Court Opinion

ID: 8826470
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:49:02.565992+00
Date Added: 2024-06-11T17:04:46.259646
License: Public Domain

WOOLLEY, Circuit Judge
(dissenting). There is involved in this case no principle of equity. The single question is one of law,—the law of fixtures. While I fully agree that the case is governed, not by the terms of the mortgage with reference to after-acquired property, but by the law of fixtures, just as though the mortgage contained no such clause, I find myself at variance with the majority of the court on both the law and the facts. Therefore, I am constrained to dissent. The first point of difference is on the law.
The law of fixtures as pronounced by the courts of Pennsylvania seems to be settled. The trouble is with its application.
This law, considered with reference to its evolution and the tests afforded for its application, I find substantially as follows:
*111The old rule of common law made all articles attached to the freehold a part of the realty, without regard to the person who made the attachment or the purpose for which the attachment was made. Carpenter v. Walker, 140 Mass. 416, 5 N. E. 160. The first relaxation in this rule appeared in the doctrine of trade fixtures; the next, in the relation generally between landlord and tenant. The Pennsylvania courts, varying the English rule to meet changing industrial conditions, early regarded as exploded the notion of physical attachment as a requisite quality of a fixture, Meigs’ Appeal, 62 Pa. 28, 1 Am. Rep. 372; and laid down certain tests by which to determine when personalty becomes realty. The controlling test, or, as expressed by the courts, the “legal criterion,” is the intention with which the personalty is placed upon or attached to the freehold. Hill v. Sewald, 53 Pa. 271, 91 Am. Dec. 209; Seeger v. Pettit, 77 Pa. 437, 18 Am. Rep. 452; Morris’ Appeal, 88 Pa. 368; Vail v. Weaver, 132 Pa. 363, 19 Atl. 138, 19 Am. St. Rep. 598; Wickes Brothers v. Island Park, 229 Pa. 400, 78 Atl. 934. This test is not limited to a mutual understanding of both parties, the one owning the personalty and the other the realty, or the one owning the realty and the other having a lien thereon, but extends to the intention of him alone who has attached personalty to realty in such a way as to raise a question of fixtures. There are, of course, some things so essentially a part of the freehold that the intention of the one affixing them to the freehold may be of little weight. Harmony Building Association v. Berger, 99 Pa. 320. So also the intention which becomes controlling is not the—
“secret design which may dwell in a party’s mind and as to whose existence he alone can speak, but it is that ‘intention’ * * * which flows, patent to all, from the nature and character of the act, the clear puipose to be served, the manifest relation which the articles bear to the realty, and the visible consequences of their severance upon the proper and obvious use of it” National Bank of Catasauqua v. North, 160 Pa. 303, 28 Atl. 694.
Discarding the early doctrine that physical annexation to realty is necessary to convert a chattel into a fixture, the courts, in seeking the intention of the party, have found that much depends on the business for which the premises aré used. Articles necessary or convenient in the transaction of one kind of business would be useless in another.
“If the article, whether fast or loose, he indispensable in carrying on the specific business it becomes a part of the realty.” Voorhis v. Freeman, 2 Watts & S. (Pa.) 116, 137 Am. Dec. 490; Pyle v. Pennock, 2 Watts & S. (Pa.) 390. 37 Am. Dec. 517; Ege v. Kills, 84 Pa. 333; Morris’ Appeal, 88 Pa. 383; Sampson v. Graham, 96 Pa. 405.
Applying the law of these authorities to manufactories, federal courts in this circuit (In re Beeg [D. C ] 184 Fed. 522, and In re East Stroudsburg Glass Co. [D. C.] 247 Fed. 614) have held:
That “machinery of a factory, which is a necessary part of it, and without which it would not be a fully equipped establishment, is a fixture to be regarded a part of the freehold, subject to the lien of a mortgagee or judgment creditor as part of the realty”
—quoting with approval from Voorhis v. Freeman, supra, in which Judge Gibson said:
*112“Whether fast or loose therefore, all the machinery of a manufactory, which is necessary to constitute it, and. without which it would not be a manufactory at all, must pass for a part of the freehold.”
Quoting from Hubbell v. Savings Bank, 132 Mass. 447, 448, 42 Am. Rep. 446, the Supreme Court of Pennsylvania in Vail v. Weaver, 132 Pa. 363, 365, 19 Atl. 138, 19 Am. St. Rep. 598, approved a charge of the trial court as to the intention of the party making the annexation where these words were used:
“In the case of machinery, or other articles which are not obviously an integral part of the realty, the question is, whether all the facts of the case lead to the presumption or inference that the oicner, in placing them in the building, intended them as a permanent improvement of or addition to the realty. If this is a fair presumption or inference, then a grantee or mortgagee would have a right to consider them as constituting a part of the realty, and they would pass to him by his deed.”
Keeping in mind that we are dealing solely with a question of fixtures,—not with the liability of a terre-tenant to an antecedent mortgagee, nor with the rights of a purchaser limited by any peculiar feature of a judicial sale, nor with rights forfeited by a mortgagee because of tardiness in issuing execution,—I find in the law of fixtures no authority for the distinction which the court has drawn between personalty attached to realty by a mortgagor owner and personalty attached by a terre-tenant after he has acquired premises encumbered by the lien of a mortgage. Nor do I.'find anything in the law which indicates that personalty attached to realty by the owner, if used in a definite business, cannot become a fixture because that business is different from the business in which the realty was used when the premises were mortgaged. Or, stated differently, neither do I find that fixtures are limited to the spécific business in which the realty was employed at the time the mortgage was given. As the position taken by the court is an approach to the law of trade fixtures, it is important to note that, from the very nature of the transaction, the law of trade fixtures cannot, in any aspect, be involved in the case. This being true, the only test of fixtures which I find in the law (in Jhe absence of an understanding between the parties) is the intention of him who affixed the personalty to the realty, first, without regard to whether he is mortgagor or terretenant, but, second, with especial regard to the temporary or permanent character of the annexation.
