Anglo-American Mill Co., Inc. v. Community Mill Co.

• Decision Date: 16 October 1925
• Citation: 240 P. 446,41 Idaho 561
• Parties: THE ANGLO-AMERICAN MILL CO., INC., a Corporation, Respondent, v. THE COMMUNITY MILL COMPANY, a Corporation; P. W. MITCHELL, Defendants, and E. W. PORTER, as Commissioner of Finance of the State of Idaho, Appellant
• Court: Idaho Supreme Court

240 P. 446

41 Idaho 561

THE ANGLO-AMERICAN MILL CO., INC., a Corporation, Respondent, v. THE COMMUNITY MILL COMPANY, a Corporation; P. W. MITCHELL, Defendants, and E. W. PORTER, as Commissioner of Finance of the State of Idaho, Appellant

Supreme Court of Idaho

October 16, 1925

SALES-CONDITIONAL SALES-FIXTURES-REMOVAL-RIGHT OF VENDEE OF CHATTELS AGAINST SUBSEQUENT MORTGAGE OF REALTY - APPEAL AND ERROR-REVIEW-FINDINGS OF FACT-PRINCIPAL AND AGENT - KNOWLEDGE OF AGENT IMPUTED TO PRINCIPAL - MORTGAGES-PRE-EXISTING DEBT AS CONSIDERATION-PRIORITY.

1. The parties to a conditional sale contract may agree that the chattel, though sold for the purpose of being annexed to the realty of the purchaser, will retain the character of personal property after annexation, and the title remain in the vendor until the purchase price is fully paid, provided that by annexation the chattel does not lose its distinctive identity or become an essential part of the structure into which it is incorporated.

2. An agreement providing that a chattel shall retain the character of personal property after annexation to realty binds a subsequent mortgagee of the realty whose mortgage is not taken for a valuable consideration.

3. A finding of fact by the trial court upon conflicting evidence but based upon evidence sufficient, if uncontradicted, to support it, will not be disturbed upon appeal.

4. Where in a transaction with a bank its cashier is openly acting in the interest of another corporation of which he is an officer, the bank is not chargeable with the cashier's uncommunicated knowledge of facts derogatory to such other corporation's title to the property which is the subject of the transaction.

5. Where it is not shown that knowledge of an agent acquired in a transaction occurring prior to the agency extended to the particular matter of which notice is sought to be imputed to the principal, nor that the transaction generally was present in the mind and memory of the agent while acting for the principal, notice thereof will not be imputed to the principal.

6. A party taking a mortgage upon real estate to secure a pre-existing indebtedness is not entitled to protection against secret titles as an innocent mortgagee for value unless at the time some new or additional consideration passes to the mortgagor for the execution of the mortgage.

APPEAL from the District Court of the Tenth Judicial District, for Lewis County. Hon. Wallace N. Scales, Judge.

Action to establish priority of conditional sale contract and to enforce provisions thereof. Judgment for plaintiff. Affirmed.

Judgment affirmed. Costs awarded to the respondent.

F. S Randall and John R. Becker, for Appellant.

Personal property which is grouped and connected up, one piece with another, and forming thus grouped and connected a complete flouring-mill, becomes, when the same has been built into a building specially constructed to receive and house it, a part of the building, and thus part of the real estate. (Wade v. Donan Brewing Co., 10 Wash. 284, 38 P 1009; 26 C. J. 670, note 48; Roddy v. Brick, 42 N.J. Eq. 218, 6 A. 806; Fortman v. Goepper, 14 Ohio St. 558; Fehr Constr. Co. v. Postl. System, 288 Ill. 634, 124 N.E. 315; Oakland Bank v. California Pressed Brick Co., 183 Cal. 295, 191 P. 524; King v. Blickfeldt, 111 Wash. 508, 191 P. 748.)

In the absence of notice a subsequent purchaser or mortgagee of land is not bound by an agreement between the owner of the land and one from whom he purchases chattels that such chattels, although annexed to the realty, shall retain their character as personalty and that the title to them shall remain in the seller until they have been fully paid for. (26 C. J. 681, sec. 47, and cases cited; 11 R. C. L. 1064, 1065; Oakland Bank v. California Pressed Brick Co., supra; King v. Blickfeldt, supra.)

When an officer of a bank is dealing with it in his individual interest, or in the interest of another corporation of which he is an officer, the bank is not chargeable with his uncommunicated knowledge of facts derogatory to the title of property which is the subject of the transaction. (3 R. C. L. 477-479; editorial notes in 29 L. R. A., N. S., 558; 49 L. R. A., N. S., 764; Smith v. Wallace Nat. Bank, 27 Idaho 441, 150 P. 21; 7 C. J. 534 et seq.)

The cancelation of a pre-existing indebtedness is a valuable consideration and constitutes a purchaser in good faith, where there was no notice of a prior grant. (Conneau v. Geis, 73 Cal. 176, 2 Am. St. 785, 14 P. 580; Foorman v. Wallace, 75 Cal. 552, 17 P. 680; Riley v. Martinelli, 97 Cal. 575, 33 Am. St. 209, 32 P. 579, 21 L. R. A. 33; Gilchrist v. Gouch, 63 Ind. 576, 30 Am. Rep. 250; Evans v. Pence, 78 Ind. 439; Citizens Nat. Bank v. Judy, 146 Ind. 322, 43 N.E. 259; Soule, Thomas & Wentworth v. Shotwell & Fitts, 52 Miss. 236; State Bank v. Frame, 112 Mo. 502, 20 S.W. 620; Brem v. Lockhart, 93 N.C. 191; Branch v. Griffin, 99 N.C. 173, 5 S.E. 393, 398; Cammack v. Soran, 30 Gratt. (Va.) 292.)

