Theatre Realty Co. v. Aronberg-Fried Co.

• Decision Date: 31 August 1936
• Docket Number: No. 10439.,10439.
• Citation: 85 F.2d 383
• Parties: THEATRE REALTY CO. et al. v. ARONBERG-FRIED CO., Inc.
• Court: U.S. Court of Appeals — Eighth Circuit

85 F.2d 383 (1936)

THEATRE REALTY CO. et al. v. ARONBERG-FRIED CO., Inc.

No. 10439.

Circuit Court of Appeals, Eighth Circuit.

August 31, 1936.

William O'Herin, of St. Louis, Mo. (Guy A. Thompson, Rhodes E. Cave, John S. Leahy, Harold F. Hecker, Bryan, Williams, Cave & McPheeters, and Leahy, Walther, Hecker & Ely, all of St. Louis, Mo., on the brief), for appellants.

Fred L. English, of St. Louis, Mo. (Fred L. Williams and Earl F. Nelson, both of St. Louis, Mo., and Lewis Hord Cook, of Jefferson City, Mo., on the brief), for appellee.

Before GARDNER, WOODROUGH, and THOMAS, Circuit Judges.

THOMAS, Circuit Judge.

This is a suit in equity by a contractor for the specific performance of a building contract, to recover a balance of $7,058.77 of the contract price, and to subject to the payment of such balance a trust fund in the possession of the St. Louis Union Trust Company. There was a judgment and decree for the plaintiff, Aronberg-Fried Company, Inc. The case is here on a joint appeal by the defendants Theatre Realty Company, St. Louis Union Trust Company, Trustee, and J. T. Blair and Edmond Koeln, receivers for the said Theatre Realty Company.

The defendants Blair and Koeln, receivers, were appointed by the state court in a proceeding to foreclose the trust deed given by the Theatre Realty Company to the St. Louis Union Trust Company as trustee to secure payment of the bonds the proceeds of which constitute the trust fund a part of which plaintiff seeks to reach in this suit.

As grounds for reversal the appellants in argument urge three assigned errors of the trial court, one a finding of fact and two being conclusions of law. They are:

(1) First, the finding of the court that all documents and certificates required by a certain deposit agreement to be furnished to the trustee before it was bound to pay the plaintiff had been furnished before August 18, 1931, except the request or certificate of the Theatre Realty Company, and that as to such certificate that Company was recalcitrantly and without valid excuse refusing to certify.

(2) Second, the conclusion of law that the recalcitrant refusal of the Theatre Realty Company to certify, all other things being done, did not justify the trustee in refusing payment.

(3) And, third, the conclusion that the deposit agreement constituted a promise for the benefit of plaintiff and an equitable assignment of the fund in its favor.

The circumstances pertinent to the issues on appeal may be briefly summarized. On the 9th day of March, 1927, the plaintiff and the Theatre Realty Company (hereinafter called the Company) entered into a contract "as of the 14th day of December, 1926," by the terms of which the plaintiff as contractor undertook to furnish the material and labor and to construct for the Company a building, known as the Fox Theatre and Office building, in St. Louis, Mo., for cost and a fee of 6 per cent. of the cost. The plaintiff entered upon the performance of the contract, and the building was completed according to the plans and specifications of the architect on the 6th day of March, 1929. The plaintiff received payments pursuant to the terms of the contract aggregating $2,977,954.27, leaving an undisputed balance due of $7,058.77, to recover which this suit was brought.

For the purpose of securing funds to pay for the building the Company, on March 8, 1927, entered into a contract with Halsey, Stuart & Co., Inc., called for brevity the Banker, by the terms of which the Company agreed to issue and did issue its bonds in the amount of $4,550,000, and the Banker purchased said bonds for $4,140,500, and accrued interest from October 1, 1927. The bonds were secured by a deed of trust conveying the lands on which the buildings constructed by plaintiff are located to the defendant St. Louis Union Trust Company, as trustee.

