| New York Court of Chancery | Nov 14, 1901
The mortgage of the Penn Cordage Company to the Knickerbocker Trust Company, the complainant in this cause, securing the payment of $100,000, though executed with the formality of a chattel mortgage, was not, in fact, recorded as a chattel mortgage.
It was conceded at the hearing that the complainant’s mortgage, because not recorded as directed by the Chattel Mortgage act, was ineffectual as a chattel mortgage against the claim of the creditors of the Penn Cordage Company, mortgagor. No argument was advanced by the complainant asserting any validity in the mortgage as a chattel mortgage. As against the claims of the judgment creditors and of the receiver of the Penn Cordage Company, representing the creditors of that company, the complainant’s mortgage must be held to be invalid as a chattel mortgage.
The complainant’s mortgage being solely a real estate mortgage, this suit to foreclose it must be considered as a real estate foreclosure, and only those issues can be considered which are pertinent to the foreclosure of a mortgage upon land.
The only contested point in the cause arises from the dispute between the complainant and the defendants as to what portions of the equipment, machinery, tools and appliances of the Penn Cordage Company are real estate, and, as such, subject to the lien of the complainant’s mortgage, and what portions are personal property, and, as such, free from that lien. All the evidence offered and all the arguments presented have been addressed to the establishment or refutation of the conflicting claims of the complainant or defendants on this one question.
Elaborate proofs were taken in the case of Reilly v. Penn Cordage Company on this point. They have been accepted by consent as evidence in this cause, and some additional expert testimony has been presented on the hearing. The petition of the receiver in the Reilly v. Penn Cordage Case (accepted by consent as evidence in this cause) shows that the receiver in that case determined that certain articles named in schedules annexed to the petition were personal property. The complainant,. by notice, claimed that certain articles which the receiver has classified as personalty are, in fact, real estate. The receiver’s schedules have since by agreement of the_ parties been corrected and certain articles named therein as personal have been admitted to be real estate. But there still remain certain other machines declared by the receiver, or the other defendants, to be personal propertjr, which are claimed by the complainant to be realty and
The Penn Cordage Company’s property is located in Beverly township, in Burlington county, and lies on the southerly side of the railroad which runs from Camden to Trenton. It consists of eleven buildings, some of brick, some of frame; in which the machinery and articles in dispute and the other equipment of the factory are placed. The larger structures are the three-story brick building, where most of the machines are located; the boiler, engine and repair shop; the rope-walks, the- tar-house, the office, wareroom, stables, shedding, &c.
The testimony shows that while these buildings are immediately usable for their present purpose, a cordage works, they are readily adaptable for many other kinds of manufacture. The only buildings peculiarly devoted to the manufacture of cordage, &c., are the. rope-walks. A rope-walk is a long; low shed with tracks running its entire length, carrying the machinery which makes the rope, the motive power being supplied from one end. The change of so peculiar a structure from the original use for which it was constructed, would be a sacrifice of -some of its value. The testimony shows that the end nearest the other buildings could be advantageously used as a storehouse.
The products of the works are rope' and binder twine, the latter of the kind used by the harvesting machines in the grain fields.
The following is a list of the machines which the complainant insists are real estate—describing them in its notice as “constituting part of the soil and as such subject to said mortgages on real estate”—and which the receiver, or other defendants, contend must be held to be personal property, with a summary of the evidence descriptive of tire disputed articles, their use, their relation to the land 'and their character as realty or personalty:
The scutcher. This is a machine used to clean hemp. It is constructed of wood with iron and steel posts, weighs probably one thousand two hundred to one- thousand five hundred pounds, is not built into the building in any way. It sits upon and is fastened to the floor by four lag screws and is run by an overhead
The lapper. This is a machine having a cylinder with fine teeth on it, into Which short hemp is fed, which it rolls up into what is called a lap or bundle. It is constructed of wood and iron, weighs about one thousand five hundred pounds, is fastened to the floor by screws and run by overhead belt connection with the shafting. Either such a machine or one doing like work is essential to a cordage works. It is, however, usable in any cordage works and; in fact, came from the Brooklyn mill, where it had previously been used. It can be removed and set up elsewhere without injury to the building or the machine, and appears to be an article of manufacture and sale in quantities.
