Opinion
No. 48-6.
04-07-1920
CAPLAN v. PALACE REALTY CO. et al.
John F. X. Ries and U. G. Styron, both of Atlantic City, for complainant. Schimpf & Hanstein, of Atlantic City, for defendants.
Bill for injunction and relief by Leah CapIan against the Palace Realty Company and others. On hearing at return of order to show cause. Preliminary restraint retained until final hearing or further order conditionally on complainant's entering bond.
John F. X. Ries and U. G. Styron, both of Atlantic City, for complainant.
Schimpf & Hanstein, of Atlantic City, for defendants.
LEAMING, V. C. By the bill filed herein complainant, as tenant, seeks reformation of her lease and restraint against threatened summary proceedings for her ejectment.
At the return of an order to show cause a tearing has been had on affidavits filed in behalf of the respective parties.
By its terms the written lease is for a period of one year from March 1, 1919, with a privilege of the lessee to enjoy an extended term of three additional years at a specified rental for each additional year. The lease also contains a clause requiring the tenant to give notice to the lessor of her intention to hold for the extended term 60 days prior to the expiration of the first year, or forfeit her right to the additional term. It is the clause relating to that notice which occasions this controversy.
Complainant alleges that the agreement which was in fact made did not contemplate that complainant should give notice of her intention to enjoy the additional term, and that the clause which is contained in the written lease making a requirement of such notice was inserted therein without complainant's knowledge, and that the written lease was accepted by complainant without examination by her under the belief that it correctly embodied the contract which had been made; that she remained in ignorance of the error until notice was served upon her shortly before the end of the first year requiring her to vacate at the end of that year. Her bill was then promptly filed.
An important preliminary question has arisen from the circumstance that shortly after the lease was made, and while complainant was in possession under it, the lessor conveyed the leased premises to defendant Palace Realty Company, which company took over the lease by assignment from the lessor, and since that. time complainant has by attornment held under and regularly paid rent to the vendee as owner. The claim is now made in behalf of the present owner of the demised premises that as an innocent purchaser thereof for value without notice of any mistake in the terms of the written instrument of lease no reformation in its terms can be made as against it.
There can be no doubt of the existence of the general rule that open, visible, notorious, and exclusive possession of land by onewho is not the record owner affords a notice to one who purchases the record title which puts such purchaser upon inquiry and charges him with a knowledge of such facts as a reasonably diligent inquiry would have ascertained. The authorities in this state defining that rule will be found collected in Schwoebel v. Storrie, 76 N. J. Eq. 466, at page 470, 74 Atl. 969, at page 970.
But the inquiry here arises whether such purchaser has discharged the full duty which the law imposes upon him by reason of the occupancy of the property, of which he has notice, when he examines a written lease which the occupant has signed with the owner of the record title, and accordingly assumes that the instrument accurately defines the rights of the occupant.
It may be here assumed that the purchaser who took the lease by assignment, and thus became familiar with its terms, would not be thereby relieved of the duty of further inquiry as to any rights acquired by the tenant subsequent to the date of the lease. A tenant may, during his term, lawfully enter into a contract for the purchase of the fee from his landlord, or may, either by parol or written agreement, lawfully contract with his landlord touching modifications of the lease theretofore executed. As to such subsequently acquired rights the tenant would be protected in the absence of inquiry by a purchaser from the landlord. Havens v. Bliss, 26 N. J. Eq. 363. cited in Wood v. Price, 79 N. J. Eq. 620, 625, 81 Atl. 983, 38 L. R. A. (N. S.) 772, Ann. Cas. 1913A, 1210. But no such subsequent rights have been acquired by complainant herein. The inquiry is accordingly suggested whether the purchaser was not privileged to rely upon the lease as an instrument correctly defining the respective rights of the landlord and his tenant at the date of the lease, and thus be relieved of the duty of further inquiry.
I am satisfied that this inquiry must be answered in the negative.
