Case Name: In the Matter of Kramer & Uchitelle, Inc., Respondent. Eddington Fabrics Corporation, Appellant; In the Matter of Kramer & Uchitelle, Inc., Respondent. M. Lowenstein & Sons, Inc., Appellant; In the Matter of Kramer & Uchitelle, Inc., Respondent. Classic Mills, Inc., Appellant
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1942-07-29
Citations: 288 N.Y. 467
Docket Number: 
Parties: In the Matter of Kramer & Uchitelle, Inc., Respondent. Eddington Fabrics Corporation, Appellant. In the Matter of Kramer & Uchitelle, Inc., Respondent. M. Lowenstein & Sons, Inc., Appellant. In the Matter of Kramer & Uchitelle, Inc., Respondent. Classic Mills, Inc., Appellant.
Judges: 
Reporter: New York Reports
Volume: 288
Pages: 467–476

Head Matter:
In the Matter of Kramer & Uchitelle, Inc., Respondent. Eddington Fabrics Corporation, Appellant. In the Matter of Kramer & Uchitelle, Inc., Respondent. M. Lowenstein & Sons, Inc., Appellant. In the Matter of Kramer & Uchitelle, Inc., Respondent. Classic Mills, Inc., Appellant.
Submitted February 24, 1942;
decided July 29, 1942.
Irving D. Lipkowitz and William Hughes Lewis for appellants.
Where an admittedly valid agreement is made providing for arbitration of any controversy thereafter arising under or in relation to the agreement and a genuine dispute arises over the non-per-' formance of the agreement the court must compel and may not stay arbitration. (Matter of Berkovitz v. Arbib & Houlberg, 230 N. Y. 261; D. & H. Canal Co. v. Pennsylvania Coal Co., 50 N. Y. 250; Fudickar v. Guardian Mut. Life Ins. Co., 62 N. Y. 392; Berizzi Co. v. Krausz, 239 N. Y. 315; Matter of Wenger & Co. v. Propper, Silk Hosiery Mills, Inc., 239 N. Y. 199; Matter of Hines [Ziegfeld], 222 App. Div. 543.) Under the agreements in the instant cases, ■ admittedly valid when made, the question of the alleged discharge of the agreements by supervening events is a matter for the arbitrators and not the court. (Matter of Kahn [National City Bank], 284 N. Y. 515; Matter of Bullard v. Grace Co., 240 N. Y. 388; Matter of Pierce & Brown Buick Co., 258 App. Div. 679; 283 N. Y. 669; Matter of Cheney Bros. v. Joroco Dresses, Inc., 245 N. Y. 375; Matter of Exeter Mfg. Co. v. Marrus, 254 App. Div. 496; Matter of Wenger v. Propper Silk Hosiery Mills, Inc., 239 N. Y. 199.) The courts below having concluded that the petitioner met the burden imposed by section 1458 of the Civil Practice Act, they were bound to order an immediate trial of the issues and were without power to dispense with such a trial. (Matter of Manufacturers Chemical Co. v. Caswell, Strauss & Co., 259 App. Div. 321; Matter of Universal Film Exchanges, Inc., v. King, 144 Misc. Rep. 708; 103 Park Ave. Co. v. Exchange Buffet Corp., 203 App. Div. 739; Oppenheim v. Thanasoulis, 123 App. Div. 494.)
Abraham Mann and Joseph Yaspan for respondent.
The contracts were nullified by the ruling of the Price Administrator and all of their provisions, including the arbitration clauses, are at an end. (Varagnolo v. Partola Mfg. Co., 209 App. Div. 347 ; 239 N. Y. 621; Mawhinney v. Millbrook Woolen Mills, 231 N. Y. 290; Nitro Powder Co. v. Agency of C. C. & F. Co., 233 N. Y. 294; Adler v. Miles, 69 Misc. Rep. 601; Mulji v. Cheong Yue Steamship Co. [1926] App. Cas. 497; Matter of Metro Plan, Inc., v. Miscione, 257 App. Div. 652.) Whether a valid contract to arbitrate is in existence or not is a question for the court, and not arbitrators, to decide. (Matter of Berkovitz . v. Arbib & Houlberg, 230 N. Y. 261; Matter of Hesslein & Co. v. Greenfield, 281 N. Y. 26; Finsilver, Still & Moss v. Goldberg, M. & Co., 253 N. Y. 382; Matter of Metro Plan, Inc., v. Miscione, 257 App. Div. 652; Matter of Universal Film Exchanges, Inc., v. King, 144 Misc. Rep. 708; Matter of A. E. Fire Ins. Co. v. N. J. Ins. Co., 240 N. Y. 398; Matter of Zimmerman v. Cohen, 236 N. Y. 15.) It was a proper exercise of discretion on the part of the judges at Special Term to dispense with unnecessary trials of nonexistent issues. (Finsilver, Still & Moss v. Goldberg, M. & Co., 253 N. Y. 382; Matter of Peterson, 253 U. S. 300; Davis v. Zimmerman, 91 Hun, 489; Riglander v. Star Co., 98 App. Div. 101; 181 N. Y. 531; Mahnk v. Blanchard, 233 App. Div. 555; Matter of Bernstein [Abrams], 176 Misc. Rep. 563.)

Opinion:
Rippey, J.
Although the foregoing were separately instituted and separately prosecuted proceedings under article 84 of the Civil Practice Act, argument thereof was consolidated in the court below and in this court, the same questions are involved in all of them and they will be treated as one consolidated proceeding in our opinion here.
