Preview:

[*1]


Decided on August 25, 2005
Supreme Court, Kings County
Seymour Escava, et. ano., Plaintiff(s),
against
Hyman Escava, Hsbc Bank USA, et al., Defendant(s). In the Matter of
the Application of Seymour Escava, Petitioner, For a Judgment Staying
the Arbitration Commenced by Hyman Escava, Respondent. Seymour
Escava, Plaintiff(s), Hyman Escava, et ano, Defendant(s). In the Matter
of the Application of

Seymour Escava, Petitioner, For a Judgment Staying the Arbitration
Commenced by Hyman Escava, Respondent. Seymour Escava,
Plaintiff(s), - against - Hyman Escava, et ano, Defendant(s).







1636/04 Yvonne Lewis, J. The parties herein have presented motions on three different actions. Action No. 1, Seymour Escava (Seymour) and Eileen Escava (Eileen)[FN1] v Hyman Escava (Hyman), HSBC Bank USA
(HSBC), Banco Popular and Citibank, N.A. (Citibank), Index No. 1636/04, Action No. 2, Matter of Seymour for a Judgment Staying the Arbitration Commenced by Hyman, Index No. [*2]16/583/04; and Action No. 3, Seymour v Hyman and Joyce Escava (Joyce), Index No. 30200/04, are consolidated for the purpose of the disposition of these motions only.
In Action No. 1, Seymour and Eileen move for an order of attachment against Hyman, pursuant to CPLR 6201 and 6210, in any interest in personal property or debt owed to him or, in the alternative, for an order, pursuant to CPLR 6301, enjoining him or any of his agents or person(s) in possession or control of his personal property, from transferring, alienating, hypothecating or otherwise encumbering any of the those assets to the extent of $1,099,748. Pursuant to the order to show cause, a temporary restraining order restraining and prohibiting Hyman from disposing of or transferring any such property was granted. By notice of motion dated April 8, 2004, Banco Popular moves for an order, pursuant to CPLR 3211, dismissing the amended complaint. By notice of motion dated April 28, 2004, Hyman moves for an order: (1) dismissing the fourth, fifth and sixth causes of action in their entirety and the first and second cause of action, in part, as barred by the Statute of Limitations; (2) compelling arbitration of any claims that are not time-barred; and (3) staying the remainder of this litigation pending completion of the arbitration. By notice of motion dated July 19, 2004, HSBC moves for an order, pursuant to CPLR 3211, dismissing the amended complaint as against it or, in the alternative, granting summary judgment, pursuant to CPLR 3212, on the grounds that the complaint fails to state a claim as against it. By order to show cause dated February 25, 2005, Hyman moves for an order releasing the $357,462.65 that he deposited with the Clerk of the Court pursuant to the order to show cause dated January 20, 2004 and the order of this court dated January 26, 2005.
In Action No. 2, by order to show cause dated May 25, 2004, Seymour moves for a judgment, pursuant to CPLR 7503 (b), staying the arbitration between the parties and directing an immediate trial on the issues of the making of or failure to comply with an agreement to arbitrate; a temporary restraining order staying the arbitration was signed by the court. By order to show cause dated November 3, 2004, Seymour moves for an order staying the effectiveness of a notice dated October 11, 2004, pursuant to which Hyman purported to cancel his interest in Escava Brothers Partnership (Escava Brothers); a temporary restraining order so providing was signed by the court.
In Action No. 3, by order to show cause dated September 23, 2004, Seymour moves for an order: (1) pursuant to CPLR 6301, enjoining Hyman from transferring, encumbering, mortgaging, hypothecating or conveying any asset of Escava Brothers without the consent of Seymour, or borrowing or lending any sums on behalf of Escava Brothers pending the determination of this action; (2) pursuant to CPLR 6201 (3), against the assets of Hyman in personal property or any debt owed to him or, in the alternative, pursuant to CPLR 6301, a preliminary injunction enjoining Hyman or any agent acting on his behalf from transferring, alienating, hypothecating or otherwise encumbering any assets to the extent of $3,000,000; and (3) permitting plaintiff to inspect and copy the books and records of Escava Brothers in Hyman's possession; a temporary restraining [*3]order enjoining Hyman and anyone acting on his behalf from taking any action in connection with the partnership other than the payment of real estate taxes or debt service on any mortgage affecting the property was signed. By notice of cross motion dated November 15, 2004, Hyman moves for an order: (1) pursuant to CPLR 7503 (a), seeking to compel arbitration in accordance with a partnership agreement executed in 1974 and ratified in 1991; and (2) vacating any injunctions and temporary restraining orders presently in effect as a result of plaintiffs' ex parte order to show cause
dated September 23, 2004 (motion sequence no. 001).[FN2]

The Partnership
In 1974, Nathan Escava (Nathan), Seymour and Hyman, who are brothers, established Escava Brothers in order to manage the properties that they owned and to pool their resources to make additional investments. Each of the brothers was an equal partner and unanimous consent was required for all important decisions, including borrowing or lending money; entering into a mortgage, lease or contract; selling or purchasing property; or transferring partnership interests. Their agreement was memorialized in a writing dated August 6, 1974 (the 1974 Partnership Agreement).
