source: Caselaw Access Project

author: Fuld, J. Froessel, J. (concurring). Dye, J. (dissenting).

license: Public Domain

text:
    In the Matter of the Arbitration between Exercycle Corporation, Appellant, and James Maratta, Respondent.
    Argued January 5, 1961;
    decided March 23, 1961.

      A. Walter Socolow and Max E. Lynne for appellant.
    I. The existence of a valid and enforcible agreement to arbitrate is a preliminary issue to be determined by the court. (Matter of Kramer & Uchitelle [Eddington Fabrics Corp.], 288 N. Y. 467; Matter of Finsilver, Still & Moss v. Goldberg, Maas & Co., 253 N. Y. 382; Matter of Berkovitz v. Arbib & Houlberg, 230 N. Y. 261; Matter of Gruen v. Carter, 173 Misc. 765, 259 App. Div. 712, 259 App. Div. 813; Matter of Metro Plan v. Miscione, 257 App. Div. 652; Matter of Rapid-Amer. Corp. [Quinn], 8 A D 2d 802, 7 N Y 2d 891; Alpert v. Admiration Knitwear Co., 304 N. Y. 1; Matter of Essenson [Upper Queens Med. Group], 307 N. Y. 68; Matter of Livingston v. Tel-Ant Electronic Co., 4 Misc 2d 600.) II. The alleged agreement created a hiring at will which had been terminated. (Rubin v. Dairymen’s League Co-op. Assn., 284 N. Y. 32; Arentz v. Morse Dry Dock & Repair Co., 249 N. Y. 439; Grossman v. Schenker,
      206 N. Y. 466; Winslow v. Mayo, 123 App. Div. 758, 195 N. Y. 551; Lacy v. Getman, 119 N. Y. 109; Heaman v. Rowell Co., 261 N. Y. 229; Matter of Bernson Silk Mills v. Siegel & Co., 256 App. Div. 617, 256 App. Div. 1068, 257 App. Div. 818, 282 N. Y. 608.) III. The alleged executory agreement is void and unenforcible for lack of consideration. (Rubin v. Dairymen’s League Co-op. Assn., 284 Y. Y. 32; Topken, Loring & Schwartz v. Schwartz, 249 N. Y. 206; Schlegel Mfg. Co. v. Cooper’s Glue Factory, 231 N. Y. 459; Strong v. Sheffield, 144 N. Y. 392; Winslow v. Mayo, 123 App. Div. 758, 195 N. Y. 551; Strobe v. Netherland Co., 245 App. Div. 573; Van Slyke News Agency v. News Syndicate Co., 207 App. Div. 736; Railroad Serv. & Adv. Co. v. Lasell, 200 App. Div. 536; Cohn v. Levine, 185 App. Div. 529.) IV. In any event, the alleged contract was terminated by respondent’s resignation.

      Edward J. Ennis and Clifford Forster for respondent.
    I. The employer proMiscd lifetime employment. (Heaman v. Rowell Co., 261 N. Y. 229; Aberon Bakery Co. v. Raimist, 141 Misc. 774; Boyer v. Western Union, 124 F. 246; Moran v. Standard Oil Co., 211 N. Y. 187; Cohen v. Bartgis Bros. Co., 264 App. Div. 260, 289 N. Y. 846; Arentz v. Morse Dry Dock & Repair Co., 249 N. Y. 439; Littell v. Evening Star Newspaper Co., 120 F. 2d 36.) II. A lifetime employment contract is valid and enforcible. III. The employee’s express proMisc to devote full time to the employer’s business and his acceptance of the position of responsibility for the employer’s sales is sufficient consideration for the employer’s proMisc of lifetime employment. (Eggers v. Armour & Co. of Delaware, 129 F. 2d 729; Pierce v. Tennessee Coal Iron & R. R. Co., 173 U. S. 1.) IV. The employee’s reservation of the power to terminate his employment did not destroy the contract. (Moran v. Standard Oil Co., 211 N. Y. 187; City of New York v. Delli Paoli, 202 N. Y. 18; Fellows v. Fairbanks Co., 205 App. Div. 271; McCall Co. v. Wright, 133 App. Div. 62; Matter of Grean & Co. [Grean], 274 App. Div. 279.) V. Five-year performance by the employee, with continuing future benefits to the employer, supplies additional consideration for the contract. (Hedeman v. Fairbanks Morse & Co., 286 N. Y. 240; Rubin v. Dairymen’s League Co-op. Assn., 284 N. Y. 32; Ehrenworth v. Stuhmer & Co., 229 N. Y. 210; Lynch v. Murphy, 81 Misc. 180, 165 App. Div. 903, 221 N. Y. 559; Grossman v. Schenker, 206 N. Y. 466; Marie v. Garrison, 83 N. Y. 14.) VI. Termination of the employment contract by discharge or resignation, or otherwise, is a question for the arbitrators and not for the courts. (Matter of Berens [Robineau], 278 App. Div. 710; Matter of Staklinski [Pyramid Elec. Co.], 6 N Y 2d 159; Freydberg Bros. v. Corey, 177 Misc. 560, 263 App. Div. 805, 263 App. Div. 858; Matter of Spectrum Fabrics Corp. [Main St. Fashions], 285 App. Div. 710, 309 N. Y. 709; Matter of Fineman [Korman], 282 App. Div. 937.)
   Fuld, J.

In March of 1955, James Maratta entered into an employment agreement with Exercycle Corporation. It provided that ‘ ‘ Exercycle employs Maratta as its Vice-President in charge of sales ” and that he hereby “ shall have general charge and supervision of the selling activities for Exercycle.” And, the agreement went on to recite, ‘1 Maratta accepts the employment and agrees to devote his best efforts and full time to Exercycle’s sales activities ”. The employment was to continue “ until he voluntarily leaves the employ of Exercycle or dies ”, with Exercycle retaining the right to terminate the contract, if sales fell below specified levels. The agreement further stated that

“ Any dispute arising out of or in connection with this agreement shall be settled by arbitration in accordance "with the rules of the American Arbitration Association.”

Prior to entering into his agreement with Exercycle, Maratta had been associated with several large and successful enterprises and thereafter became an independent direct sales consultant. In early 1955, he was approached by the then president and controlling stockholder of Exercycle and asked to join that company as a direct sales specialist in improving its business and sales which were then at a low ebb. After a period of negotiation and study, Maratta agreed to give up his work as an independent consultant and, in the words of the contract, “ to devote his best efforts and full time to Exercycle’s sales activities ”. He was fearful, however, that, once he had developed Exercycle’s sales to the point where his compensation, based on commissions, was substantial, a new management might attempt to deprive him of the fruits of his efforts. For this reason, he insisted upon and was given a life employment contract.

Maratta worked for the corporation for some four years and, apparently, the fact that he devoted all of his time, his efforts and his imagination to the enterprise, revitalized the company and improved its business. In 1959, differences arose between Maratta and the corporation—control of which had been acquired by a Mr. Little—and Maratta resigned as president, to which office he had succeeded, but continued in his employment under the 1955 arrangement. Some time later, Mr. Little expressed displeasure with Maratta’s contract and the latter, having come to believe that the new management was interfering with his supervision of sales, advised Mr. Little, by letter dated January 12, 1960, that he had “ started” to seek employment elsewhere. Three days later, an officer of Exercycle responded. Treating the letter as one of resignation, he expressed regret at Maratta’s “ decision to terminate [his] relationship with the Exercycle Corporation”.

Relying upon the broad arbitration provision in the contract, namely, tp arbitrate any dispute “ arising out of or in connection with ” the agreement, Maratta sought arbitration. Exercycle thereupon brought this proceeding for a stay on the ground that the alleged contract of employment “is void and unenforceable in that * * * [it] is lacking in mutuality by obligating Petitioner [Exercycle], to employ Respondent [Maratta] for a definite term i.e. for Respondent’s life and permitting Respondent to terminate his employment and said alleged contract at will ”. Exercycle also objected to the arbitration on the further ground that, irrespective of its validity, the contract “ is no longer in existence ” by reason of Maratta’s having terminated the contract and resigned as an employee.

The court at Special Term denied the motion for a stay and the Appellate Division affirmed by a three-to-two vote.. Both the majority and the minority, to support their respective conclusions, proceeded to construe the contract. It was the majority’s view that the contract was one to employ the respondent for life and that the provision ‘ ‘ that the employment was to continue until the respondent1 voluntarily leaves the employ of Exercycle or dies ’ did not as a matter of law make the contract illusory or just an agreement terminable at will,” On the other hand, it was the dissenters’ opinion that the contract was ££ illusory ” since the employee did not agree to work for life or for any other definite period.

