The issues in this case are: (1) whether an 'arbitration award was valid; (2) whether it could be enforced in the action commenced in the district court; and (3) whether an assignee for the purpose of suit could maintain an action on the assigned award.
The controversy arises out of the following circumstances: The Kentucky River Mills, appellant herein, is engaged in the operation of a spinning mill in Frankfort, Kentucky, spinuing only such soft fibers as hemp and jute. In the latter part of 19-13, after completing a large contract for the Navy, 'appellant sought to buy fiber for its own purposes. However, because of purchases by the government during the war period, such fibers as it had used in the past were not available on the open market. Appellant company, therefore, could not secure these fibers, at least until the domestic hemp crop would become available in the summer of 19-11; and it was, accordingly, confronted with, the alternatives of closing its mill or finding some other kind of fiber which it could spin.
For many years, appellant had purchased fiber for its own account through the firm of Smith & Bird, fiber brokers of New York City, and, in considering the needs of appellant company, Smith & Bird, in January 1944, suggested the use of a fiber called “caroa,” grown and- produced in Brazil. Appellant, accordingly, ordered a sample bale of caroa on January 19, 1944. After examining it, and taking into consideration the assurance of Smith & Bird that other mills in the East, engaged in the spinning of soft fibers, had used caroa in the past as a substitute for jute, appellant’s general manager, in a telephone conversation on February 15, 1944, purchased 100 tons of caroa from Smith & Bird, at a price of $40,320. The purchase was confirmed by letter from Smith & Bird, and the fiber was promptly shipped, received, accepted, and paid for by appellant company. In the above mentioned letter confirming the sale, Smith & Bird informed appellant- company that they had secured an option on an additional 200 tons of caroa, good for one week, and that they understood that the company would advise them shortly if they wanted this additional tonnage.
After the above mentioned shipment of fiber was received by appellant company, it was found that it would be necessary to make certain extensive changes in its mill in order to spin the fiber. Before making such changes, appellant’s general manager went to New York during the week of February 21, 1944-, to discuss with Smith & Bird the matter of the availability of sufficient fiber to meet its requirements in the future, and in the discussion, emphasized the company’s concern to have sufficient fibers so that there would be no stoppages in its manufacturing program. Although the company did not order more caroa fiber until six weeks later, it was testified to by the company’s general manager that at no time was there any indication that the fiber would be delayed in delivery or that the company would be prevented from operating its mill continuously. The discussion was generally about the possibility of getting fiber outside the United States, and appellant understood that, as to a possible shipment of 95 tons of the fiber which was mentioned as then being in Brazil, it would be necessary to secure an import permit from the federal government.
Following the New York conference, appellant’s general manager, in a telephone conversation with Smith & Bird, on April 5, 1944, told them that appellant company would purchase 225 tons of the fiber that they had indicated would be available. He slated that he told them it was necessary that the company suffer no stoppages in its manufacturing program, and he testified, with regard to such conversation, that there were no indications of any difficulty in the matter other than that there would have to be secured a permit for importation of fibers from Brazil. Following this telephone conversation and on the same day, Smith & Bird wrote appellant company, confirming the telephone conversation, “at
“We have sold you 100 tons [of fiber]* * *. "
which, it was stated, would be shipped that week and the next.
“In addition to the foregoing we have sold you subject to confirmation 125 tons * * * of which there are 30 tons * * * on spot New York and the balance [of 95 tons] * * * will be prompt shipment from Brazil subject to obtaining import permit. Regarding these 125 tons, shortly after our telephone conversation with you we cabled Brazil this acceptance, and as soon as we have their reply we will advise you.”
In the above mentioned letter, it will be seen that the confirmation of the order by Smith & Bird divided the fiber sold into two categories: (1) the 100 tons sold, and (2) the 125 tons sold “subject to confirmation,” of which 30 tons were on spot in New York, and 95 tons in Brazil, subject to obtaining import permit.
