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In re Teschner

Supreme Court of New York, Appellate Division

February 23, 1955

In re Teschner

APPEAL from an order of the Supreme Court at Special Term (GOLD, J.), entered August 20, 1954, in New York County, which (1) denied a motion by petitioner for a stay of arbitration, and (2) amended the caption of the proceedings so as to correct the name of respondent union.

COUNSEL

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Murray I. Sommer of counsel (Bogart & Lonergan, attorneys), for appellant.

Irving Rozen of counsel (Milton C. Weisman with him on the brief; Weisman, Allan, Spett & Sheinberg, attorneys), for respondents.

BOTEIN, J.

Petitioner, an individual engaged in a small business, whose only employee was a shipping clerk, entered into a collective bargaining agreement with respondent union containing a sweeping arbitration clause, as well as the following provision: 'The Employer shall have the absolute right to go out of business at any time during the term of this agreement and such right shall not be questioned by the Union. Upon such event, all employees employed more than six months, shall receive two weeks pay.'

Two months later, allegedly because of poor business conditions, petitioner surrendered his store lease, disposed of his stock, discharged his one employee and gave him three weeks' severance pay. The union contends he really has not gone out of business but has continued or resumed business through the device of a newly formed corporation. It asserts, among other things, that petitioner is not, as he claims, an employee of the new corporation but dominates it; and that the corporation deals with the same suppliers and customers as did petitioner, has the same stock in trade, machines and office equipment.

The agreement provides for arbitration of 'all complaints, controversies, disputes, and grievances arising between the Employer and the Union concerning the interpretation, operation, application or performance of the terms of this agreement, or any complaint, controversy, dispute or grievance involving a claimed breach of any of the terms or conditions of this agreement'. The union has served a demand for arbitration of the 'Failure to employ Sol Schor, in violation of clause No. 5 of the said agreement.' The demand, at least on its face, therefore encompasses the submission to arbitration of the question as to whether petitioner has in fact gone out of business, as that circumstance bears directly on whether he has violated clause No. 5 in failing to continue the employment of Schor.

It is, of course, not disputed that the parties entered into an agreement containing an arbitration clause. The only question is whether the contract is still operative as between the parties; and this question hinges on whether or not petitioner really went out of business, as contemplated in the above-quoted clause of the agreement. The issue is not whether petitioner had the

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right to go out of business, a right he clearly enjoyed, but whether he did in fact go out of business.

If the corporation was formed in furtherance of a scheme to avoid petitioner's obligations under the contract, it could follow that the petitioner is still in business within the contemplation of the parties and that he should be held to the provisions of clause No. 5. In this respect the instant case can be distinguished from Matter of Kosoff ('Jones') (276 App.Div. 621), relied on by petitioner, as there the petitioner employer was a corporation which had been legally dissolved; and irrespective of whether it had dissolved in good or bad faith, it no longer survived to be accountable in arbitration proceedings under the contract. Furthermore, as Justice CALLAHAN aptly said (p. 623): 'In this connection it may be noted that the present proceeding is not against an officer or stockholder, and that the employer's business was the manufacture of knitted polo shirts for women and children, whereas the new business in which the president-stockholder of the employer corporation proposed to engage was the manufacture of woven sport shirts for the men's trade.'

In Matter of Shapiro (Rosenblatt) (282 App.Div. 245), also cited by petitioner, there was a preliminary issue as to whether the petitioner partnership 'was, in fact and in law, dissolved' (p. 247). In the instant case, however, there is no question but what the individual petitioner is very much alive. There cannot be, as in the Kosoff and Shapiro cases, any question of the survival of the party to the arbitration agreement.

Nor does analysis of Matter of Binger (Thatcher) (279 App.Div. 650, affd. 304 N.Y. 627) and Matter of Minkin (Halperin) (279 App.Div. 226, affd. 304 N.Y. 617) give any comfort to petitioner. In the Binger case the court found on undisputed facts that the contract had been 'liquidated' by a full and final accord and satisfaction agreement. In the Minkin case (p. 228) the court, again relying on those facts which for the purposes of its decision were undisputed, held that the issue submitted for arbitration was not a 'controversy or claim arising out of, nor does it have relation to,' the parties' agreement. An element ...


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