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Larstan Industries Inc. v. Res-Alia Holding Co.

Decided: July 11, 1967.


Gaulkin, Lewis and Labrecque. The opinion of the court was delivered by Gaulkin, S.j.a.d. Lewis, J.A.D. (dissenting).


By lease dated April 16, 1959 and an amendment thereto dated October 8 and executed October 16, 1963, Larstan leased a factory building from Res-Alia. The total agreement (hereafter the lease) contained the usual provisions for the tenant to "take good care of the premises" and make all repairs except structural, plumbing and similar major work and to "comply with all statutes, ordinances, rules, orders, regulations and requirements of the Federal, State and City Government and of any and all their Departments and Bureaus applicable to said premises, in, upon or connected with said premises during said term; and shall also promptly comply with and execute all rules, orders and regulations of the Board of Fire Underwriters for the prevention of fires, at the Tenant's own cost and expense, * * *." In the event of the tenant's failure to comply with the above-mentioned provisions, the landlord had the right to have it done at the tenant's expense. The landlord also had the right to terminate the lease for breach of any of its terms "upon giving to the Tenant five days notice in writing * * *."

The agreement contained the following fire clause:

"7th: In case of damage by fire or other action of the elements to the building or buildings on the leased premises if the damage is so extensive as to amount practically to the total destruction of the leased premises or of the buildings, the landlord may within a reasonable time decide not to rebuild in which event this lease shall cease and come to an end and the rent shall be apportioned to the time of the damage; except that in such event the Tenant may exercise its option to purchase as hereinafter set forth with an abatement in the purchase price to the extent of any sum or sums realized on any and all policies of fire insurance covering the premises. In all other cases where the leased premises are damaged by fire without the fault of the Tenant or the Tenant's agents or employees, the landlord shall repair the damage with reasonable dispatch after notice of damage, and if the damage has rendered the premises untenantable, in whole or in part, there shall be an apportionment of the rent until the damage has been repaired. In determining what constitutes reasonable dispatch consideration shall be given to delays caused by strikes."

and the following option:

"34th: The landlord hereby irrevocably grants to the tenant * * * the exclusive and absolute right, privilege and option of purchasing the entire property which is the subject of the within Lease for the sum of One Hundred Twenty-five Thousand Dollars ($125,000.) by the payment of Fifty Thousand Dollars ($50,000.) in cash and by the tenant executing and delivering to landlord a non-amortizing standing purchase money mortgage and note for Ten (10) years for the sum of Seventy-five Thousand Dollars ($75,000) with interest at the rate of five percent (5%) per annum payable quarter-annually, the said mortgage to contain a prepayment clause without penalty; the said option to be exercised by the tenant on Thirty (30) days' written notice by tenant to landlord by registered and/or certified mail."

On October 18, 1963, two days after the execution of the amendment to the lease, the building was heavily damaged by fire. By letter dated October 24 David Cohn, Res-Alia's president, wrote Larstan as follows:

"Please be advised that I just received notification from the Building Department of Jersey City that several of the walls of the building at the above captioned address must be torn down.

We, also, were unpleasantly advised from our investigation that the fire and our loss were brought about by your carelessness and recklessness in experimenting which produced the fire.

Please be advised, therefore, that we are looking to you for all our damages. Furthermore, you have violated the terms of your original lease, which does not expire until July, 1964, and have failed to pay the rent and have committed other serious violations which resulted in the fire and our tremendous loss. Needless to say, the building is a total loss for all practical purposes.

Accordingly, you are hereby placed on notice that the original lease which expires in July, 1964, and the agreement to renew same, are hereby terminated and at an end."

It must be noted at this point that the letter did not fix a date of termination or mention the five days' notice thereof required by the lease. Assuming the notice was valid, it could not have taken effect until five days after its receipt by Larstan.

On October 28 Larstan wrote Res-Alia, denying that it had caused the fire or was at fault, and stating:

"Further, your letter of October 24 claims that the building is a total loss for all practical purposes and we assume that you have decided not to rebuild and have declared the lease at an end pursuant to Paragraph 7 of the original lease dated April 16, 1959. Inasmuch as we wish seriously to consider the exercise of our right and option to purchase the premises as specified in our lease with you, we specifically request that you furnish us promptly with copies of all policies of fire insurance covering the premises which you have heretofore advised us orally aggregate the sum of $75,000.

In addition, by reason of our agreed interest in the proceeds of said fire insurance and as an integral factor of our agreed option to purchase the premises, we request you to advise the fire insurance adjustors, whom you have informed us you have retained to handle claims under your policies, to report to us forthwith as to the present status of such claims and to communicate with us in connection with the prosecution and settlement of such claims."

Defendant refused to give the information requested by Larstan. Consequently, on November 12 Larstan filed this suit in the Chancery Division. In its complaint it stated the facts above set forth, that Res-Alia had ignored its repeated demands for information, and demanded ...

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