The breaker. This is the first machine that most of the hemp is put through, it “breaks it outY It is made of iron, and is a long and heavy machine. It probably weighs a couple of tons. It is fastened to the floor by eight lag screws, and is run by a belt and overhead shafting. The fastening to the floor is for the purpose of preventing it from jarring out of its place and to keep the tight belt from lifting it from the floor. In short, to keep it stationary while in use. The machine is similar to others of like nature used in other cordage factories, is not especially adapted to the Penn cordage factory, and could be removed without injury either to itself or to the factory.
The coarse spreaders. These machines are similar to the breakers, except that they are lighter and finer. .Each machine will weigh something over a ton. They are fastened to the floor with screws and operated by overhead belting. They are very essential to any complete cordage plant and are used in all cordage factories. The machines in question were not especially constructed for the Penn cordage factory, do not differ in their construction from ordinary machines of similar character and can be removed without damage to the machine or to the building-in which it is placed. The fixing to the floor is shown to be for
Four fine spreaders. These machines are described by the expert as identical with the coarse spreaders, except that the pins of the fine spreaders are finer, smaller and nearer together. They have the same characteristics of use and annexation to the building as the coarse spreader.
Two drawing frames. These are used for combing hemp. They weigh about a ton and a half. Like the others, they are fastened to the floor by lag screws and operate by a belt from overhead shafting. They are an essential part of every cordage plant. They came as finished machines from the place where they were ordered, and may be removed from the factory without injury to the machine or the buildings. They are fastened to the floor for the purpose of keeping them steady. ■ •
Eight finishers. Five of these machines are on the third floor and two on the second floor of building No. 1, and one on the second story of building No. 3. They are used for drawing in hemp, and are sometimes called “finishing frames,” because they are the last frames through which the hemp goes. They are made of iron and steel, each weighing about a ton and a half. They are essential to every cordage plant though usable to some extent for other purposes. These particular machines are not especially adapted to the Penn cordage works, are finished for use anywhere. Fastened to the floor in order to steady them in their places to prevent them from jarring.
Forty-two double jennys- These are spinning machines used to spin yarn. They are made of iron and steel, operated by belts from overhead shafting, most of them are fastened to the floor, with a lag screw, and weigh about a ton each. They are not especially adapted to the Penn cordage works, were brought upon the premises as finished machines, are movable and fastened to the floor to avoid jarring and displacement.
Single and double twisters. There are nine of these machines, which are used for twisting the yarn together into rope and strands. There are two kinds, single machines and double ma
Marline machines. These machines are similar to the twister, except that they have an additional turn. They are used in every cordage plant which goes into marline making. They are brought upon the premises as finished machines,- can be taken out without injury to the building or to the machine and used elsewhere, and are fastened to the floor to prevent displacement.
Houseline machines. They are similar to the marline machines, except that they have three bobbins in the rear instead of two. Each weighs about one thousand two hundred pounds. They are fastened to the floor with lag screws to keep them steadjq are found in every cordage works, can be removed to any other building without injury to-the building or machine. They came upon the premises as complete machines, are not.especially adapted to the Penn cordage works.
The expert testified that in the use of the machines at the Penn cordage works, although, as a rule, they remained in-their places, yet they are frequently changed about. If twine were being made, the twisters would be removed and the 'bailers put in, and if rope, the twisters would be put in and the ballei’s removed. ■ -
Bailers. There are ten of these. They are iron machines, used for putting the twine into balls, such- as are used in reaping machines. Each-machine weighs about a thousand pounds. They are necessary in any cordage factory which makes binder twine. They came upon the' premises as complete machines, are fastened to the floor to prevent displacement, are'not especially adapted to the Penn cordage works, could be taken out and used anywhere in any other cordage works.
Strapping reel bars. These are iron bars, upon' posts, with pulley and belt to revolve'tile bar so as to coil up rope’. Two of these posts were specially put up. They could, however, be taken
Eope machines. These are used to make small rope, from six threads up to twenty-four threads. The twenty-four-thread machines weigh from a ton to a ton and a half. The twelve-thread machines weigh about a ton and the six-thread machines somewhat less. They are fastened to the floor and run by belting, and are necessary parts of any cordage plant which makes small rope. They came upon the premises as finished machines, were not especially built for the Penn Cordage Company, could be taken away without injury either to the building or to the machine, and are usable in any other cordage factory. The particular machines in question were, in fact, second-hand machines—most of them-—-and had been used elsewhere before they were brought to Beverly. In their use they had been moved from place to place in readjusting the factory.
