Matter of Buxton v. Mallery

Andrews, J.

The petitioners and the respondents on June 2, 1924, entered into a somewhat elaborate contract. Mr. Mallery was an inventor and held patents covering a gas producer which burned the lighter and more expensive grades of oil. Buxton and Fisher wished to manufacture machines covered by this patent and lease them to customers. So they obtained a proper license from Mallery and in return agreed to pay him a percentage of the sums received from those renting the producers, a monthly royalty, an annual salary, and $50,500 in installments, and to give him also stock in a corporation to be organized. The contract so made contained many other provisions and among them a clause in regard to arbitration. “ Should disputes arise,” this clause provides, “ in relation to any of the provisions of this contract, the same shall be submitted to the arbitration of three competent and disinterested persons * * * and the decision of the arbitrators shall be binding and conclusive upon the respective parties hereto.”

Disputes do seem to have arisen and in May, 1926, an action was begun by Mallery against Buxton and Fisher. In this action the plaintiff alleging that he has duly per formed all the conditions of the contract claims that the defendants have neglected to keep the agreements made by them. He says that they have not manufactured, installed and leased the gas producers as in the contract provided. They have not made the various payments to him which they should have made. They have not manufactured and leased during the first year of the contract the number of machines which they had agreed to manufacture and lease, and by reason of these various defaults he claims he has been damaged to the extent of more than $74,000. The defendants have appeared in the action but have served no answer. Their claim is that these various provisions which are said to have been violated have been severally waived by the plaintiff and they ask that these disputes be submitted to arbitrators as in the contract provided.

Mr. Mallery opposed the application made by them and succeeded at Special Term. The Appellate Division, however, has granted the motion. That court is clearly right. Mr. Mallery sued to enforce performance of the contract in question. The other parties thereto say that those particular provisions have been waived as they might have said that they had not been broken or that the various sums claimed had been paid. This would seem to be a dispute in relation to the performance of the contract.

The order of reversal, however, is too broad in one respect. It states that arbitration should proceed as to all the matters in "controversy between the petitioners and the respondents set forth in the petition. In the petition it is stated that it was agreed some time after the execution of the original contract that it should be modified so that it should refer to gas producers burning crude oil. Such an invention was to be made by Mr. Mallery. It has been done and under the oral agreement of modification he and the petitioners are bound to enter into a new contract with reference to the promotion of the perfected invention. That, clearly, is not a dispute arising under the provisions of the original contract.

The order of the Appellate Division should be modified directing that arbitration proceed as to all matters in controversy between the appellant and the respondents set forth in the petition under the headings from (a) to (h) inclusive, and as so modified should be affirmed, with costs to the respondents.

Cardozo, Ch. J., Pound, Crane, Lehman, Kellogg and O’Brien, JJ., concur.

Ordered accordingly.