Case ID: md_147/html/0580-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Adkins, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

GEORGE A. SOLTER, Trustee in Bankruptcy, vs. WILLIAM D. MACMILLAN.
    
      Fixtures — Constructive Annexation — Essential Appliances— Mortgagor <md Mortgagee.
    
    Eings, molds, and cores, used in a tire manufacturing plant, the value of which was almost entirely in their use in connection with certain machinery annexed to the soil, which were made expressly for that plant and were of little value elsewhere, and which were essential to the manufacture of the larger sized tires, held to he fixtures as between the mortgagor and mortgages of the plant. pp. 584-587
    In a mortgage of the real estate of a manufacturing company, with the buildings and equipment, a provision attempting to convey after-acquired chattels, while having otherwise no validity or effect, may have a hearing upon the intent as to the use of such articles in connection with the work of the factory, and may he relevant evidence for that purpose. p. 587
    In determining whether articles are fixtures as between the mortgagor and mortgagee of laud, it is immaterial whether they were installed upon the land before or after the execution of the mortgage. p. 587
    The requirement that articles not actually annexed to the soil hut merely used in connection with machinery so annexed shall, in order to be regarded as constructively annexed, “be essentially necessary to the working of the principal machinery,” means that they must he necessary, not to the mere physical movement of the machinery, hut to the efficient working of the machinery in accomplishing the purpose for which it is adapted. pp. 587, 588
    
      Decided February 26th, 1925.
    
    Appeal from tibe Circuit Court of Baltimore City (Eraste, L).
    Proceedings by William D. Macmillan to foreclose a mortgage executed by the Dieliom Tire and Rubber ’Company. From an order overruling exceptions to the foreclosure sale, George A. S'olter, trustee in bankruptcy of said company, ■appeals.
    Affirmed.
    The cause was argued! before Boetd, C. L, Ureter, Adkiets, ■ Oeetjtt, Digges, P’arke, and Walsh, JJ.
    
      Walter H. Buck and James Morfit Mullen, for the appellant.
    
      William D. Macmillan and Joseph T. Brennan, with whom were Semmes, Bowen & Semmes on the brief, for the appellee.
   Adkins, J.,

delivered tibe opinion of the Court.

The appellant is the trustee in -bankruptcy of the Delion Tire and -Rubber Company, and 'the appellee is the assignee of a mortgage from that company to the Atlantic Trust Cbmpany, trustee, dated Eehruary 1st, 1922. ,The company Was, on December 274, 1923, adjudicated a bankrupt on the petition of creditors filed December 2-6th, 1923, and its answer filed the following day -admitted its insolvency.

The mortgage to the trust company conveyed all o-f the real estate o-f the mortgagor.

“Also all and singular the buildings, structures, and improvements located on the above described premises, all machinery, equipment, and fixtures in said buildings and structures, and on said premises * * * , now owned by the company or which it may hereafter acquire.
“Also all patents, patent rights and licenses, licenses under patents, trade marks, trade names, inventions, improvements, formulas, patterns, secrets and other processes now belonging to the company or which it may hereafter acquire.
“And all other property, real, personal and mixed, which the company may hereafter acquire, except the merchandise, materials, supplies, manufactured goods, goods in the course of manufacture, automobiles, automobile trucks, stocks of corporations, bonds and other securities, except notes and accounts receivable, hills of exchange, trade choses in action and except cash other than that due and payable to the trustee under any of the provisions hereof.”

'This mortgage Was -duly recorded in b-oith the land and chattel rectord-si -of Baltimore City. On default under the covenants and conditions of said mortgage, appellee, on Dteteember 22nd, 1923, instituted foreiafosiur© proceedings, and on Eehruary 6th, 1924-, .-after due advertisement, slold to tibe International Blank of Washington, Dl -0., the -holder of a majority of the mortgage bond's!, for $65,000, “all of the real and' leasehold estate, plant, equipment, structures, improve-meats, nmchinery, fixtures, patents and all other property covered by said mortgage, being, -and constituting the plant of 'the Delion Tire -and Eubber Company.”

