Opinion
HUSC 236-06.
Decided July 19, 2007.
Alexander Yarmosh, Plaintiff Pro-se, Eric Sachs, Esq., Attorney for Defendant Bellmore, NY.
In this action the plaintiff, Alexander Yarmosh, alleges he made a series of four $5,000 loans to the defendant, William Lohan. Previously, on December 29, 2005, plaintiff brought suit in the Suffolk County District Court, Third District Court (Index No. HUSC 982-05) seeking the small claims jurisdictional maximum judgment of $5,000. The action was dismissed as the parties voluntarily submitted to final and binding arbitration by agreeing to the "People's Court Rules" and signing an "agreement to arbitrate." On February 8, 2006, the arbitrator, Marilyn Milian, found for the plaintiff and awarded the plaintiff $5,000 in damages. On April 6, 2006, the plaintiff commenced this action in the Third District Court (Index No. HUSC 236-06); this time seeking repayment of another $5,000 loan, the proceeds of which were given to the defendant's employer. The defendant requests dismissal of the present claim on the grounds of res judicata.
Facts
The parties do not dispute that the plaintiff made a loan to the defendant which the defendant used to pay his employer to forebear from prosecuting an embezzlement claim.
The parties are in dispute over the total amount that the defendant borrowed. The plaintiff claims he made four separate $5,000 loans totaling $20,000. The defendant admits to borrowing only $4,000. The corroborative proof other than the plaintiff's testimony, is limited to the one $5,000 check dated 6-2-03 payable to cash and endorsed by the plaintiff. Exhibit No. 1.
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Issues Presented
1) Whether Res Judicata applies to arbitration awards and proceedings?
2) Whether the alleged loan transaction made between the parties, arise out of same transaction, such that the principles of res judicata bar re-litigation of this claim?
Discussion
" Res Judicata"
Under the Uniform District Court Act § 1804, "the Court shall conduct hearings upon small claims in such a manner as to do substantial justice between the parties according to the rules of substantive law."NY Uniform District Court Act § 1804 (2007). One such principle of substantive law is the concept that disputes resolved by Court decision cannot be re-litigated. The doctrine of res judicata operates as an absolute bar to a subsequent cause of action when there is "a final judgment on the merits involving the same cause of action and the same parties are involved in the supplemental proceeding." Brewery Workers Pension Fund v. New York State Teamsters Conference and Retirement Fund, 62 AD2d 1046 (2nd Dept. 1978). Res judicata operates to prelude the renewal of issues litigated and resolved in a prior proceeding which arise out of the same "factual grouping" or "transaction" and which should have or could have been resolved in a prior proceeding. Ordenana v. Weber, 269 AD2d 580 (2nd Dept. 2000). The rule of res judicata is founded upon the belief that "it is for the interest of the community that a limit should be prescribed to litigation and that the same cause of action ought not to be brought twice to final determination. The public tranquility demands that, having been once so tried, all litigation of that question, and between those parties, should be closed forever." Ryan v. New York Telephone Co., 62 NY2d 494 (1984).
"Res Judicata applies to arbitration awards with the same force and effect as it applies to judgments of the court." See, McNally Intern Corp. V. New York Infirmary-Beekman Downtown Hosp., 145 AD2d 417 (2nd Dept. 1988). Once a controversy is heard and a decision has been made either by an arbitrator, a commissioner, or a judge "that is the end of the matter." Simpson v. County of Westchester, 5 AD3d 780 (2nd Dept. 2004).
A review of the submitted documents indicates that the People's Court is a binding arbitration forum and its decision is final upon the parties to the proceeding. Once the parties agreed to arbitrate their Index No. HUSC 982-05 dispute, the action pending in this Court was dismissed with prejudice. Applying the afore mentioned principle, res judicata is applicable to the instant action.
Transactional Analysis
The threshold dispositive issue in dispute concerns whether the four disputed loan transactions are inseparable loans arising out of the same transaction or conversely, are four separate and distinct loans made on separate days for separate reasons. The defendant claims that the four loans arise out of the same transaction such that the People's Court decision bars re-litigation of subsequent additional claims under principle of res judicata. The plaintiff claims that he can bring four separate actions for the four separate loans and that the principle of res judicata is inapplicable.
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The New York Courts utilize a transactional analysis approach in deciding res judicata issues. Under the transactional analysis, once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based on different theories or if seeking a different remedy. O'Brien v. City of Syracuse, 54 NY2d 353 (1981). The term transaction is to be given a pragmatic interpretation, taking into account the setting and expectation of the parties at the time. Zarcone v. Perry, 78 AD2d 70 (2nd Dept. 1980).
Upon reviewing the two separate complaints, the written submissions of the parties, and after hearing the testimony of the witnesses; the Court finds that the four loans arose out of the same transaction. The plaintiff's contention that the gravamen of the two proceedings are distinct is without merit. Both actions were premised around the same transaction involving the same issue; the repayment of a single purpose loan made by the plaintiff to the defendant for the benefit of the defendant's employer. The loan transactions involved the same chief participants, the same dollar amount, the same ultimate purpose and where effected over a relatively short period of time. See, Ecker v. Lerner, 123 AD2d 661 (2nd Dept. 1986).
Claim Splitting
The plaintiff's failure to bring his claim as a single action is a clear demonstration of "claim splitting." The New York "claim splitting" doctrine requires a plaintiff to join all installments due under a single contract at the time suit is commenced. If the plaintiff has a money claim against the defendant in a small claims proceeding, and sues for only part of what is presently due, the plaintiff forfeits the rest under the splitting rule. A J Enterprise Solutions v. Business Applications Outsourcing Technologies, Inc. 11 Misc 3d 173 (Dist.Ct. Nass. Co. 2005). With respect to a single matter, there should not be more than a single lawsuit so as to prevent harassing and vexatious litigation. Pfeiffer v. Allstate Insurance Co., AD2d 532 (2nd Dept. 1988). The claim splitting doctrine prevents litigants from circumventing the Small Claims Court's limited jurisdiction.
The Court need not determine the factual dispute of whether the loan was $4,000 or $20,000. The dispute between the parties over the amount owed is inconsequential and moot as all of the alleged loans arose out of the same transaction, which has already been arbitrated.
Accordingly, the plaintiff's complaint is dismissed and any subsequent claims brought by the plaintiff regarding additional pre-existing loan transactions made by the plaintiff to the defendant are likewise barred.