Berkovitz v. Arbib & Houlberg, Inc.

• Decision Date: 01 March 1921
• Citation: 230 N.Y. 261,130 N.E. 288
• Court: New York Court of Appeals Court of Appeals
• Parties: BERKOVITZ et al. v. ARBIB & HOULBERG, Inc. SPRITUSFABRIEK ASTRA OF AMSTERDAM, HOLLAND, v. SUGAR PRODUCTS CO.

230 N.Y. 261

130 N.E. 288

BERKOVITZ et al.

v.ARBIB & HOULBERG, Inc.

SPRITUSFABRIEK ASTRA OF AMSTERDAM, HOLLAND,

v.SUGAR PRODUCTS CO.

Court of Appeals of New York.

March 1, 1921.

Application by Herman Berkovitz and another for an order under the Arbitration Law directing that the arbitration provided for in a written contract with Arbib & Houlberg, Incorporated, should proceed. From an order denying the motion and refusing to appoint an arbitrator, the applicants appealed to the Appellate Division, which affirmed the order (193 App. Div. 423,183 N. Y. Supp. 304), and the applicants appeal by permission of the Court of Appeals. Also an action by the Spiritusfabriek Astra of Amsterdam, Holland, against the Sugar Products Company, in which an order of the Special Term denying defendant's motion for a stay of proceeding was affirmed by the Appellate Division (184 N. Y. Supp. 952), and defendant by permission of the Appellate Division, appeals. In the first case, order of Appellate Division and of Special Term reversed, and the proceeding remitted to the Special Term for the appointment of an arbitrator; and, in the second case, order affirmed, with costs, and propounded questions as to validity and application of Arbitration Law answered.

Upon the appeal in the action of Spiritusfabriek, etc., v. Sugar Products Co., the following questions were certified:

‘(1) Is the Arbitration Law applicable to contracts made prior to its enactment?

‘(2) Is the defendant in an action brought prior to the enactment of the Arbitration Law on a written contract made prior to the enactment of the Arbitration Law, containing a provision for arbitration, entitled to a stay of the trial of the action pending arbitration pursuant to article 2, § 5, of the Arbitration Law?

‘(3) Is the Arbitration Law applicable to a written contract containing a provision for arbitration, made prior to the enactment of the law and made and to be performed in jurisdictions where arbitration was enforceable when the contract was made and to be performed?

‘(4) Is the sixth defense alleged in paragraphs 25 to 35 of the amended answer in this action, if proved, a bar to the maintenance of this action under the Arbitration Law?

‘(5) Is the Arbitration Law applicable to a written contract containing a provision for arbitration without the state of New York?

‘(6) Does the Arbitration Law contravene article 1 of section 10 of the Constitution of the United States, prohibiting laws impairing the obligations of contracts?

‘(7) Does the Arbitration Law contravene the Seventh Amendment to the Constitution of the United States, or does it contravene section 2 of article 1 of the Constitution of the State of New York, by depriving a party of the right of trial by jury?

‘(8) Does the Arbitration Law contravene section 1 of article 6 of the Constitution of the State of New York, providing that ‘the Supreme Court is continued with general jurisdiction in law and equity?’'

Crane, J., dissenting as to first case on the opinion of Dowling, J., at Appellate Division.

Appeal from Supreme Court, Appellate Division, First Department.

David Steckler, of New York City, for appellants Berkovitz and others.

Clarence M. Lewis, of New York City, for appellant Sugar Products Co.

Julius Henry Cohen, of New York City, for Chamber of Commerce of State of New York, intervener.

Sidney J. Loeb, of New York City, for respondent Arbib & Houlberg, inc.

Hiram Thomas, of New York City, for respondent Spiritusfabriek Astra, of Amsterdam, Holland.

CARDOZO, J.

The validity of the Arbitration Law (L. 1920, c. 275; Consol. Laws, c. 72), and its application to existing contracts and pending actions, are the questions here involved.

In one case (Matter of Berkovitz & Spiegel), a contract for the sale of goatskins was made in November, 1919. It provides that the skins shall ‘be the usual quality of their kind, and claims in regard thereto shall not invalidate this contract, but shall be settled amicably or by arbitration in the usual manner.’ The skins, which came from India, arrived in New York on April 12, 1920. The Arbitration Law took effect on April 19 of the same year. The buyer, after inspection of the goods, gave notice of rejection. The seller demanded arbitration, and moved, under the statute, for the appointment of an arbitrator. The appointment was refused at Special Term and at the Appellate Division, the latter court holding that the Arbitration Law did not apply to pre-existing contracts.

In the second case (Spiritusfabriek Astra v. Sugar Products Co.), a contract for the sale of molasses was made in July, 1914. One of its provisions is:

‘The regular arbitration and force majeure clauses are to form part of this contract. * * * It is agreed in the event of an arbitration being called, it is to sit in London.’

