Sand v. London & Co., A--72

• Decision Date: 26 March 1956
• Docket Number: No. A--72,A--72
• Citation: 39 N.J.Super. 513,121 A.2d 559
• Parties: Julius SAND, t/a Scotty's Truck Terminal, Plaintiff-Appellant, v. LONDON & COMPANY, Inc., a corporation of the State of New Jersey, et al., Defendants-Respondents. . Appellate Division
• Court: New Jersey Superior Court — Appellate Division

Page 513

39 N.J.Super. 513

121 A.2d 559

Julius SAND, t/a Scotty's Truck Terminal, Plaintiff-Appellant, v. LONDON & COMPANY, Inc., a corporation of the State of New Jersey, et al., Defendants-Respondents.

No. A--72.

Superior Court of New Jersey Appellate Division.

Argued March 12, 1956.

Decided March 26, 1956.

William B. Kaufman, Elizabeth, argued the cause for appellant (Kaufman & Kaufman, Elizabeth, attorneys).

Sanford Freedman, Newark, argued the cause for respondents (Max L. Rosenstein, attorney).

Before Judges CLAPP, JAYNE and FRANCIS.

The opinion of the court was delivered by

FRANCIS, J.A.D.

The Chancery Division declined to compel the defendant, Cortlandt Investors, Inc., to convey certain premises to the plaintiff, Julius Sand, trading as Scotty's Truck Terminal, pursuant to an option contained in a lease. Sand appeals.

The defendant, London & Company, Inc., owned a tract of land fronting on Woodruff Lane, Elizabeth, Lew Jersey. On August 1, 1950 it leased a portion thereof (described by metes and bounds) to plaintiff for a term of five years ending July 31, 1955. Provision was made for automatic renewal thereafter on a year-to-year basis subject to the right of either party to terminate on 90 days' notice prior to the expiration of any annual period.

The lease contained the following first refusal option to purchase:

'20. If at any time during the existence of this lease or any extension or renewal thereof, the landlord shall receive an offer for the sale of the particular lands demised herein to the tenant named herein, and as above described, and as appears on the sketch annexed hereto, the landlord agrees not to accept such offer or make any contract of sale thereof, without first giving the tenant named herein an option to acquire and purchase said lands upon the same terms and conditions contained in such offer of purchase.

'21. The landlord agrees to give the tenant notice in writing by registered mail of the terms and conditions of such offer, and if the tenant fails to enter into a bona fide contract upon the same terms and conditions as those proposed to the landlord by the prospective purchaser of said lands, within 10 days after the receipt of such registered notice, then the landlord shall have the right, and shall be at liberty to make a contract for the sale of said lands and may thereupon give notice of the termination of this lease to the tenant, as provided for herein.'

On July 23, 1951, the lessor notified Sand that an offer had been received to buy a portion of the demised premises 100 feet by the full depth of the lot, approximately 370 feet. (The frontage of the leased premises was 125 feet.) The price proposed was 50$ per square foot. Additional information was furnished also that the prospective purchaser was to have an option to buy the remaining easterly parcel of 100 foot frontage, within three years, at 55$ a square foot. The name of the offeror was not given.

Plaintiff engaged counsel who looked into the matter and ascertained that no lower price would be entertained. Consequently he did not exercise the option to acquire ownership.

Thereafter, on October 30, 1951 London & Company, Inc., notified Sand that its property, including the demised land, had been sold to Cortlandt Investors, Inc., and that subsequently accruing rents should be paid to the new owner. Cortlandt Investors, Inc., sent a similar notice. The deed is dated October 24, 1951 and was recorded on the same day. Plaintiff was not advised that Cortlandt was not the prospective purchaser referred to in the July 23 notice. Attornment was made to the new owner and thereafter rent paid to it.

In July 1954 Cortlandt exercised the termination provision of the lease. Plaintiff then caused an examination to be made of the records and discovered that the deed bore revenue stamps indicating a purchase price of approximately 20.09 cents per square foot. In this same month he attempted to take advantage of his option to buy at that price but London and Cortlandt refused.

This action was then brought to compel the sale to him at the price paid by Cortlandt. The claim to such relief was predicated upon a charge that the purchaser was aware of the lease provision conferring the option of first refusal on Sand and that acting in concert with London & Company, Inc., a fraudulent scheme was consummated to deprive him of his right to buy the property.

The trial court held that fraud had not been established. He declared also that the transaction between the corporations was not a sale but simply a transfer between two companies owned and controlled by the same interests; a shifting of the beneficial interest in the property from one hand to the other. He found on the evidence that the inducing motives were business convenience, the simplification of a federal tax problem of London & Company, and an improvement in the financial position of that company through the assumption of certain liabilities by Cortlandt stock held by a long time employee that since the owners of the two companies were the same at the time of the conveyance (except for one share of Cortlandt stock held by a long time employee of London), and since the grantee took title with knowledge of the lease, the ownership was subject to Sand's option to purchase. So if Cortlandt had received an offer to sell prior to the termination of the lease, an obligation existed to give Sand an opportunity to buy at the same price.

On this appeal the allegation of fraud is not argued. The principal contention is that the conveyance to Cortlandt constituted an ordinary sale and by virtue of the option in the lease plaintiff was entitled to notice of the offer to purchase and an opportunity to meet the consideration proposed.

The obligation of a lessor under such a lease to give notice to the lessee of each proposal of sale received from a third person, is a continuing one; it remains throughout the term of the letting. A refusal by the lessee to meet one offer which the lessor himself ultimately rejects, does not excuse the failure to report a subsequent one which is being considered. Until an offer which the lessee does not meet, is accepted by the lessor, the contractual stipulation to notify persists. Superior Portland Cement, Inc., v. Pacific Coast Cement Co., 33 Wash.2d 169, 205 P.2d 597 (Sup.Ct.1949); R. F. Robinson Co. v. Drew, 83 N.H. 459, 144 A. 67...