EFCO Corp. v. U.W. Marx, Inc.

124 F.3d 394, 1997 WL 539511
CourtCourt of Appeals for the Second Circuit
DecidedSeptember 3, 1997
DocketNo. 1652, Docket 96-9473
StatusPublished
Cited by50 cases

This text of 124 F.3d 394 (EFCO Corp. v. U.W. Marx, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
EFCO Corp. v. U.W. Marx, Inc., 124 F.3d 394, 1997 WL 539511 (2d Cir. 1997).

Opinion

McLAUGHLIN, Circuit Judge:

BACKGROUND

In July 1991, Joseph Franeese, Inc. (“Franeese”) became the general contractor of a construction project at an elementary school in Troy, New York. Franeese subcontracted with Patriot Door & Window, Inc. (“Patriot”) to put in windows at the school. Around the same time, U.W. Marx (“Marx”) was the general contractor for a similar construction project at an elementary school in New Paltz, New York. Marx also subcontracted with Patriot to put in windows at the New Paltz site.

In June 1991, EFCO Corporation contracted with Patriot to supply the necessary windows to Patriot to use on both projects. Because Patriot was installing windows at both sites and EFCO was supplying the windows for both, confusion arose as to who was paying for what at each project. In mid-January 1992, EFCO got a check for $90,-462.09 from Patriot; a note on the check indicated that it was in payment for EFCO’s windows on the Troy project (Franeese). The check bounced.

A few days later, EFCO’s people spoke with representatives of Patriot and Marx (New Paltz) — but, notably, not Franeese. Patriot explained that a second check was on the way, and Marx now told EFCO that the check was in payment for EFCO’s work on the New Paltz project, not the Troy project. There was no note on this check. Relying on Marx’s representations and apparently failing to compare the amount of the check with its own invoices, EFCO accepted the check as a payment on the New Paltz account (Marx).

Confusion and controversy reigned. In September 1992, EFCO entered into a full release (“the release”) with Marx, upon the understanding that Patriot owed EFCO $17,-884.71 for the work on the New Paltz project. In exchange for Marx’s payment to EFCO of the $17,884.71, the release stipulated that EFCO discharged Marx from any further liability stemming from the New Paltz project and that EFCO would not file any mechanic’s lien against the New Paltz property. Much later, Patriot claimed that Marx had [397]*397been mistaken and that the $90,462.09 cheek had actually been issued for work on the Troy project, and that Patriot owed much more than $17,884.71 on the New Paltz project.

Ultimately, EFCO supplied windows and other materials worth approximately $260,-000 for both projects. Patriot paid EFCO less than half that amount, and neither Marx nor Francese paid the full amount it owed Patriot, their common subcontractor. Apparently bound by the terms of the release, EFCO filed a mechanic’s hen in August 1992, but only against the property at the Troy school (Francese), and not the New Paltz school (Marx).

In February 1993, EFCO sued Patriot, Francese and some other defendants in New York State court to foreclose on the hen in satisfaction of $194,809.32 it claimed it was owed. See EFCO Corp. v. Patriot Door & Window, Inc., No. 1634/93 (N.Y.Sup.Ct. Feb. 11, 1993). EFCO did not sue Marx.

When Francese and other defendants moved for summary judgment, EFCO cross-moved to amend its complaint to add claims of unjust enrichment and quantum meruit against Francese. The court denied the cross-motion because EFCO failed to attach the appropriate supporting affidavit. The court then granted Franeese’s motion for summary judgment on the ground that EFCO failed to file suit to foreclose the hen within the six-month limitations period set forth in section 18 of New York’s Lien Law. See N.Y. Lien Law § 18 (McKinney 1993).

Undeterred, EFCO then turned to federal court. EFCO sued Francese, Marx and Patriot in the Northern District of New York in March 1995, alleging breach of contract and unjust enrichment against Patriot, and unjust enrichment and quantum meruit against Francese and Marx. Francese moved for summary judgment, arguing that EFCO’s claims against Francese were barred by res judicata, based upon the state-court ruling. Marx also moved for summary judgment, pointing to the release and to the absence of a contract between itself and EFCO.

The district court granted both motions. EFCO appeals, arguing that (1) the state-court judgment should not be given preclu-sive effect, because it was not a decision “on the merits”; and (2) it was duped into applying payments to the wrong account and should therefore be able to maintain the current action against all the named defendants, including Marx.

DISCUSSION

We review a grant of summary judgment de novo, drawing all factual inferences and resolving all ambiguities in favor of the nonmoving party. See Torres v. Pisano, 116 F.3d 625, 630 (2d Cir.1997).

I. EFCO v. Francese: Res Judicata

We are required to give the state-court judgment the same preclusive effect it would have in New York. See 28 U.S.C. § 1738 (1994); Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56 (1984). Under New York law, a prior decision dismissed “on the merits” is binding in all subsequent litigation between the same parties on claims arising out of the same facts, even if based upon different legal theories or seeking different relief on issues which were or might have been litigated in the prior action but were not. See Burgos v. Hopkins, 14 F.3d 787, 790 (2d Cir.1994); see also Restatement (Second) of Judgments § 19 cmt. f reporter’s note (1982) (hereinafter Restatement); id. § 25 cmts. d, f and j.

We address two principal questions: (1) whether the state-court judgment was “on the merits” for purposes of res judicata; and (2) whether EFCO’s instant claims against Francese are so related to the lien-foreclosure action that they could have been brought in the state-court action.

A. On the Merits

Under New York law, an action dismissed in a New York court for failure to sue within the applicable statute of limitations is considered a determination “on the merits” for res judicata purposes. See Bray v. New York Life Ins., 851 F.2d 60, 64 (2d Cir.1988) (citing cases); Smith v. Russell Sage College, 54 N.Y.2d 185, 445 N.Y.S.2d 68, [398]*39872, 429 N.E.2d 746, 750 (1981); De Crosta v. A. Reynolds Constr. & Supply Corp., 41 N.Y.2d 1100, 396 N.Y.S.2d 357, 358-59, 364 N.E.2d 1129, 1130 (1977) (citing eases); see also Restatement, supra, § 19 cmt. a. New York courts view such a dismissal as “on the merits” because a statute of limitations is a legislative limit on a party’s ability to bring an action, see United States v. Kubrick, 444 U.S. 111, 117, 100 S.Ct.

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124 F.3d 394, 1997 WL 539511, Counsel Stack Legal Research, https://law.counselstack.com/opinion/efco-corp-v-uw-marx-inc-ca2-1997.