Case ID: ohio-st_23/html/0114-01.html
Source: Caselaw Access Project
Author: {"author": "Welch, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

James Metcalfe et al. v. Samuel Fosdick.
    Where the owner of real estate perpetually leased the same, with certain fixtures, machinery, and utensils thereon, constituting and used as a factory, reserving in the deed of lease a “ lien” upon the premises and property for the purchase money and rents, but with liberty to the lessee to remove at his pleasure any portion of the machinery, upon condition that he should at the time of removal substitute others equally good — Held :
    
    1. That this reservation of a "lien” was not, in legal effect, a chattel mortgage upon the movable parts of the machinery, and need not, in order to its validity, be verified and filed as such chattel mortgage.
    2. That the right or interest thus reserved in favor of the lessor, upon such movable parts of the machinery, was superior to that of creditors of the lessee levying upon the same by attachment.
    Motion for leave to file a petition in error to the Superior Court of Cincinnati.
    In September, 1865, Fosdick sold to Metcalfe the “ Franklin Cotton Factory,” including the lot, buildings, machinery, utensils, etc., for the sum of $60,000. Of this amount, some $20,000 was paid in hand, and for the balance four notes were executed by Metcalfe to Eosdick, payable in one, two, three, and four years. Metcalfe went into possession, and a 'deed was duly executed by Eosdick conveying or demising the premises and proporty to Metcalfe, and duly recorded in the records of deeds ; but the deed was never verified or filed as a chattel mortgage. This deed contains the following provisions :
    “The said Samuel Eosdick, for and in consideration of the rents, covenants, and conditions hereinafter reserved and contained, hath perpetually demised, leased, and to farm let to the said James Metcalfe, his heirs and assigns, the following described real estate, situate in Hamilton county, and State of Ohio, to wit: Lot number one,” etc., . . . “ together with the factory and buildings thereon; and all the machinery, fixtures, appurtenances, and utensils belonging to said factory.” . . “To have and to hold the said premises to the said James Metcalfe, his heirs and assigns, forever, from the day of the date hereof upon the rents, covenants, and conditions hereinafter stated.” The deed also contains covenants on the part of Metcalfe to pay said notes, a rent of $4,200 per annum, all taxes, etc.; and to keep the “ buildings and factory machinery insured for $50,000, until payment of said notes.”
    The deed also contained the following provisions:
    “At all times during the continuance of the tenancy under these presents, the said Samuel Fosdick, his heirs and assigns, shall have a perfect lien preferable to all liens, in the nature of a mortgage, upon the said demised premises and the improvements thereou, for the payment of the notes, rents, taxes, levies, assessments, and premiums of insurance as aforesaid, that may become due and be payable under and by the terms of these presents as aforesaid, and remain unpaid, and the same shall continue and abide and be in full force until the same, with interest and penalties, are fully paid and discharged.” . . . “At any time before said four notes are paid in full, the said James Metcalfe, his heirs and assigns, may remove, at pleasure, any portion of the machinery in said factory, upon, at the time of removal, substituting other machinery in its place of equal or greater value, but not otherwise; and until said notes are paid, the said machinery in said factory, or to. be put into said factory as aforesaid, shall be kept in good working order by the said James Metcalfe, his heirs and assigns; but after said notes are paid, the said machinery may be removed from or kept in said factory at the option of the said James Metcalfe, his heirs and assigns.
    In 1868, Metcalfe having failed to fulfill his covenants with Fosdick, or to pay said notes, and being largely indebted to others, some of his other creditors caused the-property to be levied upon in attachment. The officer levying the writs of attachment took the machinery, utensils, and other movable articles belonging to the faetoryinto his possession; and while they were so in his possession, other creditors of Metcalfe caused like levies to be made upon them. Fosdick then filed his petition against Metcalfe, making his said attaching creditors also parties defendant thereto, and asking to have said creditors enjoined from selling the property so levied upon, and praying to have it sold for the payment of the purchase money, rents, etc., due to him from Metcalfe.
    On the hearing of the case, the court held that the lien or claim of Fosdick upon the machinery, utensils, etc., belonging to the factory, as well as upon the real estate, was' superior to that of the attaching creditors, and ordered the property sold, and the proceeds applied accordingly. And it is now claimed that in so holding and ordering, the court erred to the prejudice of these attaching creditors, who, with Metcalfe, ask leave to file a petition in error.
    
