Ginsberg v. Coating Products, Inc.

• Decision Date: 25 May 1965
• Citation: 210 A.2d 667,152 Conn. 592
• Court: Connecticut Supreme Court
• Parties: S. Leonard GINSBERG et al. v. COATING PRODUCTS, INC., et al. Supreme Court of Errors of Connecticut

Page 667

210 A.2d 667

152 Conn. 592

S. Leonard GINSBERG et al. v. COATING PRODUCTS, INC., et al.

Supreme Court of Errors of Connecticut.

May 25, 1965.

Allyn L. Brown, Jr., Norwich, with whom, on the brief, was Leo J. McNamara, Norwich, for appellants (defendants).

Valentine J. Sacco, Hartford, for appellees (plaintiffs).

Before KING, C. J., and MURPHY, ALCORN, COMLEY and SHANNON, JJ.

SHANNON, Associate Justice.

The defendants have appealed from a judgment directing them to proceed with arbitration in order to ascertain the value of the stock of Coating Products, Inc. Prior to February 20, 1957, the plaintiff S. Leonard Ginsberg was connected with the G. and T. Manufacturing Company, and the defendants Reynold H. Goodman and Myron M. Mainthow were officers of the Crystal Transparent Corporation. On that date the two corporations merged. Crystal Transparent Corporation purchased a half interest in the merged company, which later changed its name to Coating Products, Inc. There are presently issued and outstanding 9600 shares of stock of Coating Products, Inc., the ownership of which is divided equally among the 'Family Units' ¹ of Ginsberg, Trehub, Mainthow and Goodman, the latter two holding their shares through their interest in the Crystal Transparent Corporation. When the companies were combined, the parties executed a stockholders' agreement providing the conditions and obligations under which the stock could be sold or transferred. In light of these restrictions and covenants, the parties agreed in paragraph 11 as follows: 'The price to be paid for any stock of the Corporation purchased hereunder shall be based on its value per share, as set forth in the latest Certificate of Value signed by Leonard Ginsberg, George J. Trehub any Crystal. In the event Crystal's stock of the Corporation is distributed to Goodman and Mainthow and/or their respective Family Units, then Reynold H. Goodman and Myron M. Mainthow shall sign such Certificates of Value in lieu of Crystal. The parties agree that the present value of one share of the common stock of the Corporation is $62.50. Beginning on or about January 15, 1958 and annually thereafter, the proper parties shall sign a new Certificate of Value; but the failure to sign any such Certificate shall not invalidate the value set forth in the last Certificate so signed. By mutual agreement, the proper parties may sign similar Certificates at more frequent intervals. A copy of each such Certificate so signed shall be kept by each of the signers and filed with the Corporation.'

Since the initial certificate of value was issued in 1957, two others have been signed, the last being on January 1, 1960, valuing each share of stock at $105 per share. Although the plaintiffs have requested it, no certificate of value has been signed since 1960 because the parties could not agree on the value of each share at any given time.

On December 12, 1963, Ginsberg, on behalf of himself and his wife, the plaintiff Goldie Ginsberg, made a formal demand on the other stockholders for a new certificate of value. The defendants offered to sign a new certificate of value with a valuation of $115 per share; the plaintiffs refused because they did not believe that this was a fair value.

In their agreement, the parties provided in paragraph 20, in part, that '[a]ny controversy arising under or pertaining to this Agreement, or the interpretation, performance or breach of any provision thereof, shall be submitted to and determined by arbitration, unless relief is sought pursuant to the provisions of Paragraph 16.' ² The question is whether, under the circumstances here, '[a]ny controversy', as that term is used in paragraph 20 and the agreement as a whole, includes the present dispute over the certificate of value.

The defendants argue that as a matter of law, 'controversy' does not include mere valuations or appraisals. They cite for support the construction of a New York arbitration statute at a time when it was similar to our present § 52-408. Matter of Fletcher, 237 N.Y. 440, 448, 143 N.E. 248. The Fletcher case has been followed in this state in Mott v. Gaer Bros., Inc., 22 Conn.Sup. 449, 454, 174 A.2d 549. On two separate occasions, the New York legislature has nullified judicial constructions of the arbitration statutes which would have limited the scope of the term 'controversy'. Cf. N.Y.Civil Practice Act, §§ 1448, 1340; note, 'Arbitration as a Means of Settling Disputes within Close Corporations,' 63 Colum.L.Rev. 267, 269-72. The legislative history of § 52-408 reveals nothing which would indicate an intent to give the word 'controversy' a narrower meaning than its normal connotation. In the case at bar, under the court's order, the arbitrators would have to determine not only the ultimate value of each share but also the method to be used in determining that value. In this respect, alone, the dispute here is not merely a controversy over a simple appraisal. It is a genuine, bona fide dispute between the signatories of the stockholders' agreement and well within the meaning of § 52-408.

This court approves of arbitration. It is intended to avoid the formalities, delay, expense and vexation of ordinary litigation. Colt's Industrial Union v. Colt's Mfg. Co., 137 Conn. 305, 309, 77 A.2d 301; In re Curtis-Castle Arbitration, 64 Conn. 501, 511, 30 A. 769. No one can be forced to arbitrate a dispute who has not previously agreed to do so, but where there is such an agreement the court is empowered to direct compliance with its provisions. Gores v. Rosenthal, ...