As is relevant herein, when the Agreement was executed, Escava Brothers was a passive investor in property located at Third Avenue and 149th Street in the Bronx (the 149th Street Property) and the owner of several Bunnie entities, i.e., children's clothing stores. Escava Brothers has acquired and now holds interests in at least eight real properties located in New York and New Jersey that are valued in the millions of dollars, including one located on Jay Street in Brooklyn
(the Jay Street Property);[FN3] the 149th Street Property is claimed to be worth in excess of $20,000,000. Escava Brothers is not directly involved in the management of the 149th Street and the Jay Street Properties and receives distributions from the managing agent, I.S.J. Management Corp. (ISJ). The checks for the distributions have apparently been sent to the partners at their office, located at 100 Delancey Street in Manhattan.
As is also relevant to the dispute now before the court, paragraph 15 of the 1974 Partnership Agreement (the Arbitration Clause) includes an arbitration clause, which provides that any controversy or claim arising out of or relating to the Agreement or to the breach thereof shall be settled by arbitration and that the arbitrator shall be the brothers' father, Isaac Escava (Isaac), or a member of the law firm of Jaffee Cohen Berman & [*4]Crystal (the Jaffee firm). Ernest Allen Cohen (Cohen) was a member of the Jaffee firm at the time that the 1974 Partnership Agreement was executed and was a family friend and legal advisor for the family and for Escava Brothers for many years.
In 1987, Nathan died. In 1988, at the age of 45, Seymour suffered a serious stroke that he asserts deprived him of many of his functions, including those relating to reading and writing. By agreement, dated June 26, 1991, Nathan's Estate assigned decedent's one-third interest in the partnership to Joyce, his wife, and Joyce, Seymour and Hyman reaffirmed the provisions of the 1974 Partnership Agreement. Therein, Joyce also acknowledged that Hyman and Seymour would make all partnership decisions (the 1991 Ratification Agreement).
In early 2001, Hyman alleges that Seymour began to complain that he was not getting a fair distribution of monies from the various Escava business ventures. Following what Hyman claims was 18 months of negotiations, a settlement agreement was signed on December 4, 2002 between Seymour, Hyman, five other individuals and thirteen other entities (the 2002 Settlement Agreement). The Agreement covers a multitude of issues, is 18 pages long, and includes an additional seven pages of schedules setting forth the property owned by the entities involved, along with a list of shareholders, officers and debts. That Agreement also contained a general release.

Factual Basis of the Parties' Disputes
The instant dispute arises from the breakdown of the relationship between Seymour and Hyman, ostensibly resulting from a deterioration in the family businesses. In reliance upon copies of checks, deposit slips, and other documents, Seymour claims that after he suffered his stroke, Hyman began to appropriate monies due to the partnership for his own use. In brief, without addressing the specifics of each transaction, Seymour alleges that without his consent, Hyman engaged in a pattern of conduct in which he wrote checks against the partnership account and transferred partnership funds to satisfy personal and other non-business related expenses; bought houses for himself and his children; paid tuition for his grandchildren; diverted checks made payable to Seymour and his wife; mortgaged two partnership properties with the Israel Discount Bank (IDB) for $2,500,000 and $650,000, respectively, after forging Seymour's and/or Joyce's signature to the loan documents; and mortgaged another partnership property to the extent of $1,000,000 to Hyman's friend, Jack Benun, also after allegedly forging Seymour's signature and falsifying the notarization.
Seymour also claims that since the inception of the instant dispute, Hyman has transferred personal assets out of his name, while telling this court and the Appellate Division that he was not secreting any property. This allegation is made in reliance upon copies of deeds, dated December 14 and 21, 2003, which demonstrate that Hyman transferred his residence in Brooklyn and two other properties to his wife in her individual capacity. Seymour claims that the value of these properties approximates $8,000,000. Seymour further asserts that on February 3, 2004, Hyman withdrew [*5]$500,000 which had been on deposit in his account with Morgan Stanley and moved it out of state.
