24 Broad Street Corporation v. Quinn

• Decision Date: 01 April 1952
• Docket Number: No. C--2135,C--2135
• Citation: 87 A.2d 759,19 N.J.Super. 21
• Parties: 24 BROAD ST. CORP. v. QUINN.
• Court: New Jersey Superior Court

Page 21

19 N.J.Super. 21

87 A.2d 759

24 BROAD ST. CORP. v. QUINN.

No. C--2135.

Superior Court of New Jersey Chancery Division.

April 1, 1952.

Sidney Finkel, Newark, attorney for the plaintiff.

Mylod & Mylod, Newark (James P. Mylod, Newark, appearing), attorneys for the defendants.

STEIN, J.S.C.

Plaintiff is the lessee named in a written lease made in June, 1946, by which the defendant Helen H. Quinn (now deceased) demised to the plaintiff certain lands and building at 24 Broad Street, Bloomfield, New Jersey, for a term of 21 years, beginning July 1, 1946, and ending June 30, 1967, at midnight. This lease will be herein referred to as the main or basic lease. During the pendency of this action the lessor, Helen H. Quinn, died, and upon order of this court her devisee, John Healy Quinn, and also the executors of her will were brought in as substituted defendants and the action thereupon stood revived.

The lease called for an annual rental of $2,700 for the first four-year period (now passed) and an annual rental of $3,600, payable in monthly installments of $300, for the last 17 years of the term.

The major controversy herein arises from the conflicting interpretations given by the parties to the eighth paragraph or section of the lease, which reads as follows:

'8. The tenant covenants and agrees, as a special inducement to the landlord to make and execute this lease, to remove the building now erected upon the demised premises and shall and will at its own cost and expense erect or cause to be erected thereon and completed within five (5) years from the commencement date of this lease; to wit on or before June 30th, 1951, a building herein sometimes called the 'new building' which said building, including the store fronts, shall have a cost for the construction thereof of not less than the sum of Twenty Thousand Dollars ($20,000.00). The building so to be constructed shall be in accordance with plans and specifications that shall first be submitted to the landlord. Receipted bills, supported by an affidavit of an officer of the tenant authorized by resolution of the tenant to make said affidavit that said receipted bills totaling Twenty Thousand Dollars ($20,000.00) or more as the construction cost of said new building were bonafidely incurred, and further supported by the cancelled checks paid by the tenant or its under-tenant for the construction work done, whether such work was done by the tenant or any undertenant for the benefit of the tenant, shall be conclusive evidence of the cost for the construction of said new building.

'The tenant further convenants and agrees that if it does not erect and complete a new building on the demised premises within five (5) years from the commencement date of this lease, whether such failure to erect and complete a new building on the demised premises within the five (5) year period hereinmentioned is due to government prohibition, regulations or priorities in obtaining materials or for any reason whatsoever, then the sum of Six Thousand Dollars ($6,000.00) deposited by the tenant with the landlord, as provided for in Paragraph twenty-one (21) hereof, shall immediately be and become the property of the landlord and shall belong to and be retained by the landlord, free from any claim whatsoever on the part of the tenant, and the tenant shall thereupon be released and discharged from its obligations to erect a new building on the demised premises, and all the other terms, conditions, covenants and agreements in this lease contained shall continue in full force and effect, except that the annual rental of $3,600.00 shall be increased to $4,000.00, as provided in Paragraph three (3)(b) of this lease for the remaining sixteen (16) years of the term hereby granted.'

A fuller understanding of the controversy requires that section 21 of the lease be here set forth:

'21. As a further inducement to the landlord to make and execute this lease, the tenant has contemporaneously herewith deposited with the landlord the sum of Six Thousand ($6,000.00) Dollars, the receipt whereof is hereby acknowledged, as security and pledge for the faithful performance of the covenant on the part of the tenant to construct and erect or cause to be erected and completed, a new building within the time and in strict accordance with all of the terms, conditions and provisions of paragraph 8 hereof. If the tenant fails to comply with the terms, covenants and provisions of paragraph 8, the said sum of Six Thousand ($6,000.00) Dollars deposited hereunder shall be considered as additional rent over the twenty-one year term hereby granted and shall belong to the landlord. Upon the compliance, however, on the part of the tenant with the terms, covenants and conditions contained in said paragraph 8, the said sum of Six Thousand ($6,000.00) Dollars so deposited shall be returned on demand to the tenant. Interest shall be allowed the tenant by the landlord on the said deposit at the rate or rates of interest paid by the Bloomfield Savings Institution during said five year period and shall be paid to the tenant with the return of the deposit, if the tenant becomes entitled thereto. The said sum of Six Thousand ($6,000.00) Dollars deposited hereunder with the landlord shall be and the same is hereby made a lien upon the premises hereinabove described, as security in favor of the tenant for the return of said deposit as herein provided for.

'In the event that the landlord fails or defaults in her obligation to return the security deposited with her, as herein provided for, the tenant shall, in addition to such other remedies to which it may be entitled in law or in equity, at its option, be credited with the rent thereafter to become due, commencing with the first of the month following the completion of such new building until the entire security fund deposited has been consumed by such credits, to the same extent as though such deposit had been in the first instance applied towards the payment of the rent to become due thereafter.'

When the main lease was executed the plaintiff deposited with the lessor the sum of $6,000, as called for by the quoted section of the lease. The plaintiff, claiming compliance with those provisions, has demanded the return of the $6,000 with the stipulated interest. The defendants, claiming non-compliance with those provisions, seek to retain that $6,000 as their absolute property and assert that that sum is additional rent for the balance of the term. Yet, claiming certain breaches hereinafter mentioned, the defendants seek to have the lease declared forfeited. Such a termination of the lease would necessarily prevent the $6,000 fund from being utilized as additional rent, for if the lease stood forfeited the tenant's right to possession would be at an end and there would be no rent. It therefore plainly appears that the retention of the $6,000 by the defendants is itself in the nature of an attempted forfeiture.

It will be observed that there is nothing in the said section of the lease, or elsewhere in the instrument, which compels the plaintiff to erect a 'new' building either within the first five years of the term or at any time thereafter. The erection of such building is purely permissive, but that permission is coupled with an agreement that if the permissive right be not exercised within the first five years, the $6,000 should belong to the lessor and, further, that the rent should thereupon be stepped up from $3,600 to $4,000 per annum. If the defendants are right in their contention that a 'new building' was not erected within the first five years, then the loss flowing from such non-erection is the $6,000 deposit, plus the increased rent for 17 years, such increase amounting to $6,800, making a total loss to the tenant of $12,800. If the plaintiff is right in its claim that a 'new building' costing at least $20,000 was erected within those five years, then the...