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Carteret Properties v. Variety Donuts Inc.

Decided: March 27, 1967.

CARTERET PROPERTIES, A CO-PARTNERSHIP OF THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
VARIETY DONUTS, INC., A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT-APPELLANT



For reversal and remandment -- Chief Justice Weintraub and Justices Jacobs, Francis, Hall, Schettino and Haneman. For reversal -- None. The opinion of the court was delivered by Francis, J.

Francis

[49 NJ Page 120] In this action for possession of leased premises the Middlesex County District Court entered judgment for Carteret Properties, the plaintiff-landlord. The relief was based upon a finding that defendant-tenant, Variety

Donuts, Inc., had been guilty of breach of a covenant in the lease for which a right of re-entry was reserved. The Appellate Division affirmed and we granted the tenant's application for certification. 48 N.J. 353 (1966).

On October 31, 1958, Variety and Carteret Shopping Center, Inc. entered into a five-year lease covering a store in a shopping center in Carteret, New Jersey. The premises were to be used only "for the retail sale of donuts, coffee, and the incidental sale of cold sandwiches, together with juices, soft drinks, pre-packaged ice cream [and] machine vended cigarettes." The lease provided that "if default be made in the performance of any of the covenants" the landlord reserved the right to re-enter and repossess the store. Thereafter, on March 5, 1963, a second lease for five years from April 1, 1963 was made between Variety and Office Buildings of America, Inc., a successor in title of the shopping center. This lease provided that the store would be used only "for the retail sale of food and allied products." A rider attached said:

"c. The tenant shall have the sole right and option to operate his business as heretofore and no other lease agreement with any other tenant may be entered into encompassing the same operating powers. * * * The tenant is hereby permitted to install and utilize any and all equipment for the purpose of preparing and serving hot meals; shall be allowed and permitted to display and sell newspapers and nickel candy; display and sell any and all types of bakery goods; subject to existing leases; install additional dining tables; install and operate a soda and ice cream fountain.

d. In the event business conditions in the opinion of the tenant requires [ sic ] a change in the character of the aforesaid business, then and in that event, the tenant shall have the right to change the character of his business with due notice being served upon the landlord, subject to the consent of the landlord, which shall not be unreasonably withheld." (Emphasis added)

The right of re-entry for breach of covenants was continued.

On August 17, 1964 the lease was assigned to the plaintiff as new owner of the shopping center by Robert Cronheim, Receiver of Carteret Center Associates, successor in title to Office Buildings of America, Inc.

The parties agreed in writing after this suit was started that since about October 20, 1959 Variety has continuously sold in its store to its patrons and to members of the public bus transportation tickets of the Public Service Co-ordinated Transport Co. The dispossess action was tried on this written stipulation, copies of the leases and assignment of the current one; no testimony was submitted. There is nothing in the stipulation indicating whether the sale of the bus tickets was simply a de minimis incident of defendant's business, or constituted a substantial activity. It is plain from the tenor of the stipulation and from the oral argument before us that the various landlords, including plaintiff, were aware of the practice, and continued to accept the monthly rent from defendant to and including that payable on November 1, 1965 for the month of November.

On November 6, 1965 plaintiff gave written notice to defendant that it had violated the lease, that the occupancy was terminated "for the reason that you have committed a breach of that covenant in your lease providing that the store premises aforesaid are 'to be used and occupied only for the retail sale of food and allied products,' for which breach a right of re-entry is reserved to the landlord." Removal from the premises was demanded within five days after receipt of the notice.

In the trial court defendant argued principally that when the second and existing lease was negotiated and its terms agreed upon, the then landlord knew of the sale of bus tickets, did not regard it as a breach of the expiring lease, and consented to the continuance of the practice. That understanding, Variety asserted, was one reason why the March 5, 1963 lease contained the addendum reciting, among other things, that "the tenant shall have the sole right and option to operate his business as heretofore * * *." Additionally, defendant contended ...


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