Hyperlawhypertext legal databasebeta Denihan v. Denihan 34 N.Y.2d 307

← Cases

Denihan v. Denihan

34 N.Y.2d 307 Court N.Y. Decision date 1974-06-06 English

Delivered by Jasen, J.

Contents

Majority

p. 307
Benjamin J. Denihan et al., Respondents, v. Michael G. Denihan, Appellant.
Argued March 27, 1974;
decided June 6, 1974.
p. 308
Jack B. Levitt and Peter S. Lushing for appellant.
I. A party to an agreement containing an arbitration clause does not waive his right to arbitrate a given issue by commencing an action upon a different issue. (Matter of Nathan Assoc. v. Murray Hill Constr. Corp., 268 N. Y. 692 ; Matter of Zimmerman v. Cohen, 236 N. Y. 15 ; Matter of Cooper Hats [Kadis], 285 App. Div. 937 , 309 N. Y. 705 ; Oklahoma Pub. Co. v. Parsons & Whittemore, 255 App. Div. 589 ; Matter of Bel-Rose Fashions v. Braunheim, 25 Misc 2d 1037 ; Matter of Biller [David], 37 A D 2d 954 ; Armco Steel Corp. v. Renago Constr., 34 A D 2d 887 ; Par Plumbing Co. v. Oxford Hall Corp., 43 Misc 2d 792 .) II. The claims contained in the actions commenced by appellant do not support a claim of waiver of arbitration. III. The rules which the parties agreed to be bound by preclude of finding of waiver herein. IV. The issue of waiver should be submitted to the arbitrators. (Board of Educ., Cent. School Dist. No. 1 of Town of Grand Is. v. Grand Is. Teachers' Assn., 67 Misc 2d 859 .) V. By written stipulation, respondents acknowledged appellant’s right to arbitration of notwithstanding the commencement of actions.
Edmund F. Wolk and Julius Mager for respondents.
I. The issues involved in the three prior actions all arose out of the shareholders ’ agreement. It is also an undisputed fact that all the issues upon which appellant sought arbitration in the second and third demands for arbitration were in existence and in being at the time the third court litigation was instituted by appellant. Therefore, when appellant commenced the third action, he affirmatively waived his right to arbitration of these existing issues. (Matter of Redmond v. Redmond, 39 A D 2d 527 ; Sommer v. Quarant Contr., 40 A D 2d 95 ; Matter of Terminal Auxiliar Maritima v. Winkler Credit Corp., 6 N Y 2d 294 ;
p. 309
Matter of Zimmerman v. Cohen, 236 N. Y. 15 .) II. Once there had been participation by petitioners-respondents in the arbitration commenced on May 14, 1970 by respondent-appellant, petitioners-respondents were bound by their appearance in the said arbitration proceeding and could not have acted in any other way but to continue said arbitration in January, 1971, when the first action was commenced by respondents-appellants. (Mid-Atlantic Constr. Corp. v. Guido, 30 A D 2d 232 .) III. An agreement providing for arbitration may not only be waived by the parties to the agreement, but the parties may, by an “ election of remedies ’ ’, make a choice of the forum in which to adjudicate disputes. Once the election is made, the choice of one forum bars the other. (Friedman v. Libin, 3 A D 2d 827 ; Conrow v. Little, 115 N. Y. 387 ; Armco Steel Corp. v. Renago Constr., 34 A D 3d 887 ; Matter of Dandy Dress [Rae Dress Co.], 179 Misc. 36 ; Par Plumbing Co. v. Oxford Hall Corp., 43 Misc 792 ; Matter of Biller [David], 37 A D 2d 954 ; Matter of Wolff Co. [Tulkoff], 9 N Y 2d 356 .)

In this proceeding to stay arbitration of certain disputes between shareholders of a close corporation, the issue is whether by commencing several actions against other parties to the shareholders’ agreement on causes arising therefrom, the respondent waived his right to arbitrate different issues arising under the same agreement.