We, too, agree that there should be arbitration, but we reach our conclusion by a route quite different from that taken by the courts below. In our view, the question whether the contract lacked mutuality of obligation, depending as it does primarily on a reading and construction of the agreement, and involving, as is obvious from the disagreement amongst the judges of this court and the courts below, substantial difficulties of interpretation, is to be -determined by the arbitrators, not the court. Once it be ascertained that the parties broadly agreed to arbitrate a dispute £ ‘ arising -out of or in connection with ’ ’ the agreement, it is for the arbitrators to decide what the agreement means and to enforce it according to the rules of law which they deem appropriate in the circumstances.

It has long been this State’s policy that, where parties enter into an agreement and, in one of its provisions, promise that any dispute arising out of or in connection with it shall be settled by arbitration, any controversy which arises between them and is within the compass of the provision must go to arbitration. (Civ. Prac. Act, § 1448; see, e.g., Matter of Kelley, 240 N. Y. 74, 79; Matter of Marchant v. Mead-Morrison Mfg. Co., 252 N. Y. 284, 298; Matter of Lipman [Haeuser Shellac Co.], 289 N. Y. 76; Matter of Terminal Auxiliar Maritima [Winkler], 6 N Y 2d 294.) As the court wrote in Matter of Marchant (252 N. Y., at p. 298), "Parties to a contract may agree, if they will, that any and all controversies growing out of it in any way shall be submitted to arbitration. If they do, the courts of New York will give effect to their intention.”

As exceptions to this general policy, however, we have held that a court will enjoin arbitration (1) where fraud or duress, practiced against one of the parties, renders the agreement voidable (see Matter of Lipman [Haeuser Shellac Co.], 289 N. Y. 76, 79, supra; ef. Matter of Behrens [Feuerring], 296 N. Y. 172, 178; Matter of Wrap-Vertiser Corp. [Plotnick], 3 N Y 2d 17; Matter of Metro Plan v. Miscione, 257 App. Div. 652, 655); (2) where there is no "bonafide dispute ” between the parties, that is, where the asserted claim is frivolous (see Alpert v. Admiration Knitwear Co., 304 N. Y. 1, 6; Matter of General Elec. Co. [United Elec. Radio & Mach. Workers], 300 N. Y. 262.; Matter of International Assn. of Machinists [Cutler-Hammer], 297 N. Y. 519; Matter of Wenger & Co. v. Propper Silk Hosiery Mills, 239 N. Y. 199); (3) where the performance which is the subject of the demand for arbitration is prohibited by statute (see Matter of Kramer & Uchitelle [Eddington Fabrics Corp.], 288 N. Y. 467); or (4) where a condition precedent to arbitration under the contract or an applicable statute has not been fulfilled. (See Matter of Board of Educ. [Heckler Elec. Co.], 7 N Y 2d 476; Matter of Lipman [Haeuser Shellac Co.], 289 N. Y. 76, 79, supra; Matter of Cauldwell-Wingate Co. [New York City Housing Auth.], 262 App. Div. 829, motion for leave to appeal denied 287 N. Y. 853.)

Applying these principles to the case before us, there can be no doubt that Maratta and Exercycle made a contract in which they promised each other to arbitrate any differences which might arise out of or in connection with it. In fact, the agreement, entered into in March of 1955, was continued in force, its terms and provisions complied with and carried out, until January, 1960, a period of almost five years. It may hardly be said, therefore, that the making of the present agreement is in issue under section 1450 of the Civil Practice Act.

Nor is the agreement which was entered into “void and unenforceable ” within the meaning of Matter of Kramer (288 N. Y. 467, supra), as Exercycle contends. In that case, performance of an agreement had been rendered illegal by Federal price control regulations, and we stayed arbitration of the claim, based on a failure to deliver the goods contracted for, on the ground that “ controlling public policy barred delivery” at the contract price (288 N. Y., at p. 472). The present case is patently dissimilar. In Matter of Kramer, public policy as embodied in a Federal statute forbade the performance which was the subject of dispute and that policy and statute were as binding on the arbitrators as on the courts. No statute or public policy, as reflected in a legislative act, is here involved to render the employment contract unenforcible and, absent one or the other, it has long been firmly established that arbitrators may disregard the strict and traditional rules of law. (See Fudickar v. Guardian Mut. Life Ins. Co., 62 N. Y. 392, 399-400; Sturges, Commercial Arbitration and Awards [1930], pp. 793-798.) In other words, since there is no statute or public policy which prohibits the performance of a promise to employ one “ until he voluntarily [quits] or dies ”, enforcement of performance by the arbitrators in this case is not rendered unlawful or legally impermissible.

Maratta’s claim is not frivolous or insubstantial (cf., e.g., General Elec. Co. (Elec. Workers], 300 N. Y. 262, supra) and there is no suggestion of fraud (cf., e.g., Matter of Lipman (Haeuser Shellac Co.], 289 N. Y. 76, 79, supra) or an unfulfilled condition precedent to arbitration. (Cf., e.g., Matter of Board of Educ. (Heckler Elec. Co.], 7 N Y 2d 476, supra.) Under these circumstances, where there is a broad provision for arbitration, such as we have here, arbitration may be had as to all issues arising under the contract. (See Matter of Terminal Auxiliar Maritima (Winkler], 6 N Y 2d 294, 298, supra; Matter of Paloma Frocks (Shamokin Sportswear Corp.], 3 N Y 2d 572, 574; Matter of Lipman (Haeuser Shellac Co.], 289 N. Y. 76, 80, supra; Fudickar v. Guardian Mut. Life. Ins. Co., 62 N. Y. 392, 399-400, supra.)

Exereycle’s claim is that no court of law would enforce the promise which it made to employ Maratta for life. Obviously, however, once having agreed to eschew recourse to courts of law and have its disputes with Maratta settled by arbitrators, Exereycle cannot urge, in opposition to arbitration, that a court of law would not enforce the agreement. If the issue involved was solely one of construction or interpretation, it would, without a doubt, be for the arbitrators to decide. The mere fact that its determination involves a mixed question of the agreement’s meaning and of law should not lead to a different result. Whether the issue is one involving interpretation or law or fact or all three, it is for the arbitrators and, as long as they remain within their jurisdiction and do not reach an irrational result, they may fashion the law to fit the facts before them. (See Matter of National Cash Register Co. [Wilson], 8 N Y 2d 377, 383; Matter of Wenger & Co. v. Propper Silk Hosiery Mills, 239 N. Y. 199, 203, supra; Fudickar v. Guardian Mut. Life Ins. Co., 62 N. Y. 392, 399, supra.) So this court said in the Fudickar case (62 N. Y., at p. 399):

“ The arbitrator is a judge appointed by the parties; he is by their consent invested with judicial functions in the particular case; he is to determine the right as between the parties in respect to the matter submitted, and all questions of fact or law upon which the right depends are * * * deemed to be referred to him for decision. The court possesses no general supervisory power over awards, and if arbitrators keep within their jurisdiction their award will not be set aside because they have erred in judgment either upon the facts or the law.”

In short, the issue before us is not whether a court of law would enforce Maratta’s claim, but rather whether, as part of their agreement, the parties mutually promised to resolve all controversies arising out of or in connection with ” their agreement by arbitration. If the arbitrators could rationally and legitimately make an award in favor of Maratta, a court is not justified in staying the arbitration even if the claim would not be enforcible at law. In point of fact, we have declined to ■ enjoin an arbitration even where an arbitrator has been asked to do what a court of law would clearly not do. (See Matter of Staklinski [Pyramid Elec. Co.], 6 N Y 2d 159; cf. Matter of Grayson-Robinson Stores [Iris Constr. Corp.], 8 N Y 2d 133.) To paraphrase what this court wrote in the Staklinski case (6 N Y 2d, at pp. 163-164), since the parties agreed to arbitration, it is beside the point to consider whether or not in a case such as the present a court of law would enforce the employer’s promise to employ Maratta for life.

Since Exercycle’s further claim that Maratta had resigned and thereby brought his employment to an end turns on the construction of the letter written by him and on an appraisal of his conduct, the issue of termination must also be decided by the arbitrators. (See Matter of Terminal Auxiliar Maritima [Winkler], 6 N Y 2d 294, 298, supra; Matter of Lipman [Haeuser Shellac Co.], 289 N. Y. 76, supra.)

