Seldner Corporation v. WR Grace & Co.

• Decision Date: 23 February 1938
• Docket Number: No. 6213.,6213.
• Parties: SELDNER CORPORATION v. W. R. GRACE & CO.
• Court: U.S. District Court — District of Maryland

22 F. Supp. 388

SELDNER CORPORATION v. W. R. GRACE & CO.

No. 6213.

District Court, D. Maryland.

February 23, 1938.

Niles, Barton, Morrow & Yost (by Geo. S. Yost), of Baltimore, Md., for plaintiff.

Ritchie, Janney, Ober & Williams, of Baltimore, Md., and Howard N. Deyo, of New York City, for defendant.

CHESNUT, District Judge.

The question that has been now submitted for decision in this case is whether an award of arbitrators should be confirmed or set aside. The question arises in the following way:

On March 17, 1937, the plaintiff, The Seldner Corporation, a Maryland corporation engaged in Baltimore City in manufacturing cotton batting and mattresses, entered into a written contract with the defendant, W. R. Grace & Company, a New York corporation, whereby the latter sold to the plaintiff 500 bales of Japanese Fly Waste (cotton waste) described to be "equal to buyer's type in seller's possession." "Disputes, if any, to be settled amicably. In the event an amicable settlement cannot be reached, arbitration to be held in Baltimore." Shipment was to be made from Japan for 150 bales in April; 150 bales in May; and 200 bales in June 1937, payment to be made upon presentation of shipping documents under c.i.f. contract. As the documents for the several shipments respectively arrived they were taken up and paid for by the plaintiff as purchaser, but on inspection of the goods themselves the deliveries were rejected as not in accordance with the contract sample. Grace and Company then demanded arbitration under the contract, and an award of the arbitrators unfavorable to the plaintiff was made on September 27, 1937, which Seldner considered to be invalid for reasons hereinafter stated; and thereafter on October 15, 1937, it instituted suit in the Superior Court of Baltimore City to recover the sum of $14,094.64, with interest, which the plaintiff had paid to the defendant under the contract. The suit was begun by the customary Maryland procedure known as "Foreign Attachment" against the defendant as a non-resident, with levy on the 500 bales of Japanese Fly Waste in storage in Baltimore. The defendant then entered its appearance in the case and had it removed to this court for trial. Here it pleaded the general issue pleas and a special plea setting up the award of the arbitrators, to which plea the plaintiff filed a replication alleging the invalidity of the award. Thereupon the defendant filed a motion in this court to stay the trial of the case and to confirm the award of the arbitrators; and in answer thereto the plaintiff filed a motion to vacate and set aside the award.

The ruling now to be made arises on these motions. Counsel for both parties have acted on the assumption that the procedure is in accordance with the United States Arbitration Act, § 1 et seq., U.S.C. title 9, §§ 1 to 15, and particularly sections 9 to 13, both inclusive, which relate to the confirmation, vacation or modification of awards and the procedure thereon. A close reading of the whole Act suggests some doubt as to whether it is precisely applicable to the present case.

Sections 2 to 8, inclusive, of the act, 9 U.S.C.A. §§ 2-8, deal with situations where an arbitration, though agreed to, has not been held; and sections 9 to 13, inclusive, 9 U.S.C.A. §§ 9-13, relate to cases where, as here, the arbitration has been held and an award has been made, and regulate the procedure for confirmation, modification or vacation of such award. Section 9 provides:

"§ 9. Award of arbitrators; confirmation; jurisdiction; procedure. If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made."

