Reynolds Jamaica Mines v. La Societe Navale Caennaise

• Decision Date: 17 December 1956
• Docket Number: No. 7256.,7256.
• Parties: REYNOLDS JAMAICA MINES, Ltd., Appellant, v. LA SOCIETE NAVALE CAENNAISE, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

239 F.2d 689 (1956)

REYNOLDS JAMAICA MINES, Ltd., Appellant, v. LA SOCIETE NAVALE CAENNAISE, Appellee.

No. 7256.

United States Court of Appeals Fourth Circuit.

Argued October 15, 1956.

Decided December 17, 1956.

Harry E. McCoy and Charles R. Dalton, Jr., Norfolk, Va. (Seawell, Johnston, McCoy & Winston, Norfolk, Va., G. B. Margraf, and W. Tobin Lennon, Richmond, Va., on brief), for appellant.

Braden Vandeventer, Jr., and Barron F. Black, Norfolk, Va. (Vandeventer, Black & Meredith, Norfolk, Va., on brief), for appellee.

Before PARKER, Chief Judge, and SOPER and FAHY,^* Circuit Judges.

FAHY, Circuit Judge.

Appellant, Reynolds Jamaica Mines, Ltd., sometimes referred to herein as Mines, appeals from an order of the District Court granting summary judgment against it and dismissing its suit against La Societe Navale Caennaise, appellee, sometimes referred to as S. N. C. In its suit Mines sought damages for failure of S. N. C. to perform fully its contract with Mines involving the sale of a ship by S. N. C. to Carribbean Steamship Company, S. A., a Panama corporation which became Mines' assignor. Mines also asserts that its complaint included a cause of action based on fraud in the inducement of the contract. The essential facts are as follows:

On April 26, 1952, Mines, a Delaware corporation, entered into a contract with S. N. C., a French corporation, to purchase a ship then named the Astree, now the Dragon, for a specified sum. The contract provided that Mines would secure the establishment of a Panama corporation which would take title to the ship. On May 26, 1952, the parties signed an addendum to the contract which designated the Panama corporation so formed, Carribbean Steamship Company, as the purchaser, but which provided that Mines would remain responsible for proper execution of the contract and for payment of the purchase price.¹ Delivery of the ship pursuant to the contract took place on June 29, 1952, when transfer documents were exchanged and the Dragon was released to its new owner. Prior to delivery Carribbean had employed a marine survey company to inspect the ship, and was apparently satisfied with the report received. On that same date the Dragon left the French port where it was then located and proceeded to Jamaica. Some hours after departure her Master notified her owner that the ship was experiencing excessive vibration due to some trouble in the high pressure turbine. This condition persisted. On July 28, 1952, the Dragon was placed in a dock at Mobile, Alabama, its propulsion machinery was removed, and the rotor in the turbine was found to be out of line. Repair work required was considerable. It was finally completed on September 6, 1952, at a cost of nearly thirty thousand dollars. Carribbean notified S. N. C. of the defect on August 8, 1952.

On December 8, 1952, Mines and Carribbean jointly filed their complaint against S. N. C. for breach of contract and for misrepresentations as to the condition of the ship, seeking to recover losses resulting from the defective rotor.² Appellee filed a motion to dismiss for lack of jurisdiction on the ground there was no such diversity of citizenship as is required under 28 U.S.C. § 1332 (1952), since one of the joint plaintiffs, Carribbean, and S. N. C., defendant, were both alien corporations. Thereafter Mines filed an amended complaint alleging that Carribbean had assigned to it all claims arising out of the breach of the contract. S. N. C. moved to dismiss the amended complaint on the grounds that Carribbean was an indispensable party and that the assignment was only for the purpose of securing federal jurisdiction and was collusive. On January 27, 1954, the District Court overruled this motion.

