7 N.Y.2d 476 | NY | 1960
Lead Opinion
On January 3,1956, the respondent Board of Education entered into a contract with Heckler Electric Company for the electrical work in the Junior and Senior High Schools which were to be constructed at Great Neck, New York. This contract was made ‘ ‘ pursuant to the provisions of the Education Law” and subject to annexed “General Conditions”. These “ General Conditions” provide that “the Architect shall, within a reasonable time, make decisions on all claims of the Owner or Contractor and on all other matters relating to the execution and progress of the work or the interpretation of the Contract Documents ” and that arbitration may be had either upon the architect’s decision or upon his failure to make a decision within 10 days after the parties have presented their evidence. Notice of the demand for arbitration must be made within 10 days after receipt of the architect’s decision, or, if the architect fails to make a decision, within a reasonable time after the dispute has arisen.
According to its contract, Heckler was required to perform its work “ as construction progresses and not later than — in accordance with the progress of the General Contractor ”. And under the general construction contract, reference to which is made in Heckler’s contract, July 31, 1957 was established as the completion date. Furthermore, Heckler’s contract, as well as
In April of 1957, Heckler wrote a letter to the board in which it complained that the work of the general contractors was “ slow, sporadic and lax” and had been “ permitted [by the Board of Education] to lag” and requested an extension of time under their contract. In July of 1958, and again in August of 1958, Heckler wrote letters, this time addressed to the Board of Education as well as to the contract architects, claiming that it had ‘ ‘ been substantially delayed in the performance and completion” of its work as a result of “the failure of [the board] to coordinate the work of the several contractors and by acts of the other contractors ”; it estimated its damages as a result of this delay as $312,477.28 and made a claim against the board in that amount invoking the contractual provision for a determination of its claim by the architects.
No decision having been made by the architects, Heckler, in early September, 1958, made a demand for arbitration in which it advanced two claims: (1) $312,477.28 as damages sustained by reason of “ delays of and interferences in the performance of work * * * by reason of acts of the Board of Education, the failure of the Board of Education to coordinate the work of the several contractors performing work at the site of the project involved and the acts óf the other contractors ” and (2) $11,979.67 for extra work. About two weeks later, the board moved for a stay of arbitration, alleging that, first, there had not
Before considering whether section 3813 is applicable to arbitration proceedings and, if it is, whether it bars Heckler’s right to arbitration in this case, we must determine whether the applicability of the section is to bo decided by the court or by the arbitrators. In our opinion, it is clearly the kind of issue for the court to pass upon, involving as it does a condition precedent to Heckler’s very right to arbitration and the arbitrator’s very jurisdiction.
Although, on occasion, this court has used very broad language to the effect that “ the only issues a court may deal with on * * * [an application for a stay of arbitration] are as to ‘ the making of the contract or submission or the failure to comply therewith’” (Matter of Paloma Frocks [Shamokin Sportswear Corp.], 3 N Y 2d 572, 574; see, also, Matter of Lipman [Haeuser Shellac Co.], 289 N. Y. 76, 80), we did not mean thereby to suggest that the arbitrator possesses the power to decide whether the conditions precedent to the institution of the arbitration proceeding itself had been fulfilled. In fact, in Matter of Lipman (Haeuser Shellac Co.) (289 N. Y. 76, supra), where the matter of the cancellation of a contract of arbitration
Section 3813 of the Education Law provides, in effect, that no action or special proceeding may be maintained against a school district or board of education ‘ ‘ unless it shall appear * * * that a written verified claim upon which such action or special proceeding is founded was presented” to the district’s governing body “ within three months after the accrual of such claim ”. This unquestionably constitutes the making of a claim to the school district within three months after its accrual a condition precedent to an action or special proceeding. Accordingly, if section 3813 applies to arbitration proceedings, it establishes a condition precedent to arbitration and, therefore, whether or no the condition was satisfied is for the court, not the arbitrators.
As we have already noted, section 3813 explicitly and broadly refers to any “ action or special proceeding ”, and section 1459 of the Civil Practice Act in so many words provides that ‘ ‘ Arbitration of a controversy under a contract * * * shall be deemed a special proceeding”. The enactment of section 1459 was motivated by the desire to overcome the effect of Matter of Interocean Mercantile Corp. (Hoops) (204 App. Div. 284, 286, affd. 236 N. Y. 587) — holding that arbitration was not a special proceeding under section 308 of the Civil Practice
Nor does any provision of the particular contract before us indicate that section 3813 was not intended to be applicable to the present case.
