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Aysseh v. Lawn

Decided: February 26, 1981.

EMIL F. AYSSEH, TRUSTEE, PLAINTIFF,
v.
HOWARD M. LAWN AND PEARL B. LAWN, HIS WIFE; DAVID SCHWARTZ AND IRENE SCHWARTZ, HIS WIFE; FRANK MOSS T/A SEASHORE REAL ESTATE; ROY BAYLINSON, TRUSTEE; STATE OF NEW JERSEY; M.E. SABOSIK ASSOCIATES, INC.; CITIBANK, N.A.; LAKEWOOD OIL COMPANY; UNITED STATES OF AMERICA; PARK MOBILE SOUTH, INC.; AETNA BUSINESS CREDIT, INC.; JOHN BOLOGNA; ABRAHAM GRUNWALD; MIGRASH REALTY ASSOCIATES, A PARTNERSHIP; AND PM PARKING FIRST, INC., A DELAWARE CORPORATION, DEFENDANTS



Haines, J.s.c.

Haines

[180 NJSuper Page 393] Emil F. Aysseh, trustee, commenced this suit on August 4, 1980 seeking several forms of relief, one of which was foreclosure of a mortgage securing a note for $1,600,000 given to him by defendant Howard Lawn. The mortgage covers fractional interests in Atlantic City, New Jersey, real property owned by Lawn. Numerous defendants are named in the litigation, some of whom hold mortgages covering various parcels of real estate involved in the proceedings. All of them, including Lawn, have answered. Lawn's answer includes a demand for arbitration; he has also counterclaimed. Loss of some of Lawn's properties was threatened by mortgage foreclosures and other financial difficulties. Cotenants are at odds with each other. As a result, on plaintiff's application and over Lawn's objection, a receiver

was appointed to manage and protect the properties. The litigation is complex and has moved forward with considerable intensity.

On January 8, 1981 Lawn filed a demand for arbitration with the American Arbitration Association. He sought to arbitrate certain disputes arising under a stock transfer agreement affecting the stock of two corporations known as Park Mobile, Inc. and Park Mobile International, Inc. Lawn, Aysseh, his wife Josephine, a Lichtenstein corporation, a Luxembourg corporation and a Panamanian corporation are parties to the agreement. Among other things, Lawn claims that an oral modification of this agreement permits the note and mortgage which are the subject of this suit to be satisfied by a tender of stock pursuant to the stock transfer agreement, and further claims that the stock was tendered and refused. He requests the arbitration panel to require Aysseh to accept the stock, to cancel the note and mortgage, and to discontinue the foreclosure proceedings. Aysseh filed a counter-demand in the arbitration proceedings in which he denied making the alleged oral agreement and denied the right of the American Arbitration Association to arbitrate any questions regarding the note and mortgage in question. At the same time, he demanded arbitration of other claims arising under the stock transfer agreement.

On January 15, 1981, promptly after receiving notice of the demand for arbitration, plaintiff made an ex parte application to this court for an order restraining the arbitration as to the note and mortgage only, and restraining Lawn from commencing proceedings in any other court for the purpose of enjoining the within litigation. The application was granted, notwithstanding the lack of notice to opposing counsel, for two reasons: (1) defendant Lawn's arbitration demand was filed in the State of New York by counsel in Boston, Massachusetts, over which this court had no control, and (2) the giving of notice would have permitted defendant Lawn, through foreign counsel, to make the application sought to be restrained before a hearing could be held. In view of the lack of notice, however, the restraining

order was made returnable the next day so that an immediate application for dissolution could be entertained. Later, counsel agreed to continue the restraints until the matter could be fully briefed and argued. Plaintiff now seeks to make the restraints interlocutory, while defendant Lawn moves for their complete dissolution.

