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Associated Metals & Minerals Corp. v. Dixon Chemical & Research Inc.

Decided: July 24, 1963.

ASSOCIATED METALS & MINERALS CORP., A NEW YORK CORPORATION, PLAINTIFF-RESPONDENT AND CROSS-APPELLANT,
v.
DIXON CHEMICAL & RESEARCH, INC., A NEW JERSEY CORPORATION, DEFENDANT AND THIRD-PARTY PLAINTIFF-APPELLANT, AND CROSS-RESPONDENT, V. GLENS FALLS INSURANCE COMPANY, A NEW YORK CORPORATION, THIRD-PARTY DEFENDANT-RESPONDENT



Goldmann, Freund and Foley. The opinion of the court was delivered by Goldmann, S.j.a.d.

Goldmann

[82 NJSuper Page 285] Defendant Dixon Chemical & Research Inc. (Dixon) appeals from the whole of a Chancery Division judgment awarding plaintiff Associated Metals and Minerals Corporation (Associated) $300,347.58 in damages, and finding no cause of action as to Dixon's third-party suit against the Glens Falls Insurance Company (Glens Falls) to recover on an insurance policy providing coverage for property damage caused by "accident" in the limited amount of $25,000. Associated Metals and Minerals Corp. v. Dixon Chemical & Research, Inc. , 68 N.J. Super. 305 (Ch. Div.

1961). The judgment was stayed upon the filing of a supersedeas bond of $325,000. Associated cross-appeals from so much of the judgment as awarded only $300,347.58 and from an order denying its application to have the damages assessed at $500,000.

The trial was an extended one, held before a Chancery Division judge sitting alone.

I.

Plaintiff, a New York corporation, had for many years been an international trader in ores, metal products, steel scrap and steel products. In connection with this business it imported considerable amounts of steel annually from foreign countries and sold it to warehouses, fabricators and consumers. It also exported steel to all parts of the world. However, prior to 1955 it had never engaged in the steel warehouse business, i.e. , selling steel at retail from a supply of different types and sizes kept on hand. It is not uncommon for warehouses to store structural steel out-of-doors. Plaintiff began to look for a site to supply the retail market in New Jersey, New York and Connecticut. It checked sites in the Port Newark area and other places in New Jersey, as well as in Brooklyn and Long Island City. It finally selected Port Newark because rail facilities were available, the site was close to the Port Newark Channel where ocean-going vessels could load and unload, and there was room for expansion. Inspection of the site indicated that there were no industrial operations producing smoke within two miles. The area was found free of industrial smells or smoke (plaintiff had rejected the Long Island site for this reason); the Channel had no salty smell, and the Newark Airport, together with the highway complex bordering the site, afforded a protective belt.

On the basis of its experience plaintiff decided that Port Newark was suitable for steel storage. It thereupon entered into a lease with the Port of New York Authority on February 3, 1956 for a plot measuring 285' x 422' (hereinafter

Area 1), located a few hundred feet north of Berth 3 of the Port Newark Channel. The first boat deliveries of steel from European sources to plaintiff's site were made early in July 1956. All but 4 1/2 tons of this material was sold prior to the arrival of defendant Dixon's sulphur in September 1956, about to be mentioned. However, plaintiff had before that time already begun negotiations for additional space to the north of and adjacent to Area 1. These negotiations culminated in a lease dated October 5, 1956 between the Port Authority and plaintiff's wholly-owned subsidiary, Associated Metals & Minerals Corporation, a New Jersey corporation, for Area 2, immediately to the north of Area 1; and in a second lease between the same parties dated November 29, 1956, for Area 3, to the north of Area 2. These two leases brought plaintiff's original leased premises to within 113' and 38', respectively, of defendant's sulphur. It appears that plaintiff assigned the Area 1 lease to its subsidiary soon after its execution.

