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L. F. DOMMERICH & CO. v. BRESS

February 9, 1968

L. F. DOMMERICH & CO., Inc., a New York corporation, Plaintiff,
v.
Samuel BRESS, Evelyn Bress, Harry Matlin and Edward G. Rubinoff, Defendants



The opinion of the court was delivered by: COHEN

 This is an action in trover and conversion, alleging damages in excess of $100,000.00, based upon diversity of citizenship and requisite jurisdictional amount, arising out of a New Jersey chattel mortgage transaction. Defendants, Samuel Bress, Evelyn Bress, Harry Matlin and Edward G. Rubinoff move to strike the complaint contending that it fails to state a claim upon which relief can be granted. Plaintiff, L. F. Dommerich, Inc., a New York corporation (Dommerich), cross moves for a restraint of an action filed against it in the Superior Court of New Jersey by these same defendants which seeks to compel its foreclosure of the chattel mortgage in question. The pending State Court proceeding was instituted subsequent to the action in this Court. In support of their motion to dismiss the complaint, defendants argue that the plaintiff's present action of trover and conversion should have been asserted as a counterclaim in a prior State Court declaratory judgment action brought by these defendants involving the same chattel mortgage and in which Dommerich intervened as a defendant. Dommerich contends on its motion for a stay, that the pending State Court action seeking to compel it to foreclose its chattel mortgage lien there should be raised in this Court as a compulsory counterclaim at the time answer is filed, arising as it does out of the same chattel mortgage transaction, and not be asserted in the State Court where it might defeat or interfere with the jurisdiction, order or judgment of this Court.

 Controversy between these parties has been protracted, complicated and bitter. Six distinct actions have involved them in either the New Jersey State Courts or this Court. *fn1" These various proceedings are interwoven and require narrative history to set a proper perspective within which to frame a determination of the present cross motions.

 In considering the present cross motions, an examination somewhat in depth, but without prejudgment, was made of the instant complaint, which incorporates the declaratory judgment proceedings of the State Court, the present motions, the numerous movants' reply and supplemental briefs, and the oral arguments of counsel. Briefly, the defendants under various business identities, engaged in poultry feed mill operations and the processing of animal feed products in Vineland, New Jersey. Some twelve companies *fn2" comprised what we shall refer to as the "Rubinoff complex," whose capital stock was owned or controlled by the Rubinoff Associates, a partnership, of which the defendants herein were copartners at the times pertinent. On March 4, 1960, the Rubinoff enterprises were restructured, so that all the capital stock of their corporations was transferred to a Pennsylvania corporation, Son-Mark Industries, Inc. of Philadelphia. One of the latter's subsidiary corporations, Gold-Mark Realty Company, Inc., a New Jersey corporation, was created to receive title to certain real estate premises situated at North Sixth Street and Park Avenue, Vineland, New Jersey, where the milling and processing of feed products were conducted. On March 4, 1960, as part of this transaction, Gold-Mark executed a realty mortgage in the amount of $1,300,000.00 to Rubinoff Associates. Son-Mark and Rubinoff Associates had officers and owners in common and in addition to creating Gold-Mark they formed the Jacob Rubinoff Co., as the management corporation of all their assets and operations. It was this latter corporation which, on June 3, 1960, executed the chattel mortgage in question. Thereafter, sometime prior to January 13, 1962, Son-Mark was involved in a Corporate Reorganization Proceeding under Chapter X of the Bankruptcy Act in the Eastern District of Pennsylvania. And the Jacob Rubinoff Co. was adjudicated a bankrupt in this District in 1964.

 In light of the plaintiff's complaint, that a conversion of the chattels resulted from the adverse claims and hostile title and interests asserted by the defendants in prior litigation between these parties, the foregoing brief history will be expanded by a closer examination of the several pieces of litigation, to ascertain whether there is set forth a valid and sufficient cause of action in common law trover and conversion and, if so, whether the defendants should be restrained in their State Court action, which seeks to compel the plaintiff to foreclose the chattel mortgage, until an ultimate determination on the merits is reached in this Court.

 I.

 NEW JERSEY CHATTEL MORTGAGE FORECLOSURE SUIT

 On June 3, 1960, within three months of the aforesaid realignment of the Rubinoff companies, the Jacob Rubinoff Co., of which defendant Edward G. Rubinoff was the president, created a chattel mortgage to plaintiff Dommerich as security for a $243,000.00 debt representing a prior loan of $43,000.00 and a new loan of $200,000.00, upon milling machinery and equipment situated at the realty held by Gold-Mark, in Vineland, New Jersey. In 1961, the Gold-Mark realty mortgage fell into default. Rubinoff Associates instituted foreclosure proceedings and obtained a sheriff's deed at the sale on October 3, 1961. Around the same time, the Jacob Rubinoff Co. chattel mortgage fell into default, and Dommerich started its foreclosure proceeding wherein Rubinoff Associates intervened, claiming ownership of the chattels in suit by reason of the foreclosed realty mortgage, which purported to cover the same milling machinery and equipment allegedly affixed to the realty conveyed to them by sheriff's deed. On April 24, 1962, during the pendency of the chattel mortgage foreclosure action, an extension agreement was entered into between Dommerich and Jacob Rubinoff Co., and the foreclosure proceeding was dismissed by consent and without prejudice. It was agreed that the debt was then $174,104.77.

 As further evidence of the security of the extended chattel mortgage transaction between them, Jacob Rubinoff Co. executed and recorded on April 23, 1963 a financing statement, pursuant to the Uniform Commercial Code,3 to Dommerich covering "equipment and general intangibles presently owned by the debtor and subsequently acquired by the debtor * * *," at the premises in question as well as elsewhere. It recited further that, "* * * said lands and premises are owned by Edward Rubinoff, Harry Matlin and Samuel Bress, partners doing business as Rubinoff Associates," being three of the present four defendants. *fn4"

 II.

 JACOB RUBINOFF CO. BANKRUPTCY PROCEEDING

 III.

 NEW JERSEY DECLARATORY JUDGMENT ACTION

 On January 7, 1965, Rubinoff Associates instituted a declaratory judgment action in the Superior Court of New Jersey, naming Dommerich as one of the defendants, seeking to establish the rights of the parties in and to all of the equipment mentioned in the challenged chattel mortgage. In their complaint, they alleged that as owners of the premises in question, they had executed a lease to Jacob Rubinoff Co., which included the machinery and equipment contained in the buildings thereon, and which lease had expired thereafter on or about April 24, 1964, whereupon the lands, buildings and contents thereof were returned to them. The complaint stated further that Dommerich was made a defendant because it might assert some claim to the machinery and equipment in question by reason of its chattel mortgage, when, in fact, Rubinoff Associates owned such machinery and equipment.

 Dommerich filed an answer April 15, 1965, denying Rubinoff Associates' claim of title to the equipment and set up a ...


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