Hyman denies these allegations of wrongdoing and explains that Escava Brothers owned 100% interests in some properties, which were held in the name of the partnership, as well as other partial, or passive interests, which were held in the name of the individual partners. Further, over the years, some of the bank accounts maintained by the businesses were held in the name of Escava Realty Company and some accounts were maintained in Hyman's name, individually. Each month, the management company for the Escava Brothers' passive investments mailed the rental/dividend checks, which were made payable to the individual partners, to the partnership office and Hyman deposited them into his personal checking account, which he had earmarked for the benefit of the business. Hyman then used the partnership funds to cover business expenses and to reinvest in or to acquire additional partnership property. Hyman claims that he also used business funds to pay some of Seymour's expenses; he asserts, for example, that the business paid approximately $850,000 for a luxurious summer house for Seymour and Eileen from his personal account. Hyman argues, however, that Seymour was fully aware of the manner in which the partnership money was handled, as was Stewart Rosenberg, Escava Brothers' accountant, with whom Seymour met regularly.
Hyman also accuses Seymour of wrongdoing, claiming that Seymour received some Escava Brothers' checks himself and deposited the money into his personal account, which money properly belongs to the partnership. Hyman also contends that his review of a recently discovered ledger from one of the family's clothing stores revealed disbursements to "Sy" of approximately $2,400,000 in cash over a 15 year period; Hyman further alleges that during the same period, Seymour was fraudulently receiving disability payments from his insurance company and/or from the government, premised upon his claim that he could not work.
Each brother denies the allegations of wrongdoing made by the other and defends his conduct. For example, Seymour alleges that he has never seen the ledgers upon which Hyman relies in accusing him of stealing over $2,000,000, and that the references therein to "Sy" are just as likely references to "Sephardic vendors;" he asserts that he also paid significant business expenses utilizing checks drawn on his personal accounts. Similarly, Hyman alleges that he did not transfer any property to his wife to prevent Seymour from being able to enforce any judgment that he may obtain, but instead transferred the properties in accordance with an estate plan.
In resolving the disputes raised by the pending motions, the court notes that the papers before it are voluminous, having been submitted over a period of more than one year, and are supported by an enormous amount of detail. The parties have also submitted no less than 10 memoranda of law. In addition, the demands for relief as made in each of the three actions overlap. For example, Hyman seeks to compel arbitration in Action No. 1 and Action No. 3, while Seymour seeks to stay arbitration and pursue his [*6]claims in court in all three actions. Similarly, Seymour seeks to attach Hyman's property and to enjoin him from making any transfers in Action No. 1 and Action No. 3. Recognizing this overlap, the parties cross reference affidavits throughout the papers, thereby leaving the court with the task of culling through all of the facts, documentary evidence, and legal arguments in an effort to fashion the parties' arguments as they relate to each demand for relief. Accordingly, instead of addressing each motion individually, the court will determine the issues raised in an attempt to more efficiently dispose of the numerous applications now pending.

Procedural History of the Actions
Action No. 1
On January 16, 2004, Seymour and Eileen commenced Action No. 1, alleging that beginning in 1998, Hyman forged plaintiffs' endorsements on checks made payable to them and converted the sum of $357,462.65 for his own benefit. More specifically, plaintiffs assert that ISJ maintained a checking account with Republic National Bank, which has since been taken over by HSBC. Hyman maintained accounts with Bank Leumi, which has subsequently been taken over by Banco Popular, and European American Bank, which has since been taken over by Citibank.
By amended complaint dated January 25, 2004, plaintiffs allege that commencing in 1989, ISJ issued checks made payable to Seymour or Eileen in the amount of $711,249, drawn by ISJ on its account with HSBC; that the checks were converted by Hyman, without the knowledge or permission of plaintiffs; that Hyman endorsed the checks; and that Hyman deposited the funds into his account at Banco Popular and/or Citibank. Plaintiffs accordingly seek to recover the sum of $711,249 from Hyman, along with punitive damages in the amount of $3,000,000, premised upon causes of action sounding in conversion (first cause of action) and fraud (second cause of action). Plaintiffs also seek to recover said $711,249 from HSBC, Citibank and Banco Popular, claiming that the banks are liable for the funds because they paid the checks over forged endorsements (third cause of action).