Defendant leased an area 150' x 150' from the Port Authority for a term beginning September 17, 1956 and expiring September 30, 1957, for the "receipt, storage and handling of bulk sulphur" owned by it. At the time it entered into this lease defendant was building a sulphuric acid plant on Doremus Avenue, Newark. Finding it impractical to store sulphur there because of the construction work, it leased the Port Newark plot as a stopgap arrangement. Although the Doremus Avenue plant started operations on November 1, 1956, it was not until early April 1957 that defendant stored sulphur in excess of 1,000 tons at that location. The main storage depot was at Port Newark. When defendant's representatives inspected the site before leasing it, they saw plaintiff's steel stored nearby.

On September 17, 1956 defendant received a shipment of 10,249 gross tons of crude sulphur. The sulphur was removed from the hold of the ship and dumped into a truck which transported it over a road running alongside plaintiff's yard and then deposited it onto defendant's premises. The

trucks used were open dump trucks, and as they moved along the road sulphur blew off onto plaintiff's storage yard. As the pile of sulphur grew in size, defendant used a bulldozer to flatten it and make a roadway running up and over the pile so that trucks could go higher to dump their loads. The size of the pile was estimated to be 40' to 50' high. The unloading took place on September 17, 18 and 19, 1956. Sulphur dust covered all of plaintiff's premises and affected the eyes and throats of its employees. It complained to the Port Authority, with the result that Port Manager Fleming, who had seen the dust, told defendant's officials to put covers on the trucks and to wet the sulphur down when loading and unloading. Defendant said it would take care of the situation, but nothing was ever done: no covers were provided for the trucks in moving the sulphur to or from the sulphur pile, nor was the pile or the sulphur on the trucks ever wetted down. The pile was left completely unattended. Newark Inspector of Combustibles and Fire Risks Dukiet also instructed defendant to wet the pile and cover the trucks, but although there were a hose installed and water available, his directions went unheeded.

On April 8, 1957 another sulphur shipment arrived, this one 3,741 gross tons. Defendant deposited 2,519 tons at the rented site and had the remainder trucked to its Doremus Avenue plant. It took two days to unload this shipment. The third and last deposit of sulphur took place on May 28, 1957, when 5,250 gross tons arrived at Port Newark. 725 tons were dumped at the leased site and the remainder trucked to the plant. The operation took two days. As was the case in September 1956, the transporting, dumping and piling of the last two shipments of sulphur was accompanied by dust blown over the entire area, with no effort on defendant's part to contain or diminish the dust by cover or wetting.

From time to time defendant removed sulphur from the Port Newark site for use at its Doremus Avenue sulphuric acid plant. Beginning with October 27, 1956 there were 22 days when such transfers were made. The last of the sulphur

was removed on September 23 and 24, 1957, just before defendant's lease expired. A front-end loader would take sulphur from the pile and dump it into open trucks. This created large clouds of dust which blew over the area, including plaintiff's premises. In none of these removal operations was the sulphur wetted or the trucks covered. The testimony was that even in the absence of deposits on or removals from the pile, sulphur dust would blow onto plaintiff's premises whenever there was a strong wind.

Defendant does not dispute that sulphur dust was deposited all over plaintiff's premises. Nor does it dispute that the accumulation of dust on the steel was heavier in Area 3 (only 38' away from the pile) than in Areas 1 and 2, and heavier in Area 2 than in Area 1. There was sulphur dust on all the steel in every part of the yard -- as much as 1/8" thick at the northern end nearest the pile.

There was no rust on plaintiff's steel prior to the arrival of the sulphur. Rust began to appear toward the end of October 1956. This was not ordinary surface rust, which is brownish in color, provides a protective coat which adheres to the surface of the steel, and is not laminated or flaky. The rust which appeared on the steel after the sulphur arrived was yellowish-brown and flaky. It was testified that by March 1957 the steel was heavily flaked and pitted; even the steel in Area 1 was pitted. A photograph taken June 12, 1957 shows scale more than 1/32" thick and the steel severely pitted. Some of the scale was as large as the palm of a hand. On that day six representative samples of rust were taken from steel in different parts of the yard and analyzed. Steel which arrived at plaintiff's yard in January 1957 showed a sulphur content of 0.53% or higher, and steel which arrived in the two preceding months showed 0.32%, 0.54% and 1.10%. The chlorine content ran between 0.03% and 0.05%. These figures become significant in the light of the testimony of plaintiff's experts, hereinafter mentioned.