I. The Propriety of the Restraints

Under usual rules, subject to a consideration of "special equities," a court first acquiring jurisdiction over a lawsuit has precedence over a like suit brought in the court of another state. Yancoskie v. Delaware River Port Auth. , 78 N.J. 321, 324 (1978); Devlin v. National Broadcasting Co. , 47 N.J. 126 (1966); Interstate Wrecking Co. v. Palisades Interstate Park Comm'n , 57 N.J. 342, 352 (1971). In such cases, as here, the litigants may be restrained from proceeding in the other jurisdiction. Trustees of Princeton University v. Trust Co. of N.J. , 22 N.J. 587, 598 (1956). When an arbitration proceeding is commenced, after the beginning of litigation, and questions of arbitrability are presented, it is appropriate for the court to restrain the arbitration proceeding until it decides whether the issues in question are subject to arbitration. American Broadcasting Cos. v. American Fed'n of Television and Radio Artists , 412 F. Supp. 1077, 1082 (S.D.N.Y.1976); New Jersey Mfrs. Ins. Co. v. Franklin , 160 N.J. Super. 292, 300 (App.Div.1978); Polshek v. Bergen Cty. Iron Works , 142 N.J. Super. 516 (Ch.Div.1976); Application of Kennelly , 197 Misc. 667, 95 N.Y.S. 2d 240 (Sup.Ct.1950). Questions of arbitrability are present here; it is for this court to decide whether the oral agreement upon which Lawn relies was in fact made and whether it is within the terms of the arbitration clause set forth in the written stock transfer agreement. United Steelworkers of America v. American Mfg. Co. , 363 U.S. 564, 568, 80 S. Ct. 1343, 1346, 4 L. Ed. 2d 1403 (1960); Moreira Const. Co. v. Wayne Tp. , 98 N.J. Super. 570 (App.Div.1968), certif. den. 51 N.J. 467 (1968). The question of waiver may be an issue for the court or for the arbitrators. The answer to that question is not clear; jurisdiction seems to depend upon the

facts. Singer Co. v. Tappan Co. , 403 F. Supp. 322 (D.N.J.1975); Tsakalotos Navigation Corp. v. Sonaco , 259 F. Supp. 210 (S.D.N.Y.1966); McKeeby v. Arthur , 7 N.J. 174 (1851); 16 Williston on Contracts , (3 ed. Jaeger, 1976), ยง 1923 at 580.

When proceedings in a federal court may be affected by a restraining order, however, a different rule applies. State courts and federal courts have concurrent jurisdiction over in personam proceedings and neither may restrain such proceedings in the other court. When the proceedings are in rem , however, the court first acquiring jurisdiction may enjoin proceedings in the other. Thus, in Princess Lida v. Thompson , 305 U.S. 456, 59 S. Ct. 275, 83 L. Ed. 285 (1938), in which suits involving challenges to certain trustees' accounts were brought in the Court of Common Pleas of the State of Pennsylvania and in a United States District Court, the Supreme Court said:

The plaintiffs in the District Court were but two of the five cestuis. One of the others has appeared in the Common Pleas proceeding and excepted to the trustees' accounts. Certain it is, therefore, that if both courts were to proceed they would be required to cover the same ground. This of itself is not conclusive of the question of the District Court's jurisdiction, for it is settled that where the judgment sought is strictly in personam, both the state court and the federal court, having concurrent jurisdiction, may proceed with the litigation at least until judgment is obtained in one of them which may be set up as res judicata in the other. [Footnote omitted.] On the other hand, if the two suits are in rem, or quasi in rem, so that the court, or its officer, has possession or must have control of the property which is the subject of the litigation in order to proceed with the cause and grant the relief sought the jurisdiction of the one court must yield to that of the other. [Footnote omitted.] We have said that the principle applicable to both federal and state courts that the court first assuming jurisdiction over property may maintain and exercise that jurisdiction to the exclusion of the other, is not restricted to cases where property has been actually seized under judicial process before a second suit is instituted, but applies as well where suits are brought to marshal assets, administer trusts, or liquidate estates, and in suits of a similar nature where, to give effect to its jurisdiction, the court must control the property. [Footnote omitted.] The doctrine is necessary to the harmonious cooperation of federal and state tribunals. [Footnote omitted.] While it has no application to a case in a federal court based upon diversity of citizenship, wherein ...


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