Cent. Trust Co. of N.Y. v. Arctic Icemach. Manuf'g Co.

• Decision Date: 15 March 1893
• Citation: Cent. Trust Co. of N.Y. v. Arctic Icemach. Manuf'g Co., 26 A. 493, 77 Md. 202 (Md. 1893)
• Parties: CENTRAL TRUST CO. OF NEW YORK, v. ARCTIC ICEMACH. MANUF'G CO. ARCTIC ICEMACH. MANUF'G CO. v. CENTRAL TRUST CO. OF NEW YORK. MARYLAND ICE CO. v. ARCTIC ICEMACH. MANUP'G CO.
• Court: Maryland Court of Appeals

26 A. 493

77 Md. 202

CENTRAL TRUST CO. OF NEW YORK,

v. ARCTIC ICEMACH. MANUF'G CO.

ARCTIC ICEMACH. MANUF'G CO.

v. CENTRAL TRUST CO. OF NEW YORK.

MARYLAND ICE CO.

v. ARCTIC ICEMACH. MANUP'G CO.

Court of Appeals of Maryland.

March 15, 1893.

Appeal from circuit court of Baltimore city.

Action by the Central Trust Company of New York against the Maryland Ice Company to foreclose a stock mortgage.The Arctic Ice-Machine Manufacturing Company filed a petition in the case, claiming to own certain machinery which it had affixed to the mortgaged premises after the recording of the stock mortgage.The Maryland Ice Company answered the petition, claiming damages for breach of contract in affixing the machinery.There was a decree in favor of the manufacturing company, and the trust company appeals.Affirmed.

Argued before ALVEY, C. J., and BRYAN, ROBERTS, PAGE, FOWLER, BRISCOE, and McSHERRY, JJ.

John H. Thomas, Butler, Stillman & Hubbard, and Adrian H. Joline, for appellant.

Tho.M. Lanahan and Frank Gosnell, for appellee.

McSHERRY, J.On the 3d day of April, 1890, the Maryland Ice Company, a body corporate, executed and acknowledged, and on the 5th of the same month placed upon record in Baltimore city, a mortgage to the Central Trust Company of New York, bearing date March 1, 1890, and conveying certain property, fully described, and also all property thereafter acquired, for the purpose of securing the payment of 250 bonds, each for the sum of $1,000, together with the coupons attached for the amount of the semiannual interest; and at the same time it executed and acknowledged a second mortgage to the same trustee upon the same property, with a like provision as to after-acquired property, to secure the payment of 110 other bonds, each for the sum of $1,000, with similar interest coupons attached.On September 1, 1891, the mortgagor made default in the payment of the coupons due on that day and payable in New York, and on the next day the Central Trust Company filed a bill in the circuit court of Baltimore city for a foreclosure of the mortgage, a sale of the mortgaged property, and the appointment of a receiver to take possession of the property of the Maryland Ice Company.Simultaneously with the filing of the bill of complaint the Maryland Ice Company put in an answer, but, by the consent of the Central Trust Company, not under oath, admitting all the allegations of the bill to be true, and consenting to the appointment of a receiver, and the court at once passed an order appointing O. Hammond, Jr., such receiver.On the 4th day of the same month the Arctic Ice-Machine Manufacturing Company filed a petition in the case claiming to own certain machinery which had been affixed to the mortgaged premises after the mortgages had been recorded, but which had not been fully paid for by the Maryland Ice Company.The Central Trust Company and the Maryland Ice Company both answered this petition, and the last-named company insisted that the damages which it had sustained by the failure of the Arctic Ice-Machine Manufacturing Company to construct the machinery erected by it within the time and according to the specifications of its contract were far in excess of the balance due under the contract.On March 15 1890, Thomas Sturgis, of New York, and O. Hammond, Jr., of Baltimore, entered into a written contract with the Arctic Ice-Machine Manufacturing Company of Cleveland, Ohio, by which the Arctic Company agreed to construct and then to erect in Baltimore three ice manufacturing machines of a designated capacity, and Sturgis and Hammond agreed to pay therefor the sum of $107,000 in several installments,—the first, a cash payment of $35,000 on April 7, 1890, and the residue at later periods.The contract contained the following provision: "And it is further expressly agreed that the title and ownership of said apparatus and appurtenances shall remain in said Arctic Ice-Machine Manufacturing Company until each of the aforesaid payments shall have been fully made; and, in case of default in any of said payments when due, said Arctic ice-Machine Manufacturing Company shall have thereupon the right to take possession of and remove said apparatus and appurtenances."On March 21, 1890, the Maryland Ice Company was incorporated under the laws of New Jersey, and on the 3d of April following it executed the mortgages to which allusion has already been made.Those mortgages, as heretofore stated, bear date March 1st, or 20 days before the mortgagor company was actually incorporated, and, among other things, provide that the lien created thereby should extend to the land and premises described, "and the buildings now erected or hereafter to be erected thereon, and the plant and machinery affixed or to be affixed thereto," and that "the fixed plant and machinery hereby mortgaged, or intended so to be, shall be real estate for all the purposes of this indenture, and shall be held and taken to be fixtures and appurtenances of the said real property hereby mortgaged, and a part thereof, and shall be used and sold in connection therewith, and not separate therefrom."On May 7, 1890, Sturgis and Hammond assigned to the Maryland Ice Company the contract between themselves and the Arctic Company, the latter company having the preceding day consented that the transfer might be made.After the mortgages had been recorded, the Arctic Company began the erection of the three ice manufacturing machines on the mortgaged premises in Baltimore, but, owing to some delay in their construction, they were not finally accepted by the Maryland Company until November 8, 1890.The only payment made for them was the first installment of $35,000; the residue of $72,000 remains unpaid.The Arctic Company claims a return of the machines under the provision heretofore quoted from the contract between it and Sturgis and Hammond; the Central Trust Company claims title to and property in these same machines under the mortgages from the Maryland Ice Company, for the benefit of the holders of the mortgage bonds; and the Maryland Ice Company claims the right to recoup out of the unpaid purchase money due by it on these machines the amount of damages it has sustained by the failure of the Arctic Company to construct the machines in accordance with the contract.These conflicting claims give rise to the several questions which were ably and elaborately argued at the bar.