On December 1, 1959, sometime after the sulphur pile had been removed, six specimens of prime structural steel cut

from an angle iron were placed on the roof of the scale house on plaintiff's premises at Port Newark, and three specimens were placed about eight miles from the railroad station in Stamford, Connecticut, in what is described as a semi-rural area. The angle iron used was newly purchased and still had mill scale on it. (Mill scale was described by defendant's expert as an iron oxide which automatically forms on steel because of the high temperature rolling process it is put through at the mill.) Analysis six months later showed that the sulphur in the samples exposed at Port Newark was .10%, while the Stamford samples showed .09% -- almost the same. The difference between these figures and the sulphur content found in the rusted steel at Port Newark while the sulphur pile was present is patent and significant. Plaintiff's expert Weisberg said this test demonstrated that the Port Newark environment compared very closely with that of the rural atmosphere in Stamford. Chlorine analysis of the nine specimens showed that the amount found in those exposed at Port Newark was identical with that found in the Connecticut samples. It was also testified that steel can be stored outdoors from one to two years without protection; the light discoloration of ordinary surface rust would not affect the classification of the steel as new steel.

Plaintiff bought tarpaulins in October 1956, and more in December, to protect its steel from the sulphur dust, spending $1,802.20 for this purpose. Toward the end of October or in early November it began to look for a protective oil which would retard or prevent corrosion by the sulphur, and after some experimentation finally decided that Oakite protective oil was best for the purpose. A heavier oil or a thick coating of grease might have been more effective in retarding corrosion, but would have rendered the steel unmerchantable. Plaintiff's expert Tour said that if heavier protective oil were used, "Nobody would take that structural steel out on a job if you ever greased it up with that stuff. It would be a hazard." This statement went uncontradicted. The decision to use the Oakite product was made in December 1956,

at which time all the structural steel was sprayed with oil. As new structural steel arrived it was sprayed immediately. All the steel was sprayed from time to time to obtain maximum protection. Plaintiff spent $2,418.29 for the protective oil, which figure does not include the cost of labor or the spraying equipment used.

Plaintiff received shipments of structural steel from European mills (where it purchased all the steel here in question) after the arrival of the first sulphur, but 90% of this steel had been purchased before plaintiff knew that sulphur would be deposited in the vicinity. It decided to stop purchasing steel for its Port Newark operation in December 1956 because of the sulphur. However, it could not stop shipments on steel it was already committed to buy; it could not cancel out. The final shipment was received in April 1957.

Although the last of defendant's sulphur was not removed until late September 1957, plaintiff had to abandon its plans for conducting a warehouse business at the Port Newark site because, as was testified, no customer would buy new steel from a warehouse which also sells damaged steel; the reputation of the warehouse would be ruined if both were sold, and it would become known as a damaged steel warehouse.

Plaintiff sold its prime steel by phone or by letter at warehouse prices until the sulphur damage made its appearance. Some of the damaged steel sold after that time was returned, and plaintiff had to give rebates or pay the customer's freight. In the light of this experience plaintiff, in March or April of 1947, instructed its entire sales force to sell the steel subject to inspection, as quickly as possible and at the best price obtainable. The testimony was that the only other way of selling the damaged steel was at scrap prices, and this would have yielded substantially less than plaintiff's procedure of selling subject to inspection.