In April, 1970, the parties executed a shareholders’ agreement defining certain rights and obligations of the shareholders of 3 Mitchell PL, Inc., a corporation which owns and operates the Beekman Tower Hotel in Manhattan. The agreement contains a broad arbitration clause providing that “ Any claims, difference, dispute or question of interpretation ” arising thereunder shall be determined solely by the rules of the American Arbitration Association. In May, 1970, petitioners proposed a management agreement for operation of the Beekman providing for payment of 13% of gross revenues to a management corporation wholly owned by petitioners. On May 14, respondent demanded arbitration. The American Arbitration Association issued a notice of hearing which commenced January 25, 1971.[1]

* This arbitration resulted in an award, dated March 23, 1971, favorable to the respondent.

p. 310
"While arbitration was pending, on January 4, 1971, respondent, by order to show cause, commenced an action for a declaration of rights and an injunction against the making of a mortgage loan by the corporation as violative of the shareholders’ agreement. In February, 1971, respondent commenced a second action — a derivative action on behalf of 3 Mitchell PL, Inc., against petitioners seeking, inter alia, monetary relief resulting "from consummation of the mortgage loan sought to be enjoined in the first action. On July 30, 1971, the parties effected a “ truce ” agreeing to no further actions or arbitrations while reconciliation was sought. The “ truce ” broke down in November, 1971, and in January, 1972, respondent commenced a third (derivative) suit against petitioners for diversion of a corporate opportunity and the misuse of corporate funds. On March 10, 1972, two notices of intention to arbitrate were served upon petitioners. The first sought arbitration of respondent’s removal as a director allegedly in violation of the shareholders’ agreement. The second sought arbitration of nine claimed violations of the same agreement. This proceeding was then commenced to stay arbitration. Arbitration was stayed and a motion to dismiss the petition was denied. The Appellate Division, by a divided court, affirmed.

While the claims encompassed in the various arbitrations and actions brought by the respondent may have arisen from the shareholders’ agreement, it is not disputed that the claims are separate and distinct. As to the claims sought to be redressed in judicial proceedings, there can be no question but that the respondent has waived his right to arbitrate. (Matter of United Paper Mach. Corp. [Di Carlo], 14 N Y 2d 814 ; Matter of Zimmerman v. Cohen, 236 N. Y. 15 ; Ann., Waiver of Arbitration Provision in Contract, 117 A. L. R. 301 , § II, subds. a, i, supplemented in 161 A. L. R. 1426 , § II, subds. a, i.) But as to claims separate and distinct, no waiver of arbitration may be implied from the fact that resort has been made to the courts on other claims arising under a common agreement which remains in full force and effect. (See Armco Steel Corp. v. Renago Constr., 34 A D 2d 887 , 888, mot. for lv. to app. den. 27 N Y 2d 483 ; cf. Par Plumbing Co. v. Oxford Hall Corp., 43 Misc 2d 792 , 793; Matter of Dandy Dress [Rae Dress Co.], 179 Misc. 36 .)

p. 311
To be sure, the parties have selected an unorthodox course, proceeding in two forums as they have. But that was their choice. When the actions were brought, the petitioners had the right under the shareholders’ agreement to stay the actions and compel arbitration, but they did not do so. At this late date, the petitioners, having acquiesced in that course, should not be heard to claim that respondent has waived his right to proceed in arbitration on claims not previously presented to the courts.

While there is no legal impediment to arbitration of the instant disputes, we cannot but remark that by flitting between forums the parties have abused both the arbitration process and the courts. And although these various disputes are distinguishable in law, they are but skirmishes within one internecine, intracorporate war that, to the benefit of all, the courts included, recommends itself to final resolution before a single arbitrator.

Accordingly, the order of the Appellate Division should be reversed and the motion to dismiss the petition granted, without costs.

Chief Judge Breitel and Judges Gabrielli, Jones, Wachtler and Rabin concur; Judge Stevens taking no part.

Order reversed, etc.

Cases cited