The order of the Appellate Division should be affirmed, with costs.

Froessel, J. (concurring).

I am in agreement with the majority that there should be an affirmance here. I do not agree, however, with their reasoning that it was error for the Appellate Division to pass on the question of the alleged lack of mutuality of the contract or its illusory nature. The notice of motion for a stay was made upon the ground that the contract “ is void and unenforceable on its face ”. Should there in fact be an absence of mutuality of obligation, or illusoriness—‘Which in essence means an absence of consideration—‘the purported contract would be invalid and unenforcible, as petitioner contends (Schlegel Mfg. Co. v. Cooper’s Glue Factory, 231 N. Y. 459; Bintz v. City of Hornell, 268 App. Div. 742, 747, affd. 295 N. Y. 628; 1 Corbin, Contracts, §§ 152, 145). In that case, as Professor Corbin puts it, no “ contract was made ” (p. 499) — it never came into existence. Determination of that issue, under well-established principles, is a threshold matter for determination by the court.

The rule is succinctly stated in Matter of Kramer & Uchitelle (Eddington Fabrics Corp.) (288 N. Y. 467, 471) as follows: “ Arbitration clauses in contracts such as those under consideration are directed solely to the remedy—not to the validity or existence of the contract itself. Thus, proceedings to enforce arbitration under article 84 of the Civil Practice Act presuppose the existence of a valid and enforceable contract at the time the remedy is sought. (Matter of Berkovitz v. Arbib & Houlberg, Inc., 230 N. Y. 261, 271; Mulji v. Cheong Yue Steamship Co., Ltd. [1926], A. C. 497.) Seasonable challenge may be made to the court to the existence of such a contract by one who stays out of the arbitration and * * * the issue is properly determinable by the court as matter of law. (Matter of Finsilver, Still & Moss, Inc. v. Goldberg, Maas & Co., 253 N. Y. 382.) ” (Emphasis supplied.)

In Matter of Lipman (Haeuser Shellac Co.) (289 N. Y. 76) we acknowledged that the issue of ‘1 whether the contract never came into existence ” is for the court (id., at p. 79); and in Matter of Sarle (Sperry Gyroscope Co.) (4 A D 2d 638, affd. 4 N Y 2d 917) the distinction between questions of performance under the contract ” and the contract itself” was stressed (4 A D 2d, at p. 640), the former being for the arbitrators and the latter for the court (see, also, Matter of Wrap-Vertiser Corp. [Plotnick], 3 N Y 2d 17, 20, 22).

The logic of this rule is forcefully stated in Matter of Finsilver, Still & Moss v. Goldberg, Maas & Co. (253 N. Y. 382) where Chief Judge Cabdozo, writing for a unanimous court, said (pp. 390-391): “ If in truth there is no contract at all or none calling for arbitration, the self-constituted tribunal is a nullity, without power to bind or loose by force of its decision. * * * In the absence of a contract expressing a consent to arbitrate, an award by an arbitrator is an act of usurpation.” (Emphasis supplied.)

Simply put, the legal existence of the arbitral tribunal depends on contract. It is from that agreement between the parties that their very being, or jurisdiction and power to act, derives. Unless such contract, when seasonably challenged, is declared valid and enforcible, therefore, the arbitral tribunal can never legally come into being. As the court stated in Matter of Gruen v. Carter (173 Misc. 765, 766, affd. 259 App. Div. 712, motion for rearg. den. 259 App. Div. 813), “ It is not for the arbitrators to decide upon the validity of the very agreement upon which their own status as arbitrators is predicated ”; or, as Judge Burke well put it in Matter of Wrap-Vertiser Carp. (Plotnick) (3 N Y 2d 17, 22, supra), ‘‘' Obviously, parties cannot agree, in an invalid contract, to arbitrate the validity of the contract.’ ”

The majority in this case, without purporting to overrule these well-established principles and their underlying logic, state the applicable rule to be that, ‘ ‘ where parties enter into an agreement and, in one of its provisions, promise that any dispute arising out of or in connection with it shall be settled by arbitration, any controversy which arises between them and is within the compass of the provision, must go to arbitration ’ ’. This statement of the allegedly established law in this State contains its own refutation. If it has not been determined whether “ an agreement ” was entered into, what basis is there for the existence of the arbitrators and their jurisdiction in the matter? Again, if mutuality of obligation is lacking, there is no agreement— or, as Chief Judge Cardozo stated in Finsilver {supra), “ no contract at all ” — and the existence of such an agreement when seasonably challenged must be determined preliminarily by a court of law in order to legally constitute the arbitral tribunal, and afford them jurisdiction over the controversy between the parties arising out of the agreement.

Conceivably, the only rationale which can justify the position of the majority is that the arbitration clause is an agreement separate and apart from the main agreement, supported by its own consideration. But the majority does not proceed on that basis. They recognize — as our decisions from Finsilver through Matter of Sarle {supra) clearly demonstrate — that in this jurisdiction the promise to arbitrate is considered to be but a clause or part of the over-all contract, for they state there is “ an agreement ”, and “ one of its provisions ” (emphasis supplied) contains a “ promise ” to arbitrate. Consequently, if the over-all contract is lacking in consideration—i.e., illusory or lacking in mutuality—or is otherwise invalid, it is unenforcible, and the right to arbitrate, which is a part of it and contingent thereon, falls. Unless we determine this preliminarily as a matter of law, the jurisdiction of the arbitrators has not been established. If there be no contract, they are a “ self-constituted ” “nullity ”.

It is no answer, as the majority state, that, since “ the question whether the contract lacked mutuality of obligation ” depends “ primarily on a reading and construction of the agreement ” and involves “ substantial difficulties of interpretation ”, a basis for arbitration has been established. It is rather our function to resolve these questions since they bear on the validity, enforcibility and existence of the contract, upon which the right to arbitrate and the jurisdiction of the arbitrators in turn depend. If no agreement conferring that right and jurisdiction exists, there is nothing for the arbitrators to read and construe; and the happenstance that the question may be difficult does not permit us to pass the problem on to the arbitral tribunal—which as yet has no legal being.

Inasmuch as I am in agreement with the majority of the Appellate Division that the contract here at issue is not lacking in mutuality of obligation, the arbitrators may be properly constituted and adjudicate the controversies between the parties arising out of the agreement, and on that basis I would affirm.

Dye, J. (dissenting).

In dealing with controversies concerning the enforcibility of arbitration, the initial question is whether the underlying contract is valid and enforcible. If it is, then we may pass to the question of whether the contract, by its terms, makes provision for the settlement of disputes arising thereunder by arbitration. If not, then we do not enforce arbitration since its vitality depends, in the first instance, on the existence of a valid contract (Civ. Prac. Act, art. 84, § 1450). Whether the term “ contract ” refers to the entire agreement in which the provision for arbitration is contained, or it refers, by a loose construction of that term, solely to the clause permitting arbitration is at the heart of this controversy.

While there is a school of thought favoring the view that the power of the court is limited to a determination of whether or not an agreement to arbitrate has been made (cf. 36 Yale L. J. 866; Note, 24 N. Y. U. L. Q. Rev. 429), our decisions, until now, have uniformly held that an arbitration clause fails if a contract was never made (Matter of Wrap-Vertiser Corp. [Plotnick], 3 N Y 2d 17; Matter of Finsilver, Still & Moss v. Goldberg, Maas & Co., 253 N. Y. 382; Matter of Levinsohn Corp. [Joint Bd. of Cloak Makers’ Union], 299 N. Y. 454; 38 Cornell L. Q. 391; 6 Corbin, Contracts, § 1444).

Here, there is a real dispute between the parties concerning the existence of a contract. This, under the authorities, is for the court to determine before proceeding to the question of arbitration. On its face, the ability of this contract to survive the scrutiny of a court of law is indeed dubious. It lacks mutuality and is illusory. It provides that the employment of Maratta shall continue until he voluntarily leaves the employ of Exercycle or dies. Maratta is thus privileged in language which includes no restrictive conditions to quit his employment without obligation to respond in damages. Exercycle’s promise is to retain Maratta for as long as he wishes to continue, provided only that he maintain sales above a specified minimum. Maratta promised to devote his full time and best efforts to the business. He promised nothing with respect to continuation of employment, for he was at liberty to leave voluntarily at any time.

