225 F. 693 (8th Cir. 1915), 4402, Mellon v. St. Louis Union Trust Co.

Docket Nº:4402.
Citation:225 F. 693
Party Name:MELLON v. ST. LOUIS UNION TRUST CO. et al. [1]
Case Date:July 07, 1915
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 693

225 F. 693 (8th Cir. 1915)




No. 4402.

United States Court of Appeals, Eighth Circuit.

July 7, 1915

Page 694

The appellant, Mary E. Mellon, was the owner in fee simple of two lots in Oklahoma City, Okl. On November 1, 1909, she leased the same to Miss Dora Patterson, one of the defendants and appellees in this cause, but who neither appealed nor filed a brief at the hearing in this court. The lease was for a term of 99 years, for the yearly rental of $6,000, payable in monthly installments of $500, payable in advance. That rental was to begin on July 1, 1910. For the period between November 1, 1909, and July 1, 1910, she paid the sum of $1,000 as a rental. By the provisions of the lease the lessee obligated herself to pay, in addition to the $500 a month rental, all rates, taxes, general or special, of every nature, levied or imposed on the premises and buildings thereon, the first tax to be paid by her for the year 1910. She also obligated herself to erect, finish, and complete upon the premises a modern building, constructed of brick, concrete, or steel, not less than three storie high in addition to the basement, to cover the lots, except what might be necessary for

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light and air. The building was to cost not less than $40,000, and the erection of the building was to be commenced within one year; and the building to be constructed was to e free from all mechanics' liens and free from any and all claims likely to ripen into mechanics' liens. During the demised term no mechanics' liens for improvements should be put upon the demised premises, and in the event liens should be filed thereon the lessee was to pay the same off within 30 days after final judgment, and if she failed to do so the lessor should have the right to pay the same off, and the amounts thus paid should be added to the rent, and if the default in the payment of such sums and the rent continues for three months after they become due, the lessor has the option to declare the lease terminated, and if the forfeiture is on account of any mechanics' liens, the improvements shall also be forfeited without compensation therefor. The lessee also obligated herself to keep the building insured, the loss, if any, to be made payable to the lessor and any mortgagee who may hold a mortgage on the premises for money loaned, for the purpose of rebuilding the premises destroyed either by fire, lightning, or tornado; but in such case the lessee is not required to erect any better building than the one destroyed. If the building is destroyed within 24 months of the termination of the lease, then she need not rebuild, and the insurance money is to be paid to the lessee, except what she may owe to the lessor.

Paragraph 9 provides, among other things, that, should the lessee desire to borrow money upon said real estate and the buildings thereon to pay for the building, the lessor hereby agrees to join the lessee in the execution of a mortgage on said real estate for an amount not to exceed 60 per cent. of the actual cost of said building, provided that said mortgage, as originally negotiated upon said premises, shall not run for a longer period than 10 years; but the lessor hereby agrees, if the said lessee is unable to pay off and discharge said mortgage at the end of said period of 10 years, to consent to a renewal thereof for a period not to exceed 5 years additional after the expiration of said period of 10 years. Paragraph 11 provides for a forfeiture upon noncompliance with certain of the covenants contained in the lease. Paragraph 12 provides that upon the expiration of the term of the lease the lessor will purchase from the lessee the improvements and buildings then remaining on said premises, and will pay to the lessee a sum of money therefor, equivalent to 75 per cent. of the value of said improvements then standing upon said premises. There is also a provision in that paragraph for an appraisement of the improvements at that time, and an arbitration in case the parties cannot agree as to the value, and a further provision that in the event the lessor fails to pay for the improvements, when ascertained, for the period of one year, then the amount due the lessee for the improvements shall be a mortgage on the premises, including the lot and building, for the sum due her. Paragraph 15 provides that in case the lessor shall, without any fault on her part, be made a party to any litigation commenced by or against the lessee, then the lessee shall pay all costs and attorney's fees incurred by or against the lessor in connection with such litigation, and that such costs and attorney's fees, if paid by the lessor, and the rent reserved in the lease, and all taxes and assessments, and the payment of all moneys provided in this lease to be made to the lessor, shall be and they are hereby declared to be a first lien upon all the buildings and improvements placed upon said demised premises at any time during the term of this lease, and upon the leasehold estate hereby created, and upon the rents of all buildings and improvements situated upon said premises at any time during said term.

