Court Opinion

ID: 5182495
Source: CourtListenerOpinion
Date Created: 2022-01-06 04:43:59.930931+00
Date Added: 2024-06-11T08:26:37.432364
License: Public Domain

Goodrich, P. J. (dissenting):
I concur with Mr. Justice Bartlett in his conclusion that the machinery and fixed articles included in the mining plant were not intended by the. parties to be permanently and irrevocably attached to the land at the option of the landlord, and that they did not constitute a permanent addition to the freehold, but by the terms of the lease were intended to remain personal property; and that the lessor had not become the owner of the mortgaged property at the time the chattel mortgage was given,"
Starting with this conclusion, I proceed to discuss the rights of the lessee and his assignee, the plaintiff. It should' be borne in mind that the mortgage was given to secure the purchase money of the articles* although there is no evidence that there was any agreement at the time of the purchase that any such mortgage should be given. Still this fact, in a certain sense, appeals to the equitable power of the court to protect an innocent person who has" parted with his property without payment, where another person who has parted with no value seeks to enforce a forfeiture and to claim as his own a large and valuable property, costing more than $70,000, because the lessee has not paid rent amounting to $2,500. For the right which the lessor claims is in the nature of a forfeiture. It was ■ so held in the case of Estabrook v. Martin (7 Reporter, 786), where, a tenant being in default for non-payment of rent,, the landlord sought to restrain him from removing the improvements, in accordance with" the provisions of the lease, and the court refused to enforce a forfeiture.
It must be remembered that before some of the property had been delivered, viz., the two crushing rollers, the mortgage was executed; and if included the rollers. This mortgage was duly filed on April 23, 1893, and it is at this date that the rights of the mortgagee became crystallized If the title to this property at that time had vested in the lessor by the terms of the mining lease, the lessee had no right to execute a mortgage except in subordination to the rights *285of the lessor, and there would be no question that the entire decision of the referee was correct. If, on the other hand, the title to the property was in the lessee, it passed from him to the mortgagee, and his rights cannot be affected by any subsequent action or sufferance of the lessee. The filing of the chattel mortgage gave notice to the lessor that the mortgage had been made, and he was bound to know its effects, and all his subsequent proceedings are colored with that, knowledge. That effect was to transfer the title to the mortgagee, subject only to defeasance upon the payment of the' notes to secure-which it was given (Hall v. Sampson, 35 N. Y. 274.) When default occurred in the payments of the notes, the title in the mortgagee became absolute, subject only to the right of the mortgagor to bring his action in equity to redeem upon payment of notes, interest and expenses; but-otherwise the rights of the mortgagee-had become fixed and he was the absolute and legal owner of the. property; the title of the mortgagor was extinguished. Tender-after forfeiture does not revest the title in the mortgagor at law, nor-is acceptance of part of the debt a waiver of the forfeiture. (Patchin v. Pierce, 12 Wend. 61.) The mortgagor cannot give a second mortgage; he has no title to mortgage. (Hulsen v. Walter, 34 How. Pr. 385.)
This principle is elementary and hardly needs citation of authority, although the perfection and strength of the mortgagee’s title on. default is illustrated by the case of Leadbetter v. Leadbetter (125 N. Y. 290), where Judge O’Brien, writing the opinion, said: “ The law seems to be settted in this State that, after default, the mortgagor has no interest in the mortgaged property that can be sold on execution against him (citing authorities). The. event had happened which made the mortgage instantly due, and there was no right of' possession in the mortgagor when the levy was made.”
Of course, it goes without saying that the mortgagee could acquire-no greater rights than the lessee had or could convey; but whatever these rights were, he acquired them, and this at the time of the default. At this time the lessee was the owner of the property which,, as Mr. Justice Bartlett holds, was then personalty and not realty, and the lessor had no title whatever thereto, and no right of possession. His rent had been paid, not only up to that time, but it continued to be paid for nearly a year afterwards. The landlord *286could not have taken possession of the property during the year, for he was not the owner of-it, and there was no default in the payment of rent for which summary proceedings to dispossess could be instituted.
