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Interocean Shipping Co. v. National Shipping and Trading Corp.

decided: June 23, 1972.

INTEROCEAN SHIPPING COMPANY, PETITIONER-APPELLEE,
v.
NATIONAL SHIPPING AND TRADING CORPORATION AND HELLENIC INTERNATIONAL SHIPPING, S.A., RESPONDENTS-APPELLANTS



Friendly, Chief Judge, and Feinberg and Timbers, Circuit Judges.

Author: Timbers

TIMBERS, Circuit Judge:

The essential question on this appeal is whether, within the meaning of the Federal Arbitration Act, "the making of the arbitration agreement"*fn1 was in issue, thus requiring a trial of this question before directing appellants to proceed with the arbitration of a maritime dispute.

In July of 1971 Interocean Shipping Company, acting pursuant to the Federal Arbitration Act,*fn2 filed a petition in the district court to compel arbitration of a dispute arising under a charter party allegedly entered into by Interocean and appellants National Shipping and Trading Corporation and Hellenic International Shipping, S.A. The petition alleged that on March 17, 1971, National and Hellenic agreed to charter Interocean's vessel, the Oswego Reliance, for a period of approximately one year pursuant to the terms of the "Mobiltime" form charter, which included a clause providing for arbitration of "any dispute arising under [the] charter . . . ." Interocean further alleged that National and Hellenic repudiated this agreement on March 24, 1971. Appellants' answer denied the material allegations of the petition and demanded a trial. National's president, in an affidavit attached to the answer, stated that there had never been a meeting of the minds as to all the essential elements of a charter party. On December 30, 1971, without conducting a trial, the district court concluded that the making of the arbitration agreement was not in issue and granted the petition.*fn3 For the reasons stated below, we reverse and remand for a trial pursuant to § 4 of the Federal Arbitration Act, 9 U.S.C. § 4 (1970).

I.

Interocean relied primarily on a fixture note dated March 17, 1971 to show that National and Hellenic had agreed to charter Interocean's vessel. This fixture note was prepared by Poten & Partners, Inc., charter brokers, and was sent to the parties on March 17. It indicated that Hellenic, a subsidiary of National, had agreed to charter the Oswego Reliance for approximately one year in accordance with the terms of a "Mobiltime" form charter, excluding clauses 9, 12(a)(ii), 12(b)(ii) and 12 (b)(iii), and subject to a suitable dry-dock clause to be worked out for November dry-docking. The charter was to begin with the delivery of the vessel to Hellenic in the Persian Gulf between March 31 and April 15, 1971.

To substantiate its claim that a charter agreement existed, Interocean also attached to its petition a copy of an unexecuted "Mobiltime" form prepared by the broker on March 17 and sent to the parties. This charter party was intended to reflect the terms of the fixture note allegedly agreed upon by all the parties on March 17. However, while the broker had deleted the clauses referred to in the fixture note, it also had deleted that clause of the "Mobiltime" form pertaining to insurance coverage for the vessel. This charter party also set forth a dry-dock clause which would have required Hellenic to dry-dock the vessel in Spain, Portugal or Japan in November of 1971. Moreover, unlike the fixture note, which, after referring to Hellenic, added "subsidiary of National Shipping & Trading . . .", the charter party which was sent to Hellenic mentioned National as charterer's agent.

Following the receipt of the March 17 fixture note, there ensued a series of communications between Interocean and Hellenic concerning the terms of the charter party which Interocean contends were finalized on March 17. While it is not entirely clear upon which terms these negotiations focused, an examination of the telex messages attached to Interocean's petition reveals that Hellenic did request the inclusion of the Red Sea within the delivery range of the vessel. Hellenic also raised questions regarding Interocean's intention to enter its vessel in the Tanker Owners Voluntary Agreement against Liability for Oil Pollution (Tovalop) and the allocation of the costs of such insurance. Finally, on March 24, 1971, Hellenic broke off negotiations with Interocean, contending that there had never been agreement as to all the essential terms of a charter party.

After National and Hellenic refused to proceed with the arbitration of Interocean's claim for $1.4 million in damages for appellants' breach of the charter party allegedly entered into on March 17, 1971,*fn4 Interocean filed the instant petition to compel arbitration.

II.

Section 4 of the Federal Arbitration Act provides in relevant part that "if the making of the arbitration agreement . . . be in issue, the court shall proceed summarily to the trial thereof."*fn5

In the instant case, National and Hellenic deny the existence of the charter party which contains the arbitration clause upon which Interocean's petition relies. There can be no doubt that the question of the very existence of the charter party which embodies the arbitration agreement is encompassed within the meaning of "the making of the arbitration agreement." As we said in In re Kinoshita & Co., 287 F.2d 951, 953 (2 Cir. 1961), "if it was claimed that . . . there had at no time existed as between the parties any contractual relation whatever, . . . a trial of this issue would be required before an order could be issued directing the parties to proceed to arbitration." See also Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978, 985-86 (2 Cir. 1942); Superior Shipping Company v. Tacoma Oriental Line, Inc., 274 F. Supp. 25, 26 (S.D.N.Y.1967); Sinva, Inc. v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 253 F. Supp. 359, 364-65 (SD.NY.1966). Accordingly, if the making of the charter party was in issue, within the meaning of § 4 of the Arbitration Act, the district court should have proceeded to trial of this question.

In deciding whether the making of the charter party was in issue, the principles enunciated in Almacenes Fernandez, S.A. v. Golodetz, 148 F.2d 625 (2 Cir. 1945), are controlling. There, in discussing what a party must show in order to place the making of an arbitration agreement in issue, we said:

"To make a genuine issue entitling the plaintiff to a trial by jury, an unequivocal denial that the agreement had been made was needed, and some evidence should have been produced ...


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