It will be noted that the procedure for confirmation of an award is expressly conditioned upon the inclusion in the arbitration agreement of a stipulation "that a judgment of the Court shall be entered upon the award," which the contract in this case did not include. See Lehigh Structural Steel Co. v. Rust Engineering Co., 61 App. D.C. 224, 59 F.2d 1038; In re Thurston, 2 Cir., 48 F.2d 578, 580. It is at least arguable that the subsequent sections dealing with vacation and modification of awards were intended to be dependent on section 9, and only applicable where an award has been made in a case within its provisions; as it would seem somewhat anomalous to limit confirmations of awards to arbitration agreements providing for judgments on awards, but extend modification and vacation to all awards. A more symmetrical construction would confine the operation of sections 10 and 11 (relating to vacation and modification) to defensive use against awards which could otherwise be confirmed under section 9, as therein indicated. It may also be questioned whether there is venue jurisdiction here in view of the provision in section 9 that the proceeding for confirmation is to be in the "United States court in and for the district within which such award was made"; because the award in this case was actually made in New York (by subsequent agreement of the parties) although the contract provided for arbitration in Baltimore. But the latter objection probably could be, and in this case doubtless has been, waived.

However, it is not necessary to decide whether the United States Arbitration Act is applicable, because, under the facts presently to be stated, the result would be the same whether it or common law principles affecting arbitration and award affords the rule of decision. The court has general jurisdiction of the case on the ground of diversity of citizenship and amount involved. U.S.C. title 28, § 41(1), 28 U.S.C.A. § 41(1). The only importance of the point is with regard to the procedure. If the Act applies, the issue of the validity of the award may properly be disposed of on the motions of the parties; while if it does not apply, the question would properly be deferred until the main jury trial of the case upon the pleadings; and even this would seem to be not vitally important as the controlling facts are really undisputed, and the submission of the controversy by the parties to the court may be taken as a waiver of a jury trial on the particular issue.

The contract provision for arbitration above quoted, was in the most general terms and did not prescribe the method of procedure therefor; but by correspondence the parties agreed, for the convenience of the arbitrators, that the arbitration should be held in New York instead of Baltimore; that each party should appoint one arbitrator, and if they failed to agree, a third arbitrator should be selected by them who should decide their differences. The plaintiff selected Mr. John Ryan and the defendant Mr. Benjamin Adler as their respective arbitrators, and they named as the third arbitrator Mr. T. B. O'Brien; all three of the arbitrators being engaged in the business of buying and selling cotton waste and having places of business in New York. Grace & Company proposed that three questions be submitted to the arbitrators as follows:

1. Is the quality off?

2. If the quality is off, have you (the buyer) the right to reject?

3. If the quality is off and you (the buyer) have not the right to reject, what allowance should you (the buyer) be entitled to?

Seldner at first objected to any question being submitted to the arbitrators except the first, asserting that if the quality was off (as compared with the contract sample) then it had the unconditional right to reject; but finally assented to the submission of the three questions to the arbitrators. The parties agreed upon the arbitration and the arbitrators were appointed before the arrival of the third instalment, of 200 bales; but after it had arrived and had been inspected and rejected by Seldner, the latter suggested that the arbitration should cover it also, and this was assented to by Grace & Company.

The arbitrators met on September 27, 1937, in New York City, and by their decision on that day made an award signed by all three, by which they determined that the first shipment of 150 bales was "off" quality but not off quality sufficiently to be rejected outright, and an allowance of 30 cents per c.w.t. was granted. On the second shipment of 150 bales, "it was found that these were also slightly off quality and an allowance of 15 cents per c.w.t. was granted." On the remaining 200 bales "it was found that these were a good delivery against the sales type." The award stated, in answer to the second question submitted, which was, if the quality was off had Seldner the right to reject, "No. Since the quality of the first 150 bales was the most inferior of the three deliveries, it was the opinion of the umpire, called in this matter, that even the material tendered in this delivery, as against the selling sample, was of kind and nature and an outright rejection was unjustified." The allowance made by the award amounted to $328.01 which sum, plus a further weight adjustment of $2.03, was tendered by defendant to the plaintiff but rejected, and was subsequently paid into court by the defendant.

At the hearing upon the respective motions for confirmation and setting aside of the award, the evidence consisted of the correspondence between the parties and some other exhibits attached to the respective motions, and the testimony of the plaintiff's president and of the three arbitrators. On all the evidence the plaintiff contends that the award should be set aside for...