WThen Maratta’s promise to put forth his best efforts on a full-time basis is read together with the option to quit at any time, it becomes an unenforcible promise — and amounts to no more than a mere gratuitous statement, furnishing the company with nothing more than a hope that it will come about and as such is an illusion of a promise. So viewed, the entire agreement is unenforcible for lack of mutuality of obligation. It follows then that all the provisions contained therein, including the arbitration clause, are likewise unenforcible.

The order of the Appellate Division should be reversed and the motion to stay arbitration should be granted, with costs.

Chief Judge Desmond and Judges Burke and Foster concur with Judge Fund; Judge Froessel concurs in result in a separate opinion in which Judge Van Voorhis concurs; Judge Dye dissents in an opinion.

Order affirmed.

       The majority did not disagree with this premise in the Wrap-Vertiser case. Judge Vax Voorhis there stated: “Even if he had rescinded or asked for rescission, such an issue would have had to have heen decided in court before it could be known that an agreement existed supplying a foundation for the jurisdiction of the arbitrators” (p. 20; italics supplied).


author:
Burke, J. Vah Voorhis, J. (dissenting).
      Froessel, J. (dissenting).

text:
    The People of the State of New York, Respondent, v. Louis Finkelstein, Joseph Kleinberg, Nathan Goldstein, Louis Schaeffer and Herman H. Schenkman, Appellants.
    Argued January 12, 1961;
    decided March 30, 1961.

      Emanuel Bedfield for appellants.
    I. Section 1141 of the Penal Law on its face is unconstitutional. (Smith v. California, 361 U. S. 147; People v. Shapiro, 6 A D 2d 271; People v. Shingles, 281 App. Div. 647.) II. The statute cannot be construed by this court to supply what the Legislature deliberately omitted. (Winters v. New York, 333 U. S. 507; Poulos v. New Hampshire, 345 U. S. 395; Wait v. Van Allen, 22 N. Y. 319; Matter of Metropolitan Life Ins. Co. v. Boland, 281 N. Y. 357; James v. Patten, 6 N. Y. 9; Betz v. Horr, 276 N. Y. 83; Town of Putnam Val. v. Slutsky, 283 N. Y. 334; Weed v. Tucker, 19 N. Y. 422; Hyatt v. Taylor, 42 N. Y. 258; Gillespie v. Zittlosen, 60 N. Y. 449; Matter of Hamlin, 226 N. Y. 407; Wiley v. Solvay Process Co., 215 N. Y. 584.) III. Nor may the statute now be so construed as to render these defendants guilty. (Winters v. New York, 333 U. S. 507; Lanzetta v. New Jersey, 306 U. S. 451; People v. Engel, 7 N Y 2d 1002.) IV. Actual knowledge by appellants must be established. V. The imputation of knowledge to these defendants by the court is a denial of due process. (Roth v. United States, 354 U. S. 476; Wieman v. Updegraff, 344 U. S. 183; Bailey v. Alabama, 219 U. S. 219; Western & Atlantic R. R. Co. v. Henderson, 279 U. S. 639; Adler v. Board of Educ., 342 U. S. 485 ; People v. Richmond County News, 11 A D 2d 799.) VI. There is no proof that appellants knew that the books were obscene. (Roth v. United States, 354 U. S. 476; Halsey v. New York Soc. for Suppression of Vice, 234 N. Y. 1.) VII. Section 1141 is vague and unconstitutional. (Dreiser v. Lane Co., 183 App. Div. 773; United States v. One Book Entitled Ulysses, 72 F. 2d 705; Parmelee v. United States, 113 P. 2d 729; Hannegan v. Esquire, 327 U. S. 146; Chaplinsky v. New Hampshire, 315 U. S. 568; De Jonge v. Oregon, 299 U. S. 353.) VIII. The publications are not “obscene”. (Sunshine Book Co. v. Summerfield, 355 U. S. 372; Times Film Corp. v. Chicago, 355 U. S. 35; One, Inc., v. Olesen, 355 U. S. 371.) IX. As to Pinkelstein there was no proof of ownership.

      Frank S. Hogan, District Attorney (Peter J. O’Connor and Bichard G. Denzer of counsel), for respondent.
    I. Defendants’ guilt was established beyond a reasonable doubt. (People v. Pina, 270 App. Div. 404, 296 N. Y. 669; People v. Cuozzo, 292 N. Y. 85; People v. Roach, 215 N. Y. 592; People v. Brasch, 193 N. Y. 46; People v. Deacons, 109 N. Y. 374; People v. Louis,
      286 App. Div. 792, 1 N Y 2d 137; People v. Joyce, 233 N. Y. 61; Roth v. United States, 354 U. S. 476; People v. Richmond County News, 11 A D 2d 799; Smith v. California, 361 U. S. 147.) II. Subdivision. 1 of section 1141 of the Penal Law is constitutional. (Smith v. California, 361 U. S. 147; Morissette v. United States, 342 U. S. 246; People v. Katz, 290 N. Y. 361; People v. Shapiro, 6 A D 2d 271; People v. Richmond County News, 11 A D 2d 799; Matter of Lyons v. Goldstein, 290 N. Y. 19; Kauffman & Sons Saddlery Co. v. Miller, 298 N. Y. 38; Lanzetta v. New Jersey, 306 U. S. 451; People v. Brainard, 192 App. Div. 816; People v. Brooklyn News Co., 12 Misc 2d 768; People v. Engel, 7 N Y 2d 1002; People v. Pesky, 254 N. Y. 373; Winters v. New York, 333 U. S. 507.)
   Burke, J.

Defendants, in a consolidated appeal from unanimously affirmed convictions of violations of section 1141 of the Penal Law, contend, inter alia, that the statute is violative of the Constitution of the United States in that it does not expressly require scienter. We do not agree.

Section 1141 provides in part that “A person who sells * * * or has in his possession with intent to sell * * * any obscene * * * book # * * [i]s guilty of a misdemeanor”. It is our- firm opinion, on this our first opportunity to construe the statute, in this respect, that the definition of the crime is instinct with the idea of scienter.

In Smith v. California (361 U. S. 147), the United States Supreme Court declared unconstitutional a Los Angeles City ordinance which proscribed, and was construed to impose strict liability for, mere possession of obscene prints, regardless of the offender’s awareness of the contents. The New York proscription, on the other hand, neither expressly, nor by our construction here, dispenses with this vital element of scienter, and, therefore, in no way impinges upon the traditional freedom guarantees of speech and the press (Roth v. United States, 354 U. S. 476).

Although our statute might possibly be interpreted to exclude scienter, we feel, inter alia, guided by the strong constitutional presumption attending legislative enactments (Wiggins v. Town of Somers, 4 N Y 2d 215, 218; Lincoln Bldg. Associates v. Barr, 1 N Y 2d 413, 415) that the statute was not intended to unreasonably restrict or inhibit our inalienable “liberty” protected by due process (see Smith v. California, supra). A reading of the statute as a whole clearly indicates that only those who are in some manner aware of the character of the material they attempt to distribute should be punished. It is not innocent but calculated purveyance of filth which is exorcised, and a mere omission of the word “ scienter ” need not be construed as an attempt to eliminate that common-law element of the crime. (See Morissette v. United States, 342 U. S. 246; People v. Katz, 290 N. Y. 361.)

In any event, the statute is at least susceptible of either interpretation, and we are, therefore, clearly obliged by statute and decisional law to embrace that which will preserve its validity. (McKinney’s Cons. Laws of N. Y., Book 1, Statutes, § 150; Matter of Coates, 9 N Y 2d 242; Matthews v. Matthews, 240 N. Y. 28, 34—35; Dollar Co. v. Canadian Car & Foundry Co., 220 N. Y. 270, 275; Matter of Lyons v. Goldstein, 290 N. Y. 19, 23; People ex rel. Morriale v. Branham, 291 N. Y. 312, 317.) “ No statute should be declared unconstitutional if by any reasonable construction it can be given a meaning in harmony with the fundamental law.” (People ex rel. Simpson v. Wells, 181 N. Y. 252, 257; Kauffman & Sons Saddlery Co. v. Miller, 298 N. Y. 38, 44.) A conviction, therefore, cannot be upheld without proof of the element in question which we find required by section 1141. Such a holding is not extraordinary. The United States Supreme Court has pointed out that it has affirmed a conviction under the stated limitation of meaning ”. (Winters v. New York, 333 U. S. 507, 510.) In the view of that court: ‘ ‘ The interpretation by the Court of Appeals puts these words in the statute as definitely as if it had been so amended by the legislature.” (Winters v. New York, supra, p. 514; emphasis supplied.)

