Court Opinion

ID: 5399921
Source: CourtListenerOpinion
Date Created: 2022-01-08 10:35:36.812504+00
Date Added: 2024-06-11T08:30:26.087019
License: Public Domain

Callahan, J.
(dissenting). The question on this appeal is whether there has been a refusal to arbitrate a dispute that is arbitrable under the terms of a contract between the parties.
It is my view that the dispute sought to be arbitrated was not arbitrable under any established contract. I am also in disagreement with the majority as to when the function of the court ends and that of the arbitrators begins in determining the existence of the right to arbitration in the present circumstances.
The buyer of certain fabric, after delivery of the goods, served notice that he desired to arbitrate a claim for damages based on the seller’s alleged failure to confine the particular fabric and pattern to the buyer. The seller moved to stay the arbitration on the ground that there was no agreement for an exclusive privilege or confinement of the goods to the buyer.
In the course of negotiating the sale, three written documents passed between the parties. Only the first of these refers to confining the pattern. The nub of the dispute is whether that provision survived or was expunged in view of the form and content of the second document, and whether the court or the arbitrators should decide that question.
The first paper was prepared by the seller’s salesman on a form supplied by the seller. It was an ‘ ‘ order ’ ’ for 5,000 yards of “ Scottie ” fabric on specified terms, including “ Confined to coat and Rainwear.”
On the motion to stay the arbitration, the seller’s salesman swears that the negotiations or discussion leading to the order aforesaid took place at the buyer’s place of business, and that the buyer wrote the confinement restriction on the order despite the salesman’s admonition that he did not know whether his employer would agree to such provision. The ‘6 order ’ ’ also provided that it was not to be effective until accepted by the seller.
The salesman asserts that when he called the attention of his employer to the confinement clause, his employer refused to grant such privilege to the buyer, and thereupon the salesman notified the buyer of its rejection.
*716The second document was prepared by the seller and transmitted to the buyer. This paper was labeled a “ contract ” and numbered 2801. It had all the indicia of a formal contract, and in boldface type provided as follows: “ The order, the subject of this contract, has been accepted and recorded by the seller at its office in New York. This contract, (the provisions on both this and the reverse side of this sheet) supersedes the buyer’s own form of manifold or order, if any, and constitutes the only contract between buyer and seller covering this transaction. There are no oral understandings, representations or agreements relative to this contract that are not fully expressed herein, and this contract shall not be modified or amended except in writing.” This document contained no reference to confinement of the pattern.' On the other hand, it set forth new terms of sale, not mentioned in the original order blank, such as a color schedule, that delivery was to be made by truck, that the price was to be f.o.b. a designated city, and for automatic billing. At the bottom of this ‘ ‘ contract ’ ’ separated by a perforated line was a slip reading as follows: ‘ ‘ PLEASE TEAR OFF, SION AND RETURN * * * We * * * hereby acknowledge receipt of contract No. 2801 dated 4/16/54 and find same correct in every respect.” The buyer signed and returned this slip to the seller.
The seller contends, and I am in agreement with its view, that the second document when accepted by the buyer’s execution and return of the slip acknowledging receipt and approval of “ contract No. 2801 ” was an integration of the agreement between the parties superseding any provision of the original 1 ‘ order ’ ’, but not found in the ‘ ‘ contract ’ ’, and that, therefore, no agreement existed for confinement of the “ Scottie ” fabric. The buyer, on the other hand, claims that the confinement clause of the “ order ” survived because of the wording of the acceptance clause in the “ contract ”.
The majority opinion points out that certain provisions of the so-called “ contract ” are somewhat equivocal. They are best understood, however, when we consider that the parties were using printed forms. This court apparently considers that an ambiguity is created by reason of the phraseology of the “ contract ” paper, and that fact questions are raised as to whether the confinement clause of the “ order ” was intended to survive. Because both documents contain arbitration clauses, the majority appears to be of the view that the arbitrators are to decide those questions of fact. This procedure amounts to a *717surrender to arbitrators of functions and duties which the law has placed upon the court.
