Massari v. Einsiedler

• Citation: 78 A.2d 572,6 N.J. 303
• Decision Date: 05 February 1951
• Docket Number: No. A--68,A--68
• Parties: MASSARI et al. v. EINSIEDLER. EINSIEDLER v. MASSARI et al.
• Court: United States State Supreme Court (New Jersey)

Page 303

6 N.J. 303

78 A.2d 572

MASSARI et al. v. EINSIEDLER.

EINSIEDLER v. MASSARI et al.

No. A--68.

Supreme Court of New Jersey.

Argued Jan. 8, 1951.

Decided Feb. 5, 1951.

Joseph Weintraub, Newark, argued the cause for the appellant (McGlynn, Weintraub & Stein, Newark, attorneys).

Arthur L. Abrams, Newark, argued the cause for the respondent.

The opinion of the court was delivered by

% Burling, j./

This appeal is from a judgment of the Superior Court, Appellate Division, affirming a judgment of the Superior Court, Law Division, dismissing Charles S. Einsiedler's petition in the first captioned cause and his complaint in the second captioned cause in both of which proceedings Einsiedler sought reformation, together with incidental relief, of a contract upon which suit had been originally brought by the Massaris against Einsiedler and in which judgment had been entered in favor of the Massaris and against Einsiedler. The cause was certified by this court pursuant to a petition therefor by Einsiedler.

The litigation between the parties leading to the present appeal has been extensive and the recital of the procedural background will be limited to such facts as are necessary for a determination of the question presently before us.

On September 17, 1948, the Massaris commenced suit in the Superior Court, Law Division, to collect the unpaid balance of the purchase price alleged to be due under a contract between the parties, dated September 16, 1946, whereby the Massaris agreed to sell a business owned by them and Einsiedler agreed to purchase the same on a deferred payment plan as therein stated, the full purchase price being payable within two years. Summary judgment was entered by the trial court in favor of the Massaris, pursuant to a motion therefor. In that suit, Einsiedler's answer admitted the balance due under the contract but pleaded a loan agreement and a security trust agreement, both dated September 25, 1946. The contract dated September 16, 1946, was executed by the Massaris and Einsiedler, whereas the two subsequent agreements were executed solely by Einsiedler. The purport of the latter two agreements was to require the Massaris to accept shares of stock, at their book value, of a corporation to be formed by Einsiedler, in satisfaction of the unpaid balance of the purchase price of the business so sold in the event of a breach by Einsiedler of the contract of sale, dated September 16, 1946. The trial court held that the security trust and loan agreements, executed solely by Einsiedler, were inadmissible in evidence to vary the terms of payment as contained in the contract of sale. Einsiedler then filed a petition and supplement thereto seeking to compel the Massaris to accept the aforementioned stock at book value in reduction of the judgment. The petitions were dismissed by the Law Division. On appeal by Einsiedler, the order of dismissal and the summary judgment were affirmed by the Appellate Division. Massari v. Einsiedler, 3 N.J.Super. 40, 65 A.2d 538 (App.Div.1949); certification was denied, Massari v. Einsiedler, 1 N.J. 604 (1949).

Einsiedler, in the present proceedings, sought relief by way of reformation, urging that the true agreement between the parties was that expressed by the contract of September 16, 1946, as modified by the loan and security agreements. A petition was filed with the Superior Court, Law Division, and a complaint was filed in the Chancery Division in both of which proceedings reformation and incidental relief was sought. The complaint in the Chancery Division was transferred to the Law Division, where, by subsequent amendment, Einsiedler sought restitution and damages for breach of contract as reformed. These several actions instituted by Einsiedler were consolidated and, on motion of the Massaris, were dismissed by the Law Division. The judgment was affirmed by the Superior Court, Appellate Division. 9 N.J.Super. 59, 74 A.2d 907. Certification was granted by the Supreme Court to review the judgment of the Appellate Division pursuant to a petition therefor by Einsiedler. 5 N.J. 385, 75 A.2d 922.

The primary question to be determined is whether the disposition of the former proceedings is Res judicata of the right of Einsiedler to seek reformation of the contract of sale and to enforce it as so reformed. The question must be answered in the affirmative.

The litigation in this cause was commenced after the effective date of the Judicial Article of the 1947 Constitution, September 15, 1948, art. XI, sec. IV, par. 14, 1947 Constitution, and the disposition of the question involved must be determined by a reference to the 1947 Constitution and the Rules promulgated by the Supreme Court pursuant thereto.

