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WALL ST. TRADERS, INC. v. SOCIEDAD ESPANOLA DE CON

November 9, 1964

WALL STREET TRADERS, INC., Libelant,
v.
SOCIEDAD ESPANOLA de CONSTRUCCION NAVAL, Respondent


Frederick van Pelt Bryan, District Judge.


The opinion of the court was delivered by: BRYAN

FREDERICK van PELT BRYAN, District Judge:

This is a suit in admiralty arising out of a contract for the alteration of the S. S. Glenbrook, a T-2 tanker, to a dry bulk carrier in Spanish yards.

 Libelant, Wall Street Traders, Inc. (Traders) is a New York corporation with its principal offices and place of business here. Respondent Sociedad Espanola de Construccion Naval (Naval) is a Spanish corporation with no place of business in the United States and concededly not doing business here. Jurisdiction was obtained by writ of foreign attachment on substantial funds of Naval on deposit with a New York bank.

 The contract for the alteration of the Glenbrook was originally made between Progressive Steamship Co. (Progressive) also a New York corporation with its principal office here and Naval. The contract was made in Spain and was to be performed there. Traders, the owner of the Glenbrook, apparently had previously entered into an agreement with Progressive by which Progressive undertook such alterations. Progressive in turn contracted with Naval to carry out the alterations and delivered the Glenbrook to Naval's Spanish yards. The alterations have not been completed and the vessel remains in Naval's hands in its yards.

 We are concerned here with Traders' second amended libel against which Naval now moves. A first amended libel was dismissed by Judge Tyler with limited leave to amend.

 The first amended libel set forth a single claim by Traders for breach of the contract between Progressive and Naval and sought to allege a novation between Traders, Naval and Progressive as the basis for Traders' right to sue upon that contract. After service of the first amended libel Traders moved before Judge Tyler for an order compelling arbitration under an arbitration clause in the contract. Naval cross-moved for an order dismissing the libel, vacating the attachment and granting alternative relief.

 In his memorandum of September 10, 1963 D.C., 236 F. Supp. 358, Judge Tyler determined that "the law of Spain covers this contract. Accordingly the law of Spain determines whether there was a novation under this contract, by virtue of which Traders became a contracting party." He held that the amended libel failed to state a claim on which relief could be granted since it did not plead Spanish law as to novation upon which Traders' right to sue as a contracting party depended. He therefore dismissed the amended libel "with leave to libelant to serve a second amended libel containing proper allegations of applicable Spanish law." He also denied Traders' motion to compel arbitration and Naval's motion to vacate the underlying attachment and for other relief without prejudice to renewal.

 The second amended libel purportedly served pursuant to the leave granted by Judge Tyler contains not only the claim for breach of contract pleaded in the first amended libel with additional allegations of Spanish law, but a second claim for damages for alleged failure to maintain and care for the vessel and for the conversion of the vessel by the respondent to its own use.

 Naval's present motion is (1) to dismiss the second amended libel pursuant to Rule 12(b), F.R.Civ.P., for failure to state a claim upon which relief can be granted; (2) for summary judgment pursuant to Rule 58(b) of the Supreme Court Admiralty Rules; (3) to dismiss for lack of admiralty jurisdiction; (4) in the alternative to have the court decline jurisdiction on the grounds of forum non conveniens; and (5) to vacate the attachment pursuant to Rule 21 of the Admiralty Rules of this court. It also claims that Traders has lost the right to maintain this suit because Progressive has appointed an arbitrator in London under the arbitration clause in the contract.

 The central issue on the motions to dismiss and for summary judgment revolves about the question of whether or not there was a novation under applicable Spanish law. Both parties have submitted extensive affidavits dealing both with the facts as to the alleged novation and with Spanish law on that and other subjects.

 1. The sufficiency of the second amended libel.

 (a) The first count pleaded.

 This is in substance the same claim as was pleaded in the first amended libel with allegations of Spanish law added. It sounds in breach of the Progressive-Naval contract and Traders bases its right to sue upon an alleged novation.

 The allegations as to novation are as follows:

 
"SEVENTH: On or about January 28, 1963 libelant, with the express consent of the respondent, was substituted for, and succeeded to all of the rights, privileges and power of, Progressive Steamship Corporation under the aforesaid contract dated August 2, 1961, and addenda thereto between said Progressive Steamship Corporation and respondent."

 It is then alleged that Traders performed all the terms and conditions of the contract on its part. Allegations as to the Spanish law of novation follow to the effect that parties to a contract may agree to the substitution of a new obligor with the consent of the obligee and there are specific references to what are claimed to be the pertinent sections of the Spanish Civil Code.

 Naval contends that the first count must be dismissed because Traders has failed to allege the essential ingredients of a novation under Spanish law as it is pleaded. Naval goes upon the theory that the absence of an express allegation that ...


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