London & Westminster Loan & Discount Co. v. Drake (6 C. B. [N. S.] 798), decided in 1859, is a leading case upon the question and. settles it conclusively. One Robinson, a tenant of an eating house, under a lease which had seven years to run, on September 4, 1857, borrowed money of the plaintiff, and gave it by way of collateral security a bill, of sale upon his furniture and-effects rip on the premises, including certain tenant’s fixtures. This bill of sale was clearly equivalent to a chattel mortgage. On March 8, 1858, Robinson had given his landlord an authority to distrain the fixtures, and on April fifth he made a formal surrender of the term .to him, whereupon a fresh lease was given by the landlord to the defendant, Drake, the tenant’s fixtures in question still remaining upon the premises unsevered from the freehold. On March thirtieth the plaintiff entered the premises ■ for the purpose of taking possession of the property. -The court directed a verdict for the defendant,, which was reversed on appeal in an opinion carefully reviewing all the authorities upon the subject -and using the following language : “ It is fully established that the right of the lessee to remove fixtures continues only during the term ■and during such further period of possession by him as he holds under a right still to consider himself as tenant, and it is plain that the right of his assignee can extend no further. On the other hand, it is laid down, .as to a surrender, in Co. Litt. 338 b, that, ‘ having regard to strangers who were not parties or privies thereto (lest by a voluntary surrender they may receive prejudice touching any right ■or interest they had before the surrender) the estate surrendered hath in consideration of law a continuance.’ This doctrine has been fully adopted and acted on in modern cases (etc., citing cases). The •question is thus reduced to the inquiry whether the mortgagee’s right to sever the fixtures from the freehold is a ‘right or interest ’ within the meaning of this rule of law. ■ And we are of opinion that :it is. Certainly it is an interest of a peculiar nature, in many respects rather partaking of the character of a chattel than of an interest in .real estate. . But we think that it is so far connected with ■the land that it may be considered a right or interest in it, which, if *287the tenant grants away, he shall not be allowed to defeat his grant by a subsequent voluntary act of surrender. We are, therefore, of opinión that the plaintiffs may maintain an action against the defendant for preventing them from exercising their right to sever, and may in such action recover the value of the fixtures as severed.”
This case was cited and approved by the Court of Exchequer in the case of Saint v. Pilley (10 Exch. [L. R.] 137), where fixtures belonging to an insolvent lessee were sold at auction to the plaintiff to be removed by him in two days from the sale, but he allowed them to remain while treating with the landlord for a new lease. His attempt failing, the insolvent’s representative surrendered the premises to the landlord, who relet them, the fixtures remaining affixed. About two weeks afterward the plaintiff applied for and was refused the fixtures,' and the court held that he had not* lost his right by delay or laches. Cleasby, B., said : “ It is quite plain that the surrender did not forfeit the right which the vendee of the property had acquired. The general maxim is laid down in Co. Litt. 338 b: ‘ Having regard to the parties to the surrender, the estate is absolutely drowned.’ * * * Therefore, though the term was surrendered, yet the plaintiff’s right was not affected; the defendant came into possession of the premises with chattels upon them, which were subject to the rights of a third person.”
There remains a single question, whether, if the lessee cannot by surrender of the term defeat the rights of his mortgagee, he can, by non-payment of rent and consequent summary proceedings to dispossess, destroy the property rights conveyed by the mortgage. I can see no distinction. The reasoning of Williams, J., in London & Westminster Loan & Discount Co. v. Drake (supra) is based upon the theory that the lessee had transferred his interest in the property. So, manifestly, in the present case, the plaintiff being absolute owner of the property, no subsequent action of the lessor or lessee can defeat his rights; neither laches, nor contract, nor ■ delay, nor summary proceedings to dispossess under the provisions of the lease. The lessor is met by- a new title owner, and his right to dispossess can be contested, not only by the original lessee, but by his mortgagee, who had succeeded to his rights as they existed at that time.
If it be said that the rights of the lessor are derived from the *288lease, and' that the lease is paramount to the rights acquired subsequently by the mortgagee, and that while the tenant may remove the property during his term, he cannot do so after his term, there seem to be two answers to the proposition : First, the lease was entitled to be and was recorded as of real estate. . .It was not filed as a con- • tract relating to chattels. It conveyed no interest in the chattels, for. such Mr. Justice Bartlett concludes them to be. There was, therefore, no constructive notice of the existence of the lease to the mortgagee and no actual notice is shown in the evidence, although I do not mean to intimate that notice would make any difference in the rights of ■ the plaintiff. Second, the paramount rights of the lessor relate only to the- lessee and not to a stranger who has acquired a good title under him while he had a right to convey,
Such seems. to me to be the decision in the cases of Doe ex dem. Beadon v. Pyke (5 M. & S. 146); Pleasant v. Benson (14 East, 234), and Pike v. Eyre (4 Man. & Ry. 661), which were cases where tenants in possession made sub-leases of portions of the demised estates, and these were held good, even though the original lessees subsequently surrendered their own leases to the landlords. The right of the landlord under his grant in these cases would seem to have been equally paramount, yet the right was held not to be paramount to the right of a stranger taking under the lessee. The landlord in the present case has only such rights as the lease gave him, and these are subject to defeat by a contract of the lessee. How then can it be said that the right to institute summary proceedings to dispossess, which arises under the terms of the lease and.by the failure of the lessee to pay rent, can defeat an estate granted while he had the lawful right to grant?
