Karavos Compania Naviera S. A. v. Atlantica Export Corp.

• Decision Date: 15 November 1978
• Docket Number: D,No. 317,317
• Citation: 588 F.2d 1,1978 A.M.C. 2634
• Parties: In the Matter of the arbitration between KARAVOS COMPANIA NAVIERA S. A., disponent owner of the M/V Swede Tonia, Petitioner-Appellee, v. ATLANTICA EXPORT CORPORATION, Charterers of the M/V Swede Tonia, Respondent-Appellant. ocket 78-7423.
• Court: U.S. Court of Appeals — Second Circuit

Page 1

588 F.2d 1

In the Matter of the arbitration between KARAVOS COMPANIA

NAVIERA S. A., disponent owner of the M/V Swede

Tonia, Petitioner-Appellee, v. ATLANTICA EXPORT CORPORATION, Charterers of the M/V Swede

Tonia, Respondent-Appellant.

No. 317, Docket 78-7423.

United States Court of Appeals, Second Circuit.

Argued Sept. 28, 1978.

Decided Nov. 15, 1978.

John D. Kimball, New York City (Healy & Baillie, New York City, Jack A. Greenbaum, New York City, of counsel), for respondent-appellant.

Jonathan Friedland, New York City (Poles, Tublin, Patestides & Stratakis, New York City, John G. Poles, New York City, of counsel), for petitioner-appellee.

Before WATERMAN, FRIENDLY and MULLIGAN, Circuit Judges.

FRIENDLY, Circuit Judge:

This is an appeal from an order of the District Court for the Southern District of New York under §§ 4 and 5 of the Federal Arbitration Act, 9 U.S.C. §§ 4, 5 (1976), directing Atlantica Export Corporation to submit to arbitration of a claim by Karavos Compania Naviera, S.A. (Karavos), for breach of an alleged agreement to charter its vessel M/V Swede Tonia. The agreement, never signed but alleged to have resulted from telephone and telex exchanges by various ship brokers described below, would have incorporated the New York Produce Exchange Form Time Charter which provides for arbitration of disputes between "Owners and Charterers." Atlantica's defense was that it had not authorized anyone to charter the Swede Tonia on its behalf and hence was not a "party" to any written agreement to arbitrate within § 4. It is agreed that this issue was one for determination by the court.

The Dramatis personae, in addition to the petitioner Karavos, are as follows:

1) Atlantica Export Corporation (Atlantica), a "branch" of a Philippine corporation called Atlantica Corporation, is a California corporation headquartered in San Francisco. It is a trading company owned by John Lim, its president, and his family.

2) Atlantica Export Suppliers Corporation (Suppliers), with an office in New York City, is a sales affiliate of Atlantica whose prime function is to take care of the Middle East market. Half its stock is owned by Jose Grajo, Jr., its president, Jessie Coronel, its executive vice-president, and Luis Uranza, Jr., a vice-president and director; the other half is owned by John Lim, Domingo Yao and Carlos Tejuco, the last being vice-president and secretary-treasurer of Atlantica.

3) International Resources Exchange, Inc. (Resources), a New York corporation, also with an office in New York City. It is a trading company represented in the transaction here at issue by Raymond Kenard and Alfred Repetti.

4) Ottar Grundvig, president of Grundvig Chartering, Inc., a New York ship broker, alleged by petitioner to have been acting on behalf of Atlantica.

5) Edward Licho, an employee of Federal Motorship Corporation, also a New York ship broker, who fixed the charter with the agent of the shipowner upon instruction from Grundvig. ¹

6) John Vatis, an employee of Trans-Ocean Steamship Agency, Inc., a New York ship broker acting on behalf of the shipowner.

The line of authority relied on by Karavos runs:

The dispute is over the existence of the link between Atlantica and Resources (or Repetti) necessary to bind Atlantica.

The case was presented in a manner that must have been most confusing to the district judge. One would have supposed that, when the trial began on April 21, 1977, Karavos' first witness would have been Repetti, if his testimony would have been favorable, or, if not, Grundvig, who had been in direct touch with him. Instead it was Licho who, as the diagram indicates and his testimony was to show, knew little about Repetti's status save what Grundvig had told him. When Licho's testimony was concluded, Atlantica's counsel, a San Francisco lawyer, asked whether petitioner was resting. Its counsel answered in the negative, saying he was "going to bring in or try to bring in Mr. Grundvig" and also that:

If I can locate this man Repetti, whoever he is, I will subpoena him. I want to get to the bottom of this. ²

To fill in the time before petitioner could produce additional witnesses, respondent then called Tejuco. At the conclusion of his testimony both parties rested. After an off-the-record discussion on the possibility of settlement, the court announced that it would reserve decision, awaiting a letter from counsel.

