Schafran & Finkel, Inc. v. M. Lowenstein & Sons, Inc.

254 A.D. 218, 4 N.Y.S.2d 693, 1938 N.Y. App. Div. LEXIS 6383

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: May 20, 1938
• Status: Published

Opinions

Dore, J.

Plaintiff brings this action to enjoin defendant from further prosecuting its pending proceeding to confirm an award of arbitrators and to obtain a judgment declaring that no valid contract to arbitrate exists between the parties.

Defendant’s contention, sustained by the learned Special Term, is that an independent action in equity does not lie to restrain the prosecution of an application to confirm an arbitrators’ award made pursuant to the provisions of article 84 of the Civil Practice Act.

By chapter 341 of the Laws of 1937, in effect September 1, 1937, article 84 of the Civil Practice Act (§§ 1448-1469) was very materially amended and the former “ Arbitration Law ” was repealed. Prior to the enactment of present section 1458 of the Civil Practice Act the matters therein dealt with were contained in section 4-a of the Arbitration Law and under the provisions of that section one objecting that he was not bound by a contract to arbitrate was permitted to raise such objection at any time prior to final judgment. (Finsilver, Still & Moss v. Goldberg, M. & Co., 253 N. Y. 382.) This gave the unwilling party, an advantageous position in that a decision by the arbitrators favorable to him would be conclusive while an adverse determination would still be subject to attack on the claim that there was no valid agreement. Section 1458 of the Civil Practice Act, which relates to the enforcibility of the award under the new act, expressly provides for raising and determining issues as to the existence of the contract at various stages in the arbitration proceeding. Under subdivision 2 of that section one who has not participated in the selection of the arbitrators or the proceedings had before them and who has not made or been served with an application to compel arbitration, may put in issue the making of the contract either by a motion for a stay of the arbitration or in opposition to the confirmation of the award; if, however, notice shall have been personally served upon such party of an intention to conduct the arbitration then the issues specified in the subdivision “ may be raised only by a motion for a stay of the arbitration, notice of which motion must be served within ten days after the service of the notice of intention to arbitrate.” (Italics mine.) The section further provides that where such opposing party either on a motion for a stay or in opposition to the confirmation of the award sets forth evidentiary facts raising a substantial issue as to the making of the contract, or submission or. failure to comply therewith, an immediate trial shall be had and such party may demand a jury trial and if unsuccessful he may nevertheless participate in the arbitration if it is still being conducted.

Plaintiff contends that section 1458 of the Civil Practice Act is unconstitutional; that the procedure provided by subdivision 2 of said section is not exclusive; and that the ten days’ notice of motion is so inadequate in point of time as to contravene the constitutional provisions relating to due process.

The authority of the Legislature to prescribe the length of notice is not absolute and beyond review, but only in a clear case will a notice authorized by the Legislature be set aside as wholly ineffectual on account of the shortness of time, and in testing the sufficiency of the notice regard should be had to the probable necessities of ordinary cases. (Bellingham Bay & B. C. R. R. Co. v. New Whatcom, 172 U. S. 315.) In that case a ten-day period of constructive notice by publication was sustained. The notice required would probably be more effective in affording opportunity to protect the rights of the respective parties if the statute required the party serving the notice to include a statement that the notice was being served pursuant to subdivision 2 of section 1458 of the Civil Practice Act and that if the person served desired to raise any issue as to the making of the contract on any issue mentioned in section 1458 of the Civil Practice Act, such issues could be raised only by a motion made by the person served, notice of which must be served within ten days after the service of the notice of intention to arbitrate. We cannot, however, say that the written notice claimed by defendant to have been personally served on plaintiff December 8, 1937, did not sufficiently put plaintiff on notice. Reference to the statute is not now prescribed; every one is presumed to know the law and is chargeable with knowledge of a statute altering existing laws whereby remedies may be affected.

Article 84 provides a comprehensive plan and procedure for the conduct of arbitration proceedings. It makes the arbitration of a controversy a special proceeding and provides that any application to the court under the article shall be made and heard in the manner provided by law for the making and hearing of motions except as otherwise expressly provided. (Civ. Prac. Act, § 1459.)

We are of the opinion that section 1469 of said article did not reserve a right of action by injunction for the purpose of raising the issue of the making of the contract. Under the provisions of section 1458 an adequate remedy is provided whereby such issue may be raised and tried either before the court or before the court and a jury, if timely application is made.

Subdivision 2 of section 1458 of the Civil Practice Act is constitutional and the procedure therein provided is mandatory and exclusive. The procedure here attempted by plaintiff of bringing an independent suit in equity for injunctive relief and to avoid the award on the ground no contract existed is, on the facts disclosed, prohibited by the present statute, and plaintiff’s complaint was properly dismissed.

The alleged contract was made on June 29, 1937. Article 84, as amended, did not go into effect until September 1,1937. The notice of intention to arbitrate was served December 8, 1937, after the new act had been passed. We hold that the section considered herein is applicable to contracts existing at the time of its enactment but not to actions thereon then pending. (Matter of Berkovitz v. Arbib & Houlberg, 230 N. Y. 261.)

Section 1458 of the Civil Practice Act requires personal service of the notice of intention to arbitrate. Under the present statute any claim that the notice of intention to conduct the arbitration pursuant to the provisions of the contract specified therein was not personally served as required can be asserted and determined in opposition to the application to confirm the award.

In the case at bar any issue that might arise on a purported service without the State is not presented or considered.

The order and judgment appealed from should be affirmed, with costs.

Mastín, P. J., O’Malley and Callahan, JJ., concur; Cohn, J., dissents.