Belvin v. Raleigh Paper Co.
| Decision Date | 28 November 1898 |
| Parties | BELVIN et al. v. RALEIGH PAPER CO. et al. |
| Court | North Carolina Supreme Court |
Appeal from superior court, Wake county; Adams, Judge.
Action by C. H. Belvin, cashier of the National Bank of Raleigh, for himself and all other creditors of the Raleigh Paper Company who shall come in and make themselves parties to this action against the Raleigh Paper Company and others. From the judgment, plaintiff Belvin and defendant the North Carolina Car Company appeal. Modified.
Shepherd & Busbee and J. B. Batchelor, for appellants.
B. B Winborne, Douglass & Simms, Ed. C. Smith, Battle & Mordecai, and Jones & Tillett, for appellees.
The plaintiff Belvin is the cashier of the National Bank of Raleigh, and the defendant the Raleigh Paper Company is a corporation. The defendant corporation on the 14th of January, 1890, executed a mortgage to the plaintiff Belvin on its plant at the Great Falls of the Neuse to secure some $13,000; and on the 5th of June, 1893, the defendant paper company executed a second mortgage to Belvin, including the same property, and some other property not included in the first mortgage, but subject to the first mortgage, to secure an additional indebtedness of $9,000. The greater portion of this indebtedness still remains due and unpaid. In April, 1893, the paper company leased this property to the defendant J. N. Holding; and on the 9th of October, 1893, this lease was surrendered, and the paper company then leased said property to the defendant Holding and N. T. Cobb for the term of six years; and in the month of March, 1894, Cobb sold and assigned all his interest in said lease and property to the defendant Holding. By the terms of this lease, said Holding and Cobb were to put certain improvements on said property, including an additional building, a 100 horse power engine, and other machinery, to be used in manufacturing paper; this being the business in which said company was engaged. But by the terms of the lease said improvements and machinery so put on the corporation property by the lessees were to be and remain their property, and they were to have the right to remove the same, unless the paper company paid for said property and improvements. Before the execution of the second mortgage to the plaintiff Belvin the lessee Holding had bought a 100 horse power engine of Ellington, Royster & Co.; and this, it seems, was included in this second mortgage, subject to the payment of the balance due thereon, which was stated to be $1,500. It is stated that this indebtedness to Ellington, Royster & Co. was secured by mortgage, though this mortgage is not set out in the record as the other mortgages are; but no exception in the case seems to dispute this lien, except as to the amount, which plaintiff says should only be $1,500. The defendant Holding on the 16th of October, 1894, bought of M. P. Pegram other machinery amounting to $6,000, and gave Pegram a mortgage on said machinery to secure the notes given for said property, which was registered in Wake county on the 24th December, 1894. After the registration of this mortgage this machinery was put upon the property so leased to the defendant Holding by the Raleigh Paper Company. Besides the engine bought of Ellington, Royster & Co., and the machinery bought of Pegram, the defendant Holding erected on said property a large brick building, adjoining, but not (as the referee finds) attached to, the original buildings on said property when it was leased to Holding. On the 2d January, 1896, the defendant Holding sold to the paper company all the machinery and improvements he had put upon said property during the term of said lease, for $18,500, to which sum there seems to be added $1,500, the amount still due on the engine, for which the paper company executed to said Holding 10 promissory notes, for $2,000 each, amounting to $20,000; and at the same time, and as a part of the same transaction (as found by the referee), the paper company executed to the defendant W. W. Vass a deed of trust on all this property (improvements and machinery) so conveyed to the paper company, to secure the payment of the 10 notes given by said paper company for said improvements and machinery. These notes have not been paid, nor has a large part of the Pegram debt been paid. Besides these debts, there is a large amount of debts made by said Holding while operating this plant as lessee, a part of which is also claimed to be a lien on the original plant, or upon the property sold by Holding to the paper company. But we will first consider the rights of Belvin under these two mortgages, the rights of Pegram under his mortgage, and the rights of Vass under his mortgage or deed of trust.
