Stearns Lighting & Power Co. v. Central Trust Co., 223 F. 962

Stearns Lighting & Power Co. v. Central Trust Co.

223 F. 962 | 6th Cir. | 1915

Lead Opinion

PER CURIAM.

[1] The power plant and generating machinery of the Interurban Company, to which the transmission line in question was annexed and with which it was physically connected, was situated upon real estate held by that company under lease for 25 years from January 1, 1909. The mortgage expressly covered this leasehold interest. Under the settled law of Michigan the Interurban Company’s interest in the real estate (being held under lease for 3 years and upwards) is governed by the laws regulating the recording of conveyances of real estate. Howell’s Mich. Stat. (2d Ed.) § 10856; Crouse v. Michell, 130 Mich. 347, 357, 90 N. W. 32, 97 Am. St. Rep. 479. The mortgage was duly recorded as a mortgage on real estate, and the record was constructive notice to subsequent purchasers of the existence and contents of the mortgage. Godfroy v. Disbrow, Walker’s Ch. (Mich.) 260. With this premise, we adopt the opinion of the District Court upon the main controversy in the case, as follows :

“The first and most important question to he determined relates to the character of the property purchased and acquired by the Stearns Company from W. F. Mayhon. Was the electrical transmission line, belonging to the Interurban Company and covered by complainants’ mortgage, real estate or personal property? If it was real estate, the other questions which have been elaborately presented and discussed become of little or no importance, because it is conceded that complainants’ mortgage was duly executed and recorded as a real estate mortgage, and, as to all subsequent creditors, purchasers, or incumbrancers, became and continued to be a valid first lien upon all the real estate then owned or afterwards acquired by the Interurban Company. Recognizing the controlling importance of this question, counsel upon both sides, with commendable zeal and industry, have collected and re*967viewed a great many cases bearing upon the valions phases oí the subject. A careful and painstaking examination of the authorities cited leads to the conclusion that an electrical transmission line, constructed, connected., and situated as was this one, must be classed as real estate and not as personal property. It was a necessary and integral part o/ the electric plant, it was physically connected with and annexed to the power plant and generating machinery, which it must be conceded were real estate. Without the transmission line the entire property would have been valueless for the purposes for which it was constructed and created. Its construction and annexation were intended to be permanent. It could not be severed from the rest of the plant or machine without not only impairing hut destroying the whole. It thus contained and combined in itself all of the elements and attributes of a fixture or appurtenance to real estate. A few of the many cases so holding are the following: Dreisbach v. Ross, 195 Pa. 278 [45 Atl. 722]; Hughes v. Lambertville Electric Light Co., 53 N. J. Eq. 435 [32 Atl. 69]; Fecht v. Drake, 2 Ariz. 239 [12 Pac. 694]; Badger Lumber Co. v. Marion Co., 48 Kan. 182 [29 Pac. 476, 15 L. R. A. 652, 30 Am. St. Rep. 301]; Keating Implement Co. v. Marshall Elec. Light Co., 74 Tex. 605 [12 S. W. 489]; Southern Elec. Supply Co. v. Rolla Elec. Light Co., 75 Mo. App. 622; Metropolitan Trust Co. v. Dolgeville Elec. Light Co. [35 Misc. Rep. 467], 71 N. Y. Supp. 1055; Tippett & Wood v. Barham, 180 Fed. 76 [103 C. C. A. 430, 37 L. R. A. (N. S.) 119]; Appeal of Des Moines Water Co., 48 Iowa, 324.

