Paver and Wildfoerster v. Catholic High School Ass'n

• Decision Date: 19 February 1976
• Court: New York Court of Appeals Court of Appeals
• Parties: , 345 N.E.2d 565, 94 A.L.R.3d 522 In the Matter of the Arbitration Between PAVER & WILDFOERSTER, Appellant, and CATHOLIC HIGH SCHOOL ASSOCIATION, Respondent. In the Matter of the Arbitration Between CATHOLIC HIGH SCHOOL ASSOCIATION OF NEW YORK, Respondent, and PAVER & WILDFOERSTER, Appellant, and Warwick Construction, Inc., Respondent.

Page 22

382 N.Y.S.2d 22

38 N.Y.2d 669, 345 N.E.2d 565, 94

A.L.R.3d 522

In the Matter of the Arbitration Between PAVER & WILDFOERSTER, Appellant, and CATHOLIC HIGH SCHOOL ASSOCIATION, Respondent. In the Matter of the Arbitration Between CATHOLIC HIGH SCHOOL ASSOCIATION OF NEW YORK, Respondent, and PAVER & WILDFOERSTER Appellant, and Warwick Construction, Inc., Respondent.

Court of Appeals of New York.

Feb. 19, 1976.

Vincent J. Zichello and Robert G. Wells, New York City, for appellant.

Joseph E. Moukad and Lawrence X. Cusack, New York City, for Catholic High School Ass'n of New York, Respondent.

Anthony M. Quartararo, Poughkeepsie, and Peter D. Coddington, Albany, for Warwick Const., Inc., respondent.

BREITEL, Chief Judge.

In consolidated arbitration proceedings under CPLR 7503 (subds. (a), (b)), petitioner architec appeal. The building owner demanded arbitration under building construction agreements against the architects and the contractor. In the first proceeding the architects sought a stay and the owner, in the other proceeding, sought to compel arbitration and to consolidate the separate proceedings. Supreme Court consolidated the proceedings and directed the parties to arbitrate. The Appellate Division affirmed, two Justices dissenting. Only the architects appeal.

The issue is whether the owner's claim for damages to its building, allegedly caused by the architects' improper performance of their contractual obligations, is barred by the Statute of Limitations.

There should be an affirmance. CPLR 7502 (subd. (b)) provides that, if, at the time that a demand for arbitration was made, the claim sought to be arbitrated would have been barred by the Statute of Limitations had it been asserted in a court of the State, a party to the arbitration agreement may assert the statute as a bar in an application to the court for a stay of arbitration. In determining whether a claim for property damage is barred by the Statute of Limitations, however, the court should not be constrained by the special rules developed largely in personal injury actions and which depart from the general principle that time limitations depend upon, and are confined to, the form of the remedy. The remedies available in arbitration are, of course, not confined to traditional forms at law. Thus, if a claim is substantially related to matters encompassed by the substantive agreement, it is immaterial, in applying the Statute of Limitations, whether it lies in 'contract' or 'tort'. Hence, the owner's claim against the architects, although cognizable in law in either contract or tort malpractice, was timely asserted within the six-year period of limitations.

The Catholic High School Association is the owner of the John A. Coleman Catholic High School in Ulster County. On February 21, 1966, the architects agreed with the owner, on the standard form agreement of the American Institute of Architects, to supply professional services by designing and generally overseeing the construction of the high school. As the construction progressed, the architects would certify the contractor's applications for payments. Such certification would be a representation by the architects that, to the best of their knowledge, the quality of the work was in accordance with the contract documents. Warwick Construction, a par in the present proceedings, was engaged as the general contractor.

Shortly after the owner took occupancy on July 1, 1968, there was serious leakages into the building. Both the architects and the contractor were notified. The contractor made several attempts to correct the problem, but to no avail. Consequently, the owner withheld from the contract $15,000 of the final payment. The architects were paid in full; the architects' final payment was made to them on November 19, 1969, before fault was believed attributable to the architects.

The owner continued its complaints to the architects and the contractor until 1973. In 1973, the owner finally engaged a waterproofing company, Horn Waterproofing, to correct the leakage. After submitting a report and proposal for extensive waterproofing work, Horn advised the owner to try to recover the costs from the architects. This was suggested because the Horn report indicated that the architects, as well as the contractor, were responsible for the leakage. This was the first time, in 1973, that the owner had reason to believe that the architects were at fault.

The right to demand arbitration under the agreement was a contractual one. Thus, as the Appellate Division unanimously agreed, the demand was timely made within the six-year period of limitation insofar as the arbitration clause was involved (CPLR 213, subd. 2; see Matter of Travelers Ind. Co. (De Bose), Sup., 226 N.Y.S.2d 16, 20; Reconstruction Finance Corp. v. Harrisons & Crosfield, 2 Cir., 204 F.2d 366, 369, cert. den. 346 U.S. 854, 74 S.Ct. 69, 98 L.Ed. 368; see, generally, Arbitration-- Limitations--Laches, Ann., 37 A.L.R.2d 1125, 1126--1127).

