Glenn Acres, Inc. v. Cliffwood Corp.

• Decision Date: 12 July 1967
• Citation: Glenn Acres, Inc. v. Cliffwood Corp., 228 N.E.2d 835, 353 Mass. 150 (Mass. 1967)
• Parties: GLENN ACRES, INC. et al. v. CLIFFWOOD CORP. et al. (and a companion case).
• Court: Supreme Judicial Court of Massachusetts

Page 835

228 N.E.2d 835

353 Mass. 150

GLENN ACRES, INC. et al. v. CLIFFWOOD CORP. et al. (and a companion case).

Supreme Judicial Court of Massachusetts, Suffolk.

Argued May 4, 1967.

Decided July 12, 1967.

Edward M. Dangel, Boston (Leo E. Sherry, Boston, with him), for Glenn Acres, Inc., and another.

A. Morris Kobrick, Boston (Laurence R. Buxbaum, Boston, with him), for Cliffwood Corp.

Before WILKINS, C.J., and SPALDING, KIRK, SPIEGEL and REARDON, JJ.

KIRK, Justice.

This litigation, resulting from an agreement for the sale and development of real estate for housing purposes, consists of a bill for declaratory relief and a petition for acceptance and confirmation of an arbitration award which have been consolidated for purposes of appeal. Hearings before an arbitrator commenced on June 9, 1965, and were held on four subsequent days. Thereafter, on July 16, 1965, Cliffwood Corp. (the buyer), under G.L. C. 251, SS 2¹, 15, filed a motion for an order to arbitrate. On July 28, 1965, Glenn Acres, Inc. and Benjamin Shaffer (the sellers) brought a bill for declaratory relief seeking to have all prior arbitration hearings declared null and void, to enjoin any further arbitration, and to have the court determine 'their right, duty, status or other legal relations' with the buyer and eight other named defendants. The judge ordered that hearings before the arbitrator be resumed. The sellers appealed. On November 12, 1965, on the buyer's motion, ² a stay of proceedings was granted pending the arbitrator's award. The award was made on February 11, 1966. The buyer filed on April 4, 1966, a petition for acceptance and confirmation of the arbitrator's award (G.L. c. 251, § 11). The sellers filed an answer and counterclaim. The case was heard, together with the seller's bill for declaratory relief, commencing September 13, 1966. Final decress were entered on September 30, 1966, confirming and clarifying the arbitrator's award, dismissing the seller's counterclaim in that suit, and dismissing the sellers' bill for declaratory relief. The sellers appeal from each of the final decrees and from various interlocutory decrees. ³ The appeals from the interlocutory decrees have not been briefed or argued and are considered waived. The buyer appeals from the final decree confirming and clarifying the arbitrator's award.

We summarize those portions of the agreement which are pertinent to the issues raised by the parties on their appeals. The agreement provided for the conveyance to the buyer of 100 house lots by Glenn Acres, Inc. and 219 lots by Shaffer. The sellers agreed to assume the cost of constructing streets and installing underground services to the lots. The price of each lot was $3,000, to be financed primarily by the buyer assuming existing first mortgages on the lots and executing interest-free second mortgages to the sellers. '20. In the event that the Buyer shall not have paid both the first and second instalments under the second mortgage, or otherwise paid for each of a minimum of forty (40) lots on or before March 1, 1965, this Agreement shall be deemed automatically rescinded as of March 10, 1965 * * * and upon such rescission the provisions of * * * (section) 22 shall apply.' Section 22 of the agreement enumerates the obligations of both the buyer and the sellers upon rescission. The buyer is obligated to complete certain mortgage payments, reconvey all lots for which no payments have been made on the second mortgage, and adjust real estate taxes as of the date of rescission. The sellers are obligated to repay to the buyer the amounts paid in cash by it at the time of the original conveyance, less amounts applicable to payment for lots retained by it, and to deposit in escrow a sum sufficient to cover the cost of completing paving and the installation of underground services to the lots retained by the buyer. 'Upon the fulfillment of the foregoing respective obligations each party shall have no further obligations to the other.' Section 36 of the contract is an arbitration clause. Section 38 provides: 'This Agreement shall terminate upon rescission under Section 20 * * *. To the extent necessary to fully satisfy unfulfilled obligations outstanding on the date of termination, the provisions of this Agreement shall survive termination.'

