Schroeder v. Berlin Arcade Real Estate Co.

• Decision Date: 03 October 1921
• Citation: 184 N.W. 542,175 Wis. 79
• Parties: SCHROEDER v. BERLIN ARCADE REAL ESTATE CO. ET AL.
• Court: Wisconsin Supreme Court

175 Wis. 79

184 N.W. 542

SCHROEDER

v.BERLIN ARCADE REAL ESTATE CO. ET AL.

Supreme Court of Wisconsin.

July 13, 1921.

Dissenting Opinion Oct. 3, 1921.

Appeal from Circuit Court, Milwaukee County; E. T. Fairchild, Judge.

Action by Edward Schroeder, as trustee for bondholders, against the Berlin Arcade Real Estate Company and others. From an adverse judgment, various defendants take appeals. Affirmed.

This is an action brought by the plaintiff, as trustee for bondholders, to foreclose a certain mortgage in the form of a trust deed, executed by the defendant Berlin Arcade Real Estate Company (hereafter referred to, for convenience sake, as “real estate company”).

The real estate company, in the year 1912, was the owner of a 99-year lease upon the following described real estate, to wit, lots numbered 14 and 15 in block numbered 12, in W. P. Young's subdivision, in the Thirteenth ward of the city of Milwaukee, Milwaukee county, Wis., which lease it held under and pursuant to an assignment from the Realty Investment Company, a corporation; the lease having been entered into on the 27th day of April, 1912, by and between Maria Niemann, of Milwaukee, Wis., and said Realty Investment Company.

On the 28th day of June, 1912, the real estate company executed a trust deed or mortgage on its leasehold interest, for the sum of $125,000, to the plaintiff, Edward Schroeder, as trustee for bondholders, to secure the payment of 250 bonds; each bond being in the sum of $500, and being numbered consecutively as Nos. 1 to 250, inclusive, bearing interest at the rate of 6 per cent. per annum, payable semiannually, in accordance with certain interest coupons thereto annexed, the principal of the bonds being payable, under the terms thereof, on the 1st day of November, 1917. This trust deed constituted a first mortgage upon the leasehold interest of the real estate company.

On the same day, to wit, the 28th day of June, 1912, a second mortgage or deed of trust was executed by the real estate company on said property, to the plaintiff, Edward Schroeder, as trustee for bondholders, for the purpose of securing the payment of 100 bonds, each for the sum of $500, or a total of $50,000. Said second trust deed or mortgage constituted a second mortgage upon said real estate, subject to said first mortgage for $125,000.

The plaintiff continued to act as trustee under both of said mortgage bond issues until the 28th day of June, 1916, at which time he resigned as trustee under the second mortgage, and shortly thereafter commenced this action of foreclosure on the first mortgage or trust deed. Subsequently, and by proceedings duly had, the defendant Leonard Leidig was duly appointed by the court as trustee under the second trust deed or mortgage, and was made a party defendant to the foreclosure proceedings.

In and by the 99-year lease above referred to, executed by the said Maria Niemann to the Realty Investment Company, the said Realty Investment Company, its successors and assigns, agreed, under what is known as the third paragraph of said lease, to erect upon the leased premises within 5 years from the date of the lease a new business building of modern construction, not less than four stories in height, at a cost of not less than $75,000, and to insure and keep insured such building, when so erected and constructed, against loss or damage by fire, in the sum of $30,000, in good and responsible fire insurance companies, the policies of insurance to be assigned and delivered to lessor and to be held by her as security for the faithful performance by the lessee of the terms and conditions of said lease. In and by said lease the lessee also covenanted and agreed that--

“The new building so to be erected shall be substantial, and shall in every respect comply with the laws, ordinances, and regulations, municipal or otherwise, that may govern the construction of the same, and shall save said lessor harmless of and from any loss or damage by reason of the construction of said new building, and by reason of any mechanic's liens or incumbrances of any kind or nature.”

Said 99-year lease also contains what is known as the eleventh paragraph thereof, which provides as follows, to wit:

“It is understood and agreed that it will be necessary that the buildings and improvements now upon said lands be removed or demolished as hereinbefore provided, to make room for the new building to be erected by the lessee and that lessee may make alterations in any building from time to time, but shall not make such as will substantially depreciate the value of the building.”