At the time of the prosecution of the violations herein, the prevailing precedent (People v. Shapiro, 6 A D 2d 271 [2d Dept.]), however, since soundly repudiated (People v. Richmond County News, 11 A D 2d 799 [2d Dept.]; see, also, People v. Douglas, 12 A D 2d 194; People v. Schenkman, 12 A D 2d 457), declared that scienter was not an element of the crime. Defendants, perhaps believing because of Shapiro that their knowledge was irrelevant, did not take the stand or offer proof in this regard. Although they can be charged “with knowledge of the scope of subsequent interpretation ” (Winters v. New York, supra, p. 514), we still feel that new trials are warranted by the circumstances and in the interests of justice, so that, although the People have the burden of proof, defendants may have an opportunity to testify or offer proof, if they desire, in regard to the presence of salacious literature in their possession for sale. However, we find it unnecessary to dismiss the informations which are phrased in statutory language. They are sufficient, especially in light of this our initial interpretation of section 1141, to apprise the defendants of the true nature of the crime.

Accordingly, the judgments should be reversed and new trials ordered.

Vah Voorhis, J. (dissenting).

On this appeal appellants challenge the constitutionality of section 1141 of the Penal Law in view of the recent decision by the Supreme Court of the United States in Smith v. California (361 U. S. 147). Sub division 1 of this section renders guilty of a misdemeanor any person “who sells, lends, gives away, distributes, shows or transmutes, or offers to sell, lend, give away, distribute, show or transmute, or has in his possession with intent to sell, lend, distribute, give away, show or transmute, or advertise in any manner, or who otherwise offers for loan, gift, sale or distribution, any obscene, lewd, lascivious, filthy, indecent, sadistic, masochistic or disgusting book”.

Smith v. California (supra) held an ordinance of the City of Los Angeles to be unconstitutional which provided that it was unlawful “ for any person to have in his possession any obscene or indecent writing, [or] book * * * [i]n any place of business where * * * books * * * are sold or kept for sale ”. This ordinance had been construed by the California courts as not requiring knowledge of the obscene nature of the book on the part of the vendor. The Supreme Court held that if every bookseller were placed under an obligation • to make himself aware of the contents of every book in his shop, it would restrict the public’s access to reading matter to such a degree as to constitute an infringement of the constitutional guarantee of freedom of the press.

For the same reason it seems to us that Smith v. California (supra) renders unconstitutional subdivision 1 of section 1141 of

the Penal Law. The language is identical in substance with that of the ordinance of the City of Los Angeles which was held to be unconstitutional. As recently as 1958 the Appellate Division, Second Department, held in People v. Shapiro (6 A D 2d 271) that knowledge by the bookseller of the obscene quality of books sold or on sale was not required to convict under subdivision 1 of section 1141 of the Penal Law. The opinion therein by Presiding Justice Nolait, speaking for a unanimous court, traces the codification and subsequent history of this statute from the time of its enactment in 1868. Many decisions are cited. The conclusion reached is inescapable that knowledge of the contents of obscene books by the bookseller was purposely omitted by the Legislature as an ingredient of the crime so as to avoid what was thought to have been a facile method of evasion of this law. It is impossible to believe that the Second Department in a memorandum decision in People v. Richmond County News (11 A D 2d 799) intended to overrule the 10 learned pages of opinion which had demonstrated so effectively less than two years earlier in People v. Shapiro (supra) that the Legislature deliberately omitted scienter as an element in the crime when the statute was enacted. Since the decision in Smith v. California (supra) the First and Third Departments have declared that scienter is not an element in the crime (People v. Schenkman, 12 A D 2d 457; People v. Douglas, 12 A D 2d 194), but in each instance the information was held to be defective in not charging that the books were sold or kept for sale with knowledge that they were obscene. It is not easy to understand by what reasoning scienter is to be read into the statute by implication in order to save its constitutionality, but not into the informations which were drawn in the same language. The same words can hardly be infused with opposite meanings when used in informations to those which they bear when contained in the statute. The sound reasoning which prompted the decisions that the informations failed to charge scienter should have resulted, it seems to us, in holding that by using the same language the statute did not include scienter either.

Statutes sometimes receive heroic treatment at the hands of courts in construing them so as to sustain their constitutionality, but that is. a practice which is necessarily more limited in criminal than in civil actions where the effect is to redefine the nature of a crime ex post facto. The realization by the courts which have been faced with this question since Smith v. California (supra) that informations were defective which did not charge knowledge of obscenity suggests that judicial power is exceeded by reading into a statute drawn in similar language a requirement of scienter which is not there. The majority opinion of this court in the present case tacitly recognizes this circumstance by granting new trials to enable appellants to take the witness stand for the purpose of testifying to lack of knowledge on their part of the character of these books in their possession for sale. If the informations are construed as actually charging scienter, then new trials would not be necessary since appellants would already be on notice that scienter was charged against them. If the language of these informations (which is the language of the statute) includes inferentially a charge that appellants had such guilty knowledge, then their convictions should be affirmed. The granting of new trials is an implied recognition that neither by the language of the statute nor of the informations were appellants informed that knowledge on their part was an element in the crime charged. They are to be given a new trial, as we read the record and the majority opinion, essentially for the reason that the statute is being amended rather than interpreted, entailing a felt necessity to afford an opportunity for another trial after the amendment by the court has become effective.

As the statute reads and as it had been authoritatively construed, there must have appeared to appellants to have been no object in their taking the witness stand. The books were in evidence, and spoke for themselves; lack of knowledge of their contents had been held to be no defense. All apparently relevant facts' were undisputed. Only a question of law appeared to be involved. Appellants had no reason to believe that knowledge or lack of knowledge of the obscene nature of this reading material had any bearing on the case. They asserted that subdivision 1 of section 1141 was unconstitutional in view of the authoritative position taken by the United States Supreme Court in Smith v. California (supra). That contention seems to us to be unanswerable.

The judgments appealed from should be reversed and the informations dismissed.

Froessel, J. (dissenting).

I agree entirely with Judge Burke’s construction of the statute, but deem it unnecessary to remand for a new trial. The informations follow the language of the statute so far as pertinent. Defendants moved to dismiss the informations at the end of the People’s case upon the ground that, even if the court should find that the books were obscene, the defendants' could not be convicted for the reason that the People failed to establish scienter on their part, relying on Smith v. California (361 U. S. 147). The court below, after reviewing the evidence, found “as a fact, that the defendants had knowledge of the contents of the books ”, and there was sufficient evidence to support that finding. I would affirm.

Chief Judge Desmond and Judges Dye and Fuld concur with Judge Burke; Judge Van Voorhis dissents and votes to reverse and to dismiss the informations upon the ground that section 1141 of the Penal Law is unconstitutional in an opinion in which Judge Foster concurs; Judge Froessel dissents and votes to affirm in a memorandum.

Judgments reversed and new trials ordered.


author: Per Curiam.

text:
    The People of the State of New York, Respondent, v. Harold E. Polle, Appellant.
    Argued March 21, 1961;
    decided March 30, 1961.

      John J. Leonard for appellant.
    I. The information was insufficient as a matter of law to confer any jurisdiction on the Court of Special Sessions. (Shappee v. Curtis, 142 App. Div. 155; People ex rel. Livingston v. Wyatt, 186 N. Y. 383; People v. Scott, 3 N Y 2d 148; People v. Sledge, 192 Misc. 934; Matter of Bennett, 258 App. Div. 368.) II. Whatever authority is conferred by section 74-b of the Vehicle and Traffic Law to the persons therein enumerated arises only in cases where a uniform traffic ticket has been served and, even then, is narrowly limited. III. The inclusion by the Magistrate in his return of a uniform traffic ticket does not defeat the argument of appellant.

      John J. Conway, Jr., District Attorney (Kenneth J. Smith of counsel), for respondent.
    I. The information was properly sworn to before the deputy sergeant. II. Courts will reject the literal meaning of words to conserve the spirit and intent of an act over the mere letter. (Smith v. People, 47 N. Y. 330.) III. Any defect as to the verification of the information had been cured before objection was raised by defendant. (People v. Nitzberg, 289 N. Y. 523; Albrecht v. United States, 273 U. S. 1; People v. Scott, 3 N Y 2d 148.)
   Per Curiam.

