On appeal from the Supreme Court.
For the defendant-respondent, Stein, Stein & Stein and Martin P. O'Connor.
For the plaintiff-appellant, David B. & Moe Silver and Harry Levin.
The opinion of the court was delivered by
WOLFSKEIL, J. This is an appeal from a judgment entered for the defendant on a directed verdict in the Supreme Court,
Essex Circuit. The action was for the recovery of rent, taxes and other items claimed to be due under a lease made between the plaintiff and W.A.G. Realty Company on November 22d, 1922, for a large building with numerous stores in the city of Elizabeth for a term of about nineteen years at a yearly rental of $15,000 ($1,250 per month) for part of the term, and $15,500 ($1,291.67 per month) for the remainder of the term, beginning May 1st, 1932.
The W.A.G. Realty Company assigned the lease to a third party and by the route of mesne assignments it came into the hands of the Inter City Holding Company, of which one Max Stitch was president. On April 3d, 1930, the Inter City Holding Company assigned the lease to the defendant for the specified purposes of collecting the rents from the undertenants and after deducting from the monthly rental the sum of $1,500, which was to be forwarded to the W.A.G. Realty Company, and a further sum not exceeding $4,000 per annum for the purpose of paying taxes, and one per cent. for the services of the defendant, to apply the balance to all existing indebtedness due or to become due to the defendant from Max Stitch and Charlotte Stitch on their notes aggregating $22,500. The assignment expressly stipulated that it was made "subject, nevertheless, to the covenants, conditions and provisions therein contained."
Pursuant to the authority given to it under this assignment, the defendant collected the rents and paid the amount due to the W.A.G. Realty Company monthly until and including January, 1932, when the latter defaulted in its payment to the plaintiff on the basic lease. Thereupon the plaintiff caused notices to be served on the under-tenants to pay their rent directly to the plaintiff, as it had a right to do under section 22 of the Distress act. 2 Comp. Stat., p. 1945. In this way of course the defendant would lose whatever meager security and comfort it got out of the lease which had been assigned to it as collateral to the Stitch notes and it prevailed upon the plaintiff to withdraw the notices. The defendant then undertook to pay the plaintiff the rent reserved in its lease with the W.A.G. Realty Company in these words
contained in a letter from the vice-president of the bank to David B. Silver, attorney for the plaintiff, under date of January 29th, 1932: "You are also advised that we will continue to pay the rent to I. Hausman & Sons, Inc., as long as a default exists on their [I. Hausman & Sons, Inc.] lease with the W.A.G. Realty Co." This letter was accompanied by a check for $1,250 in payment of the rent for the month of January, 1932.
Now prior to all this and when the notices were served on the under-tenants the president of the defendant bank wrote to Messrs. Silver, attorneys for the plaintiff, saying that the bank would not pay W.A.G. Realty Company any rent until the matter between them and the plaintiff was settled. A copy of a letter which had been mailed to W.A.G. Realty Company on January 22d, 1932, was enclosed. This letter read: "I. Hausman & Sons, Inc., of Newark, New Jersey, has served us with a notice to the effect that you are indebted to them for rent in the sum of $1,250. We will be unable, therefore, to pay you on February 15, 1932, the rent due you unless the claim of I. Hausman & Sons, Inc., is settled before that date." It is worthy of note that the bank directs attention to itself in this letter as the agent for Max Stitch.
The next day the Silvers', as attorneys for the plaintiff, replied saying: "If you will write us a letter stating that you will pay us the money due the W.A.G. Realty Co. we will refrain from giving notice to the tenants direct." Apparently all they seemed to expect when that letter was written was that the defendant would promise to pay the rent due the W.A.G. Realty Company. There is nothing in the letter which would indicate that the plaintiff expected a guaranty or an assumption of tenancy from the defendant. In a preceding paragraph of the letter they say: "We could notify the tenants to pay their rent direct to us but for your sake we would not like to disturb the lease." In answer to that letter the bank president said: "We are ...