■‘It is doubtless true that some of the courts have seemingly announced a different doctrine. A review of these decisions would be of no benefit to any one. It is sufficient to say that, upon careful examination, it will be found that such cases can usually, if not always, be distinguished from the present one. In some instances the language of the court is mere dictum; in others it must be considered solely in its application to special statutes which create and contain in themselves artificial and arbitrary distinctions and definitions not found or permissible elsewhere; and in still others it is employed to negative the contention that electric light poles and wires, and similar property are a part of the real estate upon which they are situated. Readfield Tel. & Tel. Co. v. Cyr, 95 Me. 287 [49 Atl. 1047]; Dunsmiur v. Electric Light Co., 24 Wash. 104 [63 Pac. 1095]; Railway Co. v. Western Union Co., 118 Fed. 497 [55 C. C. A. 263]; Shelbyville Water Co. v. Illinois, 140 Ill. 545 [30 N. E. 678, 16 L. R. A. 505]; Union Loan & Trust Co. v. Motor Road Co. (C. C.) 51 Fed. 840; People v. Feitrier [99 App. Div. 274] 90 N. Y. Supp. 904; People v. Hendrickson, 109 N. Y. S. 402; Portland v. Telephone Co., 103 Me. 240 [68 Atl. 1040].

“Having reached the conclusion that the electrical transmission lino covered by complainants’ mortgage and afterwards conveyed to the Stearns Company was real estate, an extended discussion of the other questions presented would bo profitless, and they may be disposed of very briefly.”

[2] The transmission line having been appurtenant to an interest in real estate when the interurban Company’s mortgage attached thereto and when notice thereof was given by its recording, the effect thereof upon the rights already fixed under it was not defeated by the fact that when Mayhon sold to the Stearns Company the power and generating plant was unoperated and inoperative, and was not included in that sale, nor by the fact that the lease had been declared forfeited for nonpayment of rent, inferably after Maylion’s purchase.

The proposition that McMullin was not a good faith purchaser of the bonds in question is not sustained by the record. At the time of the conveyance by Mayhon to the Stearns Company the former was the owner of $17,500 of the bonds secured by the trust mortgage in suit, and his warranty that the property was free from incumbrance doubtless operated to give the Stearns Company an equitable title to these bonds as against Mayhon. The bonds, however, were negotiable. *968Mayhon retained their physical custody, and later, in violation of his agreement with the Stearns Company, transferred them to McMullin, who took them without notice of the Stearns claim and in good faith paid Mayhon therefor. Ifhe trustee is clearly entitled to enforce them for McMullin’s benefit.

We have considered the remaining criticisms upon the decree, and think them without merit.

The decree appealed from is in our opinion correct, and is affirmed, with costs.

Rehearing

On Petition for Rehearing.

[3] In our opinion filed June 8th instant, in discussing appellant’s contention that McMullin was not a good faith purchaser of the $17,-500 of the bonds in question, after stating that at the time of May-hon’s conveyance to the Stearns Company the former was the owner of these bonds, and his warranty that the property was free from incumbrance doubtless operated to give the Stearns Company an equitable title to the bonds as against Mayhon, we said:

“The bonds, however, were negotiable. Mayhon retained their physical custody, and later, in violation of his agreement with the Stearns Company, transferred them to McMullin, who took them without notice of the Stearns claim and in good faith paid Mayhon therefor.”

It is urged that the bonds in question were delivered by Mayhon to McMullin after the Stearns Company had acquired and paid for the transmission line, and only as collateral security for debts created previous to the time the Stearns Company acquired its rights, and that “since the Stearns Company became the equitable owner of the bonds” McMullin has parted with nothing of value, nor “surrendered or postponed any rights which he possessed to obtain possession of the bonds.” The record shows that, prior to Mayhon’s contract with the Stearns Company, McMullin had acquired an equitable right to the bonds as collateral security for a debt resulting from a prior canceled contract for the purchase by McMullin from Mayhon of the Interurban Company’s properties; that after Mayhon’s transaction with the Stearns Company the former delivered physical possession of the bonds to McMullin. The situation thus is that, as opposed to McMullin’s' legal right to the bonds, dhe Stearns Company has only an equity, and that this equity is later than and subordinate to McMullin’s equity. The fact that some of the bonds were past due is immaterial, as Mc-Mullin’s equity does not depend upon their negotiability. While, therefore, the statement in our opinion regarding Mayhon’s payment for the bonds is not strictly accurate, tne result reached was correct.

The petition for rehearing is denied.