From Casetext: Smarter Legal Research

Matter of Grayson-Robinson Stores

Court of Appeals of the State of New York
Jun 10, 1960
168 N.E.2d 377 (N.Y. 1960)


In Grayson-Robinson Stores, Inc. v. Iris Construction Corp., 8 N.Y.2d 133, 202 N.Y.S.2d 303, 168 N.E.2d 377 (1960), the Court granted specific performance of an arbitration award to construct a store in a shopping center.

Summary of this case from City Stores Company v. Ammerman


Argued April 29, 1960

Decided June 10, 1960

Appeal from the Appellate Division of the Supreme Court in the First Judicial Department, HENRY EPSTEIN, J.

Samuel Lawrence Brennglass and Lilburn S. Rogers for appellant. Samuel J. Silverman, H. Russell Winokur and Gerald D. Stern for respondents.

Again, as in Matter of Staklinski ( Pyramid Elec. Co.) ( 6 N.Y.2d 159), the courts are called upon to confirm an arbitration award which, conformably to the express powers given by the parties to the arbitrators, directed specific performance of a contract. Appellant, defaulting in performance and losing its case before the arbitrators, now argues to the courts, as did the losing party in Staklinski and in Matter of Ruppert ( Egelhofer) ( 3 N.Y.2d 576), that enforcement of this award would be contrary to public policy. Specific performance of a contract to construct a building, argues appellant, is never ordered by courts of equity because of the necessity of continuous judicial supervision and control of performance. Therefore, so the argument runs, the same courts will not confirm and enforce an arbitration award which decrees specific performance of the same kind of agreement. We disagree. There is no hard and fast rule against applying the remedy of specific performance to such contracts, especially when the parties have by agreement provided for just that remedy.

In 1955 appellant Iris, owner of vacant land in Levittown, Nassau County, entered into a written agreement with respondent Grayson (later assigned by Grayson to its subsidiary respondent Klein) whereby Iris undertook to erect on the Iris tract a building (part of a "shopping center") to be rented by Iris to Grayson for use as a retail department store for a term of 25 years after completion with certain optional provisions for renewals of the term. Possession was to be turned over to Grayson "on or before September 1, 1957, time being of the essence". The agreement called for arbitration of all disputes and incorporated the rules of the American Arbitration Association which in terms empower the arbitrator in his award to grant any just or equitable remedy or relief "including * * * specific performance".

There were several amendments and extensions of the original contract, but none of these are relevant to our discussion. The plans and specifications for the building were completed or practically completed, a public ground-breaking ceremony was held and excavation commenced, then Iris notified Grayson-Klein that, because of difficulties in getting mortgage money, Iris could not go further unless Grayson-Klein agreed to increase the agreed rent. The tenant declined to pay more. The building has never been completed.

It was, apparently, always the intention of Iris to obtain by mortgage loan the money it needed for construction but there is nothing in the agreement relieving Iris of its obligation, in the event it should find such borrowing to be difficult or impossible. At the arbitration and in the courts Iris has argued "impossibility" but the arbitrators disposed of that issue by ordering Iris to "proceed forthwith with the improvements of the leased premises in accordance with the terms of the said lease, as amended." There was no proof before the arbitrators of any physical or actual impossibility as distinguished from difficulty of financing or additional expense of construction.

It would be quite remarkable if, after these parties had agreed that arbitrators might award specific performance and after the arbitrators had so ordered, the courts would, contrary to the command of article 84 of the Civil Practice Act, frustrate the whole arbitration process by refusing to confirm the award. The only ground suggested for such a refusal is that confirmation would involve the court in supervision of a complex and extended construction contract. We hold that this apprehension or speculation is no deterrent to confirmation by the courts.

