D. M. C. Construction Corp. v. A. Leo Nash Steel Corp.

70 A.D.2d 635, 416 N.Y.S.2d 649, 1979 N.Y. App. Div. LEXIS 12080

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: May 21, 1979
• Status: Published

Opinion

Suozzi, J.,

dissents and votes to affirm the order insofar as appealed from, with the following memorandum, in which Mollen, P. J., concurs: Special Term, Kings County, (1) granted the motion of D. M. C. Construction Corp. (D. M. C.) for a change of venue of a proceeding commenced by Nash Steel to confirm an arbitrator’s award from the Suprme Court, Erie County, to the Supreme Court, Kings County, and (2) directed that a hearing be held on D. M. C.’s motion to vacate the arbitration award upon the ground that one of the arbitrators was biased. In reversing the order insofar as appealed from, the majority holds that D. M. C.’s motion for a change of venue and D. M. C.’s motion to vacate should have been denied without prejudice to renewal in Erie County. I respectfully disagree with the majority’s conclusion. In reaching its conclusion, the majority has, in my view, erroneously and improperly relied on the case of Matter of Probst (Midwest Mut. Ins. Co.) (39 AD2d 914, affd 32 NY2d 634), which at best has only negligible precedential value, and should be disregarded at this juncture. Furthermore, assuming, arguendo, that Probst is controlling here, it is my view that the result reached by the majority would still be incorrect. Where an issue claimed to be arbitrable is involved in a pending action, an application to either stay or compel arbitration must be made in the pending action. If no action is pending, the application to either stay or compel arbitration must be instituted by a special proceeding. Since D. M. C. had instituted an action in Kings County for breach of contract (indeed, this action was commenced before Nash’s suit to foreclose its lien in Niagara County), which involved the issue to be arbitrated, D. M. C. should have moved for a stay of arbitration in that action. Instead, D. M. C. commenced a separate special proceeding for that relief in Kings County (Kings County Index No. 6098/75). Nash did not object to this procedural error. It merely cross-moved in the Kings County special proceeding to compel arbitration and the parties obviously operated as if no action was pending. (Special Term thereafter entered a judgment granting Nash’s application to compel arbitration.) Viewed in this perspective, the special proceeding commenced by D. M. C. was otherwise altogether proper since it was instituted in Kings County, the county where D. M. C. was doing business (see CPLR 7502, subd [a]). Once D. M. C. (with Nash’s consent) brought "the first application arising out of an arbitrable controversy” (CPLR 7502, subd [a]) by way of a special proceeding, all subsequent applications were to be made by motion in that special proceeding (see CPLR 7502, subd [a]). D. M. C. complied with this provision by moving in the Kings County special proceeding (Index No. 6098/75) to change the venue of the arbitration hearing. Special Term, Kings County, granted the requested change of venue, this court affirmed (Matter of D. M. C. Constr. Corp. v Nash Steel Corp., 51 AD2d 1040), but the Court of Appeals reversed and directed that the arbitration be held in the place chosen by the arbitrators, the City of Buffalo in Erie County (41 NY2d 855). Thereafter, D. M. C. made an application to disqualify the American Arbitration Association from administering the arbitration. Instead of making this application by way of a motion in the Kings County special proceeding, D. M. C. instituted an entirely new special, proceeding in Kings County (Index No. 5129/77) requesting that relief. Again, Nash did not object to this procedural error. On May 26, 1978, after a hearing, the arbitrators ruled in favor of Nash. On August 16, 1978 Nash commenced a special proceeding in Erie County to confirm the arbitrator’s award. On August 23, 1978 D. M. C. moved in the Supreme Court, Kings County, with its papers bearing Index Nos. 6098/75 and 5129/77, to (1) change the place of venue of Nash’s special proceeding to confirm the arbitration award from Erie to Kings County and (2) vacate the arbitration award on the ground of bias. On September 7, 1978 Special Term, Kings County, (1) granted D. M. C.’s motion to change the venue of Nash’s special proceeding to confirm the award from Erie to Kings County, (2) ordered a hearing to be held in Kings County on D. M. C.’s motion to vacate the award, and (3) consolidated the proceeding to confirm with the proceeding to vacate the award. In so holding, Special Term stated, in pertinent part: "Pursuant to CPLR 7502(a) all applications concerning arbitration shall be made in the county in which there is already pending an action or proceeding concerning said arbitration * * * It appears that there have been extensive proceedings in this court concerning the instant arbitration including numerous applications and orders.” Special Term was obviously of the view, with which I agree, that the arbitration proceeding which had been commenced in Kings County, was still pending and that, pursuant to CPLR 7502 (subd [a]), Nash’s application to confirm the award had to be made in Kings County. In rejecting this reasoning, the majority is of the view that under the authority of Probst (39 AD2d 914, affd 32 NY2d 634, supra), once the arbitration hearing was concluded, all prior proceedings to compel or stay arbitration were no longer considered pending and a new proceeding to confirm could be commenced, and venue of that new proceeding selected, as if there had been no prior proceedings. In my view, Probst cannot be relied on for that proposition. In Probst, the initial application arising out of the arbitrable controversy was one to stay arbitration, and it was granted in New York County. Subsequently, the stay was vacated, and an arbitration hearing was conducted. The claimant, in whose favor the arbitration award was rendered, moved in Richmond County to confirm. The insurer opposed the motion contending that (1) the motion to confirm should have been made in New York County, (2) the award was imperfectly executed and (3) the award exceeded the arbitrator’s powers. Special Term rejected all of the insurer’s arguments. The majority of this court affirmed the order and judgment of Special Term, but in so doing did not discuss any of the insurer’s contentions, including the one regarding venue. (The dissent did address the venue issue directly, stating that the "application * * * to confirm the arbitrator’s award was not a new proceeding, but merely a 'subsequent application’ in the special proceeding previously brought * * * in New York County. Hence, it should have been made in that New York County proceeding, [and] it was improper to make it in Richmond County” [Probst, supra, p 915].) The Court of Appeals affirmed the order of this court without opinion. However, the synopsis of the arguments in the Court of Appeals reveals that the respondent claimant contended that the appellant insurer was not prejudiced by its making the motion to confirm in Richmond County, rather than that the choice of Richmond County was proper. In view of this court’s failure to discuss the issue of venue in Probst, the nature of the claimant’s argument in the Court of Appeals regarding venue, and the Court of Appeals affirmance of Probst without opinion, it is totally inappropriate for the majority to rely on the decision in Probst in disregard of the common sense meaning of the last sentence of CPLR 7502 (subd [a]): "All subsequent applications shall be made by motion in the pending * * * special proceeding.” As noted in the commentary to this section, "The last sentence assures that all matters relating to the same controversy are brought before the same court” (Thornton, Practice Commentary, McKinney’s Cons Laws of NY, Book 7B, CPLR 7502, p 480). In this regard, Carmody-Wait 2d specifically states (vol 23, NY Prac, § 141.179, p 116): "If, however, the application to confirm the award is not the first application to have been made in the arbitration proceeding, then the application shall be made by way of motion in the special proceeding theretofore commenced.” Moreover, even assuming, arguendo, that Probst is controlling and that Nash had the right to commence a new special proceeding, the majority concedes that Nash erred in bringing its application to confirm in Erie and not Kings County. CPLR 7502 (subd [a]), which governs the selection of venue in special proceedings involving arbitration, provides in substance that such proceedings may be brought pursuant to the following priorities: (1) in the county specified in the contract, or if not specified, (2) in a county where one of the parties resides or does business, or if there is no such county, (3) in a court in any county or in a court in the county where the arbitration was held. Since Nash is a foreign corporation and D. M. C. has offices in Kings County, Nash’s new special proceeding should have been brought in Kings County and the majority so concedes.

