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-2- <br />Mayor and City Council July 22, 1974 <br />I have also examined the mortgage made by the developers covering the above site as <br />well as other sites. It should be noted that this mortgage includes an assignment of all <br />the leases as security and further provides in Paragraph 7, entitled, Assignees Rights <br />on Defaults that if there is default by the owner in any of the terms of the mortgage or <br />any of the leases securing said mortgage, that the entire principal balance of the mortgage <br />could be declared immediately due. It is my opinion that the mortgagee could at its option <br />declare the mortgage immediately due in full if the Southland Corporation terminated its <br />lease for the 7 Eleven Store by reason of the closing of a driveway. It should be noted <br />that the calling of a mortgage under these circumstances would be most unusual; however, <br />it should also be noted that with the present high interest rates, that mortgage companies <br />might well call low interest outstanding mortgages under circumstances where such a <br />procedure would not be ordinary. <br />Following the initial agreement between Harstad and RCE Corporation, there was a subse- <br />quent agreement entered into between the parties on May 1, 1974. I have examined this <br />document but do not think it would be appropriate to include copies of it with this report. <br />The substance of the document was that Mr. Ernst had failed to perform certain of his <br />obligations under the October 2, 1973, agreement and was given until June 1, 1974 to <br />perform these obligations and should he fail, Mr. Harstad, in order to protect his <br />investment, would be required to perform those obligations and Mr. Ernst would then <br />be relieved of his interest in the property. Mr. Ernst failed to perform such obligations <br />and Mr. Harstad becamt..the sole owner of the premises in question as of June 1, 1974 <br />and at that time took over the management of the property. <br />I trust that this answers the questions raised by the council. <br />Yours ly, <br />?n i <br />?f <br />Perry W. Copeland <br />PWC/jh <br />attach.