The arbitrator's award stated in paragraph 1 that the contract was rescinded effective March 11, 1965. In paragraph 2 of the award the sellers were ordered to obtain (a) a mortgage discharge, (b) planning board releases, and (c) a tax lien waiver. By paragraph 3, the sellers were ordered to pay the buyer $40,000. 'The award includes an amount sufficient for Cliffwood Corp. to take over, and itself complete and pay for, all necessary street work and other work relating to the fifteen lots purchased by it * * *.' Paragraph 4 ordered the sellers to obtain for the buyer full releases of the first mortgages. The award provided that upon the completion of the sellers' duties under paragraphs 2 to 4, the buyer was to reconvey certain lots to the sellers and to discharge its second mortgage.

1. We first dispose of the appeal taken by the sellers from the final decree dismissing their bill for declaratory relief. The sellers do not dispute the validity of the arbitration clause (G.L. c. 251, § 1).

They assert that the judge should not have required them to submit to arbitration but, instead, should have proceeded to decide the suit for declaratory relief. The assertion is based upon the contentions that (a) there was no 'controversy' because the agreement spells out the duties of the parties upon rescission, and (b) 'the contract having been terminated by rescission, the clause with reference to arbitration is likewise terminated.' We disagree with both contentions.

The sellers' first contention requires little comment. Section 36 of the agreement which sets out the arbitration clause states that '(a)ny controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by Aribtration in accordance with the Rules of the American Arbitration Association.' The clause should be construed as broadly as the parties obviously intended. Maxwell Shapiro Woolen Co. Inc. v. Amerotron Corp., 339 Mass. 252, 260, 158 N.E.2d 875; Carter, Moore & Co. Inc. v. Donahue, 345 Mass. 672, 676, 189 N.E.2d 217. The clause constituted binding advance consent to arbitrate at the election of either party any dispute which the parties were unable to settle by reference to the terms of their contract. Itek Corp. v. McEnness, 340 Mass. 409, 412, 164 N.E.2d 636. Although § 22 of the agreement states the duties of the parties upon rescission, it gives tno assurance that a controversy would not arise in the performance of those duties. Further, the sellers' contention that there was no arbitrable controversy under § 22 of the contract does not preclude the existence of arbitrable controversies under other sections of the contract arising from events independent of and prior to the rescission of the contract. Although the arbitrator was not required to (Fazio v. Employers' Liab. Assur. Corp. Ltd., 347 Mass. 254, 258, 197 N.E.2d 598) and did not state the findings of fact and conclusions of law upon which his award was based, an examination of the award and the subsequent court proceedings shows that the parties obviously had conflicting claims.

The contention that the arbitration clause became inoperable as of the date the contract was rescinded is answered by the language in several articles of the contract. Under section 22 of the contract the parties' obligations under the contract are not terminated until all of the obligations which come into force upon rescission of the contract have been fulfilled. This provision negates the assertion that rescission put an end to the obligations under the contract. Section 38 of the contract does likewise. It states that 'To the extent necessary to fully satisfy unfulfilled obligations outstanding on the date of termination, the provisions of this Agreement shall survive termination.' The broad agreement to arbitrate any controversy, including those arising out of a breach of the contract, was clearly one of the sections of the contract intended to be included among those provisions which survive rescission of the contract.

Because the parties are bound by their agreement to arbitrate, the motion to stay the declaratory relief proceedings was properly granted. G.L. c. 251, § 2(d). See Itek Corp. v. McEnness, 340 Mass. 409, 412--413, 164 N.E.2d 636; Electronics Corp. of America v. Canter Constr. Co., 343 Mass. 210, 212, 178 N.E.2d 1. A denial of the stay would effectively deprive the arbitrator of his jurisdiction. See G.L. c. 231A, § 1. Cf. Salvucci v. Sheehan, 349 Mass. 659, 662---663, 212 N.E.2d 243. Similarly, the decree dismissing the bill for declaratory relief was proper. "In the absence of fraud an arbitration decision is binding though there may have been committed an error of law of fact in reaching that decision.' Hannan v. Enterprise Publishing Co., 341 Mass. 363, 365, 169 N.E.2d 894, 895.' Carter, Moore & Co. Inc. v. Donahue, 345 Mass. 672, 676, 189 N.E.2d 217, 220.

2. we turn to the decree confirming and clarifying the arbitrator's award. The sellers stipulated before...