In the first place, the acceptance clause of the “ contract ” document is susceptible of only one construction, viz., that any acceptance of the ‘ ‘ order ’ ’ was qualified or conditional. Among the conditions imposed was that the said paper was to be the only contract between the parties. This much seems clear, and it is set forth in unequivocal language of independent and emphasized clauses, even though there are other clauses referring to a buyer’s form of manifold or order and a provision for exclusion of “ oral ” statements or understandings of the parties.
If I am wrong in my view that the intention to merge or integrate the contract into the second document is so clear that it can be decided as matter of law upon the papers before us, there is at least a fact issue raised in connection with that question. The decision of this factual question is also for the court under the provisions of section 1450 of the Civil Practice Act, and not for the arbitrators. This statute requires the court to determine not only the existence of an agreement to arbitrate, but a refusal to comply with a demand for arbitration. A refusal to comply, of course, means improper refusal, and, therefore, the court must determine whether the dispute offered for arbitration is referable to an existing contract that calls for arbitration of the precise controversy. (Matter of Riverdale Fabrics Corp. [Tillinghast-Stiles Co.], 306 N. Y. 288, 291.) There can be no arbitrable dispute concerning damages for failure to afford an exclusive privilege to the buyer in the use of the “ Scottie ” fabric in this case, unless a contract is established to the court’s satisfaction containing a covenant out of which such a claim might arise. The mere assertion by a party to an agreement containing an arbitration clause that there is an arbitrable dispute as to the meaning or application of a contract is not enough (Matter of International Assn. of Machinists [Cutler-Hammer, Inc.], 271 App. Div. 917, affd. 297 N. Y. 519; Matter of Brookside Mills [Raybrook Textile Corp.], 276 App. Div. 357).
The existence of an arbitrable dispute is not dependent upon the construction to be given to an ambiguous term or provision of an established contract. If it were, I would agree that it was a matter for the arbitrators to resolve the ambiguity and construe the meaning of any disputed or doubtful covenant in the agreement of the parties. Here, however, the question is whether the contract as finally made between the parties contained any agreement for confinement of the “ Scottie ” fabric *718to the buyer in the manufacture of 11 coat and Rainwear. ’ ’ This requires the court to decide whether the confinement clause of the “ order ” was superseded, or did it survive the buyer’s indication of approval of the “ contract ” document omitting such provision as “ correct in every respect.” This is a question that goes to the formation of the contract between the parties — what is their agreement — and does not involve the construction of a contract already established or found to exist. Such an inquiry into the formation or existence of a contract and its terms is for the court alone. If the issue here were whether an arbitration clause had survived from the first document or “ order ”, it is clear that the court would have to decide that issue. The case is no different simply because the covenant or term, which is the subject of inquiry, is one for confinement or exclusive privilege in the use of the goods rather than one providing for arbitration itself. It is just as much the court’s function to find the existence of an arbitrable dispute referable to a proved contract as it is its duty to find that a contractual right to arbitrate exists in the first place.
The important point is that the court decides all questions relating to the formation and terms of a contract in accordance with the general rules of contract law. It is improper to allow arbitrators to decide such matters in accordance with their notions of the law. This would permit the arbitrators to make the contract or agreement for the parties. Whether in this case the first writing or “ order ” was merely an offer and the second document or “ contract ” a counter-offer or qualified acceptance, as well as the effect of the merger clause in the latter paper, must be determined by the court in accordance with the provisions of the law of contracts in general. These matters relate to the existence of a contract to arbitrate and its terms, so as to enable the court to determine whether an arbitrable dispute exists between the parties and that one of them has wrongfully refused to comply with the other’s demand for arbitration of the same. To repeat, all this is for the court in the first instance, whether or not it involves questions of fact.
I dissent, and vote to reverse the order appealed from and grant the motion for a stay of arbitration.
Peck, P. J., Breitel and Botein, JJ., concur with Rabin, J.; Callahan, J., dissents and votes to reverse, in opinion.
Order affirmed, with $20 costs and disbursements to the respondent.