About six weeks later the court was informed that a settlement could not be reached and that petitioner asked to reopen its case to have Grundvig testify. When trial resumed in the afternoon of Tuesday, July 5, present counsel for respondent was substituted. He asked, among other things, that the hearings be kept open so that Repetti could be given an opportunity to testify. ³ Counsel said that Repetti had offered to testify without need of a subpoena but could not attend that day; that counsel had promised that, after making the request of the judge, counsel would "get back to" Repetti and "see what he had to say." The judge agreed to hear Repetti if but only if he could be in court that afternoon so as to be heard when Grundvig's testimony had concluded. When Grundvig ended his testimony, at 4:55 P.M., respondent's counsel renewed his "request to have the opportunity to examine Repetti." Expressing justifiable impatience that counsel had not telephoned Repetti during the afternoon, the judge directed him to do so. When counsel reported that Repetti had "left town and will not be back until Thursday at the latest," the judge closed the hearing.

The imbroglio that brought this case to court began about the middle of September, 1976, when, according to Grundvig, he "was introduced to a Mr. Raymond Kenard of International Resources Exchange Corporation of New York City through a friend . . . ." During an ensuing luncheon Kenard explained to Grundvig "that his company represented various European cement manufacturers and that within a short time his clients, to whom he sold the cement, would require transportation ships, ships to transport the cement to the destinations and that he would keep in touch with me." At the start therefore the buyer was to be the charterer. Grundvig continued that around September 20 Kenard called to explain that Atlantica was about to conclude a contract to ship cement, starting with about 160,000 metric tons, from Spain to Saudi Arabia and that Kenard would call him back as soon as all formalities and letters of credit were in order. Grundvig may still have believed that Detrick Corporation, the ultimate buyer of the cement for use in Saudi Arabia, would be the charterer; in any event there is nothing to indicate that he clearly ascertained what Atlantica's role in the transaction was to be.

Grundvig next testified that about September 27 or 28 Kenard called again and said he should now telephone Atlantica in San Francisco and "speak with a Mr. Repetti, who would give me all details of the shipping requirements." According to Grundvig, Kenard told him that Repetti, who in fact was Kenard's associate in Resources, was "part of the Atlantica Export Corporation organization" and Grundvig thought until mid-October ⁴ that Repetti was an Atlantica employee. However, he made no endeavor to find out anything about this from Atlantica, although shipment of 160,000 metric tons would have involved very large charter hire. On September 29 Grundvig called Repetti at Atlantica's office in San Francisco. Repetti told him that Atlantica would require ships to transport 160,000 tons of cement from Spain to Saudi Arabia, with loading of the first ship to start not later than October 15 but preferably October 10, and authorized him to find a vessel for this. While the record is not altogether clear how much the first shipment was to be, apparently Repetti talked in terms of 15,000 metric tons. According to Grundvig, Repetti told him that the charterer would be Atlantica and that they were "first-class charterers." Grundvig then called Licho who shortly came up with the Swede Tonia. Grundvig thereupon sent a telex to Repetti in Atlantica's San Francisco office "confirming our discussions with Mr. Kenard" that "our owners friends will nominate a vessel tomorrow" that would meet the time and place requirements. The telex promised that the full terms and conditions including required references would then be telexed but that these were expected to be the same "as per discussions with Mr. Kenard." Grundvig's notes show many discussions of the terms of the charter with Mr. Kenard, ⁵ which at least show Grundvig's awareness that Resources had a substantial interest in the charter.

According to Grundvig he again called Repetti on September 30 and submitted the Swede Tonia. Repetti allegedly authorized him to offer firm through broker channels, which he did. The owners asked for financial references for Atlantica; after more calls, Repetti gave the name of a Mr. Grispy of the Bank of America, International Division in San Francisco. ⁶ Since it was late in the day the owners requested an extension of time until October 1 at 10:00 A.M. to check on Atlantica's responsibility. Grundvig extended the offer and confirmed this by a telex to Repetti at the Atlantica office. Grundvig sent two more telex' to Repetti on October 1. The first confirmed the charter subject to the owners' accepting the charters after contacting Mr. Grispy; for the first time this telex gave Repetti some financial details about the charter, notably $3,400 per day charter hire. Grundvig also offered to act as "your operating agent" and promised to submit a contract to Mr. Kenard. Later in the day Grundvig telexed Repetti that the owners had reconfirmed the fixture of the Swede Tonia.

Grundvig's testimony, if the judge credited it as he was entitled to do, showed that Repetti had authorized him to charter the Swede Tonia on Atlantica's behalf. What it did not do was to provide any evidence, except for the...