Boone layers. There are. two of these- machines, and are used for the purpose of putting the twist into rope. The double one weighs about three thousand pounds and the single one about two thousand pounds. They are fastened to the floor to steady them. Can be moved without injury to the building or machine, and are usable in any other cordage factory making the same product.
One former. This machine is used to twist the yarn into strands. It weighs about four hundred pounds, is a movable machine, usable in any cordage factory. Though essential to such a factory, was not especially built for ’the Penn cordage works. Could be taken out without damage.
The above-described machines are located in building No. 1 (except as mentioned), with reference to- their convenient use with relation to the amount of power there required. They constitute, as a whole, what the parties using them deem to be the most convenient arrangement of the conduct of their business. ■ •
In building No. 2 there are only two lathes, two drill's, one shaper, one grindstone, one oil pump and one emery grinder. Except the oil pump, used for oiling hemp, the whole- building •and its equipment make up a machine shop for repairing purposes.' The tools—most of them—are screwed to the floor. They are useful for the keeping of the machines of the factory in order.
Porgy spinner. This machine is used to twist up short waste material into strands. It weighs 'something less than a ton. The particular machine in question was not especially constructed for the Penn Cordage' Company, and is capable of use in similar manufacturing establishments, and is fastened to the floor to steady it while in motion.
Jacks. There are eight forming and laying jacks on the premises. They are the machinery in the rope-walk. They are run on tracks, up and down the walk, and are driven by an endless band and are taken along the floor by a windlass. The forming jacks travel from one end of the floor to the other, going down with the rope and coming back to get another lot. The laying jack, the lower one, is on wheels and movable, but, as a general thing, is tied fast to a post. The jacks on the new rope-walk are laid on rails of yellow pine timber, which are nailed to the floor. In the old rope-walk the tracks are light iron T rails, laid on the floor. The jacks themselves are movable, run back and forth on the rails, and form the yarn into strands. They are used only in rope-walks, are somewhat of the nature of small railroad cars, and are built of a certain width adapted to the tracks.
Eccling machines. These machines operate by separate gears, and are used to wind the rope into coils. The smaller ones weigh six hundred pounds and the larger one thousand five hundred. The frames of two of them are fastened to the floor. The third is on a track, with iron wheels. - It runs up and down the tracks, operated by an endless band. These machines were complete when brought on the premises, are usable in any cordage plant, and not especially adapted to the Penn cordage buildings,
Strapping reel band. This is a small stand about eighteen inches square on the floor, standing about two feet and a half high, and contains a reel, used for reeling up small coils of rope, and is driven by shafting overhead. It is a small machine, screwed to the floor. It can be used in any cordage plant.
Yarn testing reel. This is a machine used to bind yarn upon or measure the length into pounds. The axle of the reel is horizontal, fastened to two wooden posts screwed to the floor.
Belt driver. This is an appliance at the top of an endless belt that runs from the first to the second floor of the new rope-walk, and is used to send bobbins and material down from the second to the first floor. It is in the nature of an elevator. It is adjustable and usable anywhere for a like service.
Eeversing reel. This is a machine used in reversing the yarn from the outside ends of one bobbin to the inside of another. It could be used elsewhere as part of any cordage plant, and is fastened to the floor to keep it steady.
Porgy jenny. This is a second-hand machine, which is on storage in building No. 6, has been there for three years, and has never been set up. It does not appear to have been in any way connected with' the realty.
Belting. At the hearing the belting was admitted to be a part of the realty, but, as the examination proceeded, the judgment creditors insisted that a portion of the belting, which related to particular machines, was not part of the realty, but was personalty. The expert testified that all belting below six inches in width was used to drive down to the machines, while that from six inches up drives from the shafting.
Bobbin reel. This is like a large spool, and hangs from the ceiling.
Large platform scale. This 'is a large Fairbanks platform scale, set in a pit. Its weighing capacity is three thousand six hundred pounds. There is an excavation within which the weighing machinery is set. This is walled in by stone or brick, and is immovable. The first floor of the building is recessed out so that the platform of the scale comes flush with its floor.
Windlasses. Two of these are used for hoisting up rope out of the tanks.