Whatever maybe the law elsewhere, it is settled beyond dispute in Maryland that a conditional sale of personal property, whereby the vendor retains the title until the purchase price has been fully paid, is perfectly valid between the vendor and the vendee, and all persons claiming under or through the latter with notice of the outstanding lien.Hall v. Hinks, 21 Md. 418;Lincoln v. Quynn, 68 Md. 299, 11 Atl. Rep. 848.As between the Arctic Company on the one hand, and Sturgis and Hammond on the other, there can therefore be no doubt that the machines contracted for by them on March 15, 1890, remained the property of the vendor until paid for; and it is equally clear that no assignee of Sturgis and Hammond having notice of the Arctic Company's title could acquire or assert any better claim than Sturgis and Hammond had.Walker v. Schindel, 58 Md. 360.Nor is it necessary, in order to affect the person claiming under the vendee with notice of the vendor's lien, to show actual knowledge of the existence of that lien; for if "there be circumstances which, in the exercise of common reason and prudence, ought to put a man upon particular inquiry, he will be presumed to have made that inquiry, and will be charged with notice of every fact which that inquiry would give him."Baynard v. Norris,5 Gill, 483;Green v. Early,39 Md. 229;Higgins v. Lodge, 68 Md. 229, 11 Atl. Rep. 846.The Maryland Ice Company gave to the Central Trust Company an order dated April 1, 1890, for the delivery of the whole issue of the first mortgage bonds to the London & New York Investment Corporation; and on March 31st, or one day before the date of the order, and three days before the mortgage was actually executed, the Central Trust Company agreed to deliver these bonds upon receiving notice that the mortgage had been recorded.The 250 first mortgage bonds were delivered to the London & New York Investment Corporation not earlier than April 5th, and that corporation still holds 200 of them.Fifty of the 250 bonds were purchased by Poor and Greenough, and they still hold 45 of them.The remaining 5 the record does not disclose the ownership of, but if they are in possession of bona fide holders for value, without notice, the decree in this case will not affect their title.Had the bondholders in whose behalf the Central Trust Company now claims the three ice manufacturing machines erected by the Arctic Company knowledge or information, before they acquired the bonds, of the lien of the Arctic Company, or of circumstances which ought to have put them upon inquiry with respect thereto?To intelligently answer this inquiry it will be necessary to examine some of the numerous facts contained in the voluminous record, and to contrast with them portions of the testimony delivered by several of the witnesses who have given evidence in support of their own interests.

On the 28th of February, 1890, O. Hammond Jr., who has already been alluded to, entered into a written contract with the executors of William E. Hooper, deceased, for the purchase from them of certain property in the city of Baltimore.In this contract it is recited that Hammond "and certain associates" are about to form a corporation for the purchase of this property, and for making such additions thereto and improvements thereon as may be desirable, and for the conduct of the business of manufacturing and selling ice, etc.Who these associates were the contract does not say, but further references to the record will reveal that the London & New York Investment...