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George W. Loft Realty Co. v. M. H. Harris

Decided: September 27, 1934.

GEORGE W. LOFT REALTY COMPANY, PLAINTIFF-RESPONDENT,
v.
M. H. HARRIS, INCORPORATED, DEFENDANT-APPELLANT



On defendant's appeal from a judgment of the Supreme Court, based on a jury verdict at Essex Circuit, in favor of plaintiff. Affirmed.

For the respondent, McCarter & English (Ward H. Herbert, of counsel).

For the appellant, Saul J. Zucker.

Perskie

The opinion of the court was delivered by

PERSKIE, J. On May 23d, 1925, the Prudential Insurance Company of America leased to Gerge W. Loft all of the premises located at the northwest corner of Broad and Market streets, Newark, New Jersey, for a term of fifteen years, at a yearly rental starting at $450,000 and increasing during the term to $550,000 and $650,000 a year. Loft deposited with the Prudential Insurance Company securities aggregating about $250,000 in value to secure his performance of the conditions of the lease and for the payment of the rent therein reserved. Later, on December 7th, 1925, Loft, with the written consent of Prudential Insurance Company, assigned the lease to the George W. Loft Realty Company, a corporation of New Jersey; and the said Loft, on the same day and in writing, further guaranteed the performance of the conditions of the lease and the payment of the rent therein reserved by the George W. Loft Realty Company.

The George W. Loft Realty Company was a holding company. It, in turn, sublet various portions of the premises to other tenants. And so, on March 26th, 1926, it rented part of the said premises to appellant for the period of fifteen years. In addition to the rent reserved the lease provided:

"First: The lessee covenants and agrees: (3) 'To pay the lessor five per cent. of the increase in the amount of real estate taxes for land and building against the entire land and building of which the premises are a part, over and above the amount of taxes as they may be assessed in 1925 for taxes for the year 1926, which taxes may be paid, assessed or imposed upon the said property in any or every year during the period of this lease, such payments of increase of tax to be made

by the lessee to the lessor at or before the times when said taxes shall become due and payable. A tax bill shall be sufficient evidence of the amount of tax and for calculation of the amount to be paid by the lessee.'"

Thereafter, on January 5th, 1931, under circumstances which shall be more fully hereinafter detailed, a tri-party agreement (Exhibit D-2) was made and executed between George W. Loft Realty Company (party of the first part, and for the sake of brevity shall be referred to as Loft Realty Company); George W. Loft, party of the second part, and the Prudential Insurance Company of America (party of the third part, which for the sake of brevity shall be referred to as Prudential), wherein the various agreements of the respective parties were referred to and in which it was agreed between the parties that for the sum of $100,000 paid to the Prudential, the parties of the first and second part thereunder did "* * * bargain, sell, assign, transfer and set over unto * * * Prudential * * * as of January 1st, 1931, all * * * leases * * * annexed, marked, Schedule 'A' * * *." This schedule contained a list of all leases of all subtenants, including that of appellant. And said agreement also provided: "* * * and the said parties of the first and second parts do hereby covenant and agree to and with the said party of the third part that, as of the first day of January, 1931, all of the rents, claims and demands due and accrued or to become due and to accrue are as set forth in the said schedule * * *." But this schedule does not, however, set out any back or accrued rent as being due and owing by appellant. And the said agreement further provided: "And the said parties of the first and second parts in consideration of the premises have severally, as of the first day of January, 1931, surrendered and yielded up and by these presents do surrender and yield up unto the said party of the third part the said Indenture of Lease bearing date the twenty-third day of May, 1925, made by the Prudential Insurance Company of America, to the said George W. Loft, * * *." Prudential accepted the assignment and surrendered as of January 1st, 1931, and "* * * releases * * * as of the

first day of January, 1931, the said parties of the first and second parts from all liability thereafter accruing by reason of the said Indenture of Lease." The Prudential released the party of the second part from any and all liability under his several agreements with it and returned the securities deposited with it.

Respondent in the present suit sought to recover from appellant, under paragraph No. 3 of the lease aforesaid, a sum equal to the five per cent. increase of the taxes for the year 1930, over and above the year 1926. The appellant answered. It set up, as it now concedes, substantially two defenses: "First, that respondent [as assignor for its own use and benefit] could not maintain the action because it had parted with whatever interest it had in the aforesaid lease. Second, that respondent has agreed to forego its claim, if any it had, in consideration of appellant's ...


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