Applying this test, and this test alone, to the question before the court, I come to the facts. They are in the main as stated in the majority opinion. Yet, as the court has held that the facts do not disclose the intention of the company (under its two titles) in affixing its personalty to its mortgaged realty and that the facts will not sustain any inference as to its intention which may be drawn therefrom, I find it necessary to restate a few of the facts in the light in which they ¿ppearto me.
In 1913, Jennings promoted and organized .the National Automatic Press Company, a local industry. This company gave the mortgage Here in question, covering premises on which a machine' shop had been erected. This shop, later known as Shop No. 1, was equipped with *113machinery for the manufacture of printing presses. The company went into the hands of a receiver. At a receiver’s sale Jennings purchased the realty and machinery, subject to the mortgage. Embarking in a new venture, he conveyed the property (still encumbered by the mortgage) to a new corporation known as Lehigh Munitions Company. This company then purchased a tract of land adjoining the mortgaged tract. On the newly acquired tract (not encumbered by the mortgage) it erected seven buildings including a machine shop which became known as Shop No. 3, all of which, taken together, comprised the company’s plant. After acquiring Shop No. 1 with its printing press machinery, the Munitions Company, intending to engage in the manufacture of munitions, added more machinery which, with the machinery already there, equipped the shop for the manufacture of munitions. After the war, the same corporation, under its new title of Lehigh Machine Company, instálled still more machinery, which, with the old machinery, equipped it as a, machine shop in which silk manufacturing machines were made. In due course this company failed and the plaintiffs in error were appointed receivers. They in turn installed more machinery in the course of their management. Shop No. 1, thus equipped from time to time with different machines installed by different parties to do different work, through a period of seven years, became a “machine shop purely,” as the record shows, fully equipped to perform general machine work.
The machinery which the company under its two titles and its receivers installed in the machine shop on the mortgaged premises is not physically attached to the freehold except as it is connected by belts to line shafting put up for the purpose of conveying power. The greater part of the machinery is simply set in place on the floor and is of a lend that is kept in operative position by its own weight; the remaining part is held in place by set screws or clamps; ail capable of being removed without injury to the building. Of the machinery now in Shop No, 1 on the mortgaged premises, the receivers desire to remove to Shop No. 3 on the adjoining tract (not covered by the mortgage) all machines which were installed at different times by the company and its receivers, and propose to set them up in Shop No. 3 and sell that shop as a newly organized going concern; and if this cannot be done, then to sell the machines separately, free from the mortgage in either event, leaving Shop No. 1 in its original status with respect to the mortgage and to the machines on which the mortgage was a lien before the same passed under the receivership sale of the Press Company.
The determining consideration on the question of fixtures is wheth- " er these facts show an intention on the part of those who installed the machines to place them in the building for temporary use only, or to make them a permanent improvement of or an addition to the realty. Speaking negatively, I find nothing in the record which suggests even remotely an intention to place the machines in the building temporarily. Of the same opinion is the majority of the court. Speaking affirmatively, it is a fair inference that the Munitions Company intended to engage in the munitions business temporarily, but that it did not tern*114porarily install the machinery adapted to the manufacture of munitions is evidenced by the positive fact that it kept the machines in the building and used them for other purposes after it went out of the munitions business. In the building up of the several businesses, Shop No. 1 was developed into and became distinctly a machine shop adapted at different periods for special work but capable in the last stage of doing general contract machine work. The affirmative inference which, I think, should be drawn—not implied—from these facts is that the company installed the machines with the intention of doing just what it actually did, namely; the building of a complete machine shop. This shop is not the company’s whole manufactory. It is but an unit in its plant; yet it is such an unit that its destruction would inevitably work a disorganization of the plant. All the machinery installed was, so far as I am informed, of a character appropriate to the purposes for which the shop was, from time to time, being used and, in the estimation of the company installing it, was essential to the shop (otherwise it would not have been installed) and indispensable in carrying on the business of a machine shop. As the business changed, machines were not taken out. On the contrary, more were put in and all the indications are that it was the company’s intention to keep them in. And this is exactly what the company did until the receivership. There is, I think, every evidence that the machines were intended as a permanent addition to the mechanical organization of the shop and so became an integral part of the realty. Although there are many cases in the books where machinery installed in structures and actually affixed to the realty retain its characteristic of movable personalty, this is due to some circumstance showing an evident intention to that end, or that it was not essentially a part of the structure, or was not necessary or adapted to the business to which the structure was devoted, or that its installation was patently temporary. Carpenter v. Walker, 140 Mass. 416, 5 N. E. 160; Wickes Brothers v. Island Park, 229 Pa. 400, 78 Atl. 934; Harmony Building Association v. Berger, 99 Pa. 320; Vail v. Weaver, 132 Pa. 363, 19 Atl. 138, 19 Am. St. Rep. 598. The moving considerations in this case are quite the opposite. Hence, I would hold, under the law which I regard as controlling, that the machines in question are fixtures and being realty are brought under the lien of the mortgage. Roberts v. Bank, 19 Pa. 71; Muehling v. Muehling, 181 Pa. 483, 37 Atl. 527, 59 Am. St. Rep. 674; Morris’ Appeal, 88 Pa. 368. As I am alone in this view, I am constrained to dissent from the opimon and judgment of the court.