Court Opinion

ID: 5710489
Source: CourtListenerOpinion
Date Created: 2022-01-12 15:53:18.576467+00
Date Added: 2024-06-11T08:40:30.531290
License: Public Domain

M. M. Frank, J.
(dissenting in part). I agree that there is an arbitrable controversy concerning the cost of the repairs required to put the vessel into the condition specified in the contract, and as to any damages that Transpacific suffered because of an alleged breach of warranty, or active concealment and fraudulent misrepresentations by Sirena.
I must dissent, however, from the direction to arbitrate any other question. The arbitration clause in the agreement embraces “ [a]ll disputes and differences arising out of this agreement ”. Another provision in the agreement specifically prohibits modification unless in writing and acknowledged by both parties. The petitioner’s claim of a right to tender the return of the vessel, or, in the alternative, for an award for the difference between the contract price and the reduced market price on the date of delivery should be excluded from consideration by the arbitrators.
The agreement, dated January 23, 1958, for the sale of the vessel provides that Transpacific had the option to cancel the contract if the vessel was not ready for delivery by May 31, 1958. In that event, the buyer, at its option to be exercised not later than June 1, 1958, had the right to cancel the agreement and the parties were to be mutually released. The vessel was delivered to and accepted by Transpacific on May 30, 1958. It was not until June 26,1958 that Transpacific sought to return the vessel to Sirena. The contract does not permit the petitioner to accept delivery under protest and unilaterally to reserve its right to reject delivery thereafter or to return the vessel to the seller. A unilateral reservation which, in effect, varies the terms of the contract and attempts to expand the subject matter of any permissible controversy thereunder cannot be read into the contract. Thus the self-created claim for damages for the difference between the contract price of the vessel and the market price on the date of delivery should not be construed to be an arbitrable issue within the agreement.
*324The law does not require parties to arbitrate a claim which they did not intend to be arbitrable. Nor can arbitration be compelled ‘ ‘ in order to change contract rights or liabilities. ’ ’ (Matter of Essenson [Upper Queens Med. Group], 307 N. Y. 68, 73, and cases cited therein.) Arbitrators do not have unfettered discretion in awarding damages. In Matter of Marchant v. Mead-Morrison Mfg. Co. (252 N. Y. 284, 300), the Court of Appeals disallowed an award of consequential damages where the arbitrators had departed from the submission and the damages allowed were not of such a nature that the arbitrators could consider them.
The instant case is analogous. There was a substantial drop in the market value of similar vessels between January (the date of the contract of purchase) and May (the date of delivery). Using that change in market value as a springboard, Transpacific seeks recovery for the difference. In the absence of a contractual arrangement therefor, the petitioner is not entitled to take advantage of the situation by holding the seller answerable for a windfall represented by the difference in value. The law does not countenance self-created prerogatives, and an award of damages predicated thereon would be unjust, unconscionable and repugnant to public policy as in the nature of a penalty. (Matter of Publishers Assn. [Newspaper Union], 280 App. Div. 500; see, also, Matter of Wenger & Co. v. Propper Silk Hosiery Mills, 239 N. Y. 199, 202; Matter of International Assn. of Machinists [Cutler-Hammer, Inc.], 271 App. Div. 917, affd. 297 N. Y. 519.) The agreement in this matter is clear and unambiguous, and the language employed by the parties does not permit of an award directing a return of the vessel or of the alternative damages demanded. (Matter of Western Union Tel. Co. [Amer. Communications Assn.], 299 N. Y. 177, 185.)
While it has been suggested that the question of whether the arbitrators may make an award exceeding the scope of the arbitration should be deferred until a motion to confirm is before the courts, justice and orderly procedure will be better served by a delineation of the area of the arbitrable controversy before the arbitrators embark upon a resolution of the issues. Sirena should not be subjected to a contention on a motion to confirm that it has waived the non-arbitrable nature of the issues under discussion by participating in the arbitration. (See Civ. Prac. Act, § 1458.) It is now appropriate for the court to exclude impermissible items from arbitration. (Matter of Wrap-Vertiser Corp. [Plotnick], 3 N Y 2d 17.)
*325Since an award may not be rejected by the courts for a mistake in law made by the arbitrators, it may be too late for correction if that occurs here. Moreover, if a lump-sum award is made, it may be impossible to determine whether it included non-allowable damages.
We need not reach the question as to whether the arbitrators may grant equitable relief which would include rescission for fraud, since the petitioner disclaims that it seeks that relief.
The order should therefore be modified in consonance with the views herein expressed.
Valente, McNally and Stevens, JJ., concur with Breitel, J. P.; M. M. Frank, J., dissents in part and votes to modify, in opinion.
Order affirmed on the law and on the facts, with $20 costs and disbursements to the respondent, and the respondent-appellant is ordered to appoint an arbitrator within five days after service of a copy of the order entered herein, with notice of entry.