      H. D. Paul, for W. W. Embry and A. S. Kunnen:
    I. As against Embry and Kunnen, Fosdick had no lien upon the chattels.
    
      (a) Because the transaction was a sale and delivery of the-chattels. Williams’ Personal Prop. 7,22, 25; Story’s Pailments, sec. 370 a; Chase v. Washburn, 1 Ohio St. 244; Stephenson v. Haines, 16 Ohio St. 478, 486.
    
      
      (b) The only lien held by Fosdick upon the chattels was by way of mortgage. ’Williams’ Personal Prop. 27, 30, 40.
    (c) And. the lien by way of mortgage could not operate upon subsequently acquired property, Chapman v. Weimer, 16 Ohio St. 481; nor when the mortgagor has the power of disposition for his own benefit. Collins v. Meyers, 16 Ohio, 547; Freeman v. Rawson, 5 Ohio St. 1; Harman v. Abbey, 7 Ohio St. 218; Klein v. Katzenberger, 20 Ohio St. 110, 115, 116, and Welch, J., dissenting, Ib. 118.
    (d) And the statute was not complied with; there was no verification and no filing as a chattel mortgage. Sec. 1, S. & C. 475; sec. 2, S. & S. 293; Seaman v. Edgar, 16 Ohio St. 209; Wilson v. Leslie, 20 Ohio, 161; Brown v. Webb, 20 Ohio, 289; Bloom v. Noggle, 4 Ohio St. 45; Erwin v. Shuey, 8 Ohio St. 509; Fosdick v. Barr, 3 Ohio St. 471; Bercan v. Palmer, 20 Ohio St. 163; Smith v. Worman, 19 Ohio St. 145.
    II. The defendants below have liens upon said chattels? and they are entitled to satisfaction in the order of their respective levies. Secs. 198, 203, 205, Civil Code, S. & C. 1005, 1006; Secrist v. German Ins. Co., 19 Ohio St. 476.
    III. The two judges composing the majority of the court below, although agreeing in the decree, differed as to the grounds upon which it should be based; and, in fact, a majority of that court held those grounds untenable.
    
      V. Worthington and Wm. Worthington, contra:
    The order of sale, made on June 28, 1869, was a final order as to the questions therein determined. Forgay v. Conrad, 6 How. (U. S.) 201; Beebe v. Russell, 19 How. (U. S.) 283; Bronson v. La Crosse & Min. R. R. Co., 2 Black, 524; Hey v. Schooley, 7 Ohio (pt. 2), 48.
    A proceeding in error is an adversary suit, and like all other suits must have the proper parties in proper form brought into court within three years, the time prescribed by the code, after the rendition of the judgment complained of, in order to give the revising court jurisdiction. Sec. 523, Code of Civil Procedure; Schooner Marinda v. Dowlin, 4 Ohio St. 500; Smetters v. Rainey, 14 Ohio St. 290; Robin
      
