Munson v. Straits of Dover S.S. Co.

• Decision Date: 03 February 1900
• Citation: 99 F. 787
• Parties: MUNSON v. STRAITS OF DOVER S.S. CO.
• Court: U.S. District Court — Southern District of New York

99 F. 787

MUNSON v. STRAITS OF DOVER S.S. CO.

United States District Court, S.D. New York.

February 3, 1900

Wheeler & Cortis and Charles S. Haight, for libelant.

Convers & Kirlin, for respondent.

BROWN District Judge.

The above libel was filed to recover $505.56, the damages alleged to have been sustained by the libelant in 'lawyer's fees and disbursements' arising from the defendant's refusal to arbitrate a matter in dispute between the parties under a charter party. The agreement to arbitrate is contained in the following clause of the charter:

'That should any dispute arise between the owners and the charterers, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen that their decision, or that of any two of them, shall be final, and for the purpose of enforcing any award, this agreement may be made a rule of the court.'

The dispute arose on a claim of the defendant as owner of the steamship Straits of Dover against the present libelant, as charterer of the steamship, to extra compensation for a detention of the steamer beyond the charter period. The present libelant offered to arbitrate that dispute, which was refused by the present defendant, which thereupon filed its libel in this court against the present libelant in personam for the recovery of a considerable sum for the detention. The case turned upon the proper construction of some of the clauses of the charter, and resulted in the dismissal of the libel without costs. 95 F. 690. In the present libel it is alleged that in that action 'the libelant incurred the expense in lawyer's fees and disbursements of $555.56'; that 'the expense of arbitrating the claim would not have exceeded the amount of $50'; and the libelant therefore claims an 'indebtedness to him of $505.56.'

The respondent has filed exceptions (1) that the libelant does not state facts sufficient to constitute a cause of action (2) that the alleged damages are remote and not recoverable and (3) are at most nominal.

The agreement in this charter to arbitrate, was purely executory and prospective. It related to no particular dispute, but covered alike the entire subject of any matter in dispute that might thereafter arise. If valid, it would debar either party from a resort to the legal tribunals and oust the courts of jurisdiction. Such agreements ever since Lord Coke's time, and even before, have been held to be no defense to an action in the courts. In Kill v. Hollister (1746) 1 Wils. 129, upon a similar defense it was said:

'If there had been a reference depending, or made and determined, it might have been a bar, but the agreement of the parties cannot oust this court; and as no reference has been, nor any is depending, the action is well brought, and the plaintiff must have judgment.'

In Thompson v. Charnock, 8 Term R. 139, which was in action upon a charter party, Lord Kenyon upon demurrer to a plea setting up a similar agreement to arbitrate said: 'It has been decided again and again that an agreement to refer all matters in difference to arbitration is not sufficient to oust the courts of law or equity of their jurisdiction.'

In Scott v. Avery, 5 H.L. 811, an agreement that no action should be brought on certain policies of marine insurance until the amount of the loss had been fixed by arbitrators, was sustained on demurrer, as an exception to the general rule, which was recognized to be as above stated. Baron Martin observes as respects agreements to arbitrate the whole matter, that they are 'binding and operative if the parties choose to act upon them, but revocable at their will ' (page 829).

Crompton, J., observes (page 835):

'It is a legal incident to every contract that the parties should have a right to resort to a court of law for the settlement of their disputes; and a stipulation to the contrary is void, as being repugnant to the rest of the contract.'

And the Lord Chancellor (page 847) says:

'There is no doubt that when a right of action has accrued parties cannot by contract say that there shall be jurisdiction to enforce damages in respect of that right of action; * * * parties cannot enter into a contract which gives rise to a right of action for the breach of it, and then withdraw such a case from the jurisdiction of the ordinary tribunals.'

The general principle above stated has been universally followed in this country in very numerous cases, which will be found collated in 2 Am.& Eng.Enc.Law (2d Ed.)p. 570, etc. See Insurance Co. v. Morse, 20 Wall. 445, 450, 22 L.Ed. 365; The Excelsior, 123 U.S. 40, 51, 8 Sup.Ct. 33, 31 L.Ed. 75; Seward v. City of Rochester, 109 N.Y. 164, 16 N.E. 348; 2 Pars.Cont. (8th Ed.) p. 708.

An agreement, however, to submit to arbitration a question of price, value, quantity or damage merely, as it does not oust the courts of jurisdiction of the cause, has long been held to be valid. Scott v. Avery, supra; Hamilton v. Insurance Co., 136 U.S. 242, 10 Sup.Ct. 945, 34 L.Ed. 419, and cases there cited; Perkins v. Light Co., 21 Blatchf. 309, 16 F. 513; Delaware & H. Canal Co. v. Pennsylvania Coal Co., 50 N.Y. 250; Sweet v. Morrison, 116 N.Y. 19, 22 N.E. 276. These constitute a second group of arbitration cases wholly distinguishable from the first.

In many of the cases in which it is held that the agreement to refer prospective disputes is no bar to an action, it is also intimated that the party may have an action for damages for the breach of the agreement to refer; and it is upon this ground that the libelant bases the present action. But it is a singular circumstance that notwithstanding the frequent repetition of this intimation, no case is to be found in which, upon a mere refusal to arbitrate and where no action had been taken by either party under the agreement to refer beyond a mere request and refusal to arbitrate, any damages have ever been recovered, or any other than nominal damages have ever been indicated to be recoverable, because too loose, indefinite and incapable of verification.

There are indeed numerous cases, which may be said to form a third group, in which damages have been recovered for the refusal to proceed after an actual submission to arbitration has been made and entered upon, and which is afterwards revoked by the defendant. In such cases it is manifest that there may be very appreciable and definite expenses, damages, or losses caused by the revocation, which are the direct and proximate result of the defendant's breach of the submission, in reliance on which the plaintiff has acted; and for such damages upon the ordinary principles of law, a recovery should be had. See cases collated 2 Am.& Eng.Enc.Law (2d Ed.) pp. 602, 603. All the cases cited by the libelant in which damages have been recovered, are either of this latter kind or else belong to the second group of cases above referred to, in which the limited agreement to arbitrate as to price, damage, etc., is held to be valid.

The present case does not belong to either of these two latter classes. It is purely an executory agreement to submit, as I have said, prospective disputes, if any such should arise in the future, and covering also the entire subject of dispute; so that the present agreement falls wholly within the first class of cases referred to. Upon such a purely executory agreement, where no action has been induced or taken by either party beyond an offer and a refusal to submit, the authorities seem to be that only nominal damages are recoverable. In Russ. Awards (8th Ed.) p. 62, it is said:

'As it is ordinarily drawn up, usually only nominal damages are recoverable for the breach of the agreement to refer; for the jury generally can have no means of calculating the amount.'

And this is repeated in Morse, Arb. p. 96.

The case cited of Day v. Bank, 13 Vt. 97, has no application here, as in that case there was a submission under the agreement of arbitration, which the defendant refused to attend, after having thereby induced the...