Two days after the date of the above letter, Smith & Bird wrote appellant company, on April 7, 1944, as follows:
"Referring to our letter of April 5th, 1944, we have received confirmation of 125 tons of Caroa, and for the import portion have filed our application for licenses. Just as soon as we receive the permits, we will send you contract.”
On April 20, Smith & Bird wrote appellant company:
“We are pleased to advise that today we received from Washington the War Production Board import permit covering 95 tons of Caroa Fibre.
“For the total of 125 tons sold you on April 7th you will find enclosed our two contracts in duplicate, as follows:
“No. 5529-A 30 tons No. 5 shipped from spot New York.
“No. 5529-B 95 tons comprised of 50 tons No. 3 and 45 tons No. 5 for shipment from Brazil as soon as possible.
“Kindly retain the accepted originals for your file and accept and return the duplicates to us at your convenience.”
The two duplicate contracts enclosed in the above letter of April 20, 1944, provided for the sale of the 95 tons of caroa fiber from Brazil, and the provision therein as to shipment is as follows:
“SHIPMENT, as soon as possible, direct or indirect, with or without transhipment, for U. S. Atlantic port, thence by rail to Frankfort, Ky. (herein called destination). Shipment is contingent upon freight space being available to seller within the time specified; if such freight space is not available, shipment is to be as soon as possible thereafter.”
It may be noted that while the contract was a printed form, the provision for shipment “as soon as possible” was in typewriting.
On April 22, 1944, appellant company received shipment of the 100 tons, mentioned as being sold in Smith & Bird’s letter of April 5, 1944, as well as the 30 tons on spot in-New York which were sold “subject to confirmation.” At that time, the balance of the order of 95 tons, also sold subject to confirmation, was still in Brazil, although the order had been confirmed by Smith & Bird’s vendor in that country.
When the above mentioned shipment of 130 tons of caroa arrived in Frankfort, appellant’s general manager was out of the city. The fiber, however, was received, accepted, and paid for by appellant company, and no question is raised in any way about this shipment.
It is the shipment of the 95 tons of caroa fiber from Brazil that gives rise to this case; and one of the important issues is whether the parties agreed that shipment of the caroa fiber then in Brazil was to be made “promptly” or “as soon as possible.”
When, in May 1944, appellant company’s general manager returned to his office after a few weeks’ absence, he found the letter of April 20, 1944, from Smith & Bird, and the two duplicate contracts therein enclosed, one for the 30 tons of fiber shipped from spot New York, which had already been received, and the other, for the 95 tons of fiber still at the port in Brazil awaiting shipping space. He read the letter and contracts, signed the contracts of purchase on behalf of appellant company, and returned
Because of the shortage of freight space in ships bound for this country from South America, due to war conditions, the Brazilian shipment continued to be delayed. On July 10, 1944, a member of the firm of Smith & Bird wrote appellant that shipping space from Brazil had been promised for the latter part of that mouth. Upon receipt of this letter, appellant’s general manager called Smith & Bird by telephone, stating that they were putting the company in a very bad position, and that it was faced with the situation of stopping the mills, and revamping the machinery to go hack into the spinning of hemp; and that, since the 95 tons had not yet cleared the port in Brazil, he informed Smith & Bird: “I think we would like to cancel our contract.” He was, however, informed by Smith & Bird that because of the completion of their contract: with their South American supplier, they were not in a position to cancel. The 95 tons in question arrived in New York from Brazil on September 12, 1944, and Smith & Bird wrote the company that it was being shipped immediately. In reply to this letter, the company’s general manager telephoned them and said that the company felt it had no responsibility in the matter. In answer, Smith, one of the members of the firm, informed the general manager of appellant company that the fiber had been shipped in accordance with the contract which provided for shipment “as soon as possible.” Appellant company then wired Smith & Bird that it would not be in a position to accept. Nevertheless, the fiber was shipped to the company by Smith & Bird, and upon its refusal to accept, the brokers were obliged to have it shipped elsewhere and sold at a loss; and it is for this loss that they received a judgment in the district court for $14,712.56, with interest at 6 per cent from January 10, 1945, until paid.