Reel flyers. These appear to be parts of machines which have been laid aside.
Platform scale. This is an ordinary platform scale on wheels, movable from place to place.
Some additional evidence has been offered by the complainant, going to show that the machinery in question, taken as a whole, is adaptable and usable solely for the purpose of the rope and cordage business; that the buildings have been adjusted for the use of such machinery; that the permanent shafting has been put in with special reference to the use of cordage machinery, and that the removal of that machinery would make it comparatively useless. The complainant also recalled the expert who testified as to the character of the machinery, and naming over the list of the disputed articles to him, asked his opinion, whether they were more valuable when sold in connection with the building whore they are than when sold to be removed. The expert was of opinion that they would be more valuable if sold as they were located in the building, ready to run, for the reason that it would cost something to take them out and move them away and place them in another building. The complainant further sought to show that there was a liability to additional loss from the disruption of the cordage works, and from the improbability that a purchaser woukl want to buy if he could not at once proceed to work the factory. The expert,was of opinion that any purchaser who might want the property as a cordage works would
The court of appeals has several times declared the principles which govern the conversion of personal property into realty, by incorporation into the freehold. One of the latest deliverances of that court is the case of Feder v. Van Winkle, 8 Dick. Ch. Rep. 372. The rules there laid down are that in order to establish the claim of the mortgagee to machinery against the receiver (of an insolvent corporation) it must appear:
First. That the chattels were actually annexed to the real estate or to something appurtenant thereto.
Second. That they were applied to the use or purpose to which that part of the realty with which they were connected was appropriated.
Third. That they were annexed with the intention to make a permanent accession to the freehold.
As to the actual annexation and intended incorporation of the machines in dispute in this case into the realty, so that they became part of the freehold, it may be said of all the machines above described, that the testimony shows that they came to the Penn cordage works as finished and completed articles of merchandise, ready, when they arrived, to perform their work when set up in place and connected with power. Some had previously been in use elsewhere. None of them were specially made for the Penn cordage works. None of them were incorporated into or became, by construction, a part of the buildings or real estate of the Penn Cordage Company. All were served with power, not by cog-wheels, which might indicate permanent placing of the machines, but by adjustable belting, which allowed their ready removal. The court of appeals in Scheifele v. Schmitz, 15 Stew. Eq. 901, recognized this distinction. The only evidence of actual annexation to the realty, besides their presence in j;he buildings, is the fact that the machines were fastened in place by lag screws. This is a screw with a nut head which may readily be turned by a wrench. This adjustable fastening held them to
There is no evidence which indicates any intention that these machines should become either temporarily or permanently a part of the freehold. The Penn Cordage Company dealt with them as movable and adjustable tools, convenient for the conduct of its business. All are capable of removal and use in any other cordage works without injury to the Penn cordage buildings, or to the machines themselves. Many of the lighter machines were not only movable but were actually moved from one place in the factory to another, as the convenience of their use might require. When they made twine they removed the twisters and put in the bailers, and when they were making rope they took out die bailers and put in the twisters.
The counsel for complainant insists with much ingenuity that in view of the construction of the rope-walk buildings, their efficient use for rope-making purposes, and for no other, and the attendant construction of the other suitable buildings, the introduction upon the premises of machinery especially adapted to the manufacture of rope and cordage, must be considered as an annexation of the machines to the buildings specially constructed for that purpose. He insists that the evidence in the present case is much more forceful to show a conversion of the machines into realty than were the proofs in the case of Feder v. Van Winkle, and that the machines cannot be here held to be personalty without overruling that decision.
In the Feder Case the learned justice who delivered the opinion of the court of appeals put the decision upon the question whether there was an absence of the intention to incorporate the machinery with the real estate, as in Blancke v. Rogers, 11 C. E. Gr. 565, or the presence of such an intention, as in Speiden v. Parker, 1 Dick. Ch. Rep. 292. He reviews the evidence in the Feder Case as to the nature of the annexation of the various machines to the land, and holds that the chattels did not retain the character of personalty as in the Blanche Case, but were transmuted into realty and passed to the mortgagee as in the
To determine that there has been a conversion there must be evidence which shows, an annexation of a character to indicate that there is a purpose to malee the chattel a part of the realty. There was in the Feder Case, in the judgment of the court of appeals, sufficient proof to sustain this view. The character of the annexation to the land of the appliances in disputé in that case is related on page 375 of the report. It will be seen the annexation is so substantial and permanent as to be structural and incorporative of the machines into the realty.