Mr. Justice Bartlett in his opinion treats the lease as clearly evidencing an intent on the part of both lessor and lessee to consider the property in question as personal property between themselves, and that they could thus' agree is not to be questioned. Assuming this to be the case, and there seems to be no doubt of it, why resort to the theory of “ trade fixtures ? ” That theory is universally relied upon where there is no agreement that the property shall be personal property, and it would seem wholly .unnecessary to turn to it where there is a clear understanding between the parties that the articles shall be personal property. If the parties had made no *289stipulation as to the nature of the goods in question, or had stipulated that they should be regarded as “ trade fixtures,” the case-might well he different. Having been careful not to do this, it. would seem that the engines, boilers and machinery must be treated as mere chattels which could not, while the agreement subsisted,, become real property against the will of either party to the agreement. Besides, it seems clear that the lessor is estopped by that agreement to deny the personal nature of the articles as against the mortgagee who has the right to rely upon the agreement.
Summary proceedings to dispossess are of modern statutory origin, but the ancient remedy of distress for rent was in a sense its equivalent. For this reason the case of London & Westminster Loan & Discount Co. v. Drake (supra) seems to be exact authority for saying that, as the lawful process of distress for rent could not work a forfeiture of the rights of a mortgagee acquired while the tenant was in possession, no more can the statutory process for dispossession. The one was the result of the operation of a lawful power, so is the other. Both grow out of the lease, and what may be affirmed of power to affect the rights of a mortgagee under the one process may be equally affirmed of the other.
The summary proceedings to dispossess occurred in June, 1893, and the plaintiff had no notice of them until September sixteenth, when he immediately demanded the property; and, his demand being refused, the lessor became chargeable with conversion of the property, of which the plaintiff was the absolute owner. The learned referee admitted in evidence the summary proceedings to dispossess, under the objection and exception of the plaintiff, and, in my opinion, this was reversible error, as the judgment in that proceeding was inter alios and not binding upon the plaintiff.
The case of Talbot v. Whipple (14 Allen, 177) does not seem to be opposed to my general conclusion. The mortgage was apparently a mortgage of real property, and there was, no agreement that the property, a building containing machinery for manufacturing purposes, should be regarded as personal property ; upon these facts the court held that there could be no doubt that the building and machine were not to be regarded as movable chattels, such as the tenant might have removed after the expiration of his tenancy, but *290■as belonging to that class which, if removable, at all, must be •removed by the tenant from the realty during the term, or, if suffered to remain till the expiry of the tenancy, belong to the landlord as a part of the freehold. But, in the case at bar, the con- • elusion of my learned associates is clear that there was no intention ■ of the parties to the lease that the property should become a part of "the realty, and did not so become even by the subsequent omission -of the lessee to pay liis rent, thus bringing the property apparently "within the class mentioned in Talbot v. Whipple (supra) of “ movable chattels, such as the tenant might have removed within a reasonble time after the expiration of the tenancy.” . Before there was any such omission to pay rent, the rights of the plaintiff had supervened, and these cannot be defeated without his active assent or by notice to him which will give him his day in court.
•A different rule prevails between the lessor and lessee when there is no mortgage ; there the right of the lessee to remove during his tenancy is a privilege which he may forfeit by delay, but that does not affect the right of a mortgagee, who stands in a very different relation. True, he, has the right to remove the goods to which he has title, on the default of the mortgagor; but he may also leave the property on the premises with the assent of the mortgagor, and his leaving it there cannot affect his rights, as there is no principle ■ of estoppel in favor of the lessor.
It is undoubtedly true that where a tenant suffers default in payment of rent and is dispossessed, he loses his right to remove certain articles on the ground that they are to be deemed fixtures; but this right of removal is a personal privilege, and its loss. a personal one, and the results of his failure to remove cannot be extended to destroy the rights of a third person, which are in no sense dependent on a personal privilege. Section 511 of the Penal Code makes it a misdemeanor for a mortgagor to sell, assign, exchange, secrete or otherwise dispose of mortgaged property. While lying by and suffering dispossession proceedings would not be within this section, ■ the existence of such a provision shows how carefully the law regards the rights acquired by a mortgagee.
To work out the logical result of Mr. Justice Bartlett’s opinion we must hold that* if the lessee simply quits possession without removing his fixtures, the title thereto vests in the lessor. (2 Tay*291lor’s Landl. & Ten. § 553.) Then, if a mortgage exists, even though it be a mortgage for purchase money, the mortgagor can defeat the rights of the mortgagee by simply quitting possession, or by selling out to the lessor, in spite of section 571 of the Penal Code.
I cannot assent to any such proposition, and I think the judgment should be reversed.
Judgment affirmed, with costs.