On appeal from a decree of the former Court of Chancery advised by Vice-Chancellor Berry, whose opinion is reported in 141 N.J. Eq. 515.
For affirmance -- Chief Justice Vanderbilt, and Justices Case, Heher, Wachenfeld, Burling and Ackerson. For reversal -- None. The opinion of the court was delivered by Heher, J.
The challenged decree grants to the vendors specific performance of a contract made February 1, 1947, for the sale of lands and a hotel building situate on the north side of Third Avenue, east of Bergh Street, in Asbury Park (the second block from the beach front); and the vendee appeals pursuant to Article XI, section IV, paragraph 8 of the Constitution of 1947, and chapter 367 of the Pamphlet Laws of 1948.
The contract is not set out in full in the appendix. As revealed by the excerpts taken therefrom, it does not provide in terms for a conveyance of the lands free from all encumbrances except those specified, but merely for a conveyance "subject to covenants, conditions and restrictions of record, which have not been violated;" and subject also "to state and municipal laws and requirements as to the use, location and constructions of the building and premises, which have not
been violated," and "to such state of facts as may be disclosed by an accurate survey, provided said survey indicates that the buildings are all within the boundary lines."
The primary question for decision is the meaning of the first of the foregoing clauses. The vendee refused performance ostensibly upon the ground that the title was encumbered by "covenants, conditions and restrictions of record which have been violated contrary to the provisions" of the contract in suit.
The building housed the "Asbury Ambassador Hotel." Since April, 1944, the hotel management had sold intoxicating liquors at a bar maintained for the purpose on the first floor of the building under a retail liquor consumption license issued to the operating corporation; and the contract obligated both the vendors and the vendee to do all that was necessary to effect a transfer of the liquor license to the vendee. The transfer of the license was expressly declared to be "of the essence" of the agreement; and it was provided that if the transfer be refused, the contract "shall be null and void" and the payments made thereunder by the vendee shall be refunded, and that "the closing of title shall not take place until the transfer of the license is approved by the appropriate municipal authorities." The vendee also undertook to purchase, at cost, "all alcoholic beverages and other merchandise used in connection with the operation of the bar." And it was agreed that the operation of the hotel should continue until the passing of title.
A covenant against the sale of intoxicating liquors on the lands is cited in justification of the refusal of performance.
On November 16, 1875, James A. Bradley, the founder of Asbury Park, conveyed the lands to one Atkins subject to a covenant real barring their use for the sale of intoxicating liquors on pain of a reverter. With some few exceptions, a like restrictive covenant was incorporated in the deeds conveying all the remaining lands in Asbury Park east of the railroad, made by Bradley before and after the deed to Atkins. On January 7, 1944, the substitutionary administrator c.t.a. and trustee under the will of the deceased Bradley quitclaimed
the lands in suit to the then holder of the record title, freed of all right of entry and reversion for condition broken "or for or by reason of any violation" of the cited covenant or condition, in consideration of a covenant to run with the land made by the grantee against the sale of intoxicating liquor on the premises, provided that if the original restriction had been "abandoned by nonobservance, by change in the character of the neighborhood, by agreement, or otherwise," nothing therein contained would serve to revive the obligation or restriction so abandoned, and the new covenant therein "in respect to the restriction * * * shall be for nothing holden."
The insistence is that the clause cited supra constituted "a warranty that, in fact, there had been no violations of covenants, conditions and restrictions of record;" and that "the phrase 'have not been violated'" was not "intended to mean otherwise than that" the vendors "were required, and had warranted, to convey a title unencumbered by covenants, conditions and restrictions of record which had been violated." The learned Vice-Chancellor suggested that this phrase should be construed to read "which have not already been violated." Although of the view that the clause "was never intended as a warranty that the liquor restriction had not been violated," he concluded that "if it was ...