Court Opinion

ID: 5392204
Source: CourtListenerOpinion
Date Created: 2022-01-08 09:55:32.101711+00
Date Added: 2024-06-11T08:30:18.591241
License: Public Domain

Van Voorhis, J.
(dissenting). Respondent has sued appellant for damages from breach of warranty upon a sale of rice. The sales memorandum stated: “ Any controversy or claim arising out of or relating to this contract or the breach thereof, shall be settled by arbitration in New York, in accordance with the Rules, then obtaining, of the American Arbitration Association, and judgment upon the award rendered may be entered in the highest court of the forum, state or federal, having jurisdiction. Any demand for arbitration must be made within five days after tender.”
Appellant, the vendor, has applied for a stay of the action by reason of the arbitration clause contained in the sales note. Respondent countered by disclosing that it had previously demanded arbitration, which had been permanently enjoined by a former order granted at the instance of appellant. The record fails to show the ground upon which the last-mentioned order was applied for or granted, but counsel for appellant admitted upon the argument that it was sought on the ground that respondent waived all claims for breach of warranty by failing to give notice of defects in the goods within five days after delivery was tendered, and upon the ground that, even if the five-day clause did not bar as matter of laiv claims for breach of warranty in case of latent defects,, such disputes must be resolved by action inasmuch as the remedy by arbitration could be resorted to only if demanded within five days.
No appeal was taken from the previous order permanently staying arbitration. If that order decided the merits of the controversy, then it cannot be relitigatcd in an action, and it should permanently be laid at rest by staying the action as well as the arbitration proceedings. On the other hand, if the arbitration proceedings were stayed at the instance of appellant upon mere procedural grounds, on the theory that *251the controversy should be adjudicated in an action in court instead of by arbitration, appellant cannot be heard now to contend that this action should be stayed on the theory that procedure by arbitration is exclusive.
It may well be that the intention of the sales memorandum was that all controversies arising thereunder should be arbitrated, regardless of when demand for arbitration were to be made, and that the five-day clause limited when notice of defects in the quality of the rice had to be given instead of the time for the commencement of arbitration proceedings. If that be the correct construction, then arbitration was intended to be the exclusive remedy, leaving it to the arbitrators to determine whether the five-day clause was reasonable if the defects were latent. In that event, if it had been granted upon that ground, the order permanently enjoining arbitration might be construed as a determination that the defects were patent, and that no arbitrable dispute existed by reason of respondent’s failure to give the five-day notice.
We think that the order staying the arbitration is not res judicata of the merits of the controversy since the burden is on appellant to establish that it was granted on the merits (Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304). Inasmuch as the order staying the arbitration was applied for by appellant upon a procedural ground, as well as upon the merits, and the order itself does not show on what basis it was granted, and may have been granted on the procedural ground, we must assume that it did not decide the merits. Consequently, Special Term correctly held that appellant waived procedure by arbitration by obtaining the stay, regardless of whether the memorandum of sale contained an arbitration clause providing for arbitration as the exclusive procedure.
The order appealed from should be affirmed, with $20 costs and printing disbursements to respondent.
Cohe and Heeeere-ae-, JJ., concur with Peck, P. J.; Vak Voorhis, J., dissents and votes to affirm in opinion in which Shieetag, J., concurs.
Order reversed, with $20 costs and disbursements to appellant and the motion granted.