The sulphur dust resulting from defendant's unloading operation in September 1956, as already mentioned, irritated the eyes and throats of plaintiff's employees, covered its storage area, and even penetrated the interior of its scale

house. Plaintiff complained of the conditions, then and subsequently, and, as noted, Port Manager Fleming as well as Newark Inspector Dukiet told defendant's officials to cover the trucks and wet down the sulphur. The instructions went unheeded. At the end of January 1957 Fleming notified defendant's director of operations in charge of the sulphur pile, one Skeuse, that the sulphur dust was damaging plaintiff's steel. This came about because of plaintiff's specific complaint. As a result, Skeuse met with plaintiff's Mr. Norton and they made a tour of inspection. Skeuse offered to "hose the steel down." This information was at once conveyed by phone to Dr. Schweitzer, plaintiff's metallurgist, who told Skeuse that he did not believe that the washing down of the steel would remedy the situation; it "would only be a temporary solution," since the sulphur dust was always coming over onto plaintiff's premises.

Plaintiff finally instituted this action in the Chancery Division on July 1, 1957. The complaint was in two counts. The first described the sulphur dust condition and alleged that defendant's acts constituted a nuisance which defendant refused to abate despite plaintiff's demands, and if permitted to continue would result in great and continuing damage to plaintiff's property and to its employees. The second count charged negligence because of defendant's failure to use such means as were reasonably necessary to contain and confine the sulphur and sulphur powder on the trucks or on its own premises, with the result that plaintiff's steel was greatly depreciated through corrosion caused or accelerated by the sulphur. Plaintiff demanded judgment restraining defendant from creating or maintaining any unprotected sulphur mound on its leased premises or permitting sulphur dust to be blown about and deposited on plaintiff's property, and from otherwise continuing the nuisance complained of. It also demanded $500,000 in damages.

Defendant, by its answer and amended answer, of which more hereafter, denied the charges and set up these separate defenses: (1) it had violated no legal duty owing to plaintiff;

(2) plaintiff was guilty of contributory negligence; (3) plaintiff's subsidiary, the New Jersey corporation, was guilty of negligence which proximately caused or contributed to the damage plaintiff claims it sustained, which negligence was imputable to plaintiff under N.J.S.A. 46:36-1; (4) plaintiff, in selecting the particular premises, voluntarily assumed the risk of a known danger; (5) the damage was not proximately caused by defendant; (6) defendant made reasonable use of its own property and, finally, (7) plaintiff was not entitled to equitable relief.

Defendant, pursuant to leave granted by the Chancery Division, filed a third-party complaint against Glens Falls Insurance Company under the policy it had issued, seeking judgment for such sums as might be found due from defendant to plaintiff, as well as the expenses, costs and reasonable attorneys' fees incurred by it in defending the action. The trial, which consumed more than a month, resulted in the $300,347.58 judgment against defendant and a finding of no cause of action in defendant's third-party suit. This appeal and cross-appeal followed.

II.

Defendant claims it was denied its right to a trial by jury, either in the Chancery Division or by transfer of the cause to the Law Division, and this in violation of our 1947 Constitution, Art. I, par. 9, and R.R. 4:39-1. Although this is the last of the eight points it argues on appeal from plaintiff's judgment, we dispose of it first. A review of the proceedings is necessary for a proper understanding of the issue.

Plaintiff's July 1957 complaint, based on nuisance as well as negligence, sought injunctive relief against defendant's sulphur operations and also damages for injury to the steel. Defendant made no demand for a jury trial in its answer or within ten days of its filing, as required by R.R. 4:39-1. It may immediately be observed that failure of a party to serve a demand as required by that rule constitutes

a waiver of jury trial. R.R. 4:39-3. Defendant applied for, and on November 1, 1957 was granted, leave to file a third-party complaint against Glens Falls Insurance Company. Glens Falls answered, but it, too, made no demand for a jury trial. Defendant had in the meantime removed the last of its sulphur pile, but plaintiff had no information or notice that it intended to discontinue its sulphur-piling practice permanently.

