Louis Schlesinger Co. v. Rice

• Decision Date: 13 March 1950
• Docket Number: No. A--84,A--84
• Citation: 4 N.J. 169,72 A.2d 197
• Parties: LOUIS SCHLESINGER CO. v. RICE et al.
• Court: New Jersey Supreme Court

Page 169

4 N.J. 169

72 A.2d 197

LOUIS SCHLESINGER CO. v. RICE et al.

No. A--84.

Supreme Court of New Jersey.

Argued Feb. 6, 1950.

Decided March 13, 1950.

Charles Danzig, Newark, argued the cause for appellant. Riker, Emery & Danzig, Newark, attorneys.

Meyer E. Ruback, Newark, argued the cause for the respondents Rice. Ruback, Albach & Weisman, Newark, attorneys.

Sidney G. Goldberg, Newark, argued the cause for the respondent Marks.

The opinion of the court was delivered by

HEHER, J.

The controversy here grows out of a real estate brokerage contract. On June 19, 1946, the defendants Rice leased their lands known as 288 Frelinghuysen Avenue, in Newark, to the Ken-Rod Manufacturing Co. for a term of ten years commencing the ensuing August 1st, at an annual rental of $46,800. The lease was negotiated by the plaintiff broker; and on the day of the execution and delivery of the instrument, the Rices agreed in writing to pay plaintiff brokerage at the rate of 5% Of the annual rent reserved, the commission on the first year's rental to be payable forthwith and the remainder in five equal annual installments of $4212, provided the lessee had not defaulted and was still in possession of the demised lands, the first installment to be payable August 1st, 1948. Termination of the lease by the lessee's default would extinguish the 'right to further brokerage;' but in that event plaintiff should 'have the exclusive agency for the renting of the demised premises, upon terms as favorable or more favorable in respect of rent, duration of lease and the other provisions contained' in the lease with Ken-Rod, the exclusive agency to be 'limited in time to three months from the time the said tenant goes out of possession or is put out of possession.' It was further stipulated that in case plaintiff procured 'within said three months * * * a new tenant upon the aforesaid terms or any terms acceptable' to the Rices, it should have brokerage at the rate of 5% Of the rental reserved in the new lease, payable annually on the rent reserved for the current year if the tenant had not defaulted. Ken-Rod reserved the right to sublet the demised premises and to assign the lease; and in the Summer of 1947, it assigned the lease to Breimor Realty Co., who in turn sublet 18,000 square feet of the space demised, 25% Of total, to Smith Engineering Corporation. Breimor paid the rent for the demised premises while it was in possession. It went out of possession April 25, 1948, having paid the rent for that month. Smith remained in possession of the space thus sublet. On May 19, 1948, Breimor formally surrendered the lease to the Rices; and on the 21st of that month the Rices accepted from Smith rent for the month for the space held by it. Smith vacated at 'the end' of that month.

The complaint is in two counts: The first alleges an exclusive agency in plaintiff for three months commencing May 1, 1948, when the 'tenant procured by' plaintiff 'defaulted and went out of possession of the premises,' efforts made and expense incurred by plaintiff in the performance of its undertaking, the renting of the premises to General Motors Corporation for a term of ten years beginning August 1, 1948, at an annual rental of $37,800, and the accrued right to a commission of 5%; the gist of the second count is a 'malicious' and 'unlawful interference' by the Rices and defendant Marks, also a real estate broker, designed to deprive plaintiff of the fruits of its contract by contriving to negotiate a lease of the lands to General Motors during the term of plaintiff's exclusive agency and to divert the commission to Marks.

After depositions taken at the instance of plaintiff to unfold the circumstances attending the negotiation of the lease to General Motors, and a supplemental stipulation of facts, argument was had on cross motions for a summary judgment pursuant to Rule 3:56--1 et seq., for want of a genuine issue of fact, so it was said. The motions of the Rices and Marks were granted, and the motion of plaintiff denied, and judgments interlocutory and final were entered accordingly. The Judge found that plaintiff's exclusive agency began May 1, 1948, 'the date of the default of the tenant under the pre-existing lease,' and terminated on the succeeding August 1st; that while plaintiff on June 14, 1948 'did circularize General Motors, among other persons, firms and corporations,' there were no ensuing negotiations, and it conclusively appeared that plaintiff was not 'the effective, procuring cause' of the later lease to that corporation, 'which was signed by the tenant on August 6, 1948, and by the landlord-defendants on August 9, 1948, * * * subsequent to the expiration of the exclusive agency;' and that 'the acts of' defendants did not constitute 'a fraudulent attempt to deprive the plaintiff of the fruits of its labors.' In short, the Judge reasoned that plaintiff had not found a purchaser 'able and willing to buy' on the prescribed terms before the expiration of its exclusive agency, and there had been no fraudulent interference with plaintiff's efforts to effect a sale. He cited the principle of Loxley v. Studebaker, 75 N.J.L. 599, 68 A. 98 (E. & A.1907).