The lease was duly acknowledge by both parties at the time of the execution and was filed for record in the proper office of the register of deeds on March 21, 1911. On February 14, 1911, Miss Patterson entered into a contract with Campbell & O'Keefe for the erection of a building on the leased premises, whereby she agreed to pay them in installments, as certified by the architects in charge, the sum of $130,000 for all the work and material, and liens or claims for which the contractors were liable were to be deducted as an indemnity against the same. The building contract was the usual one, but contained, among others, the following provisions: 'The contractor is to be paid on the 1st and 15th of each month, upon presentation of written certificates for estimates from the architect, 90 per cent. of the amount of

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material on the ground and in the building and labor, the final payment to be made within 10 days after the contract was fulfilled.'

On April 20, 1911, Miss Patterson arranged with the appellee, the St. Louis Union Trust Company, which will be referred to as the Trust Company, for a loan of $75,000 to be used for the erection of the building contracted for as above set out, and executed a mortgage on that day, in which Mrs. Mellon joined, whereby they conveyed to the Trust Company, as security for the contemplated loan, the fee to the lots, as well as the improvements and buildings to be erected thereon. The mortgage, although signed by both parties, contains a covenant of Miss Patterson that she is the owner of the 99-year leasehold, then of record in the office of the register of deeds of Oklahoma county, and a covenant by Mrs. Mellon that she is the owner in fee simple of the lots, subject to said lease. It also contains the usual covenants against incumbrances. In addition to that the mortgage contained the following clause: 'The said Mary E. Mellon, as party of the first part in the within and foregoing mortgage, hereby joins in the execution of said mortgage to secure the indebtedness of Dora Patterson; said indebtedness being contracted for the purpose of enabling the said Dora Patterson to erect the improvements upon said premises described in said mortgage as contemplated by the written 99-year lease made and executed by and between the said Mary E. Mellon, as lessor, and the said Dora Patterson, as lessee, dated November 1, 1909, so that the interest of the said Mary E. Mellon, as owner of said premises, and lessor, as described in said lease, and the interest of the said Dora Patterson, as lessee, being the entire interest, title, and estate, in fee simple absolute, in, to, and upon the real estate described in this mortgage, is hereby mortgaged unto the said second party for the purpose of securing the payment of said indebtedness and each and every part thereof. ' The notes executed to the Trust Company for this loan were signed by Miss Patterson alone. The mortgage was executed and acknowledged by both mortgagors on April 20, 1911, and filed for record on August 2, 1911.

The proceeds of the loan were not placed by the Trust Company to the credit of Miss Patterson until August 12, 1911, and the first withdrawal of this credit was on September 5, 1911, by a check drawn by Miss Patterson on the Trust Company in favor of the contractors, accompanied by a certificate of the architects that the amount was due the contractors for work done and materials furnished on the building. This check was for $7,681.45. The balance of the deposit, which originally amounted to $72,000, $3,000 having been deducted from the loan by the Trust Company for its commissions, was withdrawn at different times by checks of Miss Patterson, all in favor of the contractors, for work and materials for the building, and upon the certificates of the architects, which were attached to the checks. The last check, which exhausted the $72,000, was paid on March 11, 1912. Before the proceeds of the loan made by the Trust Company under the mortgage had been placed to the credit of Miss Patterson, she had paid to the contractors, Campbell & O'Keefe, on the certificates of the architects, the sum of $44,189.71 out of her own funds as follows:

April 1, 1911 . . . $ 1,500.00

April 29, 1911 . . . 7,225.55

May 15, 1911 . . . 5,000.00

June 1, 1911 . . . 4,575.92

June 15, 1911 . . . 4,009.09

July 1, 1911 . . . 4,009.09

July 15, 1911 . . . 10,521.66

August 8, 1911 . . . 7,348.40

And the sum of $5,285.48 she paid on August 8th to the architects for their services, making a total of $49,475.19 paid on the building by Miss Patterson before any money was advanced to...

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