On June 18 and 19, 1941, the petitioner-respondent, Kramer & Uchitelle, Inc., entered into four separate written contracts severally with appellants, Eddington Fabrics Corporation, M. Lowenstein & Sons, Inc., and Classic Mills, Inc., affiliated corporations, generally similar in form as to all features affecting the decision here, by which appellants agreed to buy and the petitioner agreed to sell 365,000 yards of plaincloths, woven cuts as far as practicable, of specified count, width, weight and quality at 8.9375 cents per yard for 40,000 yards, 9 cents per yard for 150,000 yards and at 9.8 cents per yard for the balance, net ten days, F.O.B. mill, delivery to be made on order by installments during the months of August and September, 1941, subject to the provisions of Standard Cotton Textile Sale Note (with Specification G), which was made a part of the agreement. The " plaincloths " referred to in the contracts were " Cotton Gray Goods." Each contract contained a clause that " any controversy arising under or in relation to this contract shall be settled by arbitration. If the parties are unable to agree respecting time, place, method or rules of the arbitration, then such arbitration shall be held in the city of New York in accordance with the laws of the State of New York and the rules then obtaining of the General Arbitration Council of the Textile Industry."
On April 11, 1941, the President of the United States, in accordance with authority vested in him by the Congress as affecting the emergency, issued Executive Order No. 8734, establishing the Office of Price Administration and Civilian Supply (OPACS) in the Executive Office of the President and defined its duties and functions and, pursuant thereto, appointed Mr. Leon Henderson as Administrator. On June 27, 1941, Administrator Henderson, by due authority, issued Price Schedule No. 11, which pertained to " Cotton Gray Goods," effective June 28, 1941, which read in part as follows: " 1316.2 Maximum Prices Established for Cotton Grey Goods, (a) On and after June 30, 1941, regardless of any commitment theretofore entered into, no person shall sell or deliver, or offer to sell or deliver, any Cotton Grey Goods, and no person shall buy or accept delivery of or offer to buy or accept delivery of, any Cotton Grey Goods at a price exceeding the maximum prices set forth in 1316.7." The price established in 1316.7 was 8.037 cents per yard. No party here challenges the validity of the order and all parties construe it as applicable to existing contracts.
When the delivery dates arrived, the seller refused the demands of the purchasers to make deliveries at the " maximum price set forth " in the order of the Price Administrator on the groqnds that performance of the contract had been forbidden by law and nonperformance had been excused. The buyers served demands on the seller that it submit the matter to arbitration. Thereupon the seller moved in each case for a stay of arbitration pursuant to section 1458 of the Civil Practice Act upon the grounds that by the order of the Price Administrator performance of the contracts had been frustrated and that such frustration terminated the whole contract including the incidental provisions for arbitration. The notice of motion in each case contained a statement that the court would be asked to order an immediate trial of the issues. In the first motion returnable an order was granted ordering a trial but upon a reargument requested by purchaser, the court held that" no trial was necessary and stayed arbitration permanently upon the motion papers. Petitioner's motions in the subsequent cases were granted upon the authority of the first. A separate order was entered in each case at Special Term and in the Appellate Division. Upon appeal, the Appellate Division unanimously affirmed in each case, without opinion, but granted leave to appeal to this court.
Arbitration clauses in contracts such as those under consideration are directed solely to the remedy — not to the validity or existence of the contract itself. Thus proceedings to enforce arbitration under article 84 of the Civil Practice Act presuppose the existence of a valid and enforceable contract at the time the remedy is sought. (Matter of Berkovitz v. Arbib & Houlberg, Inc., 230 N. Y. 261, 271; Mulji v. Cheong Yue Steamship Co., Ltd. [1926] A. C. 497.) Seasonable challenge may be made to the court to the existence of such a contract by one who stays out of the arbitration and, if no issue of fact is presented on such challenge, the issue is properly determinable by the court as matter of law. (Matter of Finsilver, Still & Moss, Inc., v. Goldberg Maas & Co., 253 N. Y. 382.) There is no issue of fact raised by the record. The affidavits are in agreement as to all material facts and no reason for a trial was shown to the court. If a trial had been ordered, there would have been no issue to decide. Both parties to each proceeding admit the making of the contract, that the contract price was higher than that fixed as the maximum by the Price Administrator, that the ceiling was fixed before delivery was required by the contract and that the contract was not performed.
As of the precise time when the remedy was invoked, it was to to be determined whether public policy prohibited enforcement of the contracts according to their terms. The price at which the goods were to be sold as of the time of delivery was as much of the essence of the contract as any of its other provisions and controlling public policy barred delivery at that price. By act of government there was complete frustration of performance excusing the seller from performance as matter of law. (Mulji v. Cheong Yue Steamship Co., supra; Varagnolo v. Partola Mfg. Co., 239 N. Y. 621; Nitro Powder Co. v. Agency of Canadian Car & Foundry Co., 233 N. Y. 294; Mawhinney v. Millbrook Woolen Mills, Inc., 231 N. Y. 290; 6 Williston on The Law of Contracts, § 1759, 1938.)
Arbitration was the method agreed to between the parties to determine controversies in connection with the obligations of the seller and buyers to deliver and pay for cotton gray goods at a stipulated price. The question was not whether the' seller could be compelled to deliver the goods at the price fixed as the maximum by the Price Administrator. ' It was whether delivery could be compelled according to the terms of the contracts of sale and the Price Administrator put an end to that question and to the contract itself before time for delivery arrived or any dispute as to delivery arose. Thus there was no " controversy arising under or in relation to " the contracts. The arbitration clause was only an incidental part of an indivisible contract of purchase and sale and when the contract was at an end the arbitration provision no longer existed or had any force whatsoever (Mulji v. Cheong Yue Steamship Co., supra; Russell on Arbitration and Award, p. 78) except as to rights and wrongs which had already come into existence as to which the contract still remained in effect.
The orders should be affirmed, with costs.