Appeals from orders of the United States District Court for the Southern District of New York, Charles E. Stewart, Jr., Judge. Compania Espanola de Petroleos, S.A. appeals from an order of December 18, 1974, holding that it had agreed to arbitrate certain disputes with Nereus Shipping, S.A.; and Nereus Shipping, S.A. appeals from an order of March 21, 1975, consolidating two arbitration proceedings and making appropriate provision for the appointment of the arbitrators. The orders with certain modifications are affirmed. The motion by Nereus Shipping, S.A. to dismiss the appeal from the order of December 18, 1974, is denied.
Medina, Anderson and Mansfield, Circuit Judges.
Any system of court procedure worthy of the name requires the observance of certain fundamentals. The parties must prepare papers, sometimes called pleadings, in which they set forth the issues or disputes between them, preferably doing so in such fashion as to make it easy to separate the issues of fact from the issues of law; at the trial or hearing some written record must be made of the proceedings, either in the form of a stenographic transcript by a court reporter or by what have been sometimes euphemistically called the judge's "minutes"; if, by common consent or otherwise the issues are changed during the trial or hearing, the change must be evidenced by new or amended papers or pleadings, or by a written order by the judge or a statement made by him and in some way made a part of the written record; and, when the issues are decided by the judge, there must be some writing, generally called a judgment, in which it clearly appears that the judge has made a final disposition of the whole case or that something else remains to be done. That the observance of these fundamentals is in the interest of justice, that it tends to avoid or at least reduce confusion, the great enemy of justice, and that it greatly facilitates the functioning of an appellate court of review is too obvious for comment. We are sorry to say that in the matter now before us neither the judge nor any of the parties seem to have been aware of some of these fundamentals, except after the event.
So we are presented with what are called four appeals, one cross-appeal, one motion to dismiss one appeal on written papers, and a miscellany of suggestions scattered throughout the briefs to the effect that, in another appeal, neither the District Court below nor our Court had any jurisdiction to make any adjudication relative to the rights and obligations of the parties. It turns out, as will appear more fully below in this opinion, that there is no merit whatever in any of these claims that we or the court below lacked jurisdiction. We have managed to penetrate the outer shell of this mass of confusion and procedural effluvia and we find buried underneath it all two relatively simple questions of law. As will more fully appear shortly in this opinion, there was a contract of affreightment, a charter party, with an arbitration clause and an Addendum No. 2 to that contract separately executed by a guarantor. The two questions are:
(1) Did the guarantor agree to arbitrate; and
(2) Was it proper for the District Judge to consolidate the arbitration between the shipowner and the guarantor with the arbitration between the shipowner and the charterer and make the necessary adjustment concerning the selection of the arbitrators?
We decide that Judge Stewart properly construed the charter party and Addendum No. 2 so as to require the guarantor to arbitrate. And we also decide that Judge Stewart had the power under the Federal Arbitration Act and Fed.R.Civ.P., Rule 42(a), to consolidate the two arbitrations and that in doing so he did not abuse his discretion, because the two arbitrations had common questions of law and fact, and because the extensive and complicated issues were so intertwined and overlapping that it could have caused great and irreparable injustice had Judge Stewart ruled that the two arbitrations must proceed separately.
The Background of Undisputed Fact
A chronological survey of the course of events will serve as a background against which to focus the law points which we are called upon to decide.
