Goldmann, Freund and Kilkenny. The opinion of the court was delivered by Goldmann, S.j.a.d.
Defendant appeals from a summary judgment entered against him in plaintiff's action to recover the sum of $6,225.74, with interest and costs, for materials sold and delivered.
The complaint, in six counts, was filed June 8, 1959, sometime after defendant had gone bankrupt. The first count was based on an open book account, and the second was a claim for materials sold and delivered. The third count alleged that defendant, having no further credit and in order to obtain materials for the so-called Cherry Valley job, entered into an agreement with plaintiff on September 9, 1955 to secure such materials with combination checks to be issued by Cherry Valley Builders, Inc. to plaintiff and Borek Construction Co. On the same day an agreement for the combination checks was signed by defendant on behalf of himself and the then non-existent Borek Construction Co. which he controlled and operated as his own, which agreement
was accepted by Cherry Valley Builders, Inc. Combination checks were issued until November 1955, when defendant in fraud induced Cherry Valley Builders, Inc. to issue checks to Borek Construction Co. only, which funds were withdrawn on defendant's signature to defraud plaintiff. The fourth count recited that defendant had gone into bankruptcy; plaintiff filed its claim; the referee determined that defendant owed plaintiff $6,445.74, the entire amount of its claim, not dischargeable because of the bankrupt's fraud; and that judgment in that sum was entered in the U.S. District Court, which determination was now res judicata. Count five alleges that an account was thereby determined, upon which defendant paid $225, leaving $6,225.74 due, with interest. The final count alleges a balance owing of $6,225.74, with interest, on a book account.
Defendant in due course filed an answer admitting the allegations of the first and second counts, and denying the remainder. By way of special defense he asserted that plaintiff's negotiations, agreements and business activities were at all times with the corporation -- meaning thereby the alleged corporation known as Borek Construction Co. -- and at no time did he deal with plaintiff as an individual. By way of counterclaim defendant demanded judgment for the $225 he had paid on account.
Plaintiff promptly moved to strike the answer, defense and counterclaim, and for entry of summary judgment. The application was supported by the affidavit of plaintiff's credit manager showing $7,411 due on the claim plus interest, less credits for payments on account. The affidavit charged that the defense to the action was untrue since defendant had no corporation organized at the time of the September 9, 1955 agreements, the certificate of incorporation of Borek Construction Co. having been filed September 26, some 16 days later; and the testimony taken before the referee in bankruptcy disclosed that defendant alone conducted the business of the company, which showed no paid-in capital on its books.
Defendant filed two affidavits in opposition to plaintiff's motion. The first, by his attorney Maressa, stated that he had admitted the first and second counts "through inadvertence and neglect," when in fact they should have been denied. The second, by defendant himself, alleged that "All transactions were executed in the name of Borek Construction Co., never individually." As to the Maressa affidavit, it should be observed that defendant at no time took any step to retract his admissions or to amend his answer. Rather, he filed a motion for summary judgment in his favor, proposing that the complaint be dismissed because "the question at bar is presently pending" before the U.S. District Court. (The question referred to, as shown by another affidavit filed by Maressa, was whether a judgment based on fraud could be docketed against defendant individually by order of the bankruptcy referee.) As for defendant's affidavit, nowhere in the trial court proceedings does he clearly state that at the time of the September 9, 1955 agreements Borek Construction Co. was a legally existent corporation, nor does he anywhere deny its non-existence on that date.
Although there was argument before the County Court judge on August 18, 1959, the return date of plaintiff's motion for summary judgment, no decision was rendered because of the matter pending in the federal court. No record was made of the argument on that day or on the continued dates of August 24 and September 25, 1959. However, a statement by the trial judge, included in the appendix by leave of this court, gives it as the judge's best recollection that at the time of argument he remarked that the matter would be held pending the U.S. District Court decision, and that since there was no dispute as to the amount, he might enter a summary judgment against defendant if that court vacated the judgment entered by the referee in bankruptcy.
In January 1960 the federal judge filed an opinion, In re Borek , 180 F. Supp. 567 (D.N.J. 1960), holding that the
referee lacked the power to direct the entry of judgment against defendant; and on January 14, 1960 he ordered the judgment cancelled, without prejudice to plaintiff's right to proceed against defendant. On being informed of the federal court decision, the county judge wrote both attorneys on January 12, 1960, stating that he was allowing summary judgment and requesting that an order be prepared. Plaintiff's attorney did so, and on January 13, the next day, the court signed an order striking defendant's answer and counterclaim and entering judgment in plaintiff's favor for $7,411 and costs. The order refers to the action taken by the U.S. District Court, finds defendant's application for summary judgment without standing in law or in fact, determines that defendant has no just or legal defense upon the merits, and concludes that by reason of his admissions to owing the debt to plaintiff, as alleged in the first and second counts of the complaint, the ...