The plaintiff, the buyer, brought action against the seller in July, 1916. The defendant answered with defenses and counterclaims. Between July, 1916, and April 19, 1920, there was active litigation. One phase of the controversy, a motion by the defendant for judgment on the pleadings, came as far as this court (221 N. Y. 581, 116 N. E. 1077). Plaintiff expended several thousand dollars for fees and disbursements. In June, 1920, on the eve of the trial, the defendant moved for a stay of proceedings until the matters in difference were arbitrated. The Special Term denied the motion, and the Appellate Division affirmed.

[1] 1. We think the Arbitration Law is applicable to pre-existing contracts, but not to pending actions.

Section 2 of the statute (L. 1920, c. 275; Consol. Laws, c. 72) declares a new public policy, and abrogates an ancient rule. ‘A provision in a written contract to settle by arbitration a controversy thereafter arising between the parties to the contract, or a submission hereafter entered into of an existing controversy to arbitration pursuant to title eight of chapter seventeen of the Code of Civil Procedure, shall be valid, enforcible and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract’ Arbitration Law, § 2.

Sections 3 and 4 prescribe the procedure for the enforcement of the contract and the naming of the arbitrator.

Section 5 directs a stay of proceedings ‘if any suit or proceeding be brought’ when arbitration should be ordered.

The common-law limitation upon the enforcement of promises to arbitrate is part of the law of remedies Meacham v. Jamestown, F. & C. R. R. C., 211 N. Y. 346, 352,105 N. E. 653, Ann. Cas. 1915C, 851; Akieselskabet K. F. K. v. Redieria Ktiebolaget Atlanten (D. C.) 232 Fed. 403, 405; 250 Fed. 935, 163 C. C. A. 185, Ann. Cas. 1918E, 491;U. S. Asphalt Refining Co. v. Trinidad Lake Petroleum Co. (D. C.) 222 Fed. 1006, 1011. The rule to be applied is the rule of the forum. Both in this court and elsewhere, the law has been so declared. Arbitration is a form of procedure whereby differences may be settled. It is not a definition of the rights and wrongs out of which differences grow. This statute did not attach a new obligation to sales already made. It vindicated by a new method the obligation then existing.

[2] In thus classifying its purpose, we have gone far in determining its effect. Changes in the form of remedies are applicable to proceedings thereafter instituted for the redress of wrongs already done. They are retrospective if viewed in relation to the wrongs. They are prospective if viewed in relation to the means of reparation. Lazarus v. Metr. E. R. Co., 145 N. Y. 581, 585,40 N. E. 240;Laird v. Carton, 196 N. Y. 169, 89 N. E. 822,25 L. R. A. (N. S.) 189;Brearley School, Ltd., v. Ward, 201 N. Y. 358, 363,94 N. E. 1001, 40 L. R. A. (N. S.) 1215, Ann. Cas. 1912B, 251. A different problem arises when proceedings are already pending. There is then a distinction to be noted. The change is applicable even then if directed to the litigation in future steps and stages. Lazarus v. Metr. E. R. Co., supra; Lamport v. Smedley, 213 N. Y. 82, 86,106 N. E. 922. It is inapplicable unless in exceptional conditions, where the effect is to reach backward, and nullify by relation the things already done. Maxwell Interpretation of Statutes (5th Ed.) pp. 348, 370; Reid v. Mayor, etc., of N. Y., 139 N. Y. 534, 34 N. E. 1102;U. S. Fidelity & G. Co. v. Struthers Wells Co., 209 U. S. 306, 28 Sup. Ct. 537, 52 L. Ed. 804; Attorney General v. Chandler, 108 Mich. 569, 571, 66 N. W. 482. There can be no presumption, for illustration, that a statute regulating the form of pleadings or decisions is intended to invalidate pleadings already served, or decisions already filed. Gen. Construction Law (Cons. Laws, c. 22) §§ 93, 94. We speak, of course, of the principles that govern in default of the disclosure by the Legislature of a different intent. Nice distinctions are often necessary. Jacobus v. Colgate, 217 N. Y. 235, 111 N. E. 837, Ann. Cas. 1917E, 369. The word ‘remedy’ itself conceals at times an ambiguity, since changes of the form are often closely bound up with changes of the substance. Jacobus v. Colgate, supra, 217 N. Y. at p. 244, 111 N. E. 837, Ann. Cas. 1917E, 369;Isola v. Weber, 147 N. Y. 329, 41 N. E. 704. The problem does not permit us to ignore gradations of importance and other differences of degree. In the end, it is in considerations of good sense and justice that the solution must be found. Maxwell, supra, pp. 348, 370.

[3] Applied to the case of Berkovitz & Spiegel, these principles and presumptions require that arbitration be enforced. The statute was enacted after the contract had been made, but before a remedy was invoked. The range of choice is governed by the remedies available at the time when choice is made. We are told that the promise to arbitrate when made was illegal and a nullity. Even before the statute, this was not wholly true. Public policy was thought to forbid that the promise be specifically enforced. Public policy did not forbid an award of damages if it was...