We shall dispose, first, of one issue upon which the district court directed a verdict in favor of appellee. It was claimed by appellant company that the court should have submitted to the jury the question whether execution of the contract for the sale of the 95 tons of caroa fiber by Smith & Bird to appellant company was procured by fraud.
As a preliminary statement, it should be remarked that appellant seems, in some aspects of its argument, to rely upon the Smith & Bird letter of April 5, 1944, as constituting the contract that was actually consummated between the parties and to insist that the subsequent contract of April 20, 1944, which was thereafter executed by appellant, was not the agreement of the parties. Counsel claimed before the trial court that appellant “never made that contract.” But it must be held that the contract of April 20, signed by both parties, was the contract between them. Appellant,, in its answer to the complaint, admitted the execution of this contract, and sought to have the court adjudge it to be invalid by reason of its procurement through fraud. In no sense, then, can the Smith & Bird letter of April 5, 1944, confirming the telephone conversation between the parties, be considered as their contract.
In support of its contention that the contract of April 20 was procured by fraud, appellant submits that the fiber was purchased on the basis of “prompt shipment” rather than shipment “as soon as possible,” and that the Smich & Bird letter of April, 5, 1944, conclusively established such fact; that Smith & Bird learned from the owner of the fiber in Brazil, on April 17, 1944, that the best delivery he could hope to make was to ship a part of the fiber within a short time; that fair dealing required that they disclose to appellant the actual situation with respect to the ability of the owner to ship the fiber; that, instead, they were guilty of intentional and deliberate fraud in changing the terms of the contract to protect themselves from such known delay in shipment, and submitting a contract for
It is, however, contended by -appellant that the provision in the contract for arbitration of any dispute arising thereunder did not authorize an ex parte arbitration under the laws of the State of New York rather than the applicable remedy provided by the Federal Arbitration Act, 9 U.S.C.A. § 1 et seq.; and that the enforcement of the award obtained by arbitration, in a suit based on diversity of citizenship, in the federal court in Kentucky, was contrary to law.
The provision for arbitration in the contract is as follows:
“23. Arbitration: Any dispute arising out of this contract of its interpretation shall be settled by arbitration in New York in the customary manner, buyer and seller each naming his arbitrator, whose award, or that of the umpire whom the arbitrators may appoint, shall be final and binding upon both parties. If either party fails to appoint an arbitrator within seven (7) days after receiving the other party’s nomination of an arbitrator, the one arbitrator nominated may act as sole arbitrator * * * the seller and buyer consent that the arbitration shall be enforceable under and pursuant to the laws of the State, Country or Government having jurisdiction and that judgment upon the award may be entered in any court of any such jurisdiction.”
Pursuant to the foregoing provision for arbitration, Smith & Bird, on November 24, 1944, notified appellant that they had appointed an arbitrator, Edward M. de
Appellant’s contention as to the award is specifically stated as follows : that the contract was made in Kentucky and was to he performed in that state; and that the provision for arbitration was invalid under the laws of Kentucky. The answer to this contention is, as was held by the district court in a prior controversy involving this same award, that the contract between the parties evidenced a transaction involving interstate commerce, and, hence, the arbitration provision in the contract was rendered valid, and its enforceability was to be determined under the provisions of the United Slates Arbitration Act, 9 U.S.C.A. § 1 et seq. Jackson v. Kentucky River Mills, D.C.Ky.,
What appears to be the principal claim of appellant with respect to the award is that it is invalid because it is the award of only one arbitrator. The above mentioned contract between the parties, however, provided that if either party failed to appoint an arbitrator within seven days after receiving the other party’s nomination of an arbitrator, the one arbitrator nominated might act as sole arbitrator. The award of the single arbitrator was, therefore, entirely in accordance with the agreement of the parties, as evidenced by their written contract.
