Manufacturers Bank & Trust Co. v. Lauchli

• Decision Date: 22 April 1941
• Docket Number: No. 11715,11716.,11715
• Citation: 118 F.2d 607
• Parties: MANUFACTURERS BANK & TRUST CO. OF ST. LOUIS v. LAUCHLI (two cases).
• Court: U.S. Court of Appeals — Eighth Circuit

118 F.2d 607 (1941)

MANUFACTURERS BANK & TRUST CO. OF ST. LOUIS v. LAUCHLI (two cases).

Nos. 11715, 11716.

Circuit Court of Appeals, Eighth Circuit.

April 2, 1941.

Rehearing Denied April 22, 1941.

Milton Yawitz, of St. Louis, Mo. (Rassieur, Long & Yawitz, of St. Louis, Mo., on the brief), for appellant.

Harry S. Gleick, of St. Louis, Mo., for appellee.

Before STONE and GARDNER, Circuit Judges, and OTIS, District Judge.

STONE, Circuit Judge.

These appeals are by a mortgagee from two separate orders authorizing sales by the trustee of the bankrupt J. H. Belz Provision Company of certain property "free and clear of any right, title or interest" of the mortgagee. The property covered by each of the two orders is entirely different but because the same mortgage is involved and because the various properties are within the same bankrupt estate, it has been found convenient to present the two matters together, although upon separate records and briefs. While the underlying issue in both cases is whether the mortgage covers the property included in each of the two orders, yet the situation and resulting issues are so different in the two cases that it is necessary to consider them separately. However, there are certain facts common to both cases which may be stated before taking up the separate situations.

These common facts are as follows. J. H. Belz Provision Company is a corporation which, prior to bankruptcy, conducted a pork and beef packing business in a three-story plant owned by it in St. Louis, Missouri. In April, 1934, it executed a mortgage deed of trust, to secure bonds aggregating $91,000 upon its real estate and packing plant located thereon. After conveying described real estate, this instrument continued:

"Together with all and singular the buildings and structures, power plants, boiler houses, office buildings, refrigerating, electric and other machinery, apparatus, engines, boilers, generators, switch boards, dynamos, elevators, shafting, belting, pulleys, vats, tanks, conveyors, tools, implements and fixtures, and any and all equipment, erected thereon, or in process of erection, or which may be hereafter erected in or upon any of the real estate hereinabove described and constituting the packing plant and property and office of the J. H. Belz Provision Company, it being the intention hereof that the conveyances of this mortgage deed of trust shall include as part of said real estate all the buildings, machinery, tools, fixtures, equipment and appliances erected on or used as part of said plant, or which may hereafter be so erected or used.

"To Have and To Hold the above described real estate and other property, together with all and singular the tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, the reversion and reversions, remainder and remainders, rents, issues and profits thereof, and all the estate, right, title, interest, property, possession, claim and demand whatsoever, as well at law as in equity, in and to the same, and every part thereof, including all rights, privileges, benefits and advantages accruing or to accrue under any contract with any railroad with reference to or for the use of any switch or switches which may hereafter be connected with any of the above property, unto the Party of the Second Part, its successor or successors in trust and its assigns, forever."

At the time the above mortgage was executed, a "rendering" department was an integral part of the packing plant. The purpose of this department was to convert inedible portions of slaughtered animals into commercial products. The process of such conversion then being used was known as a "wet" system. In 1937 and in 1938, this "wet" system was replaced by what is known as a "dry" system. While some of the old equipment was used in this "dry" system, some thousands of dollars worth of new equipment was necessary. The greater part of this new equipment was purchased under two instalment payments conditional contracts whereby title was retained in the sellers until full payment.

Thereafter (the record does not disclose when), the Belz company went into bankruptcy. At that time, $4,951.26 had been paid on one of the contracts, leaving a balance of $1,583.30 due. The record does not disclose the purchase price under the other contract nor the amount paid thereon but only the balance due of $2,153.84.

Included in this equipment bought under the above two contracts, were tanks of various kinds, pumps, cookers, conveyors and crushers. Some of these things were large and weighed thousands of pounds — two of the tanks weighed about twenty thousand pounds each. Various parts of this equipment were installed on each of the three floors of the plant and seem to have been connected by conveyors, pipes or pumps. To install this equipment, a concrete foundation therefor was built on the first floor; the floors changed from wood to reinforced concrete and one or more floor openings cut. The machines on the first floor were attached to the concrete foundations by bolts. Some of the tanks on upper floors were supported on legs sunk into the concrete flooring. This new system constituted the only rendering system in the plant and was a part of the plant and process.

From the above fact situation arise two contentions regarding the inclusion under the mortgage of the devices bought under the two conditional sales contracts. The first contention is that this is a real estate mortgage and that this property was not so affixed to the real estate as to be fixtures and, therefore, never passed under the mortgage. The second is that these devices could not pass under the mortgage because the title thereto remained in the sellers since full payment had been made under neither conditional sales contract. As to both of these contentions it must be kept in mind that the contest here is solely between the mortgagee and the trustee standing in the shoes of the mortgagor.

As to the fixture contention. The above quotations from the mortgage are clear that it was intended to and did cover not only the real estate and buildings but generally, "any and all equipment, erected thereon, or in process of erection, or which may be hereafter erected in or upon any of the real estate hereinabove described and constituting the packing plant and property and office of the J. H. Belz Provision Company, it being the intention hereof that the conveyances of this mortgage deed of trust shall include as part of said real estate all the buildings, machinery, tools, fixtures, equipment and appliances erected on or used as part of said plant, or which may hereafter be so erected or used." In short, this mortgage covered the then existing going plant and all after-acquired machinery, etc., erected on this real estate or used as part of such plant.

There can be no dispute that a "rendering" department was an integral part of this plant when the mortgage was executed nor that the then equipment of such department was covered by the mortgage. All of the things covered by this order of sale are parts of a rendering department installed on this real estate to replace those which constituted the same department at the time the mortgage was made.

We need not discuss the character of attachment of these things to the real estate in so far as removability without injury to the real estate or buildings. It is clear that all of them were, in some manner, attached. The here governing law of Missouri is that where a mortgage is upon a plant, with the equivalent of an after-acquired clause, machinery placed in the plant thereafter and constituting a part of the plant, becomes `subject to the mortgage. Johnston v. Morrow, 60 Mo. 339, cited with approval in Cook v. Condon, 6 Kan.App. 574, 51 P. 587, 590. This contention must, therefore, be resolved in favor of appellant.

As to the second contention, that is, that the things purchased under the conditional sales contracts did not pass under the mortgage because the title thereto never passed to the mortgagor but remained at all times in the sellers. If no property right or interest of any...