It would seem that Belvin is entitled to everything conveyed, in either of his mortgages, that belonged to the paper company at the time said mortgages were made, and to any improvements placed upon said property since that time, by the paper company or by any one else, that the paper company would be entitled to if the property had not been mortgaged, but that he is not entitled to improvements put upon said property that the paper company would not have been entitled to if the property had not been mortgaged. The general rule is that whatever improvements a mortgagor puts upon the mortgaged property inure to the benefit of the mortgagee, or, more correctly speaking, is additional security for the debt. But this is upon the idea that the mortgagor is at least the equitable owner of the fee in the land; that he is entitled to the absolute legal as well as equitable title, upon payment of the debt, and that such improvements are his, and are made for his benefit; and that they increase the value of his property. Under the law, when a mortgagor puts such improvements upon the land they become a part of the land; and he cannot remove them, and thereby impair the security for the mortgage debt, any more than he could dispose of a part of the land itself. Wharton v. Moore, 84 N.C. 479; Moore v. Vallentine, 77 N.C. 188; Jones v. Hill, 64 N.C. 198; Foote v. Gooch, 96 N.C. 265, 1 S.E. 525; Horne v. Smith, 105 N.C. 322, 11 S.E. 373. This is where the improvements--the fixtures--would belong to the mortgagor. The mortgagee is only entitled to this additional security when the fixtures become a part of the soil, or a part of the land belonging to the mortgagor; and if it is not a part of the land of the mortgagor, and does not, and never did, belong to the mortgagor, it cannot belong to, or inure to the benefit of, the mortgagee. The law with regard to fixtures is very different under different relations and circumstances. Thus, we have seen that where a fee-simple owner puts improvements, called "fixtures," on his land, the law at once fixes them with the character of land. But where a tenant for life, or a lessee, or a tenant for a term of years puts such improvements upon the leased property, for the purposes of manufacturing or for trade, while there under the lease the law does not impress upon such improvements (fixtures) the character of land; and the tenant putting them there is the owner of them, and may remove them from the land. They are considered and treated as personal property. Railroad Co. v. Deal, 90 N.C. 112; Overman v. Sasser, 107 N.C. 432, 12 S.E. 64; Woodworking Co. v. Southwick, 119 N.C. 611, 26 S.E. 253. Therefore, as a matter of law, these improvements were never a part of the land, never belonged to the mortgagor, and cannot inure to the benefit of Belvin under his mortgage. But in this case it is not necessary to rely upon this principle of law, so firmly established in our courts, as it is expressly stipulated, as a part of the contract of lease, that this property is to belong to the lessee, and that he is to have the right to remove the same.
There were many cases cited to sustain the contention of Belvin and to show that he is entitled to the improvements (the fixtures) put on the property by Holding. But upon examination it is found that they do not conflict with the doctrine stated in this opinion. The cases most relied on for this contention were Wharton v. Moore and Moore v. Vallentine, supra. These cases are not in conflict with this opinion, but in fact sustain the views we have here expressed. In Wharton v. Moore the improvements were made by a fee-simple purchaser, and, when made, the law attached them to, and made them a part of, the land. In Moore v. Vallentine the same principle obtains. The improvements (the fixtures) were placed on the land by a fee-simple purchaser, who sustained the relation of a mortgagor; and the law attached them to the land, and made them in law "a part of the land." Indeed, it is said in Moore v. Vallentine, supra: "If he had taken a lease, say for five years, his right to remove the engine and appurtenances would have been beyond any question." In both of these cases the nature of the estate proves that the erection of the fixtures was for a temporary purpose, and not for the purpose of making them a part of the freehold. In such cases the fixtures may be removed, and they do not, in contemplation of law, become "a part of the land"; and as the fixtures erected by the lessee Holding "did not become a part of the land," in contemplation of law, and as they were expressly made Holding's personal property by the terms of the contract,--the lease,--we see no ground upon which Belvin is entitled to them under his mortgages. This must be so, unless he is entitled to them by reason of the conveyance made by Holding to the paper company on the 2d of January, 1896. We have seen that these fixtures belonged to Holding, and, being his, he had the right to convey them; and having...
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