Court Opinion

ID: 5756793
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:07:47.09139+00
Date Added: 2024-06-11T08:41:26.336758
License: Public Domain

Steijer, J.
(dissenting). We dissent. The parties are the sole stockholders of a corporation engaged in the moving and warehouse business. Each of the parties owns half of the stock. They acquired their interests by purchase from 'former stockholders. Upon their entering into the business they signed an agreement providing for equal salaries, equal division of profits, and the right to purchase the other’s stock in the event either desired to sell. The agreement provides for arbitration in case of a dispute.
It appears that the corporation is the lessee of a warehouse wherein its business is conducted. The lease contains an option to purchase. One of the parties desires to have the corporation exercise the option, the other does not. It is this issue on which the respondent has demanded arbitration, which arbitration appellant seeks to stay. We believe the stay should have been granted.
Primarily the question which has arisen between these parties does not arise out of their ownership of the stock of the corporation. There is no issue as to any division of income or control. These are the questions which the parties agreed to arbitrate and there is no agreement to arbitrate any other. Moreover, while the strict rule that any agreement which inhibits the control of the corporation by its directors is ineffectual does not apply to closed corporations where all of the stockholders agree (Ripin v. United States Woven Label Co., 205 N. Y. 442), even in the instance of such corporations it is recognized that the business of a corporation cannot be conducted by referring issues that may come up to arbitrators. This includes questions of management policy (Matter of Burkin [Katz], 1 A D 2d 655). *218So that even if the wording of the arbitration agreement would apparently include this question — which we believe it does not — the matter would still not be arbitrable. It is obvious that otherwise either of these parties could destroy the business of the corporation by insisting on arbitrating any of the numberless questions which may develop in the operation of the business.
Nor do we believe, as the majority holds, that there is an exception to the general rule that a business cannot be run by arbitration, that exception consisting of policy questions vital to the life of the corporation. One entering a business relies on his own judgment or on those with whom he is engaged in the enterprise, and not on the judgment of third persons who may be called on to arbitrate. The more important the question, the less should he be compelled to abide by anyone else’s decision as to what should be done. And unless he specifically contracts to the contrary, he should not be compelled to do so. To find that respondent here so agreed it is necessary not only to ignore the general principles 'but it is also required that the agreement to arbitrate be given an interpretation well beyond its plain meaning.
The orders should be reversed and the arbitration stayed.
Boteiw, P. J., and MoNally, J., concur with Stevens, J.; Steuer, J., dissents in opinion in which Eager, J., concurs.
Orders, entered on April 2,1965 and August 20,1965, affirmed, with $30 costs and disbursements to the respondent.