Maxwell Shapiro Woolen Co. v. Amerotron Corp.

• Decision Date: 19 May 1959
• Citation: 158 N.E.2d 875,339 Mass. 252
• Parties: MAXWELL SHAPIRO WOOLEN CO., Inc. v. AMEROTRON CORPORATION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 875

158 N.E.2d 875

339 Mass. 252

MAXWELL SHAPIRO WOOLEN CO., Inc. v. AMEROTRON CORPORATION.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued April 7, 1959.

Decided May 19, 1959.

Joseph B. Abrams, Boston (Robert T. Abrams, Boston, with him) for plaintiff.

Kevin Hern, Milton, and Samuel B. Potter, So. Westport, for defendant submitted a brief.

Before WILKINS, C. J., and RONAN, COUNIHAN, WHITTEMORE and CUTTER, JJ.

CUTTER, Justice.

This is an action, originally in contract or tort but amended into an action of tort for deceit, by a Massachusetts corporation (hereinafter called Shapiro), against a New York corporation (hereinafter called Amerotron), alleged in the writ to have a place of business in Boston. Upon the declaration, the substitute answer, and the replication to the substitute answer, the trial judge allowed a motion by Amerotron for judgment for it on the pleadings. See G.L. c. 235, § 1; Adiletto v. Brockton Cut Sole Corp., 322 Mass. 110, 112, 75 N.E.2d 926; Willett v. Webster, 337 Mass. 98, 104-105, 148 N.E.2d 267. Shapiro's bill of exceptions presents the question whether this motion was properly allowed.

Shapiro's declaration alleged that in 1955 it 'was induced to enter into contracts for the purchase of * * * cloth by * * * the fraud of * * * [Amerotron,] its agents and servants, * * * consisting in false representations that the quality and color of the goods and the * * * composition of the ingredients * * * matched uniformly the swatches * * * shown to * * * [Shapiro] by' Amerotron's salesman; that Amerotron 'knew or should have known (a) that said representations * * * were knowingly false or were made recklessly without actual knowledge * * * although * * * susceptible of knowledge; (b) that they were material; (c) that they were made with the intent that * * * [Shapiro] should rely'; and (d) that Shapiro did rely and sustained damage because the goods shipped did not uniformly conform with the swatches.

Amerotron's substitute answer included not only a general denial, but also the following affirmative allegations. Several contracts for the sale of goods were made between October 21, 1955, and January 25, 1956, both dates inclusive, each of which contained the arbitration clause set out, so far as relevant, in the margin. ¹ This action was begun by writ dated November 9, 1956. Amerotron filed a demand, dated November 20, 1956, for arbitration in accordance with the rules of American Arbitration Association. This demand was served on Shapiro, and required 'arbitration of * * * all claims and controversies of any nature whatsoever connected with or relating to the said contracts stated above, or any modification thereof, and/or the merchandise shipped or to be shipped thereunder.' The demand also requested that 'all claims that * * * [Shapiro] has or may have against * * * [Amerotron] arising under or relating to the contracts * * * be * * * disallowed in their entirety.' In the Superior Court, the proceedings in the present case were stayed. It does not appear that any exception was taken to the stay of proceedings. 'Arbitration was held in New York. Though notified, * * * [Shapiro] failed * * * to appear at or to participate in the arbitration hearing. An award was made in favor of Amerotron * * * in the sum of $288,778.44 * * * with interest. * * * On January 21, 1957, Amerotron moved in the Supreme Court of New York for an order confirming the award * * *. Shapiro appeared and opposed the * * * motion' and submitted an affidavit of its president with respect to the contracts which asserted, among other things, (a) that the goods shipped upon testing did not conform to the samples; (b) that '[t]he representations made * * * as to the contents and composition of the goods * * * were wilfully fraudulent, or were made recklessly without actual knowledge * * * although the truth was susceptible of knowledge,' and (c) that the present action was pending in Massachusetts. Confirmation of the award was denied by a single judge of the Supreme Court of New York on March 1, 1957, but on May 14, 1957, the Appellate Division (3 A.D.2d 899, 162 N.Y.S.2d 214, 215) reversed the single judge and granted the motion for confirmation of the award, saying, 'By all its actions respecting its claim of fraud inducing the contract, including its * * * Massachusetts action, [Shapiro] failed to rescind the contract and elected to recognize the contract and claim damages for the fraud. Such a claim was arbitrable and should have a been arbitrated under the contract. There is no basis for relieving [Shapiro] of its deliberate default in the arbitration proceeding, and there is no surviving question as to the existence of the contract.' Shapiro appealed and the Court of Appeals (Matter of Amerotron Corp. [Maxwell Shapiro Woolen Co., Inc.], 4 N.Y.2d 722, 171 N.Y.S.2d 111, 148 N.E.2d 319) without opinion affirmed the order. On February 3, 1958, judgment for Amerotron was entered in the Supreme Court. Shapiro sought and was denied permission to reopen the arbitration proceedings, to vacate the award, and to participate in the arbitration. The sums due from Shapiro to Amerotron by reason of the New York judgment have been paid. The substitute answer then pleaded that Shapiro appeared generally in the New York court proceedings, that the NewYork judgment 'constitutes an adjudication of any issue raised in the case at bar,' and that the award confirmed by judgment 'is conclusive as to the issues raised by the * * * declaration.' An accord and satisfaction was also pleaded.