Cox & Martin, for Respondent.

The title retaining contract is valid, not only between the respondent and the Community Mill Company, but as against the Union State Bank and the appealing defendants. (Harkness v. Russell & Co., 118 U.S. 663, 7 S.Ct. 51, 30 L.Ed. 285; Boise-Payette Lumber Co. v. McCornick, 32 Idaho 462, 186 P. 252; Kester v. Schuldt, 11 Idaho 663, 85 P. 974; Anderson v. Creamery Package Mfg. Co., 8 Idaho 200, 101 Am. St. 188, 67 P. 493, 56 L. R. A. 554; Southern California Hardwood & Mfg. Co. v. Borton, 46 Cal.App. 524, 189 P. 1022; Murray Co. v. Chickasha Cotton Oil Co., 73 Okla. 106, 174 P. 1091; Lynn v. Waldron, 38 Wash. 82, 80 P. 292; In re Hemmer (N. Y.), 280 F. 414; Adams Mach. Co. v. Interstate Building & L. Assn., 119 Ala. 97, 24 So. 857; Duntz v. Granger Brewing Co., 41 Misc. 177, 83 N.Y.S. 957, 96 A.D. 631, 89 N.Y.S. 1103.)

The cashier and managing officer of the Union State Bank had knowledge of respondent's ownership of the property and of the balance due. The bank therefore took the mortgage with notice of respondent's ownership. (2 Pomeroy, Eq. Jur., 4th ed., sec. 672; Smith v. Wallace, Nat. Bank, 27 Idaho 441, 150 P. 21; Hitt Fireworks Co. v. Scandinavian Am. Bank, 114 Wash. 167, 195 P. 13, 196 P. 629; Malm v. Griffith, 109 Wash. 30, 186 P. 647; Otis v. Zeiss, 175 Cal. 192, 165 P. 524, Hess v. Conway, 92 Kan. 787, 142 P. 253; Foote v. Utah Commercial & Sav. Bank, 17 Utah 283, 54 P. 104; Campbell v. First Nat. Bank of Denver, 22 Colo. 177, 43 P. 1007; Penoyer v. Willis, 26 Ore. 1, 46 Am. St. 594, 36 P. 568; Simpson v. Central Vermont R. Co., 95 Vt. 388, 115 A. 299; Vulcan Detinning Co. v. American Can Co., 72 N.J. Eq. 387, 67 A. 339; State Bank of Morton v. Adams, 142 Minn. 63, 170 N.W. 925; Metzger v. Southern Bank, 98 Miss. 108, 54 So. 241; Lea v. Iron Belt Mercantile Co., 147 Ala. 421, 42 So. 415; Berry v. Rood, 168 Mo. 316, 67 S.W. 644; Tagg v. Tennessee Nat. Bank, 9 Heisk. (Tenn.) 479.)

The bank, having taken the mortgage to secure a past due indebtedness, is not in the position of an innocent purchaser for value. (Mountain Home Lumber Co. v. Swartwout, 30 Idaho 559, 166 P. 271; Land v. Hea, 20 Idaho 250, 118 P. 506; King v. Blickfeldt, 111 Wash. 508, 191 P. 748, at p. 750; Southern California Hardwood & Mfg. Co. v. Borton, 46 Cal.App. 524, 189 P. 1022; Western Grocer Co. v. Alleman, 81 Kan. 543, 106 P. 460; Hayden v. Russell, 119 Me. 38, 109 A. 485; Union Nat. Bank v. Oium, 3 N.D. 193, 54 N.W. 1034; Dickerson v. Tillinghast, 4 Paige (N. Y.), 215, 25 Am. Dec. 528.)

The trial court found that the mill, milling machinery and accessories are so placed in the mill building that they can be removed without injury to the property. Having heard the witnesses and observed them on the stand, and there being ample evidence in support thereof, the findings of the trial court are conclusive on appeal. (C. S., sec. 7170; Independent Placer Min. Co. v. Knauss, 32 Idaho 269, 181 P. 701; Hemphill v. Moy, 31 Idaho 66, 169 P. 288; McKeehan v. Vollmer-Clearwater Co., 30 Idaho 505, Ann. Cas. 1918E, 1197, 166 P. 256; Holland v. Avondale Irr. Dist., 30 Idaho 479, 166 P. 259; Wolf v. Eagleson, 29 Idaho 177, 157 P. 1122; Young v. Extension Ditch Co., 28 Idaho 775, 156 P. 917; Jensen v. Bumgarner, 28 Idaho 706, 156 P. 114.)

BUDGE, J. William A. Lee, C. J., and Wm. E. Lee, Givens and Taylor, JJ., concur.

OPINION

BUDGE, J.

On November 5, 1919, the Community Mill Company, hereafter referred to as the mill company, purchased from the respondent the flour-mill, machinery and accessories that are the subject matter of this suit. What is termed a license title retaining, contract was entered into, by the terms of which it was agreed that the respondent should retain title to the personal property until the same was fully paid for, and also that "no matter in what manner such property shall become attached to real estate, it shall not become a fixture or part of the real estate." Soon thereafter the milling machinery was installed in a mill building erected for the purpose upon lots owned by the mill company. On May 20, 1921, the mill company, being insolvent, for the purpose of securing the Union State Bank of Nez Perce and possibly other creditors, through its president and secretary executed and delivered to P. W. Mitchell a note for $ 25,000, together with a mortgage securing the payment of same covering lots owned by it, including the lots upon which the mill building with its machinery was located. Some time after the note and mortgage were executed and delivered Mitchell assigned the same without recourse to the Union State Bank, but the assignment was not placed of record until after the bringing of the present action. Neither the note nor the mortgage were carried on the books of the bank as...