Court Opinion

ID: 5392154
Source: CourtListenerOpinion
Date Created: 2022-01-08 09:55:19.888163+00
Date Added: 2024-06-11T08:30:18.519208
License: Public Domain

Shientag, J.
(dissenting). The respondent, Aquella Products, Inc. (hereinafter called “ Aquella”), and Usines De La Seigneurie (hereinafter called the Ci French Corporation ”), were assignees of rights and obligations under a contract involving the sale of a waterproofing paint made according to a special formula. Aquella was granted the exclusive right to manufacture and sell this paint, under the trade name “ Aquella ”, in various countries, and for its part agreed to pay royalties of 5% of the sales price. In December, 1949, Aquella sold to the petitioner, appellant Prima Products, lire, (hereinafter Prima), its rights under this contract in a portion of the territory reserved to it, in consideration of which Prima agreed, inter alia, to assume the obligation to pay royalties and to hold Aquella harmless for any claim or demand arising out of the sale of the paint. Both contracts contained clauses providing for arbitration by the American Arbitration Association of disputes arising thereunder.
*114The French Corporation has initiated an arbitration proceeding before the American Arbitration Association against Aquella and several other parties. One of the principal items of relief there sought against Aquella is an accounting for royalties allegedly due the French Corporation upon sales of the waterproofing paint. It appears that in the territory assigned to Prima that corporation has been selling a waterproofing paint, under the name of Aquella, on which it has refused to pay royalties to the French Corporation, contending that the paint it is selling differs in composition from that embraced in the above contracts. Aquella has filed a petition with the American Arbitration Association, requesting an arbitration of the respective liabilities of Prima and itself with respect to the paint sold by Prima, which arbitration it wishes to have proceed as part of the first arbitration with the French Corporation. It was to stay this latter arbitration that Prima commenced the present proceeding. The court at Special Term denied this stay.
The learned majority of this court holds that Special Term erred in refusing this stay. It so holds substantially on the ground that no actual or present controversy has been shown to exist as between Aquella and Prima and in any event that the two arbitration proceedings should be separate and distinct. I believe such a controversy does exist. If, in its petition for arbitration, Aquella alleged that it had information that Prima Products, in violation of its contractual promise was refusing to pay to the French Corporation royalties on the sale of paint, and was basing this refusal on the spurious claim that it was selling a different kind of paint, it would not be doubted that Aquella had disclosed a genuine controversy between itself and Prima requiring arbitration under their contract. Aquella would be entitled to demand arbitration to establish whether or not Prima was in fact violating its agreement with Aquella to pay the appropriate royalties to the French Corporation and to hold Aquella harmless from any complaints made by the French Corporation. Realistically considered, Aquella’s allegations that if it be found liable to the French Corporation, Prima is, in turn, liable to it, states substantially the same thing. Thus, Aquella has set forth an actual and present controversy with Prima, which is entirely harmonious with the definition of controversy set forth by the majority — “ a disagreement between the parties about the way one or the other has effected the assumed conditions of the contract.”
*115However, I see no reason why the word “ controversy ” should be given a narrow, rigid construction. If the contracts in question contained no arbitration clause and the French Corporation had commenced a court action against Aquella, there is no doubt but that Aquella would be entitled to implead Prima upon the allegations here set forth. It would certainly be an anomalous development if arbitration proceedings are rendered more rigid and inflexible than actions at law. The Court of Appeals has said that “ Proceedings of this kind are equitable in character ”, and that “ To work well it [arbitration] must operate with a minimum of delay and with all the flexibility which equity can give it.” (Matter of Feuer Transp., Inc., 295 N. Y. 87, 92, 91.) In the absence of clear indications of a contrary intention, I can see no valid reason why allegations which would be deemed sufficient to state a cause of action at law are not to be considered as involving a “ controversy ” for purposes of arbitration.
Prima urges that to require it to arbitrate controversies with Aquella in the context of Aquella’s arbitration with the French Corporation would impose upon it a responsibility greater than that which it assumed in its contract. I see no merit to this contention. There is nothing in the contract, nor in the rules of the American Arbitration Association, which prohibits or excludes the simultaneous arbitration of controversies which present the identical factual question. Whether or not the two arbitrations should proceed separately or together, seems to me a question which should be governed by considerations of justice and convenience. In the arbitration between the French Corporation and Aquella, a central question will be whether the paint sold by Prima was embraced in the contract set forth above. That precise question will be decisive in the arbitration between Aquella and Prima. Particularly in view of the circumstances of this case, I can perceive no justification for requiring that very same question to be litigated twice before separate forums. To require the arbitrations to proceed separately would present the possibility of conflicting-determinations of the same question with the result that Aquella might be found liable to the French Corporation without any recourse against the party which promised to hold it harmless. Such a result would be manifestly unjust; it has been found to be unsatisfactory in actions at law; there is no reason why it should be permitted to exist in the more informal arbitration proceedings. Whether the procedure sanctioned by the Special *116Term be treated as in the nature of an impleader involving two pending arbitration proceedings, or a consolidation of the two proceedings, is largely a matter of procedure which ii is the province of the American Arbitration Association to regulate.
To use the language of the Court of Appeals in Matter of Feuer Transp., Inc. (supra, p. 92), “If the relief to which a party is entitled is not granted and he is remitted to a new proceeding, the purposes of the reforms intended by the arbitration Law of 1920 would be defeated. Instead of relief from legal technicality, the parties to an arbitration are given delay and a surfeit of legal procedure. Proceedings of this kind are equitable in character, and the practice of equity as to relief should be followed. In equity proper relief is ordinarily granted when the facts warrant regardless of what may have been asked for ’ ’. The order appealed from should be affirmed.
Does and Cohn, JJ., concur with Bebgan, J.; Shientag, J., dissents and votes to affirm, in opinion in which Peck, P. J., concurs.
Order reversed, with $20 costs and disbursements to appellant and the motion granted, with $10 costs. [See 279 App. Div. 1052.]