Opinion
March 14, 1966
In an action to recover a certain amount of money as the balance due upon a contract and for work labor and services and for an additional amount of money for work labor and services, defendants appeal from (1) an order of the Supreme Court, Queens County, entered August 30, 1965, which granted plaintiff's motion to confirm the report of a Special Referee and denied defendants' motion to compel arbitration and to stay the action; and (2) an order of said court, entered January 27, 1965, which had directed the reference to the Special Referee (to hear and report). Order entered August 30, 1965 modified by providing therein that defendants' motion to compel arbitration and to stay the action is granted and by striking out the third and fourth ordering paragraphs thereof, which are to the contrary. As so modified, said order is affirmed, with $10 costs and disbursements to appellants jointly. Appeal from order, dated January 27, 1965, dismissed, without costs. An order directing a reference to hear and report is not appealable ( Ayers v. Ayers, 16 A.D.2d 926). On November 14, 1962 plaintiff and the corporate defendant Oxford signed a contract for the installation of the central cooling and heating plant in said defendant's building, in accordance with certain plans and specifications, all work to be done in accordance with plaintiff's letter of October 26, 1961. The contract contained an arbitration clause. It also provided that the contract was not to become effective until the plans and specifications were signed by the contracting parties. Thereafter plaintiff completed the job, except for certain work which was not completed at defendants' request. When plaintiff commenced this action, defendants moved to compel arbitration, which plaintiff opposed on the ground that the plans and specifications had never been signed. It is conceded that plaintiff completed the work in accordance with the plans and specifications. Under these circumstances, both contracting parties have by their conduct adopted the plans and specifications; the failure to sign them is inconsequential; there was compliance with a valid agreement (CPLR 7503); and plaintiff should be compelled to arbitrate (cf. Matter of Uraga Dock Co. [ Mediterranean Oriental S.S. Corp.], 6 N.Y.2d 773).
An issue as to the making of a valid contract or as to the fulfillment of conditions precedent to arbitration is for the court (see Matter of Board of Educ. [ Heckler Elec. Co.], 7 N.Y.2d 476, 481-482; Matter of Board of Educ. v. Bernard Assoc. No. 3, 11 A.D.2d 1038; cf. El Ross Eng. Transp. Co. v. American Ind. Oil Co., 289 F.2d 346, 350-351). Proceedings to compel arbitration presuppose the existence of a valid and enforcible contract ( Matter of Kramer Uchitelle, 288 N.Y. 467, 471). Here a contract was signed which specifically provided that it was not to become effective until "the plans and specifications prepared by Samuel Paul, A.I.A. engineers" had been signed by the parties to the contract. The fact is, and the Special Term so found, that neither contracting party signed these plans and specifications. As the Special Referee found, these were not the same plans and specifications which plaintiff had prepared and incorporated in its letter of October 26, 1961. The conclusion is inescapable that the contract by its terms never became effective. It necessarily follows that the arbitration provision of the contract likewise never became effective and, under the law, plaintiff may not be compelled to submit to arbitration in the absence of a valid and enforcible written agreement to arbitrate. To hold, as does the majority, that completion of the work constitutes a waiver of the provision that the contract should not become effective until both contracting parties signed the architect's plans and specifications, is to extend the contract and, necessarily, the arbitration provision thereof, which may not be done (see Matter of Riverdale Fabrics Corp. [ Tillinghast-Stiles Co.], 306 N.Y. 288, 289 and cases there cited). If a party wishes to bind another in writing to an agreement to arbitrate future disputes, this purpose should be accomplished in such a way that each party to the arrangement will fully and clearly comprehend that the agreement to arbitrate exists and binds the parties thereto ( Matter of Arthur Philip Exp. Corp. [ Leathertone, Inc.], 275 App. Div. 102, 104-105). Here the plain meaning of the condition precedent is that the contract and its arbitration provision do not effectively exist and do not bind the parties unless and until they both shall have signed the architect's plans and specifications. Consequently, if plaintiff's completion of the work amounted to a waiver at all, it was a waiver of the written agreement in toto, and not just in part. We regard Matter of Uraga Dock Co. ( Mediterranean Oriental S.S. Corp.) ( 6 A.D.2d 443, affd. 6 N.Y.2d 773) cited by the majority, as distinguishable on its facts. There it was held that performance of the first of three specified conditions precedent to the effectiveness of the contract (i.e., execution of the contract) imposed an absolute mutual obligation on the parties and thus gave rise to an effective agreement. In the instant case, however, the parties did not make execution of the contract a condition precedent to its effectiveness. The only condition precedent here is the signing of the architect's plans and specifications and as to this there was no performance at all. Consequently, execution of the contract in the present case did not impose an absolute mutual obligation on the parties as it did in Uraga ( supra). As was said in Matter of Eagar Constr. Corp. ( Ward Foundation Corp.) ( 255 App. Div. 291, 293-294), "petitioner has failed to comply with the express provisions of the contract on which it relies to compel defendant to arbitrate." Since the effectiveness of the arbitration agreement hinges upon performance of the condition precedent, the fact of nonperformance may not be dismissed as inconsequential. Since a substantial question exists as to whether the contract and its arbitration provision ever became valid (i.e., effective), arbitration was properly denied (see CPLR 7503, subd. [a]).