Plaintiffs further assert that on November 21, 1989, Hyman asked Seymour to participate in a loan to another of Hyman's friends, Stanley I. Chera (Chera), in the amount of $700,000 (the Chera loan); Seymour asserts that one-half of the loan was attributable to money due to him.[FN4] Plaintiffs deny that they have any knowledge with regard to whether Chera made the interest payments of $50,000, as due between 1991 and 1996, and further aver that on July 2, 1996, without his consent, Hyman released the Chera loan for the assignment to himself, individually, of a 10.38% interest in the 149th Street property owned by I. Chera & Sons. Plaintiffs argue that since this time, Hyman's distributions resulting from this new ownership interest exceeded Seymour's by
$544,988. [*7]Plaintiffs accordingly seek to recover $350,000,[FN5] plus punitive damages in the amount of $3,000,000, premised upon claims of unjust enrichment (fourth cause of action), breach of fiduciary duty (fifth cause of action) and fraud and conversion (sixth cause of action).
Upon commencement of the action, the parties engaged in extensive motion and appellate practice pursuant to which plaintiffs sought to attach Hyman's assets and/or to enjoin him from transferring any property and Hyman sought to vacate the restraints. Hence, by order to show cause dated January 20, 2004, the Honorable Gerald S. Held granted an ex parte temporary restraining order which provided that Hyman and anyone acting on his behalf were restrained and prohibited from transferring or paying any assets in which he had an interest, to the extent of $357,462.65. In response, Hyman offered to deposit that sum into court, without admitting any wrongdoing. That agreement was embodied in an order dated January 26, 2004, which also stated that upon receipt of the funds by the Clerk of the Court, the January 20, 2004 order to show cause and all relief entered pursuant thereto would be vacated and rescinded. These are the funds that Hyman now seeks to have released.
By order to show cause, signed on February 6, 2004, originally returnable on March 26, 2004, plaintiffs obtained an order restraining Hyman from transferring $1,099,748. pending hearing of the motion, arguing that they had discovered that Hyman had purloined additional sums well in excess
of $357,462.65.[FN6] On February 24, 2004, Hyman applied to the Appellate Division for an order vacating the restraint. The Honorable Myriam J. Altman vacated the temporary restraining order, pursuant to CPLR 5704, allegedly premised upon the representation made by Hyman's counsel that Hyman did not secrete assets and that he owned a house in Brooklyn worth in excess of $5,000,000; the judge also advanced the return date of the motion.
Thereafter, arguing that he discovered deeds that established that Hyman had transferred and/or secreted assets valued at approximately $7,000,000, Seymour's attorneys appeared in the Appellate Division before Judge Altman on May 5, 2004 in connection with an application to reinstate the temporary restraining order. Allegedly having been faced with proof that he secreted assets, Seymour asserts that the parties stipulated that Hyman would post an additional $600,000 in security; no order or stipulation so providing has been provided to this court. Seymour now alleges that despite having so agreed, Hyman has not yet posted any additional security.
On February 15, 2005, claiming that he had become aware of misrepresentations [*8]made by Seymour in support of his demand for the temporary restraining order, Hyman obtained an ex parte order pursuant to which the temporary restraining order granted on January 20, 2004 was vacated and $178,731.32, or one-half of the money that Hyman had deposited with the Clerk of the Court pursuant to the January 26, 2004 order, was to be released. Upon being served with a copy of that order, Seymour moved in the Appellate Division to reinstate the restraints. The Honorable Renaldo
E. Rivera granted the application, pursuant to CPLR 5704, only to the extent of striking the provision releasing the money, without prejudice to renewal on notice. Accordingly, by order to show cause, dated February 25, 2005, Hyman moved this court for an order releasing the funds held on deposit with the court.
In addition, HSBC and Banco Popular moved to dismiss the action as against them, premised upon affirmative defenses including: (1) that the banks paid the checks in good faith, (2) that recovery is precluded by the fictitious payee rule, and (3) that the causes of action are barred by the Statute of Limitations. Hyman also cross moved for an order dismissing a portion of the first and second and the entire fourth, fifth and sixth causes of action as time-barred, compelling arbitration of any claim that was not time-barred and staying the remainder of the litigation pending completion of the arbitration.

Action No. 2 (Index No. 16583/04)
On May 25, 2004, Seymour commenced this proceeding seeking to stay an arbitration
demanded by Hyman in a Notice of Intent to Arbitrate dated May 4, 2004. The order to show cause
that commenced the proceeding stayed the arbitration. Pursuant to that notice, Hyman sought
arbitration of the following claims: (1) that there is a disability or inability on the part of Seymour
to make decisions on behalf of the partnership; (2) that Seymour and his agents interfered with the
proper functioning of the partnership by, among other things, unreasonably refusing to consent to
the making of leases on vacant properties; (3) all claims raised by Seymour in Action No. 1, to the
extent not dismissed by the court; and (4) Seymour's liability to the partnership for partnership
assets that he diverted to himself, including tenant rent payments.
