On defendant's appeal from the Essex County Court of Common Pleas.
For the appellant, Charles S. Barrett, Jr.
For the respondent, Herman Waldman.
Before Brogan, Chief Justice, and Justices Parker and Porter.
The opinion of the court was delivered by
PARKER, J. This is a suit by a landlord against a tenant for an alleged balance of unpaid rent. The action was tried with a jury and terminated with a direction of a verdict for the plaintiff.
The germ of the controversy, as we understand the matter, came into existence over ten years ago. At the time, the title to the premises described as "No. 26-28 Clay Street, Newark, N.J., being a one-story garage type building," was then in a corporation called the Clay Holding Company (hereafter called "Clay"), subject to a mortgage held by the present respondent, Phoenix Building and Loan Association (hereafter called "Phoenix"). Under date of December 30th, 1931, Clay leased these premises to the present appellant, Tung-Sol Lamp Works, Inc. (hereafter called Tung-Sol) for a term of three years commencing January 1st, 1932, and ending December 31st, 1934. The rent was to be $400 a month, payable monthly in advance except (and this is an important feature of the case) that on the signing of the lease the sum of $800 was to be paid, and of that sum $400 was to be applied as rent for January, 1932, and the other $400 considered as an advance payment for the last month of the term, namely, December, 1934; so that during the full period of this lease the landlord, Clay, would hold as a sort of advance security the sum of $400 which ultimately was to be applied to the rent for the last month of the term.
This arrangement seems to have been simple enough though somewhat unusual. But there was one element in the case which the parties, and particularly the tenant Tung-Sol, did not apparently foresee, which was the possible foreclosure of a mortgage held by Phoenix. In fact, the mortgage was foreclosed and the property bought in by Phoenix on the foreclosure sale before the end of the term. The case does not show the details of the foreclosure proceeding, but it is to be inferred that it terminated some time in the spring of 1933, because the next important document in the case is plaintiff's Exhibit P -1, being a lease dated June 1st, 1933, between Phoenix as landlord and Tung-Sol as tenant for the same property so far as appears, the annual rental being $6,600 payable in equal monthly payments. In short, Tung-Sol, the tenant, recognized the new owner and instead of attorning to it entered into a new lease. It is to be surmised that the Clay Holding Company was insolvent and therefore the balance of the preliminary deposit, namely $400 in reserve for rent of December, 1934, could not be recovered back. With this situation in view we turn to the lease by Phoenix of June 1st, 1933, Exhibit P -1, and find the following paragraph numbered 16:
"(16). The Tenant has this day deposited with the Landlord, the sum of Four Hundred Dollars ($400), the receipt whereof is hereby acknowledged by the Landlord, as collateral security for the payment of the rents to grow due to it from it under the lease, and for the faithful performance by it of all the other obligations hereunder, and for the payment of any and all sums of money for which it may be, or become, liable hereunder. Said sum of Four Hundred Dollars ($400) or so much thereof as shall not be applied for the purposes aforesaid, without interest, shall be returned to the Tenant, its successors or assigns, at the expiration of this lease, and upon the surrender of the herein demised premises, provided all the terms, conditions, covenants and agreements herein mentioned have been performed by the said Tenant, its successors and assigns."
And paragraph 17 of the same lease is an agreement for a renewal of the lease for a further term, subject to substantially
the same conditions, the only material difference being, that if some one else offers a larger rent, Tung-Sol will meet that offer. ...