S. P. Dunham & Co. v. 26 East State St. Realty Co.

Decision Date28 December 1943
Docket Number149/265.
Citation35 A.2d 40
PartiesS. P. DUNHAM & CO. v. 26 EAST STATE STREET REALTY CO.
CourtNew Jersey Court of Chancery
OPINION TEXT STARTS HERE

Suit by S. P. Dunham & Company against 26 East State Street Realty Company for construction of a lease or alternatively its reformation and restraint against closing of certain passageways, wherein the defendant filed a counterclaim.

Decree in accordance with opinion.

1. Where Chancery has jurisdiction of a cause, the consideration of all the controversial issues may be undertaken to subserve the ends of justice and to repel the likelihood of recurrent litigation.

2. The cardinal rule in the interpretation of contracts, whether at law or in equity, is to ascertain and effectuate the common intention of the parties unless to do so transgresses legal principles or public policy.

3. Occasionally, the words used are of doubtful meaning and purport, and their application to a given circumstance or event is problematical. In such an exigency, the corollary to the general rule permits an inquiry into the factual circumstances accompanying and surrounding the composition of the contract and into the objects thereby sought to be accomplished by the parties. Such an inquiry is not undertaken in any endeavor to change the writing but to illuminate its true and actual signification.

4. The ‘true meaning’ of words, as we characterize it in their use in a given document, is that meaning which those who employed them were desirous of expressing.

5. The circumstances to be considered in construing a contract are limited to those known and those deemed reasonably to have been contemplated by the parties when the agreement was made.

6. One of the most ancient and useful powers of a court of equity is its power to correct and reform writings to conform to the true convictions and intentions of the contracting parties.

7. The power to reform is not confined to instances of an inadvertent omission or an erroneous inclusion of some matter. Indefinite or inaccurate expressions may be corrected.

8. It is not the permissible function of courts to enlarge contracts beyond the range of the contemporaneous intentions of the contracting parties.

9. The acts of attorneys within the scope of the delegated authority are to be regarded as the acts of their clients.

I. Herbert Levy, of Trenton, for complainant.

Scammell, Knight & Reese, of Trenton, for defendant.

JAYNE, Vice Chancellor.

The complainant conducts a department store in the City of Trenton. The stock ownership of the defendant is shared by The First-Mechanics National Bank and The Trenton Banking Company, two banking institutions. The transaction between these parties from which the present dissension has ensued is exhibited by a written lease dated June 15, 1934, actually executed on December 26, 1934, whereby the defendant demised to the complainant for a term of eighteen years, subject to stated provisions, certain premises identified as Nos. 11 and 13 North Broad Street and Nos. 24 and 26 East State Street, in Trenton. The contiguous properties on North Broad Street and those on East State Street unite astern at right angles. Thus they are capable of forming a unit for business utility with entrances available on each street.

The defendant did not have a plenary title to all the interests and estates in the premises known as No. 24 East State Street. Its right to possession was in part derived from a leasehold estate in an outstanding undivided interest and the term of that tenancy would terminate on June 14, 1940. This circumstance has increased in significance. The inability or failure of the defendant to obtain an adequate extension of its own leasehold estate in No. 24 has been a generating cause of anxiety and complications. That eventuality, however was not unforeseen. The lease between the complainant and the defendant contains the following relevant provision: ‘It is understood and agreed between the parties hereto as a condition and term hereof that in the event the Landlord is unable to negotiate a lease for the whole of said property, namely, No. 24 East State Street, Trenton, New Jersey, for the period commencing June 15, 1940, and ending June 14, 1952, the date of the termination of this lease, with the respective owners of the undivided interests in the said property, at the same rental and on the same terms as are now contained in the lease between the Landlord and the present owners of the undivided interests in said property, that this lease shall terminate as to 24 East State Street only at midnight on June 14, 1940, and as to that property only shall be null and void, and the term and estate hereby granted as to said property only and all rights hereunder of the Tenant in said property shall cease, end and expire, and that the annual rental for the then balance of the term of this lease for the remaining property covered by this lease shall be reduced by the sum of $5,050.00 to be applied as monthly credits of $420.83 each month to the amount to be paid by the Tenant, as required by Par. (g) of Section 2.’