Appellant, however, submits that the agreement to arbitrate is not self-executory ; that where, under a contract providing for arbitration, one of the parties is aggrieved by the refusal of another to arbitrate, the recourse of the party aggrieved is to petition the court for an order directing that the arbitration proceed; and it is argued that an ex parte arbitration is contrary to the ordinary concepts of fairness. It is to he said that an arbitration by an arbitrator appointed by one of the parties only may well result in a degree of advantage to the other party, for mere personal friendship with one of the parties does not disqualify an arbitrator, and an arbitration carried on by such an arbitrator would not be contrary to ordinary concepts of fairness, although one would hardly he considered vigilant of his interests if he failed to appoint an arbitrator himself when he was entitled to do so. But it is the proof of bias or unfairness or partiality on the part of an arbitrator that results in unjust advantage, and calls for the setting aside of the award. See Davy v. Faw,
Both parties agree that the state law does not govern either the matter of the validity or the enforcement of the award in this case. Appellant declares there is no question as to the fact that Congress, in the enactment
Section 2 of the Act provides that a written provision in a contract evidencing a transaction involving interstate commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction shall be valid, irrevocable, -and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
Section 4 of the Act provides that a party aggrieved by the failure, neglect, or refusal of -another to arbitrate under a written agreement for arbitration may petition any court of the United States which, save for such agreement, would have jurisdiction under the judicial code of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.
An ex parte arbitration was permissible at common law where provided for by the terms of the arbitration agreement; and, as is evident upon its face, Section 4 of the Act uses permissive language only, and does not, by its terms, require resort to the enforcement provisions thereof, if an ex parte. arbitration is permitted by the terms of the arbitration agreement.
To sustain its contention that the ex parte award in this case was not valid, appellant relies upon the authority of Bullard v. Morgan H. Grace Co., Inc.,
In the Bullard case, the controversy arose between the arbitrators as to whether or not there was an agreement to arbitrate a particular question. The jurisdiction of the arbitrators depended upon the existence of an agreement to arbitrate the question to be decided by them, and at the arbitration hearing, challenge was made to their jurisdiction to consider the particular question that was then in dispute. It is not clear that the court, by its holding that the award was invalid, intended to declare that all awards rendered in ex parte statutory arbitrations were invalid except where the party-desiring the arbitration procured an
In Finsilver, Still & Moss, Inc. v. Goldberg, Maas & Co., Inc.,
Regardless of whether the Bullard case constituted a holding to the effect that every ex parte arbltra,lon was invalid except wllere thc party desirinS arbitration procured an enforcement order under the statutei w,e are of the opinion that the award m the mstaní case was a valid awarcL Tbe partles expllclÜy contracted for arbitration of any dispute arising out of the contract or its interpretation, and agreed that if one of them failed to appoint an arbitrator within seven days after receiving the other party’s nomination of an arbitrator, the one arbitrator nominated might act as sole arbitrator. There was nothing in the terms of the contract that invalidated it. Tt was not contrary to public policy,
Regardless of the foregoing conclusions, appellant contends that the award in favor of Smith & Bird could not be enforced by an action at law commenced more than one year after the award was made. This claim is based upon the proposition that the enforcement of the award in this case is barred by Section 9 of the United States Arbitration Act, which-provides that: “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.” The language of the foregoing section as to application to the court for an order is not mandatory, but permissive. See United Fuel Gas Co. v. Columbian Fuel Corp., 4 Cir.,
AppeUant»s ckim that the assignment of the award for purposes of suit was invalid; cannot be sustained. Smith & B¡rd made the assignment> fciduding therein power of attorney, in New York, to appellee, for purposes of suit which was brought in Kentucky. Appellee was the real party in interest; Titus. v. Wallick,
In accordance with the foregoing, the judgment of the district court is affirmed.