Matter of Wilaka Constr. Co., 17 N.Y.2d 195 (1966)
Contractual time limits for invoking arbitration can be waived by a party’s conduct, and a broad arbitration clause encompasses disputes over extra work even if the work is initially characterized as corrective.
Summary
Wilaka Construction sought to compel arbitration with the New York City Housing Authority regarding a dispute over extra compensation for corrective work. The Housing Authority argued Wilaka failed to meet contractual time limits for initiating arbitration and that the dispute wasn’t arbitrable. The New York Court of Appeals held that Wilaka had satisfied the initial notice requirement and that the Housing Authority waived subsequent time limits. The Court further clarified that CPLR 7501 prohibits courts from considering the merits of the underlying claim when deciding whether to compel arbitration. The order to arbitrate was affirmed, emphasizing the broad scope of the arbitration clause and the principle that procedural compliance can be waived.
Facts
Wilaka contracted with the Housing Authority to construct a housing project. The contract required Wilaka to construct the framework “true and plumb” within certain tolerances. The Authority informed Wilaka that columns were out of plumb and directed corrective measures without added cost. Wilaka, through its subcontractor Lafayette Ironworks, attributed the problem to faulty plans. The Authority insisted the corrective work was Wilaka’s responsibility. Wilaka requested a meeting, which the Authority refused. Wilaka then informed the Authority that it would proceed with corrective measures while reserving the right to claim increased costs. The Authority acknowledged this reservation and stated they would give the claim consideration. After completing the work, Wilaka submitted a claim which was rejected, leading to the arbitration dispute.
Procedural History
Wilaka sought to compel arbitration in Supreme Court, New York County, which granted the motion. The Appellate Division, First Department, affirmed without opinion. The Housing Authority appealed to the New York Court of Appeals after obtaining permission.
Issue(s)
1. Whether Wilaka complied with the contractual time requirements for invoking arbitration of its claim for extra compensation.
2. If Wilaka failed to comply with the time requirements, whether the Housing Authority waived compliance.
3. Whether the dispute sought to be arbitrated falls within the scope of the arbitration agreement.
4. Whether the alleged disagreement is a bona fide dispute.
Holding
1. Yes, because Wilaka’s letter of August 18, 1961, constituted a timely assertion of its intention to make a claim for extra compensation, satisfying the contractual requirement.
2. Yes, because the Housing Authority’s letter of August 22, 1961, stating it would give Wilaka’s claim consideration “when received,” waived the contractual time limits for further notice of intention to arbitrate.
3. Yes, because the arbitration provision authorizes submission of “all questions relating to compensation, damages, or other payments of money,” and the question of whether the work was extra or corrective is for the arbitrators.
4. The court did not explicitly rule on this issue, stating that the Cutler-Hammer doctrine (requiring a bona fide dispute) had been overruled by CPLR 7501.
Court’s Reasoning
The Court reasoned that Wilaka’s initial letters did not trigger the five-day notice requirement because they were merely providing information or requesting instructions. The August 18th letter, however, clearly asserted Wilaka’s intent to claim extra compensation. The Court emphasized the Authority’s August 22nd letter, stating, “However, we will give your claim consideration in accordance with the terms of the Contract, when received,” as a clear indication of waiver. The court noted that both parties intended the work to proceed, with the Authority considering the claim later. The phrase “in accordance with the Contract” related only to the merits. Addressing the scope of the arbitration agreement, the court held that the broad language encompassed the dispute, and the classification of the work (extra vs. corrective) was for the arbitrators to decide. The court also clarified that CPLR 7501 prevents courts from considering the merits of the underlying claim when deciding whether to compel arbitration, effectively overruling the Cutler-Hammer doctrine. The court stated, “Under this provision, the court may not consider ‘whether the claim with respect to which arbitration is sought is tenable, or otherwise pass upon the merits of the dispute.’” This underscored the judiciary’s limited role in reviewing the substance of arbitrable claims. The Court also found that CPLR 7501 applied retroactively to agreements predating the statute.