While a written lease produced by the owner of the fee purporting to be signed by the person in possession as tenant presumptively defines with accuracy the rights of the tenant at the time the lease was executed, it does not necessarily do so. As between the parties to the instrument it is a finality as to the terms of the agreement actually made only in the absence of fraud or mistake, and is always open to attack upon those grounds. If the purchaser is content to rely upon the representations of the landlord, either express or implied, to the effect that the writing contains the genuine signature of the person in possession and contains an accurate statement of the terms actually agreed upon, and fails to inquire of the tenant touching those facts, I am satisfied that the purchaser's rights as against the tenant can rise no higher than those which were in fact enjoyed by the landlord under that instrument, and any right of reformation of the instrument for fraud or mistake which the tenant may have enjoyed against the landlord may in like manner be enjoyed against the purchaser.
Prof. Pomeroy's summary of the force of the notice imparted to a purchaser by occupancy of the premises purchased is as follows:
"The rationale seems to be that, as the occupant's title is a good one, and as his possession is notorious and exclusive, a purchaser would certainly arrive at the truth upon making any due inquiry. The purchaser cannot say, and cannot be allowed to say, that he made proper inquiry, and failed to ascertain the truth. The notice, therefore, upon the same motives of expediency, is made as absolute as in the case of registration." 2 Pom. on Eq. Juris. § 615.
I do not understand the learned author to here suggest that, if due inquiry is made by a purchaser of the person in possession touching his rights and is misinformed by the occupant, the occupant may not be barred on ordinary principles of estoppel from asserting rights in conflict with the rights so disclosed. But the purchaser must, if possible, ascertain the truth from one in possession.
It is further contended in behalf of defendants that the answering affidavits should he operative to deny relief to complainant pending final hearing.
The affidavits filed in behalf of complainant disclose, and the defensive affidavits admit, that the agreement touching the tenancy was made on the day preceding the date of the written lease, and that a payment was then made by the tenant and a written receipt then signed by the landlord. The accuracy of the copy of that receipt, as annexed to the bill, is not questioned. That receipt, after acknowledging the receipt of the money then paid, states that a lease is to be signed within 24 hours for one year with privilege of 3 additional years, and specifies the rental for each year, and also embodies stipulations touching shelves, counters, and a showcase and amount to be paid by the landlord for them at the end of the term. The bill and affidavits accompanying it state that the whole agreement as actually made was embodied in that receipt, and that a formal lease was to be made by the landlord the following day embodying the terms there set forth; that no stipulation was made or even discussed at any time touching any duty upon the part of the tenant to give notice at any time, of the tenant's intention to enjoy the full 4-year term; that the formal lease, as prepared by the landlord, contained the clause now sought to be enforced by the present owner to the effect that, should the tenant determine to hold for the additional 3 years, he should give 60 days' notice to that effect prior to the expiration of the first year; that
this formal lease was not examined by the cenant; and that the tenant had no knowledge of such a clause being in the lease until she was notified to quit, at which time it was too late to give 60 days' notice; that the lease was in fact signed by the husband of the tenant without authority on his part to do so and without knowledge on his part of the 60-day clause; that at no time was any such provision either discussed or agreed upon between the parties. These averments are specifically verified by affidavits made by Leah Caplan, the tenant, who does business under the name of L. Caplan & Son, in which latter name the lease is signed; also by Joseph Caplan, who signed the lease for his wife. Simon D. Rosenfield also makes affidavit that he is in the real estate business and was instrumental in effecting the tenancy and was present at all negotiations touching the terms of the lease, and at the request of the parties drew the receipt, already referred to, at the conclusion of the agreement of the parties, and that it embodied their whole agreement; that no agreement was made touching any notice to be given by the tenant for the extended term.
It is clear that, if the facts are as stated in complainant's bill and verified by the affidavits referred to, complainant is entitled to a reformation of the lease, and also entitled to protection against enforcement of the notice clause in the interim.