By order to show cause dated November 3, 2004, Seymour seeks an order staying Hyman
from cancelling his interest in Escava Brothers pursuant to a notice dated October 11, 2004. That
order to show cause contains a stay of the notice and purports to cancel Seymour's interest in
Escava Brothers, pursuant to paragraph 11 of the 1974 partnership Agreement on the ground that
Seymour has been disabled for two consecutive years. Seymour argues that the right to raise the
issue of his {Seymour's) disability was waived by the Partnership and by Hyman; in that neither the
partnership nor Hyman sought to have Seymour declared disabled at any time (after 1988) when he
suffered the stroke from which his claimed disability appears to stem. Seymour further avers that
the claim that he is disabled is also belied by the parties' conduct, since following his stroke. The
1991 Ratification Agreement was executed, pursuant to which the partners agreed that Hyman and
Seymour would make all partnership decisions, as was the 2002 [*9]Settlement Agreement, which
also provides that Seymour's consent is required to conduct all significant partnership business.
Finally, Seymour asserts that Hyman does not have the right to unilaterally cancel his interest in the
partnership.
Seymour also contends that he will be irreparably injured if a preliminary injunction staying
Hyman from cancelling his partnership interest is not granted, since Hyman's actions, as discussed
above, establish that Hyman is acting on the partnerships' behalf, without his (Seymour's) required
consent and in breach of his fiduciary duty, to the detriment of the partnership and to Seymour.
Action No. 3 (Index No. 30200/04)
On September 23, 2004, plaintiff Seymour commenced this action against defendants Hyman
and Joyce demanding an accounting with regard to Escava Brothers and, upon completion of said accounting, an order directing Hyman to turn over to Seymour all monies determined by the accounting to be due to him. This demand is predicated upon Hyman's alleged misconduct, including the above discussed allegations of self dealing and embezzlement. By order to show cause of the same date, Seymour sought the order of attachment described more fully above, along with an order permitting him to inspect the books and records of the partnership. The order to show cause also contained a temporary restraining order which enjoined Hyman and any person acting on his behalf from taking any action in connection with or on behalf of the partnership, other than the payment of real estate taxes or debt service on any mortgage affecting the property of the partnership.
Hyman's cross motion for an order compelling arbitration of these claims and seeking an order vacating any injunctions and temporary restraining orders that are presently in effect in this case is premised upon the 1974 Partnership Agreement and the 1991 Ratification Agreement.
Joyce submits an affidavit from counsel in which she alleges that Seymour should not be entitled to an accounting of Escava Brothers because of his bad faith and unclean hands, since the agreements entered into between Hyman and Seymour were fraudulent and constituted preferential payments made to her detriment. Arguing that her brothers' actions demonstrate their insensitivity to their fiduciary duties to her, Joyce argues, however, that she should be permitted to designate the accounting firm to perform the accounting and that Hyman and Seymour should reimburse her for legal fees and the cost of the accounting. She further seeks an order directing Hyman and Seymour to each deposit $100,000 with her lawyers, to be held in escrow to pay said expenses, in order to insure their compliance.

Hyman's Demand for Arbitration
Inasmuch as a determination that the instant disputes as between Seymour, Eileen and Hyman must be arbitrated would resolve many of the issues raised in the pending applications, the court will address this issue first. As the following discussion of the law makes clear, this course of action is also an [*10]appropriate starting point inasmuch as a determination that a broad arbitration clause is controlling compels the conclusion that only limited threshold issues should be determined by the court.
Hyman's Contentions
As was noted above, the 1974 Partnership Agreement contains an Arbitration Clause, which provides in full that: "Arbitration: Any controversy or claim arising out of or relating to this Agreement or to the breach thereof shall be settled by arbitration in New York City in accordance with such reasonable procedures as are set forth by the arbitrator. The arbitrator shall be ISAAC ESCAVA, unless he shall be a party to the controversy. If for any reason ISAAC ESCAVA shall not serve as an arbitrator, then the arbitrator shall be a member of the law firm of JAFFEE COHEN BERMAN & CRYSTAL." (1974 Partnership Agreement, para 15).
In addition, the Articles of Limited Partnership for 149th Street Realty Associates (149th Street Realty), the owners of the 149th Street Property, also contain an arbitration clause, which provides, in relevant part, that:"Arbitration Procedure. Any dispute arising under, out of, in connection with, or in relation to this Agreement, or any breach thereof, shall be determined and settled by arbitration in New York City pursuant to the rules then obtaining of the American Arbitration Association then." (Articles of Limited Partnership of 149th Street Realty, para 17.13). Further review of the Articles of the Limited Partnership reveals that Hyman was a general partner and that Nathan, Seymour and Hyman were limited partners and that each Escava brother owned an interest of eight and one-third percent interest in the property as a limited partner.