S. N. C.'s answer was filed February 17, 1954. This delay was obviously due to the time consumed in disposition of S. N. C.'s two motions to dismiss and by Mines' filing of an amended complaint. The answer as originally filed made no mention of the arbitration clauses in the contract sued upon by Mines, and contained a counterclaim against Mines. On April 13, 1954, however, with leave of court, granted over Mines' objection, S. N. C. filed an amended answer which explicitly omitted the counterclaim³ and pleaded as a separate defense the provisions of the contract for arbitration. These read in pertinent part as follows:

"All disputes and/or differences which may arise in connection with the fulfillment and/or interpretation hereof, shall be referred to the arbitration in London of a single arbitrator mutually appointed by the Parties.

"If the Parties cannot agree to appoint a single arbitrator, each of them shall appoint his own arbitrator and the arbitrators so appointed shall, in their turn, if necessary, appoint an umpire.

* * * * * *

"The award of the sole arbitrator, arbitrators and/or Umpire shall be final and shall bind the parties hereto, who undertake to consider it as a rule of court.

"The right for each party to request arbitration shall automatically cease within 30 (thirty) calendar days as from and excluding the day of delivery."

Prior to the filing by S. N. C. of this amended answer Mines had filed no responsive pleading to the counterclaim set forth in the original answer of S. N. C.

In dismissing the suit on motion of S. N. C. the District Court concluded, "that there are no material issues of fact in dispute at this stage of the proceedings; that this court is without jurisdiction to determine the merits of the controversy as the action is time-barred under the arbitration clause of the contract between the parties; and that the defendant's motion for summary judgment must be granted." The decree which followed also set forth that the court was without jurisdiction because "the action was time-barred under the arbitration clause" and "defendant's motion for summary judgment is granted."

Mines challenges the action of the District Court on three grounds:

1. It takes the position that S. N. C. by filing an answer and a counterclaim irrevocably submitted to the jurisdiction of the District Court, waived the defense of arbitration, and could not, over appellant's objection, escape that jurisdiction by filing an amended answer which withdrew the counterclaim, and set up the defense of arbitration. It seeks to support this contention by relying on Merchants Heat and Light Co. v. J. B. Clow and Sons, 204 U.S. 286, 27 S. Ct. 285, 51 L.Ed. 488, which holds that by setting up a counterclaim a defendant becomes a plaintiff and thus invokes and submits to the jurisdiction of the court. The jurisdiction there referred to is that over the person. If the submission to the court's jurisdiction inherent in filing the counterclaim in the case at bar were a submission of S. N. C. to the processes of the court we assume jurisdiction thus obtained could not be unilaterally withdrawn by S. N. C. But here the question more accurately is one of waiver of a defense, or if it is a jurisdictional question it is one with respect to subject matter only, and does not involve jurisdiction over S. N. C. Such a waiver, or submission to jurisdiction, is not irrevocable. Only a very strained application of law would permit us to hold that if a counterclaim is withdrawn, nevertheless, having once been filed no defense inconsistent therewith may validly be interposed, even though, as here, no intervening rights arose by reason of the original filing. Rule 15(c) Fed.R.Civ.P., 28 U.S. C., is applicable. It provides that in situations to which it applies an amended pleading relates back to the date of the original.⁴ If, therefore, the amended answer withdrew the counterclaim the pleadings thereafter were to be considered as if the counterclaim had not been filed.

Plaintiff contends, however, that the counterclaim was not validly with-drawn, relying upon Rule 41(c) Fed.R. Civ.P., 18 U.S.C. We think this reliance is misplaced; for this Rule permits a voluntary dismissal of a counterclaim before a responsive pleading is served. In the case at bar the court itself permitted the amended answer, without the counterclaim, to be filed. This was done on S. N. C.'s motion and before Mines had filed a responsive pleading to the answer or counterclaim. Surely such a withdrawal is no less effective and no less valid than a voluntary dismissal without court order.⁵

Appellant's reliance on Radiator Specialty Co. v. Cannon Mills, 4 Cir., 97 F.2d 318, 117 A.L.R. 299, for the...