Jackson v. Kentucky River Mills, 48.

• Decision Date: 03 May 1946
• Docket Number: No. 48.,48.
• Citation: 65 F. Supp. 601
• Parties: JACKSON v. KENTUCKY RIVER MILLS.
• Court: U.S. District Court — Eastern District of Kentucky

65 F. Supp. 601

JACKSON v. KENTUCKY RIVER MILLS.

No. 48.

District Court, E. D. Kentucky.

May 3, 1946.

James Park and Stoll, Muir, Townsend, Park & Mohney, all of Lexington, Ky., for plaintiff.

Leslie W. Morris, of Frankfort, Ky., Eldon S. Dummit, of Lexington Ky., and Smith & Leary, of Frankfort, Ky., for defendant.

FORD, District Judge.

This case is submitted upon the defendant's motion to dismiss the complaint by which the plaintiff, a citizen of New York, invoking the constitutional mandate that full faith and credit shall be given in each state to the judicial proceedings of every other state (U.S. Const. Art. IV, sec. 1), seeks to enforce against defendant, a corporate citizen of Kentucky, a personal judgment for $14,712.56 rendered by the Supreme Court of the County and State of New York in favor of certain individuals doing business as partners under the firm name of Smith & Bird, who assigned the judgment to the plaintiff.

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It appears from the complaint and its accompanying exhibits that a written contract was made in Kentucky on April 20, 1944, by the terms of which the plaintiff's assignors, Smith & Bird, sold to the defendant 95 tons of Brazilian Government Graded Caroa fibre at the price of 18 cents per pound. The contract provided for the delivery of the fibre to a United States Atlantic port and for its transportation thence by rail to Frankfort, Kentucky.

Seventy-nine (79) tons of the fibre were shipped to Kentucky, but the defendant refused to accept delivery claiming that the shipment was not made within a reasonable time and that the fibre was not as it had been represented.

The contract of sale contained the following provision:

"Arbitration. Any dispute arising out of this contract or its interpretation shall be settled by arbitration in New York in the customary manner, buyer and seller each naming his arbitrator, whose award, or that of the umpire whom the arbitrators may appoint, shall be final and binding upon both parties. If either party fails to appoint an arbitrator within seven (7) days after receiving the other party's nomination of an arbitrator, the one arbitrator nominated may act as sole arbitrator. In case of alleged inferiority the arbitrators' and umpire's fees are to be paid by the seller if the fibre is allowanced more than the amount which the seller may have offered the buyer in settlement; otherwise the fees are to be paid by the buyer. The seller and buyer consent 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."

Upon the refusal of defendant to accept delivery of the fibre, Smith & Bird demanded arbitration of the controversy and by registered mail notified defendant of the demand and of their appointment of an arbitrator. By the same communication they requested the defendant to appoint an arbitrator in order that arbitration of the controversy might proceed in accordance with the agreement.

The defendant failed to appoint an arbitrator and entirely ignored the demand for arbitration. After giving notice to the parties by mail, the arbitrator nominate by Smith & Bird, at a hearing held at his office at 70 Pine Street, New York City, on December 19, 1944, at which the defendant was neither present nor represented, awarded Smith & Bird damages against the defendant in the sum of $14,174.59 together with interest and costs. Smith & Bird then instituted a proceeding in the Supreme Court of New York County, New York, for confirmation of the award of the arbitrator and for judgment for the amount of the award and costs. An order was made by the Court calling upon the defendant to show cause before the Supreme Court of the County of New York at the County Court House, Foley Square, in the City of New York on the 25th day of January, 1945, why judgment should not be entered accordingly. By registered mail the order was delivered to defendant at Frankfort, Kentucky. The defendant did not appear and made no response whatever to the show cause order. On January 31, 1945, the Court entered the judgment which is sought to be enforced in this action.

The grounds upon which the defendant bases its motion to dismiss are:

1. The contract upon which the judgment was based having been made in the State of Kentucky, in respect to validity and enforcibility it is governed by the law of Kentucky under which the arbitration clause contained therein is unenforceable;

2. The Court of New York by which the judgment was rendered was without jurisdiction of the subject matter or the parties and no provision of the contract express or implied, vested that court with jurisdiction to enter the judgment.

On February 12, 1925, Congress enacted "The United States Arbitration Act." Sec-2 of the Act provides: "A written provision in * * * a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, * * * shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S. C.A. § 2.

The contract here exhibited evidences a transaction involving "commerce" which, as defined by the Act, "means commerce among the several States or with foreign nations." 9 U.S.C.A. § 1. The plenary power to regulate such commerce is committed to Congress by section 8, clause 3 of Article I of the Constitution of the United States.

Thus, legislating within its constitutional domain, Congress has declared, as a matter of substantive law, that an arbitration agreement such as that here in question, is valid and enforceable. Donahue v. Subsequehanna Collieries Co., 3 Cir., 138 F.2d 3, 5, 149 A.L.R. 271.

The power of Congress to regulate such commerce by National laws is paramount and the conflicting laws of a state can not stand in the way of enforcement. "If it were otherwise, the government and its laws might be prostrated at the feet of local authority." Northern Securities Co. v. United States, 193 U.S. 197, 333, 24 S.Ct. 436, 455, 48 L.Ed. 679. The contention of the plaintiff, therefore, that the validity and enforcibility of this arbitration agreement is governed by the law of Kentucky seems clearly untenable. The opinion of the United States Circuit Court of Appeals of the Sixth Circuit in Gatliff Coal Co. v. Cox, 142 F.2d 876, upon which defendant relies, is not apposite. In that case the arbitration agreement relates to a contract of employment of coal miners engaged as workers in interstate commerce and the Court held that the United States Arbitration Act was not applicable to such an agreement by reason of the provision of the first section thereof that "nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C.A. § 1.

Moreover, if the New York Court which rendered the judgment had jurisdiction of the parties and the subject matter, full faith and credit could not be denied merely on the ground that mistakes of law may underlie the judgment, for the judgment of a court of competent jurisdiction is "conclusive as to all the media concludendi" against collateral attack. Fauntleroy v. Lum, 210 U.S. 230, 237, 28 S.Ct. 641, 52 L.Ed. 1039; Milliken v. Meyer, 311 U.S. 457, 462, 61 S.Ct. 339, 85 L.Ed. 278, 132 A.L.R. 1357.

It is a familiar rule, however, that where a judgment rendered by a court of one state is sought to be enforced in another, the validity of the judgment may be challenged for want of jurisdiction over either the person of the defendant or the subject...