In other respects, said 99-year lease contains provisions of the usual and ordinary nature of documents of that kind.

The mortgages above referred to were executed for the purpose of raising money to pay in part the cost of the erection and construction of said proposed new building, and for other purposes.

Said first trust deed or mortgage, among other things, contains the following provisions, to wit:

“Now therefore, this indenture witnesseth that the mortgagor, for and in consideration of the premises and of $1.00 received by it from the trustee, and in order to secure the due and punctual payment of the principal and interest of all of the bonds issued hereunder, and at any time outstanding, does hereby convey and assign unto the trustee, his successors and assigns forever, all its right, title, and interest in, to, and under said lease hereto annexed and marked Exhibit A, and to any and all future income, rents, and revenue from the lease, and leased property and any part thereof.”

The habendum clause of said lease, among other provisions, contains the following:

“That until default shall be made and continued by the mortgagor in the payment of the principal or interest of any of the said bonds hereby secured as hereinafter provided, or until default shall be made and continued in respect to any act, thing, obligation, or agreement herein required to be done, performed, or kept by it as hereinafter or in said lease provided, the mortgagor shall be permitted to possess, manage, use, and enjoy said property and the improvements, appurtenances, rights, and privileges, and to take and use the incomes, revenues, rents, and profits thereof as if this mortgage had not been made.”

Said trust deed or mortgage also contains an agreement on the part of the real estate company to the effect that the leased premises shall be maintained, and shall not at any time during the continuance of the mortgage be torn down or removed without the consent of the trustee and all of the holders of the bonds issued under said first bond issue, and in the event of the destruction by fire or otherwise the said mortgagor will repair or rebuild the same forthwith, or erect a new building of equal value, to cost at least the sum of $125,000, and that in the event that the mortgagor fails, within 90 days after the damage or destruction of the building, to repair or rebuild the same, it shall become lawful for the trustee, and it shall be his duty, upon a demand in writing signed by the holders of one-third of the bonds then outstanding, to enter and take possession of the demised premises, and exclude the mortgagor therefrom, and repair, rebuild, and replace the building upon said premises in as good condition as the building was before such damage had occurred, and to pay for the rebuilding and repair of said building out of the moneys received on the insurance loss.

In connection with the foregoing provisions with respect to the rebuilding and repair of the building upon the premises damaged or destroyed by fire, said trust deed or mortgage also contains the following provision, to wit:

“The mortgagor will, and the trustee may, in all things keep, observe, and perform all the covenants in said lease contained in respect to repairing, rebuilding, and replacing the building to be erected on said premises as in said lease provided to be done by the lessee.”

The second article of the trust deed contains the following provision, to wit:

“The said mortgagor has contracted for the erection of a store and office building, to be known as the Berlin Arcade Building, upon said lands, and the trustee shall receive and hold all of said bonds, with full power and authority to sell and dispose of all or any of them at such prices and upon such terms and conditions as the trustee may deem advisable, and the trustee shall use and apply said bonds and the proceeds of any sale or sales thereof in paying and liquidating the cost of erection of such building upon the said lands, and none of said bonds and none of the proceeds of sales thereof shall be used for any other purpose or purposes.”

Said article also provides for the payment by the trustee of all sums due to contractors and materialmen employed in the constructionof the building upon said premises, under the written order and direction of one Robert T. Newberry, architect.

Among other provisions in said trust deed or mortgage is one authorizing the trustee to raise and borrow money on the security of the mortgage, lease, and premises, or upon any sublease, for the purpose of paying off any sum due for interest, rentals, insurance, taxes, or other charges payable by the lessee under said 99-year lease, or any charges or any lien for the time being charged upon the mortgaged property or any part thereof, in priority to the trust deed, with such interest and upon such terms as to the trustee may seem best.

Article 5 provides, among other things, as follows, to wit:

“In case default shall be made in the payment of any interest on any of the bonds issued hereunder, and shall continue for the period of six months after payment of such interest shall have been duly demanded in writing, or in case default shall be made in the payment of the principal of any of said bonds, or in case the mortgagor shall fail to keep the buildings insured against loss by fire, as herein...