Defendant was convicted of a violation of subdivision 5 of section 70 of the Vehicle and Traffic Law—a misdemeanor. The information was sworn to before a sergeant of the Sheriff’s office who was not a notary public. He had no authority to administer the oath unless authorized by section 74-b (now § 208) of the Vehicle and Traffic Law. That section, however, authorizes him to take oaths only where “ a traffic summons has been served ’ ’. The People’s witness, the arresting officer, flatly testified that no traffic summons had been served. Immediately after the establishment of this fact, defendant moved for a dismissal of the information. The motion should have been granted since the court had no jurisdiction (People v. Scott, 3 N Y 2d 148, 151). We do not feel that we may “ reject the literal meaning” of section 74-b as respondent suggests.

The judgment of the County Court should be reversed, the judgment of conviction vacated, and the information dismissed.

Judges Fuld, Froessel, Yaw Yoorhis, Burke and Foster concur in Per Curiam opinion; Chief Judge Desmond and Judge Dye dissent and vote to affirm upon the ground that this was, at worst, an irregularity which could not affect jurisdiction.

Judgment reversed and the information dismissed.


author: Dye, J. Chief Judge Desmond (dissenting).

text:
    The People of the State of New York ex rel. Ferdinand Baumgart, Appellant, v. Walter B. Martin, as Warden of Attica Prison, Respondent.
    Argued February 21, 1961;
    decided March 30, 1961.

      Robert M. Cipes for appellant.
    I. The order of the Appellate Division is appealable to this court. (People v. Pitts, 6 N Y 2d 288; People v. Borum, 8 N Y 2d 177.) II. Were this an appeal in a “ criminal ” case, the order of the Appellate Division dismissing the appeal would clearly have been improper. (Griffin v. Illinois, 351 U. S. 12; People v. Wilson, 7 N Y 2d 568; People v. Williams, 6 N Y 2d 193; Daugharty v. Gladden, 257 F. 2d 750; People ex rel. Shook v. Martin, 11 A D 2d 909.) III. The Griffin and Borum cases apply to a prisoner’s habeas corpus appeal either through constitutional necessity or in the interests of proper administration of justice. (People ex rel. Maconi v. Murphy, 11 A D 2d 1095; Banks v. United States, 249 F. 2d 672; People v. Pride, 3 N Y 2d 545; People v. Silverman, 3 N Y 2d 200; People v. Sullivan, 3 N Y 2d 196.) IV. There is no other limitation upon the Griffin and Borum rules applicable to this case. (People ex rel. Mathews v. Murphy, 11 A D 2d 1096.)

      Louis J. Lefkowitz, Attorney-General {Winifred C. Stanley and Paxton Blair of counsel), for respondent.
    I. Relator has not been aggrieved, since the identical issues which he raised in the habeas corpus proceeding had already been adjudicated on his appeal from the judgment of conviction. (People ex rel. Meers v. Martin, 4 A D 2d 659, 4 N Y 2d 898; Kenyon v. Robin, 231 N. Y. 604; People v. Pitts, 6 N Y 2d 288; Griffin v. Illinois, 351 U. S. 12; People ex rel. Vitolo v. Morhous, 279 App. Div. 957; People v. Burrell, 12 A D 2d 807.) II. The order of the Appellate Division dismissing relator’s appeal in the habeas corpus proceeding was proper and did not constitute a denial of his constitutional rights. (People v. Wilson, 9 A D 2d 869, 7 N Y 2d 568; People v. Borum, 8 N Y 2d 177; People v. Gersewitz, 294 N. Y. 163, 326 U. S. 687; Matter of Moore, 108 N. Y. 280; Johnson v. Rochester Sav. Bank, 256 App. Div. 1043; Ehde v. State of New York, 260 App. Div. 511; Rosetano v. State of New York, 208 Misc. 352; People ex rel. Maconi v. Murphy, 11 A D 2d 1095.)
   Dye, J.

The relator instituted this proceeding for a writ of habeas corpus by a petition verified June 4, 1957, claiming that the 40-year-to-life sentence (which is presently being served in Attica Prison) following conviction after trial of the crime of murder, second degree, was illegally imposed in that the clerk of the court failed to call the roll of the jurors following their return into court, as required by section 433 of the Code of Criminal Procedure, and that when the jury was polled only 11 of the 12 answered, thereby producing a procedurally irregular verdict which deprived the court of jurisdiction. Following hearings on that issue, at which the deputy clerk and juror No. 4 testified, the Wyoming County Court found that the jury were all present in the box when polled, that the failure of the minutes to show the polling of the twelfth juror was a stenographic omission and that their verdict of guilty of the crime of murder, second degree, was unanimous. He then made an order, filed December 2, 1957, dismissing the writ and remanding the relator to the respondent’s custody, whereupon the relator filed a notice of appeal dated December 30, 1957, but took no further steps to perfect it. Instead, he moved in the Appellate Division, Fourth Judicial Department, for leave to prosecute his appeal taken from the judgment of conviction entered May 10, 1954, on the original papers and typewritten brief, and for assignment of counsel. The motion was granted and the court, on its own motion, enlarged his time to the March 1958 Term of that court (People v. Baumgart, 13 A D 2d 620). Upon that appeal the defendant attacked the validity of the judgment on the same grounds relied on in the habeas corpus proceeding.

In the Appellate Division the judgment of conviction was unanimously affirmed without opinion (People v. Baumgart, 6 A D 2d 854). This court unanimously affirmed (5 N Y 2d 874), following the granting of leave to appeal by the Chief Judge and the granting by the court of a motion to have the appeal heard on the original record and for assignment of counsel (5 N Y 2d 793). Certiorari was thereafter denied by the United States Supreme Court (359 U. S. 994). The respondent then made a motion to dismiss the dormant appeal which the relator had taken from the order of the Wyoming County Court dismissing his writ of habeas corpus. The relator opposed this motion, notwithstanding that the appeal involved the same question that had been presented and rejected in his prior appeals to the highest appellate courts of the State and nation. At the same time he made a cross motion for an order to have his appeal heard as a “ poor person ” and for incidental relief without, however, certifying that a good cause existed (Rules Civ. Prac., rule 35; Civ. Prac. Act, §§ 199, 558). The Appellate Division granted the respondent’s motion to dismiss the appeal for failure “ to file and serve the printed papers on appeal, as required by Rule 234 of the Rules of Civil Practice ”, and simultaneously denied relator’s cross motion (11 A D 2d 909), citing People ex rel. Meers v. Martin (4 A D 2d 659, affd. without opinion 4 N T 2d 898).

This appeal is here by permission. The relator contends that in dealing with his motion the court should have applied the principle recently enunciated in a series of cases involving appeals from orders denying relief in post-conviction proceedings coram nobis to the effect that an indigent defendant is not required to show substantial merit before his appeal may be entertained (People v. Borum, 8 N Y 2d 177).

The Borum rule contemplates that an indigent defendant-snail suffer no prejudice by reason of his poverty. However, this does not mean that, whenever the question sought to be reviewed in the post-conviction proceeding has already been passed upon, and this appears either from the moving papers or from the court’s own records, it nonetheless may be prosecuted at public expense.

This is because a court should not be called upon to deal anew with questions it has already decided. If, as here, the claimed error has been finally answered in the highest appellate courts of the State and the United States, nothing can be accomplished by a repeated review of the same question because it is dressed in different procedural garments. One proceeding should suffice to satisfy the right of appeal; it is otherwise when new and really different points are raised.

Although we know from experience that the courts are powerless to prevent a financially able defendant from engaging in a multiplicity of useless court procedures, that affords no very good reason for allowing an indigent defendant to indulge his litigious proclivity at public expense. Under our court system, both State and Federal, an indigent defendant may not be deprived of any fundamental right by reason of his poverty. This indigent appellant has already received “as adequate appellate review as defendants who have money enough to buy transcripts ”. (Griffin v. Illinois, 351 U. S. 12, 19.) Due process and equal protection impose no obligation on the State to accord a purposeless activity a constitutionally protected status.

The order appealed from should be affirmed.

Chief Judge Desmond (dissenting).

By this decision we abruptly abandon a policy solemnly proclaimed and many times enforced by us: that indigent defendants must be given the same right of appeal as those with financial means. 1 ‘ The right to appeal is assured to all defendants, rich and poor alike, by section 517 of the Code of Criminal Procedure and, since this statutory right to appeal does not depend upon the existence of meritorious points, an appellate court may not insist upon an indigent defendant showing substantial merit before entertaining his appeal. What our statute gives, a court may not take away or severely limit. The right to appeal requires a review of the merits upon appeal and is not satisfied by a mere consideration of those merits upon a submission of affidavits on an application for leave to have the appeal heard on the original papers” (People v. Borum, 8 N Y 2d 177, 178-179). In a number of other very recent cases (see, for instance, People v. Wolochen, 8 N Y 2d 1044; People v. Bartone, 8 N Y 2d 1072; People v. Garcia, 8 N Y 2d 1143; People v. Robertson, 8 N Y 2d 1149; People v. Fish, 9 N Y 2d 695 [Feb. 23, 1961]), we have reinstated appeals where the Appellate Division had dismissed them and refused “poor person” relief on the ground of lack of merit to the appeal. Now we ourselves are doing what we have repeatedly said it is wrong for the Appellate Division to do.

