Opinion
December 26, 1991
Appeal from the Supreme Court, Ontario County, Henry, Jr., J.
Present — Denman, P.J., Doerr, Green, Lawton and Davis, JJ.
Order unanimously reversed on the law with costs, defendants' motion denied, and plaintiff's application granted. Memorandum: Plaintiff school district appeals from separate orders denying its applications to stay arbitration and instead granting cross motions by defendants to compel arbitration of their claims to recover for change orders, extra work, and delay damages in connection with a school construction project. Plaintiff, having expended the entire $9,307,800 authorized in the voters' capital expenditure resolution, seeks to stay arbitration of defendants' claims insofar as they seek interpretation and enforcement of the construction contracts to require payments in excess of the sum authorized by the voters. Plaintiff contends that such payments would violate its statutory spending restrictions (see, Education Law § 416, 1704 Educ. [1]; § 1709 [6]; § 1718 [1]; § 1804 [1]; § 1805; see also, Burhans v Union Free School Dist. No. 1, 24 App. Div. 429, affd 165 N.Y. 661; Union Free School Dist. No. 4 v Grear, 57 Misc. 472, affd 127 App. Div. 922; 7 Opns St Comp, 1951, at 406; see generally, Granada Bldgs. v City of Kingston, 58 N.Y.2d 705, 708; New York Tel. Co. v Town of N. Hempstead, 41 N.Y.2d 691, 695-696; Syracuse Orthopedic Assocs. v City of Syracuse, 136 A.D.2d 923, 924; City of Zanesville v Mohawk Data Sciences Corp., 97 A.D.2d 64, 67). Plaintiff thus contends that arbitration must be stayed on public policy grounds. We agree.
Arbitration is properly stayed where, looking at the subject of the request for arbitration and the demand for relief therein, it must be determined that the arbitrator could not grant the relief requested without violating public policy (Matter of Port Washington Union Free School Dist. v Port Washington Teachers Assn., 45 N.Y.2d 411, 417, citing Board of Educ. v Areman, 41 N.Y.2d 527). Applying that test, we conclude that arbitration should be stayed in this case. Plaintiff concedes that defendants have legitimate claims for extra payment, but plaintiff has already spent the sum authorized. Thus, any sum awarded by the arbitrator would necessarily violate public policy.