Included in the machinery and equipment wére certain articles purchased after the date of the mortgage, which appellant claimed were personal Chattels, and which had subsequently been conveyed to the mortgagee, ¡and to these he publicly claimed title -at the sale and protested ¡against their sale by appellee. O-n the sale being reported he filed exceptions to- its ratification. •

The trial court in its opinion -separated these articles into three Masses, as follows:

1. Machinery and equipment physically affixed to the realty casting $2,628.33.

2. Eings, molds -and cores, -costing $11,126.50.

3. Furniture and -office fixtures -and equipment costing $419.52.

The first and second classes the learned chancellor held to be fixtures, which went with the real estate under the mortgage. The third he held to be merely personal -chattels not subject to the mortgage, and he found the value thereof to be $315, and announced that if the purchaser at- the sale would pay or secure the payment of that sumí to- the trustee in bankruptcy he would overrule the -exceptions and ratify -the sale. This having been arranged, the sale wais ratified.

This -appeal is from the order overruling the exceptions and ratifying the sale.

It is conceded that the ruling, of the -chancellor was correct -as to the first and third Masses.

The sole question is: Did title to the artieles in the second Mass pass under the mortgage or -did it go> to- the- trustee in bankruptcy ? The determination of this question depends upon, whether -at the 'díate -of ithie institution of the bankruptcy proceedings these articles Were fixtures or metfely personal -chattels.

There is much discussion in the briefs .as to the effect of the -amendment of 1910 tot the Bankruptcy Act, Vesting a trustee in bankruptcy “with all the rights, remedies and powers .of a creditor' ■ holding a, lien by legal or equitable proceedings * * * and with raid the rights., remedies and powers of a judgment creditor holding an execration duly returned unsatisfied * *

Giving that .amendment its utmost effect, the position of such trustee could not be better than, would have been that of a judgment creditor with an execution duly levied on the property in question at the date of the bankruptcy. And even if it were conceded, which we do. not decide, that the trustee in this easel held such a, position, our question would not be answered, because the relative positions of the mortgagee and such a judgment creditor, if there were any, would still depend upon whether the articles in question were covered by the mortgage of -an earlier date than that of the execution. It would be different if the controversy were between' .a trustee in bankruptcy and one holding .a defective mortgage. Most of the eases cited deal with situar tioms of that kind, and do not help, us in the present situation.

Here the question is the legal character of the articles in controversy as between the mortgagor and mortgagee.

There is no. subject as to. which the authorities are more hopelessly in conflict. But the law in Maryland on this subject was settled, in principle, by the ease of Dudley & Carpenter v. Hurst, Miller & Co., 67 Md. 44. In the much earlier ease of Kirwan v. Latour, 1 H. & J. 289, it had been held that in order to constitute a fixture a chattel must be .actually fastened to the soil. In the later ease, this Court, in overruling the earlier one, said:

“This ease was decided in 1802. But since the decision of that ease the doctrina of constructive .annexation has been much discussed. From the general current of decisions, the following principle seems clearly deduoiblei.
That where in the ease of machinery the principal part becomes a fixture by actual annexation to. the soil, such part of it as mlay be not so physically annexed, but which if removed would leave rthe principal thing unfit for use, and would not of itself and ¡standing alone be well adapted for general us© elsewhere, is considered constructively annexed.
Thus the key of a lock, the sail of a wind-mill, the leather belting of a saw-mill, although .actually severed from the principal thing, and stored elsewhere, pass by 'constructive annexation. They must bei .such as go> to complete the machinery, which is affixed to the land, and. which, if removed, would leave /the principal ¡thing incomplete .and unfit for use.”

And then, applying the principle .announced to the facts of that case, the Oourt continues:

“In this ease there are some articles not actually annexed to the soil, such .as crates, dapping machines and work tables, but .are essentially necessary to the working -of the principal machinery, and pas® by constructive annexation. The main machinery would not be in working condition without them, and they are not adapted for general purposes. .

We are therefore of opinion that the whole machinery of the canning factory passed under the mortgage to Bowie, and consequently to hi® vendees under the mortgage sale.”

It was said in that case that the testa by which a fixture is determined are generally these:

1. Annexation to. the realty either actual or .constructive.

2. Adaptation to the pse of that part of the realty with which it is connected.

3. The intention of the party making the annexation, to make the article a permanent accession to the freehold, this intention being inferred from the mature of the article annexed, the situation of the party making the annexation, the mode of 'annexation, and the purpose for which it was annexed.

