62 A.2d 711 | N.J. Super. Ct. App. Div. | 1948
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *189 The plaintiffs are the owners of premises commonly known as No. 40 Frelinghuysen Avenue, Newark, N.J., which they leased to defendant, Air Brakes Equipment Corp., for a term of three years commencing March 1, 1947. The lease provided that the premises were "to be used and occupied for the sale, service, distribution and storing of brake and power-brake equipment and materials, and Auto Accessories"; that the tenant should not assign the agreement, or underlet the premises; and for termination in the event of default.
For a long time prior to the making of the lease, the plaintiff, Samuel Posner, had occupied the premises in the conduct of the business described in the lease. At the time of the execution of the lease, he was a stockholder in the tenant corporation. Thereafter, on or about May 2, 1947, for and in consideration of $31,690 he sold his interest to the remaining stockholders, and he and Sara Posner agreed to an extension of the term of the lease for a further period of two years, upon an increased rental.
Subsequently, the remaining stockholders sold their shares; they are now owned by System Brake Equipment Company, the other defendant in this cause. The latter corporation is engaged in a business similar to that conducted by Air Brakes Equipment Corp., and in addition performs frame extension and alignment work, operating two places of business, one at *190 No. 1196 Broad Street, Newark and the other in Jersey City. The two defendant corporations are separate entities, their relationship being parent and wholly-owned subsidiary. The rent is paid to the plaintiffs by the tenant, Air Brakes Equipment Corp., although some of the persons working at the demised premises are employees of the defendant, System Brake Equipment Co.
The plaintiffs served notice upon the defendant, Air Brakes Equipment Corp., terminating the lease on the ground that its provisions had been violated in that said premises were used and occupied for purposes other than those specified in the lease, and, further, that said lease had been assigned, or the premises underlet and occupied by an entity other than the tenant. Defendants denied violation of the lease. Plaintiffs thereupon filed their complaint, seeking (1) cancellation and rescission of the lease, (2) a declaratory judgment setting forth the rights, status and other legal relations of the plaintiffs and defendant, Air Brakes Equipment Corp., and (3) specific performance by the defendants in the surrender and delivery to the plaintiffs of the fixtures and property in the demised premises.
Two issues are raised: (1) had there been an assignment of the lease or an underletting of the premises, and (2) had the tenant violated any provisions of the lease respecting the use of the demised premises.
It is well-settled that an assignment of a lease is not a violation of a covenant not to underlet, Field v. Mills,
The right of our courts, in a proper case, to pierce the corporate veil and to look "at the substance, not merely the outward form," is fundamental. The exercise of this right is posited in the principle that courts do not permit the doctrine of corporate entity to be used for the purpose of defeating justice. Stockton v. Central Railroad Co.,
In the instant case, I find no such facts or circumstances. The two corporate entities are separate and distinct. Air Brakes Equipment Corp. is still the tenant and liable to the landlord for the performance of its obligations under the lease. The fact that its stock is now owned by System Brake Equipment Co. instead of by the individuals who owned it at the time of the execution of the lease, does not constitute a violation of the lease in the particulars charged.
The plaintiffs also argue that the tenant violated the provisions of the lease respecting the use of the demised premises, because the greater part of the work done in the premises is frame extension and alignment work, rather than brake work, and that some customers desiring brake work were directed to the Broad Street location of System Brake Equipment Co. Defendant's testimony is to the effect that frame extension and alignment work is very often essential in brake and power brake equipment work. Plaintiffs' argument is that the tenant should continue to use the premises exclusively, or more, for brake work. Such a contention finds no support in the lease or the law. Where words used in a lease are merely descriptive of the character of the premises, although indicating a particular use, such words of description cannot be construed as restrictions upon the lessee in its use of the property to the distinctive use which the words may suggest. If the contract does not restrict the use of the leased premises to a single purpose, the provisions are generally regarded as permissive rather that restrictive in nature.
In McCormick v. Stephany,
In Hoffman v. Seidman,
In Burns Schaffer Amusement Co. v. Conover,
Indeed, in the instant case the nature of the business to be conducted in the premises, is, as described in the lease, very comprehensive and broad, and the use being made of the premises is not in violation thereof.
Judgment will be entered for the defendants.