In the present case, as to the machines, there is no such evidence. They were fixed in position, as the expert proved, by adjustable fastenings, to keep them from displacement by motion. They connected with the permanent shafting by adjustable belting. Many, of them were, in fact, moved as the convenience of their use required. These facts bring these machines within the ruling in the Blanche Case, recognized in Feder v. Van Winkle to be the leading decision of its class.
The proofs in this case do show one of the elements necessary to support a conversion of chattels into realty. The machines were used for the same purposes to which the realty was appropriated. But this is not enough. All the essential incidents must co-exist ip. order to effect a conversion. In this case there is no sufficient showing either of an actual annexation of the machines or of an intention to make them part of the freehold. The principles declared and applied in the decisions of Blancke v. Rogers, Scheifele v. Schmitz, ubi supra, and Penn Mutual Insurance Co. v. Semple, 11 Stew. Eq. 578, must control this ease.
There are, however, several articles in dispute, regarding which the evidence shows actual annexation to the freehold of a permanent character.
The large platform scale rests upon a stone or brick founda
The tar tank and kettles are in the same class. The large one is built into the tar-house, and would be practically destroyed if removed. The smaller tar kettle and the tar tank are so fixed in the building that-they, are part of it, and are also connected with the realty by steam pipes leading from the boiler. The receiver concedes these to be realty, but the judgment creditors insist they are personalty. The tallow tank is within the same ruling. They are all part of the realty.
The movable platform scale on wheels is clearly unattached to the realty, and is personal property.
The belting usable in immediate connection with the individual machines which are held to be personalty, not usable without them, partakes of their nature, and is also personalty. This applies to the belting which the expert described as “all the belting below six inches, which drives down to the machines,” and not to that “from six inches up, which drives from the shafts.”
I have discussed the matters in dispute solely with reference to the evidence of a conversion of the machines in question into realty, and the consequent lien of the mortgages thereon. It may be proper to note that the mortgages do not refer to the thing mortgaged as a cordage factory or designate it in any other way as an entirety, whereof the land’, the buildings, the machines and tools and equipment were component parts, all going to make what is known in business parlance as “a plant.” The descriptions in no way indicate that the parties dealt with the things mortgaged as an entirety. The complainant’s mortgage was executed by the Penn Cordage Company, not only as a real estate mortgage, but also as a chattel mortgage, showing that the mortgagor did not deal with its property as a single thing—an entirety—in making the mortgage. The land is described as land, •the personalty as personalty. There is not even mention of the character of the business for which the property was used. Nor are machines or machinery named in the complainant’s mortgage.
It is no reason to include the personalty within the lien of the mortgage, and the sale of the mortgaged premises (against the wishes of those interested in the personalty), because a possible purchaser of the works would pay more for both factory and machines, if they were sold at one bid than if sold separately. The complainant is entitled to a decree for the sale of the property included within the mortgage and to no more. If any accompanying disposition is to be made of the personalty, it can only be by consent of parties interested in the personalty or by a showing of an equitable right in the complainant, which has not been exhibited in this case.
This disposes of all the questions necessary to the ascertainment and enforcement of the complainant’s rights. There are suggestions in the answers of equities claimed by the defendants as against each other, which, in the present state of the pleadings, cannot be determined in this foreclosure suit. The receiver claims that the Ealli mortgage held by the defendants, the receivers' of the Guarantors company, and of the People’s Bank, is absolutely void for want of consideration, &e. The answer which sets up this claim by one defendant against another is not framed as a cross-bill, nor has the mode of procedure required by the rules of this court in cases of cross-bills been followed. The Ealli mortgage is, as above shown, a lien only upon the real estate. The inferences to be drawn from the proofs indicate that it is very doubtful whether the purchase-money of the real estate will be sufficient to satisfy the complainant’s mortgage. If it is insufficient, litigation between the defendants as to whether the Ealli mortgage is valid or not would be futile.' The foreclosure sale of the premises ought not to be delayed to await the reformation of pleadings and the settlement of disputes between defendants which do not affect the complainant’s right to relief, but which may seriously interfere with the enforcement of its
A decree will be advised in accordance with the views above' expressed.