Stuart & Wood., Inc. v. Palisades Prop. & Operating Corp.

• Citation: 157 A. 659
• Parties: STUART & WOOD., Inc. v. PALISADES PROPERTY & OPERATING CORPORATION.
• Decision Date: 24 December 1931
• Court: New Jersey Court of Chancery

157 A. 659

STUART & WOOD., Inc.

v. PALISADES PROPERTY & OPERATING CORPORATION.

Court of Chancery of New Jersey.

Dec. 24, 1931.

Syllabus by the Court.

1. When the parties (1) agree on some of the terms-of a contract which they embody in a writing and leave other terms for future negotiation, or (2) when the agreement is mereIy

tentative and the parties intend to negotiate further before the contract shall have binding force, or (3) when, having agreed upon all the terms, they make it a part of the bargain that it shall not be operative until embodied in a written instrument signed by the parties, then the contract is not enforceable until the remaining terms are agreed upon, or until the further action of the parties ratifies the tentative contract, or until the contemplated document is prepared and executed. But the contract may be complete and enforceable even though it contains a provision for such modifications as may later be agreed upon.

2. A vendee may have a lien for purchase money paid even though the contract, pursuant to which the payment was made, is incomplete and unenforceable.

3. A landlord agreed to sell the demised premises to the tenant and thereafter allowed the tenant to remain in possession for over two months under the new agreement. The agreement of sale was incomplete and unenforceable and was rescinded. Held, that there was no surrender of the lease by operation of law.

4. The landlord held a deposit of $5,000 as security for the lease. The agreement of sale provided that this deposit should be applied on the purchase price. Held, that upon rescission of the agreement of sale the landlord could still retain the sum as security for the lease.

Suit by Stuart & Wood, Inc., against the Palisades Property & Operating Corporation. Decree in accordance with opinion.

Gross & Gross and Leo Blumberg, all of Jersey City, for complainant.

Pasqualino C. Corbo and Ferdinand D. Masucci, both of Newark, for defendant.

BIGELOW, Vice Chancellor.

This is a bill by a vendee to rescind an agreement of sale and to recover a deposit made on account of the purchase price. Defendant is the owner of a parcel of real estate, used as a restaurant called the Villa Richard. On April 30, 1929, defendant leased this property to Harry Sossin, Alexander Stuart, and Thomas F. Wood for five years at an annual rental of $24,000, payable monthly in advance. The lease contained an option to purchase for $500,000. The lessees deposited with the lessor $5,000 as security. In May, Sossin assigned his interest in the lease to Messrs. Stuart and Wood, and they assigned the lease to complainant, a corporation of which they were officers.

Defendant and complainant on August 2, 1929, entered into a written agreement, the contract which complainant seeks to rescind. In the first place, by it defendant leases to complainant the Villa Richard for ten years, commencing August 1, 1929. For the first year complainant agrees "to pay the sum of $7,900 which is 2 per cent. interest on $395.000, which said sum of $395,000 represents the balance due the party of the first part herein, after making allowance to the party of the second part for $5,000 given to the party of the first part August 1, 1929, and the sum of $3,000 as a payment on said principal sum of $395,000 for the first year from August 1, 1929 to August 1, 1930, making a total of $10,900 to be paid the first year in equal quarter-annual payments of $2,725, commencing with November 1, 1929, and ending August 1, 1930." For the remaining nine years, complainant agrees to pay quarterly installments of principal aggregating $99,000, with interest at 2 per cent. on the unpaid balance. Complainant also agrees to pay taxes, assessments, and insurance premiums "until such time as this lease expires or the party of the second part obtains a deed of the premises as above described from the party of the first part."

It is further stipulated that: "This agreement shall operate as a sale and not as a lease of the above described premises and that the terms of the same be as follows: The purchase price is $400,000. The party of the first part agrees to apply $5,000 given to it by Stuart and Wood on May 1, 1929, as a deposit on the purchase price, leaving a balance due of $395,000 * * * to be paid for the next ten years as above set forth in equal quarter-annual installments and the balance of the unpaid principal at the end of ten years is to be paid off at the rate of $12,000 on account of the unpaid principal, together with interest at the rate of 2 per cent. per annum until the whole principal sum is fully paid and satisfied, and which manner of payment is also more particularly set forth above." The defendant also acknowledges receipt of an additional $1,000 on August 2, 1929. At the foot of the contract is the written consent of Stuart and Wood individually, to the use of the deposit of $5,000 above mentioned.

The agreement recites that Jean Richard, the president of the defendant, contemplates a trip abroad, and that upon his return he shall have the right to inspect the books of complainant. "If he finds that net income during his absence warrants a change in the terms of the agreement," the parties "shall meet and arrange for suitable terms and if necessary amend the terms of payment." Upon the return of Richard from Europe, the parties "shall meet and they may have the privilege of either amending this agreement or revising it and that any such revisions or changes shall only be done by mutual consent." Indorsed on the contract when it was executed is this note, signed by the presidents of the two parties: "This agreement is temporary until Mr. Richard returns from Europe about October 15, 1929. This agreement is to be revised according to the business at that time."

Defendant says that, the agreement being temporary, complainant can have no relief in this suit, citing such cases as Moore v. Galupo, 65 N. J. Eq. 195, 55 A. 628; Bettcher v. Knapp, 94 N. J. Eq. 433, 120 A. 39; Kuskin v. Guttman, 98 N. J. Eq. 617, 130 A. 829; Venino v. Naogole. !)'.! N. J. Eq. 183, 131 A. 895, affirmed 100 N. J. Eq. 357, 134 A. 920; Levine v. Lafayette Bldg. Corp., 105 N. J. Eq. 532, 148 A. 772. Tie rule, I take it, is this: When the parties agree upon all the terms of their bargain, the contract is complete and enforceable even though the written contract contains a provision for such modifications as may later be agreed upon. But, when the parties (1) agree on some of the terms of the contract which they embody in a writing and leave other terms for future negotiation, or (2) when the agreement is merely tentative and the parties intend to negotiate further before the contract shall have binding force, or (3) when, having agreed upon all the terms, they make it a part of the bargain that it shall not be operative until embodied in a written instrument signed by the parties, then the contract is not enforceable until the remaining terms are agreed upon or until the further action of the parties ratifies the tentative contract, or until the contemplated document is prepared and executed. The reason for this lies in the intent of the parties. The rule is the same in law as in equity. Donnelly v. Currie Hardware Co., 66 N. J. Law, 388, 49 A. 428; Mente & Co. v. Heller, 99 N. J. Law, 475, 123 A. 755. If I should look only at the provisions embodied in the contract proper, I should say that the parties intended the agreement of August 2 to be a complete and enforceable instrument; that its terms are to be modified only if Richard should find the' net income warrants a change and only if both parties agree to a change. This is not clear, however. The right given Richard to inspect complainant's books for the purpose of ascertaining what change should be made, and the positive covenant if Richard finds a change warranted, that the parties shall arrange suitable terms, imply that the contract shall not be obligatory if further negotiations are unfruitful. The indorsement on the contract cannot be overlooked. The evidence shows that Richard insisted upon it before he would sign the contract. It states unequivocally that the agreement is temporary until his return from Europe and that it is to be revised.

In my opinion, the agreement gave complainant the right to possession until Richard should return; all the rest was tentative. The agreement is not one that could be enforced specifically; but complainant does not ask enforcement. It seeks cancellation and the return of the deposit on account...