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APPEAL from a judgment of the Supreme Court in favor of plaintiff, entered February 5, 1953, in Ulster County, upon a decision of the court on a trial at Special Term (ELSWORTH, J.), which (1) adjudged that a deed to the intervener dated December 13, 1948, was void, (2) directed specific performance by the other defendants of a contract to convey the premises to plaintiff and of a purchase option which had been assigned to plaintiff, (3) directed that the intervener and the other defendants account to plaintiff for the rents of the premises since December 13, 1948, that plaintiff pay all interest and carrying charges of the premises since that date, that all adjustments be made as of that date, and that plaintiff execute on closing a second mortgage of $14,000 to the intervener, and (4) directed that the intervener surrender possession of the premises on the closing date.
Samuel W. Eager, Jr., for intervener-appellant.
James Abernethy for defendants-appellants.
John J. Egan for respondent.
The plaintiff entered into an agreement with Samuel J. Van Kleeck, individually and as executor of the estate of John D. Van Kleeck, on November 15, 1948, for the purchase of a parcel of real property in the business section of Kingston, New York. There were several stores upon the premises; one, occupied as a barbershop, had been leased to one Ferrara by Van Kleeck on February 15, 1945; another, a larger store, had been leased on September 10, 1948, to a firm known as Crosby and Mertz. Each of the leases contained an option to the lessee to purchase the entire parcel, of which the demised premises were a part, at the same price and upon the same terms as offered by any prospective purchaser whose offer the lessor was willing to accept. The options were of the type known as a 'first privilege to purchase' (R. I. Realty Co. v. Terrell, 254 N.Y. 121). The option to Crosby and Mertz was made expressly subject to 'any prior option which may exist in favor of Louis Ferrara'.
The Ferrara lease read: 'And it is further agreed that if said party of the first part receives an offer of purchase of property 314-324 Fair Street, and the offer results in a bona fide sale, said party of the second part will peaceably surrender said premises on sixty days written notice to surrender and quit the premises provided that said party of the second part may have the option to purchase said premises at the same price and terms as offered by the prospective purchaser.'
The Crosby and Mertz lease read: 'It is further agreed between the parties that if the party of the first part receives an offer for the purchase of the property known and designated as 314-324 Fair Street, which includes the demised premises, and the said offer results in a bona fide sale of the property, the parties of the second part will peaceably surrender the demised premises on six months written notice to surrender and quit the premises; this agreement, however, shall in nowise affect the original term of this lease, and any notice so served during the original term of the lease shall be ineffective to terminate the lease prior to the 15th day of March 1952; it is further understood and agreed between the parties that the parties of the second part, in the event of such offer of purchase, shall have the option to purchase the said premises at the same price and on the same terms as offered by any prospective purchaser, subject to any prior option which may exist in favor of Louis Ferrara.'
The rental under the Ferrara lease was $22 per month; the term was three years, beginning July 1, 1945, with an option to renew for a further period of two years. The rental under the Crosby and Mertz lease was $175 per month; the term was three years, beginning September 15, 1948, with an option to renew for two further periods of two years each upon the same terms except that the rental was to be $190 per month.
On December 14, 1946, Ferrara sold his barbershop to one Dumenigo and leased the store to Dumenigo for the unexpired term of the original lease, at the same rental as provided in the original lease. The lease to Dumenigo provided that he had 'the privilege of making such payments directly to Samuel J. Van Kleeck, the landlord of the party of the first part'. There was no express reference to the option to purchase in the Dumenigo lease but a copy of the original lease was annexed thereto and the Dumenigo lease was made 'subject to all the limitations, restrictions and covenants contained' in the original lease.
On November 15, 1948, Van Kleeck executed the agreement for the sale of the property to the plaintiff, referred to above. The 'binder' recited that it was 'subject to present leases'.
Apart from this express provision, the purchaser was chargeable with constructive notice of the options held by the tenants, since they were in possession of the premises and their possession gave notice to the world of all their rights under the leases ( Jurgensen v. Morris, 194 A.D. 92; Phelan v. Brady, 119 N.Y. 587; Ritz v. Rubin, 201 N.Y.S. 99).
On November 23, 1948, the attorney for Van Kleeck sent letters to Ferrara and to Crosby and Mertz, notifying them of the receipt of an offer for the purchase of the premises from a prospective purchaser and requesting them to advise the writer on or before December 1, ...