One of the designs of the Judicial Article of the 1947 Constitution was to facilitate and expedite the hearing of causes by disposing of all matters, whether legal or equitable, arising in a controversy in one trial and thus avoid multiple trials of the same case. Article VI, sec. III, paragraphs 3 and 4 of the Constitution provides:

'3. The Superior Court shall be divided into an Appellate Division, a Law Division, and a Chancery Division. Each division shall have such Parts, consist of such number of Judges, and hear such causes, as may be provided by rules of the Supreme Court.

'4. Subject to rules of the Supreme Court, the Law Division and the Chancery Division shall each exercise the powers and functions of the other division when the ends of justice so require, and legal and equitable relief shall be granted in any cause so that all matters in controversy between the parties may be completely determined.'

We have had occasion in previous cases to so consider the pertinent provisions of the Judicial Article of the Constitution and the objective sought to be attained thereby by the framers of the Constitution. In Steiner v. Stein, 2 N.J. 367, 377, 66 A.2d 719, 724 (1949), Chief Justice Vanderbilt said: 'Were the trial judge in whichever division he is sitting not to hear the entire case once he has assumed jurisdiction, all of the confusion and waste of judicial effort which the framers sought to eliminate would reappear. The trial of an entire case before the same judge conforms, moreover, to the practice in many jurisdictions, including the federal courts.'

Again in State v. Jones, 4 N.J. 374, 383, 72 A.2d 872, 876 (1950), Chief Justice Vanderbilt said: 'We conceive it to be quite impossible for a litigant to go on to trial in one Division of the Superior Court and then assert, after judgment, a right to be heard, except on appeal, in another. To hold otherwise would be to revive one of the worst defects of the old order and to do violence to both the letter and the spirit of the new Constitution.'

See also O'Neill v. Vreeland, 6 N.J. 158, 77 A.2d 899 (1951).

The Rules of Court, promulgated under the authority of the Constitution are designed to implement the purpose and objective clearly expressed in the Constitution. Rule 3:12--2 provides, Inter alia, that 'Every defense, legal or equitable, in law or fact, to a claim for relief in any pleading * * * shall be asserted in the answer thereto * * *'. Rule 3:12--8 provides, Inter alia, that 'A party waives all defenses and objections which he does not present either by motion as hereinbefore provided or, if he has made no motion, in his answer or reply * * *'.

Under the accepted practice prior to the adoption of the 1947 Constitution a defendant who had unsuccessfully defended a contract action in a law court could then apply to the chancery court for reformation of the contract. The Commercial Union Assurance Co. v. N. J. Rubber Co., 64 N.J.Eq. 338, 51 A. 451 (E. & A.1902). Likewise, a plaintiff who had prosecuted an action on a contract to judgment which was rendered for the defendant was not precluded from thereafter seeking reformation of the contract in the chancery court. Knight v. Electric Household Utilities Corp., 133 N.J.Eq. 87, 30 A.2d 585 (Ch.1943), affirmed 134 N.J.Eq. 542, 36 A.2d 201 (E. & A.1943). The reason for the intercession by the equity courts was to prevent the injustice which sometimes resulted from the invulnerability of written instruments in a law court when such instruments did not express the actual intent of the parties but were unassailable in the law court because of the parol evidence rule. The basis for the equitable relief of reformation was the inadequacy of the remedy at law. Knight v. Electric Household Utilities Corp., supra. Under our present court structure we have a Superior Court which has original general jurisdiction throughout the state in all causes. It is divided into a Law Division and a Chancery Division for the trial of causes. Where adequate relief can be obtained in the Law Division, there is no need for intercession by the Chancery Division since the entire controversy can be determined in the Law Division in one and the same suit. The furnishing of complete relief in one court was the design of the unified court structure effectuated by the 1947 Constitution. Our present judicial system is similar to that which is generally referred to as the 'reformed procedure', wherein legal and equitable causes of action, legal and equitable defenses, and legal and equitable remedies may be united and determined by the same judgment. See Pomeroy's Equity Jurisprudence, Fifth Edition (1941) Vol. 1, § 84, p. 110; 45 Am.Jur., Reformation of Instruments, § 90, p. 639.

In the present case, Einsiedler was not only permitted to set up in the original action every equitable defense available to him but, indeed, was required to do so under Rule 3:12--2. It is urged, however, that the reformation of an instrument constitutes affirmative relief and is not an 'equitable defense' but rather is properly the subject of a counterclaim. Under the practice in our former Court of Chancery it was generally considered that a defendant should seek affirmative relief by...