Hyman also relies upon an affidavit submitted by Cohen, in which Cohen alleges that he has known Seymour and Hyman for 30 years; he was a close personal friend of Isaac; and he handled nearly all of the Escava family's business matters, including drafting the 1974 Partnership Agreement. Cohen explains that it was important to Isaac that all disputes between his sons be resolved quickly and privately by someone who knew them and the business; in fact, Isaac envisioned an informal arbitration in which he would listen to what his sons had to say, review the relevant documents, and provide a solution. If Isaac died, he wanted Cohen to act in his place. That the Escava brothers agreed with this dispute resolution procedure is made clear by the fact that the Arbitration Clause was included in the 1974 Partnership Agreement.
Cohen further alleges that he is currently licensed to practice law in New Jersey and Arizona, he previously practiced law in New York State for 45 years, and he has extensive experience in arbitration. He avers that he has no knowledge of the nature of the disputes or of the merits of the claims at issue between Seymour and Hyman, and that he has refused to discuss these issues with any of them, their families or their counsel. Further, Cohen represents that he is willing to travel to New York to preside over the arbitration.
Hyman thus concludes that the disputes as between himself, Seymour, Eileen and [*11]Joyce must be resolved through arbitration.

Seymour's Contentions
In opposition, Seymour contends that the arbitration should be stayed because the disputes raised in Action No. 1 are not governed by the Arbitration Clause in the 1974 Partnership Agreement. More specifically, Seymour contends that those issues concern the theft of checks drawn by a third-party, ISJ, and made payable to Seymour and/or Eileen, for property that is owned by the individual partners, so that it does not arise under the 1974 Partnership Agreement. Moreover, Eileen is not a party to the 1974 Partnership Agreement. Seymour also asserts that it is impossible to comply with the qualification of the arbitrators as provided in the 1974 Partnership Agreement because Isaac is now deceased and the Jaffee firm is now defunct. Finally, Seymour contends that Cohen should be disqualified because he initiated ex parte communications with Seymour and his wife, during which he discussed the particulars of the case.
It is well settled that arbitration is favored as a matter of public policy (see TNS Holdings v MKI Sec., 92 NY2d 335, 339 [1998]; Matter of Weinrott [Carp], 32 NY2d 190, 199 [1973]) since "this State favors and encourages arbitration as a means of conserving the time and resources of the courts and the contracting parties" (Matter of Nationwide Gen. Ins. Co. v Investors Ins. Co., 37 NY2d 91, 95 [1975]). "The strong public policy of this state encourages the arbitration of disputes and dissuades 'parties to such agreements from using the courts as a vehicle to protract litigation'" (Roffler v Spear, Leeds & Kellogg, 13 AD3d 308, 314, n 1 [2004], quoting Matter of Weinrott [Carp], 32 NY2d at 199). Hence, "[w]hen faced with a broad arbitration clause, which creates 'a presumption of arbitrability,' a court merely determines whether there is 'a reasonable relationship between the subject matter of the dispute and the general subject matter of the underlying contract'" (Domansky v Little, 2 AD3d 132, 133 [2003], quoting Collins & Aikman Prods. Co. v Building Sys., 58 F 3d 16, 23 [1995]; Matter of Nationwide Gen. Ins. Co., 37 NY2d at 96).
In resolving the instant dispute, the court also recognizes that pursuant to CPLR 7501: "A written agreement to submit any controversy thereafter arising or any existing controversy to arbitration is enforceable without regard to the justiciable character of the controversy and confers jurisdiction on the courts of the state to enforce it and to enter judgment on an award. In determining any matter arising under this article, the court shall not consider whether the claim with respect to which arbitration is sought is tenable, or otherwise pass upon the merits of the dispute." Further, pursuant to the statutory scheme, Article 75: "creates 'a hospitable procedural environment that is intended to encourage arbitration,' [under which] the courts play the 'gatekeeping' role of deciding certain 'threshold' issues before compelling or staying arbitration (CPLR 7503). . . . The courts' gatekeeping role is delineated in CPLR 7503, which sets forth three specific issues a court must decide, if called upon to do so, before compelling or staying arbitration. These threshold issues are whether a valid agreement was made, whether the agreement [*12]was complied with, and whether the claim sought to be arbitrated is barred by a statute of limitations." (Merrill Lynch, Pierce, Fenner & Smith v Benjamin, 1 AD3d 39, 43-44 [2003]; accord County of Nassau v Civil Serv. Empls. Assn., 14 AD3d 509 [2005]. Hence, it has been held that "no stay of arbitration is available where 'the parties' agreement to arbitrate the dispute is clear and unequivocal but there is some ambiguity as to the coverage of the applicable substantive provision of the contract'" (Franklin Cent. School v Franklin Teachers Assoc., 51 NY2d 348, 356-357 [1980], quoting Board of Educ. v Barni, 49 NY2d 311, 314-315 [1980]; Matter of Wyandanch Union Free School Dist. v Wyandanch Teachers Assn., 48 NY2d 669 [1979]; Matter of Board of Educ. v Roosevelt Teachers Assn., 47 NY2d 748 [1979]).
