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KOLMER-MARCUS v. DAVID E. WINER (06/19/69)

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FIRST DEPARTMENT 1969.NY.42129 <http://www.versuslaw.com>; 300 N.Y.S.2d 952; 32 A.D.2d 763 June 19, 1969 KOLMER-MARCUS, INC., APPELLANT,v.DAVID E. WINER, AS EXECUTOR OF WILLIAM KOLMER, DECEASED, RESPONDENT, ET AL., DEFENDANT Appeal from an order of the Supreme Court, at Special Term entered on January 24, 1969, in New York County, which granted a motion by defendant executor for an order directing an arbitration of the issue of the purchase price for decedent's share of stock in plaintiff corporation, and directing that such arbitration should proceed. Markewich, Nunez and Bastow, JJ., concur in Memorandum by the court; Eager, J. P., concurs in memorandum; Capozzoli, J., dissents in opinion.


Appeal from an order of the Supreme Court, at Special Term entered on January 24, 1969, in New York County, which granted a motion by defendant executor for an order directing an arbitration of the issue of the purchase price for decedent's share of stock in plaintiff corporation, and directing that such arbitration should proceed.

Markewich, Nunez and Bastow, JJ., concur in Memorandum by the court; Eager, J. P., concurs in memorandum; Capozzoli, J., dissents in opinion.

Memorandum. Order entered January 24, 1969 pursuant to CPLR 7503 (subd. [a]), directing arbitration, is affirmed, with $30 costs and disbursements. Special Term has correctly construed the option agreement dated December 31, 1954 entered into between defendant-respondent's testator and the plaintiff. That agreement established the purchase price of $120,000 only until November, 1955. Thereafter the purchase price was to be fixed annually each November by mutual agreement in writing and if the parties failed to agree, the price was to be fixed by arbitrators. The price-fixing procedures were not followed during the life of the testator. Plaintiff, although not a party to the agreement, was a beneficiary thereunder and the alter ego of Jack Marcus and other members of the Marcus family. It is plaintiff who has commenced this action seeking to enforce the agreement.

A dispute has arisen between the corporate plaintiff and decedent's executor concerning the price to be paid for the stock of the corporate plaintiff owned by the decedent at the time of his death. Kolmer's executor stands in the place of his testator and is entitled to enforce the contract arbitration provision. (See Matter of Buccini v. Paterno Constr. Co., 253 N. Y. 256, 259.) Special Term correctly held that the price for decedent's stock must be determined by arbitration pursuant to the terms of the agreement.

 Special Term properly observed: "The well-settled rules of construction as between the conflicting interpretations of the terms and expressions involved herein require due consideration to all parts of the subject agreement, so as to give effect and meaning to the intentions of the parties which best accords with the sense of the remainder of the agreement as expressed in the unequivocal language employed." In this connection, it is noted that the stock option provisions of the agreement have but one dominant purpose, i.e., to provide a means of smooth transition and fair evaluation of Kolmer's interest at the time of his death, and the agreement should be construed to effectuate that purpose. Accordingly, it is untenable to argue that the arbitration process was restricted to the lifetime of Kolmer, when it had no real meaning, and rejected at the time of his death, when most meaningful. Although not initially raised at Special Term, plaintiff-appellant now urges (1) that the plaintiff corporation not a signatory to the agreement is not bound by its terms to arbitrate the issue of purchase price; (2) that Jack Marcus and the other Marcus family signatories are necessary parties; and (3) that by his laches in demanding arbitration, defendant executor waived his right to demand arbitration. These issues are entitled to little consideration when raised for the first time on appeal (see Rentways, Inc. v. O'Neill Milk & Cream Co., 308 N. Y. 342, 349; Dunning v. Dunning, 300 N. Y. 341) and, in any event, clearly lack merit.

Disposition

Order affirmed, etc.

Eager, J. P. (concurring).

