Summary
In Ginsberg v. Coating Products, Inc., 152 Conn. 592, 210 A.2d 667 (1965), Connecticut's Supreme Court construed an agreement providing that "[a]ny controversy arising under or pertaining to this Agreement, or the interpretation, performance or breach of any provision thereof, shall be submitted to and determined by arbitration...."
Summary of this case from Lupoli v. ZempskyOpinion
At the time of the merger of two corporations, the parties executed a stockholders' agreement providing the conditions under which the stock of the merged corporation could be sold. The agreement provided that any "controversy" arising under it, or the interpretation, performance or breach of any provision, shall be submitted to arbitration. A dispute arose over the value of the stock, in the light of provisions of the agreement concerning certificates of value, to be issued annually, as a basis for the value of the shares. The defendants claimed that as a matter of law "controversy" does not include mere valuation or appraisals. Held that the dispute was not merely a controversy over a simple appraisal but was a genuine, bona fide dispute between signatories to the stockholders' agreement and well within the meaning of our arbitration statute ( 52-408). The defendants claimed that the provision that failure to sign any annual certificate of value shall not invalidate the value set forth in the last certificate so signed specifies the sole remedy when there has been no new certificate signed. Held that this provision was intended to guard against some contingency which might prevent the timely signing of an annual certificate and could not be used to force compliance where there is a genuine controversy such as exists here. Where there was no claim that the words used in the stockholders' agreement were ambiguous or of doubtful import, testimony by one of the parties about his intention at the time the agreement was signed was properly ruled inadmissible.
Argued April 7, 1965
Decided May 25, 1965
Application for an order directing the defendants to proceed with arbitration, brought to the Superior Court in Hartford County and tried to the court, Covello, J.; order directing the defendants to proceed with arbitration and appeal by the defendants. No error.
Allyn L. Brown, Jr., with whom, on the brief, was Leo J. McNamara, for the appellants (defendants).
Valentine J. Sacco, for the appellees (plaintiffs).
The defendants have appealed from a judgment directing them to proceed with arbitration in order to ascertain the value of the stock of Coating Products, Inc. Prior to February 20, 1957, the plaintiff S. Leonard Ginsberg was connected with the G. and T. Manufacturing Company, and the defendants Reynold H. Goodman and Myron M. Mainthow were officers of the Crystal Transparent Corporation. On that date the two corporations merged. Crystal Transparent Corporation purchased a half interest in the merged company, which later changed its name to Coating Products, Inc. There are presently issued and outstanding 9600 Shares of stock of Coating Products, Inc., the ownership of which is divided equally among the "Family Units" of Ginsberg, Trehub, Mainthow and Goodman, the latter two holding their shares through their interest in the Crystal Transparent Corporation. When the companies were combined, the parties executed a stockholders' agreement providing the conditions and obligations under which the stock could be sold or transferred. In light of these restrictions and covenants, the parties agreed in paragraph 11 as follows: "The price to be paid for any stock of the Corporation purchased hereunder shall be based on its value per share, as set forth in the latest Certificate of Value signed by Leonard Ginsberg, George J. Trehub and Crystal. In the event Crystal's stock of the Corporation is distributed to Goodman and Mainthow and/or their respective Family Units, then Reynold H. Goodman and Myron M. Mainthow shall sign such Certificates of Value in lieu of Crystal. The parties agree that the present value of one share of the common stock of the Corporation is $62.50. Beginning on or about January 15, 1958 and annually thereafter, the proper parties shall sign a new Certificate of Value; but the failure to sign any such Certificate shall not invalidate the value set forth in the last Certificate so signed. By mutual agreement, the proper parties may sign similar Certificates at more frequent intervals. A copy of each such Certificate so signed shall be kept by each of the signers and filed with the Corporation."
"Family Unit" was defined by the parties as including the named male, i.e., Ginsberg, Mainthow, Trehub and Goodman, "his wife, their children and children-in-law."
Since the initial certificate of value was issued in 1957, two others have been signed, the last being on January 1, 1960, valuing each share of stock at $105 per share. Although the plaintiffs have requested it, no certificate of value has been signed since 1960 because the parties could not agree on the value of each share at any given time.
On December 12, 1963, Ginsberg, on behalf of himself and his wife, the plaintiff Goldie Ginsberg, made a formal demand on the other stockholders for a new certificate of value. The defendants offered to sign a new certificate of value with a valuation of $115 per share; the plaintiffs refused because they did not believe that this was a fair value.
In their agreement, the parties provided in paragraph 20, in part, that "[a]ny controversy arising under or pertaining to this Agreement, or the interpretation, performance or breach of any provision thereof, shall be submitted to and determined by arbitration, unless relief is sought pursuant to the provisions of Paragraph 16." The question is whether, under the circumstances here, "[a]ny controversy", as that term is used in paragraph 20 and the agreement as a whole, includes the present dispute over the certificate of value.