Plaintiff's appeal to the Appellate Division of the Superior Court was certified here on our own motion.

There was error in the challenged judicial action. The evidence raised issues of fact which precluded a summary judgment as a matter of law.

The plaintiff broker assumed that the tenant under the original lease defaulted and surrendered possession of the demised premises on May 1st, 1948. On the prior April 29th, in anticipation of the surrender of the premises, it advised the Rices by letter of its intention to proceed under the agreement for 'an exclusive agency on your property * * * for a period of three months commencing May 1st, 1948, on which date we understand the present tenant surrenders their leasehold,' and to undertake an advertising campaign by signs, newspapers and circulars directed to concerns selected from its 'specialized mailing list,' which included the General Motors, for the sale of the property at the stipulated price 'and for lease for a minimum ten year period at 65cents per square foot ($46,800) per annum.' There was no dissent from this statement of the period of the exclusive agency. The Rices knew the circumstances attending the surrender of possession; plaintiff did not. On the ensuing August 3rd, not knowing of the time of the surrender of the lease or of the existence of the sublease and the sublessee's continued possession until the latter part of the prior May, plaintiff removed their rent signs from the premises and returned the key to the Rices with a letter stating that it would 'continue to use every effort to lease or sell the property.' Breimor's surrender of the lease to the Rices did not terminate Smith's right of possession under the subleast. The subterm was not thereby extinguished. Shaw v. Creedon, 133 N.J.Eq. 397, 32 A.2d 721 (Ch.1943). The complaint counts upon an exclusive agency expiring August 1, 1948.

There is evidence tending to show that the lease was negotiated by the Rices through the instrumentality of the second broker, Marks, during the period of plaintiff's exclusive agency, and that its execution and delivery were deferred until after August 1, 1948, in the belief that plaintiff's exclusive agency would then have expired and all its rights thereunder would have been extinguished.

Following its letter of April 29th, plaintiff erected signs on the demised premises, advertised their availability and facilities in Newark and New York newspapers, circulated by mail and otherwise a description of the premises and the rental price and other pertinent information, and exhibited the premises to interested persons, all at a cost of $823.73, exclusive of incidental telephone calls, the expense incurred by salesmen in personal calls upon prospective customers, and general overhead. On June 14, 1948, by letter addressed to General Motors at its New York office, plaintiff offered the property for sale at the price of $375,000 and for rent at the rate of 65cents per square foot. A day or two thereafter, real estate brokers of New York City and other representatives of General Motors were shown the premises by Rudd, an associate of Marks. On the 16th, 17th or 18th of the month, Rudd and Marks informed Samuel W. Rice of General Motors' interest in the property. It is conceded that Rudd and Marks then knew of plaintiff's exclusive agency. Rudd told Rice in this conversation that he 'didn't want to infringe on any exclusive agency;' that Marks 'had a co-broker,' and was 'really interested in receiving 5%.' Rice replied: 'You go ahead and make your deal, and I will take care of Schlesinger.' Again, Rudd said: 'I had explicit instructions from the landlord. I was told definitely don't worry, go ahead and make your deal, and that is enough for me.' Marks and Rudd proceeded accordingly. And it is reasonably inferable from the proofs that then or shortly thereafter Marks was authorized by the Rices to offer a lease of the premises for a term of ten years at the rate of 52 1/2cents per square foot, or a total rental of $37,800, and that plaintiff was not given the same terms nor advised of the lower price to Marks. Only the rental was then unsettled in the negotiations with General Motors. On June 22nd following, Marks wrote General Motors that Rice had authorized him to prepare a lease of the building for ten years at a rental of 52 1/2cents per gross square foot per annum; and on the same day he wrote to the New York brokers representing General Motors that he recognized them 'as co-brokers on a 50-50 basis.'

Immediately after the first meeting with Rice, Rudd undertook, with Rice's cooperation, to arrange the engineering and mechanical details necessary to consummate the lease, relating to water and power facilities and other utilities,...