Under the statute, the contractor must present his claim to the Board of Education within three months after its accrual, and the board is given 30 days in which to arrive at a decision. Under the contract, if the decision of the boárd is adverse to the contractor, he may submit the dispute to the architect (art. 39). And, if he is dissatisfied with the architect’s decision, he is privileged to seek arbitration, but “ the demand therefor shall be made within ten days ” of the receipt of the decision (art. 40). As is manifest, neither the provision of the contract for the architect’s decision of disputes nor the provision for an ‘ ‘ appeal ’ ’ therefrom to arbitration comes into effect until the contractor first presents Ms basic claim to the board pursuant to section 3813. This being so, Heckler is mistaken in urging that it is impossible to comply with the contractual reqmrement that arbitration be demanded within 10 days after the architect’s decision as well as with the statutory demand that the board have 30 days in which to consider any claim. The 30-day period afforded the board for consideration of the claim occurs before the matter is presented to the architect for decision, while the 10-day period within which arbitration must be demanded begins to run only after the architect’s decision. Thus, the supposed conflict between the provisions of the statute and the provisions of the contract simply does not exist.
The order of the Appellate Division should be affirmed, with costs.
. Section 3813 of the Education Law, insofar as relevant, reads as follows:
“ 1. No action or special proceeding, for any cause whatever, except as hereinafter provided, relating to district property or claim against the district, or involving- its rights or interests shall be prosecuted or maintained against any school district, board of education, or any officer of a school district or board of education, unless it shall appear by and as an allegation in the complaint or necessary moving papers that a written verified claim upon which such action or special proceeding is founded was presented to the governing body of said district within three months after the accrual of such claim, and that the officer or body having the power to adjust or pay said claim has neglected or refused to make an adjustment or payment thereof for thirty days after such presentment.”
Dissenting Opinion
(dissenting). We agree with the views expressed in the dissenting opinions below. Appellant Heckler’s claim is clearly an arbitrable one under article 11 of the contract, which expressly provides for arbitration of “ any disagreement [which] shall arise between the .parties hereto” (De Lillo Constr. Co. v. Lizza & Sons, 7 N Y 2d 102; Matter of Lipman [Haeuser Shellac Co.], 289 N. Y. 76). Article 11 embraced disputes with regard to delays attributable to “the failure of the Board of Education to coordinate the work of the several contractors performing work at the site of the project involved ”, and claims for damages resulting therefrom.
As to the principal ground upon which the majority of the Appellate Division reversed Special Term, namely, the failure of appellant to comply with section 3813 of the Education Law, we are of the opinion that this is a matter to be determined by the arbitrators. As Judge Ftjld wrote for a unanimous court in Matter of Terminal Auxiliar Maritima (Winkler Credit Corp.) (6 N Y 2d 294, 298), “ It "is settled that under a broad provision for arbitration, such as we have here, arbitration may be had as to all issues arising subsequent to the making of the contract. [Citing cases] ”. In Matter of Paloma Frocks (Shamokin Sportswear Corp.) (3 N Y 2d 572, 574), we expressly held that the “ only issues a court may deal with on such a stay application are as to ‘ the making of the contract or submission or the failure to comply therewith ’ (Civ. Prac. Act, § 1458; Matter of Kramer & Uchitelle, Inc., 288 N. Y. 467, 472; Matter of Western Union Co. [American Communications Assn.], 299 N. Y. 177) and ‘ all acts of the parties subsequent to the making of the contract which raise issues of fact or law, lie exclusively within the jurisdiction of the arbitrators ’ (Matter of Lipman [Haeuser Shellac Co.], 289 N. Y. 76, 80).” And in Matter of Lipman (*Haeuser Shellac Co.) (supra) we added (p. 79): '“ A different question would be here if the issue was whether the contract never came into existence and hence was void, or if,
Thus, in Matter of Uraga Dock Co. (Mediterranean & Oriental S. S. Corp.) (6 A D 2d 443, affd. 6 N Y 2d 773), where written contracts for the Construction and purchase of tankers provided they were not to “become effective” until the buyer made timely payment of the first installment, we held that an issue as to the timeliness of the first payment was for the appropriate arbitration tribunal, not for the courts, to decide, since timely payment of the first installment was a condition precedent, not to the formation of valid and binding contracts, but to the duty of subsequent performance by the builder, i.e., its obligation to commence construction of the vessels. Here, section 3813 of the Education Law is at most a provision relating to the presenting of a claim under an admittedly valid contract, and hence the issue as to the applicability of section 3813 is for the arbitrators, not the courts, to decide.
