On appeal from the Superior Court of New Jersey, Law Division, Mercer County.
Matthews, Furman and Havey. The opinion of the court was delivered by Matthews, P.J.A.D.
The facts material to the narrow issues raised on this appeal are largely undisputed.
By agreement dated July 12, 1967, the State leased an office building to be built in Trenton by plaintiff. The lease term was for 20 years, commencing on January 1, 1969, unless the building was not completed by that date, in which case the term was to begin on the first day of the month next following delivery of the building to the State.
Paragraph twenty-fifth of the lease granted the State an option to purchase the land and building:
It is mutually covenanted and agreed between the parties hereto that during the eleventh year of the within lease, the Lessee herein shall have the option to purchase the land and building containing approximately 200,000 square feet so erected thereon, of the premises herein leased at the just and true market value at that time which value shall be ascertained in the manner hereinafter provided.
In order to ascertain the value of the lands and building then erected on the demised premises, the owner and Lessee shall each nominate one fit, competent and impartial real estate appraiser to value and appraise the fee simple true market value of such land and buildings which such nomination shall be made and signified by each party to the other within one (1) month after receipt of notice of Lessee's intent to exercise the option hereunder, and if the two persons so nominated and appointed by each of said parties shall differ in judgment as to the fair market value, they shall within one month from the date of the last appointment mutually appoint a third fit, competent and impartial real estate appraiser to act as an umpire between them. In the event that they cannot agree on such umpire during said period, then each party shall no later than 10 days thereafter nominate two fit, competent and impartial real estate appraisers and from the names of the four persons so nominated, one shall be designated by the then sitting assignment judge in and for the County of Mercer, who shall be such umpire; and the decision of such persons or in the case of their disagreement, of the said umpire together with any one of the other appraisers so nominated shall be final and conclusive. Said final decision will be made within 20 days after appointment by said assignment judge.
In no event, however shall the aforesaid option price exceed the sum of SEVEN MILLION NINE HUNDRED THOUSAND DOLLARS ($7,900,000.00).
Notice of the Lessee's intention to exercise the above option shall be given to the Lessors at least 180 days prior to the commencement of the eleventh year of the within lease.
If the Lessee shall fail to exercise the aforesaid option and to consummate the purchase in accordance therewith during the eleventh year of the within lease, the Lessee's rights hereunder and the purchase option herein given shall have no further force and effect. [emphasis added]
Subsequent to entering into the lease, plaintiff considered increasing the size of the building, and by a letter to the State dated October 31, 1967, informed the State that the architectural plans were in the final stages, and that it was considering adding two stories to the then contemplated eight stories. It offered the State a right of first refusal to utilize the proposed additional space, and it concluded by saying:
In view of the above, we hereby request that the State of New Jersey agree to amend paragraph 25 of the existing lease which will provide for the increased cost in the maximum option price.
Plaintiff does not claim that it received a response to this letter.
Plaintiff ultimately decided to construct a nine story building rather than a ten story building. Despite plaintiff's earlier letter request and decision with respect to an increase in the size of the building, on February 9, 1968, it entered into an
addendum to the lease, the sole substantive provision being that:
Anything in this lease to the contrary notwithstanding and with particular reference to Paragraph Twenty-fifth of the within lease, the right of the Tenant-Lessee, the State of New Jersey to exercise its option as defined in Paragraph Twenty-fifth of the within lease shall remain in full force and effect, and the option rights granted by said Paragraph Twenty-fifth shall cease and terminate after the eleventh year of the within lease.
Subsequently, on June 23, 1971, some fifteen months after the State's occupancy of the building, the parties executed a further addendum to the lease which established the commencement date for the obligation to pay rent and for the lease term:
[A]nything in the lease to the contrary notwithstanding, the Lessee agrees to pay to the lessor and the Lessor shall be entitled to receive as rental for the demised premises set forth in said lease an annual rental of One Million Eighty-Nine Thousand Five Hundred Ninety-Four and 50/100 ($1,089.594.50) Dollars, payable in equal month installments on the first day of each month during said term commencing on March 1, 1970, plus an additional sum of Twenty-Seven Thousand Nine Hundred Forty-Six ($27,946.00) Dollars for the rent of six floors of said building (3 to 8 inclusive) for the period from 2/15/70 to 2/28/70 in the manner provided by the laws of the State of New Jersey governing the disbursement of public funds. . . .*fn1
That addendum concluded by stating:
FURTHER AGREED that all other terms and conditions contained in the aforesaid lease and other addenda thereto, not in conflict with this agreement, shall remain in full force and effect.
The signature page of the July 12, 1967 lease contained a space for the State Treasurer to sign the lease as being "[a]pproved in accordance with the provision of R.S. 52:34-8 and 52:34-9(c)." Although this signature line is blank in the
copy of the lease included in the State's appendix, the then State Treasurer did affix his written approval thereto. The statutory reference is explained as follows. N.J.S.A. 52:34-6 provides:
All purchases, contracts or agreements, the cost or contract price whereof is to be paid with or out of State funds shall, except as otherwise provided in this act, be made or awarded only after public advertisement for bids therefor, in the manner provided in this act.
N.J.S.A. 52:34-8 provides:
Any such purchase, contract or agreement where the cost or contract price exceeds $2,500.00 may, with the written approval of the State Treasurer, be made, negotiated or awarded by the Director of the Division of Purchase and Property without advertising, when the subject matter thereof is that described in section 4 of this act [ N.J.S.A. 52:34-9] or when the purchase, contract or agreement is made or awarded under the circumstances described in section 5 of this act [ N.J.S.A. 52:34-10], in ...