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WESTON FUNDING CORP. v. LAFAYETTE TOWERS

March 9, 1976

WESTON FUNDING CORPORATION, Plaintiff,
v.
LAFAYETTE TOWERS, INC., a corporation of the State of New Jersey, and George C. Peck, Defendants



The opinion of the court was delivered by: CARTER

ROBERT L. CARTER, District Judge.

 Defendants have moved, pursuant to Rule 56, F.R.Civ.P., for summary judgment on the grounds of res judicata. For the reasons set out below, the motion is granted.

 Prior Proceedings

 This is an action for brokerage commissions brought by plaintiff Weston Funding Corp. ("Weston"), a New York corporation, against defendants Lafayette Towers, Inc. ("Lafayette"), a New Jersey corporation, and George C. Peck, Lafayette's sole shareholder, a New Jersey resident. On November 1, 1973, the plaintiff corporation and the defendants entered into an agreement whereby Weston was given the exclusive right and authorization (for a period of seven days) to obtain a standby commitment for end loans in the sum of $4,500,000 relative to the financing of Lafayette Towers. Weston was to receive as compensation an amount equal to 3 1/4 % of the total commitment, such sum to be deemed earned and payable when the letter of commitment was issued. This agreement was signed by Peck on behalf of Lafayette and was extended orally by the defendants.

 By February, 1974, Weston was finally successful in obtaining a written construction loan commitment from the First National State Bank of New Jersey for the full sum of $4,500,000. On February 25, 1974, Weston wrote to Peck to inform him of the loan commitment. The letter went on to recite as follows:

 
"CONFIRMING OUR AGREEMENT AND UNDERSTANDING THE AMOUNT OF $191,250 HAS BEEN EARNED AND IS DUE AND PAYABLE TO WESTON FUNDING CORPORATION FOR THEIR BROKERAGE SERVICES IN THIS MATTER.
 
"YOUR SIGNATURE BELOW IN BOTH PLACES WILL CONSTITUTE YOUR ACCEPTANCE AS AN INDIVIDUAL, AND, FOR THE CORPORATION."

 At a subsequent meeting in New Jersey, Peck signed the letter as "accepted and approved" on behalf of himself and Lafayette. Peck then produced a check in the sum of $25,000 as partial payment of the commission due to Weston. The defendants have made no further payments pursuant to the November 1, 1973, agreement. It is plaintiff's contention that the defendant subsequently used the loan commitment obtained by Weston as a springboard to obtain loans from different sources without the plaintiff's knowledge.

 On May 21, 1974, Weston filed a complaint in the United States District Court for the District of New Jersey (Civil Action No. 74-746), alleging the facts as stated above and demanding the balance allegedly due for their brokerage services in the amount of $166,250, together with interest and costs. On June 22, 1974, defendants filed an answer and counterclaim, followed by a motion for summary judgment filed on September 21, 1974. On November 6, 1974, Judge James A. Coolahan granted summary judgment in favor of defendants on the grounds that under New Jersey law only brokers licensed in New Jersey could bring suit for commissions in the courts of that state, and that plaintiff was not so licensed. Weston then filed a notice of appeal from the grant of summary judgment in defendants' favor. On March 18, 1975, however, the parties stipulated to a dismissal of the appeal. In May, 1975, Weston filed a new action in the Southern District of New York realleging the same facts and causes of action as in the prior New Jersey action. *fn1" Defendants answered and have now brought on the instant motion for summary judgment. *fn2"

 Discussion

 I.

 It is well settled that for a judgment in a prior action to be a bar to reaching the merits in a subsequent action the following elements must be established. First, the prior judgment must have been rendered by a court of competent jurisdiction; second, the prior judgment must have been a final judgment on the merits; and third, the same cause of action and the same parties or their privies must have been involved in both suits. *fn3"

 I have no difficulty in deciding that the first and third of these elements have been satisfied. *fn4"

 II.

 The second element -- whether the prior judgment is deemed to be "on the merits" requires further elaboration.

 The requirement that a judgment, to be res judicata, must be rendered "on the merits" guarantees to every plaintiff the right once to be heard on the substance of his claim.

 
"Thus, ordinarily, the doctrine may be invoked only after a judgment has been rendered which reaches and determines 'the real or substantial grounds of action or defense as distinguished from matters of practice, procedure, jurisdiction or form,' Clegg v. United States, 112 F.2d 886, 887 (10th Cir. 1940), and, at common law, a dismissal on a ground which did not resolve the substantive merit of the complaint was not a bar to a subsequent action on the same claim. Hughes v. United States, ...

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