Paragraph 16 gives a remedy by way of an action for specific performance in the event that "any controversy arises concerning the right or obligation to purchase or sell any of the stock."
The defendants argue that as a matter of law, "controversy" does not include mere valuations or appraisals. They cite for support the construction of a New York arbitration statute at a time when it was similar to our present 52-408. Matter of Fletcher, 237 N.Y. 440, 448, 143 N.E. 248. The Fletcher case has been followed in this state in Mott v. Gaer Bros., Inc., 22 Conn. Sup. 449, 454, 174 A.2d 549. On two separate occasions, the New York legislature has nullified judicial constructions of the arbitration statutes which would have limited the scope of the term "controversy". Cf. N.Y. Civ. Prac. Act 1448, 1340; note, "Arbitration as a Means of Settling Disputes within Close Corporations," 63 Colum. L. Rev. 267, 269-72. The legislative history of 52-408 reveals nothing which would indicate an intent to give the word "controversy" a narrower meaning than its normal connotation. In the case at bar, under the court's order, the arbitrators would have to determine not only the ultimate value of each share but also the method to be used in determining that value. In this respect, alone, the dispute here is not merely a controversy over a simple appraisal. It is a genuine, bona fide dispute between the signatories of the stockholders' agreement and well within the meaning of 52-408.
This court approves of arbitration. It is intended to avoid the formalities, delay, expense and vexation of ordinary litigation. Colt's Industrial Union v. Colt's Mfg. Co., 137 Conn. 305, 309, 77 A.2d 301; In re Curtis-Castle Arbitration, 64 Conn. 501, 511, 30 A. 769. No one can be forced to arbitrate a dispute who has not previously agreed to do so, but where there is such an agreement the court is empowered to direct compliance with its provisions. Gores v. Rosenthal, 150 Conn. 554, 557, 192 A.2d 210; Batter Building Materials Co. v. Kirschner, 142 Conn. 1, 5, 110 A.2d 464; International Brotherhood v. Shapiro, 138 Conn. 57, 63, 82 A.2d 345.
The defendants claim error in the court's ordering of arbitration because they argue that paragraph 11 of the stockholders' agreement provides the sole remedy when there has been no execution of a new certificate of value. The language relied on states that "the failure to sign any such Certificate shall not invalidate the value set forth in the last Certificate so signed." The defendants submit, therefore, that the plaintiffs cannot be prejudiced by the failure to agree on a new certificate. We do not accept this line of reasoning. The defendants overlook paragraphs 9 and 10 of the agreement, which provide that in the event of the death of any male member heading a "Family Unit", i.e. Ginsberg, Mainthow, Trehub and Goodman, "the Corporation shall be obligated to buy and the legal representatives of the decedent's estate and members of the decedent's Family Unit shall be obligated to sell all the stock of the Corporation comprising the decedent's Family Unit." At the time of the trial, Ginsberg was sixty-three years of age. The defendants Mainthow, Trehub and Goodman were in their forties. Consequently, having in mind the vicissitudes and uncertainty of life, the necessity of having a current certificate of value in force is readily apparent, and especially so with regard to the plaintiffs. If they are correct in their claim that the value per share is more than the $115 offered by the defendants, then they are certainly prejudiced. Reasonably construed, the provision in paragraph 11, which continues the validity of the last signed certificate of value until a new one is signed, was intended to guard against some contingency which might prevent the timely signing of an annual certificate. The provision cannot be used as a club to force submission where there is a genuine controversy as exists here.
Another error assigned claims that the court should have allowed Mainthow to testify about his intention at the time the agreement was signed. When asked by his counsel whether he intended that "this issue of [a] certificate [of] value should be arbitrated," the plaintiffs' counsel objected on the ground that "the agreement is the best evidence and speaks for itself." The court sustained the objection. This ruling was correct. The agreement must be construed "according to the intention of the parties as expressed in the language used in the document itself, rather than according to the intention which may have existed in the mind of . . . [any one] of the parties." Foley v. Foley, 149 Conn. 469, 471, 181 A.2d 607; Ives v. Willimantic, 121 Conn. 408, 411, 185 A. 427; cf. Connecticut Union of Telephone Workers v. Southern New England Telephone Co., 148 Conn. 192, 200, 169 A.2d 646. There was no claim made at the time of the offer of this evidence that the words used in the stockholders' agreement were ambiguous or of doubtful import. See Perkins v. Corkey, 147 Conn. 248, 252, 159 A.2d 166.
The defendants' assignment of error contending that the court erred in finding, without evidence, certain paragraphs of the finding is lacking in merit.