In addition, it is well established that the question of whether an agreement is abandoned or terminated involves issues which must be resolved by the arbitrator (In re Estate of Cassone, 63 NY2d 756, 758-759 [1984]; accord Port Auth. v Office of the Contract Arbitrator, 254 AD2d 194, 195 [1998], appeal denied 1999 NY App Div LEXIS 2161 [1999], motion denied, in part, dismissed in part 93 NY2d 913 [1999), motion denied 1999 NY LEXIS 1272 [1999] [the issue of whether an arbitration agreement has been terminated is for the arbitrator]; Two Cent. Tower Food v Pelligrino, 212 AD2d 441, 442 [1995] [it is well-settled that issues which go to the validity of the substantive provisions of a contract are to be resolved by an arbitrator, even where there are allegations that the underlying agreement was abandoned or terminated, which could have the effect of negating the agreement's arbitration clause]. Similarly, once parties to a broad arbitration clause make a valid choice of forum, all questions with respect to the validity and effect of subsequent documents purporting to work a modification or termination of the substantive provisions of their original agreement are to be resolved by the arbitrator (see e.g. Metalink Marine v Ned Chartering & Trading, 207 AD2d 688, 689 [1994], appeal denied 84 NY2d 812 [1995]; accord Fener Realty Co. v NICO Constr. Co., 182 AD2d 436, 437-438 [1992] [termination of a contract's substantive obligations and its replacement with a new agreement are issues which involve conduct of the parties subsequent to the contracting which are to be decided by the arbitrator]).
Discussion
In the matter sub judice, Seymour does not deny that the 1974 Partnership Agreement contains a clause requiring the partners to arbitrate all disputes, that he was a signatory to that Agreement and that the 1991 Ratification Agreement assumed the terms of the 1974 Partnership Agreement. Similarly, Seymour does not argue that there are any conditions precedent that must be complied with for the arbitration provision to be exercised.
Further, the language of the 1974 Partnership Agreement, standing alone, makes it clear that the parties agreed that all disputes arising out of the partnership should be resolved by arbitration. This conclusion finds further support in the above discussed affidavits submitted by Hyman and Cohen, in which each so states. In this regard, it must [*13]also be noted that Seymour does not deny that when the 1974 Partnership Agreement was signed, it was the intent of the parties that all of their disputes should be resolved by arbitration. In addition, although the arbitration clause contained in the Articles of Limited Partnership of the 149th Street Realty is not controlling herein because the disputes as between Seymour and Hyman do not involve 149th Street Realty, the arbitration clause contained in that partnership agreement further supports the conclusion that the Escava brothers agreed that all disputes relating to the family business would be resolved by arbitration.
Accordingly, the Arbitration Clause in the 1974 Partnership Agreement is valid and binding (see generally Morris v Signorelli, 9 AD3d 433, 434 [2004] [arbitration clause in an agreement that provided for the arbitration of "each and every controversy or claim arising out of or relating to this Agreement, or the breach thereof" was held to be broad in scope, clear, explicit, and unequivocal]; Ballon Stoll Bader & Nadler v Kaufman, 210 AD2d 29 [1994] [the court properly concluded that the subject dispute should have proceeded to arbitration where it was not disputed that the plaintiff's predecessor-in-interest agreed to a broad arbitration clause, it was clear that the parties' dispute arose before the expiration date of that agreement and the record demonstrated the parties' intention to be governed by the original arbitration clause]).
This court rejects Seymour's claim that the subject disputes do not arise out of or relate to the 1974 Partnership Agreement. Both Seymour and Hyman agree that the 149th Street and the Jay Street Properties are owned by Escava Brothers, and Seymour repeatedly refers to Escava Brothers as a passive investor in the properties. Thus, money due to Hyman, Joyce, Seymour and/or Eileen as income earned from the property interests owned by Escava Brothers must be construed to arise out of or relate to the 1974 Partnership Agreement. Further, the predicate for Seymour's claim of entitlement to additional monies by virtue of Hyman's agreement to accept the assignment of a 10.38% interest in the 149th Street Property in satisfaction of the Chera loan is the contention that Hyman entered into the transaction by loaning money belonging to the partnership. Accordingly, Seymour's claim, as it is premised upon the Chera loan, must also be characterized as arising out of the 1974 Partnership Agreement. As such, Seymour's characterization of his claims as being separate and apart from Escava Brothers is lacking in merit.
