In re the Arbitration between Gunze Silk Corp. & Charles Rudolph Corp.

The contracts involved herein were for delivery of certain quantities of raw silk during August and September, 1941. On July 26, 1941, the Office of Production Management issued General Preference Order M-22 prohibiting all persons from making or accepting delivery of raw silk unless specifically authorized by the Director of Priorities (see 6 Federal Register 3731; also Code of Federal Regulations, tit. 32, ch. 9, § 963.1). This was later interpreted by that governmental agency as not to prohibit transfer of title documents; but on October 16, 1941, the order was amended to prohibit transfer of title documents (6 Federal Register 5290). Performance of the present contract, which called for physical delivery of raw silk, was completely frustrated by the governmental decree, and the arbitration clauses of the contracts were thus rendered unenforcible (Matter of Kahn & Feldman, Inc. [Rothschild], 265 App. Div. 470, affd. 290 N. Y. 781).

The. order should be modified by granting a permanent stay of the arbitration, and, as so modified affirmed, with twenty dollars costs and disbursements to the petitioner.

Towrley, Dore, Corar and Callahan concur; Mártir, P. J., dissents.

Order modified by granting a permanent stay of the arbitration, and, as so modified affirmed, with twenty dollars costs and disbursements to the petitioner. Settle order on notice.