There is, of course, an old tradition or approach according to which courts have been reluctant to enforce "Contracts which require the performance of varied and continuous acts, or the exercise of special skill, taste and judgment" because "the execution of the decree would require such constant super-intendence as to make judicial control a matter of extreme difficulty" ( Standard Fashion Co. v. Siegel-Cooper Co., 157 N.Y. 60, 66). In some instances courts of equity in other States have for some such reasons refused to order specific performance of building contracts ( McCormick v. Proprietors of Cemetery of Mt. Auburn, 285 Mass. 548; see discussion in McDonough v. Southern Oregon Min. Co., 177 Or. 136, 150). Other courts of equity have gone the other way (see Jones v. Parker, 163 Mass. 564, which also was a contract to build for a lessee). "There is no universal rule that courts of equity never will enforce a contract which requires some building to be done. They have enforced such contracts from the earliest days to the present time" ( Jones v. Parker, supra, p. 567). On varying facts our New York decisions take one or the other position ( Strauss v. Estates of Long Beach, 187 App. Div. 876; Post v. West Shore R.R. Co., 123 N.Y. 580, 591; Jones v. Seligman, 81 N.Y. 190; Beck v. Allison, 56 N.Y. 366; Conger v. West Shore R.R. Co., 120 N.Y. 29, 32). Modern writers think that the "difficulty of enforcement" idea is exaggerated and that the trend is toward specific performance (5 Corbin, Contracts [1951 ed.], § 1172; 5 Williston, Contracts [rev. ed.], p. 3977; Restatement, Contracts, § 371, comment a). Clearly there is no binding rule that deprives equity of jurisdiction to order specific performance of a building contract. At most there is discretion in the court to refuse such a decree. And here we do not even have an equity suit but a motion made as of right to confirm a completely valid arbitration award conforming in all respects to the express conferral of authority on the arbitrators and meeting all statutory requirements for confirmation (see Civ. Prac. Act, §§ 1461, 1462, 1462-a).

Assuming that the equity court in an original suit would have discretion to refuse specific performance, and even making the very large assumption that the court would have similar discretionary power to refuse to confirm this award, it remains that such discretion, if any, was exercised the other way in this case, and unanimously affirmed by the Appellate Division. That exercise of discretion was justified on the facts. There is nothing extraordinary about this ordinary building contract. Appellant is simply being required to fulfill its promise. If it fails or refuses to obey the judgment, the remedy is in section 773 of the Judiciary Law.

Arbitration is by consent and those who agree to arbitrate should be made to keep their solemn, written promises. Such is New York State's public policy, plainly written in article 84 of the Civil Practice Act. The courts should follow a "liberal policy of promoting arbitration both to accord with the original intention of the parties and to ease the current congestion of court calendars" ( Lawrence Co. v. Devonshire Fabrics, 271 F.2d 402, 410).

The judgment should be affirmed, with costs.

If "Arbitration is not merely a step in judicial enforcement of a claim nor auxiliary to a main proceeding, but the full relief sought" ( Goodall-Sanford v. Textile Workers, 353 U.S. 550, 551), it would relieve the courts if the arbitrators enforced their own awards in specific performance instead of delegating that essential function to the courts after they have been discharged from further duty. Only recently was it settled that an arbitration award will be enforced by the courts which grants, under an appropriate arbitration clause, equitable relief by injunction ( Matter of Ruppert [ Egelhofer], 3 N.Y.2d 576). More recently it was held that our courts would enforce specific performance of an employment contract on an arbitration award ( Matter of Staklinski [ Pyramid Elec. Co.], 6 N.Y.2d 159) even though a court of equity would not compel a man to work for another or to continue another in his employment (see dissenting opinion by Judge BURKE in Matter of Staklinski [ Pyramid Elec. Co.], supra, p. 165). The decision in the present case lends the enforcement machinery of the courts, to implement specific performance directed by arbitration that extends beyond any equitable relief which the courts have heretofore granted either on arbitrations or after trial.

The mechanism for enforcement of this award of specific performance of a complicated construction contract for the erection of a building estimated to cost $5,000,000, is a judgment to be entered following confirmation of the award under section 1466 of the Civil Practice Act which provides that "The judgment so entered has the same force and effect, in all respects as, and is subject to all the provisions of law relating to, a judgment in an action; and it may be enforced as if it had been rendered in an action in the court in which it is entered." This signifies not that the arbitrators but that the court is the agency which will be called upon to supervise the construction of this elaborate and expensive building, and which will be required to do so by the very inappropriate remedy of punishment as for contempt of court. The plans and specifications, whether they have been finally approved by the parties or not, are not before the court and have been materially changed since the contract was made. They have been the subject of long and acrimonious disputes between the parties which are not likely to end with the entry of a judgment on this award for specific performance.