Similarly, there can be no dispute that the issues raised in the Notice of Intention to Arbitrate, which arbitration Seymour seeks to stay in Action No. 2, as well as Seymour's demand for an accounting from the partnership, as demanded in Action No. 3, also arise out of the 1974 Partnership Agreement (see generally City Trade & Indus. v New Cent. Jute Mills Co., 25 NY2d 49, 53 [1969] [the court properly stayed demand for an accounting and directed plaintiff to submit all disputes and issues to arbitration, as was originally provided for in the subject contract on which the accounting was premised]; Garson v Powell, 267 AD2d 277, 277-278 [1999] [the court did not err in denying the [*14]plaintiff's motion to compel an accounting under circumstances where the parties' agreement included a broad arbitration clause, which encompassed the plaintiff's demand for an accounting, and the court directed the parties to arbitrate the matter]; Feffer v Goodkind, Wechsler, Labaton & Rudoff, 183 AD2d 678 [1992] [the imposition of sanctions was not an abuse of discretion under circumstances where plaintiff, a former partner in defendant law firm who sought an accounting and dissolution, had signed a partnership agreement with a broad arbitration clause, but argued that the dispute was not arbitrable because the partnership had been abrogated, since the dispute was arbitrable "without question," so that plaintiff's conduct was designed to delay or prolong resolution of the dispute]). Accordingly, all of the disputes raised in the pending actions as between Hyman, Seymour, Eileen and Joyce must be resolved by arbitration.
Implicit in this holding is the rejection of the claim that Eileen cannot be compelled to arbitrate because she was not a signatory of the 1974 Partnership Agreement. In this regard, it must be emphasized that although both Hyman and Seymour allege that each transferred his interest in the 149th Street Property to his respective wife, no documentation substantiating this claim was
submitted to the court.[FN7] Also significant is the fact that there is no allegation made by either Seymour or Hyman that the said transfers of the interests were effectuated in accordance with Article XI of the Articles of Limited Partnership. This must contrasted with the "Agreement of Assignment and Assumption of Partnership Interest" dated July 2, 1996, pursuant to which I. Chera & Sons assigned its 10.38% interest in 149th Street Realty Associates to Hyman. Similarly, the 1991 Ratification Agreement, pursuant to which Nathan's interest in Escava Brothers was transferred to Joyce, was also reduced to writing. In addition, the court notes that Eileen was not mentioned in the 2002 Settlement Agreement, nor was she a signatory thereof, which further supports the conclusion that Escava Brothers did not transfer any ownership interest in the 149th Street Property to her.
Thus, it is concluded that Eileen acquired only an assignment of Seymour's right to receive the income generated by the 149th Street Property, and not an assignment of the ownership interest therein held by Escava Brothers. In this regard, it is hornbook law that an assignee stands in the shoes of an assignor (see e.g. Arena Constr. Co. v Sackaris & Sons, 282 AD2d 489 [2001]; Wald v Marine Midland Bus. Loans, 270 AD2d 73, 74 [2000]; Richard T. Blake & Assocs. v Aetna Cas. & Sur. Co., 255 AD2d 569, 571 [1998]). From this it follows that Eileen is bound by the Arbitration Clause contained in the 1974 Partnership Agreement. Further, any argument that the agreement concerning the assignment of the partnerships' interest in the money generated by the 149th Street [*15]Property superseded the partnership agreement would also be for the arbitrator to decide (see
e.g. Domansky v Little, 2 AD3d 132, 134 [2003], citing Matter of Cassone, 63 NY2d at 758-759).

Seymour's Claim that Arbitration is Impossible
Seymour's contention that the instant disputes cannot be arbitrated pursuant to the 1974 Partnership Agreement because it is impossible for the arbitrators named in the Agreement to serve is incorrect. In making this determination, the court is guided by CPLR 7504, which provides that: "If the arbitration agreement does not provide for a method of appointment of an arbitrator, or if the agreed method fails or for any reason is not followed, or if an arbitrator fails to act and his successor has not been appointed, the court, on application of a party, shall appoint an arbitrator." In interpreting this provision, it has been held that once the court concludes that parties clearly intended that all disputes should be resolved by arbitration, the only issue to be resolved is the designation of the arbitrator (see generally Sawyer Co. v. John W. Cowper Co., 55 AD2d 774, 774

Download 2005_51358.pdf

New York Law