232 F. 403 | S.D.N.Y. | 1916
(after stating the facts as above). Were not the law of Denmark and Sweden pleaded so broadly, I think that it would be possible to dispose of the arbitration clause without recourse to the question whether such clauses go to the remedy, and not to the right. It is clear that the respondent did not intend to rely upon the clause in the letter of January 8, 1915, and did not suppose the case was one for arbitration at all. What it did rely on was the penalty clause, under which it thought itself protected, and which made it to its interest to repudiate as soon as freight got above 34 shillings. The attempt at justifying this repudiation wholly falls. The respondent violated its contract without any shadow of
However, the allegations of the answer do not admit of this method of disposing of the point, for they contain the statements that under the law of Denmark and Sweden arbitration is the condition precedent to any suit in any court “for, upon, or by reason of any matter or dispute with respect to or arising under said charter.” This, taken merely as an allegation, and it must be so taken on exceptions, would cover a suit for repudiation of the charter party as an entirety. Therefore it becomes necessary to determine whether the clause goes to the right or to the remedy, and whether it is a condition precedent under our law, if it goes only to the remedy.
I do not propose to consider the very vexed question whether an arbitration clause, which purports to cover all disputes, and not merely the quantum of the award, may be valid, if it be clearly meant as. a condition precedent. In the state of New York it certainly is invalid. Meacham v. Jamestown, etc., Co., 211 N. Y. 346, 105 N. E. 653, Ann. Cas. 1915C, 851. And undoubtedly Scott v. Avery, 5 H. L. Cas. 811, has been understood very generally in this country as so fixing the law. The judgments in the Exchequer Chamber (8 Exch. 497) did proceed upon that distinction, but those in the House of Lords are, to say the least, subject to a different interpretation.
However, along with the right to sue under the penalty ran collaterally the right to sue on the covenant to pay, and it was never held that the penalty affected the right of the covenant in any way. Kacii ran concurrently, though both could not be used simultaneously. Abbott on Shipping, pt. IV, c. 2, § 2. This was the state of the law while the clause existed in either of its two previous forms, whether as penalty in a stated sum, or as penalty for the estimated amount of freight. Yet during that period the penalty clause really added nothing to and subtracted nothing from the promisee’s rights. He might sue under either the covenant or the penalty, and recover his actual damages in either event; the only difference, being that, if he foolishly selected the penalty, he was limited by its amount. To add to the penalty clause the words “proven damages” changed nothing whatever; it merely made express what the law imposed in any event. There is, therefore, not the least reason for supposing that the addition of these words in the charter party was intended to- effect a limitation of liability; there was as much ground when the penalty was in a stated sum to argue that its presence necessarily implied that the parties intended to limit any liability as after the words were added. Yet we see that the courts did not accept that conclusion when the clause was in its earlier form. It seems to follow, therefore, that Mr. Justice Bailache could not have reached a different result in Wall v. Rederiaktiebolaget, supra, from what he did, without disregarding the whole history of the clause.
It is quite true that the,practical result is to reduce the penalty clause to a brutum fulmén, but that result did not arise after the words “proven damages” were inserted; it existed from the time when the penalty would not be enforced at all, except in limitation of the recovery of any one who selected the penalty clause to sue upon. Of course, while the practice in debt differed from that in assumpsit, there remained some real distinction, but that has long since disappeared and the clause has persisted as an archaism, such as is common enough in all branches of the law. That the parties should have really intended to limit their liability by any such inartificial and awkward paraphrase beginning with a penalty is unlikely. Such instruments are full of formal and time-honored phrases, and it is fair to look for some clear intent at so important an innovation. If they meant a limitation, they should have been more explicit. Lines v. Atlantic Transport Line, 223 Fed. 624, 139 C. C. A. 170.
Besides, the result is most arbitrary if the clause be thought to be in limitation. It does not limit the owner at all, because in no event can he recover more than his freight; it does limit the charterer, and by an amount which bears no relation to his loss. Of course, the par
Exceptions overruled. Decree for full damages, with costs. I assume that the amount of the damages-will be settled by agreement.