On appeal from the Superior Court, Chancery Division, Morris County.
Plaintiff, lessee under a commercial lease with defendant as lessor, brought this action to specifically enforce the renewal option provision of the agreement and for other relief. Defendant counterclaimed for possession of the premises and incidental relief. Following plenary hearing, the trial judge found the renewal option provision unenforceable and accordingly entered judgment granting possession to defendant. Plaintiff appeals.*fn1
The relevant facts are essentially undisputed. In late 1975 defendant, a building contractor, purchased the premises, a commercial building situated on property adjoining land which he already owned. The prior owners had started preparations for a fast-food restaurant at the location; defendant intended to complete those plans and "construct and sell" the restaurant. His broker's advertisement elicited a response from Jerome Healey and Paul Ruth, who subsequently became the principals of plaintiff. Their negotiations eventuated in an agreement of sale dated November 7, 1975, under which defendant agreed to sell to Ruth*fn2 "all that certain fast-food service store now located at 1042 Tabor Road, Morris Plains, New Jersey" for $23,000, payable in installments as set forth in the agreement. At the March 29, 1976 closing of the transaction the parties executed a lease of "that certain fast-food service store located at 1042 Tabor Road, Morris Plains" for a term of five years commencing April 1, 1976 at a monthly rental of $350. The lease contained the following provisions:
35th. At the end of the term of this lease, Tenant shall have a series of four successive options to renew for periods of five years, all at a rental reasonably to be agreed upon inclusive of payments for taxes.
36th. Tenant has the right of first refusal should Landlord decide to sell the property within the initial term of this lease as well as all subsequent terms.
37th. This lease agreement is being executed in conjunction with a contract for the sale of certain restaurant trade equipment of even date. It is understood and agreed that this lease and said contract are being entered into as a combined package and that failure of the Landlord to close as a result of its own fault under either the lease or the contract shall entitle the Tenant to return of all monies heretofore deposited and/or paid to the Landlord.
At trial the genesis of these provisions was described by Healey without contradiction:
Well, first of all, the reason that we paid such a substantial amount of money, and at the time it was for a nonexistent business, was that the terms of the lease were considered to be extremely favorable. And at that time Mr. Puschak, not having a tenant in the building, and interested and desirous of selling the premises for subsequent development as a restaurant, he extended what we thought was a good lease at this time for a lengthy period of time at what was then a very good rent. And for those reasons, we paid what was, we also considered, an excessive amount for a non-existing building. But being the lease was so favorable, we went ahead and committed ourselves to the terms of the contract and to the terms of the lease.
We made it very clear to him that either contract without the lease was worthless and that they were going to be, or go hand in hand. Otherwise, either one was totally worthless.
Sometime in late 1979 and in contemplation of the sale of the business, plaintiff broached the question of the renewal option and rental with defendant. A variety of discussions ensued on that and other topics relating to the tenancy, but no agreement was reached either as to plaintiff's continued occupancy after March 31, 1981 or the rent to be paid therefor. After the present action was filed on March 27, 1981, the trial court entered a ...