46 N.Y.S. 329 | N.Y. App. Div. | 1897
Lead Opinion
On April 20, 1892, William P. Shinn executed a chattel mortgage to the Sturtevant- Mill Company of Boston, Mass., to secure the payment of six promissory notes, made by him to the order of that corporation, which notes aggregated the sum of $30,000. All of these notes have been paid except one for $5,000, now held by the Massachusetts National Bank, one of the plaintiffs herein, and. two for $5,000 and $3,000 respectively, now held by the plaintiff Waldemar A. Schmidt.
All this machinery and these appliances had been purchased from the Sturtevant Mill Company in order to carry on mining operations-upon the Butler farm, in Westchester county, upon which, a deposit of iron ore had been discovered. On October 21,1890, the defendant ' George B. Butler, by an elaborate instrument of lease, granted and conveyed to one Henry E. Collins, for a term of twenty years, all the iron ore in or under a certain portion of his farm therein described,- together with the, exclusive, right to mine the same. The lessee, among other things, covenanted and agreed to mine- at least 10,000 gross tons of ore a year after June.1, 1891, and to erect such buildings, sink such shafts, make such drifts and galleries and provide such machinery as might be necessary to - enable him to mine and ship that quantity. Collins subsequently, with the consent of Butler, assigned a two-thirds' interest in this lease to William P. Shinn, who undertook to perform the covenants, conditions' and obligations contained in the instrument, and who accordingly went on and erected a mill and complete plant, with appropriate machinery for carrying on the business of mining, washing and concentrating-iron ore upon the leased premises and shipping it therefrom. This, plant, comprising everything covered by the chattel mortgage except-the two crushing rolls, was complete and on the groun.d before the chattel mortgage was given, on April 20, 1892.
On May 5, 1892, William P. Shinn died. His representative's,however, continued mining operations under the lease, and paid the minimum royalties therein provided for until December 1, 1892. No further rent was paid, and, between the 10th and 22d of June,
The chattel mortgage was assigned to the Massachusetts National Bank, which thereupon, on October 18, 1893, brought this suit to foreclose it for its own benefit and that of Waldemar A. Schmidt, who claims to be entitled to share in its proceeds in proportion to his interest in the unpaid notes which it was given to secure. The. defendant Butler resisted the foreclosure upon the ground that the mortgaged property, prior to the giving of the mortgage, had been so annexed to the. freehold as to constitute a part of it, and that it became the absolute property of the landlord when he was put. in possession of the premises in the summary proceeding to dispossess the tenants for the non-payment of rent. This defense was sustained, except as to the two crushing rolls, of which mention has already been made, and judgment was directed accordingly in favor of defendant Butler.
I am unable to agree with the conclusion of the learned referee, that the machinery and fixed articles of every description included in the mining plant were intended by the parties to be permanently and irrevocably attached to the land, and unless at the option of the landlord were to constitute a permanent addition to the freehold.
As between landlord and tenant, the placing of machinery or other .appliances by the tenant upon the leased premises, for the purpose of trade or manufacture to be carried on by the tenant, does not make the property so affixed a part of the freehold, but it still remains personalty, to such an extent at least that the tenant retains the right to remove it. (Ombony v. Jones, 19 N. Y. 234; Tifft v. Horton, 53 id. 377, 382; Lewis v. Ocean Navigation & Pier Co., 125 id. 341, 346.) The trade fixtures of a tenant, in other words, remain personal property in the eye of the law, so far as the right of removal is concerned. (2 Taylor’s Landl. & Ten. [8th ed.] § 519.) The correctness of this proposition is not disputed, but the referee holds that the presumption to which it would naturally give rise “in favor of the removal of these buildings and machinery erected for the pmrposes of trade is absolutely precluded by the terms of the lease and the subsequent. transactions, all of which taken together show the object of the annexation and express the
The language of - this article' is - as follows: “ The lessee further covenants and agrees to and Avith the lessor that he will, if tire lessor so desires, at the expiration of this lease, or of the renerval -lease, if the same shall be accepted, sell to the lessor all the mining machinery, buildings and other erections, erected Upon or under the said premises during the Avhole time that he shall have occupied the same, allowing therefor to the lessee the full valuation at which such machinery, buildings and other erections shall be then estimated in the buildings,, and not for the purposes of removal. And in case the parties hereto shall not agree upon a valuation, then the same shall be made by three disinterested persons selected as hereinafter provided.
• “In case the lessor, at.the expiration of this lease, or' of the renewal lease, if the' same shall -be accepted, shall fail to purchase
It is difficult to believe that the lessee and lessor would have thus ■carefully specified what should he their respective rights as vendor and purchaser of the mining machinery and buildings at the termination of the original or renewal lease, if it had been their understanding that the lessor was to acquire title thereto simply by virtue of the erection of the buildings and the operation of the plant on the leased premises. Why should provision be made for the purchase by the lessor at the end of twenty years of property which became his, according to the claim now put forward, at or near the beginning of that period ? It certainly is unusual for a party to enter-in to a covenant to buy that which he already owns.
