Rego Industries, Inc. v. American Modern Metals Corp.

• Decision Date: 14 June 1966
• Docket Number: No. A--530,A--530
• Citation: 91 N.J.Super. 447,221 A.2d 35
• Parties: REGO INDUSTRIES, INC., Plaintiff-Appellant, v. AMERICAN MODERN METALS CORP. and Airlite Aluminum Corp., Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 447

91 N.J.Super. 447

221 A.2d 35

REGO INDUSTRIES, INC., Plaintiff-Appellant, v. AMERICAN MODERN METALS CORP. and Airlite Aluminum Corp. Defendants-Respondents.

No. A--530.

Superior Court of New Jersey Appellate Division.

Argued June 6, 1966.

Decided June 14, 1966.

Max L. Rosenstein, Newark, for appellant (Harold M. Cohen, South Orange, on the brief).

Lawrence B. Raff, Newark, for respondents (Raff, Sherman & Scheider, Newark, attorneys; Terence Corcoran, Newark, on the brief).

Before Judges GOLDMANN, FOLEY and COLLESTER.

The opinion of the court was delivered by

GOLDMANN, S.J.A.D.

Plaintiff filed a Chancery Division complaint in four counts, respectively seeking (1) a declaratory judgment with respect to its status under a contract entered into with defendant American Modern Metals Corp. (Amco) on February 28, 1963, whereby it agreed to supply plaintiff with aluminum-sheathed television cable to be manufactured by it, the agreement to continue for ten years;

(2) a judgment rescinding that agreement, extinguishing Amco's rights thereunder, and granting plaintiff leave to recover all damages sutained by reason of Amco's alleged breach;

(3) a judgment for damages allegedly sustained by reason of Amco's breach of the agreement; and

(4) a judgment for replevin of certain equipment allegedly loaned by plaintiff to Amco.

Plaintiff joined Airlite Aluminum Corp. as defendant in the belief that Amco had merged with Airlite and the corporate entity was being operated as a division of Airlite, both corporations being controlled by the same individuals.

The first count of the complaint alleges that Amco did not perform in accordance with the contract and, indeed, breached it, the result being that the agreement was allegedly completely superseded by a new working arrangement, confirmed in part by a letter addressed to plaintiff by Amco dated September 15, 1964. Plaintiff also alleged that in furtherance of the expansion of its business and its commercial needs, and in order to prevent commercial frustration in the proper operation of its business, it arranged to set up its own plant for the purpose of doing the work theretofore performed by Amco. To this end it organized a wholly-owned subsidiary, which is in operation and supplies plaintiff with a portion of its aluminum-sheathed cable needs.

Defendants moved for an order dismissing the entire complaint for failure to comply with R.R. 4:8--1, which requires that the complaint contain a statement of facts on which the claim is based and showing that the pleader is entitled to relief, and R.R. 4:8--5(a), which directs that each averment of a pleading should be simple, concise and direct. In the alternative, they moved (1) to dismiss the first count on the ground that a petition for a declaratory judgment would not lie on the facts stated in the complaint and the affidavit annexed thereto; (2) to dismiss the second count because it did not set out a ground on which the Chancery Division could order rescission, and (3) to transfer the third and fourth counts to the Law Division on the ground that neither plaintiff's primary right nor the principal relief it sought was equitable.

The matter came on for hearing after the filing of affidavits and resulted in an order (later given the effect of a final judgment): (1) dismissing the first count for a declaratory judgment; (2) allowing plaintiff to amend the second, third and fourth counts to include the factual allegations necessitated by that dismissal; (3) retaining jurisdiction of the second count for rescission and directing defendants to answer or otherwise plead thereto in the Chancery Division; (4) transferring the third and fourth counts to the Law Division and directing defendants to answer or otherwise plead thereto, and finally, (5) denying a stay pending appeal. Plaintiff thereupon appealed from the dismissal of the first count and the transfer of the third and fourth counts to the Law Division.

Before proceeding to a consideration of the appeal, we note that defendants filed an answer and counterclaim. Their first separate defense alleged that plaintiff had failed to plead facts establishing grounds upon which the trial court could grant rescission under the second count, in that plaintiff did not offer to restore defendants to the Status quo existing at the time of the execution of the February 28, 1963 contract. The second separate defense alleged that plaintiff had breached the contract by constructing its own plant and depriving defendants of the benefit of an exclusive right to supply the sheathed cable, and was therefore estopped from denying the validity of the agreement. The counterclaim, in four counts, demanded (1) judgment for $22,897.60 due from plaintiff on a book account; (2) a judgment for damages because plaintiff had breached the agreement between the parties, leaving defendants with an unusable plant and a complete loss of business; (3) judgment requiring plaintiff (a) to make a full disclosure of the operation of its business with respect to aluminum sheathing and processed cable; (b) to account for all profits derived from the operation of its business with respect to these items since February 28, 1963; (c) to pay defendants all monies derived from its use of their secret process, alleged to have been improperly acquired and used by it, and (d) to compensate defendants for all losses sustained by reason of the termination of the agreement, including loss of profits, and to restrain plaintiff from any further use of the secret process; and (4) judgment for punitive damages because of plaintiff's wilfully wrong action in setting up its own plant and equipment in order to deprive defendants of the benefits of the contract, and because it had pirated their secret process in accordance with a preconceived plan on its part.

Plaintiff's first point on appeal is that where the plain purpose of the complaint seeking declaratory judgment was to secure repose in a controversy and to accelerate a determination of rights and status where prospective litigation was causing unrest, it was error for the trial judge to dismiss the first count. In dismissing that count the trial judge stated that the controversy had already reached fruition. The Declaratory Judgments Act, he said, was designed to avert litigation by resolving impending disputes and giving repose to a party who did not know which way to turn. However, where the controversy had progressed to a point where relief could be obtained in an ordinary law suit--under the facts present, in an action properly to be brought in the Law Division--the trial judge ruled that declaratory relief should not be granted. He further ruled that such relief was not available where it appeared that its purpose was to 'bag' a law suit, i.e., to obtain a judicial ruling that plaintiff possessed a good defense to an imminent action at law.

We find that the dismissal of the first count was correct on the facts present in this case. The purpose of a declaratory judgment proceeding is to provide a means by which rights, obligations and status may be adjudicated in cases involving a controversy that has not yet reached the stage at which either party may seek a coercive remedy. Such proceeding is intended to serve as an instrument of preventive justice, to relieve litigants of the common law rule that no declaration of right may be judicially adjudged until that right has been violated, and to permit adjudication of rights or status without the necessity of a prior breach. Stated in another way, there is ordinarily no reason to invoke the provisions of the Declaratory Judgments Act where another adequate remedy is available.

Plaintiff does...