Goldmann, Conford and Haneman. The opinion of the court was delivered by Conford, J.A.D.
[55 NJSuper Page 124] This is an action by a real estate broker to recover commissions in connection with a later sale of certain property to the principal stockholder and officer of a corporate lessee of the property procured by the broker. Plaintiff appeals from a judgment of involuntary dismissal entered by the Superior Court, Law Division, at the end of the presentation of the plaintiff's case.
The defendant Citron was a subsequent grantee of the original owner of the property with whom the lease and commission agreement had been entered into. The status of the other parties will appear from the following statement of the facts.
On November 1, 1951 one James A. Murray, the then owner of the premises in question, leased a portion thereof to Power Generators, Inc. (hereinafter "PGI"), a California corporation. Plaintiff, a licensed real estate broker, had obtained the tenant and negotiated the lease. Paragraph 11 of the lease declared that Murray recognized plaintiff as the broker on the lease and agreed to pay him 5% of the annual rent so long as the lease or its extensions remained in effect. The lease also provides for payment to plaintiff of 5% of the selling price of the premises if they are purchased by the tenant, "its successors or assigns, or anyone acting on its behalf."
On July 15, 1955 Murray sold the premises to the defendant Citron, who was in no way connected with the defendant corporation. PGI was still a tenant. Before purchasing the property, Citron insisted that the lease with PGI be renewed, and this was done.
Some time in July 1956 Citron and his tenant, PGI, which was still in possession under a lease extension, began negotiating for the sale of the premises to the latter at a price of $70,000. However, PGI had borrowed heavily from the Trenton Trust Company, and by agreement with the bank dated April 2, 1954, had obligated itself, among other fiscal restrictions, to secure the approval of the bank as well as of the Federal Reserve Bank of Philadelphia before spending more than $10,000 for capital improvements.
In a letter dated July 17, 1956 to the Trenton Trust Company seeking permission for PGI to buy the property, Anthony Larrecq, the corporation's president, explained why its purchase of the entirety of the premises in which it was situated would be a wise move. That part of the premises not then used by PGI was suitable for contemplated expansion of the company's manufacturing business.
The rent of $15,000 per year then being paid would exceed the $70,000 cost of the property within five years. Rental of the basement to the warehouse company then in occupancy thereof would cover tax and maintenance expenses. Larrecq went on to explain the corporation's cash status and anticipated increases therein, and suggested that the purchase would protect the company's capital position without embarrassing its cash position, would give it greater financial flexibility, and after five years would result in a large annual saving.
Both banks, however, felt that the purchase would too greatly attenuate PGI's cash reserves, and they refused to approve the sale. Mr. Rice of the Trenton Trust Company then suggested to Larrecq that he personally buy the building and stated that the bank would give him the required mortgage loan. Rice suggested that at the proposed selling price it would be a good investment for Larrecq. He noted that PGI had made improvements to the building, built a parking lot and made alterations, and that the building contained room for the corporation to expand. He also commented to Larrecq about possible adverse effects to the corporation should the building pass into adverse hands.
Shortly thereafter, Larrecq, who directly or indirectly owned 87.6% of PGI stock and was its principal executive officer, did purchase the property in his own name. On August 3, 1956 he borrowed $5,000 from the corporation for a down payment, and, in September 1956, an additional $10,000 for closing fees, etc. He paid 4 1/2% interest on these advances and had by the time of trial fully repaid the loans. To facilitate repayment of the loan PGI increased Larrecq's salary from $20,000 to $25,000. The necessary consent of the Federal Reserve Bank for this step was granted on certain conditions, including:
"1. The net amount of the increase after taxes is used to repay the $5,000 advanced to him.
2. That there shall be no increase in the rental of about $14,000 per annum currently being paid for the building ...