The simple basic rule is this: “ Once the State chooses to establish appellate review in criminal cases, it may not foreclose indigents from access to any phase of that procedure because of their poverty. * * * This principle is no less applicable where the State has afforded an indigent defendant access to the first phase of its appellate procedure but has effectively foreclosed access to the second phase of that procedure solely because of his indigency. * * * The imposition by the State of financial barriers restricting the availability of appellate review for indigent criminal defendants has no place in our heritage of Equal Justice Under Law ” (Burns v. Ohio, 360 U. S. 252, 257-258).

The order should be reversed and the case remitted to the Appellate Division for appropriate proceedings on appellant’s appeal to that court.

Judges Froessel, Van Voorhis, Burke and Foster concur with Judge Dye; Chief Judge Desmond dissents in an opinion in which Judge Fuld concurs.

Order affirmed.


author: Fuld, J.

text:
    In the Matter of the Arbitration between S. M. Wolff Company, Inc., et al., Appellants, and Harry Tulkoff et al., Copartners Doing Business under the Name of Tulkoff’s Horse Radish Products Co., Respondents.
    Argued February 22, 1961;
    decided March 30, 1961.

      Benjamin Buseh and Otto C. Sommerich for appellants.
    1. Since the Department of Agriculture has stated its official position to the effect that it will abide by any decision of the Supreme Court, State of New York, County of New York, and the contracts of arbitration are deemed a consent to the jurisdiction of the Supreme Court, said court does have the right to enforce the present contracts of arbitration and to require the parties specifically to perform their obligation to arbitrate. The question whether the court has jurisdiction to stay a Federal administrative tribunal is, therefore, academic. (Overnight Motor Co. v. Missel, 316 U. S. 572; Matter of Grayson-Robinson Stores [Iris Constr. Corp.], 8 N Y 2d 133; Lawrence County v. Devonshire Fabrics, 271 F. 2d 402.) II. Inasmuch as the Perishable Agricultural Commodities Act merely creates a new remedy for an alleged breach of a perishable food contract and does not create any substantive rights, and since the Department of Agriculture officially states that it will not proceed on respondents’ complaint if the latter are obligated to, and are required to, arbitrate their differences, the Supreme Court of the State of New York is authorized to require and should require respondents specifically to perform their agreement of arbitration. (Garrity v. Bagold Corp., 267 App. Div. 353; A. J. Conroy, Inc., v. Weyl-Zuckerman & Co., 39 F. Supp. 784; Rothenberg v. Rothstein & Sons, 183 F. 2d 524; Le Roy Dyal Co. v. Allen, 161 F. 2d 152; Gillarde Co. v. Martinelli & Co., 169 F. 2d 60; Matter of River Brand Rice Mills v. Latrobe Brewing Co., 305 N. Y. 36; Matter of Marchant v. Mead-Morrison Mfg. Co., 252 N. Y. 284; Matter of Staklinski [Pyramid Elec. Co.], 6 A D 2d 565, 6 N Y 2d 159.) III. Respondents accepted, upon two separate days, “ Bought ” notes containing an arbitration clause upon the face thereof, without objection or rejection, and thereafter accepted and paid for delivery of merchandise pursuant to said notes. Accordingly, respondents are bound by the provisions thereof which constitute a written “ contract to arbitrate a controversy thereafter arising ”, (Matter of Exeter Mfg. Co. v. Marrus, 254 App. Div. 496; Matter of Helen Whiting, Inc. [Trojan Textile Corp.], 307 N. Y. 360; Matter of Catz American Sales Corp. [Holleb & Co.], 272 App. Div. 689, 298 N. Y. 504; Matter of Perfect Fit Prods. Mfg. Co. [Pantasote Co.], 5 Misc 2d 348.) IY. Since appellants never intentionally relinquished their right to arbitration or performed any other unequivocal act which would constitute an election and waiver of their right to arbitrate, they cannot be deemed to have waived their right under the agreements of arbitration here involved and the courts below should have ruled accordingly. In the alternative, any question of waiver is, also, under the arbitration agreements herein, to be decided by the arbitrators. (Matter of Potter Co. [Miles Metal Corp.], 2 Misc 2d 515, 2 A D 2d 816; Klein Coat Corp. v. Peretz, 4 Misc 2d 341; Matter of Terminal Auxiliar Maritima [Winkler Credit Corp.], 6 N Y 2d 294; Matter of Zimmerman v. Cohen, 236 N. Y. 15; Matter of Haupt v. Rose, 265 N. Y. 108; Matter of Hosiery Mfrs. Corp. v. Goldston, 238 N. Y. 22; Almacenes Fernandez, S. A. v. Golodetz, 148 F. 2d 625.) V. The motion to stay the proceedings pending before the Secretary of Agriculture was made by petitioners, Sol M. Wolff, Martha M. Wolff and Samuel Wolff, who entered into the contracts here involved under the partnership name of S. M. Wolff Company and by the corporation, S. M. Wolff Company, Inc., which is now conducting the business heretofore conducted by S. M. Wolff Company. Inasmuch as the corporate appellant was in effect added to the contracts by actions equivalent to a novation or assignment, the motion below was made by parties who have status to compel arbitration in accordance with the provisions of said contract. (Fisser v. International Bank, 282 F. 2d 231.)

      Norman Copian for respondents.
    I. The Supreme Court of the State of New York has no jurisdiction to stay an administrative proceeding pending before the United States Secretary of Agriculture, nor does it have jurisdiction over the persons of respondents. The application of section 1451 of the Civil Practice Act is limited to actions or proceedings in the courts of the State of New York. (Matter of Albrecht, 225 App. Div. 423; Matter of Schlesinger v. Rothman, 162 Misc. 317.) II. The Supreme Court of New York has no jurisdiction over respondents who are residents of Maryland. III. Respondents, in the administrative proceeding before the Secretary of Agriculture, are enforcing substantive rights provided under and created by the Perishable Agricultural Commodities Act, and said proceeding, therefore, may not be stayed. (Le Roy Dyal Co. v. Allen, 161 F. 2d 152; Rothenberg v. Rothstein & Sons, 183 F. 2d 524; Gillarde Co. v. Martinelli & Co., 169 F. 2d 60; A. J. Conroy, Inc., v. Weyl-Zuckerman & Co., 39 F. 2d 784; Matter

      of City Serv. Cleaning Contrs. v. Vanzo, 179 Misc. 368, 266 App. Div. 660; Garrity v. Bagold Corp., 267 App. Div. 353.) IV. Respondents made no written contract with any of appellants requiring arbitration of future disputes. (Matter of Tanenbaum Textile Co. v. Schlanger, 287 N. Y. 400; Matter of Miss Youth Form Lingerie v. Lowenstein & Sons, 300 N. Y. 702; Matter of Helen Whiting, Inc. [Trojan Textile Corp.], 307 N. Y. 360; Matter of Albrecht Chem. Co. [Anderson Trading Corp.], 298 N. Y. 437.) V. Appellants have waived any purported right to arbitration and are estopped from claiming such right. (Nagy v. Areas Brass & Iron Co., 242 N. Y. 97; Matter of Zimmerman v. Cohen, 236 N. Y. 15; Cargo Carriers v. Erie & St. Lawrence Corp., 105 F. Supp. 638.) VI. Petitioner-appellant S. M. Wolff Company, Inc., has no status to move to stay the proceeding pending before the Secretary of Agriculture.
   Fuld, J.

The novel question presented by this appeal is whether section 1451 of the Civil Practice Act authorizes a stay of proceedings brought in violation of an arbitration contract, where such proceedings are pending, outside of New York State, before an administrative agency of the Federal Grovernment.

The petitioner, Wolff Company, Inc. (a corporation), just as its predecessor, Wolff Company (a partnership), is a broker or agent dealing in perishable agricultural commodities, while the respondent, Tulkoff’s Horse Radish Products Co., is a dealer in perishable agricultural commodities. The petitioners, corporation and partnership, doing business in New York, and the respondent, a partnership doing business in Maryland, are licensed pursuant to the provisions of the Perishable Agricultural Commodities Act (U. S. Code, tit. 7, §§ 499a-499s).

