Joyce Research & Development Corp. v. Equi-Flow Division of Vibro Mfg. Co.

• Decision Date: 05 October 1961
• Docket Number: EQUI-FLOW
• Citation: 221 N.Y.S.2d 164,31 Misc.2d 952
• Parties: JOYCE RESEARCH AND DEVELOPMENT CORPORATION v.DIVISION OF VIBRO MFG. CO., Inc.
• Court: New York Supreme Court

Page 164

221 N.Y.S.2d 164

31 Misc.2d 952

JOYCE RESEARCH AND DEVELOPMENT CORPORATION v. EQUI-FLOW DIVISION OF VIBRO MFG. CO., Inc.

Supreme Court, Special Term, Queens County, Part I.

Oct. 5, 1961.

Leo Brown, New York City, for plaintiff.

Peirez, Karmiol & Rosenthal, Woodside, for defendant.

HAROLD TESSLER, Justice.

On February 25, 1960, Victor B. Fabry, Charles E. Wetzler and Wladyslaw Sandowski entered into an agreement which they called

'Integrated Copy Of Minutes Of A Joint Meeting Of

'(1) (a) The Board of Directors

'(b) The Stockholders

Of Joyce Research and Development Co., Inc. (hereinafter referred to as 'Joyce')

'(2) (a) The Board of Directors

'(b) The stockholders

of Equi-Flow Division of Vibro Manufacturing Co., Inc. (hereinafter referred to as 'Equi-Flow') * * *.'

Therein, Wetzler and Fabry agreed to transfer all of their respective stock in Joyce to Sandowski and to resign as officers and directors of this corporation. Sandowski agreed to transfer his shares of stock in Equi-Flow to Fabry and Wetzler and to resign as an officer and director of that corporation. By the terms of this agreement certain assets and liabilities were to be transferred by and between Equi-Flow and Joyce and certain individual duties and obligations on the part of Wetzler, Fabry and Sandowski were assumed by each in connection therewith. The agreement further provided that Joyce was to transfer all of its assets to Equi-Flow and Equi-Flow was to assume all of Joyce's liabilities but that Equi-Flow was to have the right to use Joyce's name in connection with the sale of merchandise inventory and the collection of accounts receivable transferred to it by Joyce; that by December 31, 1960, Joyce was to purchase from Equi-Flow all woodworking machinery inventory transferred to Equi-Flow by Joyce as assets, etc. The parties agreed that all prior agreements between the parties were to be deemed null and void and that

'Any and all claims, controversies, disputes or disagreements arising out of or related in any manner to this agreement shall be settled by arbitration * * *'.

The foregoing agreement was signed individually by Wetzler, Fabry and Sandowski, who, however, were described in the introductory portion thereof as 'being all of the directors, all of the stockholders and all of the officers of Joyce and Equi-Flow.' This description immediately preceded the body of the agreement introduced by the clause 'It was unanimously agreed as follows:'.

Thereafter, Wetzler and Fabry commenced a proceeding to compel Sandowski to arbitrate certain disputes that has arisen under the agreement. On April 17, 1961, an order was entered directing such arbitration. Hearings were held by the arbitrator and the matter is currently in recess.

It appears that the attorney for Sandowski filed with the arbitrator seven major objections to the relief sought by Fabry and Wetzler. Two of these are as follows:

'I. As a general objection to all invoices, any amount which was originally owing thereon, and any balance which may still be due and owing thereon, was and is due and owing to Equi-Flow Division of Vibro Mfg. Co., Inc. (hereinafter referred to as 'Equi-Flow'), and not to the petitioners herein or either of them.

'II. As a further general objection to all invoices, any amount which was originally owing thereon, and any balance which may still be due and owing thereon, was and is due from Joyce Research and Development Corporation (hereinafter referred to a 'Joyce'), and not from the respondent herein.'

Thus, in essence Sandowski, the respondent in the pending arbitration maintains that all major rights and obligations under the agreement of February 25, 1960, were corporate obligations for which the individual signers of the agreement are not liable.

The instant action brought by Joyce against Equi-Flow in the Supreme Court, Nassau County, on August 23, 1961, seeks to recover certain books of account and corporate minutes and stockbooks of the plaintiff. The complaint alleges that plaintiff is and always has been the owner of these books, but that the defendant is wrongfully in possession thereof and unlawfully retains them following a demand therefor by the plaintiff.

Equi-Flow now moves to stay this action and to direct the parties thereto to submit to arbitration the issues raised by the pleadings herein, on the ground that they embrace a dispute referable to arbitration, under the so-called 'integrated' agreement of February 25, 1960. Said defendant also moves to add the corporate parties hereto as parties to the pending recessed arbitration between the individuals who signed the agreement, and thereupon to consolidate the arbitration herein sought with that already pending.

It is fundamental that no one is under duty to resort to arbitration unless by clear language he has so agreed. (Matter of Lehman v. Ostrovsky, 264 N.Y. 130, 190 N.E. 208; Matter of Kelley, 240 N.Y. 74-78, 147 N.E. 363.) This question, when raised, is one for the court to determine and not the arbitrators. (International Ass'n, of Machinists Dist. No. 15, Local No. 402, v. Cutler-Hammer, Inc., 271 App.Div. 917, 67 N.Y.S.2d 317, affd. 297 N.Y. 519, 74 N.E.2d 464; Matter of Miller Art Co. Inc. v. Firestone, 4 A.D.2d 1032, 168 N.Y.S.2d 732.)

With these principles in mind, it is necessary to determine at the outset whether from the four corners of the 'Integrated Copy of Minutes' of the joint meeting the corporations sought to be joined as parties to the arbitration are bound by its terms. As already noted, the agreement initially refers to

'Victor B. Fabry, (hereinafter called 'Fabry')

'Wladyslaw Sandowski, (hereafter called 'Sandowski')

'Charles E. Wetzler, (hereafter called 'Wetzler')

being all of the directors, all of the stockholders and all of the officers of Joyce and Equi-Flow.'

It then recites certain undertakings and obligations to be performed both by the individual signatories and the two corporations. While the agreement was not executed by either of the corporations as such, the provisions thereof, in so many words, contemplate action by way of specific undertakings on the part of each corporation. Thus the conclusion is inescapable that the individuals who signed the agreement, 'being all of the directors, all of the stockholders and all of the officers of Joyce and Equi-Flow,' contemplated that their respective corporations as well as they, individually, should be bound by its terms. In this connection it is to be noted that Sandowski in an opposing affidavit, sworn to September 17, 1961, states: 'I have always taken the position, and still do, that if the arbitration clause in question is valid, it binds the two corporations, and only the corporations.'

This court is of the opinion that to hold that the two corporations were not parties to the agreement in the circumstances here presented would 'deny effect to and frustrate the legitimate object' of its terms. (Mencher v. Weiss, 306 N.Y. 1, 7, 114 N.E.2d 177, 180.) It is evident that these corporations are the alter egos for the individual signatories to the agreement. (Matter of Reif v. Williams Sportswear Inc., 9 N.Y.2d 387, 214 N.Y.S.2d 395, 174 N.E.2d 492.) Accordingly, the interests of justice dictate that they be added to the presently pending arbitration so that complete relief may be accorded.

Now, as to the stay sought in the instant action between the two corporations and to compel arbitration of their dispute and thereupon to consolidate the arbitration with that presently pending . Plaintiff's objection to this is two-fold: (1) that...