In the 3d article of the lease a renewal is provided for, upon at least one year’s notice from the lessee to the lessor, and in this article, upon receiving such notice, “ the lessor covenants and agrees that he will let and lease to the lessee all the premises, machinery ■and appurtenances'” thereinbefore described, for a further term of twenty years. The mention of the machinery in the clause quoted is regarded by the referee as indicating that it was intended to become the property of the lessor when placed upon the land, and it is suggested that Butler would not thus agree to lease the machinery to Collins and Shinn in the event of a renewal, unless Butler was understood to be the owner. When we refer to the 19th article, however, and read its provisions in connection with these of the 3d article concerning a renewal, it becomes plain, I think, that the agreement on the part of Butler to lease the machinery to Collins and Shinn, if the lease of the mine should be renewed, was predicated on the assumption that Butler might purchase the plant at the expiration of the original lease, as he was privileged to do by virtue of the 19th article, in which event the lessees would have to acquire from him the right to continue to use it in operating the mine.
For these reasons I am satisfied that the defendant George B. Butler had not become the owner of the mortgaged property at the time the chattel mortgage was given. Shinn possessed rights in
At that time there had been no default on the part of the lessees, and Shinn still had the right to cancel and surrender the lease under the till article thereof, which provided that the lessee might do so at any time within two years from its date if not satisfied that ■ the ore could be mined economically. Hence, it is argued in behalf of the plaintiffs, who have succeeded to the interest of the Sturtevant Mill Company as mortgagees, that the chattel mortgage given by Shinn at this time to secure the balance of the purchase price for' the .machinery was good and valid, and that no subsequent default oh his part, could vitiate the rights of the Stnrtevant Mill Company or its assignees to collect out of the proceeds of said machinery the balance due on account of the purchase price thereof.
But this argument proceeds in' disregard of the proposition that the rights of the mortgagee of the tenant’s trade fixtures are to be measured by the rights of the tenant himself in respect to such fix.tiires. Although the tenant possessed the right of removal, he was bound to exercise it, if at all, before his term expired, or within the period limited by his lease, or at all events before quitting possession of- the real estate. upon which the trade fixtures were situated. (Brooks v. Galster, 51 Barb. 196.) Where the tenant has mortgaged such trade fixtures, after placing them upon the leased land, and fails to.remove them within the term or the period prescribed by his lease, or while he retains possession of the land upon which they are located, his title becomes subordinate to that of the lessor and his right of removal is lost. (Talbot v. Whipple, 14 Allen, 177, 182.) This point was directly involved and expressly decided in the case cited, where the court says: “ It is hardly necessary to add that the plaintiffs can claim no better title to the property in controversy than that which was vested in the tenant under whom they claim as mortgagees. When the mortgage was made, the building and machine were fixtures annexed to the realty of the defendant by his tenant, and which the defendant 'had then the inchoate right to claim, as part of the freehold, if not. seasonably disannexed before the term was ended.” So, in the case at bar, at the time the chattel mortgage was made and ever since, the defendant Butler had and
There is nothing adverse to this view in Lewis v. Ocean Navigation & Pier Co. (supra), which the appellant cites in support of his proposition that a landlord' cannot destroy the tenant’s right to remove trade fixtures by dispossessing the tenant for non-payment of rent. In that case the tenant, who held over after the expiration of his lease, claimed the right to remove his building"at the time of his ejection by virtue of the summary proceedings, but was not permitted to remove it. His claim was seasonably made, while still in possession of the leased premises upon which the building stood. In this respect the case seems clearly distinguishable in principle from the case at bar, where the term of the tenant ended by reason of his default in the payment of the rent, and where he was also deprived of the possession of the leased premises without any claim being made on his behalf, or that of his mortgagees, that they were entitled to remove the machinery in question or even desired to.do so. As Mr. Taylor says: “The tenant’s right to remove is rather considered a privilege allowed him than an absolute right to the things themselves.. If he does not exercise the privilege before his interest expires, he ■ cannot do it afterwards, because the right to possess the land and the fixtures as part of the realty vests immediately in the landlord.” (2 Taylor’s Landl. & Ten. [8th ed.] § 551.) His mortgagee, as already suggested, must act with equal promptitude.
It seems to me, therefore, that the referee was right hi his conclusion that the mortgage in suit could not be enforced except as
All concurred, except Goodrich, P. J., dissenting.
Dissenting Opinion
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
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
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
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
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
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
•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
I cannot assent to any such proposition, and I think the judgment should be reversed.
Judgment affirmed, with costs.
