Clapp, Goldmann and Ewart. The opinion of the court was delivered by Ewart, J.A.D.
This suit arises out of a written contract, copy whereof is annexed to the complaint, entered into between the plaintiff and the defendant on March 11, 1953 by which the former agreed to sell and the latter to buy, the American flag steam tanker "Rosina Marron" at a price of $1,150,000, payable as follows: (a) by the buyer depositing $115,000 with the First National Bank of Jersey City as escrow holder for the joint account of the buyer and seller and to be released to the seller upon the closing of title; (b) by the payment of $335,000 at the time of closing title, and (c) by the buyer assuming payment of a first preferred mortgage for $700,000 against the vessel held by the United States of America. A specific date for settlement is not set forth in the contract, but paragraph 6 thereof provides for delivery of the vessel during the month of April 1953. By supplemental agreement between the parties, time for delivery of the vessel was extended to June 26, 1953, plus such additional time, if any, required to make certain repairs pursuant to the provisions of paragraph 7 of the agreement.
Approval of the proposed sale by the U.S. Maritime Commission was essential and by mutual agreement between the parties, the date for definitive action by the Maritime Commission, fixed at April 8, 1953 by paragraph 4 of the contract, was extended to May 19, 1953.
The significant portions of the contract involved in this suit are the following:
"THIRD: Seller and Buyer each warrants that it is, and will be, on the closing date, a citizen of the United States within the meaning of the appropriate and applicable sections of the Shipping Act of 1916, as amended.
FOURTH: The Buyer warrants that it will meet all of the operational and financial requirements of the United States Government and of the Maritime Commission in order to obtain the approval and release as referred to hereinabove. If the Buyer does not obtain such approval and release or if the Maritime Commission has not taken definitive action by April 8, 1953, then in either event, the Seller or the Buyer may terminate this agreement unless the Buyer on that date agrees to pay all cash for the
vessel. In the event of termination of the agreement by either the Seller or the Buyer hereunder, the deposit in full shall be released to the Buyer and any and all liability of the parties under this agreement shall thereupon cease and terminate.
ELEVENTH: In case of default by the Buyer, such part of the deposit, as may be necessary, shall be applied toward payment of actual damages to the Seller, and the Seller shall be free to sell the vessel either by public or private sale and the deficiency by reason of such sale, if any, shall be paid to the Seller by the Buyer. If default should be made by the Seller in the execution of a Legal Transfer or in the delivery of the vessel and all belonging to her in the manner and within the time herein specified, the deposit in full shall be released to the Buyer, and unless the default shall have arisen from events over which the Seller has no control the Seller shall also make due compensation for the damages and expenses and loss of time caused by the nonfulfillment of this contract.
FOURTEENTH: If any disputes or differences should arise in connection with this Agreement, the same shall be referred to a single arbitrator in New York to be appointed by the parties hereto, but if the parties cannot agree upon a single arbitrator, they shall each appoint an arbitrator and the two shall appoint a third arbitrator. The decision of the single arbitrator, or in the event there are three arbitrators, the decision of any two shall be final and binding upon the parties hereto and may for the purpose of This Agreement be made a rule of Court."
Defendant having failed to complete the purchase of the vessel, plaintiff files a complaint in three counts.
The first count charges the defendant has defaulted in the performance of the contract; that plaintiff has always been and is ready, willing and able to deliver the tanker in accordance with the terms of the contract; more particularly that the defendant has breached the warranties contained in paragraphs 3 and 4 of the contract in that it was not, either at the signing of the contract on March 11, 1953 or at any time thereafter, a citizen of the United States within the meaning of the Shipping Act of 1916 and in that the defendant did not meet the operational and financial requirements of the U.S. Government and of the Maritime Commission in order to obtain the requisite approval and release referred to in the contract.
The second count repeats the allegations of the first count and, in addition thereto, alleges that the representations and warranties made by the defendant in paragraphs 3 and 4 of the contract were false when made, to the knowledge of defendant; were made for the purpose of inducing the plaintiff into entering into the said contract; that plaintiff did enter into said contract in reliance upon said representations and warranties; and that by reason of the falsity of said representations and warranties the defendant could not obtain the requisite approval of the United States Government and of the Maritime Commission, as aforesaid, by reason whereof plaintiff has been damaged. In effect, the second count charges that the warranties contained in paragraphs 3 and 4 of the contract were fraudulent in that defendant knew at the time it entered into the contract that it would not qualify for the ...