Court Opinion

ID: 5740688
Source: CourtListenerOpinion
Date Created: 2022-01-12 16:41:12.365907+00
Date Added: 2024-06-11T08:41:03.753130
License: Public Domain

McNally, J.
This is an appeal from an order denying a stay of arbitration.
The arbitration clause herein provides: “ 6. The parties agree to submit to arbitration all disputes between (a) charchat and plein, (b) the Corporation and charchat or plein, (c) the Corporation and a. plein & co. of Johannesburg, South Africa, (d) the Corporation and a. plein & co. of London, (e) the Corporation and any corporation in which a. plein may have an interest, (f) charchat and a. plein & co. of Johannesburg, South Africa, (g) charchat and a. plein & co. of London, (h) charchat and any corporation in which plein may have an interest, (i) the Corporation or charchat and a. plein & co. of Capetown and (j) the Corporation or charchat and a. plein & co. of Rhodesia. Such arbitration shall be in accordance with the laws of the State of New York and the rules of the American Arbitration Association. Such arbitration shall be before a panel of three arbitrators selected in accordance with the aforesaid rules.”
Appellant argues (1) the arbitration clause is vague and indefinite; it does not provide for arbitration in New York; (2) Harris, appellant’s attorney in fact, did not have authority to sign the arbitration clause; (3) the adjudication in bankruptcy of A. Plein & Co. Inc. caused frustration and termination of the agreement dated September 18, 1959; (4) the first five items of the demand for arbitration may be asserted by the trustee in bankruptcy of A. Plein & Co. Inc. and may not be asserted by respondent; (5) the remaining items- of the demand for arbitration are unrelated to the agreement and without merit; moreover, as to one of the items, a prior adjudication is controlling.
Appellant and respondent each owned 50% of the stock of A. Plein & Co. Inc., a New York corporation. Appellant is a *27resident of South Africa and respondent is a resident of New York. A tripartite agreement dated September 18, 1959 was made among the parties herein and the corporation, and executed in behalf of the appellant by his attorney in fact. Thereby it was resolved to dissolve and liquidate the corporation and towards that end each of the individual parties undertook to advance certain sums and provide credits in order to effect an orderly liquidation of the corporate business and assets.
The demand for arbitration dated November 9,1961 sets forth five claims in behalf of the corporation pertaining to corporate funds diverted and borrowed by appellant, and damages resulting from appellant’s appropriation of the corporation’s business. Said demand also specifies claims in behalf of respondent for moneys advanced by him to appellant, for damages in respect of a transaction pertaining to A. Plein & Co. of Rhodesia, and for damages consequent on the wrongful prosecution in the courts of South Africa by appellant’s nominee of a claim against the respondent grounded on bills of exchange executed by respondent solely in behalf of the corporation, and not personally, allegedly subject to the arbitration clause.
Section 1448 of the Civil Practice Act enables two or more parties to contract for the arbitration of “ a controversy thereafter arising between them ” and does not require that the controversy arise out of a then existing contract or agreement. Beyond that the scope of the instant arbitration clause is for determination by the arbitrators. (Matter of Exercycle Corp. [Maratta], 9 N Y 2d 329.)
It is undisputed that the trustee in bankruptcy of the corporation has appeared and answered in and is a party to the arbitration proceeding. The demand for arbitration herein was made November 9, 1961. Prior thereto and on September 20, 1960 the trustee, ex parte, petitioned the Referee in bankruptcy for leave to commence arbitration against the appellant herein in respect of the first five claims. Leave therefor was granted to the trustee on September 29, 1960. Appellant herein thereafter moved before the Referee in bankruptcy to vacate the Referee’s order on the ground that the trustee had failed to affirm the contract herein dated September 18, 1959 within the 60-day period required by subdivision (b) of section 70-b of the Bankruptcy Act. (U. S. Code, tit. 11, § 110, subd, [b].) The Referee denied the motion to vacate. However, the District Court reversed the order of the Referee. The trustee appealed to the United States Court of Appeals, Second Circuit, from the last described order. Pending said proceeding and before the determination of said appeal, on November 9, 1961, *28the instant demand for arbitration was served, including the five claims in the arbitration sought by the trustee.
On April 6, 1962 the United States Court of Appeals reversed the order of the District Court and reinstated the order of the Referee in bankruptcy. (Tobin v. Plein, 301 F. 2d 378.) The Circuit Court in so doing stated that the trustee had not affirmed the contract within the 60-day period. However, that court held that the trustee could maintain the arbitration proceeding insofar as it is grounded on the appellant’s breach of the contract antedating the bankruptcy.
In the circumstances, the extent to which the trustee and the respondent herein, respectively, may prosecute the claims in behalf of the corporation is not sufficiently definite to insure complete relief to the corporation. However, it is clear the recovery, if any, on the first five claims will inure to the benefit of the corporation. Appellant is not thereby prejudiced and any uncertainty as to who may properly prosecute the claims in behalf of the corporation is determinable in arbitration.
Whether the adjudication in bankruptcy resulted from appellant’s alleged defaults or served to frustrate and terminate the agreement are matters for determination in arbitration. (Matter of Exercycle Corp. [Maratta], 9 N Y 2d 329, 337, supra.)
We may not consider the merits of the controversies. (Civ. Prac. Act, § 1448-a, eff. April 9,1962; see N. Y. Legis. Doc., 1962, No. 65 [F].)
Appellant’s other points are without substance. (Tobin v. Plein, supra.)
The order should be affirmed, with costs to respondent.