CPLR 7502 (subd. (b)) provides, however, that '(i)f, at the time that a demand for arbitration was made * * * the claim sought to be arbitrated would have been barred by limitation of time had it had been asserted in a court of the state, a party may assert the limitation as a bar to the arbitration on an application to the court as provided in section 7503 (application to stay arbitration)'. The purpose of the statute was to apply the Statute of Limitations referable to the substantive issue to arbitration proceedings, and to permit it to lie as a bar to the arbitration proceeding (see N.Y. Legis. Annual, 1959, p. 12). As was stated in Matter of Cohen, 17 A.D.2d 279, 282, 233 N.Y.S.2d 787, 790: 'Section 1458--a (the predecessor to CPLR 7502 (subd. (b))) was proposed upon the basis that 'The same considerations of public policy which make stale claims in actions at l unenforceable also apply to disputes in arbitration.' Specifically, it was enacted to eliminate the confusion theretofore existing in the decisions as to whether a proceeding in court could be invoked to enforce the defense of the statute of limitations or whether the applicability of the defense was in the sole discretion of the arbitrators. (N.Y.Legis. Annual, 1959, pp. 12, 13, 27.)' (See Matter of Plastic Molded Arts Corp. (A & H Doll Mfg.), 23 Misc.2d 839, 841, 200 N.Y.S.2d 858, 860, affd. 11 A.D.2d 668, 204 N.Y.S.2d 78; Matter of New York Cent. R.R. Co. (Erie R.R. Co.), 30 Misc.2d 362, 368--369, 213 N.Y.S.2d 15, 23--24; Skidmore, Owings & Merrill v. Connecticut Gen. Life Ins. Co., 25 Conn.Sup. 76, 88--91, 197 A.2d 83; cf. Fourth Preliminary Report of the Advisory Comm. on Practice and Procedure, N.Y. Legis. Doc. (1960), No. 20, at pp. 77--78). In proceedings authorized by a prior agreement to arbitrate future disputes, it is for the court to determine whether the claim, and therefore the arbitration, is barred by the Statute of Limitations (see Matter of Caudill, Rowlett, Scott (Board of Educ.), 47 A.D.2d 610, 364 N.Y.S.2d 70; Matter of Schlaifer (Kaiser), 46 A.D.2d 850, 361 N.Y.S.2d 183; Matter of Andresen & Co. v. Shepard, 45 A.D.2d 578, 579, 360 N.Y.S.2d 36, 37; Matter of Cohen, 17 A.D.2d 279, 283, 233 N.Y.S.2d 787, 791, Supra (by implication); Hammerstein v. Shubert, Sup., 127 N.Y.S.2d 249, 251; 8 Weinstein-Korn-Miller, N.Y.Civ.Prac. par. 7502.14).

Thus, it is necessary to consider if, at the time the demand was made, the claim sought to be arbitrated would have been barred by the Statute of Limitations had it been asserted in court (CPLR 7502, subd. (b)). The 'claim' in the instant case, as stated in the demand for arbitration, is one for '(b) reach of contract' by the architects, 'by reason of defects in design and faulty supervision in the execution of their contract with the claimant'. More specifically, the owner's petition alleges architectural omissions in design, that the plans and specifications were contradictory, and that the architects failed to notice or report to the owner that the contractor had failed to comply with certain specifications. Also in its petition, however, in addition to breach of contract, the owner alleged that the architects 'failed to fulfill their common law duty to exercise reasonable care and skill in the performance of their contracts.' Thus the owner's claims would be cognizable in law in either contract or tort malpractice.

To be sure, it has been said that the law in this State, in applying the Statute of Limitations, will look to the 'reality' or the 'essence' of the action and not its form (see, e.g., Brick v. Cohn-Hall-Marx Co., 276 N.Y. 259, 264, 11 N.E.2d 902, 904; Schmidt v. Merchan Desp. Transp. Co., 270 N.Y. 287, 303, 200 N.E. 824, 828). Thus, when the wrong complained of, although arising from a breach of a contractual obligation, essentially consists of a failure to use due care in the performance of that obligation, it has been held that the 'negligence' or 'malpractice', and not the 'contract', Statute of Limitations applies (see, e.g., Webber v. Herkimer & Mohawk St. R.R. Co., 109 N.Y. 311, 314--315, 16 N.E. 358, 359--360; Calhoun v. Gale, 29 A.D.2d 766, 767, 287 N.Y.S.2d 710, 711, affd. 23 N.Y.2d 756, 296 N.Y.S.2d 953, 244 N.E.2d 468; Alyssa Originals v. Finkelstein, 22 A.D.2d 701, 254 N.Y.S.2d 21, affd. 24 N.Y.2d 976, 302 N.Y.S.2d 599, 250 N.E.2d 82; Carr v. Lipshie, 8 A.D.2d 330, 332, 187 N.Y.S.2d 564, 566, affd. 9 N.Y.2d 983, 218 N.Y.S.2d 62, 176 N.E.2d 512; see, also, Blessington v. McCrory Stores Corp., 305 N.Y. 140, 147--148, 111 N.E.2d 421, 423).

Significantly, many of these cases were decided in the context of causes of action to recover damages for direct or underlying personal injury (e.g., Webber v. Herkimer & Mohawk St. R.R. Co., 109 N.Y. 311, 313, 16 N.E. 358, 359, Supra; Calhoun v. Gale, 29 A.D.2d 766, 767, 287 N.Y.S.2d 710, 711, affd. 23 N.Y.2d 756, 296 N.Y.S.2d 953, 244 N.E.2d 468, Supra; Gautieri v. New Rochelle Hosp. Assn., 4 A.D.2d 874, ...