Shapiro, on July 11, 1958, filed a replication admitting the foregoing facts alleged in the substitute answer, except that it denied (a) that Shapiro had entered a general appearance in the New York proceedings and (b) the defences asserting the conclusiveness of the New York arbitration and court proceedings and accord and satisfaction. Shapiro also in its replication made certain assertions with respect to the affirmative allegations of the substitute answer. ² These are wholly immaterial in the light of the facts clearly established by the pleadings. Shapiro also asserted that 'at no time did * * * [Shapiro] waive * * * its right to proceed with its Massachusetts fraud action.' The New York Appellate Division has held in effect that the issues raised by the Massachusetts case were arbitrable and should have been submitted to arbitration. If the New York judgment, by a court to whose jurisdiction Shapiro has consented, is binding upon Shapiro with respect to those issues, it is immaterial whether Shapiro in the New York proceedings either affirmatively purported to waive its asserted right to proceed in Massachusetts or attempted to preserve it. See Liberty Mut. Ins. Co. v. Hathaway Baking Co., 306 Mass. 428, 434-435, 28 N.E.2d 425.

The record does not reveal where the contracts for the sale of cloth were made or where they were to be performed. There is, however, no fact established by the record that would suggest (see Restatement: Conflict of Laws, §§ 332, 346, 355, 358) that the law of any State other than Massachusetts or New York (the respective States of incorporation of Shapiro and Amerotron and the only places where there is any indication that they did business) has any application whatsoever to these contracts. The arbitration clause in the contracts provides that any arbitration shall take place in New York 'in accordance with the laws of * * * New York.' This provision is not to be given a narrow meaning. Samincorp South American Minerals & Merchandise Corp. v. Lewis, 337 Mass. 298, 301, 149 N.E.2d 385. Indeed, the provision may well be broad enough in terms to constitute a valid and reasonable agreement that the law of New York (the State of incorporation of one of the parties to the contract) is to be the law governing the contracts. Mittenthal v. Mascagni, 183 Mass. 19, 21-22, 66 N.E. 425, 60 L.R.A. 812; Clark v. State Street Trust Co., 270 Mass. 140, 150, 169 N.E. 897 ³; Dougherty v. Equitable Life Assur. Soc., 266 N.Y. 71, 80-81, 193 N.E. 897; Compania de Inversiones Internacionales v. Industrial Mortgage Bank, 269 N.Y. 22, 26, 198 N.E. 617, 101 A.L.R. 1313; Swift & Co. v. Bankers Trust Co., 280 N.Y. 135, 140-141, 19 N.E.2d 992. See Jewett, Inc. v. Keystone Driller Co., 282 Mass. 469, 475-476, 185 N.E. 369, 87 A.L.R. 1298; Auten v. Auten, 308 N.Y. 155, 159-163, 124 N.E.2d 99, 50 A.L.R.2d 246; A. S. Rampell, Inc. v. Hyster Co., 3 N.Y.2d 369, 381, 165 N.Y.S.2d 475, 144 N.E.2d 371; Wm. H. Muller & Co., Inc. v. Swedish American Line Ltd., 2 Cir., 224 F.2d 806, 807-808. See also Bernhardt v. Polygraphic Co., 350 U.S. 198, 202-205, 76 S.Ct. 273, 100 L.Ed. 199. At the very least, the arbitration provision constitutes advance consent by each party to the contracts (a) to arbitration in accordance with the rules of one of the three named arbitration organizations and with the law of New York and (b) to the jurisdiction of the Supreme Court of New York in all matters relating to the contracts. Such a consent is valid and binding under the law of Massachusetts, and is consistent with the public policy of this Commonwealth. See G. L. c. 251, §§ 14, 21 (both inserted by St.1925, c. 294, § 5); Spence, Bryson, Inc. v. China Products Co., 308 Mass. 81, 82, 88-89, 30 N.E.2d 885; Samincorp South American Minerals & Merchandise Corp. v. Lewis, 337 Mass. 298, 301-303, 149 N.E.2d 385. Cf. Sanford v. Boston Edison Co., 316 Mass. 631, 636-637, 56 N.E.2d 1, 156 A.L.R. 644. The law of New York also recognizes such consent as valid and as consistent with its public policy. Gilbert v. Burnstine, 255 N.Y. 348, 355-357, 174 N.E. 706, 73 A.L.R. 1453; Matter of Gantt (Hurtado & Cia. Ltda.), 297 N.Y. 433, 79 N.E.2d 815. See N. Y. Civil Practice Act, art. 84, §§ 1448-1469; Stern, Conflict of Laws in Commercial Arbitration, 17 Law & Contemp. Prob. 567, 569-575, 578-579; Note, 56 Col. L. Rev. 902.

As the New York Appellate Division...