Respondents' brief admits that the enforcement of this building contract will be the responsibility of the court and not that of the arbitrators (pp. 17-18). In a case of this kind, that circumstance closes the gap between what courts and boards of arbitration can do in specific performance where the objection to that form of court relief is impossibility of adequate enforcement. That is the basis on which courts have traditionally declined to grant specific performance of elaborate and time-consuming building construction contracts ( Beck v. Allison, 56 N.Y. 366, 370; Standard Fashion Co. v. Siegel-Cooper Co., 157 N.Y. 60; McCormick v. Proprietors of Cemetery of Mt. Auburn, 285 Mass. 548; Jones v. Parker, 163 Mass. 564; Restatement, Contracts, § 371). This section of the Restatement says: "Specific enforcement will not be decreed if the performance is of such a character as to make effective enforcement unreasonably difficult or to require such long-continued supervision by the court as is disproportionate to the advantages to be gained from such a decree and to the harm to be suffered in case it is denied."

Where difficulty of enforcement is the reason for nonintervention by courts of equity, it is equally a reason on account of which restraint should be exercised in confirming and entering judgment upon arbitration awards where the difficulty of enforcement is precisely the same whether the judgment has been entered on the decision of a court or on an award in arbitration. This objection to the confirmation of this award is not based upon any threatened usurpation by the court of the jurisdiction of the arbitrators. This objection does not arise out of anything which the arbitrators did or omitted in the performance of their functions, but springs from difficulty in enforcement problems which devolve upon the court under the arbitration article of the Civil Practice Act which is invoked by respondents in moving to confirm the award. It was well said by FRANK E. JOHNSON, J., in Queens Plaza Amusements v. Queens Bridge Realty Corp. ( 22 Misc.2d 315, revd. on other grounds 265 App. Div. 1057): "It is a fundamental limitation upon the jurisdiction of any equity court that it will not entertain demands that are inherently unenforcible by it. A decree in personam is enforced by contempt and whether or not there had been default would involve the trial of a question of fact as to plans, specifications, construction details, etc.; the enormous detail indicated by this contract would put the court in a position of a building superintendent and an architect, passing upon an incredible number of problems arising on a building construction large enough to warrant the mortgage of $140,000. This is so plainly outside of the power and function of a Justice of this court that supervision of the performance of such agreements cannot be entertained; they are outside of the practicable limits of equity jurisdiction."

These problems are neither solved nor diminished by the circumstance that this responsibility of supervision of the construction of this building has to be undertaken by the court as the result of an arbitration. If the arbitrators were to remain upon the scene and supervise and enforce the building operations which courts are not created to handle, the result might be different. Once the award has been confirmed and judgment of specific performance entered, the arbitrators depart and the court has to enforce the building contract by contempt proceedings against the appellant and the persons of its officers and agents. The court cannot look to the arbitrators to resolve disputes arising in the erection of this building, either of interpretation of the building contract, plans or specifications, or concerning performance. The theory on which judgment will be entered is that the award is final and definite so that the acts to be performed can be clearly ascertained and the court determine whether or not the performance rendered is in accord with the contractual duty assumed (Civ. Prac. Act, §§ 1461-1462; 5 Corbin, Contracts, pp. 756-760). In order to punish deviation from the specific performance directed, or to decide whether or in what respects there has been performance, substantial performance or nonperformance, the court will be unable to call in the arbitrators to interpret its decree or subrogate them to vindicate its dignity if its decree is violated.

The court cannot appoint a receiver as an arm of the court to take possession of the property and cause the work to be done as was pointed out in Beck v. Allison ( supra). The unsatisfactoriness of contempt of court as the means of enforcement of transactions of this kind is augmented by the inability of the court to punish defaults that are not willful or deliberate ( Staples v. Staples, 206 App. Div. 196; see opinion by McGIVERN, J., in Matter of Chassman [ Probyn], 1 Misc.2d 766).

