Cohen v. Cohen

• Decision Date: 13 November 1962
• Parties: In the Matter of the Arbitration of Controversies between Gertrude S. COHEN, Daniel Cohen, Resolute Paper Products Corp., Carolina Paper Mills, Inc., and The Windsor Locks Paper Corp., Petitioners-Appellants, and Leo COHEN, Respondent-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 787

233 N.Y.S.2d 787

17 A.D.2d 279

In the Matter of the Arbitration of Controversies between Gertrude S. COHEN, Daniel Cohen, Resolute Paper Products Corp., Carolina Paper Mills, Inc., and The Windsor Locks Paper Corp., Petitioners-Appellants, and Leo COHEN Respondent-Respondent.

Supreme Court, Appellate Division, First Department.

Nov. 13, 1962.

Ira M. Millstein, New York City, of counsel (Max Cutler and Marshall C. Berger, New York City, with him on the brief; Weil, Gotshal & Manges and Cutler & Cutler, New York City, attorneys), for appellants.

Harry J. Halperin, New York City, of counsel (Samuel L. Scholer, New York City, with him on the brief; Halperin, Shivitz, Scholer & Steingut, New York City, attorneys), for respondent.

Before BOTEIN, P. J., and BREITEL, VALENTE, McNALLY and EAGER, JJ.

EAGER, Justice.

The petitioners appeal from an order denying their motion, purported to be made pursuant to Section 1458-a of the Civil Practice Act, to stay 'so much of the arbitration of the controversies between the parties' as relates to claims of respondent allegedly barred by the statute of limitations.

The pending arbitration stems from a written agreement for submission to arbitration. The agreement, which provided that the individual petitioners were to buy from the respondent his stock in three certain closely-held corporations and that the arbitrators were to fix the purchase price of the stock, was intended to settle and dispose of two pending actions brought by the respondent. The one action, in the nature of a stockholders' derivative action, had been instituted to recover for alleged wrongful acts of the individual petitioners and others as officers of the three corporations; and by the terms of the submission, it was provided that, in evaluating the interest of the respondent in the corporations and fixing the purchase price for his stock, 'the arbitrators may take into consideration claims asserted' by the respondent in such derivative action. The respondent had also instituted an action against the corporations to recover moneys allegedly due him under and for breach of an employment agreement and to recover upon certain checks and on account of an alleged loan; and it was provided by the submission that the controversy between the parties with respect to 'the claims' of respondent against the corporations 'as set forth in the complaint in' the said action were also submitted to the arbitrators.

By the terms of the submission agreement, the respondent was to have reasonable access to the books and records of the corporations 'for the purpose of examining said books and records insofar as they pertain to the controversies submitted herein'. Pursuant thereto, the accountant for the respondent was permitted to examine the books of the corporations covering the years 1951 through 1958. The respondent them requested a further examination of the books and records going back to the date of January 1, 1946. The petitioners, however, refused such examination and the arbitrators have scheduled a hearing to determine how far back the examination of the records should be permitted to go. In the meantime, however, the petitioners brought this motion to stay arbitration and contend here that claims pre-dating a period beginning six years prior to the commencement of the respondent's said actions are barred by the statute of limitations and that the arbitration should be limited to preclude the arbitrators from consideration of all such claims and matters in relation thereto. It is on this theory that the stay is sought pursuant to Section 1458-a of the Civil Practice Act. Said Section 1458-a reads as follows:

'A motion to compel arbitration shall be denied, and a motion to stay arbitration granted, if at the time of the giving of notice of intention to arbitrate, or of the making of a demand for arbitration, the claim sought to be arbitrated would be barred by an existing statute of limitations if such claim were asserted in an action in a court of this state.

'Such bar shall be asserted in court at or before the hearing of such motion or the commencement of the first hearing in the proposed arbitration proceeding, whichever shall be earlier; except that any party who is entitled, under the provision of section fourteen hundred fifty-eight, subdivision two, to put in issue the making of the contract or submission or the failure to comply therewith, may at the same time assert such bar.

'The failure to assert such bar in court shall not preclude the raising of such bar before the arbitrators who may, in their sole discretion, apply or not apply such bar. Such exercise of discretion by the arbitrators shall not be subject to review by any court upon a motion to confirm, vacate, modify, or correct an award.'

Section 1458-a was proposed upon the basis that 'The same considerations of public policy which make stale claims in actions at law unenforceable also apply to disputes in arbitration.' Specifically, it was enacted to eliminate the confusion theretofore existing in the decisions as to whether a proceeding in court could be invoked to enforce the defense of the statute of limitations or whether the applicability of the defense was in the sole discretion of the arbitrators. (N.Y.Legis.Annual, 1959, pp. 12, 13, 27.)

The legislative memorandum of Senator Periconi, who introduced the legislation, noted that the proposed section 'also clearly indicates that the period of the statute runs up to the time of giving of notice of intention to arbitrate or making of a demand for arbitration.' (Id., p. 12.) Thus, as appears from a reading of the opening paragraph of said section, it (said paragraph) was designed to fix the date to which the statute of limitations would run where the proceeding for arbitration was commenced by 'the giving of a notice of intention to arbitrate or of the making of a demand for arbitration.'

It is obvious that this first paragraph of Section 1458-a, by the terms used therein, is limited in its application to arbitration proceedings instituted by 'notice of intention to arbitrate' or by a 'demand for arbitration'.

Fundamentally and by statute, the source of and basis for the institution of an arbitration proceeding may be either one of two general types of agreement, namely, an agreement which provided for arbitration of future controversies or an agreement providing for submission of existing controversies. (See Civ.Prac.Act, Art. 84; 21 Carmody-Wait, New York Practice, § 12, p. 396.) The proceeding which is authorized by a prior agreement for the arbitration of future disputes, may be instituted by the giving of a 'notice of intention to arbitrate' or by the making of a 'demand for arbitration'. These phrases are well understood in the arbitration...