      son v. Orr, 16 Ohio St. 284; Bradford v. Andrews, 20 Ohio St. 219; Hammond v. Hammond, 21 Ohio St. 626.
    This court has nothing now before it but the findings and ruling in the order of April 23, 1870, as to the priorities- and rights of the respective parties and the distribution then made.
    Even if Fosdiek’s claim -is to be treated as an unfiled chattel mortgage, it is good as against the plaintiffs in error. Embry and Kunnen, as shown by their own attachments,, had actual notice of Fosdick’s rights under the lease, and the others attached-, pendente lite, after Fosdick had brought Metcalfe into court in an action to subject all of the demised property to his liens; hence, all of the plaintiffs in error hold liens inferior to that of Fosdick. Paine et al. v. Mason, 7 Ohio St. 207; Day et al. v. Munson, 14 Ohio St. 488; Smith v. Worman, 19 Ohio St. 145; Ludlow’s Heirs v. Kidd’s Ex’r, 3 Ohio, 542; Barnet’s Lessee v. Williams, 5 Ohio, 462; Stoddard’s Lessee v. Myers, 8 Ohio, 209; Gibbon v. Dougherty, 10 Ohio St. 371; Porter v. Barclay et al., 18 Ohio St. 550; Myers v. Hewitt, 16 Ohio, 449; Irwin v. Smith, 17 Ohio, 239; Murray v. Lylburn, 2 Johns. Ch. 444; Diamond v. Lawrence Co., 37 Penn. St. 353; Patterson v. Johnson, 7 Ohio (pt. 1), 226; Chapman v. Weimer, 4 Ohio St. 481; Carty v. Fenstemaker, 14 Ohio St. 457; Morgan v. Spangler, 20 Ohio St. 38, 55; Brennan v. Whitaker, 15 Ohio St. 454; Tousley v. Tousley, 5 Ohio St. 86, 87; Brown v. Webb, 20 Ohio, 389, 399; Smith v. Moore, 11 N. H. 55; Stowe v. Meserve, 13 N. H. 46; Clark v. Strong, 16 Ohio, 323; Stone v. Elliott, 11 Ohio St. 259; Murray v. Ballou, 1 Johns. Ch. 566; McNeil v. Tenth National Bank, 46 N. Y. 325; Ingraham v. Desborough, 47 N. Y. 423.
    By the terms of this lease, the lessor has a lien in equity charged upon all the property demised, real and personal, not as a mortgage, for a lease is not a mortgage. The lien is in the nature of a mortgage security, and to be enforced as a trust. The instrument reserving this lien is good between the parties. It is not a chattel mortgage, nor intended to operate as a chattel mortgage. It is a valid lien,. not given by the lessee, but reserved by the lessor in his demise, an.d is prepotent and preferable to all previous incumbrances. It is like a lien reserved in a deed, or rent charge reserved in a lease. It is a charge fastened by the lessor upon the interest transmitted to the lessee, who takes- and holds subject to this charge. He gets nothing but what the lease gives. All else remains in the lessor, as it was before the lease was given. Mortgages in equity are trusts. Shoenberger et al. v. Mount, 1 Handy, 569; Fletcher v. Morey, 2 Story, 555, 565, 568, 569; Parker v. Muggridge, 2 Story, 342-344; Mitchell v. Winslow, 2 Story, 630; Patterson v. Johnson, 7 Ohio (pt. 1), 226; Stephenson v. Haines, 16 Ohio St. 478, 486, 487; Legard v. Hodges, 1 Ves. Jr. 477; Ex parte Steward in re Blake, 7 Jurist, 116; Sawyer v. Fisher, 32 Maine, 28; Fosdick v. Barr, 3 Ohio St. 431.
    There was much controversy before the entry of the-order of sale, of 28th June, 1869, as to the lien of the lessor upon the machinery, fixtures, etc. It was claimed they were mere chattels, and not demisable or letable with lands and houses; that the transfer, by the lease, of this machinery, etc., was absolute, and the liens attached to the lot of land and the building. That order of sale, however, settled all this. It finds the liens attached to all the property attached. But if, by any chance, it should be considered that these matters are still open for consideration, then we say that the demise in this ease covered, not only the lot and building, but also the fixtures, machinery, utensils, etc.* used in the factory. The demise, however, upon the machinery, etc., original and substituted, would, upon the payment of the four notes, accrued rents, taxes, insurance, etc.* as required by the lease, terminate.
   Welch, J.

We see no error in the judgment of -the court below. The ground assumed by the plaintiffs in error is; that Fosdick had no lien upon the machinery, utensils, etc., belonging to and used in the factory, because (1) they were sold and delivered to Metcalfe, and (2) Fosdiok’s lien upon them was a mere chattel mortgage, in the form of covenants in the deed or lease, which, not having been verified or filed as such chattel mortgage, is void as to creditors of Metcalfe. ¥e think these positions are unmaintainable. As between Fosdick and -Metcalfe, the whole property conveyed or demised is to be regarded as a unit. The machinery, -utensils, etc., belonging to the factory are to be regarded, as between Fosdick and Metcalfe, as appurtenant to and forming part of the real estate. The whole or absolute interest in the property did not by the deed pass to Metcalfe. He took the property subject to the “ lien ” or right reserved. To the extent of that reservation the property never passed to him. The power given by the deed to Metcalfe to remove portions of the machinery, and to substitute others in their palace, is to be regarded as a mere power to repair, and not as indicating an ¡absolute ownership in the movable articles. They could only be removed upon the condition that others as good should, “at the time of removal,” be substituted in their palace. Until so removed, they remained the property of Fosdick to the extent of his right reserved. As we understand the facts of the case, the articles of property in controversy had never been so removed by Metcalfe, but remained, at the time of their seizure by the officer, as parts and parcels of the establishment, equally as at the date of the deed. That being the case, it seems to us the court was right in holding that the so-called “lien” of Fosdick was not by way of mortgage, but by virtue of a preservation in the deed, and should therefore be preferred to the liens of the attaching creditors of Metcalfe.

Motion overruled.