This case hia® been cited with .approval in a number of later cases. Warren Mfg. Co. v. Baltimore, 119 Md. 188; Mt. Vernon Co. v. Continental Trust Co., 121 Md. 163; Talbott v. Silcite Co., 144 Md. 645. See also Ewell on Fixtures (2nd Ed.), star page 33; 26 C. J., page 722, and. note 55.

Attention, i® directed in appellants brief to> the record in the Dudley & Carpenter case, supra,, wherein it appears that the crates in that ease were integral parts, of certain kettles., into which) , they fitted, which kettles, conld not be taken up without tearing up the floor and removing the sleepers. Lut there is nothing in the record of that ease to show that the capping machines or tables were integral parts of 'any machinery physically annexed to the building or soil.

We think the .articles in controversy in the present case bear a relation to the general machinery of ’ the factory, similar in character to that sustained by those above mentioned to the canning factory in the Dudley & Carpenter case.

A description of the articles in question is found in the following testimony:

“A pair constitutes a set of ringsi which are bolted around the bead of an uncured tire to hold the air-bag inside of the •casing while being cured.”
“The mold is the receptacle that holds the tire during the vulcanization which gives the imprint of the tread design and the lettering on the mold.”

In exhibiting a tire, one witness said: “This tire (indicating) is ready for the baking process now. It has been formed around an iron circular form by the tire builder* 'and is completely built on that. We call that (indicating) a core.”

This witness further testified that tírese articles are used by themselves and separate from 'any other machinery; but without them the machinery coiuld not turn out .any tires, nor could these .articles tum out tires by themselves unless they were used in connection with the particular machinery on the premises, or some other machinery of the same type; and, furthermore, they could not be used by any other company. This testimony wa® micomtradicfced.

The testimony shows that their value was almost entirely in connection with the annexed machinery with which they were used, and) that they would he of little value elsewhere. Part of them were patented, and the patent rights were conveyed to the mortgagee. They were made expressly for that plant and were essential to the manufacture of the larger size tires which it was important for the plant to produce in order to compete with its business rivals.

It remains to' consider the objection that these articles were installed after the date of the mortgage, and were not intended to be substituted for worn out or broken original parts. That would he a valid objection if appellee’s rights depended upon the attempt in the mortgage to- convey .future acquired chattels. Such provision has no validity and no effect, except as it may have a bearing upon the intent as to the permanent use of such articles in connection with the work of the factory. Eor that purpose it may be relevant evidence. Dudley & Carpenter v. Hurst, Miller & Co., supra.; In re Russell Falls Co., 249 Federal, 260.

In the Dudley & Carpenter case the mortgage did not expressly convey chattels, but such as were constructively annexed were held to have passed under the clause, “Together with the buildings 'and improvements thereupon, and the rights, roads, ways, waters, privileges, appurtenances and advantages thereto’ belonging, or in anywise appertaining,.” And fluey were held to pass because they were “essentially necessary to the working of .the principal machinery.”

It was there noted, that, in McKim v. Mason, 3 Md. Ch. Dec. 186, Chancellor Johnson had decided that such articles as were fixtures passed to the mortgagee even when they were placed upon the land after the mortgage was executed. So that, having decided that the articles in controversy were fixtures, it makes no difference whether they were installed before or after the execution of the mortgage, any more than would the time of the erection of a building on mortgaged property.

Nor do we understand that “essentially necessary to the working of the principal machinery” means necessary to the mere physical movement of the machinery. It rather means. as shown by (the facte of the casia in which the expression was used, the efficient working of thei machinery in accomplishing the purposes for which it is adapted. Soi draft. if ¡the plant in the present ease was reasonably equipped otherwise for the manufacture of a larger .size tire than it was making art the díate of the mortgage, but had noit the articles now in controversy, the addition of such articles might well be necessary for die efficient working of the principal machinery. The testimony show® they Were purchased for that purpose. A fair test would seem to be, Would such 'articles be held to be fixtures if installed in 'an additional building, intended solely for the manufacture of tires of the larger size, erected after the date of the mortgage ? If so, there is no reason why they should not be so considered when installed in die original building for the same purpose.

We find no error in the order appealed from.

Order affirmed, with costs to appellee.