Gulf Oil Corp. v. Montanaro

• Decision Date: 23 March 1967
• Docket Number: No. C--1269,C--1269
• Parties: GULF OIL CORPORATION, a Pennsylvania Corporation, Plaintiff, v. Mariano MONTANARO, Defendant.
• Court: New Jersey Superior Court

Page 348

94 N.J.Super. 348

228 A.2d 352

GULF OIL CORPORATION, a Pennsylvania Corporation, Plaintiff, v. Mariano MONTANARO, Defendant.

No. C--1269.

Superior Court of New Jersey

Chancery Division.

March 23, 1967.

Vieser, Hoey & San Filippo, Newark, for plaintiff (W. Eugene San Filippo, Newark, appearing).

Hein, Smith & Mooney, Hackensack, for defendant (John T. Mooney, Hackensack, appearing).

LORA, J.S.C.

This was originally an action for reformation of a lease agreement and for specific performance of an option to purchase. However, only the latter count for specific performance now remains for the court's determination.

Defendant Mariano Montanaro is the owner of certain premises located on the northeast corner of Market Street and Midland Avenue in the Borough of East Paterson. As a result of negotiations between the parties, plaintiff Gulf Oil Corporation as tenant, and defendant as landlord, entered into a written lease agreement demising the premises on December 7, 1955. At the time of the execution of the lease title to the premises was held by Mariano Montanaro and Minnie Montanaro, his wife, as tenants by the entirety. Mrs. Montanaro is now deceased. Defendant is also the owner of land adjacent to the demised premises. At the time of the lease agreement and subsequent thereto the whole of defendant's property (leased and nonleased) constituted a single undivided lot.

According to the terms of the lease, a printed form submitted by plaintiff during the course of negotiations, the premises were to be leased for a term of five years beginning on January 15, 1956. In addition, plaintiff-lessee was given an option to renew the lease for an additional term of five years. For the original five-year term the rent was to be $325 per month, and in the event that the lessee exercised its option to renew the lease for the second five-year term, the rent was to be $350 per month. In the early part of 1961 plaintiff chose to exercise the renewal option and was thus in possession as lessee for a ten-year period.

Paragraph 16 of the lease agreement provides, in relevant part:

'In consideration of One ($1.00) Dollar and other good and valuable considerations, receipt whereof is hereby acknowledged, Lessor hereby grants to Lessee, its successors and assigns, an option to purchase the premises herein described at any time during the term of this lease or any renewal or extension thereof, for the sum of Seventy-five Thousand Dollars ($75,000.).'

In addition, the following typed provision was inserted in the agreement at defendant's request as paragraph 17 'Option to meet offer to purchase. It is agreed that if Lessor, at any time during the term of this lease or any extension or renewal thereof, receives one or more bona fide offers from third parties to purchase the demised premises, and any such offer is acceptable to Lessor, then Lessor agrees so to notify Lessee in writing, giving the name and address of the offeror and the price, terms and conditions of such offer, and Lessee shall have ninety (90) days from and after the receipt of such notice from Lessor in which to elect to purchase the property for the consideration and on the terms and conditions contained in said bona fide offer. If Lessee does not elect to purchase or does not purchase said property, and Lessor either sells or fails to sell the property to anyone (sic) or more of such third parties who may make such offer or offers, then in any and all such events all of the terms, provisions, conditions and privileges of this lease, including this option, and the other rights of lessee under this lease shall continue in full force and effect.'

No offer, as provided in paragraph 17, was ever made. Plaintiff now asks the court to order the specific performance of the fixed price option to purchase the premises (i.e. $75,000) as provided in paragraph 16 of the lease instrument, plaintiff on July 15, 1965 and after lease extension negotiations had failed, having notified defendant in writing that it was exercising its option to so purchase. Upon defendant's refusal to tender a deed, the instant proceedings were commenced by plaintiff.

The exercise of the option to purchase by plaintiff involves a severing of defendant's property since defendant, as noted above, demised only a portion of his holdings to Gulf. Such severance, of course, necessitates subdivision approval by the planning board of the municipality. The requisite approval resolution was passed by the board at a time subsequent to trial, application having been made by plaintiff just as soon as defendant consented to the reformation sought in the complaint. However, the secretary of the board is holding the matter in abeyance until such time as this court renders its decision. The court considers that such approval renders moot some of defendant's trial arguments, and does not agree with his position that the court, in deciding this case, may not consider the favorable action of the planning board.

Defendant contends that equity may not order specific performance of a contract where compliance rests in the will or discretion of a third party uncontrolled by defendant. But here, since the planning board has approved the subdivision, this objection has been rendered academic and should no longer serve as a bar to the court's granting or specific performance. Then, too, even if subdivision approval had not as yet been obtained, it would appear that the granting of specific performance might nevertheless be ordered by the court but entry of judgment be withheld until subdivision approval actually issued. Similarly defendant's contention that the court's granting of specific performance would permit the parties to circumvent the requirements of the Municipal Planning Act and the Planning Board of East Paterson is now without merit. Defendant's additional argument of supervening impossibility of performance is, of course, negated by the planning board's approval of the subdivision.

N.J.S.A. 40:55--1.23 provides:

'If, before approval or favorable referral and approval have been obtained, any person transfers or sells or agrees to sell, as owner or agent, any land which forms a part of a subdivision which, by ordinance, the planning board or the planning board and the governing body are required to act, such person shall be subject to a fine not to exceed two hundred dollars ($200.00) or to imprisonment for not more than thirty days and each parcel, plot or lot so disposed of shall be deemed a separate violation. * * *'

Defendant, citing this statute, contends that an agreement, the performance of which is opposed to public policy and/or forbidden by statute under penalty of fine or imprisonment, is illegal and void. It is apparently his contention that application for subdivision approval should have been made at some time prior to the time when Gulf actually made its application, perhaps contemporaneously with the lease agreement itself. Contrary to this assertion, the court believes that plaintiff's application to the planning board was timely. There is no requirement of subdivision where the premises are merely leased; the initial point at which subdivision would be necessary is when the ownership of a single tract is to be divided. In the instant case that would be at the time when Gulf informed defendant that it was going to exercise the option to purchase, for only then would the ownership of the tract originally held In toto by defendant be divided. This was the procedure followed by Gulf.

Sanction, at least implicit, for this procedure is given in Popular Refreshments, Inc. v. Fuller's Milk Bar, 85 N.J.Super. 528, 205 A.2d 445 (App.Div.1964), a case heavily relied upon by defendant to support his contentions. In that case the court criticized plaintiff for not appealing from an adverse ruling of the planning board, and accordingly denied specific performance of the option to purchase, but nowhere did the court indicate or imply that application for subdivision approval should have been made at some time prior to the exercise of the option or that the court would have denied specific performance if the planning board had approved the subdivision. Thus, this court concludes that Gulf's application was timely and that the approval of the planning board obviates this objection by defendant to the court's granting specific performance.

As noted above, paragraph 16 of the printed form lease gave Gulf, as lessee, the option to purchase the property for $75,000. In addition, paragraph 17, entitled 'Option to meet offer to purchase' and included at the insistence of defendant-lessor, permitted Gulf to match any bona fide offers the lessor may have...