D. M. C. Construction Corp. v. A. Leo Nash Steel Corp.

— Appeal by A. Leo Nash Steel Corp., as limited by its brief, from so much of an order of the Supreme Court, Kings County, dated September 7, 1978, as (1) granted the motion of D. M. C. Construction Corp. for a change of venue, of a proceeding commenced by A. Leo Nash Steel Corp. to confirm an arbitrator’s award, from the Supreme Court, Erie County, to the Supreme Court, Kings County, and (2) directed that a hearing be held on D. M. C. Construction Corp.’s motion to vacate the award upon the ground that one of the arbitrators was biased. Order reversed insofar as appealed from, with $50 costs and disbursements, and the motion for a change of venue and the motion to vacate the arbitrator’s award are denied, without prejudice to renewal in Erie County. D. M. C. Construction Corp. (hereinafter D. M. C.) is a general contractor with offices in Brooklyn. A. Leo Nash Steel Corp. (hereinafter Nash Steel) is a Massachusetts corporation with its principal place of business in that State. In September, 1974 D. M. C., as general contractor, and Nash Steel, as a subcontractor, entered into an agreement whereby the latter agreed to perform certain steel work in connection with the construction of a building known as the Niagara Geriatric Center in Niagara Falls, New York. In January, 1975 Nash Steel completed its work and sought payment. D. M. C. demanded that Nash Steel reduce its bill by approximately $60,000 upon the ground that Nash Steel’s tardy. completion of the work had damaged D. M. C. in that amount. This demand was refused by Nash Steel and D. M. C. commenced an action in the Supreme Court, Kings County, to recover damages from Nash Steel for breach of contract. Thereafter, Nash Steel filed a mechanic’s lien against the property and brought suit to foreclose its lien in the Supreme Court, Niagara County. At the same time, Nash Steel served a demand for arbitration upon D. M. C. pursuant to a broad arbitration clause contained in the September, 1974 contract between the parties. CPLR 7503 (subd [a]) provides that where an issue claimed to be arbitrable is involved in a pending action, an application to either stay or compel arbitration must be made in the pending action rather than by means of a separate special proceeding. D. M. C. disregarded the mandate of the statute despite (1) the pendency of the Niagara County action by Nash Steel to foreclose its mechanic’s lien and (2) the pendency of its own Kings County action to recover for breach of contract. Instead, D. M. C. commenced a separate special proceeding by service of an order to show cause and petition for a permanent stay of arbitration (Kings County Index No. 6098/ 75). Nash Steel did not object to this unauthorized procedure but, rather, cross-moved in the special proceeding to compel arbitration. Special Term, Kings County, dismissed D. M. C.’s petition seeking a stay of arbitration, granted Nash Steel’s application to compel arbitration and stayed prosecution of the two pending actions. On appeal, this court affirmed (Matter of D. M. C. Constr. Corp. v Nash Steel Corp., 50 AD2d 560). D. M. C. then moved in the special proceeding (Kings County Index No. 6098/75) to change the venue of the arbitration to Kings County. Special Term, Kings County, granted the requested change of venue. This court affirmed (Matter of D. M. C. Constr. Corp. v Nash Steel Corp., 51 AD2d 1040), but the Court of Appeals reversed and directed that the arbitration be held in the place chosen by the arbitrators, the City of Buffalo in Erie County (41 NY2d 855). D. M. C.’s next step was to commence what amounted to an entirely new special proceeding in Kings County (Index No. 5129/77) to disqualfiy the American Arbitration Association from administering this arbitration. Special Term, Kings County, denied that application. Then D. M. C. moved for discovery in aid of arbitration, with its papers bearing both Index Nos. 6098/75 and 5129/77. That motion was granted. On May 26, 1978, after a hearing, the arbitrators awarded Nash Steel $194,260. On August 16, 1978 Nash Steel commenced a special proceeding to confirm the arbitrators’ award in the Supreme Court, Erie County. On August 23, 1978 D. M. C. moved in Supreme Court, Kings County, with its papers again bearing both Index Nos. 6098/75 and 5129/77, to change the place of venue of Nash Steel’s new special proceeding to confirm the award from Erie to Kings County and at the same time it moved to vacate the award upon the ground that one of the arbitrators was biased. On September 7, 1978 Special Term, Kings County, (1) granted D. M. C.’s motion to change the venue of Nash Steel’s proceeding to confirm the award to Kings County, (2) ordered a hearing to be held there on D. M. C.’s motion to vacate the award, and (3) consolidated the proceeding to confirm with the proceeding to vacate the award. Nash Steel has appealed from this