* Since everyone concedes that Nash chose the wrong county when it commenced its proceeding to confirm the award, it must be determined what relief D. M. C. was entitled to and by what mechanism it could achieve that relief. Since venue was laid by Nash in an improper county, D. M. C. could have moved to change venue as of right to a proper county provided that it served a timely demand on Nash to change the place of the proceeding to the proper county pursuant to CPLR 511 (subds [a], [b]). As the majority correctly notes, D. M. C. failed to serve this demand. Nevertheless, it has been held that where a party has the right to a change of venue but neglects to make a timely demand for same, he may still move for an order in the court’s discretion changing the improper venue (Reichenbach v Corn Exch. Bank Trust Co., 249 App Div 539; De Litta v Milde, 52 Ad2d 548). However, it has also been held that a motion to change venue which is addressed to the court’s discretion, must be made in the county whose venue is objected to (Baker v Poliak & Sons, 277 App Div 11). In this case, D. M. C.’s discretionary motion should have been made in Erie County not Kings. Under these circumstances, the preferable practice would have been for Special Term, Kings County, to have denied the motion to change venue without prejudice to renewal in Erie county. Nevertheless, Special Term, Kings County, did decide the motion and since the motion, although made in the wrong county, was not jurisdictionally defective (see Cwick v City of Rochester, 54 AD2d 1078), it should be reviewed at this late juncture on the merits. In holding that Special Term abused its discretion in changing venue, the majority relies on the fact that the arbitrator is a resident of Niagara County, which adjoins Erie County, and all of the witnesses live in the Buffalo and Niagara Falls area. Consequently, the majority holds that D. M. C. failed to establish, pursuant to CPLR 510 (subd 3) that "the convenience of material witnesses and the ends of justice will be promoted by the change.” In so holding, the majority ignores the vast difference between the hearing on the very limited issue of the arbitrator’s bias ordered by Special Term, and the original arbitration hearing where the convenience of numerous witnesses to be called by both sides in the controversy influenced the arbitrators to choose Erie County. In view of the fact that Nash’s choice of Erie County was incorrect even under the authority of Probst (39 AD2d 914, affd 32 NY2d 634, supra), Special Term did not abuse its discretion in changing the venue of Nash’s proceeding to confirm from Erie to Kings County (Reichenbach v Corn Exch. Bank Trust Co., supra; De Litta v Milde, supra). For all of these reasons, I dissent and vote to affirm.

In view of D. M. C.’s conceded residence in Kings County and the priorities listed in CPLR 7502 (subd [a]) regarding venue, it is totally irrelevant to this discussion that the arbitration hearing was conducted in Erie County.