Young v. Crescent Dev. Co.

• Decision Date: 05 May 1925
• Citation: 148 N.E. 510,240 N.Y. 244
• Parties: YOUNG v. CRESCENT DEVELOPMENT CO.
• Court: New York Court of Appeals Court of Appeals

240 N.Y. 244

148 N.E. 510

YOUNG

v.CRESCENT DEVELOPMENT CO.

Court of Appeals of New York.

May 5, 1925.

Application of Stuart Young and another, as receivers for the American Concrete-Steel Company, Inc., to require the Crescent Development Company to submit certain questions to arbitration. From an order of the Appellate Division (212 App. Div. 805, 207 N. Y. S. 941), affirming an order of Special Term granting the motion, defendant appeals.

Reversed, and motion to compel defendant to submit to arbitration denied.

Cardozo, J., dissenting.

Appeal from Supreme Court, Appellate Division, First Department.

Irwin Untermyer, of New York City, for appellant.

Frederick Hulse, of New York City, for respondents.

HISCOCK, C. J.

A contract was made between the corporation of which respondents are receivers as contractor and the appellant corporation as owner for the erection of a large number of houses. The contract, which was in writing, contained the provision: ‘All questions that may arise under this contract and in the performance of the work thereunder shall be submitted to arbitration at the choice of either of the parties hereto.’ Controversies arose between the parties, and the contractor claimed that there was quite a large sum due to it for work and materials, and a still larger sum by way of damages, because the owner had delayed it in the performance of the contract. Under these circumstances an application was made in behalf of the contractor by its receivers to require appellant under the clause which has been quoted to submit to arbitration the claims which have been mentioned. It is of some importance to note that this application was returnable October 2, 1924. In opposing this application the appellant established without contradiction that on or about July 10 or 11 the receivers had duly filed in the clerk's office and served upon appellant copies of three notices of mechanics' liens covering in the aggregate the amount claimed to be due to the contractor for work and materials under the contract, and October 17, 1924, the appellant served notice in accordance with section 59 of the Lien Law (Cons. Laws, c. 33), requiring the receivers of the corporation to commence action within 30 days for the enforcement of said liens.

The courts having granted the application compelling appellant to submit to arbitration, two questions claim our consideration. The first of these is the one whether the contractor's claim for damages because of the alleged fault of the appellant in preventing the performance of the contract is a dispute which comes within the fair interpretation of the arbitration clause in the contract. The second question is the one whether the receivers of the contractor by filing mechanics' liens upon and against appellant's property have done something which is so inconsistent with their right to arbitration that they must be regarded as having waived or abandoned that right.

While the question may be close and debatable, I do not think that the arbitration clause in the contract should be interpreted as covering and including such a claim as the one made against appellant for breach of the contract. The arbitration clause provides for the submission of ‘all questions that may arise under this contract and in the performance of the work thereunder.’

We know by common experience the class of questions to which this language naturally applies. It applies as stated to questions arising under and in the performance of a contract and such questions are those which involve an interpretation of its provisions for the purpose of determining whether work has been done according to the contract, whether work which has been demanded under the contract is really covered by its provisions or constitutes extra work, when payments become due, and so on. All of these questions involve recognition of the contract and not repudiation of it.

This is not true of the claim under discussion. According to respondents' theory, the acts done by appellant were not done under and in performance of the contract, but in violation of it and in repudiation of its provisions. There is involved no interpretation of its meaning, but a willful refusal to be bound by it, and, as it seems to me, this clause was intended to cover controversies which do not deny but seek an interpretation of and submission to its provisions; an attitude which seeks action under the contract and not one outside of and in denial of it.

But, passing this, we come to the second and more important question which has been outlined, and I think that the answer to that question must be that the respondents by filing mechanics' liens set out on a course so inconsistent with arbitration that they must be regarded as having decisively elected to waive and abandon their right to that course. We are all agreed that, if respondents by filing these liens abandoned their right to arbitration of the claims covered thereby, such waiver would also bar their right to arbitration of the claim for damages for breach of contract. We do not think that a party having two or more claims against the same party springing out of the same contract ought to be allowed to abandon his right to arbitration in respect of some of these while he insists upon it in respect of others.

Of course the interpretation and significance of many acts depend more upon the conditions under which they are performed than upon the intrinsic character of the act itself. If we should conceive of a statute which gave general permission to a contractor to file a lien for the purpose of securing a claim no matter when or by what manner of proceeding ultimately...