Most of the defensive matter contained in the affidavits filed on behalf of the defendants relates to the authority of the husband of complainant to sign the lease. It would be, I think, impossible at this time, on the present record, to assume as a fact that the husband of complainant was without authority to sign the lease.
But the primary issue is whether the notice clause of the lease was ever in fact agreed upon. If no such clause was ever agreed upon in the negotiations of the terms of the tenancy and was inserted in the formal lease without its having been agreed upon, and the lease was signed without knowledge of the party so signing that it contained such a clause or that it contained a clause not already agreed upon, and was accepted by complainant without knowledge that it contained such a clause until after the time when notice under the clause should have been given, then relief should be granted to complainant pending final hearing.
As already stated, complainant, Leah Caplan, has sworn that no notice provision was in fact agreed upon; that she believed her term was for four years and has at great expense established a valuable business on the demised premises in that belief. Joseph Caplan, who was also present at the time the bargain was made, testified to the same effect, and also that he signed the lease without knowledge that it contained the notice clause and relying upon his belief that the instrument conformed to the agreement that had been made. Simon D. Rosenfield also swears that no notice clause was either discussed or agreed upon, and that he embodied in the written receipt all terms that had been agreed upon.
Against all this there stands alone the affidavit of Charles S. Pryor.
It is true that the general rule is that, when the material facts relied upon in support of a complainant's claim for relief are denied under oath, preliminary restraint ordinarily will be denied. But exceptions exist to that general rule, and in my judgment this case falls within the exceptions. Unless restraint is awarded, the objects of the bill will be wholly defeated. Complainant will in that event be ejected from possession, and her business destroyed, unless she can find some new location to which she may move her stock of merchandise. On the other hand, complainant can be protected in her possession on terms which will amply protect defendant owner against possible loss. In such circumstances I think complainant's possession should be protected until final hearing which can be had at an early date.
Another circumstance should be here noted. The affidavit of Charles S. Pryor touching the agreement is as follows:
"And it was further discussed between them that either the lease should be made for four years, or else that the tenant, Joseph Caplan, should have the privilege of remaining for three additional years at sums stated, providing that said Joseph Caplan should give notice to deponent of his intention to exercise the privilege or option for the remaining three years."
It will be noted that it is not here specifically stated that either of the alternative propositions so discussed was agreed upon. This averment, standing alone, obviously could not be regarded as a denial of the facts alleged by complainant. But in a subsequent part of his affidavit he says:
"The terms [of the lease] were strictly in accordance with the discussion and understanding reached the day before when the receipt was given with reference to the notice required to exercise the option or privilege of remaining for three additional years."
This latter averment may be equivalent to a direct statement that the 60 days' notice clause was in fact agreed upon, but, when considered in connection with the averment first quoted can scarcely be considered as a forceful direct averment of that fact. The two averments, considered together, do not exclude with clearness the idea that the alternative plans were discussed without either plan being definitely agreed upon, and that when the landlord prepared his lease he assumed the responsibility of inserting the plan for notice. In such circumstances the tenantshould have been apprised that the clause for notice had been inserted.
The affidavits further disclose that the defendant owner has threatened expulsion of complainant unless she becomes a month to month tenant and pays rent at the rate of $2,000 per year. This may appropriately be made the basis of terms on which restraint will be granted. I will accordingly advise retention of the preliminary restraint until final hearing or further order of the court, providing complainant at once enters into bond with form and security approved by Wm. M. Clevenger, as special master, in the sum of $2,000, conditioned that she will pay rent to defendant owner pursuant to the terms of her written lease until the final termination of this litigation, and that in the event of reformation being refused as a final result of this litigation she will pay in addition for the period she has held possession under her extended term an amount making her total payments at the rate of $2,000 per year, and will then vacate possession or continue in possession as a month to month tenant at said rate at the option of defendant owner.