order. CPLR 7502 (subd [a]) and CPLR 7503 (subd [a]), when read together, require that the "first application” arising out of an arbitrable controversy must be made by making a motion to either stay or compel arbitration in a pending action if the issue claimed to be arbitrable is involved in that pending action, and if no such action is pending, then the application to compel or stay arbitration must be made by instituting a special proceeding for that relief. All "subsequent applications” must also be made in the pending action or special proceeding (CPLR 7502, subd [a]). By making its first application concerning the arbitration by means of a special proceeding rather than by motion in one of the pending actions, D. M. C. charted its own procedural course through the courts, and Nash Steel acquiesced in this unauthorized procedure by failing to object. The result is that although the actions for breach of contract and to foreclose the mechanic’s lien are still pending, the parties must be governed by the rules governing special proceedings. The case of Matter of Probst (Midwest Mut. Ins. Co.) (39 AD2d 914, affd 32 NY2d 634) stands for the proposition that prior special proceedings to compel or stay arbitration are no longer pending after a judgment is entered directing arbitration and the arbitration has been held pursuant thereto. Since the original proceeding is no longer pending, Probst (supra) holds that a new special proceeding to confirm the arbitrator’s award may be commenced and the venue of that new proceeding may be selected as if there had been no prior proceedings. CPLR 7502 (subd [a]) governs the selection of venue of special proceedings involving arbitration. It provides, in substance, that such proceedings may be brought (1) in the county specified in the contract, or if not specified, (2) in a county where one of the parties resides or does business, or if there is no such county, (3) in a court in any county or in a court in the county where the arbitration was held. Since the instant contract was silent as to venue, the statute required that venue of the special proceeding be laid in a county in which one of the parties resides or does business. Nash Steel is a foreign corporation with its offices in another State. D. M. C. is a domestic corporation with offices in Kings County. Accordingly, the proper venue for the new special proceeding was Kings County where D. M. C. does business and not Erie County. Where venue is laid in an improper county, a party wishing to change venue as of right to a proper county must serve a demand to change the place of trial to the proper county at any time before the service of a responsive pleading is due (CPLR 511, subd [a]). Having failed to serve a timely demand for a change of venue and having failed to make a motion within the 15-day requirement of the statute (CPLR 511, subds [a], [b]), D. M. C. was not entitled to a change of venue as of right (Callanan Ind. v Sovereign Constr. Co., 44 AD2d 292, 295; 2 Weinstein-Korn-Miller, NY Civ Prac, pars 510.06, 511.05). Its motion thus became one addressed to the discretion of the court which could be exercised on either of the grounds specified in CPLR 510 (subds 2, 3). However, a motion to change venue on discretionary grounds is governed by the usual rules of motion practice and must be made in the county where the proceeding is pending or in any county in the judicial district or in any adjoining county (CPLR 2212, subd [a]; McLaughlin, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR 511:1, p 136). The preferred practice is to move in the county in which the objectionable venue was laid (Baker v Poliak & Sons, 277 App Div 11). Where, as here, a motion to change venue on a discretionary ground is made in the "wrong county” and timely objection is raised to the improper venue of the motion itself, Special Term should deny the motion without prejudice to renewal in a proper county. Since the Kings County special proceedings are no longer pending under the rule in Probst (39 AD2d 914, supra), D. M. C.’s motion to vacate the arbitrator’s award should also have been denied without prejudice to renewal in Erie County. Finally, we note that the present procedural tangle has been caused by the failure of the parties to follow the plain mandates of the CPLR with respect to arbitrable disputes. The result, however, is not an exaltation of form over substance. The allegedly biased arbitrator is a resident of Niagara Falls in Niagara County, which adjoins Erie county where the arbitration was held and where Nash Steel’s proceeding to confirm the award was commenced. If a hearing is required on the issue of bias, all the prospective witnesses reside in the area of Buffalo and Niagara Falls and it is unlikely that their convenience would be served by requiring them to come to the other end of the State for a hearing in Kings County. Damiani, Rabin and Martuscello, JJ., concur.