In late January, 1959 and early February, 1959, Wolff Company, the partnership, and Tulkoff’s engaged in negotiations by telephone concerning the purchase of Japanese horseradish roots. According to an affidavit submitted on behalf of the petitioners, these telephone conversations ‘1 were finalized, subject to written confirmation” on or about February 5, 1959 and, shortly thereafter, a letter was sent in which Wolff Company advised Tulkoff’s that it would mail * * * as soon as possible copies of Contracts as well as facsimile Credit Letter ”. On February 6, Wolff Company sent the respondents two “ Bought Notes ”, covering the purchase in question, which contained broad arbitration provisions.

The respondents’ version of the sale agrees in all particulars with that of the petitioners except that they insist that the sale was verbal, without any discussion concerning arbitration of future controversies, and they point to the letter of February 5, as well as the “ Bought Notes ”, as confirmation of an already consummated sale. It is on this basis that Tulkoff’s urges that no agreement or consent to arbitrate any dispute was ever made.

In March of 1959, the horseradish roots arrived from Japan and were accepted and paid for by Tulkoff’s. Thereafter, on May 29, Tullcoff’s lodged a preliminary complaint with the United States Department of Agriculture claiming that all shipments failed “to grade according to contract” and that the merchandise was unfit for resale purposes. This preliminary complaint, filed pursuant to subdivision (a) of section 6 of the Perishable Agricultural Commodities Act (U. S. Code, tit. 7, § 499f), was followed in August by a “hearing” before the Agricultural Marketing Service, the purpose of which was to “ achieve a settlement between the parties ”. No settlement was reached, however, and Tulkoff’s lodged a formal complaint with the Department of Agriculture in October, 1959.

This complaint, requiring an answer within 20 days, was served on the petitioners in late December, but they requested and received permission to put off their time to answer. However, instead of interposing an answer in the proceeding in the Department of Agriculture, the petitioners, relying on the arbitration provision in the “ Bought Notes ” which they had sent to the respondents, filed the petition now before us for a stay of the proceedings before the Agriculture Department.

In opposition to the petition for a stay, Tulkoff’s alleged (1) that its rights under the Perishable Agricultural Commodities Act may not be vitiated by an arbitration agreement; (2) that the court has no jurisdiction to stay a proceeding pending before a Federal administrative agency; (3) that no agreement or contract exists between the parties requiring arbitration; and (4) that the petitioners have waived any purported right to compel arbitration.

In denying the motion for a stay, the court at Special Term placed its decision upon the ground that it was ‘ ‘ without power to stay the Federal proceeding ”, The Appellate Division affirmed, and the appeal is before us by our permission.

The grant of rights under the Perishable Agricultural Commodities Act was not designed to preclude resort to other statutory or common-law remedies. The statute unequivocally declares that liability under the act ‘ may be enforced either

(1) by complaint to the Secretary as hereinafter provided, or (2) by suit in any court of competent jurisdiction”, and it goes on to provide that this section shall not in any way abridge or alter the remedies now existing at common law or by statute, and the provisions of this chapter are in addition to such remedies” (U. S. Code, tit. 7, § 499e; also, § 499o; see Le Roy Dyal Co. v. Allen, 161 F. 2d 152, 157; Krueger v. Acme Fruit Co., 75 F. 2d 67). The question then arises whether the remedy sought by the petitioners, a stay, is available. The respondents claim that it is not, contending that section 1451 of the Civil Practice Act empowers the New York courts to stay only actions or proceedings pending in New York tribunals and that, accordingly, in this ease the court had no jurisdiction to stay the administrative proceeding before the United States Department of Agriculture.

The argument lacks merit; the courts of this State possess the power to stay proceedings wherever they may be pending. Had it been the design of our Legislature to limit the stay, as urged by the respondents, words were at hand to reflect that design. The Federal arbitration statute, for instance, sanctions a stay only of an action or proceeding ‘1 brought in any of the courts of the United States ” (U. S. Code, tit. 9, § 3). The broad, unqualified language of the New York statute, in sharp contrast with this, simply recites that ‘1 If any action or proceeding be brought upon any issue otherwise referrable to arbitration * * * the supreme court * * * shall stay all proceedings in the action or proceeding” (Civ. Prac. Act, § 1451). The absence of limiting words is, as suggested, significant, bespeaking as it does an intention that the Supreme Court is empowered to stay actions or proceedings irrespective of where they may have been instituted.

The purpose of a stay is to enforce a contractual obligation to arbitrate by preventing other actions or proceedings ineonsistent with that obligation. If onr courts may only prevent inconsistent actions or proceedings in the courts or administrative agencies of this State, they will only be providing partial enforcement of the promise to arbitrate; if the'court’s power to stay were thus limited, the obligation of the contract could easily be frustrated by the prosecution of actions or proceedings in another jurisdiction.

At common law, “ Arbitration agreements * * * meant very little ” because they were not subject to specific enforcement. (See Matter of Feuer Transp. [Local No. 445], 295 N. Y. 87, 91.) It was dissatisfaction with this situation that led to the enactment of our Arbitration Law. And, as this court observed in the Feuer Transportation case (295 N. Y., at p. 91), ‘ ‘ Under the new statute. arbitration became both orderly and enforcible and was made subject in effect to a decree for specific performance.” ■ To deny to our courts the power to grant specific performance of an arbitration clause by enjoining the prosecution of foreign proceedings would be a step backward. It would partially re-establish the long-abandoned doctrine that an agreement to arbitrate is revocable. We may not and should not take such a step unless expressly directed to do so by the Legislature.

In short, the petitioners seek an order forbidding the respondents from pursuing their remedy before the Department of Agriculture. If the respondents did agree to arbitrate all differences arising from the sale of Japanese horseradish, and if there has been no waiver of that contractual obligation, neither the New York Arbitration Law nor the Federal Perishable Agricultural Commodities Act stands in the way of specifically enforcing the agreement to arbitrate. (Cf. Watkins v. Hudson Coal Co., 151 F. 2d 311, 320, cert. denied 327 U. S. 777; Donahue v. Susquehanna Collieries Co., 138 F. 2d 3, 6-7.) Having personal jurisdiction over the respondents by reason of the fact, if it is one, that they agreed that 1 ‘ Any controversy or claim * * * shall be settled by arbitration in New York, N. Y.”, a decree may be entered enjoining the respondents from continued prosecution of their claim before the Department of Agriculture. (Cf. Arpels v. Arpels, 8 N Y 2d 339, 341; Garvin v. Garvin, 302 N. Y. 96.)

Since Special Term denied the petitioners’ motion on the ground that it was “without power to stay the Federal proceeding”, there must be a reversal—unless it is established that the parties either had not entered into a contract to arbitrate or, having done so, the petitioners had waived their right to arbitration. We turn, therefore, to a consideration of these questions.

The factual dispute concerning the maldng of a contract to arbitrate, outlined above, consists essentially of a disagreement over whether the parties’ initial telephone conversations “ closed the deal ” or whether they were preliminary, or subject, to the subsequent “ Bought Notes ” containing the arbitration clause. Whether these facts fall within our holding in Matter of Albrecht Chem. Co. (Anderson Trading Corp.) (298 N. Y. 437) or our holding in Matter of Helen Whiting, Inc. (Trojan Textile Corp.) (307 N. Y. 360) depends on whose version of the sale is accepted. This must be resolved at a hearing to be held at Special Term.

The respondents’ further claim, also disputed by the petitioners, that there was a waiver of any rights to arbitration by reason of laches on the part of the petitioners and their participation in a hearing before the Department of Agriculture likewise involves a determination of fact calling for a hearing and decision by the court at Special Term. (See Matter of Zimmerman v. Cohen, 236 N. Y. 15, 19; cf. Matter of Terminal Auxiliar Maritima, 8. A. [Winkler Credit Corp.], 6 N Y 2d 294, 299-300; Matter of Haupt v. Rose, 265 N. Y. 108, 110; Nagy v. Areas Brass & Iron Co., 242 N. Y. 97, 98-99.)

The order of the Appellate Division should be reversed, with costs in this court and in the Appellate Division, and the matter remanded to Special Term for further proceedings in accordance with this opinion.

Chief Judge Desmond and Judges Dye, Feoessel, Van Vooeiiis, Bueke and Fostee concur.

Order reversed, etc.