Van Tassel, J.c.c., Temporarily Assigned.
This case concerns the sale of goods by a lessee of the owner to one who now claims good title by reason of the entrustment provisions of N.J.S.A. 12A:2-403(2) and the doctrine of estoppel. Plaintiff-owner relied on his original title to the goods and seeks their return. In the alternative, he sues for their reasonable value.
In 1967 Joseph J. Solon, the stipulated real party in interest, trading as AAA Machinery Co. (AAA) along with his brother-in-law Albert R. Tumber, purchased certain machinery from S. J. Dolce & Co., Inc., a Long Island corporation, which together with Dolce-Helix, became a division of Roto American Corp. Payment for such equipment was made by Donlon Ventures, Inc., an investment company in which Solon and Tumber were partners. Title to these goods was placed in the name of AAA by an assignment from Solon.
As marketing and sales agent for AAA, Solon contracted to supply machinery to Roto American Corp. (R.A.C.), a corporation in the business of manufacturing and selling packaging equipment. R.A.C. owned its own building located at 560 Winters Avenue, Paramus, N.J., subject to New Jersey Bank & Trust Co.'s mortgage lien on this and all
after-acquired assets. R.A.C. permitted Solon, S. J. Dolce & Co., Inc. and others to occupy and use its office facilities and leased plant facilities and machinery to Jyron Co. It also leased a portion of the premises to defendant Automation Design & Mfg. in 1968, discussed hereinafter.
In May 1966 R.A.C. began to experience financial difficulty which required refinancing and liquidation of assets. Roto American Sales Corp. (R.A.S.C.) was formed and began to act as R.A.C.'s agent in this regard on January 18, 1967 when it took an assignment of all of R.A.C.'s rights, title and interests by an agreement procured through "Joseph J. Solon, Agent." James Talcott, Inc. assumed the refinancing and received in return a security interest in R.A.C.'s accounts receivable. This security interest was then assigned to Donlon Ventures, Inc., which became affiliated with R.A.S.C. in May 1967. By this time R.A.C. showed a negative net worth. AAA assisted by purchasing R.A.C. equipment and leasing it back to R.A.C. for one year at 7 I/2% of the purchase price, with an option in R.A.C. to repurchase thereafter at its original selling price.
In June 1967 the subject equipment was entrusted to R.A.S.C. AAA through Solon leased a Sigma Radial Drilling Machine, Type UR-4, serial number 6616; a LeBlond Regal Engine Lathe, serial number D-9041, and a Bridgeport Milling Machine, Model J, serial number J-26384, to R.A.S.C. The leasing arrangement was again one whereby AAA would receive 7 I/2% of the price, representing an annual rental fee with an option in R.A.S.C. to purchase after one year. Solon testified that the lease was never completed and that he left the equipment with R.A.S.C. with the understanding that he would sell the equipment to a willing buyer some time in the future.
On September 26, 1967 R.A.C. filed a voluntary petition in bankruptcy which was confirmed on Oct. 31, 1967. Thereafter, pursuant to a court order, the January 18, 1967 asignment between R.A.C. and R.A.S.C. was cancelled and deemed void, the result of which was that R.A.S.C., a
closely held corporation (the stock of which was owned in equal parts by Herbert Frutkin and Louise M. Solon, wife of Joseph Solon) became owner of approximately two-thirds of the outstanding shares of Roto American Corp.
The testimony disclosed that the formation of R.A.S.C. was an emergency measure designed to save the failing R.A.C. It would receive income from the sale of its stock. i.e., the Walton contract and Seigfried contract, and filter it back into R.A.C. to keep it afloat. In December 1967 and January 1968 it acquired two companies, Nordam, Inc. and S. J. Dolce & Co., Inc. which were charted to be assigned to R.A.C. R.A.S.C. was also used as a vehicle to compromise claims of creditors. The testimony also reveals that Solon acted as a "free-lance" agent and was inextricably interwoven in these transactions.
In April 1968, through Solon's promptings and assistance, Carl Frank, the president of Automation Design & Mfg. Corp. (Automation Design) arranged to lease a portion of R.A.C.'s building. Frank knew Solon when Frank was chief engineer of R.A.C. in charge of research and development. At that time he constantly sought Solon's advice. Frank testified that he rented space from R.A.C. in April 1968, and that Automation Design took possession thereof in May 1968 and remained there until April 1970 when it moved to Norwood, N.J. He testified further that in November and December 1968 Dolce of S. J. Dolce & Co., Inc. and Billington, the president of R.A.S.C., offered to sell four machines to Automation Design. Frank had previously discussed with Solon the sale of various machines in August or September 1968 but failed to agree on a price. However, as a result of discussions with Dolce and Billington, he purchased the machines. A Leland Gifford Drill Press ...