On January 27, 1971, "at New York, N.Y." a charter party or maritime contract of affreightment was signed by Nereus Shipping, S.A., a Liberian corporation, an agent for owners of various vessels, as "owner" and Hidrocarburos y Derivados, S.A., a Venezuelan corporation engaged in the oil business as "charterer." These parties are referred to in the record and will be referred to in this opinion as Nereus and Hideca. This three-year maritime contract called for the transportation of 600,000 long tons of petroleum products from the Persian Gulf to various ports in Europe and the Mediterranean. It contained elaborate provisions as to the selection of the vessels, demurrage and so forth. What concerns us here especially is the arbitration clause 24, which is as follows:
24. ARBITRATION. Any and all differences and disputes of whatsoever nature arising out of this Charter shall be put to arbitration in the City of New York or in the City of London whichever place is specified in Par. 1 of this charter pursuant to the laws relating to arbitration there in force before a board of three persons consisting of one arbitrator to be appointed by the Owner, one by the Charterer, and one by the two so chosen. The decision of any two of the three on any point or points shall be final. Either party hereto may call for such arbitration by service upon any officer of the other, wherever he may be found, of a written notice specifying the name and address of the arbitrator chosen by the first moving party and a brief description of the disputes or differences which such party desires to put to arbitration. If the other party shall not, by notice served upon an officer of the first moving party within twenty days of the service of such first notice, appoint its arbitrator to arbitrate the dispute or differences specified, then the first moving party shall have the right without further notice to appoint a second arbitrator, who shall be a disinterested person with precisely the same force and effect as if said second arbitrator has been appointed by the other party. In the event that the two arbitrators fail to appoint a third arbitrator within twenty days of the appointment of the second arbitrator, either arbitrator may apply to a Judge of any court of maritime jurisdiction in the city above-mentioned for the appointment of a third arbitrator, and the appointment of such arbitrator by such Judge on such application shall have precisely the same force and effect as if such arbitrator had been appointed by the two arbitrators. Until such time as the arbitrators finally close the hearings either party shall have the right by written notice served on the arbitrators and on an officer of the other party to specify further disputes or differences under this Charter for hearing and determination. Awards made in pursuance to this clause may include costs, including a reasonable allowance for attorney's fees, and judgement [sic] may be entered upon any award made hereunder in any Court having jurisdiction in the premises.
At "Madrid, 24th June, 1971," Compania Espanola de Petroleos, S.A., a large integrated Spanish oil company referred to in the record and in this opinion as Cepsa, signed "Addendum No. 2" to the agreement of January 27, 1971. This document was also signed by Nereus and Hideca. It reads as follows:
In connection with the contract of affreightment, embodied in the Charter Party drawn up at New York and dated 27th January, 1971, between Nereus Shipping S.A. as Agents for Owners (hereinafter called the Owner), and Hidrocarburos y Derivados, C.A. (HIDECA) (hereinafter called the Charterer), being that the Charterer shall use the tonnage contracted under the present Charter Party for the transportation, during the period of three years commencing November 1971/January 1972, of crude oil under a CIF contract to be signed with Compania Espanola de Petroleos, S.A. (CEPSA) we, Compania Espanola de Petroleos, S.A., hereby agree that, should HIDECA default in payment or performance of its obligations under the Charter Party, we will perform the balance of the contract and assume the rights and obligations of HIDECA on the same terms and conditions as contained in the Charter Party. Provided, however, that Compania Espanola de Petroleos, S.A. shall not be responsible for any payments or damages as a result of HIDECA's default, prior to receiving written notice from the Owner advising us that HIDECA is in default, and calling upon us to assume performance of the Charter Party.
It is obvious to us that these two separate documents must be read together.
All went well until the Arab oil embargo in October, 1973, when the market rate for oil cargoes fell precipitously. The ensuing complications were many and various. We do not think it is necessary in this opinion to set them forth in detail or in summary. They are all relevant to the question of whether or not there was a default by Hideca. There are also numerous and difficult questions of interpretation of the meaning of the two documents, all of which will be questions for the arbitrators to decide in the ensuing consolidated arbitration, as the arbitration clause 24, quoted above, refers to "Any and all differences and disputes of whatsoever nature arising out of this Charter shall be put to arbitration * * *." In this connection it is worthy of note that the arbitration is not limited to disputes recited in the original demands for arbitration. Clause 24 also provides:
Until such time as the arbitrators finally close the hearings either party shall have the right by written notice served on the arbitrators and on an officer of the other party to specify further disputes or ...