Court Opinion

ID: 3599936
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:46:38.525782+00
Date Added: 2024-06-11T09:15:38.422350
License: Public Domain

Classic Mills, Inc., has made a contract with M. Lowenstein 
Sons, Inc., for the delivery of "cotton grey goods" at a stipulated price. The Price Administrator of the Office of Price Administration and Civilian Supply has issued an order that, "regardless of any commitment theretofore entered into, no person shall sell or deliver, or offer to sell or *Page 473 
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 maximum prices "set forth" are lower than the stipulated price. The buyer has demanded delivery at the "maximum price set forth." The seller has refused performance of the contract on the ground that performance of the contract has been forbidden by law and in consequence non-performance has been excused.
The contract of sale provides: "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." A controversy exists. That cannot be disputed. It is a controversy "arising under or in relation to" the contract. That, too, is clear. Accordingly the buyer has demanded arbitration and when the seller denied that it was bound to arbitrate the controversy, the buyer served a demand upon the seller that it submit the controversy to arbitration. The seller thereupon moved, in accordance with the provisions of section 1458 of the Civil Practice Act, for a stay of arbitration. The seller admits the making of the contract of sale and that it contained the provision for arbitration. It claims, however, that performance of the contract has been frustrated and that such frustration has terminated the whole contract including the incidental provision for arbitration. The courts below have sustained that contention, and the arbitration proceedings have been permanently "stayed and enjoined."
I shall state as briefly as I can the reasons why I cannot concur in that conclusion. I do not pause to consider the legal effect of the order of the Price Administrator. That is the question which the buyer demands should be submitted to arbitration. We do not reach that question if the parties have agreed that it should be determined by arbitration, not by the court. The court, upon the motion to stay arbitration, has power to decide only an issue "as to the making of the contract * * * or the failure to comply therewith." (Civ. Pr. Act. § 1450.) As I have said, there is no *Page 474 
issue as to the making of the contract for arbitration. The only issue in this case is as to the failure to comply therewith. There is failure to comply with the contract of arbitration, which is, I concede, only an incidental part of the contract to sell and pay for goods, if the controversy as to whether the principal contract has been terminated by impossibility of performance in exact accordance with its terms falls within the scope of the agreement to arbitrate. The primary question to be determined upon this appeal concerns the scope of the agreement to arbitrate.
Doubtless, since the contract for arbitration is only an incidental part of an indivisible contract of purchase and sale, it can apply only to a controversy in regard to the obligation of the seller to deliver the goods or the obligation of the buyer to accept and pay for them. If, then, it appeared without dispute that these obligations had been terminated either by act of the parties or from some other cause, it would be plain that no controversy exists which the parties agreed to submit to arbitration. Here there is no dispute concerning the facts, but there is dispute about the effect of those facts upon the obligations assumed by the buyer and the seller. The seller asserts that as matter of law neither party can or may lawfully perform the obligation it assumed at a time when performance was lawful. The buyer asserts that the obligation of the seller todeliver the goods may be performed without violation of the order of the Price Administrator, and that the effect of the order is only to relieve the buyer of obligation to pay for the goods the part of the stipulated price in excess of the price fixed by the order. I assume, arguendo, but only arguendo and without further consideration or attempt to decide, that a court of law applying legal rules and principles would be constrained to sustain the contention of the seller. I cannot assume that arbitrators might not sustain the contention of the buyer, and to me it seems clear that by agreement of the parties any controversy concerning the existence, scope or effect of the obligations assumed under the contract is a controversy "arising under" the contract and also "in relation" to the contract, and that such a controversy must be "settled by arbitration" in accordance with the contract made by the parties. *Page 475 
In the affidavit of the seller upon the motion for a stay of arbitration the demand of the buyer for arbitration is characterized as "a very clever move because arbitrators in the textile industry — invariably laymen who are untrained in the distinctions of the law — might be deluded into thinking that Mr. Henderson's price ruling was intended to benefit the buyer and thus make some kind of an award to it." In that statement the seller, it seems to me, supplies an incontrovertible reason why the arbitration should proceed. The parties have agreed to abide by the judgment of business men in all disputes concerning the interpretation of their contract or the scope of the obligations they have assumed, and disputes concerning the effect of subsequent words, acts or events upon these obligations are not excluded. It has been said that "* * * the conditions that rendered performance impossible do not terminate the contract abinitio, and vitiate what has been done and what remains to be done that is capable of execution. The conditions may be of such an extent as to amount to a substantial abrogation of the entire contract, or they may relate to an insignificant part of the contract, but they excuse performance only to the extent to which performance is impossible, and leave what has been done valid permitting a recovery therefor, and may not excuse performance of the remaining work. No general rule can be laid down which will apply to all cases, but each case must be decided upon its own facts, and that this course can be taken and justice done according to the facts in each case unhampered by written rules is due to the great flexibility of the common law which is its chief merit." (Kinser Construction Co. v. State, 125 N.Y. Supp. 46, at p. 55; affid., 145 App. Div. 41; affd., 204 N.Y. 381; quoted with approval, 6 Williston on The Law of Contracts [1938], § 1956.) Professor Williston there states the applicable rule: "Since the qualification of the literal terms of the promise is imposed by the law, on principles of justice, not because of the expressed intention of the parties, the extent of the qualification depends merely on what is just." The parties have agreed to submit question of what is just to business men "untrained in the distinctions of the law." The courts should not assume to decide according to legal principles a controversy which the parties have *Page 476 
agreed should be decided otherwise. The order should be reversed, etc.
LOUGHRAN, FINCH, LEWIS and CONWAY, JJ., concur with RIPPEY, J.; LEHMAN, Ch. J., dissents in opinion in which DESMOND, J., concurs.
Orders affirmed. *Page 477