While "There is no universal rule that courts of equity never will enforce a contract which requires some building to be done", in the words of Justice HOLMES in Jones v. Parker ( supra), the "question is practical rather than a matter of precedent" and specific performance of construction projects can be decreed, said Justice HOLMES, where the possible differences between the parties over the performance of the undertaking are such as lie "within a narrow compass and which can be adjusted by the court." All that was involved there was the installation of heating and lighting apparatus for the benefit of a lessee. Jones v. Parker is "A decision which has often been cited for more than it held" (164 A.L.R. 802, 822). A similar holding was made in Strauss v. Estates of Long Beach ( 187 App. Div. 876) in directing the specific performance of a covenant to construct a sewer in a street in a subdivision in which the plaintiff had already purchased a lot from the defendant. A highway crossing was required to be constructed across a railroad in Post v. West Shore R.R. Co. ( 123 N.Y. 580). Professor Corbin enumerates in section 1172 of his work on Contracts situations where a court "has ordered performance of building repairs and other construction work", relating to such relatively simple matters as the enforcement of contractual obligations for the construction of highway bridges, digging wells, repairing houses, laying sidewalks in subdivisions or refilling excavations after mining or gravel pit operations have been completed. But because this can be done in some instances does not mean that it can be done in all, nor does equitable jurisdiction in arbitrators signify that the courts will enforce anything that arbitrators may do — especially if it is of a nature that has been held to be unenforcible by judicial decree. None of the projects just enumerated approximate the complexity and magnitude of the building operation involved here.

The board of arbitration, without doubt, would have had jurisdiction to award damages to petitioners for any breach of this construction contract which has occurred but they were not asked to award damages. Petitioners told the arbitrators that they did not want damages but specific performance, which it is evident that the arbitrators granted pro forma because the contract said that a building was to be erected, and without considering whether the construction of this building by appellant had become impossible. They appear not to have understood that specific performance is not granted mechanically, that equity does not enforce idle ceremonies, that before making an award of this kind they had to rule upon whether performance had become impossible ( Saperstein v. Mechanics Farmers Sav. Bank, 228 N.Y. 257) and that if it was impossible petitioners would be relegated to damages. The record before us indicates that appellant applied unsuccessfully to 27 different lending institutions in order to obtain the necessary mortgage money with which to erect this building. Petitioners appear to recognize that for this reason the building may not be constructed by appellant even after the entry of a specific performance decree. They profess an intention of suing for damages by the recovery of a fine to be imposed on appellant under section 773 of the Judiciary Law in case appellant is adjudged in contempt (petitioners-respondents' brief, pp. 17-18). This contention presents a double anomaly in that (1) if it is impossible for appellant to construct the building, its failure to do so would not be willful and, therefore, would not subject it to punishment for contempt, and (2) the board of arbitration is deprived of its function to assess damages which should have been claimed and awarded in the first instance in case they found specific performance by appellant to be impossible.

Therefore, even if confirmation were not denied to the specific performance award on account of difficulty in enforcement, the award should be vacated and the matter remitted to the arbitrators to rule upon whether specific performance by appellant is possible and, if they find it is not, to decide upon the question of damages.

Judges DYE, FULD and FROESSEL concur with Chief Judge DESMOND; Judge VAN VOORHIS dissents in an opinion in which Judges BURKE and FOSTER concur.

Judgment affirmed.

Summaries of

Matter of Grayson-Robinson Stores

Court of Appeals of the State of New York
Jun 10, 1960
168 N.E.2d 377 (N.Y. 1960)

In Grayson-Robinson Stores, Inc. v. Iris Construction Corp., 8 N.Y.2d 133, 202 N.Y.S.2d 303, 168 N.E.2d 377 (1960), the Court granted specific performance of an arbitration award to construct a store in a shopping center.

Summary of this case from City Stores Company v. Ammerman

In Grayson-Robinson Stores, Inc. v. Iris Construction Corp. (1960), 8 N.Y.2d 133, 137, 168 N.E.2d 377, 378, 202 N.Y.S.2d 303, 305, the majority found specific performance appropriate where the plans and specifications for the building were completed or practically completed.

Summary of this case from Franklin Point, Inc. v. Harris Trust & Savings Bank
Case details for

Matter of Grayson-Robinson Stores

Case Details

Full title:In the Matter of the Arbitration between GRAYSON-ROBINSON STORES, INC., et…

Court:Court of Appeals of the State of New York

Date published: Jun 10, 1960


168 N.E.2d 377 (N.Y. 1960)
168 N.E.2d 377
202 N.Y.S.2d 303

Citing Cases

Franklin Point, Inc. v. Harris Trust & Savings Bank

As other courts have recognized, specific performance of a construction contract should not be denied simply…

Rust v. Drexel Firestone Inc.

Moreover, the arbitration provision was not imposed unilaterally by the defendant upon the plaintiff; it was…