Consolidated Fisheries Co. v. Consolidated Solubles Co.

• Decision Date: 18 September 1953
• Citation: 99 A.2d 497,34 Del.Ch. 60
• Court: United States State Supreme Court of Delaware
• Parties: CONSOLIDATED FISHERIES CO. et al. v. CONSOLIDATED SOLUBLES CO. et al.

Page 497

99 A.2d 497

34 Del.Ch. 60

CONSOLIDATED FISHERIES CO. et al. v. CONSOLIDATED SOLUBLES CO. et al.

Supreme Court of Delaware.

Sept. 18, 1953.

John Van Brunt, Jr. (of Killoran & Van Brunt), of Wilmington, for appellants.

Samuel R. Russell (of Tunnell & Tunnell), of Georgetown, for appellees.

SOUTHERLAND, Chief Justice, WOLCOTT, Justice, and HERRMANN, Judge, sitting.

SOUTHERLAND, Chief Justice.

The essential question presented is whether an order of the Vice Chancellor granting a preliminary injunction in the cause below is an appealable one. The facts are these:

On April 6, 1951, Consolidated Fisheries Company, a Delaware corporation, made a contract with David Levin and Consolidated Solubles Company, a Delaware corporation, for the erection and operation of a plant for the manufacture of a product known as 'condensed fish stickwater'. (The parties will be referred to as 'Fisheries', 'Levin' and 'Solubles', respectively.) Fisheries is engaged in the processing of oils and other substances from fish. A by-product from this process containing certain residual solids is known as 'weak stickwater', and from this by-product may be recovered, by a process of evaporation, another product higher in solid content--the 'condensed stickwater'--which is salable to the poultry industry.

The plant is owned by Solubles, though erected on land leased by Fisheries from the Commissioners of Lewes. Fisheries is to supply the 'weak stickwater' to the Solubles plant, and also to furnish all of the labor, power, supplies and supervision necessary to operate the plant. Fisheries is to supply all services in connection with the sale of the product. Net profits are to be divided between Fisheries and Solubles in the ratio 60% to 40%.

Paragraphs 5 and 6 of the contract provide:

'5. Solubles will pay Fisheries for all power, oil, supplies and labor furnished by Fisheries in the operation of the fish 'stickwater' plant the cost thereof to Fisheries. On all sales made by Fisheries of Solubles, Fisheries shall be paid commissions at the rate of 2% on the net prices received for the condensed 'stickwater'.

'6. All sales made of condensed 'stickwater' processed in the plant of Solubles shall be billed and charged by Solubles, and all receipts on such sales shall be deposited in the account maintained by Solubles. All payments due from Solubles to Fisheries for power oil, supplies and labor shall be made on the tenth of the following calendar month in which the supplies and labor have been furnished.'

The plant was built and has been in operation since sometime in 1951. The business is a seasonal one, operating from about June 1 to October 1 of each year. Sales of 'stickwater' were made by Fisheries during 1951 and 1952, but were made in its own name and the proceeds of the sales were retained by it. In January, 1952, and on other occasions, Solubles protested against this disregard of the contract provisions, but the practice was continued.

Disputes having arisen over the cost of the plant and other matters, Solubles and Levin on December 11, 1952, filed suit in the court below against Fisheries and two individuals, alleging breaches of the contract by Fisheries and failure to account in respect of sales made and moneys received. Solubles seeks an accounting, specific performance of the contract, and other relief.

After the trial of the accounting issue, Solubles on June 15, 1953, moved for a preliminary injunction restraining Fisheries from any breach of the agreement and particularly from any breach of the provisions of paragraph 6 (quoted above). This motion was supported by an affidavit of Levin. This affidavit averred that Fisheries had during the years 1951 and 1952 made sales of large quantities of 'stickwater' in its own name and had appropriated to itself all of the proceeds (excepting one item of $71.19); that Solubles had repeatedly protested against this practice; that Fisheries nevertheless intended to continue it; that the business of Solubles was a seasonal one, operating from about June 1 to October 1 of each year; and that such continued breaches of the contract would inflict upon Solubles irreparable injury, for which it had no adequate remedy at law. No answering affidavit was filed.

On July 7, the Vice Chancellor filed an opinion holding that Solubles was entitled to an injunction restraining Fisheries from selling Solubles' products in its own name and from refusing to deposit the proceeds of sales in Solubles' account. Observing that the contract was still in full force and effect, and its validity undisputed, the Vice Chancellor considered Fisheries' contention that Solubles was indebted to it, and held such indebtedness, if it existed, to be no justification for Fisheries' continued violation of the contract provisions. On motion for reargument he adhered to this conclusion. On July 21, 1953, he entered an order, effective as of July 7, 1953, enjoining Fisheries from selling the product produced in Solubles' plant 'other than as the agent for and in the name of Consolidated Solubles Company and from applying all receipts from the sales of said product other than to the bank account maintained by Consolidated Solubles Company,' as provided in the contract.

From this order Fisheries has appealed. Solubles moves to dismiss on the ground that the order is not an appealable interlocutory order within Art. IV, Section 11(4) of our constitution. Del.C.Ann.

The principles governing the appealability of interlocutory orders in Chancery are well settled by our decisions. See Tatem v. Gilpin, 1 Del.Ch. 13; Tebo v. Hazel, Del.Ch., 74 A. 841; Electrical Research Products, Inc. v. Vitaphone Corp., 20 Del.Ch. 417, 171 A. 738; Consolidated Film Industries, Inc. v. Johnson, 21 Del.Ch. 417, 192 A. 603; Du Pont v. Du Pont, Del., 82 A.2d 376; Martin v. American Potash, etc., Corp., Del., 92 A.2d 295. An order determining real or substantive rights is appealable; but a preliminary order designed merely to prevent threatened injury and to preserve the status quo pending final determination of the cause is not appealable except in the rare case of abuse of discretion.

We are of opinion that the order of July 21 is of the latter kind. Fisheries' conduct was a clear violation of its contract, and an obvious injury to Solubles, which was not only deprived of funds which were its property, but was also prevented from acquiring any good will that might flow from conducting the business under its own name. To permit the continuance of the wrong...