Goldmann, Freund and Foley. The opinion of the court was delivered by Goldmann, S.j.a.d.
This is an appeal by defendant lessee from an interlocutory order of the Chancery Division in which it was held that the trial of the condemnation action would be limited to the question of the leasehold damages it had suffered, plus the stipulated sum of prepaid rent. We granted leave to appeal in order to obviate the necessity of an extended trial of the parties' respective contentions, by resolving just what elements of damage might properly be considered at the ultimate hearing.
Plaintiff is the owner of real property located on the west side of State Highway No. 4 in Fort Lee, Bergen County. In 1954 negotiations between the parties resulted in the execution of a lease on October 18 of that year. The lease was for an initial 15-year term, and was to begin upon plaintiff's completion of a restaurant building to be used by defendant. The building was completed on or about August 1, 1955. Meanwhile, on June 1, 1955, defendant subleased to the Kened Company, plaintiff consenting thereto in writing.
Early in 1960 the New Jersey State Highway Department notified both plaintiff and defendant that the land and improvements in question would be taken by the State as part of its road program involving the building of new approaches in connection with the double-decking of the George Washington Bridge. On February 17, 1961 the Department instituted a condemnation action naming both plaintiff and defendant as parties. Immediate possession was sought, with the result that the premises were surrendered, the State accepting possession of the land and building on March 23, 1961.
Thereafter the Bergen County Law Division judge on April 14, 1961 appointed commissioners to hear the condemnation and to report by July 14 following. In the meantime the State Highway Department sought to effect a settlement. Such agreement was reached while the condemnation action was pending. The Department agreed to pay plaintiff $160,000 for the land and improvements taken and for the damage caused to its remaining vacant land. No further steps were taken in the condemnation action. We are informed that the State has issued its check, payable to plaintiff, which is being held by the State's closing agent pending the obtaining of a release from defendant tenant.
Since the parties were in dispute as to the distribution of the $160,000, it was agreed that an action be instituted on the basis of N.J.S.A. 20:1-15. That statute deals with a situation where a condemning authority has paid into court the amount involved. However, neither party raised any question as to the jurisdiction of the Chancery Division to determine the dispute between them.
Plaintiff, by its complaint in the Chancery Division, sought judgment requiring defendant to deliver a release of the lease. Defendant, by its amended answer, claimed that under section 16(c) of its lease, hereinafter set forth, it was entitled to an apportionment of the $160,000, comprising four items totalling $127,632.55, as follows:
"(1) Rent prepaid by the Kened Company, $38.557.31.
(2) The market value of the unexpired term of the leasehold, from March 23, 1961 to August 1, 1970, $35,000.
(3) The depreciated value of the fixtures, less ...