Pursuant to notice dated June 3, 1958, plaintiff applied for an order permitting it to amend its complaint in several respects, among them by increasing its damage claim to $1,000,000. It also moved for leave to file a supplemental complaint to cover that amount. Defendant opposed both applications. The matter was continued until the first pretrial conference on September 19, 1958 before Chancery Division Judge Kolovsky, on which occasion defendant for the first time orally applied for a jury trial and a transfer of the cause to the Law Division. Judge Kolovsky reserved decision and subsequently handed down an opinion reported in 52 N.J. Super. 143 (1958). Plaintiff's applications, he said, involved the exercise of sound judicial discretion, to be exercised in the light of the factual situation existing at the time they were made. If, as was admitted, no facts then existed authorizing injunctive relief, it would not be a proper exercise of discretion to permit either the filing of a supplemental complaint containing allegations of threatened future injuries and a prayer for injunctive relief, or an amendment to the complaint restating the threat of future injury and continuing the prayer for injunctive relief. He observed that:

"For plaintiff to proceed on its original complaint even though injunctive relief has become moot is one thing, but if plaintiff desires leave to file an amendment to the original complaint and a supplemental complaint, any leave granted should be conditioned upon the elimination of allegations which are contrary to the conceded facts, viz. , threatened future injury, as well as deletion of the prayers for equitable relief. * * *" (52 N.J. Super. , at page 151)

Accordingly, he concluded that unless plaintiff accepted these conditions, leave to file the amended and supplemental complaints

would be denied. On the other hand, if it assented, leave would be granted and defendant would then be entitled to demand a jury trial.

Plaintiff did not accept the conditions, with the result that an order was entered December 2, 1958 denying its applications to file an amended complaint and a supplemental complaint, and denying defendant's motions to transfer the action to the Law Division and for a jury trial. Defendant then applied to this court for leave to appeal. One of the arguments it advanced was that the trial would be an extended one involving considerable expense, and therefore the right to a jury trial should be settled before trial. We denied leave to appeal on January 6, 1959.

More than 1 1/2 years after plaintiff had instituted this action, defendant launched upon a determined campaign to obtain a jury trial. On February 27, 1959 it applied for leave to file a third-party complaint against plaintiff's wholly-owned subsidiary, the New Jersey corporation. The proposed complaint was endorsed with a demand for a jury trial on all issues. Chancery Division Judge Sullivan heard the motion, concluded that the proposed complaint gave no indication of the substance of the alleged cause of action, and entered an order denying leave, without prejudice. On June 19, 1959 defendant again applied for leave to file a third-party complaint against the subsidiary, this time on the basis of depositions taken since denial of its first application. The proposed complaint bore an endorsement demanding a jury trial. The motion was continued until the pretrial by an order signed by Chancery Division Judge Pindar.

The pretrial conference took place October 20, 1959. Judge Pindar, over defendant's objection, denied its application for leave to file the third-party complaint, and so provided in the pretrial order subsequently entered. Defendant having asked for leave to file an amended answer, the order granted leave to file in accordance with the form submitted at the pretrial conference. It is important to consider just what the amended answer alleged. Examination demonstrates that it set forth

in substance, albeit not in the same language, the defenses raised by the original answer filed in August 1957. Only one new item appears -- the demand for a jury trial.

In the course of the pretrial conference defendant argued that on the basis of the facts then existing, plaintiff should abandon the issues of equitable relief, all claims for such relief having become moot. (The reference, of course, was to the discontinuance of the sulphur pile at the end of September 1956.) Plaintiff declined to do so, whereupon Judge Pindar adjudicated, and later so provided in the pretrial order, that "The issue of equitable relief is involuntarily abandoned without prejudice."

The order had not been completed at the pretrial conference because the judge took under advisement defendant's application for a jury trial. By letter opinion of November 5, 1959 Judge Pindar concluded that defendant was not entitled to a trial by jury despite its contention that the granting of leave to amend its answer extended the time to demand a jury trial. In his view, the action taken by Judge Kolovsky barred defendant's application. Accordingly, Judge Pindar, in the paragraph of the pretrial order dealing with the order of opening and closing to a ...


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