On the day the bonds were issued, October 1, 1927, the Company, the Banker, and the trustee entered into a written contract, denominated a deposit agreement. The plaintiff was not a party to this contract, but D. G. Aronberg of the plaintiff Company was familiar with the arrangements provided for therein. The deposit agreement recited that the proceeds of the bonds in the sum of $4,140,500 and accrued interest had been deposited with and accepted by the trustee; that the Company was about to erect a theater and commercial building upon the premises mortgaged to secure the bonds, and:

"Whereas in said indenture (trust deed) the Company has covenanted to erect, complete and equip the said building and to pay in full for the same and requires the proceeds of said bonds for that purpose; * * * it is agreed as follows: * * *

"The Company expressly covenants to pay for said building * * * not later than thirty days after the completion of said building, * * * unless the Company shall properly refuse to pay any bill or item in dispute and notice to that effect, together with a statement of the facts pertaining thereto shall be promptly given by the Company to the Trustee and the Banker, together with a joint certificate of the Architect and the Supervising Architect that such bill or item is properly in dispute and contested by the Company; in such event an amount equivalent to such bill or item in dispute shall be withheld by the Trustee pending the determination thereof. * * *

"Second: The Trustee shall hold and disburse said sum of Four Million One Hundred Forty Thousand Five Hundred Dollars ($4,140,500.), and accrued interest from October 1, 1927, and any additional moneys which shall be received by it, and the disposition of which shall not otherwise in this agreement be specifically provided for, as follows:

"(a) The Trustee shall at once reserve and set aside the sum of Four Hundred Forty Three Thousand Six Hundred Twenty-five Dollars ($443,625.), being an amount equal to eighteen months' interest upon the bonds accruing to and including April 1, 1929, to which shall be added the accrued interest from October 1, 1927, paid by the Banker as aforesaid. * * *

"(b) The balance of said moneys shall be reserved and held by the Trustee as a trust fund to be disbursed and applied by the Trustee for the payment of the construction costs of said building and carrying charges, meaning thereby, all sums payable to contractors or other persons who have rendered services or furnished labor or material or other property required in the erection and equipment of said building and carrying charges set forth in Schedule B. Such payments on account of construction costs and carrying charges shall be made by the Trustee in monthly installments upon the written request and order of the Company executed by a duly authorized officer thereof and having the corporate seal affixed thereto, and upon the filing with the Trustee with such request of the following:

"1. A certificate of said architect and the supervising architect. * * *

"2. A certificate from the New York Title & Mortgage Company or Title Guaranty Trust Company of St. Louis, that there are no liens or encumbrances of record on said premises superior to the lien of said indenture. * * *

"3. With each such request, except the first, vouchers approved by the architect and by the supervising architect showing the disposition of the amount of the next previous request in the manner therein stated. * * *

"Final payment on account of construction cost as herein defined shall be made by the Trustee from the balance of the moneys in its hands, subject to such deductions as may be otherwise provided for in this agreement, only upon the filing with the Trustee of:

"1. A written request of the Company executed by a duly authorized officer having its corporate seal affixed.

"2. A final certificate signed by the architect and the supervising architect. * * *

"3. An opinion of counsel satisfactory to the Trustee and the Banker that the time for filing liens for labor and materials has expired. * * *

"4. A certificate by the New York Title and Mortgage Company or Title Guaranty Trust Company of St. Louis that said building and mortgaged premises are subject to the lien of said indenture securing said bonds free from all other liens or encumbrances of any kind prior thereto. * * * "5. Evidence satisfactory to the Trustee and the Banker of the issuance of the usual certificates from all governmental and other authorities of the City of St. Louis, Missouri, having jurisdiction thereof and the Board of Fire Underwriters. * * *

"The Company shall not have the right to require any such payments in this section or said indenture provided to be made if it shall be in default under any of the provisions hereof or of said indenture (trust deed)."

During the construction of the building, the monthly payments to the plaintiff were made by the Trustee upon the furnishing of the certificates provided for under clause (b) of the second paragraph of the deposit agreement. The dispute arises in connection with the provision relating to the "Final payment on account of construction cost." It will be observed that such final payment was to be made by the Trustee upon filing with it five different documents described severally in the contract. The trial court found that all of such documents, except the first, the request of the Company, were "duly furnished to the Trustee on or before August 18, 1931." The appellants claim that the court erred in so finding because the evidence shows that the certificate of the architect with reference to partial payments required by paragraph 1 under clause (b) in the second division of the contract was not on file at that time. The trial court's finding in this respect is not subject to criticism. The certificate referred to was not required by the terms of the contract as a condition for "final payment."

On October 1, 1931, default in payment of interest on the bonds occurred, and under the accelerating clause the principal was declared due on December 17, 1931. Paragra...