Paul v. Chromalytics Corp.
| Decision Date | 22 July 1975 |
| Citation | 343 A.2d 622 |
| Parties | 20 UCC Rep.Serv. 1080 Donald G. PAUL, Plaintiff, v. CHROMALYTICS CORPORATION, a Delaware Corporation, and Chemalytics Corporation, a Pennsylvania Corporation, Defendants. |
| Court | Delaware Superior Court |
This action arises from an agreement entered into on February 1, 1973, for the purchase and sale of substantially all of the assets of Chemalytics Corporation to Spex Industries, Inc., for the price of $200,000. In another agreement executed on the same date, Spex agreed to employ Donald Paul, the president of Chemalytics, for a three-year period. Shortly before the closing, Spex transferred all of its rights in the purchase agreement to its wholly-owned subsidiary, Chromalytics Corporation. The $200,000 purchase price was payable as follows: $151,500 in cash, and two promissory notes, one for $7,500; the other for $41,000.
An escrow agreement was executed on the same day setting aside $17,500 of the cash and the $7,500 promissory note as an escrow fund to cover damages arising from any misrepresentations, breaches of warranty, or non-compliance with the terms of the purchase agreement on the part of Chemalytics. The escrow agreement called for arbitration of disputed claims, while the purchase agreement contained no such provision.
Pursuant to the escrow agreement, Chromalytics, on January 7, 1974, gave notice to the escrow agents not to dispose of the escrow fund and claimed it as damages for misrepresentations and breaches of warranty on the part of Chemalytics.
On January 8, 1974, Chemalytics purported to assign its rights, title and interest in the promissory notes to Donald G. Paul, the plaintiff, despite a provision in the purchase agreement forbidding such assignment without the consent of Spex or its assignee, Chromalytics. The required consent was apparently never obtained. In February of 1974, Chemalytics demanded arbitration as provided in the escrow agreement, whereupon arbitration was commenced in New York.
On September 6, 1974, the arbitrator made the following jurisdiction determinations:
1) Chemalytics Corporation is a proper Party claimant.
2) The Arbitrator finds that the AGREEMENT FOR PURCHASE AND SALE OF ASSETS dated February 1, 1973, the ESCROW AGREEMENT dated February 1, 1973, and the ESCROW AGREEMENT dated May 15, 1973, together constitute a single transaction and the Arbitrator will assume jurisdiction of all disputes arising out of said transaction.
3) The Arbitrator's jurisdiction in adjudicating this Arbitration will not be limited in any manner to the amount deposited in escrow with the escrow agent.
4) The Arbitrator declines jurisdiction over any dispute arising out of the employment agreement between Donald G. Paul and Chromalytics Corporation.
Three days prior to the arbitrator's jurisdictional pronouncements, plaintiff, Donald G. Paul, brought this suit in Superior Court against defendants Chromalytics Corporation and Chemalytics Corporation seeking the following relief:
I. Payment to him of the two promissory notes earlier assigned to him by Chemalytics in the amount of $48,500 by defendant Chromalytics;
II. A declaratory judgment that defendant Chemalytics is alternatively also liable to plaintiff for the $48,500 sought in the first cause of action;
III. Damages for breach by defendant Chromalytics of the employment contract; and
IV. A declaratory judgment limiting the jurisdiction of the arbitration proceeding then pending in New York.
In response, defendant Chromalytics has moved to dismiss with respect to the first, second and fourth causes of action on the grounds that the Court lacks jurisdiction over the subject matter thereof, that plaintiff lacks standing to maintain such causes of action, and/or that they fail to state claims upon which relief may be granted. As to the third cause of action, defendant Chromalytics has moved for summary judgment.
On March 21, 1975, defendant Chemalytics filed an amended answer and counterclaim and added a cross-claim against Chromalytics asserting a right against Chromalytics in the two promissory notes which it has assigned to Mr. Paul. On April 2, 1975, defendant Chromalytics moved the Court for an order dismissing the amended pleadings of Chemalytics on the grounds that the attempted amendments were violative of Civil Rule 15 in that they were filed without the consent of of Court or the adverse parties.
It is the policy in this jurisdiction to be liberal in permitting amendments to pleadings at all stages of the proceedings unless the opposing party shows that it would be seriously prejudiced thereby. Gott v. Newark Motors, Inc., Del.Super., 267 A.2d 596 (1970); E. K. Geyser Co. v. Blue Rock Shopping Center, Inc., Del.Super., 229 A.2d 449 (1967). Chromalytics cites no specific prejudice resulting from the attempting amendment, alluding only to the interest in not disrupting the orderly progress of the case. Under the circumstances here present that interest is not enough to constitute serious prejudice. The interests of both parties should be considered when an application to amend is made. Friedman v. Transamerica Corporation, 5 F.R.D. 115 (D.C.Del.1946). Even if some prejudice to the adverse party is found, that prejudice must be balanced against the hardship to the moving party if he is denied leave to amend. 6 Wright & Miller, Federal Practice and Procedure, § 1487. The prejudice alleged by Chromalytics is far outweighed by the damage to Chemalytics if it is barred from asserting its cross-claim against Chromalytics. Therefore, defendant Chromalytics' motion to strike Chemalytics' amended pleadings of March 21, 1975, is denied, and the amended pleadings are permitted.
Defendant Chromalytics' initial contention is that plaintiff Paul lacks standing to sue to collect on the two promissory notes or to seek declaratory relief limiting arbitration of Chromalytics' claim to offset...
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...ab initio such that equitable defenses or ratification could not apply. Id. at 195–96.Another such authority is Paul v. Chromalytics Corp. , 343 A.2d 622 (Del. Super. 1975). The case involved the sale of a business, and the seller received promissory notes from the buyer for a portion of th......
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...decisive act, implying an election to forego some advantage which the waiving party might have insisted on"); Paul v. Chromalytics Corp., 343 A.2d 622, 626 (Del.Super.Ct.1975) (an obligor's waiver of an anti-assignment clause must be " 'clear, distinct and unequivocal' "). Provided that thi......
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...renders the transaction void, which is often required to hold the assignee lacks standing. See, e.g., Paul v. Chromalytics Corp., 343 A.2d 622, 625-26 (Del.Super.1975) (holding assignee lacked standing due to an unauthorized assignment of the contract, because the contract included a nonass......
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