I concur in the affirmance of the order of Special Term. The dissent, discussing at length the matter of the alleged intent of the parties in fixing the price of $120,000 for the stock, states that "there is a complete failure of evidence to indicate that it was ever the desire of the parties to revise the figure of $120,000"; and that "if there was an agreement between them, then their heirs were bound whether the agreed upon price was satisfactory to them or not." If an inquiry with respect to the intent of the parties in connection with the price is necessary and relevant, or if there is an ambiguity in the agreement bearing upon the right of arbitration, then a hearing would be required.

Generally, the fulfillment of conditions precedent to the right of arbitration is to be determined by the court. (See Matter of Wilaka Constr. Co. [ N. Y. C. Housing Auth.], 17 N.Y.2d 195, 198.) If the parties contend that there is an issue of fact as to whether such right exists, they should be afforded the opportnuity of a hearing, with the right to present evidence and to examine and cross-examine witnesses. (See Matter of Princeton Rayon Corp. [ Gayley Mill Corp.), 309 N. Y. 13, 14; Matter of Fineman [ Korman ], 282 App. Div. 937; Matter of Public Affairs Committee [ Dist. 65, Retail, etc. Union ], 15 A.D.2d 645.) But here the parties contend that there is no issue of fact bearing upon the right of arbitration; that the questions involved should be determined on the basis of the alleged unambiguous provisions of the agreement. In any event, on the undisputed facts, I conclude that the plain terms of the agreement are construable as a matter of law to require arbitration of the existing dispute as to the price. The parties agreed that the price "shall be $120,000.00 or such other sum, in accordance with the terms of this agreement as may be agreed upon and fixed in writing and subscribed or initialed by the parties hereto. During the month of November, 1955, and annually thereafter, for the term of this agreement, the First Party and the Second Party shall fix the price at which the shares of stock hereinabove described, owned by the First Party, shall be sold. Said sum so agreed upon shall be the price of the shares for the period commencing September 1, 1955. It is understood and agreed that the purchase price herein is an arbitrary figure. The actual value of the stock is its book value, as reflected on the corporate books."

The aforesaid provisions clearly show the intent and the understanding of the parties. It was agreed that the sum of $120,000 was "an arbitrary figure" and that the parties "shall" yearly fix a sales price for the stock. On this basis, the parties expressly agreed that the price shall be fixed by arbitration if they "shall fail in any succeeding [yearly] period or periods [beginning in 1955] to agreed upon such price".

Here, as a matter of undisputed fact, the parties did "fail" to agree upon a price -- there was no agreement as to price in any yearly period subsequent to the making of the agreement -- and, thus, under the terms of the agreement, there exists the right of arbitration. I conclude that the cause of the failure to agree is immaterial. The party of the first part had the right to rely upon the plain provisions of the agreement that the price would be fixed by arbitration if there was no yearly agreement as to the price. Certainly, it was within the contemplation of the parties that the right of arbitration would continue upon the death of the first party, and upon his death, his executor now succeeds to the right of arbitration since the parties failed to agree upon a price.

Capozzoli, J. (dissenting).

Plaintiff corporation in this action is seeking specific performance of an agreement giving it the option, exercisable on the death of William Kolmer, to purchase his stock in the plaintiff corporation. The defendant, David E. Winer, as executor of said William Kolmer, deceased, does not contest the right of the plaintiff to specific performance of this contract. The issue arises from the disagreement between the parties as to the proper purchase price to be paid for the stock.

The agreement providing for the option was entered into on the 31st day of December, 1954, between William Kolmer, now deceased, first party, and Jack Marcus, Helen Marcus, William Marcus and James Marcus, second party. In essence, it provided for the right of plaintiff corporation to purchase, at its option, the shares of stock of plaintiff corporation, which were owned by the decedent, Kolmer, at the time of his death, at the price set forth in the agreement. This agreement resulted from the reorganization of a men's clothing shop which was originally operated as a copartnership consisting of the deceased, Kolmer, and members of the Marcus family. The partnership was discontinued and the corporation was organized and continued the business. At the time that the ...


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