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Fisser v. Doornum

August 1, 1960


Author: Hincks

Before LUMBARD, Chief Judge, and HINCKS and FRIENDLY, Circuit Judges.

HINCKS, Circuit Judge.

The immediate issue for decision is whether the respondent-appellee, International Bank, may be directed to submit to arbitration the determination and measure of any liability it may owe to libelants-appellants,*fn1 German coal importers,*fn2 by reason of the conceded breach of a written contract of affreightment signed solely by the libelants and Allied Transportation Corporation, a Liberian corporation which libelants charge was the alter ego of the respondent. The court below answered this question in the negative. It reasoned that whatever liability might ultimately attach to the respondent growing out of the contract default of Allied, its alleged instrumentality or adjunct, the respondent could not be compelled to arbitrate the issue of its liability or the measure thereof because it had not signed the formal charter-party and hence as to it there was no "written provision" for arbitration within the meaning of the Federal Arbitration Act of 1952, 9 U.S.C. §§ 1-14. Accordingly, the court dismissed the libel with its accompanying petition for the enforcement of arbitration.

It is true that under the Act, a "written provision in any maritime transaction * * * to settle by arbitration a controversy thereafter arising out of such * * * transaction" is the sine qua non of an enforceable arbitration agreement. 9 U.S.C. §§ 2, 4. It does not follow, however, that under the Act an obligation to arbitrate attaches only to one who has personally signed the written arbitration provision.*fn3 For the Act contains no built-in Statute of Frauds provision*fn4 but merely requires that the arbitration provision itself be in writing. Ordinary contract principles determine who is bound by such written provisions*fn5 and of course parties can become contractually bound absent their signatures. It is not surprising then to find a long series of decisions which recognize that the variety of ways in which a party may become bound by a written arbitration provision is limited only by generally operative principles of contract law.*fn6

The charter-party here under consideration clearly contains a written provision in which it is agreed that a controversy such as that now presented shall be submitted to arbitration,*fn7 and the sole issue for determination is whether the respondent, as well as the formal signatories to the charter-party, is bound by the arbitration provision. Libelants argue that if in fact Allied was the respondent's mere alter ego, making this a proper case to pierce the corporate veil of Allied and to hold those controlling it as one with it, then consistency and the alter ego doctrine itself require that the respondent be obligated not only to respond in damages for Allied's breach of contract but to specifically perform Allied's other contractual obligations, including that of arbitration.

We agree. While we discover no authority on this precise point, it is clear that the consequence of applying the alter ego doctrine is that the corporation and those who have controlled it without regard to its separate entity are treated as but one entity, and at least in the area of contracts, the acts of one are the acts of all. Weisser v. Mursam Shoe Corporation, supra; Shamrock Oil and Gas Co. v. Ethridge, D.C.Colo., 159 F.Supp. 693; Chilean Nitrate Sales Corp. v. The Nortuna, supra; Powell, Parent and Subsidiary Corporations, Chpt. I. There is no reasonable basis for distinguishing between the parent's obligation to respond in damages for its instrumentality's breach of contract and its obligation to arbitrate the measure of those damages. In neither instance does the parent consent to a contractual obligation; to the contrary it carefully avoids any such agreement, express or implied in fact. Farm Security Administration, Department of Agriculture v. Herren, 8 Cir., 165 F.2d 554.

We have heretofore held that the obligation to respond in damages arises from a contract to which the alter ego theory binds that parent which as "puppeteer" has "directed his marionette" to sign. Weisser v. Mursam Shoe Corporation, supra. We hold now that if the parent is bound to the contract then like its marionette it is bound to submit to arbitration.*fn8 It follows that the judge erred in ruling that the respondent was not bound by the arbitration clause merely because it had not signed the charter. The respondent's amenability to arbitration could be solved only by determining whether Allied in entering into the charter did so as the respondent's alter ego.*fn9 The judge below thought it unnecessary to deal with that issue and so did not attempt to make comprehensive findings of the facts upon which it depends. We must, therefore, turn to the evidence and make our own findings.

We find the facts to have been as follows. On October 24, 1955 Mr. Lawn, who stated he represented a financial group, requested Phs. van Ommeren Shipping (U.S.A.), Inc., a firm of maritime brokers, to negotiate for ship charters and maritime contracts of affreightment. On that occasion and at later meetings on October 27 and 31 Lawn received general information about the incidents of such business from Mr. Solleveld and Mr. Vincent, the president and vice-president, respectively, of van Ommeren's representatives insisted that they could proceed no further with such business until authorized by a principal with a satisfactory credit rating. Lawn disclosed the respondent as principal, stating that it would operate through a Liberian company. On November 3 Lawn presented as evidence of his authority a letter dated November 2 from the respondent signed by Vreeland, its president. The letter state, in part:

"We have in principle accepted a proposal to finance and conduct a shipping business which includes time chartering two Liberty dry cargo type ships to carry cargo generally between Mexico, the United States and certain foreign countries.

"The business would be operated through a corporation to be formed by us and to which we would supply the financial resources.

"We advise you of the foregoing so that the initiation of contracts may be expedited pending prompt formalization of the necessary corporate and financial arrangements. * * *"

The letter also referred van Ommeren to respondent's correspondent banks and listed respondent's officers and directors and their business connections. Prior thereto the respondent had been engaged in the business of financing ventures but never in operating ventures.

Thereafter, van Ommeren canvassed the market to discover available ships and cargoes. It secured an offer on two ships and so advised respondent by letter dated November 9 in which it requested authorization to negotiate and finalize the charters. No response was forthcoming until November 16 when Vreeland accompanied by Lawn and a Mr. Simonson discussed the project thoroughly with the van Ommeren representatives who told him that $100,000 to $150,000 would be necessary to start the venture. Vreeland gave van Ommeren authority to bid for charters on the two vessels and to continue negotiations on an available coal contract which van Ommeren had discovered. Also, Vreeland concededly told van Ommeren that the respondent would neither appear on nor guarantee the coal contract; that the contract would be performed by a Liberian corporation to be created for that purpose.

At this point, a conflict of testimony developed. Solleveld and Vincent testified that Vreeland's explanation to them for operating through a foreign subsidiary was to avoid the payment of United States income taxes; this explanation they accepted since such was common procedure for shipping ventures. These van Ommeren officers also testified that Vreeland assured them the respondent would furnish Allied with all necessary financial resources and that as responsible principal it would stand behind the performance of the operating company which it had nominated. There was, however, no evidence that these representations to van Ommeren were passed along to the libelants. And that such representations had been made was denied in Vreeland's testimony. He testified that the respondent's sole interest in the maritime venture, either expressed or ...

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