MATTER OF LIPSCHUTZ (GUTWIRTH)
| Decision Date | 17 April 1952 |
| Citation | 304 N.Y. 58 |
| Parties | In the Matter of the Arbitration between Isidore Lipschutz et al., Appellants, and Albert Gutwirth, Respondent. |
| Court | New York Court of Appeals Court of Appeals |
Leon Finley and David S. Meyer for appellants.
Max A. Gulack for respondent.
This is an appeal, as of right, from an order of the Appellate Division, First Department, unanimously modifying on the law and the facts an order of Special Term of Supreme Court, New York County, directing that the parties proceed to arbitration and appointing an arbitrator.
Appellants, Isidore Lipschutz and Charles Gutwirth, and respondent, Albert Gutwirth, nephew of Isidore and son of Charles, are parties to a partnership agreement. An arbitration clause in that agreement provides for the arbitration of disputes by three arbitrators — "the First Party [Isidore Lipschutz] shall select his arbitrator, and the Second and Third Parties [Charles and Albert Gutwirth, father and son] jointly shall select their arbitrator; and the two arbitrators shall thereupon select a third arbitrator. * * *"
Controversies arose between appellants and respondent due to the latter's alleged lack of concern for the welfare of the partnership. Pursuant to the arbitration clause Isidore demanded that the controversy be submitted to arbitration and designated his arbitrator. Albert and Charles could not, however, agree upon a joint arbitrator — due, among other things, to Albert's insistence that he be permitted to select an arbitrator independently since the interests of Charles and Isidore in the controversy were identical and adverse to his. Upon motion made by appellants and pursuant to sections 1450 and 1452 of the Civil Practice Act, Special Term appointed a joint arbitrator for Charles and Albert and directed that arbitration proceed. That joint arbitrator together with the arbitrator selected by Isidore chose a third person as provided by the agreement of the parties. Respondent thereupon appealed to the Appellate Division which was of the opinion that because of the change in alignment of the partners, not contemplated when the agreement was entered into, the contract providing for arbitration "should be construed as though no method [for appointing arbitrators] were provided therein." (278 App. Div. 132, 133.) That court then entered an order appointing a single arbitrator and directing that arbitration proceed before such person.
The sole question presented on this appeal is whether, under the circumstances presented, it was error for the Appellate Division to disregard the provisions of the contract of the parties which provided for the settlement of disputes by a panel of three arbitrators, one of whom was to be selected by appellant Isidore.
Appellants contend that the Appellate Division, in appointing a single arbitrator, has rewritten the contract of the parties. Respondent, on the other hand, argues that the designation of a single arbitrator was a proper exercise of discretion, especially since appellants allegedly seek to deprive respondent of his interest in the firm.
The present statutory provisions regarding arbitration are to be found in article 84 of the Civil Practice Act (). The purpose of that article is to give effect to contracts providing for the settlement of disputes before tribunals of the parties' own choosing by rendering such agreements irrevocable and, in effect, subject to specific enforcement. The provisions of article 84 are intended to strengthen — not change — the rights and obligations of parties to arbitration agreements. The law "does not bring the contract into being, but adds a new implement, the remedy of specific performance, for its more effectual enforcement." (Matter of Marchant v. Mead-Morrison Mfg. Co., 252 N.Y. 284, 293.)
The spirit of the arbitration law being the fuller effectuation of contractual rights, the method for selecting arbitrators and the composition of the arbitral tribunal have been left to the contract of the parties. Sections 1450, 1453, and 1462 of article 84 bear witness to the fact that the Legislature in enacting that article intended that the Supreme Court give due regard to the method and procedure prescribed by the contract of the parties. However, at times parties, for one reason or another, fail to make provision for a method of naming arbitrators or fail to designate in their contract the panel of arbitrators or the arbitrator who is to settle their dispute. An order directing the parties to agree on the matter in dispute would be impractical since an agreement, by its very nature, is dependent upon the concurrence of free wills and cannot be brought into existence by coercion. Moreover, even though a method has been provided, a party may refuse to avail himself of his right, under the contract, to select an arbitrator. In the absence of statutory provision for the appointment of arbitrators under those circumstances, the plan for arbitration could be thwarted and the right of the other party or parties rendered valueless. Section 1452 of the Civil Practice Act, conferring power upon the Supreme Court to designate arbitrators, was enacted to cover such situations. It is apparent from a reading of section 1452 that it is but part of the overall plan of article 84 of the Civil Practice Act to honor the contractual rights and obligations of the parties. That section is entitled, "Provision in case of failure to name arbitrator or umpire" and provides: "If, in the contract for arbitration * * * provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed; but if no method be provided therein, or if a method be provided and any party thereto shall fail to avail himself of such method, or for any reason there shall be a lapse in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then, upon application by either party to the controversy, the supreme court, or a judge thereof, shall designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the said contract * * * with the same force and effect as if he or they had been specifically named therein; and unless otherwise...
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