In Matter of Cauldwell-Wingate Co. (New York City Housing Auth.) (262 App. Div. 829), where the contract expressly provided that the timely filing of a notice of claim, as well as other notices, were conditions precedent to the right of arbitration, it was held that the issue of timely compliance was for the courts, not for the arbitrators, to decide. We denied.leave to appeal (287 N. Y. 853). That case was not followed in Matter of Tugee Laces (Mary Muffet, Inc.) (273 App. Div. 756, affd. 297 N. Y. 914); Matter of Hatzel & Buehler (Fuller Co.) (278 App. Div. 647, affd. 303 N. Y. 836), or Matter of Levine Bros. Iron Works Corp. (Constitution Sq.) (279 App. Div. 912, motion for leave to appeal denied 304 N. Y. 986), all of which cases held that the question of the timeliness of the demand for arbitration was for the arbitrators, not the courts, to decide. Given a broad arbitration clause such as we have here, the modern rule, as heretofore indicated, is that all issues of fact or law arising subsequent to the making of the contract are for the appropriate arbitration tribunal, not for the courts, to decide.
Moreover, we do not think that section 3813 of the Education Law was intended to apply to arbitration proceedings. That statute provides that “ No action or special proceeding * * * shall be prosecuted or maintained against any school district * * * unless it shall appear by and as an allegation in the complaint or necessary moving papers that a written verified claim upon which such action or special proceeding is founded was presented” (emphasis supplied). It is clear from the italicized words that this section has no reference to an arbitration proceeding but refers to the conventional action or special proceeding.
Section 11-a of the General Construction Law provides: ‘ ‘ ‘ Action ’ when applied to judicial proceedings, signifies an ordinary prosecution in a court of justice, by a party against another party, for the enforcement or protection of a right, the redress or prevention of a wrong, or the punishment of a public offense. Actions are of two kinds: civil and criminal.” (Emphasis supplied.) (See, also, Civ. Prac. Act, § 4.) Section 46-a of the General Construction Law provides: ‘ ‘ Every prosecution by a party against another party in a court of justice which is not an action is a special proceeding.” (Emphasis supplied.) (See, also, Civ. Prac. Act, § 5.) An arbitration proceeding is not had “ in a court of justice ”; it is not founded on a complaint or moving papers as those words are generally understood. The very purpose of arbitration is to avoid the courts insofar as resolution of the controversy is concerned.
It is true that section 1459 of the Civil Practice Act provides that arbitration “shall be deemed a special proceeding, of which the court * * * shall have jurisdiction ”, but, as we said in Matter of Hosiery Mfrs. Corp. v. Goldston (238 N. Y. 22, 26), “ The new section merely makes the arbitration a special proceeding to meet our decision to the contrary. (204
Respondent’s contention that section 3813 is applicable here leads to an absurd result. Appellant gave respondent timely notice of the delays in April, 1957. In July and August, 1958 it wrote both respondent and the architects of its claims by reason of such delays, amounting to the sum of upwards of $300,000, and requested a hearing before and ruling by the architects. The latter having failed to comply, demand for arbitration followed. Assuming a prompt adverse decision by the architects, article 40 of the contract requires that “if the arbitration is an appeal from the Architect’s decision, the demand therefor shall be made within ten days of its receipt ”. It follows that it would be impossible under such circumstances for appellant to serve a notice of claim under section 3813 thirty days before serving a demand for arbitration, when the demand for arbitration had to be served ten days after the architects’ decision.
To overcome this impossible result, respondent maintains that section 3813 requires that a written verified claim must be served even before presentation of the dispute to the architects, but we simply cannot find any language in the statute that even remotely suggests this requirement. Indeed, such a result would require that the statute be rewritten. Under the contract, appellant is first required to exhaust its remedy before the architects, and until then it has no claim against respondent. If the majority were correct, and the architects in their decision adjusted and modified the claim in various respects, how could a new modified claim be filed 30 days before demand for arbitration when the demand must be served within 10 days after the architects’ decision? As Judge Cabdozo pointed out in Outlet Embroidery Co. v. Derwent Mills (254 N. Y. 179, 183), “If literalness is sheer absurdity, we are to seek some other meaning whereby reason will be instilled and absurdity avoided ”.
The order of the Appellate Division should be reversed and the order of Special Term reinstated, with costs.
Order affirmed.