party to conduct the arbitration at the place which in turn became the place where the district court presided.

In light of the recognized general principle in the federal system that "apart from specific exceptions created by Congress the jurisdiction of district courts is territorial." Ahrens v. Clark, 335 U.S....

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