This action raises out of a series of transactions dealing with a restaurant known as the Springfield Steak House situated on Route 22 in Springfield Township, Union County, New Jersey.
Plaintiff Poydan, Inc., a New Jersey corporation, owned the real property used by the restaurant. Springfield Steak House, a New Jersey corporation, owned the liquor license and the personal property and operated the restaurant. Both corporations were under the control of Frank Baldan, who was the equitable or principal owner of the stock.
On or about November 18, 1969 plaintiffs jointly agreed to sell the real and personal property, liquor license and restaurant to five individual defendants, Nicholas Protopapas, Nikitas Protopapas, John Protopapas, Constantine Zavolas and John Zavolas for $500,000, plus the value of the inventory. The contract provided for transfer of the assets to two corporations to be formed by the buyers. As it turned out the buyers formed only one corporation, named Agia Kiriaki, Inc. (hereinafter Agia Kiriaki) and took all of the assets in that corporation. The purchase price was to be paid partly in cash, partly by assumption of an existing mortgage, and partly by a purchase money note payable to Poydan, Inc., one of the sellers. The note was for $250,600. It was secured by the following:
1. A real estate mortgage dated June 10, 1970 from Agia Kiriaki, Inc. to Poydan, Inc.
2. A security agreement covering the personal property in the restaurant, made June 10, 1970 by Agia Kiriaki, Inc. to Springfield Steak House, Inc.
3. The pledge to Springfield Steak House, Inc., Poydan Inc. and Frank Baldan of all of the issued and outstanding shares of stock of Agia Kiriaki, Inc.
The individual purchasers as well as the corporation formed by them were co-makers of the note, and became jointly and severally liable thereon.
The contract of November 18, 1969 contained the following, among other provisions:
4. The Buyers shall likewise enter into a buy and sell agreement whereby in the event any of the said Buyers desires to terminate his activity with the businesses herein named that the corporate stock so held by such terminating stockholder shall be first offered to the remaining stockholders or the corporation and the by-laws shall further provide that in the event none of said stockholders desire to purchase said stock that then and in that event the corporation may purchase same if it receives the prior written consent of Seller which shall not be unreasonably withheld. If neither the said stockholders or the corporation want to purchase the proferred stock or are able to purchase same, said stock may then be purchased by Seller or its main stockholder, Frank Baldan, but by no other person or entity of any kind whatsoever. The intent of the parties hereto is that as long as the Buyers are indebted to Seller and Operator that no persons strangers to the corporation shall be entitled to become stockholders of either of said corporations.
A rider dated November 22, 1969 provides:
9. Buyers represent that they will constitute the only stockholders of the corporation that will be formed by them provided however, that it is agreed by the Seller and Operator and the Buyers that one additional stockholder may be admitted providing that such additional stockholder is a blood relative of Constantine Zavolas.
A written agreement executed on June 10, 1970, at the closing of title, expressly continued these provisions of the contract and rider in effect after the closing.
In the mortgage note of June 10, 1970 it is provided:
4. Notwithstanding the foregoing, the unpaid balance of the principal sum of this note and interest hereon shall immediately become due and payable, at the ...