Expedients were employed which enabled the complainant to continue its occupancy of No. 24, principally as a tenant of the defendant, until October 1, 1942. However, in April, 1941, the stockholders of the complainant organized a corporation entitled ‘Audrey-Paul, Inc.,’ and in June of that year it acquired by purchase the premises No. 15 North Broad Street which are in contact with No. 13. The incidental events are that financial aid in the acquisition of that property was granted by the Mechanics Bank, and on or about June 20, 1941, the complainant with the consent of the defendant made passageways between Nos. 13 and 15 on the second, third and fourth floors of the buildings. A tenant in no wise associated with the complainant retains possession of the first floor of No. 15 and access to the upper floors is had only through the demised premises.

In the summer of 1942 a decree in a partition suit necessitated a public sale of No. 24 East State Street at which the title to the premises was acquired by a corporation known as Doherty, Inc. In September, 1942, the defendant having declined to lease No. 24 and to sublet it to the complainant, the latter leased that property from Doherty, Inc., for a term of two years from October 1, 1942, at an annual rental of $8,500 plus any eventual increase, during the term, of real estate taxes thereon above those levied for the year 1942. On October 18, 1941, the complainant established its toy and domestic departments (previously located on the first floor of No. 26 East State Street) on the second floor of No. 15 North Broad Street.

Amid these factual circumstances, the parties experience a diversity of opinion concerning the amount of rent payable by the complainant to the defendant pursuant to the covenants of the lease.

The covenants are transcribed as follows:

(a) For the period from June 15, 1934 to June 30, 1934, the sum of Eight hundred thirty-three dollars and thirty-three cents ($833.33).

(b) For the period from July 1, 1934, to June 30, 1936, a sum equal to four (4%) per centum of the ‘gross sales' (as hereinafter defined), of the Tenant during such period of the aforesaid described premises; excepting, however, that in the event that the rental computed as aforesaid shall for any yearly period or rent year be less than Twenty thousand ($20,000) dollars, the Tenant shall pay to the Landlord the said sum of Twenty thousand ($20,000) dollars for each of said annual periods or rent years, said sum of Twenty thousand ($20,000) dollars being hereby fixed as the minimum rental for each of said yearly periods or rent years.

(c) For the period from July 1, 1936 to June 30, 1939, a sum equal to four (4%) per centum of the ‘gross sales' (as hereinafter defined), of the Tenant during such period on the aforesaid described premises; excepting, however, that in the event that the rental computed as aforesaid shall for any yearly period or rent year be less than Twenty-three thousand ($23,000) dollars, the Tenant shall pay to the Landlord the said sum of Twenty-three thousand ($23,000) dollars for each of said annual periods or rent years, said sum of Twenty-three thousand ($23,000) dollars being hereby fixed as the minimum rental for each of said yearly periods or rent years.

(d) For each of the annual periods or rent years beginning with July 1, of each year and ending June 30, of the following year, commencing with the year 1939, to and including the year 1952, and up to June 14, 1952 (midnight), a sum equal to four (4%) per centum of the ‘gross sales' (as hereinafter defined), of the Tenant during said period on the aforesaid described premises; excepting, however, that in the event that the rental computed as aforesaid for any annual period or rent year of said period be less than Twenty-six thousand ($26,000) dollars, the Tenant shall pay to the Landlord the said sum of Twenty-six thousand ($26,000) dollars for each of said annual periods or rent years, said sum of Twenty-six thousand ($26,000) dollars being hereby fixed as the minimum rental for each of said yearly periods or rent years. For the period from June 1, 1952, to June 14, 1952 (midnight), the Tenant shall pay to the Landlord a sum equal to four (4%) per centum of the ‘gross sales' of the Tenant during that period, excepting, however, that in the event that the rental so computed be less than One thousand eighty-three dollars and thirty-three cents ($1,083.33), the Tenant shall pay to the Landlord the said sum of One thousand eighty-three dollars and thirty-three cents ($1,083.33).

(e) On the 10th day of August 1934, the Tenant shall pay to the Landlord four (4%) per centum of the ‘gross sales' for the preceding rent month from July 1, 1934 to July 31, 1934, unless such sum shall be less than one-twelfth of $20,000, or $1,666.66, in which event the Tenant shall pay a minimum of $1,666.66. On the 10th day...

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    ...argues that such is the law and offers in support of its position the following as authority: S. P. Dunham & Co. v. 26 East State St. Realty Co., 134 N.J.Eq. 237, 35 A.2d 40 (Ch.1943); Kirke La Shelle Co. v. Paul Armstrong Co., 263 N.Y. 79, 188 N.E. 163 (Ct.App.1933); Wood v. Lucy, Lady Duf......
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